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Home My WebLink Aboutagenda.council.worksession.20080415ASPEN C N A M B E R RESO RT ASSOCIATION MEMORANDUM To: City Council Thru: Randy Ready, City of Aspen From: Debbie Braun, president, ACRA Date: April 11, 2008 Re: Request for amendment to the Economic Development service agreement f'. 11~ BACKGROUND: Our contract for economic development service became effective on January 1, 2006, and shall terminate on December 31, 2011. The payment for the contract in 2006 was $248,000 with increases annually to account for inflation, by a percentage that is consistent with the percentage by which appropriations to City of Aspen General Fund. In 2008, the contract for economic development is budgeted at $252, 810. The ACRA is requesting a financial contractual amendment to the existing contract for an additional $30,000 per year based on expanding service for the community. ADDITIONAL FUNDING REQUEST FOR NEW SCOPE OF WORK The last year, the ACRA, Pitkin County, Aspen Skiing Company and Town of Snowmass Village, along with many business partners, embarked on a community-wide guest service initiative called Faces of Aspen/Snowmass. This long-term commitment provides guest service resources to our business community. In the first year, we've been able to conduct research with our local businesses, spoke with over 1000 visitors and hired a mystery shopping company to benchmark the current state of service in our community. We were successful in this effort and have achieved a "benchmark" of service for our local communities. We also provided resources like our "How to Aspen/Snowmass" booklet, which was distributed to over 5000 employees in the community. (The City gave booklets out to your employees.) This booklet will also be printed in the Spanish language if we can reach our funding goals. Our one-day guest service training programs, and on-line web program support are invaluable tools for educating and training our workforce; we also partner with other organizations like the Aspen Historical Society, the Aspen Club and Spa and many local businesses in support of Aspen 101 and our annual guest service training summit. C\Documents and Settings\dbnun\Desktop\ACRA contract amendmentdoc We successfully coordinate a Rewards and Recognition program - "the Star Program". Any employee from the Aspen/Snowmass area can be recognized for providing outstanding service. We have "Stars of the Moment", "Stars of the Month", and "Stars of the Season". Local businesses are big supporters by providing gifts and prizes throughout the winter and summer seasons. And finally, renewed focus on service recovery. The ACRA provides an outlet for consumers to supply feedback on their experience -good or bad, and we'll work to help solve any issues that might have occurred during their stay in our area. This multi-tiered approach to guest service needs many partners to be truly sustainable. We have big plans for the next couple years and we know this effort could be enhanced by the City of Aspen's participation. Our focus for the 2007-2008 year is to increase guest service operations at the Pitkin County Airport and promote community-wide guest service. We will continue to cultivate and promote the Faces of Aspen/Snowmass program with your support in the coming years. Thank you for your consideration C:\D000ments and Settings\dbraun\Desktop\ACftA contract amendmencdoc 4 MEMORANDUM TO: Mayor and City Council FROM: Bentley Henderson THRU: Steve Barwick DATE OF MEMO: 04-Ol-OS MEETING DATE: 04-15-08 gF; Burlingame Ranch Single Family lot issues REQUEST OF COUNCIL: Owners of the Burlingame Ranch Single Family lots will be presenting to you their concerns regarding the development of their lots at Burlingame Ranch. The issue of principal concern (as staff perceives it), is the resale limitation placed on the single family lots (subsequent to development). Secondarily, there is a concern that the Burlingame s.f lots were not programmed for any kind of annual cost of living adjustment. BACKGROUND: Staff has attempted to compile a historical body of information as it relates to the creation of the single family lots, and subsequent discussions as they pertain to the development of those properties. Based on the information that we have been able to coalesce, the resale limitation issue has been before the city council on at least 3 previous occasions. Staff memos reflecting these discussions aze attached. The most recent discussion resulted in an agreement by the City Council that additional subsidy's be provided the lot owners. Those subsidies have been appropriated and aze available. DISCUSSION: Resale limitations (cansl Staff is of the opinion that any modification to the present resale limitation is purely a policy issue to be considered by the City Council. There aze philosophical issues related to the discussion that do not necessarily involve City operations, nor do they have any impact to either the housing program or the housing development fund. Given that, other than providing some historical perspective, and analysis tools, staff has no opinion on the resale limitation issue, with the exception that staff feels that some sales limitation cap is appropriate. Page 1 of 3 Adiustments to Resale Maximums The annual adjustment issue is similaz to the maximum resale question in the fact that it is essentially a policy discussion. Staff has recently become awaze of the fact that no mechanism was put in place for annual price/value adjustments to the single-family lots and homes. Provided aze the results of an analysis by the Aspen/Pitkin County Housing Authority that show what the new maximum resale price of one of the properties would be had there been annual adjustments made starting when the lots were initially offered for sale. Housing staff has broken the calculation into two components, the lot fully developed and the other calculation based on an undeveloped lot. Pro osed with annual adjustment• Current/Ori . Cate o 6 Lot: $133,000 Sin le-famil home: $476,0001ot incl. $454,000 Cate o 7 Lot: $136,000 Sin le-famil home: $519,000 lot incl. $496,000 Category RO Lot: $161,841 Single-family home: $690,5191ot incl. $640 000 a~:_ _ _t __ ~•rr , -••-~ ••~~~= u===~=~ w.u, ~~ auacnea scneauie aue to the tact that the schedule reflects straight line appreciation of 3% annually. The number in the table above is the actual and includes a yeaz that CPI was less than 3%. One of the attachments is an amortization schedule that reflects what the annual (maximum) appreciation of the cap would be. I think that this tool is useful in the fact that it provides for an objective comparison of costs versus the maximum resale. Provided below is an abbreviated analysis intended to provide a context by which the discussion could be framed. As you work through this exercise the resale limitation issue and the annual adjustment question are inextricably linked. R.O lot example: 2200 sq ft. x $350 sq ft. cost of coast $770,000 total coast cost + 150 OOO lot cost $920,000 total lot and coast - 189 500 additional city council approved subsidy $730,500 net value of project for affordable housing calculations Based on the attached amortization schedule the payback for this scenario would be in yeaz 5, utilizing the base yeaz sales cap of $640,000. The most significant consideration for this examnle is that the adjustment is constant at 3% per yeaz. If the annual adjustment drops below 3%, the number of yeazs before full payback of development costs would be longer than the 5 shown in the example. Moving forwazd, per previous City Council direction the City will be the developer of the balance of the single family lots within the development. Page 2 of 3 4 RECOMMENDATON: At the very least staff recommends the retroactive application of annual adjustments to the maximum sales prices. These adjustments should be consistent with the rest of the APCHA inventory. The real question is "what is a reasonable time period that someone should be expected to wait before the investment made in the property is equal to what the property could be sold for?" One option would be to utilize the attached schedule with the recognition that if the annual adjustments aze lower than the 3% (as demonstrated in the APCHA schedule), the issue could be revisited and adjustments made going forwazd with the understanding that the recapture time period would not exceed (by way of example) 7 years. Lastly, an alternative was placed on the table last yeaz to have the city buy the lot back with some reimbursement for (reasonable) expenses to date. This issue has not been broached since the last time this discussion was had. This may again be a viable option. FINANCIALBUDGET IMPACTS: Notwithstanding the fact that the City Council may, at its discretion, choose to propose alternatives that have a fmancial impact, there is no specific budget implication associated with the discussion as presented. ATTACHMENTS: A. Letters from S.F. lot owners -Feb. & Maz. `07 a. Villaloz b. Ettlinger c. Carney B. Memo from Ed Sadler - 04-06 C. Memo from Bentley Henderson - 02-07 D. Analysis of Category appreciation - 03-07 E. Analysis of Development Costs - 04-06 (city staff) F. Analysis of Development Costs - 06-06 (Shaw Contt.) G. Packet from Diana Etlinger and Single Family lot owners - 04-08 C:~Documents and SettingsW-14 wk session sf lou budingame.doc Page 3 of 3 ~~~ March 11, 2007 Members of City Council City of Aspen RE: 0088 Forge Road Dear Members of City Council, I am sure that you have heard from the other single-family lot owners. I would like to have my position included as you make your decision regarding the affordable housing subsidy for Burlingame. I also have run into the same roadblocks in trying to build/plan as my fellow lot owners. I have not been able to have any builder, modular or stick built, even consider the project as my lot is Cat 6 with the $454k CAP - basically, it is not feasible. I originally won an R/0 lot and felt that the $650K would be hard for me to attempt. Months later, I was informed that I won the Cat 6 lot, still a stretch, but at least within reach. I knew that it would be a formidable project, but the thought of actually owning my own home, close to town where I live and work was amazing. I had been bidding in the housing lottery for 7 years- no luck. I signed the papers and took out the loan. Given the amount of time to make a decision, I concentrated on getting the loan and reading the information on building guidelines and such. It was my own fault, but I took it for granted that the city had done the budgets, surveys and planning to make it possible to build the 2200 sq foot house for that amount with the associated extra costs at