Rather than lament the state of Rocky Mountain real estate, county officials and nonprofit groups in Teton County, Idaho, are working to develop concrete solutions that will not only help this corner of southeastern Idaho, but also be applicable to other Western communities.
Located on the western slope of the Teton mountains, Teton County’s houing market exploded during the mid-2000s, a story similar throughout the Rockies.
Second homeowners and commuters, many of whom couldn’t afford sky-high home prices in neighboring Teton County, Wyoming, started buying in Idaho.
Developers, lured by the robust market, ample private land and cheaper fees with lax conditions, went into overdrive to meet both the real and anticipated demand. Teton County officials were eager to supply the market and, during the height of the boom in 2007, the county’s approval rating for subdivisions was five times the region’s norm.
Teton was named one of the fastest growing counties in the United States.
But when the market turned in 2008, Teton Valley (as it’s locally known), was quickly rendered the poster child for ill-conceived development dreams in resort towns.
Today, this community of approximately 8,800 residents has 7,791 vacant lots. Local analysts say that, even if building rates returned to what they were in 2007, it would take a minimum of 77 years to exhaust the supply.
“Any time your ratio of vacant subdivision lots to the number of people in your county is close to one, that’s a bad thing,” says Randy Carpenter, North American Program Director for the international land planning organization the Sonoran Institute.
In addition, development in Teton Valley has not managed to pay its way. Questions about the maintenance of roads and bridges needed for accessing remote developments along with the increasing demand placed on schools, emergency medical and safety services and public parks and pathways were never asked or answered. Even with the additional revenue garnered by property taxes on those additional 7,791 lots once they are built, the county would still come up $17.4 million dollars short for what it would take to cover country operations, infrastructure and capital investments to service those lots.
“For 10 years, our county platted lots in potentially the most expensive land-use pattern for a rural community—thousands of lots were platted in the far nether regions of the valley with no real long-term vision for how the county would be able to provide basic services to these areas,” explains Anna Trentadue, Program Director and Staff Attorney for Valley Advocates for Responsible Development (VARD), a local planning advocacy group.
“Homes farther from cities simply cost more to service and do not pay for themselves in tax revenues. The result is an overall decline in the county’s level of service and supplemental levies have to become the norm, as they are needed in order to raise revenue just to provide basic services.”
Trentadue recently spoke at Rocky Mountain Land Use Institute Conference in Denver and found the audience laughing as she painted a picture of the development boom in Teton County.
“I think they were just incredulous,” she says. But Trentadue’s presentation was more than just a sob story about the troubles her county is facing. It was a chance to highlight the work Teton County is doing to rectify the situation.
“We would like to show we are breaking new ground in dealing with these problems,” she says.
In 2009, VARD, her organization, approached the Sonoran Institute for help with developing tools that would assist with the aftermath of the real estate crash. So began a project called Reshaping Development Patterns—a collaborative effort between VARD, the Sonoran Institute and the Lincoln Institute of Land Policy.
The plan was to offer the lessons learned and tools developed via this project to other Intermountain West counties facing similar real estate problems like Colorado’s Douglas County, Clark County in Nevada and Montana’s Madison County.
Solutions include a fiscal-impact calculator that could figure out if development will pay its own way, as well as an in-depth study of one Teton County development that is redesigning its layout through an updated replatting process—one designed to help both the developer and the county.
The calculator came about after RPI, a consulting firm out of Durango, Colorado, that specializes in financial planning for rural communities, was brought on board.
Called the Fiscal Impacts Planning System, it uses variables such as a subdivision’s number of lots, estimated sale prices of lots and miles traveled on county roads to get there. Plugging these variables in helps officials get a better sense of the county-related costs associated with a particular housing development.
In the summer of 2010, Teton County’s Board of County Commissioners adopted the calculator as a planning tool.
“Previously, we didn’t have anything. We knew we had to assess costs because it’s in our policy, but we didn’t have a systematic way of addressing it,” says County Commissioner Kathy Rinaldi, who believes simple lack of knowledge partially explains why the question was so frequently glossed over in the approval phase.
