By Kirk Stapp
June 17, the Town Council unanimously approved the Snowcreek Development Agreement (DA). There were smiles, congratulations and handshakes all around. The approval came after two years of consultants, financial analyses, committee meetings and a campaign vilifying the Town’s Development Impact Fees (DIF) and Affordable Housing fees as the cause of a nationwide real estate downturn. The mayor proclaimed that fees were too high, we look like fools to capital markets; there has been no new major development in five years, zero percent of zero (no new development, no DIF) is zero, we need to lower our fees to make Mammoth competitive with other resorts.
There are always two sides to every story. This story begins a few years after 2000:
1) A very smart developer comes to Town and does his due diligence: evaluates school fees, water district connection fees, fire district fees, and the Town’s DIF and Affordable Housing fees. The developer also evaluates land and construction costs.
2) The developer is fully aware of his risks with Mammoth Lakes’ land, construction and fee costs and that there is a short building season.
3) The developer makes a conscious decision to invest–a developer’s risk.
4) The developer’s initial condo products sell well.
5) In 2006 the real estate bubble begins to leak, in 2007 the bubble pops. Sales slow to a standstill.
6) The Town’s budget is overextended from leveraging state grants while relying on new development fees that never materialize for matching funds.
7) The federal government begins its bailout of Too Big to Fail. The country tightens its budget belt.
8) The Town cuts its budget using furlough days and early retirements.
9) As real estate values plummet, the developer’s investment risks substantially increase.
10) The Town Council is under pressure to fix the “worldwide economic crisis” and get development moving.
11) The Council springs into action and creates a committee, appoints the developer to the committee and starts hiring consultants.
12) The committee eventually recommends and the Council adopts cutting Development Impact Fees by 50 percent and Affordable Housing fees by 60 percent.
13) To backfill the $90 million in reduced DIF, the committee and consultant recommend the “Community Investment Strategy,” which the Town Council won’t discuss or evaluate until June 2011.
With the Town Council’s adoption of the Snowcreek 20-year DA, Council locks in Snowcreek’s DIF reductions from 2007’s $39.6 million in fees to 2010’s $19.1 million in fees, a reduction of $20.5 million, and Snowcreek’s Affordable Housing reduction from 2007’s $45.3 million to 2010’s $8.7 million in fees, a reduction of $36.6 million. In other words, the developer walked out of the Council meeting with $57.1 million in reduced fees.
The elephant left in the room: Where is the money going to come from to backfill these reduced fees? The consultant identified Measure R and U as two possible revenue backfill sources.
In defense of the Snowcreek DA, the Council, consultant and Town staff argued:
1) “Additional” TOT, sales and property tax revenues will flow into the Town’s general fund which then can be used to backfill the reduction in DIF and Affordable Housing fees.
2) The DA’s Greater Community Benefits of $10 million in Additional Financial Contribution, which can only be spent in Snowcreek’s sphere of influence, wouldn’t occur without a DA. Of course, when Rick Wood asked Town staff to provide a list of projects the $10 million could be spent on, staff’s response was “anything the Council chooses,” a non-answer.
3) Other Greater Community Benefits include a championship golf course, open space, additional access roads, public egress from the Sherwin Range, public spaces and the Great Lawn and Outfitter’s Cabin, all “Greater Community Benefits” which also substantially increase the value of the Snowcreek development.
With the adoption of the Snowcreek DA, the final legacy of the 2008-10 Town Council will be a humongous deficit or a hole in the Town’s General Plan Vision of becoming a destination resort. The Snowcreek DA also sets a precedent for future developer requests and perhaps a record for a developer subsidy. Other resort communities will look upon Mammoth Lakes with awe.