or below the CAP price. There was definitely not time allotted to speak with builders or do the research (which I have since done) prior to buying the lot. Since buying the lot, I have sat down with numerous professionals and no matter how you run the numbers, there is no answer. As with the other owners, 1 never had any delusions of a Red Mountain or North-Forty home. Through our conversations with Asset Management and the other lot owners it has come to my attention that in fairness, and iri keeping with how the multi-family homes are priced- we should be afforded the same opportunity to build energy-efficient homes, with comparable finishes, fees and costs that we can be proud of. It has also been brought to light that, the Cat 6 should not be a penalty, but ad as the scale to level the playing field as was intended. Just as the same one- bedroom apartment in Centennial would sell for three different prices depending on the category, so should this property. Again, I am not asking for anything other than what has been standard practice for the Housing Authority. ~,b Jared and Diana Ettlinger 523 Park Circle Basalt, CO 81621 March 8, 2007 City of Aspen City Council Re: Bwlingame Ranch Single Family Lots Deaz Council Members: We write to wge you to support Bentley Henderson and Asset Management's proposal for asingle-family housing subsidy at Bwlingame Ranch. When we won ow Bwlingame lot in the lottery over a year ago, the City represented to us that we could build a 2200 square foot home on the lot within a $640,000 price cap. Tt soon became apparent to us that we could not. When Owners and staff suggested a price cap increase, Council was adamant that tbe cap should not be lifted, because "affordable housing needs to stay affordable." However, Council was unanimous in its support for Ending a way for us to build the houses we were promised on ow lots-and asswed us that the City would work with us to rectify the situation. Relying upon the Council's support, and ow faith in the City to make the single-family housing project work at Bwlingame, we spent thousands of dollars on architects to design a 2200 square foot home, and we have spent the past year of out lives cultivating our plans and advocating the changes we needed to get us there. We have invested numerous hours and have tried every method of bringing down constntction costs; we have researched alternative building materials, and we have sought bids from pre-fabricated home companies and builders. Still, we find the gap between what it will take to build ow house at Bwlingame and the price cap impossible to bridge. Now, a yeaz later, we have been presented by Mt. Henderson with a proposal that will fmauy permit us to build the homes we were told we could build when we pwchased ow lots, and the homes that Council envisioned when it created this project. With the ups and downs of this project, we never imagined that we would be presented with such a fair and equitable solution. The group of seven lot owners before you supporting this request is a group of qualified employees who need affordable housing and desperately want to build homes on our lots. If the Council does not approve Mr. Henderson's subsidy proposal, building ow homes will be unattainable and unrealistic for most of us. {ooobeazo.noc i z~ City staff has explained that its recommended subsidy is only meant to provide the single family lots with an equivalent subsidy that was provided to the multi-family housing at Burlingame: similar environmental features, similar finishes, and similar amounts of square footage. In fact, a category 7multi-family unit at Burlingame is actually the equivalent of 2300 square feet when storage space is added to the base amount of square footage, and a number ofmulti-family units have carports on top of this square footage. We are not seeking a new subsidy; we are seeking the same type of subsidy that has been paid for the remainder of the project, commensurate with our Resident Occupied ("R/O'~ category. If this has not been done in the past it is because the City has not sold lots in the past, and has never placed a cap on R/O housing, When the City makes new rules, it needs to keep them fair and reasonable, and to continue to promote the goal of affordable housing -keeping it affordable for us. The City has an amazing opportunity to provide local workers and their families with over fifty single-family homes at Burlingame Ranch, with mom for growing families. If the Council members cannot reconcile the idea of a subsidy for all ofthe single family Iots with their general policy and fiscal concerns, please find a separate solution for the remaining lots and approve the proposal as it relates to our lots. Please do not penalize the lot owners who have been searching desperately for neatly a year since we purchased our lots for a way to make the dream of building homes oa our lots a reality and who deserve to be permitted to build to the level the City represented we could build when we purchased our lots. Again, for our family and our future, we urge you to vote in favor of Bentley Henderson's proposal. Thank you. Respectfully, ~2~ Jared Eultnger and Diana ttlinger tooobsa2o.ooc izl ~~ DATE: February t3, 2007 TO: Mayor Klanderud FROM: Jennifer & Tim. Carney Burlingame Lot Owners - 0065 Forget Road RE: City Council Work Session-Tues.2/13/07 Proposal for the COA to act as developer of single family lots at Burlingame We support the city acting as developer of Burlingame Ranch's Single Family lots and would like to request that permission be granted for asset management to begin the analysis now. We believe that the outcome of their reseazch will present some new options for us. And from a timing perspective, we would like to see this happen sooner as opposed to later. Each day that passes represents time lost, dollars spent, and gets us closer to this year's building season. Asset Management's preliminary research shows that even the city (with economies of scale of working with the same developer, shazed labor force, and shared materials) will not be able to build within the single family homes price cap. And that additional subsidy's will be required for them to build within the price cap. We are facing these same challenges and as part of the analysis, we are asking that the existing lot owners be addressed in an equitable fashion. Moving ahead with the analysis will allow us to discuss alternatives and equity issues with Asset Management that will hopefully result in the ability for us to move forwazd and build. The lot lottery took place exactly one year ago today, Feb. 13, 2006. For the past year since we have won, we have invested a great deal of time, energy, and financial resources to try and move forwazd to build our own homes. But due to the challenges of Burlingame, it just has not been possible. We believe the city taking the step forwazd to act as developer will benefit existing lot owners and help us to reach our goal of building our own home. Please support staff moving forward with the analysis of the city acting as developer of the single family homes with existing lot owners being addressed in an equal and timely manner. ~~ L Date: March 9, 2007 To: Aspen City Council Members From: Jennifer & Tim Carney Burlingame Lot Owners RE: Response to Work Session 3-06-07, Burlingame Single Family Homes Thank you for reviewing the information in regazd to the Burlingame Single Family home proposal by Asset Management. We recognize this is a challenging subject and aze very appreciative of your time. Based on the comments we heazd at Tuesday night's work session, we understand that some council members still have concerns about our issues. We aze writing to help clarify these issues and hope that we will have an opportunity to speak to you in person to help explain them prior to Monday's council meeting. Please note the following points: 1.) Question: Why have we come to council? Answer: High cost of construction. It is not possible to build with -in the CAP. -Neither the City (with their advantage of economies of scale working with the same developer, shared labor force, shared materials, etc.) nor individual landowners are able to build at a reasonable rate that was originally. anticipated at the inception of this project. Labor & materials are expensive and the ability to secure a builder at a reasonable price is impossible in Aspen given the extreme competition of the multitude of multimillion- dollaz construction projects currently available. -Please note: We are not looking to build mansions with Red Mountain finishes. We are just trying to build, period. And to build with average finishes. 2.) Asset Management's Equitable Solution: Offer the single family lots the same subsidy that multi-family units are receiving. -Asset Management is proposing a subsidy that is "On Par" with what is currently being incorporated into the multi-family units as well as a square footage level that is "On Par" with the squaze footage of what's being built in the multi-family units. - The subsidy program is the same as the multi-family units, the difference is the product. One product is amulti-family unit and one is asingle-family home. But the program is EQUAL! - This program provides multi-family units at various sales categories to sell at established category prices. Additional fees aze not then chazged to these multi-family units for land, permit, and tap fees. The program would offer the same to the single- family homes. - We are not asking for more than what's already being done for multi family units! - The conversations we had with Asset Management really gave us hope...Hope that we were actually going to be able to make this happen and to move forwazd after a yeaz of much time, energy, and money spent trying to figure it out. And the ability to make it happen is based off of the equitable solution proposed by Asset Management "as is" and as it was presented to us by them last week. Suggestion of reducing to 1,900 sq. foot plan is catastrophic to us. Asset Management is well aware of the challenges we have faced. Per Council's direction last May, they have put a great deal of effort into working with us over the past year. We are confident that they have put a tremendous amount of thought into offering us the proposed subsidy. Asset Management fully understands the situation and has determined that their recommended solution, at 2,200 square feet, is the most fair and equitable given the circumstances (i. e. high cost of construction, fact that contracts were signed under premise given by City that 2,200 sq. ft. could be built for CAP, good faith actions of Council at previous proceedings, equality of program with multi family units, etc.) We aze just