Fort Collins Utilities is thinking about stepping outside its established geography to whittle millions of dollars off a developer’s water and sewer costs for the massive Montava proposal, but early efforts have sparked protest and logistical tangles.
The Montava development is expected to build a miniature town of sorts on about 1,000 acres in north Fort Collins west of the Anheuser-Busch brewery, complete with 3,900 energy- and water-efficient homes, a 40-acre working farm and 80-acre community park, town center and an array of schools, trails, retail and other features.
If completed, Montava will be Fort Collins’ largest residential development in recent history. Residential development in Fort Collins generally happens a few hundred homes at a time on significantly smaller pieces of land.
Developer HF2M plans to buy the Montava site from its current owner, the Anheuser-Busch Foundation. The site is in Fort Collins city limits but not in Fort Collins Utilities’ service area.
That matters because the water and sewer districts the land is part of — East Larimer County Water District (ELCO) and Boxelder Sanitation District — have higher price tags for development compared with Fort Collins Utilities. ELCO requires large developers to acquire their own water rights, which are expensive and difficult to find in abundance, while Fort Collins allows developers to simply pay for water. Boxelder’s sewer tap fees cost about three times those of Fort Collins Utilities.
Max Moss of HF2M has been working with Fort Collins staff to bring down costs, which he says is essential to pulling off the expansive project and realizing the city’s affordable and attainable housing aspirations.
Among the ideas that emerged during those conversations: For water, Montava could buy water credits from Fort Collins, which would then transfer its own water to ELCO for Montava to use. For sewer service, Montava could use Fort Collins Utilities rather than Boxelder Sanitation.
But serving developments outside a utility’s established boundaries is a lot more complicated than you might think. Northern Water told Fort Collins this fall that their draft agreement to cover about two-thirds of Montava’s treated water needs was a nonstarter because it didn’t align with their policy for Colorado-Big Thompson water shares. And Boxelder’s board and management are reluctant to cede any of their service area to a larger district, particularly without extensive planning. District manager Brian Zick fears a bad deal could result in “enormous loss” and higher rates for the district’s existing customers, many of whom live in Fort Collins.
Now they’re imploring city staff and council to tap the brakes on Montava until the sewer service issue is resolved. City Council is set to review Montava’s planned unit development master plan, the last regulatory hoop before the final stage of development, on Jan. 7.
‘A unique opportunity’
It’s unusual for a utility to provide sewer service to an area outside of its district, and Fort Collins rarely provides water for developments outside its service area. The city’s water supply and demand management policy, which encompasses the $120 million planned expansion of Halligan Reservoir, directs Fort Collins Utilities to plan supplies only for its service area.
Comments from city staff suggest Montava could be an exception to the rule.
The draft water agreement with Montava and ELCO, now defunct, says the development “presents a unique opportunity for the city to plan for the development of one of the few remaining large blocks of undeveloped land” within city limits and Fort Collins’ growth management area (GMA).
It also notes the “benefits to the city that would result from the Montava development’s success.” Some of those benefits, according to staff comments on Montava’s Planned Unit Development proposal, include high-quality urban design, diversified land use and the developer’s innovative “master-planned approach” to a large swath of land that makes up about a third of Fort Collins’ Mountain Vista subarea.
Montava ties in with Fort Collins staff’s reimagined vision for its northern stretch near Anheuser-Busch. The current plan reflects an outdated hope for that area to become a hub for large businesses, but during the last 20 years, demand for housing has climbed and businesses have become less interested in large suburban campuses. Staff wants to rebalance the land use mix in the area to allow mostly residential development accessorized by business and industry. They also want development that ties in with the area’s agricultural roots and has trail connectivity, open space, sustainability features and more attainably priced homes.
DEVELOPMENT: Montava neighbors petition to save Country Club Road
Moss says that’s what he wants to deliver. He’s described his vision for Montava as an agri-urban community that favors “pedestrians over cars, front porches over garage doors and a way of life that hearkens back to times when life was simpler and richer.” The single-family homes will be net-zero energy ready and adhere to EPA WaterSense standards for efficiency.
Moss has a goal of at least 10% affordable and attainable housing on the site, which would include units accessibly priced for people making between 60% and 120% of the area median income. Affordable housing is reserved for people who make less than 80% of the AMI; attainable housing is priced at a range people making between 80% and 120% of the AMI can afford.
But Moss is concerned that the high costs of water rights and sewer service would push those goals out of reach.