Rinaldi, who was elected in November 2008 (the first time in the county’s history that a Democratic majority was elected into office), says the process provides more of a 30,000-foot view of the costs. That view, she says, allows the commission to look at impacts in a fair and consistent way.
VARD and the Sonoran Institute have already received multiple inquiries regarding the calculator from counties in Wyoming, Idaho, Arizona and Montana. Teton County’s Reshaping Development Patterns team paid $13,000 for the system and an associated fiscal impact study for Teton County.
In February, Montana’s Madison County, which currently has 4,500 vacant subdivision lots in a county of 7,500 people, purchased the FIPS software through a combination of county funds, grants and donations.
“It makes it more plausible to quantify impact. It isn’t going to be so anecdotal, or ‘I think’ vs. ‘you think.’ This is neutral information which is real important,” says Charity Fechter, Madison County’s planning director.
Fecther explains how second homebuyers attracted to the area, which includes notably swanky locales like the Yellowstone Club and Big Sky Ski Resort, want their piece of nirvana but don’t realize “they don’t necessarily get the services to haul their garbage and that they’ll need to be volunteer firefighters.”
Fechter sees the calculator as a valuable, nonbiased tool that will ensure that development will pay its own way, in addition to allowing developers a means of knowing what to expect.
Simultaneous to the development of the FIPS, Teton County, Idaho, made the decision to adopt incentives that would encourage developers to redesign their dormant subdivisions.
The hope is that replatting, or rethinking lots, will not only create an opportunity to increase open space through better clusters of homes, but will also protect critical wetlands ignored in the original platting process and increase the number of large swaths of open space.
Further, the new process aims to reduce the cost of the county’s servicing responsibilities while providing developers an opportunity to create unique properties—different from the thousands of other lots on the market.
“From a planning perspective we care about dormant subdivisions because we want to see a vibrant, economically forward-moving community, but the glut of lots is undermining that,” says Angie Rutherford, Teton County Planning Administrator.
Rutherford explains how developers in Teton County were allowed to sell lots before finishing their subdivisions. The sales would often be used to finance different phases of the subdivision. Now that no one is buying, the money needed to finish many of Teton Valley’s new neighborhoods has run out. Partially occupied neighborhoods feature weed-infested dirt piles, roads leading to nowhere and promised-but-undelivered amenities like parks and pathways.
“Even if someone wanted to build a house, it might not get a certificate of occupancy because the fire department can’t get there,” says Rutherford, explaining that looking out for the safety, health and welfare of the community is written into the county’s code.
Carpenter says incomplete subdivisions, whether they’re partially finished or the ground has yet to be broken, make planning for the long term difficult.
“It creates a lot of uncertainty. You’ve already established the patterns which limit your ability to be effective with current planning measures and, in many cases, partially completed subdivisions create blight situations,” he says. “Whether it’s an abandoned factory or unfinished subdivision, blight reduces nearby property values.”
Teton County’s goal with replatting is getting developers to rethink their subdivision’s layout and what might make their property stand out from others. While mid-level properties located close to Teton Pass remain a hot commodity for workers who commute to Jackson, Wyoming (25 miles to the southeast and over an 8,400-foot pass), properties on converted farmland, located outside of Teton County’s three small towns, are a dime a dozen. In addition, because of their remote location off the main highway, they are more expensive for the county to service.
Rutherford hopes that developers will see the opportunity to replat as an exercise in creativity. By reconfiguring existing lots and focusing on the property’s natural amenities, like open, wild space or protecting sensitive wetland areas, the developer has an opportunity to replan a development into something more unique than the thousands of 2.5-acre lots sitting stagnant in Teton Valley’s sagebrush flats.
County commissioners and planning administrators, like Rutherford, hope this combination of distinct designs and lower densities will create a reduction in available lots and jump-start the market. In addition, with the aid of the FIPS, the county commissioners and developers will have a better idea of what different design options will cost both the county and the developer.
While laws differ from state to state, replatting isn’t as simple as walking into the courthouse and signing a piece of paper — especially in Teton County, where a developer still has the ability to sell lots before the project is completed. Others involved include multiple homeowners, investors, the original property owner and the bank.