trying to live and work here as the affordable housing program was intended. And to build a comfortable home...for hopefully a growing family and one that we can stay in forever. We are not trying to build a Red Mountain mansion with designer finishes but a reasonable size home to accommodate a family with enough space to store the things we need for the active life style our community offers. (And we're just hoping to be able to build with average finishes, hopefully to the quality that the City is building in the multi-family units!) The fact is if this proposal is not approved, we realistically will not be able to proceed with this project. We personally find ourselves in a very difficult situation and being able to build at Burlingame is our opportunity...to stay in the Valley...to be a part of the Aspen work force... and to contribute to the community. Please consider our challenges and support the equitable solution as recommended by Asset Management's proposal dated 3-02-07. Thank you for your time. ~~~2~ To: Mayor and City Council From: Ed Sadler, Asst. City Manager Date of Memo: Apri117, 2006 Meeting Date. Jute 25,' 2006 RE: Bnrlingame~lot sales ' SUMMARYa In February 2006, the Housing Office offered 71ots for sale at Burlingame through the lottery process. The response was overwhelming with about 175 applications. The lots offered were 2 category 61ots and 5 category RO. The selling prices for the lots were~$119;400 fofthe category 6 and $150,000 for the RO's. I have delayed the offering of the second batbh of lots pending this discussion with you. The issue is that to arrive at the seven buyers, we went through 17 buyers as 10 did not culminate the deal; mostly due to costs and buyer inexperience. Please note that this is the first time that the City has offered lots for affordable housing projects, although lots have been offered by other parties. ~ - ,_~.,, PREVIOUS COUNCIL Al'I'~ON Oyer two year`s ago; City Council developed a pro forma thatwould allow 11ie Buringame project to proceed in Phases: The pro forma was dependa~n_tA}at that dime u~,~on selling several dots early in the project to generate cash to allow the`remamder of the project to proceed. Re"venues have changed since that time and the lot sales are not necessarily required to allow the project to proceed The. plan which Counct~d approve*has a total of 236rtotal units;which includes 3$ lots over the three phases and 13 of hose are inc-hided in Phase T. DISCUSSION First let me say that there is little doubt in my mmd that the prices for k9 ,}i5sa '9A? Sty.: v Ar.._3 d;.,Gi z`.-7 ... ,o.:.~ the lnt~c we have nffere ,s a ¢ood deal_ as free mar~Cet lots eo for this price or"more in ost, however seem to be tfiebiggest hurdle for the lottery winners fo pecially for the category 61ots Staff of the Asset Department and Housing .on after the lottery with t~lie appar"e`nt winners of the 71ots. It was` very gat meehng~that the lot winners had;lt'ttle or no idea what was going to be u,l~,n¢ a home atBurlineame. It was also obvious that few tf anv had done too 2. +"-` 1 -"`i; s rf24 ~.'q~ .1 2 aa_ hrgh considering the caps placed on the homes. The attached spread sheet shows what we estimate for pre-construction costs and therefore what the tvoical owner would then have available to actually build the home. If possibly lower revenue slightly based upon a final price per sq ft from the developer and the upgrades included in each home. Option six makes no changes to revenues. ENVIRONMENTAL IMPLICATIONS: Little or no implications are anticipated. RECOMMENDATIONS: Other than Option 2, I believe that all of the options listed above are acceptable. Because we have already had one lottery for lots, I do not believe that these opfions should apply to the first lottery with the exception of voluntary participation in Option 5. I believe that should you change the rules for the first lottery, that it will be unfair for either those 10 who opted out or the 7 who did enter contracts. I believe that this was just a significant enough issue for you to take the time to reexamine the opfions and costs. ALTERNATIVES: I believe that all of the alternatives are covered above. CITY MANAGER'S COMMENTS: MEMORANDUM TO: Mayor and Council FROM : Bentley Henderson THRU: Steve Barwick DATE OF MEMO: 2-19-07 MEETING DATE: 3-5-07 RE: Burlingame Single Family Lots SUMMARY: At your February 13th Work Session you directed staff to provide an analysis of the Burlingame Ranch Single family home sites with the city acting as the developer of those properties. Provided herein aze the results of that analysis. BACKGROUND: It became evident eazly on that there were going to be challenges in the development of the single family lots at Burlingame Raiich. The lot owners and staff realized the fact that the costs associated with building in this area and the maximum value caps placed on the lots were in conflict. The problems surface shortly after the initial sale and at this time last yeaz the City Council was being asked to consider provide relief from the maximum sales caps associated with these properties so that the lot owners had more flexibility in their development options. Provided in an earlier packet was a breakdown of anticipated construction costs for the lots. The important thing to keep in mind is the fact that these aze only construction related costs and do not include the lot price, permit fees, plan review fees, zoning fees, GIS fees, or tap fees. Staff estimates that these fees alone can be as high as $40,000. Couple those expenses with the original purchase price, ($150,000 for an RO lot) and the total in lot costs and fees gets pushed up to $190,000. What that leaves the owner is $450,000 for construction of the house (considering that the RO cap is $640,000). At $295.00/sq. ft. the structure would be roughly 1525 squaze feet in size. The question then becomes, is that enough? If you determine that a home of just over 1500 squaze feet is enough, then the balance of this discussion is rendered moot. If however, you want to permit these lot owners more flexibility in house size further discussion and analysis aze provided below. What we have determined following our rather lengthy discussions, is that the only way to make this work within categories and between those who choose to or not to participate in the city plan is to establish a cost per squaze foot construction cap, determine the size of subsidy that generates and use the subsidy as the equalizer across the lots. Our initial approach was to let everyone build to the cap and then essentially calculate the appropriate subsidy at closing. This theory did not hold up due to the fact that not everyone can afford to build to the cap, and therefore the subsidy could not be predicated on that component. Applying the subsidy across the lots uniformly made the most sense regazdless of the type of project one chooses to pursue. There aze a couple of things that may change the actual subsidies identified above, those being a situation where an individual may have lazge sums of money invested in plans that they may choose not to pursue, and if there is a desire by the City to further reimburse lot owners for carrying costs of their lot during the construction period. , So faz, the majority of the examples in the memo have referred to a lot owner that chooses to have the City act as the developer. The cases that most likely will result in the majority of the exceptions will be the lots where an owner chooses to pursue construction themselves. These projects were the reason we chose to establish as the benchmazk for equality, the subsidy amount. EXAMPLES OF AN OWNER BUII,DER LOT OWNER BUILDER CAT 6" OWNER BUILDER CAT 6' $119,400 lot cost $119,400 lot cost construction of 1700 construction of 1700 square $416,500 squar~eet $245.OOlsq ft. $416,500 feet $245.00/sq ft. Total Cost of construction Total Cost of construction $535,900 including lot cost $535,900 including lot cost gross amount to be gross amount to be borrowed =maximum per borrowed =maximum per -$454,000 category -$454,000 category $81,900 city subsidy $81,900 city subsidy (const. related) *minimum subsidy required to make owner Additional funds brought to "whole" in terms of outlay vs. cap. $78,100 closing c,en nnn .. *both examples aze representative of a best case project for both contt. costs and minimal squaze footage. **The right hand table demonstrates that even to get back to what is identified above as an RO subsidy ($160,000) significant additional funds would have to be brought to the table one way or another. FINANCIAL IMPLICATIONS: The analysis of fmancial implications will be analyzed on two conditions. The first being short term consideration as it relates to current funding for Burlingame in general, and the second is the impact the decision made will have on our long range planning efforts. Current budgetary will be predicated upon how many of these units we get under construction in 2007. As the developer, the City will essentially be fronting the money for the construction of these units, not unlike what we aze doing with the multi-family properties. 'The attached spreadsheets further clarify the budget impacts. Essentially, in terms of cun•ent revenue and funding sources we are in a good position to initiate construction on the three or four units from the first lottery. ~/ ' BURLINGAME RANCH AFFORDABLE HOUSING Anyalsis of Category Cap Appreciation March 8, 2007 RO Category Cap~"~ Appreciation Added Value New hse value $640,000.00 0.03 $19,200.00 $659,200.00 1 $659,200.00 0.03 $19,776.00 $678,976.00 2 $678,976.00 0.03 $20,369.28 $699,345.28 3 $699,345.28 0.03 $20,980.36 $720,325.64 4 $720,325.64 0.03 $21,609.77 $741,935.41 5 $741,935:41 0.03 $22,258.06 $764,193.47 6 $764,193.47 0.03 $22,925.80 $787,119.27 7 $787,119.27 0.03 $23,613.58 $810,732.85 8 $810,732.85 0.03 $24,321.99 $835,054.84 9 $835,054:84 0.03 $25,051.65 $860,106.48 10 $860,106,48 0.03 $25,803.19 $885,909.68 11 $885,909:68 0.03 $26,577.29 $912,486.97 12 $912,486'97 0.03 $27,374.61 $939,861.58 13 $939,861.58 0.03 $28,195.85 $968,057.42 14 $968,057.42 0.03 $29,041.72 $997,099.15 15 $997,099.15 0.03 $29,912.97 $1,027,012.12 16 $1,027,012.12 0.03 $30,810.36 $1,057,822.48 17 $1,057,822.48 0.03 $31,734.67 $1,089,557.16 BURLINGAME RANCH AFFORDABLE HOUSING SINGLE FAMILY LOTS SINGLE FAMILY DEVELOPMENT COSTS April 17, 2006 CRITERIA CONSTRUCTION CAPS ,, CAT-6 CAT-7 RO '$454,000 ,$4 LOT COST $119,400 $122,600 $150,000 STRUCTURE SIZE 1700 SF MIN 1900 SF MIN 1900 SF MIN FEES FEES REQUIIiED AND INCLUDED WITHIN THE CONSTRUCTION CAP CAT-6 CAT-7 RO HOUSE DESIGN FEES ARCHITECT @ 10% $30,000-$40,000 $40,000 DESIGN/BUILD $30,000 PACKAGE DESIGN $2,500 LOT COST $119,400 $122,600 $150,000 PERMITS TAP