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Isabel Circle Project Moves Forward; City May Bond to Pay for Project’s Infrastructure

Photo by Cassandra Hemenway.
Aacred Development Holdings has decided to complete the purchase of about 80 acres on Isabel Circle on June 26 for a $3 million, 31-lot subdivision that’s been in the works for two and a half years. According to Gabe Lajeunesse, Aacred’s managing director, the land development firm is moving forward despite some hesitation prompted by high interest rates and high construction costs. The project received Act 250 approval in early May; city subdivision approval was granted in March 2023.

Aacred plans to take advantage of a new city policy under which the city might pay for the project’s infrastructure — roads, water pipes, and sewer pipes— funded by a bond of $1.5 to $1.7 million that voters could be asked to approve in November. Aacred would have to guarantee that enough homes will be built to pay the bond back via increased property taxes and water and sewer fees.

Lajeunesse said that from the beginning his group has wanted to build homes for the so-called “missing middle” market, homes that are neither subsidized by the government for low-income families nor high-end properties that only the wealthy can afford. He thinks middle-market homes can be built at Isabel Circle if the city pays for the infrastructure.

The development could provide a total of 61 units on 31 lots. Twenty-one of the lots would be for single-family homes, but ten of the lots are permitted to have “fourplex” units. 

“If 25 townhomes were sold on those lots at something like $350,000 each, I calculate that would be enough to pay back the bond,” he said.

Under the city policy, the developers would have to post a surety bond to ensure enough development occurred to pay the city bond.

If an Isabel Circle bond is not approved by the city council or voters, then instead of “missing-middle” units, Lajeunesse said the development would become more of a “premium” project. Lots might then sell for $125,000, and with construction costs at $350 to $400 per square foot, building a 2,000 square foot house could cost $700,000 to $800,000.

Lajeunesse said his investor group plans to sell all or chunks of the lots to developers who would actually build the new homes. Developers have already expressed interest, including one who is committed to building for the “missing middle market,” he said.

If all goes according to plan, the infrastructure work would begin next spring, housing construction could begin late next summer or fall, and some units could be ready for occupancy in 2026, according to Lajeunesse.

The Aacred group that obtained city permits for the land includes Lajeunesse, a Montpelier resident and financial advisor, Barre developer and Mayor Thom Lauzon, local commercial property investor Pat Malone, Lajeunesse’s brother, and a New Hampshire developer. 

After getting Act 250 approval this spring, “we had to look at this very carefully,” Lajeunesse said. “Interest rates and construction costs have soared in recent years, and there is a risk the city or voters won’t approve a bond.” He expressed thanks to Lauzon and Malone, who he said are very busy with other things, for their involvement.

In Chittenden County, there are three or four production builders who are always building new homes, perhaps 30 or 40 units each, every year, he said. “We don’t have that here,” he said.

After considering the situation and risks, Lajeunesse and his partners decided they would go ahead and buy the property, the sale of which was originally scheduled to close June 12. The group had already invested $450,000 getting permits and faced costs of a bit over $1 million for the property and another $1.5 or more for infrastructure. 

“We did not get into this to build $1 million homes,” Lajeunesse said, so the possibility of a strategic partnership with the city to cover infrastructure costs is appealing.

Lajeunesse noted that some people questioned the location of the development when it was proposed, suggesting people would prefer to be within walking distance of downtown. “Post-flood, it makes even more sense,” he said. “It’s on higher ground, close to employers like National Life, and we have 50 acres of remaining land with walking trails that will not be developed and that backs up to a city park. We’ve been in communication with the Recreation Department about that land.”

This spring, city staff members developed a “Montpelier Development Agreement” policy approved by the city council unanimously on May 8. The policy states “[a] development agreement is a voluntary and legally-binding contract between a property owner (or developer) and a local government, often including terms not otherwise required through existing regulations . . . An example of a development agreement could include the City paying to install sewer or water extensions while the developer agrees to guarantee a minimum number of units that would be necessary to cover the costs of that infrastructure.”

Josh Jerome, a community and economic development specialist for the city, said each proposal that comes to the city will have to be reviewed for the revenue sources it would provide and an individual contract would be drawn up. “This is another tool for the city to help new development,” he said.

He said the city started talking with the Isabel Circle developers “months ago,” and all agreed the city needed a policy to guide staff when development opportunities arise. “This is a test case,” Jerome said. “I don’t know of any other projects this year.”

A memo to the council about the policy signed by City Manager Bill Fraser said “we now have larger asks coming up for various housing projects including Isabel Circle.” Other new developments in Montpelier that have been talked about include projects by Habitat for Humanity off Northfield Street and a project by Downstreet Housing & Community Development at the Washington County Mental Health property on Heaton Street.

At the May 8 meeting when the development policy was approved, Fraser said staff members would come back to the city council with recommendations on whether there should be a cap on the amount of bonds the city might incur for housing and how projects might be prioritized if several materialized. 

The city has a debt policy that limits how much the city can borrow, and other bond possibilities are on the horizon from Country Club Road infrastructure to municipal water pipes to a possible new recreation center, or rehabbing the existing center.

Jerome said the policy as drafted only looks at possible revenues, not at the city costs a development might generate. He did not think the growth involved in a project like Isabel Circle would have much impact, but “if a development of 300 or 400 units” comes forward, the city might need to consider the impact of offsetting costs such as hiring more employees in the police, fire, or DPW departments, he said.

In the case of Isabel Circle, Jerome said he understands there is a lot of interest from developers in buying lots and building homes. “We’ll have to look at details like the number of units, the timeline to match revenue projections, and the schedule for bond payments,” he said. “If an agreement is reached and we get council approval, our goal would be to have this on the November ballot.”