Colorado Outdoors LLC’s hoped-for workforce housing development took a major step forward Friday, when the state housing authority awarded it critical low-income housing tax credits.
The news came on the heels of Montrose County’s decision Wednesday to assign its $1.1 million private activity bond capacity to the Colorado Housing and Finance Authority on behalf of Colorado Outdoors.
Colorado Outdoors had applied with CHFA for a 4 percent low-income housing tax credit allocation, and on Friday received news the application had succeeded.
“I think it’s great. We were the only project awarded outside of the Front Range,” Colorado Outdoors President David Dragoo said. “That puts Montrose back in the forefront.”
Colorado Outdoors is a multi-acre development in northern Montrose that includes the headquarters of Mayfly Outdoors, the parent entity of Ross Reels and Abel Reels. As well, it is the site of a hoped-for outdoor industry business park — and, on the southern end, possible workforce housing.
This potential project, called The Park at Colorado Outdoors, envisions about 72 units, a mix of one-, two- and three-bedroom rentals, for workforce housing, which is severely lacking in rental-hungry Montrose.
Many steps remain before Colorado Outdoors can proceed with The Park, but its plans are winning local government buy-in, as well as the CHFA award.
“If we have an opportunity to help the citizens and do better things for our community, we want to be aware of it,” Montrose County Commissioner and board chairwoman Sue Hansen said, shortly before a unanimous vote Wednesday to assign the county’s 2019 private activity bond capacity to CHFA on behalf of Colorado Outdoors.
Separately, Montrose City Council is considering assigning its 2019 private activity bond capacity to CHFA for the same purpose; this totals more than $1.03 million.
The IRS allocates a per-capita bonding authority to each state each year, which is called private activity bond capacity, or “PAB cap.”
Municipalities or taxing authorities issue the bonds, but are not obligated to repay the investors who buy the bonds. Underwriters use the investors’ money to make a loan to privately developed projects, which then pay back the loan and investors are repaid with tax-exempt interest.
Private activity bonds can be used to finance multi-family rental housing projects for low- and moderate- income earners; to provide qualified parties with mortgage loans, or to issue mortgage credit certificates for first-time homebuyers, according to information from the county. Private activity bonds are key to making rental housing available for the 4-percent low-income housing tax credit, per the county’s information.
CHFA had earlier asked Montrose County to assign its private activity bond capacity on behalf of Colorado Outdoors. Typically, the county has returned its PAB allocation to the state fund balance, County Finance Director Cindy Dunlap said.
CHFA is also the allocator of state and federal low-income housing tax credits. Its award Friday was for the state 4-percent low-income housing tax credit.
Dragoo said CHFA’s approval allows Colorado Outdoors to take the next steps in financing The Park.
It will also be seeking a 9-percent low-income housing tax credit. (Although the 4-percent credit can be used with private activity bonds, the 9-percent credit cannot.)
“The tax credits become the equity,” Dragoo said Thursday. “The rents (that would be charged) are not high enough to support a market-rate project right now and that’s why you need the tax credit.”
Colorado Outdoors will also approach the U.S. Department of Housing and Urban Development for a permanent loan that specifically funds construction projects like The Park; this process will take months. Colorado Outdoors would then need to find a buyer for the tax credits and take multiple other steps.
“But the first step is the most important one to getting there. It’s awesome,” Dragoo said Friday.
Montrose County commissioners on Wednesday ultimately backed assigning the county PAB cap to CHFA, even though, at the time, it wasn’t certain whether Colorado Outdoors’ application would succeed.
Hansen asked what would become of the PAB cap if that application failed.
Once the PAB caps are assigned to CHFA, they become CHFA’s, Karen Harkin, CHFA’s Western Slope community relationship manager, said.
“If they (Colorado Outdoors) get the allocation of tax credits, I’m very confident the project would move forward. They are very confident to making this project go forward,” Harkin said at the time.
She said if it failed, though, CHFA would do its best to make sure the county’s PAB cap would at least help a Western Slope project, which reassured county officials.
“I think this is a good project and that it’s a good plan looking forward that we can take advantage of, for western Colorado and specifically, Montrose County,” County Manager Ken Norris said. “It’s a good project.”
The City of Montrose is also considering assigning its PAB cap to CHFA on behalf of Colorado Outdoors’ workforce housing proposal.
“It’s not money we get or things we’re giving away,” Virgil Turner, city director of innovation and citizen engagement, said.
The IRS’ annual housing bonding authority allocation is divided among states to make sure projects using PABs are being fairly distributed, he said.
“It (The Park) meets our goals to bring additional workforce housing to Montrose, as well as affordable housing,” said Turner, who also sits on the Montrose County Housing Authority board.
The MCHA has agreed to administer project-based vouchers for units at The Park, if it is built. These federally funded vouchers would help qualified tenants whose income falls at or below 30 percent of the average median income.
Friday’s news means the tax credit can be paired with the project, Turner said. He said that in his memory, this is the first time the 4-percent tax credit could be used with PAB cap allocations for a local housing project.
S.B. Clark Companies, the public finance consulting firm that is assisting Colorado Outdoors, is “thrilled” about the affordable housing tax credits, vice president Alisa Wilson said.
“The state tax credits will enable this important development to move forward and provide much-needed affordable rental housing in Montrose,” she said.
Katharhynn Heidelberg is the Montrose Daily Press assistant editor and senior writer. Follow her on Twitter, @kathMDP.