Consultants tell Bozeman commission 33% affordable set‑aside in 'Ward' could harm development feasibility

Consultants for the City of Bozeman told commissioners on Tuesday that the proposed Bozeman Water Adequacy Initiative (known locally as "Ward") would significantly change the financial feasibility of common housing projects and could deter development without substantial subsidies or incentives.

David Fine, housing and renewal program manager (speaker 27), introduced Brian Dufney (speaker 20), a principal with Economic and Planning Systems (EPS). Dufney summarized EPS’s modeling and said the initiative’s text — which would require roughly a 33% set‑aside of new units as affordable (for‑sale units at 120% AMI; rentals at 60% AMI) — would reduce average project revenues while costs remain unchanged. "A 33% set aside requirement would make, we think, most development infeasible," Dufney said.

EPS walked the commission through simple pro‑forma examples. For a hypothetical 30‑home for‑sale project, EPS estimated market revenue would fall from about $23.5 million to $20.3 million under a 33% affordable set‑aside. EPS told the commission that typical builder profit margins (roughly 10% of sale price) would evaporate and the project could show a roughly $100,000 per‑unit gap without other incentives. On multifamily prototypes, EPS said rental income shortfalls would reduce net operating income and yield‑on‑cost measures that lenders use, making many projects harder to finance in current cost and interest‑rate conditions.

City staff emphasized the analysis was intended to provide data for voters, not to direct how anyone should vote. City Manager Winn (speaker 4) told the commission the briefing was third‑party analysis and reiterated that the city is not advocating a vote but providing information on potential market impacts. "We did this to provide data… We're not here to tell folks how to vote," Winn said.

Public comment during the meeting echoed both sides of the debate. Members of the Ward working group described the initiative as a linkage tool to require community benefits tied to municipal water, while other speakers and local experts questioned EPS assumptions about vacancy, land costs and whether localized exemptions or incentives could alter outcomes.

What it means: If voters approve Ward as written, EPS said developers would face a steeper feasibility test and many projects would need gap financing, land‑use incentives (reduced setbacks, parking relief), or other subsidies to proceed. EPS also flagged water‑rights logistics as a separate, time‑consuming constraint on developments that attempt to secure private water sources.

Next steps: The consultant’s report and the UDC draft are public; the commission did not take a vote on policy during the presentation. Staff said the intent is to provide factual information to the public ahead of the ballot.