FI$16,000-$24,000 $16,000 $20,000 $24,000 BUILDING"PERMIT $5,500 $6,500 $8,000 GIS FEES INSPECTION FEES $1,500 $1,500 $1,500 REMP FEES ENERGY PLUS REQUIREMENTS $7,500 $7,500 $7,500 DESIGN REVIEW FEES $1,000 $1,000 $1,000 SPRINKLER $12,000 $12,000 $12,000 PERMIT FEE SUBTOTAL 5165,400 $201,100 $244,000 ., ~_. ~ BUILDER 5 L L C June 16, 2006 Mr. John Laatsch Asset Management City of Aspen Re: Single Family Home Prices Deaz John: We have provided magnitude pricing for the single family homes below. We have also provided a summary of the scope of work: Ma¢nitude Costs: 1700sf 1900sf 2200sf Construction Cost $391,000 $437,000 $506,000 Architectural $20,525 $22,925 $26,425 Structural $5,000 $6,000 $7,000 MEP $2,000 $2,300 $3,000 Landscape $2,500 $2,500 $2,500 Civil $2,000 $2,500 $3,000 Subtotal $423,025 $473,450 $547,925 The above pricing is for each home and is based on constructing (6) homes sequentially and located together. The design documents will be full CD documents and will comply with the existing. requirements as set forth in the PUD and by the building department's requirements of the single family homes. The design of the single family homes will not meet the same points that the multifamily homes complied with. There will be (1) review by building science corporation. The pricing above assumes that there will be (2) homes of each size. The CA by the design team will be very limited and on an as needed basis. There will be no communication between design/construction team and the purchasers. All time required for council meetings, purchaser meetings, building science meetings will be billed on a T&M basis. MEMORANDUM TO: City of Aspen Mayor and City Council FROM: Diana Ettlinger and Burlingame Ranch Single Family Lot Owners RE: Burlingame Ranch Single Family Lot Cap and Cost Issues DATE: Apri19, 2008 SUMMARY We are a group of seven lot owners who purchased lots at Burlingame Ranch two years ago, in early 2006. We aze encountering severe hazdship in fmancing and constructing our houses within the price caps established for our lots. We are requesting the City to increase the Burlingame Single Family Lot cap, or at least the cap as it relates to the five "Resident Occupied" ("R.O ") lots and two Category 6 lots sold to qualifying employees in 2006 to cover the actual cost of constructing houses on the lots in 2008 and beyond within the parameters established and re-established by City Council. BACKGROUND Five of our lots are R.O. lots with a resale cap of $640,000. R.O. Lots cost $154,380 ($150,000 plus a "stub out" fee of $4,380). Two lots aze Category 61ots with a resale cap of $454,000. Category 6 Lots cost $123,780.00 ($119,400 plus a "stub out" fee of $4,380). We are told this cap limits all expenses and improvements on the lot and thus every dollar we spend in excess of the cap before we obtain our Certificate of Occupancy is lost to us. After the Certificate of Occupancy is obtained, the Housing Office has dictated that we can make up to $64,000 in capital improvements (10%), which will depreciate annually, but any other costs incurred are at a loss to us. We have tried all means available to us of keeping our costs down. Most of us sought to use canned plans and build pre-fabricated homes. Our lots are small, long and narrow with a slope. This combined with an original minimum square footage requirement of 1900 feet and a maximum of 2200 and other stringent design requirements dictated that we hire azchitects, as no building plans could be found that could address all these factors. We also discovered some inconsistencies between the P.U.D. approval and the Housing Guidelines, and worked with the City and City Council to clarify that we would be permitted to build 2200 square foot houses with 500 squaze foot garages and basements calculated per the Code. Most of us have designed 2200 square foot houses with garages and fmished or anfurished basements to build out the full amount of square footage permitted. Most of us have or plan growing families and since the minimum was 1900 squaze feet we all chose {0015'/595.DOC / 1] to pursue the additiona1300 squaze feet. Additionally, a number of us aze planning pre- fabricated houses, which require excavation for crawl space, so the difference between a partial or full excavation and unfinished basement was not substantial enough to outweigh the added mechanical, storage and future living space of a basement. Most of us are choosing unfmished basements for potential later completion. Pazking is extremely limited at Burlingame and due to the space limitations of our small lots, we all chose garages or carports in order to meet the Burlingame Ranch Design Guidelines (the "Design Guidelines") parking requirements for single family homes. When compazed with the multi-family units at Burlingame, our square footage is not unreasonable; many three bedroom multi-family units at Burlingame aze in excess of 1800 livable squaze feet and have additional storage units outside the units, mechanical rooms aze not included in the square footage as they aze in our houses, and a number of these multi-family units also have carports lazge enough to house two vehicles. Our goal is to have finishes and environmental efficiency at least equal to the finishes in the multi- family units. As our plans progressed, we discovered that building within the $640,000 price cap ($454,000 for Category 6), which includes the price of the lot and pernut and tap fees, would be impossible. We approached City council in February, 2007 with a request to raise the cap. At that meeting staff revealed that the City priced the lots at $150,000 to generate revenue for the construction of the project in general, but due to a lazge housing fund surplus, this money was not necessary income for the City. Discussion further revealed that the $640,000 cap ($454,000 for Category 6) was based on the Stillwater employee housing project construction costs; not a single family housing project but multi-family housing that had been bid yeazs earlier. It became appazent that the $640,000 and $454,000 caps were set using old and not entirely applicable numbers. Asset Management and Bentley Henderson supplied estimated construction costs to show that we could not build within the cap and proposed a $189,500 subsidy for R.O. lots and a $344,000 subsidy for Category 6 lots designed to reverse the effect of purchasing the lots and to cover carrying costs rather than raise the cap. Council approved the subsidy. The result of the subsidy is to pemut the full $640,000 or $454,000 caps within which to build our houses. t Council also duected staff to provide an alternative for the City to buIld our houses for us. The City offered aone-time opportunity to build our houses for us at the maximum allowable square footage and sell the lots back to us for $640,000 ($454,000 for Category 6), minus our purchase price, tap fees and interest paid. Unfortunately, at this point most of us were too far along with our plans and had spent too much money pursuing our plans to choose this option. One Category 6 owner chose this option and Poss designed her house at 2200 squaze feet with garage and basement. Currently, due to construction costs well in excess of those anticipated in eazly 2007, the City is only building a shell house to ~ Notably, at the time [he City estimated that it would cost $650,000.00 [o build our houses. This was based on a rough bid from Shaw dated January 26, 2007. Asset management tells us this bid has increased substantially since the azchitectural plans were drawn, but it will not reveal what the latest cos[ estimate is. {00157595.DOC / 1} the entire level of the Category 6 cap, and the owner is contemplating completing all finish work with trades with contractors since there is no money left in the cap to finish the house. The remainder of us aze facing numbers that indicate we will be substantially over the R.O. and Category 6 price caps, respectively. CONSTRUCTION AND MISCELLANEOUS COSTS A. Overview of our numbers When we approached City Council about a cap increase, we had rough estimates for the constmction of our houses falling near or slightly over the $640,000 price cap. We have all been diligently pursuing the construction of our homes but fmalizing designs takes time, building permit review is averaging six months, and since our last meeting with council, those numbers have increased drastically. None of us have been able to negotiate fixed price contracts with any local contractor. Today those of us who aze far enough along have "fmal" estimates in the range of $840,000 to $922,000 (non-fixed so we will be billed for actual construction costs). In addition, contractors advise and lenders require qualification for fmancing with a 10-20% cost increase contingency. Unless the cap is increased commensurate with the rising costs of construction, R.O. lot owners face losing on average between at the lower end $237,340 (best case scenario if our costs do not escalate) and $470,875 (with potential taxes as further described below and 20% cost increase). Category 6 owners face losing potentially more. Please see chart attached as Exhibit A hereto to see our average carrying costs and estimated construction costs. We have spent an average of $20,000 on carrying costs (interest and taxes) alone for the past two yeazs. Most of us have spent additionally between $10,000 and $40,000 into planning our lots and one owner who is presently building has already spent an additional $660,000 to date. We can't afford to turn back, yet we can't afford to proceed. We are in a lose-lose position. We have no other choice but to return to Council for further relief. B. Subsidy Tax Issues The $189,500 R.O. subsidy has been issued to two owners for the construction of their houses and most of us aze ready or close to being ready to receive our subsidy; however we have run into a substantial tax issue. The City assured us that it would structure the issuance of the subsidy so as not to constitute taxable income. However, we retained local accountant Mike Otte, who has opined that the subsidy will constitute taxable income unless the City can provide adequate documentation to evidence that the subsidy is not intended to be income. This taxable income will add on to our ordinary employment income and put us in higher tax brackets. Part or all of our subsidies will be taxed at 33%. At 33%, $62,535 of the {00157595.DOC / 1f $189,500 subsidy will go to the LR.S. instead of towazd keeping our houses affordable. Bentley Henderson says he needs direction from Council to pursue this issue. I attach as Exhibit B two emails from Mr. Otte outlining the issue and his proposed solution. We request that the City direct staff to: (1) request