Fruita Housing Authority approves $400,000 appropriation and loan for Oaks redevelopment; funds secured by promissory note and deed of trust

The Fruita Housing Authority on the council dais approved two related measures to support redevelopment of the Oaks multifamily site, advancing the Headwaters Housing Partners project with an immediate $400,000 appropriation and an authorized loan to 805 Otley Avenue LLC that will convert to equity when the project secures construction financing.

Housing Authority Executive Director Shannon Lawson told commissioners the amendment “transfers $400,000 in funds from the economic development fund from the city of Fruita, to be used for a potential contribution to the Headwaters project, which is a redevelopment project of the existing Oaks facility off Otley Avenue.” She said $325,000 of the appropriation comes from voter‑approved lodging tax revenue and $75,000 from federal American Rescue Plan (ARPA) funds.

The authority’s special counsel, Dalton Kelly of Butler Snow, described the security for the loan: “The $400,000 is secured by a promissory note delivered by the entity to the housing authority, upon receipt of the funds. It’s also secured by a deed of trust, which is in first lien position on the property.” Kelly said those protections allow the housing authority to foreclose and recover funds if the project does not proceed and explained the loan will convert to an equity contribution once the LLC closes its construction loan and the city and developer execute a redevelopment agreement and a land‑use restriction agreement.

Public comment on the measures included objections from Paul Schultz of the Red Rock subdivision, who urged delay and greater disclosure. Schultz said the resolutions would “commit a staggering $800,000 in taxpayer funds to two entities that share the exact same physical Aspen address” and asked for disclosure of ownership and independent review before the city advances funds.

Authority staff and counsel answered questions in public session, confirming that the appropriation before the board was only for the first $400,000; a previously approved term sheet contemplates up to $800,000 total but any additional amounts would require future annual appropriations by the Fruita City Council. Managers also explained that, if the authority becomes an equity partner after construction close, the land‑use restriction agreement will preserve rent restrictions on the units. Kelly noted the project seeks to offer a mix of units with rents capped at up to 100 percent of area median income, and that the infusion of purchase‑price funds reduces the developer’s need to borrow, enabling lower rents than would otherwise be feasible.

Commissioners voted to adopt the appropriation resolution and the loan resolution in separate roll calls; both measures passed 6–0. Shannon Lawson said a formal development agreement and related contractual documents will be brought forward for council consideration before any additional contributions or final equity decisions are made.

Ending: The authority’s action moves the Oaks/Headwaters project closer to construction financing and formal land‑use restrictions, while leaving additional oversight steps — the redevelopment agreement and land‑use restriction agreement — for later public review and approval.