But Teton County is doing its best to facilitate the process. Although developers must still contend with surveyor and engineer fees, the county has waived replatting application fees.
But not all Teton County residents are enthusiastic about helping developers.
“I don’t feel sorry for the developers,” says Lynda Skujins, an interior designer in Victor and a member of the newly formed Teton Valley Business Development Center. “I don’t think we should have to bail out a developer.”
Rutherford acknowledges critics’ view that the market will naturally right itself and that such measures are unnecessary, but she fears that assumption is tied to an outdated buying model. Even if the market bounces back quickly, homebuyers will be looking for a very different type of property than what was popular pre-bust.
“From the research I’ve seen, the market is moving away from the golf-course community. People want to buy in town, on a bike path. The market trends have changed and may not come back to that paradigm,” she says, emphasizing the need for developers to focus on creating stand out properties. “I really think most people who get educated about what we’re trying to do will see that it’s about giving people options and putting tools in the tool shed.”
Mike Potter, President of Potter Clinton Development, a consultant and advisor on Big Sky Western Bank’s River Rim Ranch development, is confident that this 5,400 acre project in Teton Valley’s north end has the kind of momentum needed to guarantee success. To date, approximately 150 of the development’s planned 578 lots and units have sold. Potter says they have discussed the replatting process and while it may make sense for some developers, it wasn’t necesary for River Rim Ranch.
“It’s just a matter of economic recovery and absorption of products. There’s critical mass to River Rim and it will go on and prosper,” he says. “It really comes down to individual circumstances and timing.”
The only critiques Rutherford says she’s received regarding the county’s push to get developers to replat is skepticism that it will actually work.
“But they’re not discouraging us from trying,” she says. “If I can have a conversation with someone about the on-the-ground situation in some of these subdivisions they go away baffled. They had no idea it was so complicated.”
With the help of VARD, one developer, Land Equity Partners, has decided to try its hand at these new tools and undertake the replatting process. The lessons learned will be analyzed and published as part of the Reshaping Development Patterns project, along with a summary of the replatting procedures specific to eight western states.
“The sad reality is we and most developers aren’t talking about profit here. We’re not even talking about getting equity back,” says Land Equity Partners Chief Financial Officer Spencer Thunell, who admits the company has lost millions of dollars.
Prior to the bust, Land Equity Partner’s was planning 151 lots for their Targhee Hill Estates subdivision. Eighteen lots sold right before the fallout in 2008. No lots have sold since then. Thunell says future sales are simply about making good on obligations to creditors and lot owners, whose undeveloped plots still lack basic infrastructure like roads, dry utilities, water and sewer connections, in addition to improved open-space areas, waterways and ponds.
Targhee Hill Estates’ revised plan calls for 134 residential lots instead of the previous 151, which in turn has allowed for a 44-percent increase in open space. Thunell says his company was also able to make a 59 percent reduction by reconfiguring roads, sewer and utility lines, improved open space and amenities like a small recreation center. And by using the FIPS, the county is able to ensure that if the revised plan moves ahead, its associated expenses, road and bridge maintenance and emergency services, will be covered.
Still recovering from the real estate crash and the current lack of credit available to developers, Land Equity Partners continues looking for additional investors to finance Targhee Hill Estates’ new design, but Thunell remains hopeful.
“All of the intangibles are still there. Teton County is a place people want to be,” he says. Thunell sees his company’s participation in Reshaping Development Patterns Project as simply a way to expedite the recovery process.
“Ultimately, the market will rectify itself, but what if it takes 20 years? In the end, are we better off waiting? I think we’re much better off being proactive than reactive,” says Thunell. “I think any educated developer with a sane or open mind would see the value in this.”
Thunell says he’s had substantive conversations with several developers interested in Land Equity Partner’s take on the replatting process. While no one has committed yet, Rutherford and Trentadue are optimistic other developers will follow suit.
“In my experience, everyone wants to be second to try something new,” says Rutherford.
Like Rutherford and Thunell, Trentadue is optimistic about the future.
“It’s going to take time to recover,” she says. “But we haven’t lost the heart and soul of Teton Valley.”