Despite an ongoing lawsuit and empty pockets, Gunnison Rising’s project managers are confident that, although the project is behind schedule, it will make a full recovery next year.
It’s been a quiet, but eventful year for the Gunnison Rising development east of town. Gunnison’s Bureau of Land Management (BLM) moved into its new field office, while crews finally hooked the FedEx building up to permanent power this month. But little progress has been made on the construction front, and the remainder of the property is vacant. Gunnison Rising’s first homes were planned for early 2024, but this is no longer the case.
Even though project managers expect funding streams to be restored early in the new year, the development is ensnared in a growing lawsuit after another local contractor claimed Gunnison Valley Properties (GVP), the company behind Gunnison Rising, failed to pay them for their work. This brings the total amount GVP may owe on the construction phase alone to around $4.5 million.
A tough market
Already more than 20 years in the making, Gunnison Rising will eventually consist of entire neighborhoods and a business district. Building the underground infrastructure that will support Gunnison Rising — which project managers envision will be one-third the size of Gunnison once it is complete — is the first, and one of the largest, hurdles it must overcome. The result is a project with heavily front-loaded costs. As of August, GVP had already invested close to $30 million in underground infrastructure such as water, sewer and electric utility lines, and planning and zoning work.
While the BLM Field Office connected to the City of Gunnison’s existing electrical grid, the city’s Public Works Department had to upgrade one of its electrical substations to support the rest of Gunnison Rising. Running underground conduits has been a slow process — one complicated by a need for a mixture of private and state land easements and then a lack of funding to install the power feeds this year.
As a result, the 38,000 square-foot FedEx building ran on generators for close to a year. With help from Altitude Energy and the city, GVP finally resolved the problem at the beginning of December by upgrading one of Gunnison’s existing power feeds. With the route for underground conduits approved, project manager Jeff Prosapio said GVP plans to connect Gunnison Rising to permanent power next year.
So far, GVP has funded the development out of pocket, with a mix of private debt and equity. The project team planned to close on its first slate of metro district bonds last year, but the credit market became volatile and interest rates rose, Prosapio said. As a result, Gunnison Rising ran out of money.
“It was a tough market for any kind of financial investment,” he said.
Metro district bonds are a common way to fund large developments in Colorado. Once created, these special districts are equivalent to a government entity or taxing body, like a school district, that have the ability to place a tax on real estate. This helps pay for the infrastructure over a long period of time and shifts a small portion of the cost to future home and business owners. More than 1,000 exist across the state.
Prosapio expects GVP to regain funding during the first quarter of 2024, with a bond payout of between $10-16 million. His top priority is finishing the power feeds and completing the groundwork for phase one. This includes sidewalks, the street network and engineering plans for a future roundabout at one of Gunnison Rising’s first major entrances. Next year, construction crews plan to bring infrastructure to the north side of Hwy. 50, which is known as “phase two,” he said.
Prosapio, along with local realtor Brian Cooper, who was named as Gunnison Rising’s sales and marketing director this year, remain confident in the community’s long-term vision for the development: a project that offers enough new homes and apartments that it helps ease the Gunnison Valley’s pricey housing market.
Cooper is negotiating “exciting” contracts for new development, with announcements planned for early next year, according to Prosapio. Whether that is housing or commercial businesses is unknown. Cooper said interest in Gunnison Rising has stayed strong, despite a standstill in 2023.
“The interest in this place is still very much peaked and not going anywhere,” Cooper said. “It’s one of the most desirable and applicable places for development around Gunnison right now.”
Non-payment claims surpass $4 million
Construction crews broke ground at Gunnison Rising in the spring of 2021. But just two years later, after the City of Gunnison approved the utility extension and crews started laying plumbing and electric lines, the developer ran out of money. Within months, local contractor Spallone Construction and the project’s construction material supplier, Wesco Distribution, filed claims against GVP for just under $500,000.
At the end of November, Crested-Butte based Dietrich Dirtworks and Construction joined the lawsuit, adding a claim of over $4 million to the amount GVP may owe in unpaid construction invoices. Like Wesco and Spallone, Dietrich filed a mechanics lien against the property, a legal claim that, if upheld by the court, can force GVP to sell portions of the project in order to guarantee payment for the construction companies.
According to the complaint, after “repeated promises (and excuses),” GVP’s lack of payment has had a “crippling effect” on the Dietrich family, forcing them to take out loans against nearly all of their property, including their home, to make ends meet.
Deitrich trusted that GVP had the “business integrity” and financial well-being to not only make the project possible, but get workers paid on time. Instead, they received promises of payment and empty invoices, according to court records.
“Gunnison may be rising for the benefit of the developer, and others, but in the meantime the ax is falling on Rask and Stephanie,” said Bruce Rohde, Dietrich’s lawyer. “ … They've got to pay for their people and for the equipment. They're going to be good to their word. But in the meantime, they're not getting paid by Gunnison [Rising].”
In the years between starting on the project and filing the lawsuit, Dietrich received continual promises on email, text and phone that the company would be paid, according to the complaint. There was also never a word that the development’s financial situation was anything but upright, Rohde said.
If the court finds in favor of the construction companies, GVP could also be forced to pay out additional damages for breach of contract, unjust enrichment and other related claims.
“What we had is repeated satisfaction and compliments regarding the nature, quality and timeliness of our work and repeated assurances we were going to be paid everything we were owed,” Rohde said. “That’s at least one reason we got $3 or $4 million behind. If they had told us from the beginning that there was something wrong, or that they weren't going to be able to pay, it'd be a different situation.”
While mechanics liens usually result from a dispute between the contractor and the developer or homeowner over payment amounts or shoddy work, that’s not the case with Dietrich, Prosapio said.
“They had an overhang of billing that we couldn't fund because we lost our funding … Rask and his guys are great. We hope that they'll come and work at Gunnison Rising again,” Prosapio said. “We are committed to resolving this.”
(Abby Harrison can be contacted at 970.641.1414 or abby@gunnisontimes.com.)
(Bella Biondini can be contacted at 970.641.1414 or bella@gunnisontimes.com.)
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