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The municipal council provides support for grant applications for proposed workforce housing

On July 2, the city of Pagosa Springs formally lent its support to a Montrose-based developer, Colorado Outdoors LLC, for a More Housing Now grant application and also voted to enter into a developer agreement with the company.

The grant funding, for which the city must be an applicant, would come from the Colorado Department of Local Affairs (DOLA) and would be up to $2 million for public infrastructure improvements that would serve the proposed Pagosa Peaks apartments, an agenda document on the matter explains.

The developer is proposing 96 moderate-income rental apartments and would be part of a 99-acre subdivision development east of Pagosa Springs Medical Center.

The apartments will serve those earning between 80 percent and 120 percent of the area median income (AMI), with each apartment building containing 24 units, the document said.

Part of the development would house a 30,000-square-foot building for Archuleta County administrative offices.

“These two projects are proposed to occur as part of a phase one of the proposed development of the large subdivision,” the document states.

The grant funding would help the developer build these apartments below market rate and create moderate-income rental housing in the community, the document says.

Community Development Director James Dickhoff explained that the public infrastructure to which the funding would be applied “could be roads, could be sidewalks, could be water, sewer, electric — things that will help serve this proposed housing development.”

He noted that with the amount of roads and utilities that would need to be installed to serve the development, the city would probably apply for the full $2 million.

He explained that in addition to the resolution supporting the grant application, the city would also need to enter into a developer agreement with Colorado Outdoors LLC.

He said the developers, Heidi and David Dragu, were in the room at the meeting and that “this was an opportunity for the city to apply for an additional housing grant now … to benefit this proposed housing development.”

The grant funding would require a 25 percent match, which the developer would be fully responsible for, as well as a 30-year deed restriction to ensure an average of 90 percent of AMI is maintained for the entire Pagosa Peaks apartment development, Dickhoff explained.

Rental costs for the apartments would be targeted at the so-called “missing middle” income level, or AMI level, because other grant and tax credit programs are more geared toward helping development projects targeted at lower income levels, Dickhoff explained.

The project’s developer, David Dragu, explained that the project aims to fill the gap between the market rate and the percentage of Low Income Housing Tax Credit (LIHTC) projects, which typically fall between 60 percent and 80 percent AMI.

Dickhoff explained that the filing is due Aug. 1, “so there’s some legwork to be done between now and then,” adding that the developer will “do a lot of that legwork.”

He added that this is “a great opportunity” for the city to indirectly support local workforce housing, rather than becoming directly involved in the housing industry.

“This is a developer who is willing to work with us, and we’re willing to work with them to help them make their project a reality, and it’s pretty rare that we get developers who are really committed to workforce housing and to a 30-year statute of limitations,” he said.

The developers will also apply for Proposition 123 funding. The city would not have to be a party to those applications, he added.

A concept plan for the apartment complex was available and presented at the meeting, where Dickhoff explained that the concept plans are only preliminary, as they have not yet gone through the city’s Planning Commission review process.

“So, in a way, this approval to submit the grant application would supersede the actual processes that the development has to go through for their proposed development in accordance with our development code,” he explained.

David Dragu said his development company “has a lot of experience and works exclusively in rural areas, small towns and small towns in the western part of the state.”

He explained that the company’s experience includes multifamily housing, adding, “We’ve done it in Colorado Springs and on the Western Slope, and we’re currently doing one in Montrose and in Moffat County.”

He added, “And we have a track record of getting these grants, and we work with cities, and that includes state funding, especially DOLA funding.”

The proposed apartment development would be “targeted at the people who run our cities — the nurses, the police officers, really what we refer to as ‘the missing middle,'” he said.

The project “would fill the gap” between the LIHTC project near Walmart and the standard market rate, he said.

“This funding is really critical to delivering the AMIs that we want,” he said, explaining that workforce-build housing costs the same as market rate development, “but we have to cap rents, and so this really makes that possible by provide the public improvements and make the business work.”

He explained that multi-family housing, as opposed to single-family units, is critical to growing the local job market because people “need a place to land” when they take a new job in town.

He also added that multifamily housing can serve as an important transition for members of the local workforce who want to transition from the rental market to home ownership.

In addition to the apartment units, the subdivision development would include smaller single-family homes and larger residences, “so there’s an opportunity there to move up,” he said.

Heidi Dragu added that the developers are reviewing the housing needs of the community and as part of that, they have been talking to local employers about the housing needs of their employees.

She said there is “a history out there, a lived experience of business owners and workers, and we want that history to inform the development of our project.”

Councilman Mat deGraaf wanted clarification on whether the proposed apartments are a single tip, “where you have the multi-family units as workforce units, and then there’s the county section (administrative building), and then the subdivision, where the subdivision is all market rate, right?” he asked.

The subdivision would be “market-rate single-family homes,” David Dragu clarified.

Heidi Dragu added, “I think the idea is to have a pathway to home ownership. One thing that we’ve learned … is, you know, having the ability to move within a neighborhood is really powerful for people. Maybe you start renting , and as your income increases … you can buy something in the same area.”

Councilman Brooks Lindner asked the developers, “Why do you want to do this development in Pagosa?”

“First of all, we love the community and have been coming here for 20 years. We have a home outside of Piedra. There is a great need,” replied David Dragu. – We know a lot of businesses in town. They are our friends. We believe that there’s a gap in that workforce housing AMI and we’ve seen what it’s done in Montrose. We’ve seen housing change that city for the better.”

He added that housing was key to recruiting and retaining the workforce in Montrose, “so that’s why.

Mayor Shari Pierce asked about the timeline for the project, to which David Dragu responded that, if all goes as planned, the condo project will break ground in 2025, but that the rest of the subdivision could take 15 to 20 years to build out.

Councilman Gary Williams added that the city of Pagosa Springs “is committed to workforce housing, and we are committed to working with developers to provide that.”

Dickhoff added: “This would be a great win for our community.”

When a motion was made in support of the resolution to submit the grant application and enter into a developer agreement with Colorado Outdoors, it was seconded and passed unanimously by the council.

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