Loading...
HomeMy WebLinkAboutagenda.council.worksession.20120424 THE CITY OF ASPEN MEMORANDUM TO: Mayor and City Council FROM: Chris Everson, Affordable Housing Project Manager THRU: Barry Crook, Assistant City Manager L . DATE OF MEMO: April 20, 2012 MEETING DATE: April 24, 2012 RE: Burlingame Phase II Presales REQUEST OF COUNCIL: Direction requested on Burlingame Phase II Presales PREVIOUS COUNCIL ACTION: To address community concerns about demand for affordable housing, on March 22, 2011, staff proposed a multi-part plan for Burlingame Phase II presales, and Council directed staff to proceed with the Reservation List phase of the presales program, which is currently in progress. On September 27, 2011, the status of the presales effort was reported by staff to Council as 206 total applicants with 68 of those APCHA qualified, and Council directed staff to produce 60 mortgage-prequalified applicants which may allow Council to consider starting construction of infrastructure in 2012. At the March 6, 2012 City Council work session, staff reported that 67 applicants had become both APCHA-qualified and prequalified for a mortgage thus Council directed staff to start the civil infrastructure construction, defer decisions on the number of units to construct and what those unit categories should be and schedule an April 24, 2012 work session to define future presales steps related to deposits and unit selection. There are currently 76 dual qualified applicants. BACKGROUND: The presales plan that was originally proposed by staff on March 22, 2011 consisted of the four parts listed below: 1. Reservation List (initial sign-up and APCHA qualification) 2. Reservation Agreement(Signed agreement with refundable deposit) 3. Presales Agreement (Signed agreement with non-refundable deposit) 4. Final sales agreement/closing DISCUSSION: Mortgage prequalifications were intended for Step 2 (Reservation Agreement) in the above list, but were incorporated into Step 1 (Reservation List) at Council's request. Another condition which has changed is that the demarcation between Step 2 (Reservation Agreement) and Step 3 (Presales Agreement) was originally intended to be the public vote on debt-financing. Council has since decided to cash-flow construction from the 150 Fund thus there is no longer a clear break point between steps 2 and 3. Because of this, staff sees the opportunity to streamline the presales process and proposes the following: 1. COMPLETED Reservation List (initial sign-up and APCHA qualification) 2. Presale Agreement (Signed agreement and refundable deposit) Page 1 of 3 4E THE CITY OF ASPEN 3. Sales Contract (Signed agreement, earnest money that becomes a post walk-through non-refundable deposit) Presale Agreement: Staff proposes that the Presale Agreement would provide the qualified applicant with the right to reserve a specific unit for purchase in return for the applicant placing a $500 refundable deposit. The City cannot currently guarantee the delivery of the unit since the final decision on vertical construction has not yet been made by City Council. Thus, to be an equitable agreement, the $500 deposit should be refundable for any reason at any time while the Presale Agreement is in force. The applicant is given the opportunity to select the unit which they intend to purchase, and the selected unit is noted in the agreement. Barring conflicts, the applicant may change their unit selection while the Presale Agreement is in force (subject to units still"unsold".) Staff considered an alternative method where the Presale Agreement would instead reserve a place in line for unit selection to occur later, but allowing unit selection to occur immediately could be a more efficient, streamlined, less time-consuming process, and it could also create excitement which may incentivize applicants to come forward and sign a Presale Agreement sooner rather than waiting ("This is my chance to pick my unit") Staff has heard concerns that this process could be problematic and chaotic thus staff proposes the below methodology for allowing applicants to select their units in an orderly way, while giving appropriate priority to those who went through the effort to get signed up during the already-completed Reservation List process. a) Upon Council go-ahead, applicants would be asked to sign a Presale Agreement and place a $500 refundable deposit to be held in escrow. b) Every unit in buildings 1-7 (82 units) would be assigned a category designation. c) Existing applicants for units of categories 5, 6 and 7 who have already become both APCHA-qualified and mortgage prequalified (there are currently 3) would be given the first 3 weeks to sign the Presale Agreement and pay the deposit and select their unit from any of buildings 1 through 7, thus offering them top priority for unit selection. Unit categories will be resorted if necessary to reflect the current mix for categories 2, 3 and 4. d) Existing applicants for units of categories 2, 3 and 4 who have already become both APCHA-qualified and mortgage prequalified (there are currently 73) would be given the following 6 weeks to sign the Presale Agreement and pay the deposit and select their unit from any of buildings 1 through 