Project's finances caused concerns
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Tamara
Miller
October 6, 2004
AVON - It all seemed a little too familiar.
An affordable housing project unable to pay its construction
loans. Requests for financial help. A soft rental market keeping apartments
vacant far longer than expected.
Commissioner Michael Gallagher saw a similar scenario at the Mountain Glen
project in Gypsum. While serving on the housing board that oversaw Mountain
Glen, Gallagher watched the complex go bankrupt. And in his mind, Buffalo Ridge
- the affordable housing project above I-70 in Avon - seemed on track to do the
same.
Commissioner Tom Stone agreed.
After seeking input from County Administrator Jack Ingstad - and only receiving
assurance that the project would be OK for a year - the two commissioners
believed the Lake Creek Affordable Housing Board, which oversees a complex in
Edwards, should deny Buffalo Ridge's request for $200,000.
"I don't believe in throwing good money after bad," Stone said.
Why was the money needed?
Nevertheless, the Lake Creek board approved Buffalo Ridge's request. Even more
concerning to the two commissioners was that two of their appointees -
Commissioner Arn Menconi and local businessman Rob LeVine - approved the
request, the commissioners said.
Shortly after, Menconi and LeVine were removed from the Lake Creek board.
Buffalo Ridge's developers also asked Avon for more funds. That request never
made it before the Avon Town Council because its members believed they had
already done enough to help, said Town Manager Larry Brooks.
The fact that Avon wouldn't give more money to Buffalo Ridge was also a bad
sign, Stone said.
And after learning Buffalo Ridge had already received almost $1 million in
outside help, he was more convinced the development was in financial trouble,
Stone said.
"I didn't know until after the fact that (Eaglebend housing board) had
already given $600,000 worth of seed money," Stone said. "Michael and
I both agreed that this was so similar to the money that was wasted on the
Mountain Glen apartments. This was another Mountain Glen in the making."
But the details paint a different picture. The Eaglebend
Affordable Housing Board gave $600,000 to Buffalo Ridge and Avon did handed over
$495,000 out of a community block grant.
But those grants were not for overruns, they were part of the initial plan to
pay for the projects, said Jamie Fitzpatrick, Lake Creek board member and vice
president of Buffalo Ridge's development company, Corum Real Estate.
"There was a total cost of the project and the sources to pay for those
costs were a combination of HUD loans, the block grant and the grant from
Eaglebend," Fitzpatrick said.
Charity or subsidy?
LeVine and Menconi, who both have backgrounds in real estate management,
believed the grant was a good one, and would simply be the last piece needed to
get Buffalo Ridge on its feet.
Both sides concede Buffalo Ridge had a difficult time leasing out apartments in
the beginning. The complex eventually began offering deals, such as reduced
rent, for the first few months.
Buffalo Ridge is nearly 100-percent leased now, Menconi said. And he disputes
comments made by his colleagues that there is a glut of affordable housing in
the valley, he said.
"In fact, there is just a small amount of extra capacity now," Menconi
and LeVine wrote in a recent column explaining their actions. "While demand
for housing can quickly outstrip supply in a single season, providing adequate
inventory takes several years of planning."
A copy of the wire transfer request shows the $200,000 was sent directly to the
title company for Buffalo Ridge. While Menconi strongly disputes claims the
grant was a direct subsidy for a private developer, Stone stands firm.
The construction over-runs are the fault of Corum, the developer, Stone said.
And since $130,000 of the $200,000 grant will go to pay off construction loans,
that money is essentially helping a private developer meet its financial
obligations, Stone said.
"That's not quite true," Fitzpatrick countered. "Remember, the
developer has no ownership interest in the deal and had no obligation to cover
those shortfalls."
And construction overages were only part of the problem,
Fitzpatrick said. The softer rental market was the real unforeseen challenge
because Buffalo Ridge failed to bring in enough revenue in rents to pay for the
balance of the construction loan.
Rent rules
But Stone said the $200,000 grant was inappropriate because Fitzpatrick sits on
both Lake Creek's and Buffalo Ridge's boards. Both projects are managed by Corum
Real Estate and, Stone said, Fitzpatrick's involvement could be a conflict of
interest.
Lake Creek's $90,000 grant to the Riverview complex in Eagle-Vail differs
significantly from this scenario, Stone said.
"First of all, there was no person who sits on both boards," he said.
"I only sit on the Riverview board, and we didn't have Corum as a
management company."
Conflict of interest, aside, it is common to have money transfers between boards
with similar members.
For example, Jeff Spanel serves on the housing boards for Eaglebend, Buffalo
Ridge in Avon, and Kayak Crossing in Eagle-Vail. Eaglebend has given money to
Buffalo Ridge, and has made a loan to Kayak Crossing.
Because Buffalo Ridge is being built using federal Housing and Urban Development
loans, rents must be affordable to people making no more than 80 percent of the
average local wage.
If the complex had not received the grant, it may have had to raise rents to
make ends meet, Fitzpatrick said. Not only would Buffalo Ridge lose the federal
loans by violating the rent requirement, but the complex would no longer be
affordable, he said.
"(The grant) was made to help affordable housing," Menconi said.
Staff Writer Tamara Miller can be reached at 949-0555, ext. 607, or tmiller@vaildaily.com.