its tax counsel to review Mr. Otte's proposal and issue a tax opinion on its viability and if it is not viable, propose other options; and (2) implement the tax strategy recommended that will keep the subsidy as Council intended it to be: providing direct relief to Owners for the costs of the land and improvements. C. Construction Costs have been increasing locally and nationwide With lazge development projects in Aspen and Snowmass Village and increasing development here and downvalley, workers aze busy and have increased their chazges. The costs of construction in the valley have skyrocketed lazgely due to high labor rate increases. However, costs of materials such as steel and concrete and construction costs generally nationwide have increased. See January 28, 2008 New York Times article "Building Costs Deal Blow to Local Budgets" attached as Exhibit C hereto? In addition, there aze a number of unique aspects specific to our lots that make building on a budget difficult and have added on to our overall costs: D. Cost issues specific to our lots 1. Narrow lots & Design Reurrements. Prefab designs do not fit. Architect costs have ranged so faz between $10,000 and $26,000, and aze expected to increase as azchitects play a continuing role in our projects. The narrowness and close proximity plays a role in excavation costs as well. The City originally had four R.O. lots planned where there now are five. With five foot setbacks we will all be within ten feet or so of each other's houses. Builders estimate that we will spend an extra $16,000 to stabilize our excavation on each side of our lots where an existing home is located to comply with building department requirements and to avoid harm to existing homes. 2. Design Review Committee (run by City) required a landscape azchitect or civil engineer prepared grading plan. Cost: $1,500. 3. Green Reuirements. We want to build green, but green costs (us) more. a. Publicly Funded Affordable Housing is required by Code to be 20% more efficient than free mazket. i. To achieve this, some of us will need to use spray in insulation in walls and roof (as in Burlingame multi-family units). Estimated cost: $30,000. ~ This article notes that "Nationwide, increasing costs fast became a problem for some projects more than two yeazs ago.... The list of culprits for the increase often depends on the rate of growth and construction in a particular region, with labor costs playing a role along with the rising price of materials like steel and concrete, and asphalt, fuel and other petroleum-based products." ii. A $7500 CORE subsidy is available for those who meet a threshold point requirement on the City's Efficient Buildmg Checklist; however, $7500 doesn't begin to cover the added expense of environmental add-ons, such as: (a) Solaz hot water: $5000. (b) Dual flush toilets (as in multi-family): $300 each. (c) Radon mitiga5on system: $1500. (d) Planting trees beyond requirements: $1,000-$3,000. (e) Icenyne Spray in insulation: $30,000 estimate. (f) Miscellaneous: non-toxic paint and glues, cabinetry. iii. Some pre-fabricated home companies offer a "high performance Energy Staz home" package that encompasses most (but not all) of the City's building efficiency requirements at the cost of $25,000 more per house. iv. After our meeting with Council last year staff discussed obtaining more environmental rebates but no changes have been proposed. b. Our units are required to have fue sprinkler systems (the Code does not generally require such system except for houses over 5,000 sq. ft.) Fire protection system estimates: $15,000-20,000. E. The City's Multi-family construction costs. According to Bentley Henderson, the City's actual cost per square foot for building Phase I multi-family units, not including the land or any development infrastructure, was $350 per squaze foot. Asset Management reports that it does not have hard numbers at this time for what Phase II will cost. Asset Management has solicited bids for six single family homes in Phase I, however it would not share these numbers with us. Asset Management did state that it expects the Phase I costs to increase substantially for the single family aspect of Phase I and for Phase II. Many Burlingame multi-family units have been occupied now for over 18 months. The $350 per square foot costs are for work that is up to three years old now. Additionally, multi-family units aze designed to be and aze naturally less expensive than single family units as they share walls, infrastructure and mechanical systems, and architectural costs aze reduced by duplicating design for multiple units. However, since these aze the only numbers the City has provided to us, we have applied $350 per square foot to our buildout to present generally what the cap would be if the City allowed us to build to the level it built the multi-family units. We discussed with Bentley Henderson what cost would be applied to an unfinished basement and garage. Bentley suggested that 40% of the livable squaze footage cost might be a good place to start in estimating these costs (contractors have advised we should calculate this space at 50% of the livable square footage cost). Forty percent of $350 = $140/square foot. Main livable azea: 2200 square feet x $350 = $770,000.00 {00157595.DOC / 1} Unfinished basement: 800 squaze feet x $140= $112,000.00 Gazage: 500 square feet x $140 = $70,000.00 TOTAL $952,000.00 Landscaping Estimate +$10,000.00 TOTAL WITH LANDSCAPING $962,000.00 20% construction cost increase contingency +192,400.00 $1,154,400.00 Thus the City's actual costs for building Phase I over the past several years, when compared to our actual cost estimates on Exhibit A, aze very neaz the projected cost to Owners to build our houses, with cost increase contingencies. We request the City to allow us at a minimum to build to the level the City built the Burlingame Ranch multi- family units during 2005-2007 and increase our cap to $350/square foot plus a cost of living increase and a reasonable allowance for garage and basement per our approvals. E. Background on the cap and R.O. housing We have received confusing and conflicting information as to how the Housing Office will view the $640,000.00 price cap. The cap has been presented as a static number and has not increased since it was conceptualized, even though the cost of living and construction has increased, and the City has afforded itself a cost of living increase on the sale ofmulti-family units at Burlingame Ranch. We have asked, but have never received an answer as to whether landscaping should be included within the price cap, or added on after the cap has been reached. We have landscaping requirements to meet per the Design Guidelines and planting trees, shrubs and perennials will improve our houses, our environment and our community. We feel actual landscaping costs should be added on to the resale value of our homes after the price cap has been reached. Additionally, it has been suggested that we can build smaller homes with the option of building out the fu112200 square feet, or build our houses with unfmished basements but when we fmish them we continue to be restricted by the $640,000 cap. Not only does this not take into consideration the exorbitant increases in the cost of constmction from yeaz to yeaz (based on our quotes up to 25%), this conflicts with the Housing Guidelines and we request clarification of this issue. The 2008 Aspen/Pitkin County Housing Guidelines ("Guidelines") state "There may be a maximum initial sales price for a newly developed Resident Occupied Unit. This will be based on aproject-by-project basis." Guidelines §6.1. After the initial sales price is set, {0015'1595.DOC / 1} the guidelines dictate that owners get dollar for dollar what they spend to construct a house to the maximum square footage permitted.3 The Guidelines during 2002-2003 set no cap on the cost of R.O. housing. The Guidelines were revised in 2004 to state that project can be subject to an initial price cap on case by case basis. To our knowledge, Burlingame Ranch is the first such case. Other Relevant Facts on R.O. Housing: • The R.O. category was created "to offer the private sector an incentive to produce affordable housing for the community." 2000 Guidelines Section 7. Prior to the North 40, R.O. housing was built by the City or private developers. • Caps have been placed on the initial sales price of R.O. units. In 2001, the cap was $465,800 for a three or four bedroom unit. However, the developer could request a special review to increase the maximum sales price by providing documentation that a higher price was needed. 2001 Guidelines §6.1. • Unlike category housing, there is no income limitation for R.O. owners. There is an asset cap of $900,000. If the cap is increased, R.O. qualifying employees can afford this level of R.O. housing. • R.O. Guidelines state "Single-family lots shall be developed with homes of three bedrooms or larger." This, along with our initial 1900 squaze foot minimum requirement, shows a preference in the guidelines for family-sized single family housing, which is what we aze all striving for in building 2200 squaze foot three to four bedroom houses for our families. CONCLUSION Many of us are expecting to build homes on our lots this spring or summer (we aze required by our deed restrictions to build our houses this year). However, given all of the unanswered questions and cost issues affecting our lots, it is impossible for us to proceed without a written commitment from Council as to how our issues will be addressed. Even with the generous subsidy City Council agreed to provide lot owners last year, we a "4. The maximum resale price shall be calculated as follows (unless specified differently in a recorded deed restriction). The appreciation is calculated using the simple method, not the compounded method. • the initial sale price of [he RO lot or unit, plus 3% or the Consumer Price Index (CPI) whichever is less, appreciation on that amount, subject to the requirements below; PLUS • the atonal cost to cnnatnret a nit n„ a Int, plus 3% or CPI, whichever is less, appreciation on that amount from the time of Certificate of Occupancy (CO), subject to the requirements below ;PLUS • anv additional cos[ to expand the unit to the maximum 2,200 squaze feet, plus 3% or CPI, whichever is less, appreciation on that amount, from the time of CO for [ha[ addition, subject to the requirements section stated below; PLUS • the a tc„~,al occ _t of permitted capital improvements stated in an exhibit attached to the deed restriction, n_ot to exceed 10% of the initial sales price of [he completed unit, or the expanded unit." Guidelines §6.4. {00157595.000 / 1] cannot build reasonable, efficient functional