7, thus offering them the next priority for unit selection. No changes in category mix would take place at this time. If, for instance, category 2 units sell out, a waiting list would be created for additional category 2 unit sales in the future. e) After the 9-week period described above, any applicant who becomes both APCHA- qualified and mortgage prequalified may sign the Presale Agreement, pay the $500 deposit and select their unit from any of buildings 1 through 7 in the chronological order in which deposits are placed. Page 2 of 3 THE CITY OF ASPEN f) Again, no category mix changes would occur in this Phase of the presales effort— those decisions would be deferred until we report back to Council in late Fall 2012. Decisions do not have to be made even at that time — and we would recommend no changes be made until the next phase of presales is nearer to completion. Sales Contract: The proposed Sales Contract process would not be very different from the Sales Contract and closing process used by APCHA for resale of existing properties as part of their everyday operation, except it is proposed to have a timeline of approximately 6 to 9 months rather than 6 to 9 weeks. During vertical construction of the project, construction of each housing building will take 6 to 9 months. At the start of construction of any housing building, applicants who have selected a unit in that building would be asked to sign a Sales Contract at that time. Unlike an APCHA resale situation, staff proposes that the closing date would not be immediately set. Instead, when the unit is far enough along in construction to have drywall installed, a,final walkthrough and the closing would then be scheduled at that time. This would be about 6 to 9 weeks to closing. When the Sales Contract is signed, the applicant must increase their deposit level to a total of $2,000 by paying an additional $1,500 to the already-collected $500. This $2,000 serves as the applicant's earnest money, and is equal to the usual $2,000 that APCHA collects as earnest, money for resale of existing properties and is thus consistent with APCHA's usual process. Like every APCHA sale, the $2,000 earnest money is non-refundable unless the applicant cannot secure a mortgage. However, unlike the usual 'APCHA sales process, it is proposed that the applicant be allowed the final walkthrough to make a final purchase decision before his earnest money becomes a non-refundable deposit. This is proposed because, up until the final walkthrough, the applicant has never actually seen the unit in its near-completed condition. If an applicant chooses to opt out at the final walkthrough, they will either choose another available unit if a unit in their category with the number of bedrooms they need is still available (there is no guarantee that there will be another unit available in their category with the number of bedrooms that they need), or they will be allowed to exit their sales contract. So after the walkthrough a decision on committing to the purchase of the selected unit, changing to another unit or backing out of the agreement must be made. The earnest money will be refunded or it will become a non-refundable deposit and a closing date will be set. RECOMMENDED ACTION: Staff recommends that Council consider the above process and provide direction on how the staff should proceed with the presales program so that Council may be able to make an informed decision later in 2012 about whether or not to begin vertical construction (construction of housing structures #1 through #7) in 2013 for Burlingame Ranch Phase IIA. CITY MANAGER COMMENTS: Page 3 of 3 MEMORANDUM TO: Mayor and City Council FROM: Phil Overeynder, Special Projects Engineer THRU: Dave Hornbacher, Director of Utilities & Environmental Initiatives DATE OF MEMO: April 19, 2012 MEETING DATE: April 24, 2012 RE: Ridgway Hydroelectric Project REQUEST OF COUNCIL: During the work session, staff will present City Council with detailed information regarding the Ridgway Hydroelectric project. Staff requests City Council support of staff preparing a contract between Aspen Electric and MEAN regarding the purchase of hydroelectric energy produced at the planned Ridgway hydroelectric facility. The contract will then be presented to City Council at a regular council meeting for consideration and approval. PREVIOUS COUNCIL ACTION: In 2007, council appropriated funds in the amount of $400,000/yr. to add 20 million kWh/yr. of new renewable energy to Aspen's existing energy portfolio. The $400,000/yr. applies to the incremental cost of new renewable energy above "Schedule M" rates (50.057/kWh). Under the direction of Council, staff proceeded in year 2009 with a contract through MEAN to purchase 5 million kWh of supplemental wind power increasing the City of Aspen energy portfolio to 75% renewable. This equates to 25% of our 20 million kWh goal at an approximate cost of$100,000/year above Schedule "M" rates. BACKGROUND: Nearly a decade ago, the City of Aspen began discussion with Tri County Water Conservancy District (TCWCD) as part of our long term electric energy management strategies. This developed into the working relationship we share today with TCWCD and the opportunity