Steamboat Springs City Council approved an annexation agreement for the Brown Ranch affordable housing development in a 5-2 vote Tuesday night, setting the stage for council members to decide on a formal annexation ordinance that, if approved, would officially bring the land into the city.

The Yampa Valley Housing Authority purchased the 534-acre Brown Ranch using a $24 million donation in 2021. The planned development would provide housing to qualified residents earning between 60% and 258% of the area median income.

With approval of the agreement Tuesday, next steps are a first reading of the annexation ordinance scheduled for Oct. 10, followed by a second reading Oct. 17.

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During those discussions, council members could vote to approve or reject the ordinance, or send it to a voter referendum. A citizens’ petition could also force voters to decide. If the ordinance vote fails, by council vote or at a referendum, the annexation agreement would be null, according to City Attorney Dan Foote.

The question over how the city will fund its portion of the development to construct infrastructure to support the housing project continued to loom large over Tuesday’s discussion with council members trying to find a solution to close a projected $52 million funding gap over the 20-year life of the final project, which could ultimately add 2,264 affordable and attainable housing units west of downtown Steamboat.

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City Council voted earlier this month to finalize ballot language that will ask voters to allocate 75% of the revenue collected from a 9% tax on short-term rentals in Steamboat until 2042 to the housing authority for the Brown Ranch project, provided the housing authority meets certain performance metrics.

The tax revenue directed to the housing authority would be used to support most of the offsite infrastructure improvements for Brown Ranch. However, the city faces a budget gap to fund the remaining portion of the work, including improvements to U.S. Highway 40 and the construction of parks and utilities.

Reviewing a fiscal analysis prepared by the city’s finance director ahead of approving the annexation agreement Tuesday, council member Gail Garey pointed to the city’s projected costs associated with the potential construction of two “amenity-rich” community parks. Built during phase one and phase two of the development the parks would cover a combined 39.6 acres. One of the parks would cost the city roughly $30.3 million, with $7.5 million provided by the housing authority, according to financial projections. The other park is estimated to cost the city $23.1 million.

Garey suggested removing at least one of the parks from the financial projections or downgrading their design, with fellow council members Dakotah McGinlay and Michael Buccino in support of that pitch.

“I think that is something that I would like to throw out on the table,” Garey said. “We are hearing a lot of concern about the fiscal impact and that is one way we could reduce the budget gap.”

McGinlay said she could consider the removal of the park from the financial analysis but also pointed to the city’s ability to find other available funding mechanisms, “that are not being discussed right now.” At a previous Council meeting, McGinlay had suggested the idea of a lift-ticket tax. The idea of pursuing state grant money earmarked for affordable housing was also mentioned.

“This community needs housing more than parks, and I will say that again and again,” offered Buccino.

Council member Heather Sloop said that even with the parks removed, she still worries about more immediate Public Works budget gaps over the next three years.

“It’s not about a park, it’s about the next 50 years of Steamboat Springs,” she said. “We got to get down to the brass tacks of what we are talking about here and that is a lot of people west of town. With or without a park, that is not going to change your funding gap, it’s going to help it look better but it is not going to look good.”

Sloop and City Council President Robin Crossan, who both voted against the annexation agreement and signaled a preference that the annexation ordinance be approved through a voter referendum, suggested reducing the scale of the Brown Ranch development.

Crossan wondered if Brown Ranch should proceed with a plan of building 1,100 units over 20 years, roughly the scale of phase one of the project, “and then when it is finished, we look again to see what we can do with the balance of the land.”

Sloop said a $20 million budget gap over 20 years is “an easier pill to swallow” than a $54 million gap over the same time frame.

“The reality of this is that there is a way forward and I think the way forward is a smaller project at a longer time frame.”

YVHA Executive Director Jason Peasley wasn’t sure if the housing authority would consider scaling back the project.

“They are getting all of our revenue to solve those capital gaps in the first five years of the short-term rental tax revenue that is based on a project of 2,200 units,” he said on his way out of Centennial Hall.

The widening work for U.S. 40 is something the city “absolutely has to take care of,” with or without Brown Ranch, added Peasley, but the housing development’s short-term tax revenue would be “part of the solution more so than the problem.”

“If you take Brown Ranch out of the equation, the capital gap just got $20 million bigger and they weren’t talking about that until Brown Ranch came along,” he said. Widening U.S. 40 is “still a huge issue and a liability for the city that they are going to have to reckon with at some point in the future.”

Peasley contended the removal of the community parks might be a better option to alleviate the budget deficit.

“Parks are something you can build as funding allows; you have the land, you build it incrementally — they are doing it right now at Bear River Park,” Peasley said. “That is not the perfect solution, but it is a solution and one that does not immediately propose a tax to the community.”

Ahead of the annexation ordinance readings in October, council members agreed to work with city staff to find ways past the projected budget deficit.

“We are at the point where we have to decide if we are really going to go forward with this knowing that the (financial) problems that existed before we ever started drafting the annexation agreement still exist,” said council member Joella West. “Are we going to say that it is more important to move forward with this project as it is, once the ordinance is adopted, or not? And if we don’t, what do we say to the housing authority? Do we say to them your project is too big and we don’t have the money for it?

“Is that what we say to all the people who have been here and at all the town hall meetings … that we understand you have a problem, but we don’t have the money … I think we are reduced to that question.”