and attractive homes for families that meet the requirements of the guidelines and our initial approvals within the $454,000 and $640,000 price caps set by Council. There is a serious question for us as to whether we can even proceed given the reality of the costs to build our houses versus what we can recoup when we sell them. None of us can afford to lose the kind of money we aze estimated to lose. Banks will not loan money in excess of 80-90% of the price cap. Thus, unless the cap is increased, we will face fmancing difficulties in building our houses and some of us may be unable to build our houses. We request the City to raise the price cap to consider not only cost of living increases, but construction cost increases and the fact that individual employee owners do not have the resources and bazgaining power to fix their costs the way a municipality can. We are not seeking the price cap increase without justification. We have all spent several years of our lives looking for creative ways to keep our costs down. The City's own costs building multi-family units at Burlingame Ranch during 2005-2007 of $350.00 per square foot aze well in excess of the price cap for our housing. Based on experience over the past two yeazs, those costs will continue to increase substantially. We request that the City commit now to allowing us build our 2200 foot single family homes at least to the level the City has built for Burlingame multi-family housing, with a reasonable allowance for basement and garage, per our approvals and a cost of living increase. We cannot proceed to build our houses and receive financing without a current commitment. We request that the City consider adjusting this number upward based on the City's actual costs per squaze foot to build the six single family homes that aze planned for completion in Phase I. Finally, we request that Council direct City staff to obtain the opinion of tax counsel as to how to avoid the subsidies that have been and will be given to us for each of our lots becoming taxable income, which will defeat the effectiveness of these subsidies in being put to work to make our houses more affordable. This result will keep our housing as affordable as possible while allowing single family owners the same level of environmental efficiency and fmishes as the multi-family units, while minimizing the loss to us fmancially. We are providing the City with an asset by adding to the affordable housing inventory what we hope to be quality single-family homes that aze affordable to our respective price cap groupings. The price cap increase we seek does not cost the City any additional public housing funds, and will save us from depleting our retirement nest eggs by self-subsidizing these houses. Thank you for your consideration of this matter. {00157595.DDC / 1J EXHIBIT A BURLINGAME RANCH SINGLE FAMILY LOT COSTS R.O. Category 6 Lot Purchase Price $150,000.00 $119,400.00 Stub Out Fee $4,380.00 $4,380.00 Average Closing Costs + 1 000.00 +$1.000.00 Subtotal: Purchase Costs $155,380.00 $124,780.00 Average Carrvina Costs 3/2006-412008 Interest $20,000.00 $20,000.00 Lot Interest Reimbursement for lack of access to lots -$3,500.00 -$3,500.00 Tax Paid on lot reimbursement +$1,000.00 +$1,000.00 Taxes +$2.345.00 +$2.345.00 Subtotal: Lot Carrying Costs $19,845.00 $19,845.00 Sample/AveraaeSoft Costs to date Architect Structural Engineer Landscape Consultant -Landscape Plan Landscape Architect -Grading Plan (required DRC) Prefabricated Home Design Fees Deposits with Builder (non-refundable) Subtotal: Soft Costs to date $23,500.00 $2,500.00 $890.00 $1,500.00 $3,225.00 +$5.000.00 $36,615.00 36,615.00' TOTAL COSTS TO DATE $211,840:.00 ' $144,625.00 Lot Cost - -150,000.00 -119,40Q.00 Est.,Lot Increase in Value (1:7% 06-07 3% 07-08) +$7,050':00 +$5,617:80 Housing 2°~ fee to sell lot -3.141:00 -2..500.24 Sample Loss to date to sell lot $65,749.00 $28,336.56 Construction Costs Estimate Average $840,000.00 Additional Architect Oversight Estimate $5,000.00 GradinglLandscaping Cost Estimate Average +$10.000.00 Total Average Construction Costs $855,000.00 $855,000.00 Total Average Costs (Soft, Carrying+Construction Costs) $1,066,840.00 $1,036,240.00 City Subsidy -$189,500.00 -$344.000.00 Total Average Cost to Employee Owner $877,340.00 $692,240.00 Resale Value per current Cap -$640.000.00 -$454,000.00 Average Loss to Owner $237,340.00 $238,240.00 Additional Potential Losses: Tax on subsidy at 33% $62,535.00 $113,520.00 Construction Increase Contingency 20% $171,000.00 $171,000.00 Total Potential Losses to Employee Owner $470,875.00 E522,760.00 ' This number included in total average costs but not total costs to date since Cat. 6 owners have not yet incurred. ' Based on those who have wmplete price estimates based on plans submitted for permit. {00155620.DOC / 2) Page 1 of 2 Diana Godwin Ettlinger EXHIBIT B From: MikeOtte [mikeotte@aspencpa.com] Sent: Friday, February 29, 2008 8:24 AM To: Diana Godwin Ettlinger Subject: RE: Ettlinger/Burlingame Taxation Crisis Diana, I just read your email. My reading of the attachment from Bentley Henderson seems to indicate that the "subsidy" would be used to reduce the debt of the homeowner. This apparently satisfies the town's concerns about having the homeowner comply with certain guidelines. Your email indicates that Mr.. Henderson say the intent is that this subsidy would not add to the homeowner "basis" because it would be paid directly to the lender. Unfortunately, the IRS does not always see tax consequences in a transaction the same as a taxpayer or a local government might wish. Let me give you some thoughts about various elements of this transaction: 1. Cash paid to a third party for the benefit of a taxpayer can be taxed the same as if it went directly to the taxpayer. The implication here seems to be that by paying the taxpayer's debt directly, the transaction would have no tax consequence. In an IRS audit it's very likely that the taxpayer would be considered as having received a taxable benefit either from "debt relief', or thought the "constructive receipt doctrine". 2. Income tax "basis" is a concept that is created by various federal income tax rules. Intent in many cases is an element that is considered when analyzing tax consequences. But items that affect "basis" cannot be added or deducted simply by one having the "intent". If a taxpayer incurs a cost it adds to basis. Let me summarize my understanding of the details. If this is not correct please let me know: You purchased a lot through the City's process to build your residence. There are ceiling limitations for the amount that one can spend, or incur debt and still meet the qualifications. Overtime the cost of construction has increased. It seems now that the original guidelines make it financially impractical to be able to build a reasonable quality residence, yet still meet the maximum financial qualifications. The City wishes to facilitate the problem, but not change their guidelines. Hence, the idea of paying a subsidy to the lender directly with a hope that this would solve the problem. Also a former official believed that this strategy could be used without any tax consequence to the homeowner. My concern is that, if you incur costs for construction, land, and related costs, then those costs add to your basis. If the City pays off part of your debt, that was incurred in paying for those costs, then they payoff is a taxable event. If we were starting at day one the transaction might want to be structured differently for the best outcomes. Now we are trying to make the best by looking backwards. Everyone would like to find a solution. I think it will take more thought and research by the City to get there. I do not have an immediate and final recommendation to create that solution at this time. I have not reviewed all of the related documents and covenants and guidelines. I would be happy to assist if needed to help find a solution. Let me know your thoughts. Yours truly, Mike Otte CPA, CVA 4/4/2008 ,• EXHIBIT B Diana Godwin Ettlinaer From: MikeOtte [mikeotte@aspencpa.com] Sent: Saturday, March 01, 2008 4:01 AM To: Diana Godwin Ettlinger Subject: Budingame Issues Hi Diana, I wanted to put these thoughts down before they left me What if: the City passes 'a resolution that provides for some of the following: To amend and restate the terms of the settlement of your purchase of the lot. In order to correct an error or inequity which may have occurred where you purchased the lot for a certain price according to an interpretation of the pricing guidelines, and for the City to preserve its public policy regarding affordable housing, which is in the best interests of the community these corrections are made to the original purchase. Ln addition you as the purchaser would be required by the City to agree to these amended and restated terms as a condition of final approval and issuance of a certificate of occupancy. Then the resolution would provide that the original purchase price be reduced by $x dollars, and certain other expenses such as tap fees or other soft costs that you may have paid be reimbursed to you by the City. what ever dollar change that may be required ($189K approx.) would then be provided by the City in the form ~of a corrective payment directly to your construction lender or what ever source that was used to purchase the land originally. The resolution should also include recitals to provide foundation for the transaction being considered as intended and agreed by all parties to be only a correction, and certainly not intended to be a taxable event. It seems to me that this approach would provide any income tax preparer or IRS auditor with a reasonable basis for the proper out come. The more formal the resolution the better. This approach would go back to the beginning of the transaction, and make the City payment a corrective measure. This would put things back to where they should have been, as opposed providing a "subsidy", after the fact, which looks more like an additive finacial benefit to your financial world, and a target for taxation. The "subsidy" format could create the negative tax consequence we discussed earlier. One worst of all tax worlds could be having the "subsidy" taxable up front, but not finding out till you are audited a couple of years later. You would be then suject to additional tax, penalty, and interest. Let me know if you want to discuss this any further Best, Mike Otte CPA, CVA ' Bnil'ding Costs Deal Blow to Local Budgets -New York Times Page 1 of 3 p~ EXHIBIT C ~~}r ~1rtu ~o[~C ~riimr~ PRfXi£R iRI£X6CY PoflMFi nyttme~s.rc~rt7 ~P°"saR.