before us. The Ridgway Dam and Reservoir were completed in 1987 with provisions for future hydropower development. Tri County Water Conservancy District(TCWCD) operates the dam and controls releases to satisfy water requirements of irrigators located downstream of reservoir, as well as end-users in Ouray, Montrose, and Delta. Page 1 of In anticipation of the need for new renewable energy, staff partnered with TCWCD to complete hydropower feasibility studies at Ridgway Reservoir beginning in 2002, and has since invested in two updates to these studies. TCWCD has obtained "Lease of Power Privilege" from US Bureau of Reclamation the only license required to construct and operate the proposed facility. TCWCD has also secured 3 firm price bids for installation of a power plant, which includes two turbines and generators. Financing is already in place for construction of the plant, and they are now in a position to select and award a construction contract that would provide for power production beginning in CY2015. The Municipal Energy Agency of Nebraska (MEAN) has been retained by Aspen to draft terms of power purchase agreement with TCWCD. DISCUSSION: The Ridgway project contract as proposed will contribute 10 million kWh annually of renewable energy to the City's energy portfolio. In combination with previous wind purchases and the proposed Castle Creek Energy Center, these 3 projects are the most effective method to achieve Aspen's aggressive renewable energy goal of 20 million kWh and elevate our overall energy portfolio to 95% renewable energy. This is a decisive step in reaching the goal of 100%renewable energy by year 2015 as envisioned in the Canary Initiative crafted in 2005. The proposed purchased output from the Ridgway project fits Aspen's unique demand curve and existing portfolio extremely well. Our peak energy demands occur during the winter months, which is when Ridgway energy purchases will exclusively occur. Also, CCEC energy output will—if completed peak during the summer months, making these two projects complementary. From a financial perspective, the proposed Ridgway agreement, as negotiated, is very advantageous. The current agreement allows Aspen Electric to "roll over" unused energy each month because of a "power swap" arrangement through MEAN with the City of Delta. As a result, Aspen Electric will only pay for energy used, saving the City hundreds of thousands of dollars per year in excess energy charges. Additional wind energy purchases, often suggested as an alternative to hydroelectric power, are more expensive and lack the long-term cost assurances of Ridgway (Ridgway rates are indexed to inflation of"Schedule M"). Lastly, it is important to note that Ridgway is neither a replacement nor an alternative to the Castle Creek Energy Center, due to immutable aspects of our current power purchase agreement with MEAN (Ridgway provides an equivalent amount of kWh as those permitted projects listed in "Exhibit A" which it replaces. Summarily, there is no more room for similar offsets in our current agreement with MEAN). FINANCIAL/BUDGET IMPACTS: The Ridgway project will have no additional budget impacts due to the fact that the $/kWh negotiated ($0.059/kWh, indexed to MEAN) is roughly equivalent to current "Schedule M"rates. Due to periodic rate inflation freezes also negotiated, over time Ridgway will present a cost advantage over "Schedule M"power purchases. Page 2 of 3 Final budgetary considerations are dependent on the details of the contracts recommended and will be reviewed with City Council before action on any of the required agreements. ENVIRONMENTAL IMPACTS: The powerplant would be operated using normal operational releases from Ridgway Reservoir. Minimum streamflow commitments (Bureau of Reclamation 1976) would be maintained and downstream releases for irrigation, and municipal and industrial water would not be altered by the Project. An Environmental Assessment has been completed by the BLR: "Overall, the hydropower facility has the potential to improve downstream fisheries at Ridgway State Park and should have no effect on the reservoir fishery." Additionally, the new hydroelectric plant will qualify as a local renewable energy facility and as such will receive (under state law) between 150 to 200% of Renewable Energy Credits (RECs) for each kWh produced. RECOMMENDED ACTION: Staff is requesting council's direction to prepare a power purchase agreement through MEAN related to the Ridgway hydroelectric project. Staff will also require direction to work with MEAN to amend the "Exhibit A" of our existing power purchase agreement to substitute the Ridgway hydroelectric project for projects the City is not currently pursuing (e.g., hydroelectric projects near Ashcroft and the Maroon Bells). ALTERNATIVES: If Council does not approve the power purchase agreements and related Ridgway project, there appear to be two immediately available options: 1. Pursue additional wind purchases at significant added cost ($355,443/yr vs. $141,154/yr.); 2. Continue with existing contracts and project commitments and fall well short of our renewable goals (83% with CCEC on line in 2014). CITY MANAGER COMMENTS: ATTACHMENTS: N/A Page 3 of 3