Construction of the “Residences at Durango” is finally ready to commence.
The old Best Western Inn & Suites building, located at 21382 U.S. Highway 160, will be converted into the new 120-unit housing complex later this month.
A groundbreaking ceremony will be held at the building at 10 a.m. Oct. 27. The city has been working to fund the project for about two years.
“It is the first hotel-to-residential-conversion in the state of Colorado to utilize low-income housing tax credits for this project,” Eva Henson, Durango housing innovation manager, said at a study session Tuesday. “We are the first. So we are learning a lot by doing this project.”
The project will convert 72 motel rooms and build two new buildings with 48 new units between them, for a total of 120 studio, one-, two- and three-bedroom rentals targeting income earners between 30% and 60% area median income. Some units may target people earning less than 30% AMI.
For reference, 60% AMI is about $49,920 annual income, or $22 an hour full-time, for a dual-income household, Henson said at the regular City Council meeting Tuesday. Thirty percent area median income is about $24,960 annually, or $12 an hour.
Indianapolis company TWG Development will carry out the motel conversion, which includes flipping existing rooms into homes and constructing new homes, to the end result of 120 units targeting prospective renters earning 60% or below the area median income.
Henson said the multi-year-long project is “complicated” and “complex” and required a lot of collaboration to become ready to build.
Last year, the city was awarded $3 million from the Congressional Direct Spending Act, backed by Sens. Michael Bennet and John Hickenlooper, specifically for the Best Western motel conversion. The city was also awarded $1 million in grant funds to offset development fees and construction costs, Henson said.
Because the city received federal grant funding, those dollars would normally be taxable, Henson said. However, City Council approved a financing structure modification on Tuesday to modify the funding as a loan by the city, which is a tax-exempt partner in the Best Western conversion project.
“It is a very complex, lawyer-driven way to avoid paying the federal government taxes,” city attorney Mark Morgan said. “It is technically a loan … where the developer doesn’t have to pay those taxes so they can put more money into the project.”
He said the city has options for how the loan gets paid back; TWG Development can pay the loan back or buy it over time.
The city was able to modify its financing structure without having to change its grant agreements, Henson said.
“It will impact the project positively by (allowing) all $4 million into the project cost directly by the structure, therefore allowing the issuance of permits this month,” she said.
Henson noted that the city of Durango committed to Prop 123 affordable housing requirements, and the 120-unit Residences at Durango project will put the city at 65% total commitment to the requirements with just one project.
Councilors unanimously approved the finance structure modifications.
“It’s good to see that those low-income units will be available and they are very much needed,” Councilor Olivier Bosmans said.
Councilor Jessika Buell said she supported the Best Western motel conversion when it was first proposed as a 70-or-so unit conversion, and she supports the project now that it’s expanded.
“This is definitely a very effective means of increasing our housing supply, addressing housing shortages,” Mayor Melissa Youssef said. “This is a kind of rapid implementation of units that we can convert. I see it as support for populations in need of housing.”
She said the Residences at Durango will create a mixed-income community, provide housing stability for more community members and is a “wonderful” construction project coming down the pipeline.
Several residents at the Tuesday meeting commended Henson and the city’s Housing Innovation Division for getting the Best Western motel conversion project off the ground.
cburney@durangoherald.com