°~, January 26, 2008 Building Costs Deal Blow to Local Budgets By WILLIAM YARDLEY SEATTLE -State and local governments in many parts of the country are struggling to pay for roads, bridges and other building projects because of rising construction costs, adding another burden to budgets already stressed by the troubled housing market. The problems have come as many governments pursue ambitious projects to improve roads and airports, build schools and upgrade long-neglected water and sewer systems. Many of the projects were conceived when money from property, sales and income taxes was steady and interest rates low, but officials say the ground has shifted beneath their feet. "Everybody's scared,° said Uche Udemezue, director of engineering and transportation for San Leandro, Calif, which will soon put out a request for construction bids on a retiree center and a parking garage. "You don't know what you're going to find when you go out to bid.° Costs have jumped for projects as varied as levee construction in New Orleans, Everglades restoration in Florida and huge sewer system upgrades in Atlanta. The reconstruction of the Interstate 35W bridge in Minneapolis, a $z34 million project, has been fast-tracked for completion by December, and state officials say it is too soon to know whether it will come in on budget. The impact has been felt in different regions at different times, and not every project has been high-profile. In Oregon, high costs have forced the State Department of Transportation to slow the rate at which it upgrades roads and bridges. In Seattle, school building projects were put on a fast track this fall because of fears of cost overruns. "We escalated our project schedule to get ahead," said Fred Stephens, director of facilities and construction for Seattle Public Schools. Nationwide, increasing costs first became a problem for some projects more than two years ago, and in some regions the rate of increase has dropped in the past year. But some regions are tighter than ever, and the pressure from the high costs can be more acute in the context of general revenue declines. The list of culprits for the increases often depends on the rate of growth and construction in a particular region, with labor costs playing a role along with the rising prices of materials like steel and concrete, and asphalt, fuel and other petroleum-based products. Experts say high costs are linked to competition from a global development boom, particularly in China and India; the housing boom in the United States; and the rush to rebuild after Hurricane Katrina in 2005 and other recent hurricanes that struck Florida and the Southeast. In the Northwest, public projects have competed with downtown construction surges in Seattle and Portland. Just across the Canadian border, http://www.nytimes.com/2008/O1/26/us/26build.html? i=1&ore~slogin&emc=etal&pagewanted... 3/31/2008 Baifding Costs Deal Blow to Local Budgets -New York Times Page 2 of 3 hotels and highways are being built to prepare fo~~~4~rVVinter Olympics in Vancouver. The costs have added to what has become an increasingly bleak economic forecast for many states and local governments. At ]east z5 states expect to have budget deficits in 2009, according to the Center on Budget and Policy Priorities, which estimates the combined budget shortfall for i~ of the states at $3r billion or more. Many cities, too, see difficult times ahead as revenues wane and costs increase for wages, pensions and health care. "We're talking about all levels of government being in some revenue constraints at a time when the service costs aren't going down," said Chris Hoene, the director of policy and research for the National League of Cities. In some places, the news is not all bad. Recent declines in residential construction are beginning to force contractors to be more competitive when they bid for government work. Yet some government officials see that as a dubious silver lining. In Oregon, low bids for recent bridge projects came in at $t8 million, about to percent below what the state had projected. That was unimaginable a year ago, but the relief is relative, said Tom Lauer, the major projects manager for the Transportation Department. "We've been getting hit so hard that we've been pumping them up the last couple of years,' Mr. Lauer said of the state's internal cost projections. "I didn't get a price break," he said of the recent bid. "I may just have more predictable pricing. I still can't afford to do other stuff' In Newcastle, a growing Seattle suburb, the situation is emblematic of the struggles confronting towns and school districts across the country. Two main goals prompted the improvements now under way on a main thoroughfare, Coal Creek Parkway. Widening a bottleneck on the road would help relieve congestion on nearby Interstate 405. And doing it with style -using steel on a bridge to evoke an old train trestle and installing landscaped medians between lanes -would send the signal that Newcastle is ready to do business. Then the bids came back. "Slack jawed," said John Starbard, the city manager, when asked his reaction to the bids. Mr. Starbard said even the project's engineering consultant, CHzM Hill, was stunned when what they believed was a very conservative $38 million estimate in March 200 was met with a low bid of more than $44 million for a mile's worth of road and bridge improvements. But waiting to build was not an option. The city had already received help from Senator Pattv Murray, Democrat of Washington, and state lawmakers, as well as the State Transportation Improvement Board. It went back to the board and received $z million more. "It was a shared sticker shock, but they had seen this with other projects so they were not as surprised," Mr. Starbard said of the board. In Newton, Mass., a Boston suburb with a population of more than 80,000, the estimate for the new Newton http://www.nytimes.com/2008/Ol /26/us/26build.html?_r=1 &orei=slogin&emc=eta 1 &pagewanted... 3/31/2008 ` Building Costs Deal Blow to Local Budgets -New York Times Page 3 of 3 North High School was $io4 million in 2004. Foitt~e~~~aTBr, the foundation is about to be poured and the estimate is now at least $r86 million, said Jeremy Solomon, a city spokesman. Mr. Solomon said about $25 million of the increase involved changes to the original plan, for asbestos abatement, adjustments to the heating and air-conditioning system and other factors. Otherwise, he said, the increase resulted from rising building costs. "We kind of got caught in a period where construction costs grew rapidly," said Mr. Solomon, citing steel and fuel costs, among others. The need for public improvements only grows greater. Costs are rising even as engineers across the country say infrastructure is rapidly decaying. In San Leandro, a city of ~8,00o in the San Francisco Bay Area, Mr. Udemezue said the city could not afford to delay work on the parking garage and retiree center. "We can't wait," he said, "because we don't know if the prices are going to come down or go up." In the grading guide known as the Pavement Condition Index, zero is not far from a dirt strip and roo is a fresh new roadway. When Mr. Udemezue began working for San Leandro t6 years ago, the average road ranking in the city was nearly ~o. Now it is closer to 60, despite what Mr. Udemezue said were the city's efforts to keep up maintenance. Years ago, there was more money in the cit}~s general revenue stream that could be diverted to help with basic maintenance, which Mr. Udemezue said required about $5 million a year. That general revenue now goes to other needs, like public safety, and the roads go wanting, with flat revenue from gas taxes and other declines leaving about $t.2 million to maintain roads each year. The $t3 million retiree center and the $8 million parking garage have been affected, too, with the city dropping plans to build commercial space beneath the garage and reducing the space for social programs in the center. Mr. Udemezue and others say they have heard that things may be stabilizing, but they cannot be sure. Even in places where the rise of costs has slowed, said Ken Simonson, chief economist with the Associated General Contractors of America, "it's dormant at best." CoovriaM 2008 The New York Times Comoanv Ply Policv ~ &samh ~ Correclicns ~ ', RSS First Look ~ ya7Q ~ Contact Us ~ work for Us ~ $ilC.MaQ http://www.nytimes.com/2008/Ol/26/us/26build.html? r=1&oref=slogin&emc=etal&pagewanted... 3/31/2008 MEMORANDUM TO: Mayor and City Council FROM: Bentley Henderson THRU: Steve Barwick DATE OF MEMO: 04-07-08 MEETING DATE: 04-15-08 RE: Burlingame Phase II Site Plan alternatives REQUEST OF COUNCIL: Provided for your consideration are some Burlingame Phase II site plan modifications. The modifications aze twofold, 1) consideration for underground pazking, and, 2) consideration of revised building/pazking area configuration. The two alternatives are not interrelated. Staff's request tonight is to see if the City Council would like to pursue either of these options further. BACKGROUND: Per direction given on at least two different occasions, staff is moving forward with the pre-development planning activities for Burlingame Phase II. One of the efforts underway is the development of grading and drainage plans for the Phase II section of the property. As our consultants got into their analysis of this component of the predevelopment activities, they realized that the topography of the site provided for an opportunity to install some underground parking. Additionally, this detailed review of the property prompted the development team to review some of the building/pazking lot layouts. Along with the underground pazking concept, the site development team is recommending the relocation of two building envelopes, and two parking azeas. DISCUSSION: As stated above, the desire tonight is to provide the city council with an alternative relative to the site planning of Burlingame Ranch. The team is to the point in its effort to be able to make some alterations to the site plan without substantially changing either the timing of the work, or the overall scope of the project. Conceptual approval is in place for the project as a whole. Our land use consultant is of the opinion that unless the proposed changes are substantive ie. density or general configuration changes, the final PUD application process can continue to move toward final approval. Page 1 of 2 FINANCIALBUDGET IMPACTS: As you will see from the attached DHM memo preliminary cost estimates for the structures is $4.75 million. Cleazly this estimate was developed to set the stage for additional discussions. The development cost identified above only reflects the cost associated with the structures themselves, and does not reflect saving opportunities that we aze continue to explore. Some of those immediate