Real-estate developer Terrence Wall has requested that the Town of Westport consider financing some of the infrastructure for Phase 5 of Bishops Bay. It would cost the town approximately $9 million.
Wall said the town could recoup the cost via a special-assessment tax on lots yet to be sold.
“It’s simple,” Wall said. “It’s a special assessment over a long period of time. We just take some of the cost structure we have and, if we can finance that over 20 years, what happens is we can then reduce the price (of lots) significantly.”
The infrastructure has already been built by the developer.
However, Wall said reimbursement from the town would give his company the ability to reduce lot prices by approximately $90,000 – thereby increasing demand for property in Bishops Bay.
“The major challenge right now is affordability,” Wall said, “and the extremely high cost structure that we have in place today. So I started asking myself, well over a year ago, what we could do about it. I knew there had to be some answers out there.”
Wall said he invested a significant amount of time in finding the solution.
“I looked into it,” Wall said. “I spent many months researching a possible answer or approach we could take that’s simple, that’s no risk to taxpayers, that’s really on the development itself, and would address the need to make housing more affordable by reducing the price of the lot.”
The UW grad began reaching out to alumni in the real-estate industry to see what suggestions they had for ways to reduce lot prices and encourage more buyers.
“I saw housing being built in other states,” Wall said, “and asked myself what they were doing differently. And I found the answer: long-term financing. In fact, one mortgage broker said, ‘Without this financing, there would be no housing built in Colorado.’”
There, he said, financing municipalities are reimbursed via specials assessment paid by buyers.
“The cost of that special assessment goes onto the tax bill,” Wall said. “In exchange for paying a little bit extra on their tax bill each year, they get a significant reduction in price of the lot. That translates into not only a big cost reduction of the house, but also a reduced down payment.”
Wall presented his request to Town of Westport supervisors at Monday night’s board meeting. Chair Dean Grosskopf questioned the logic behind the developer’s proposal.
“It seems like a zero-sum game,” Grosskopf said. “No matter how you finance it, the costs are there and you have to come up with the financing – whether it be a first mortgage, a second mortgage or a special assessment. Why is it a better deal to have this special assessment?”
Wall said the major benefit would be a lowered initial payment for buyers.
“That is really the biggest factor,” Wall said, “especially for younger people trying to get that down payment put together.”
Mortgage lender Mike Odden said reduced prices would lead to lower interest costs as well.
“From the perspective of a lender,” Odden said, “your principal and interest is going to go down because you’ll end up borrowing less money. So you may have a special assessment, that’s true. But that’s going to get some folks into a house sooner.”
Recently hired as vice president for State Bank of Cross Plains, Odden assured the town board that special assessments come without any kind of stigma attached to them.
“A special assessment really is not a concern for us,” Odden said. “We’ll look at that just like we’ll look at taxes. So whether we’re using our own portfolio money, or whether we’re going to Fannie Mae or Freddie Mac and selling the loan, it doesn’t matter.”
Wall said more homes in Westport means more revenue for the town.
“There’s a financial benefit for the township as well,” Wall said. “If we can get going with this development and get housing built, then the houses will bring more tax revenue to the town. This isn’t a TIF or anything. This is tax revenue that’s going to go to the town immediately.”
Town Supervisor Ken Sipsma said the municipality would need additional time to consider the developer’s request.
“I’m not criticizing what you’re presenting,” Sipsma said. “But I think we need some due diligence from the town on this. And I understand you’re on a tight window. But somebody’s got to give us, from our perspective, some kind of risk analysis.”
The board met in closed session but took no action on Wall’s proposal.