The Montrose Urban Renewal Authority’s investment in Colorado Outdoors has climbed significantly since its first expense in 2017.
Here is where the financial picture stands for MURA and Colorado Outdoors:
The MURA investment and financial projections
As of May 9, MURA has spent over $11.7 million and has taken slightly over $13 million in promissory notes from the City of Montrose. A portion of the expenses have come from the city’s general fund and water fund.
According to a 2020 report from Anderson Analytics, projected tax increment financing revenues (TIF) in the second stage of the project is $15.2 million. Revenues from the first stage are projected to be $4.5 million for a total of $19.8 million through the first two stages.
The report from Anderson Analytics did not take into account the planned Colorado Outdoors Medical Center, which is an estimated $30 million project and can generate property tax for MURA.
The MURA board has $375,766 in a balance from outside grants and projects developed at lower prices than expected. It can use funds from that balance to supplement future projects, but that would also require approval from the board.
Why MURA proposed a new funding approachWithout the planned Marriott hotel, which can generate property, sales and lodging tax, the projected TIF revenue drops to $14.5 million. (Excavation for the hotel project started on Wednesday.)
MURA’s investment is inching closer to the low-end projection of TIF revenue, and the hotel and Wedge Brands building are yet to be online. Brad Hughes, county assessor and MURA board member, proposed using existing funds from MURA’s cash balance to pay for Shelter Distilling’s site improvements.
Shelter’s founders are expected to request up to $700,000 — rather than borrow additional loans from the city.
Commercial projects within Colorado Outdoors are expected to generate high tax revenues, at a 29 percent assessment rate. The assessment rate for residential taxes, such as those expected to come from the Basecamp Apartments, is likely to be 6.8 percent.
Upon full build out, which Montrose County estimated around $11 million, Basecamp would generate a little over $56,000 in annual taxes, including personal property tax. Of the $56,000, 80 percent, or $45,226, would be diverted to MURA.
Since MURA issued $1.3 million for site improvements for the project, it would take a little over 30 years to pay the principal back with the tax return hovering around $45,000 for MURA.
At Basecamp’s high-end estimated value — $16 million — and at an assessment rate of 6.8 percent, the estimated annual taxes, including from personal property tax, are $79,648. MURA would receive 80 percent of the $79,648, which equates to $63,719. At this rate, it would take over 21 years to pay back the $1.3 million, according to county projections.
With Basecamp providing a fraction of the funds needed for repayment, it adds importance to see momentum around projects such as the hotel and other commercial projects, which can generate higher tax totals in a short period of time, Hughes said.
Hughes also mentioned that it could take years before the MURA board begins to see substantial TIF returns — the first time MURA might see full tax revenue from the Basecamp project could be around 2024 to 2025, though this depends on completion of the buildings within the project since the buildings’ value won’t be added until the following tax year.
For other projects such as the hotel and distillery, it might follow a similar timeline.
“We don’t know what the future holds,” Hughes said in an interview. “The economy could take a downturn or construction materials could continue to rise. Nothing is guaranteed until construction is proceeding and something is coming out of the ground.”
Why MURA could stick with its previous funding approach
Bill Bell, city manager and executive director of MURA, reiterated the importance of investing in projects such as Shelter Distilling’s during an executive MURA board session on May 18.
Over the life of the Colorado Outdoors Renewal Urban Area (URA) — up to 2042 —Shelter Distilling’s project could generate $2.2 million in sales tax, just over $500,000 in meal tax and $1.6 million from property taxes.
At that rate, after an estimated 18-month lag period, the payback period to MURA is less than approximately seven years, Bell said.
A $4.4 million return on investment pays back nearly half of the MURA’s existing debt of $11.7 million, Bill said. He said MURA should base its decisions project-by-project.
Other board members, such as Barbara Bynum, have emphasized this approach in previous meetings. Bynum added there’s incentive to invest in the URA because the MURA board must pay back the city at a 4 percent interest rate on the money that was borrowed.
“It’s a great deal to borrow money at 4 percent for the URA,” Bynum told the Daily Press. “We aren’t going out and bonding, which is more expensive — you pay a lot of money when you bond. We’re borrowing from the city and it’s a great deal for the city taxpayers because they are earning 4 percent on that money and that’s a great return. It’s really a win-win for the URA and the city.
“We have healthy fund balances,” Bynum added. “The city is in a good financial position to lend money to the URA.”
Bynum cited the city’s sales tax reports, which have shown considerable increases in retail sales tax in each month year-to-year since 2020.
She also mentioned Colorado Outdoors’ potential for job creation and how the campus can make Montrose even more attractive for residents and businesses.
The private investment
The amount of private investment from developers and project leaders exceeds $65 million, according to David Dragoo, founder of Colorado Outdoors. The total includes private investment from those leading the Fairfield by Marriott hotel project but not for the planned Colorado Outdoors medical center.
The $65 million from the private sector also does not include the investment from Shelter Distilling, which has a cost of around $13 million for its project and private investment is upwards of $12 million, Dragoo said.
In total, private investment for Colorado Outdoors projects is approaching $100 million, Dragoo said, with costs for materials rising.
“At full build out, we knew the investment would exceed several hundred million in total. With several new projects starting, and with inflation, we will get to the first $100 to $125 million sooner that we thought,” Dragoo said.
Hughes, Bell and Bynum each agreed that without MURA’s initial investments and support towards developers and project leaders, the private investment amount wouldn’t be where it is today.
“That’s private money being spent that would not have been spent if the city and MURA hadn’t invested money in the infrastructure,” Bynum said.
When can repayment occur?
The repayment schedule is flexible, which means that MURA does not have set deadlines on when payments to the city need to be made.
That, Bynum said, provides MURA with flexibility and helps stimulate economic development in the URA.
But the lack of scheduled payments gives Hughes pause, he said, considering construction timelines can fluctuate and incur delays.
However, he said it benefits MURA that the tax collection is cumulative — property and sales tax are expected to be higher than the year prior during the life of the URA.
“That’s why more activity out there is better,” Hughes said. “The more people that come out there and the more projects that start, the better chance this thing has of doing what it was designed for.”
Bynum said she doesn’t see a situation in which MURA is unable to pay back in full with interest. She added it’s too early to wonder whether the city might have to find other ways to collect potential debt if MURA can’t make a full repayment.
“This is a 20-year process,” Bynum said. “If in year 18 we haven’t paid back our debt, then we can worry. But I really think we’re still in the very beginning of this URA process. This is still the right time to invest money knowing that there is going to be a return and a benefit to our community.”
Hughes said the situation is currently in a “holding pattern” as MURA waits for projects to come online, which will later generate tax collection for repayment.
“If it gets paid back and with interest, then it probably was a good deal for the citizens because they’ll get the principal back plus interest,” Hughes said. “But it has to happen. You have to know you’re getting paid back in full. That’s the risk.”
The MURA board is expected to vote at its meeting in early June on whether to approve the funds for site improvements for Shelter Distilling and how exactly it will pay for those.
Dragoo previously said 2022 was shaping up to be a “busy year” for the Colorado Outdoors campus and current timelines for projects align with that belief — the modular sections of the hotel could start being placed this summer and Shelter’s founders want to break ground this fall.
Secret Creek’s facility should be complete in June and the additional construction of the interior of the Flex Buildings is ongoing.
Josue Perez is a staff writer for the Montrose Daily Press