savings opportunities include (as identified in the memo) fewer truck trips for excavation spoils hauling as well as material importing, and a potential for savings in overall concrete poured on site. ENVIRONMENTAL IMPACTS: The longer term benefits to the site, the environment, and the residents are numerous in number but also difficult to quantify. Those include, additional open space, better living environment as the result of less impervious surface, and an opportunity to incorporate a geothermal component into the project. Additional environmental benefits are outlined in the associated materials. RECOMMENDED ACTION: Staff request at this point is to get a sense of where the City Council stands on the two items presented. Should be move forward with reconfiguring the site as it relates to the "swap" of the single family home sites and the pazking aze, and shall we further our investigation of the underground pazking option. If the answer to the later question (underground pazking) is yes it would be our desire to establish some pazameters by which the analysis would move forwazd. For example, if there is no net expense to the project in terms of up front construction costs versus savings in hauling and concrete. Or, do the long term benefits to the residents in snow removal and asphalt maintenance make the project feasible given some base expense criteria. ATTACHMENTS: A. DHM memo B. Site Plans a. Current site plan b. Pazking structures c. Revised site plan H:~Bulingame mb-gamell site plan alt.doc Page 2 of 2 DESIGN LANDSCAPE ARCHITECTURE LAND PLANNING URBAN DESIGN Burlingame ranch phase II parking structure preliminary analysis TO: City of Aspen Asset Date: April 9, 2008 (DRAFT) Management RE: Burlingame P2 parking structures Introduction Over the past few weeks, the Burlingame Ranch Phase II design team has been reviewing and refining the conceptual plan for the development of Phase II. The livability, sustainability, and community character goals that drove the design and development of Phase I continue to guide the team in the refinement of this second Phase. With these guiding principles in mind, we have sought to identify opportunities to improve the character, function, and sustainability of the site plan within the context of the original Conceptual Approval. Phase II Overview Phase II of Burlingame Ranch includes 139 housing units in multifamily & single family buildings, and 192 parking spaces in surface lots & tuck-under parking. Under the current plan, surface and tuck-under parking is distributed across the site in an effort to provide reasonable parking access to each unit without creating large expanses of surface parking in any one location. Parking Structures The team has identified two locations on the Burlingame Phase II site that allow the introduction of single- level, underground parking structures into the project with minimal site plan impacts. The first site is located within the loop road at the north end of Phase II, and would serve the northern portion of the Phase II site ("north parking structure"). The second is located to the southwest of the four-way stop at the entrance to Burlingame Ranch, and would serve the southern portion of the Phase II site ("south parking structure"). The project team has created a preliminary analysis of the two parking structure options. The attached information is intended to facilitate the discussion of the feasibility and desirability of parking structures. The team is seeking a go/no go decision directing the team to revise the plans to include one or both parking structures,•or abandon the parking structure option. This memorandum is intended provide an introduction to the proposed addition of parking structures. Three diagrams are included with this memorandum: (1) the Current Site Plan, showing building and surface parking layout; (2) the Revised Site Plan with Parking Structures, showing building layout, reduced surface parking, increased open space, and the outline of the parking structures; (3) the Parking Structures Option, showing the conceptual layout of the underground parking and maintenance equipment "shop" in the context of the site plan. 580 Mai^ Street, Suite 110 I Carbondale, CO 86123 1970.963.6520 I www. dhmdesign. com The existing and proposed grades within Phase II provide the opportunity to add the parking structures underneath proposed multi-family buildings and open space (much like the current tuck-under parking access in Phase I) without artificially raising the elevations of the residential buildings. The roof of the parking structures double as public open space and patio space at the ground level of the residential units. The team is exploring the inclusion in Phase II of a "ground-source heat pump" system, which will provide highly efficient heating (and even cooling) to each unit in Phase II. This system requires a central pump facility; the north parking structure provides an ideal location to house this facility in a climate controlled environment, without adding the density of new buildings to the site. The team has worked under the assumption that total residential unit count and total parking counts for Phase II are not to change from the original Conceptual Approval. As such, surface parking in Phase II will be reduced by the total number of spaces in the proposed parking structures. Small areas of surface parking remain where needed to provide guest and ADA accessible parking; these spaces are dispersed along the loop road. The reduction of the surface parking on the site allows for the creation of new and larger open spaces and the limitation of the impact of parked automobiles along the street. These new open space areas may be "recaptured" as passive open space, a children's playground, or additional site stormwater management. Additionally, the collection of parking within the sub-grade structures and subsequent reduction of surface parking significantly reduces the impervious area of the site, and reduces the "heat island effect" (the significantly hotter microclimate at the surface of an asphalt parking lot) of the overall project. At full build-out, Burlingame Ranch presents a significant property management and maintenance task. The parking structures provide the opportunity to house on-site property management equipment in three separate, dispersed locations on the site (within the Commons basement and in the two parking structures, in dedicated "shop" space). Additional space within each parking structure may be allocated for rental parking spaces for "toy" storage, or extra lockable storage units for residents to use. The parking structures will not be heated, with the exception of the property management "shop" space, and possibly the central pump plant for the ground-source heat pump. Mechanical ventilation will be required, as a majority of the structures will be completely underground. The excavation of the parking structures will yield a significant amount of fill material; as Phase II will require soil import, this site- sourced material will reduce truck trips to the site. The excavated material will be processed on site, and used as roadbase and backfill. Though further study will be required to determine the volumes of cut and fill on the site, the team would attempt to use the parking garages to balance the cut and fill on the site, significantly limiting the number of truck trips required to and from the site. The covered parking will also provide annual savings in dollars and energy expended to maintain the site, particularly in the reduction of plowing during winter months. The team has discussed ways to innovatively use the parking structures to further decrease the carbon footprint of the project, including the ground-source heat pump central plant. A summary of the pros and cons of the underground parking is included on the following page, along with preliminary, order of magnitude costs. These costs are based on team members' recent experience with similar construction in Aspen, but should be considered conceptual. More detailed review of the proposed underground parking -including parking allocation and discussion of the site grading -will be most effective during our meeting as we can explain the adjustments to the site and directly respond to your questions. 580 Main Street, Suite 110 I Carbondale, CO 86123 1970.963.6520 I www. dhmdesign. com Summary of Pros and Cons Pros: - Reduction of automobile impact on site plan -cars are 'hidden' underground. - Improved open space by the reduction of surtace parking areas; areas for children's playground or passive park space. - Convenience of covered parking for homeowners. - Reduced maintenance costs - no plowing or snow storage required within parking structures. - Simplified management - easier to paint (and less frequent to repaint) numbers, etc. - Creation of additional areas for HOA shop/maintenance equipment. - Possible creation of toy storage rental spaces or additional storage units (HOA revenue generator). - Ability to house ground source heat pump central plant in garage, eliminating site impacts of additional pump plant building or vault. - Duplication of uses -roof of parking structure doubles as public open space. Cons: - Concentrated parking means that some units will be more distant from parking (relative to the surface parking version of the plan). - Additional costs. General Environmental Benefits/Impacts - Reduction in dump truck traffic to and from site for site fill. - Reduction in maintenance equipment carbon emissions. - Reduction in car warming/idling in winter months. - Reduction in "heat island effect" (from surtace asphalt lots). - Reduction in impervious material/stormwater runoff (from asphalt lots). - Increased concrete use for underground structures. Order of Magnitude Costs - Order of magnitude cost for 2 parking garages, totaling 112 covered parking spaces, plus 2,000 square feet (approx) for HOA shop/storage and 2,000 (approx) square feet for central pump plant, and 5,000 square (approx) for additional storage spaces: $4,750,000.00 - This cost includes a savings of approximately $ by the reduction of asphalt surtace parking lots/spaces, and $ by the reduction of fill import on the site. - The HOA will realize an annual savings of up to $6,000.00 (over the all-surface parking scheme) based solely on the reduction of snow plowing. 560 Main Street, Suite 110 I Carbondale, CO 86123 1970.963.6520 I www. dhmdesign. com W w W = N N Q S U w Z Q m ~ o lal z o ~ 5 Q a C7 ~_ Z N ~ m J z o ~ w o ~ N m U V W ~~ U ~ w ~Q~ N ~ I d ~~• z ~'n • z ~ ~ •• YQZ 1 •~• K y W ~ - •• dUW ~ ,`. ~ ••• xao ~ J ~~• ~ H i • oma `, ~ %` ~••• z ~o f ._ / \ •• ~~, -•, Y i '1, C N. 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