Can Vail maintain financial security while tackling a list of big, costly projects?
With the significant price tags on Timber Ridge, West Middle Creek and Dobson, the Town Council has some decisions to make
Ali Longwell/Vail Daily
Vail’s Town Council is going to have to make some big decisions to preserve its budget reserves as the town looks ahead to the next five years with several large projects in the pipeline. Among the big-ticket items: developing Timber Ridge, remodeling Dobson Ice Arena, creating housing at West Middle Creek and making other housing investments.
At its Tuesday, May 7, meeting, the Town Council will be receiving a presentation from its finance department on some options to do just that.
Referring to Timber Ridge, Dobson and West Middle Creek, the memo notes that “with the planned large capital projects scheduled to begin this year and next, budgeted reserves will be significantly reduced.”
Vail’s town policy requires it to maintain 35% of annual General Fund revenues in its budget. The memo reports that this is approximately $22 million for the current year.
This percentage has increased in recent years from 25% before 2018. The memo notes that the policy “was put in place to ensure the town would always have available reserves to continue at some level of operations should a catastrophic event such as a wildfire take place.”
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With the town’s projected spending and timelines for these bigger projects, town staff is warning that “actual cash flows are projected to be strained beginning at the end of 2024 through mid-2026, decreasing below the council’s reserve policy of 35% of General Fund revenues.”
While the funds are expected to recover in 2026, this will be entirely dependent on how sales at Timber Ridge go, which carries a risk.
“Based on estimates from Triumph Development, the town is expected to be paid back in full for a total of $49.9M in 2026 but that could push into 2027 depending on the timing of sales of the homes,” the memo reads. “There is significant financial risk to the town if not all homes sell, or sell much later than anticipated.”
On Tuesday, town staff will present the Town Council with a variety of options to maintain its reserves and preserve a higher level of financial security. Council members will be asked if there’s a scenario they prefer or if they’d like staff to look into different approaches (including deferring any of the planned projects).
What’s currently planned
One of the scenarios includes an outlook should the town continue with its projects and spending as planned. This includes details on Dobson, Timber Ridge and West Middle Creek as well as some recent “unanticipated” spending.
Currently, the town has budgeted $55 million for 2024 and 2025 for the remodel at Dobson. This budgeted amount includes an estimated $48.8 million from future Vail Reinvestment Authority funds as well as a $3 million commitment from the Vail Recreation District. The Town Council will soon face some decisions around this project as well after initial cost estimates from contractors came in at $20 million over this budget.
The redevelopment of Timber Ridge is the town’s largest capital project in history. Estimated to cost a total of $194 million, the town has budgeted to put up $38.6 million in cash for site work and podium infrastructure as well as $1.9 million for a transit stop and $10.4 million in costs and contributions for land and an existing Timber Ridge loan balance.
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The town has created a unique model for the project in which it expects to be paid back for its $49.9 million in contributions with the sale of the homes to local businesses and residents. The town of Vail itself intends to be among the purchasers, planning to purchase 43 units on the site at an estimated cost of $25.7 million. This amount would also be paid back from rental income, with an expected $5 million to $10 million subsidy to maintain rental affordability.
West Middle Creek is expected to cost a total of $174 million, with the town fronting $20 million for site work and initial infrastructure costs. The packet notes that the project originally planned to start in 2025 with $10 million in funding from the town. However, recent proposals would see the project start construction this fall with a $20 million contribution from the town.
“When the project is financed in 2025 the town will be repaid $10.0M of the $20.0M outlay. Separately, the financing for the project will be procured by a non-profit corporation set up by either the town or the VLHA, but will require a moral obligation by the town,” reads the memo.
The memo outlines two other unanticipated expenditures that are expected to impact reserves. They include a $2 million investment to enable Habitat for Humanity to purchase homes at Timber Ridge as well as $4.8 million spent on recent home acquisitions in the town.
Should the town continue as planned with these expenditures and timelines, its reserves would hit “historically low levels.”
“General Fund reserves dip to a projected $5.3M in 2024 (9% of annual revenues, or $16.7M short of the minimum),” the memo adds.
What’s recommended
Among the five scenarios in the council memo, the staff is recommending two options, both of which would utilize “financing to assist in the cash flow needs while cash reserves are being utilized for Timber Ridge.”
The three scenarios it is not recommending include continuing as planned, a scenario that provides a baseline of what reserves look like before committing to those three major projects as well as a scenario that would defer Dobson to 2026. The latter would not solve the challenge as reserves would still fall below the required minimum and cash flow would rely on Timber Ridge sales.
The first of the staff-preferred scenarios includes using $30 million in short-term financing. This scenario would deplete the town’s Capital Project Fund and see a cut into its reserves, but would still maintain above the required level.
“Without deferring the timing of these significant 2024 and 2025 projects, staff is recommending short-term financing to raise reserves back above the 35% reserve policy. This will allow for more flexibility in 2024-2026 and help mitigate cash flow risks associated with the unit sales of Timber Ridge and the projected bond reimbursements from West Middle Creek,” reads the memo.
The other recommended scenario would include deferring West Middle Creek to 2026 and using $30 million in short-term financing.
In this scenario, the memo says “General Fund reserves will exceed the reserve policy by $24.0M.”
This option, it notes has a “higher cost” than using $30 million in short-term financing but “allows for additional funding capacity should any new or unforeseen costs arise (operating, housing or capital).”
The Vail Town Council will discuss this predicament at its Tuesday, May 7 afternoon meeting, which is scheduled to begin at 1 p.m. The meeting will take place in person at Vail Town Hall (75 South Frontage Road) and online via Zoom. It is live-streamed on the town’s and on . To learn more about the meeting or provide public comment, visit .