“We’re trying to marry two big, challenging things: high standards for development and affordability,” he said. “Those things are very difficult to do with the system that exists.”
Boxelder’s plant investment fee — a tap fee leveled on all new development to fund infrastructure growth — is $12,000 for a single-family home and $6,000 for one- to two-bedroom multi-family units. Fort Collins Utilities’ plant investment fees are considerably lower: $3,550 per single-family home and $2,560 for multi-family units.
For a development the size of Montava, the difference between those tap fees is over $25 million, according to a Coloradoan analysis of tap fees on a 3,900-unit development with 60% single-family and 40% multifamily units.
That’s $25 million less to spend on other Fort Collins development costs and site amenities. When the cost of a development goes up, so do the home prices.
Moss said securing water supply for the development has been one of its biggest obstacles. Colorado water rights operate on a seniority system, so people who have older, more expensive water rights get access to water before people with less expensive junior water rights. In a region perennially on the edge of drought, residential developers need senior water rights. While Fort Collins Utilities accepts money in exchange for access to its valuable water rights, smaller water districts like ELCO require developers to track them down on their own.
Obstacles are unresolved
Moss approached city staff about working with Fort Collins Utilities to secure water and provide sewer service.
Staff responded by meeting with Boxelder’s management earlier this year to “explore concepts that would potentially use city-owned assets with excess capacity to meet the demands of the development,” according to an Oct. 29 memo to City Council.
“The northeast portion of the Growth Management Area of Fort Collins is ripe for transit-oriented development that includes higher densities, more amenities provided by developers, and most importantly the inclusion of affordable housing stock,” deputy city manager Jeff Mihelich wrote in an email to Zick and Dennis Gatlin, chairman of Boxelder’s board of directors, following the July 31 meeting.
Mihelich added Boxelder’s service rates and tap fees “impact the city’s ability to deliver affordable and attainable housing stock that includes neighborhood amenities.”
He proposed a collaboration among the city, Boxelder and Montava where Fort Collins would take on wastewater treatment for some of Boxelder’s service area. HF2M would have to pay Boxelder for any sunk costs that the district has invested in the Cooper Slough Interceptor, a sewer line that runs through the Montava area.
Any agreement would also require no adverse impact to Boxelder and Fort Collins Utilities customers, Mihelich added. He ended his message with an offer to create a draft intergovernmental agreement or nonbinding draft of terms to present to City Council “if this is generally acceptable.”
For Boxelder, it wasn’t.
Gatlin and another Boxelder board member said as much during public comment at a Dec. 3 City Council meeting. They asked council members not to vote on Montava’s Planned Unit Development without meeting with Boxelder’s management and coming to a consensus.
“We’re always interested in long-range utility planning,” Gatlin told the Coloradoan. “Those kinds of conversations, however, they’re lengthy, they’re comprehensive. The thing that seems to be limiting that at this point is what I perceive as an insistence on some sort of short-term agreement that doesn’t take these issues into account.”
Council member Ross Cunniff was disconcerted to hear city staff had been leading conversations about the water and sewer issues.
“Do you feel somehow that we’ve given council direction to do that?” he asked Mihelich.
Mihelich replied that negotiations are “at a very, very cursory level.”
“Well, I appreciate that,” Cunniff said. “But personally, I’m not sure I see any benefits to the ratepayers in my district for us to move in this direction. I would certainly hope that any amount of staff time we’re doing is strictly incidental, and not anything that should be budgeted, because I don’t think we have full council authorization of significant effort in this area.”
Cunniff said a meeting between Boxelder and council was a good idea, while Fort Collins Mayor Wade Troxell countered that a meeting would be “premature” at this stage of the review. No meeting between council and Boxelder management has been scheduled.
It appears Montava’s developers will present their PUD proposal without answers on sewer service or water rights.
City drops draft agreement
The water agreement city staff drafted with ELCO was one of many ideas staff had for water collaborations, said Carol Webb, Utilities deputy director of water resources and treatment operations. The city has previously made arrangements with ELCO and Fort Collins-Loveland Water District related to water service, staff said.
“We collaborate with water providers all over Northern Colorado,” Webb said. “We all share similar sources, and we’re always looking for more opportunities to be efficient.”
The draft water agreement for Montava, acquired by the Coloradoan through a public records request, outlined a plan for Montava to purchase water credits from Fort Collins, which would annually provide up to 400 acre-feet of water to ELCO. By Fort Collins’ current rates for water credits, 400 acre-feet would cost $13.3 million.
