Last spring the city of Steamboat Springs adopted water adequacy and water rights dedication policies that apply to new developments. Under the Water Rights Dedication Policy, every applicant shall dedicate to the city a dependable water supply equal to 120 percent of the water rights necessary to meet the requirements identified in the water demand report. At its discretion, the city may allow an applicant to provide a cash payment in lieu of water rights sufficient for the city to acquire 120 percent of the water requirement for the proposed development.
City Council appears to have favored Steamboat 700 by agreeing to accept a payment of only $960,000. This Annexation Agreement dictates that the city may use this money for legal, engineering, purchasing and other costs to firm up water rights.
To compare approaches to water and annexations, the Ginn Company annexation into Minturn offers a stark contrast. The Ginn Company agreed to dedicate to Minturn water rights valued at $30 million. Steamboat 700 was well aware of this precedent and other municipal water dedication policies long before the city of Steamboat Springs put the issue on the table. Steamboat 700 implied disingenuously that the city was unfair to bring this up when it did. Accepting this annexation without requiring the dedication of a dependable supply equal to 120 percent of the water rights necessary to serve the annexation leaves current taxpayers on the hook for millions of dollars and calls into question the fiduciary obligations of City Council members to the city they serve.
Let’s apply the Ginn water rights to Steamboat 700 and our city. Stantec’s November 2008 “Steamboat Water Supply Master Plan” (art. 188.8.131.52) estimates average Steamboat 700 water demand at full build-out at 1,215 acre feet a year. Accordingly, 120 percent of 1,215 equals 1,458 acre-feet. The Ginn Company annexation bid $22,737.50 per acre-foot for 1,337 acre-feet of the Columbine Ditch outside Leadville. At that price, Steamboat 700 would be paying the city of Steamboat Springs $33,151,275. The city gave Steamboat 700 a $32,191,275 discount. These estimates are based on the highly fluctuating costs of water rights. The Ginn water rights represent the higher end. At a value of $4,000 per acre-foot, the value of water would be almost $6,000,000, six times what Steamboat 700 paid.
The McLaughlin Water and Wastewater Master Plan Updates (December 2009) validates even the higher water rights value. Voters should note that City Council approved this Annexation Agreement before the report was completed and submitted, even though the report was commissioned with the intent to receive and consider it before the first reading.
McLaughlin’s engineers recommended the city upgrade its water systems to the city’s current boundaries, i.e. without Steamboat 700. Those upgrades totaled $9,552,000. Then, in order to serve the Steamboat 700 annexation and future annexations in West Steamboat Springs, McLaughlin recommended another $27,398,000 in water supply improvements for a total of $36,950,000.
McLaughlin addressed wastewater improvements, as well. McLaughlin recommends $14,656,000 in wastewater improvements to the city’s current boundaries, without Steamboat 700. Then it recommends another $8,276,000 to serve Steamboat 700 and additional West Steamboat Springs annexations (Steamboat 700 comprises 80 percent of the identified annexation parcels in West Steamboat) for a total of $22,932,000.
If the city annexes Steamboat 700, the sum of estimated costs equals $59,882,000. In this context, the $33,151,275 seems a reasonable amount to contribute in order to annex into the city.
The Annexation Agreement contradicts itself. Contrary to Schedule F, 24d and 24f, the Annexation Agreement says the developer is not obligated to construct or fund off-site water and wastewater treatment and storage facilities as required by the citywide Water and Wastewater Master Plan (Section VII, Utilities, A. water and sewer, 3 (b), page 21, Annexation Agreement). Doesn’t the text of this Annexation Agreement govern supporting schedules and exhibits?
Because the city is relying on a revenue stream based on Steamboat 700 lot and home sales to construct the water and wastewater treatment and storage facilities, and these sales may not materialize, the current residents of the city’s water district could be left paying the lion’s share.
Leaving as much as $32,200,000 on the table begins to look like a serious omission by the City Council, and it dramatically increases our financial risk. Annexations must meet two critical criteria: revenue neutrality and community benefits that substantially outweigh the costs of service. This annexation is not revenue neutral. Furthermore, Steamboat 700 benefits greatly from annexation. What are the benefits to our community?