Early estimates indicated Montava’s treated water needs at full build-out would be about 600 acre-feet.
Moss said that’s a significantly lower rate of treated water use compared with traditional development. He attributed the savings to his plans for aggressive residential water efficiency and the existence of wells and ditches on the property that will supply non-potable water for outdoor irrigation.
The agreement would only have been executed if the city confirmed it wouldn’t adversely impact Fort Collins Utilities and its ratepayers. City staff hadn’t finished vetting that requirement before the draft agreement stopped in its tracks.
Because the water referenced in the draft agreement is from the Colorado-Big Thompson Project, the agreement needed approval from CBT operator Northern Water. But Northern Water couldn’t sign off on its agreement because it violated the district’s policy for long-term leasing of CBT water, spokesman Jeff Stahla said.
Fort Collins Utilities isn’t pursuing the draft agreement, Webb confirmed.
That sent Montava back to the drawing board. Moss said he believes water dedicated to Fort Collins by Anheuser-Busch will be involved in an eventual agreement, although Fort Collins Utilities staff told the Coloradoan the city hasn’t considered providing water to ELCO based on the brewery’s water dedication. HF2M is buying the Montava land from Anheuser-Busch, which dedicated water rights to Fort Collins when the brewery was built here in the ’80s.
“We’ve been looking at every possible alternative to address the water challenges, and the solution is going to include the history of Anheuser-Busch and the water that they’ve dedicated to the city,” Moss said.
Moss said he’s determined to find solutions that work for Montava as well as the districts, but continued water and sewer issues shouldn’t pause review of the development.
“From our standpoint, we’re at the point where we need to know we’ve got permission to move forward with the plan before we can continue to work on solving those challenges,” he said.
Why Boxelder and ELCO policies differ from Fort Collins Utilities
Boxelder and ELCO leaders said they want to help make Montava a reality. Their policies and fees differ from those of Fort Collins Utilities for good reason, they said: Both districts face more financial constraints and have fewer resources than a large city utility.
“The large cities have the advantages of these rich, senior water rights portfolios,” ELCO general manager Mike Scheid said. “But the rest of us, who are relatively speaking the Johnny-come-latelys … are picking up the scraps that are left over. It’s expensive and it’s hard to find.”
He added that ELCO’s water policy isn’t unique in Northern Colorado and doesn’t preclude development. Developments can secure water rights in phases, he said, and Montava is currently slated to be built in 12 phases over the next 10 to 20 years.
“We see other developers that are able to find water today and see their projects develop,” Scheid said. “It’s not easy, and it’s not cheap, but it’s not impossible, either.”
Boxelder leaders said they want to work with Montava and find ways for the developer to save on sewer costs. The district charges higher tap fees and service fees because it’s a more spread-out network and has made recent investments in sewer lines and treatment facilities to prepare for significant growth.
But handing over a portion of their service area to another utility presents a huge risk to the district’s financial sustainability, they said. Boxelder is a geographically large district with a small-but-growing customer base of about 14,000 people. Montava’s 3,900 homes would boost the district’s customers by about 70% (using the census average of about 2.5 people per household), bringing in significant revenue in the form of tap fees and monthly service charges.
“We anticipated that area of Montava would have potential for capacity,” Zick said. “If that were to go away, we don’t have potential for revenue from those customers, and then the effect would be that our existing customers would have to basically pick up those expenses, which would result in increased rates.”
Zick and Gatlin are frustrated by what they consider a backwards process that puts development review ahead of fundamental services.
“It seems like the developer is trying to place the burden on this district for his inability to make that land deal he’s involved in workable for him,” Gatlin said. “To place the responsibility of whether or not the development happens on this district, I think, is really inappropriate.”
Asked if Montava’s unique circumstances warrant unique arrangements for water and wastewater, Moss said he sees the situation differently.
“I don’t want to speak to the word ‘warrants,’ ” Moss said. “I don’t deserve anything. We’re trying to bring Fort Collins’ vision for itself to life, and this is what Fort Collins has said it wants it be. It deserves this. I think Fort Collins is one of the only cities in the country where you can build something this unique and this special and this extraordinary, and we’re just trying to … help everybody understand what it takes to make this happen.”
Jacy Marmaduke covers government accountability for the Coloradoan. Follow her on Twitter @jacymarmaduke.Support stories like this one with a digital subscription to the Coloradoan.
Read or Share this story: https://www.coloradoan.com/story/news/2019/12/25/fort-collins-development-montava-seeks-affordable-water-sewer-elco-boxelder/2634413001/