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Steamboat Springs — Planning Services Manager John Eastman knows officials in other communities might raise an eyebrow when he says Steamboat Springs is "encouraging residential development."

The statement sounds a little crazy because of Colorado's tax structure, which Tim Katers said prevents the state's sales-tax-based municipalities from generating revenue from residential development. Katers is a planning consultant who works for Hayden and other small Colorado communities.

Steamboat officials agree with Katers. A report being prepared for the city's Planning Commission, which is considering urban growth boundary amendments, states that "multiple studies : clearly show that single-family residential development costs the city of Steamboat Springs more to serve than revenues received through sales tax."

"Based on the financing mechanisms that the city has in place, residential has shown to be a money-loser for the city," Eastman said. "If each new resident could at least bring a tourist along, we'd be OK"

Nonetheless, Eastman said the city's great need for affordable housing means it is willing to consider the annexation of Steamboat 700, a 700-acre development that proposes about 2,000 homes on a parcel just west of city limits.

"It was a recognition that if we want to continue to remain a real community, we have to provide at least some opportunity for the people who work here to live here," Eastman said. "We've got a goal of being a real community."

As Steamboat city officials address the challenges and opportunities presented by the potential annexation of Steamboat 700, municipalities across Colorado are tackling very similar issues. Minturn residents will vote May 20 on a proposed, 5,300-acre project on Battle Mountain. And in Durango, a project nearly identical to Steamboat 700 in size and uses is beginning to take shape.

Hayden has drawn the line when it comes to the annexation of anything but commercial and industrial properties, while Granby has staved off collapse and quadrupled its size in less than a decade with the annexation of about 7,000 acres of resort development such as the SolVista Basin ski area.

Grow or die

"We knew that we had to grow or we were going to die, literally," said Ted Wang, former mayor of Granby.

"Our sales tax was completely flat," Wang said. "Inflation alone was eating us alive. We knew we absolutely had to do something to increase our economic engine."

As a result, developments such as Granby Ranch, which includes SolVista Basin, Grand Elk Ranch & Club and Orvis Shorefox, were brought into town limits. Although these projects are geared toward second-home owners, Wang said the town required a strong commercial component be a part of each project. Grand Elk, for example, includes 350,000 square feet for commercial use along with its 730 housing units. In its initial submittal to the city of Steamboat Springs, Steamboat 700 proposes 272,000 to 331,000 square feet of commercial with 1,837 to 2,243 homes.

But Granby didn't stop at requiring commercial space, and Steamboat officials don't intend to, either. The Granby developments established special districts to tax their residents and fund required infrastructure improvements. Additionally, a percentage of the districts' bond proceeds go to the town. At Shorefox, Development Manager Jeff Martin said the development's tax district is approved for $40 million in bonds. If the full amount is issued, the city will see $3.6 million from Shorefox alone. Wang said the town's annual budget is about $4.5 million.

"The only stipulation is that they have to use it downtown, which we think is a good thing," Martin said. "You need a downtown to succeed for your developments to succeed."

"You want the vitality of downtown to grow at the same time these projects grow so it's a cohesive town together," added Steve Bromberg, general manager of the Shorefox and Grand Elk developments. "It's a benefit to the public, but the public is going to include residents of Shorefox."

Tax and mend

Bromberg disagrees with the notion that residential development doesn't pay its own way.

"During the early stages of development, we agree that's costly to the town. But once a project is platted, that's when this thing stabilizes," Bromberg said. "Once a new community is developed, why should that lot owner be treated differently than one that wasn't annexed recently?"

Granby also has required real estate transfer assessments in annexation negotiations. After the initial sale of property in the developments, a small percentage of future sales is given to the town.

Wang said these measures and others have successfully mitigated the costs of growth and that the town's economic needs for annexation have been fulfilled.

"We did a number of things that we felt were more creative," Wang said. "Over the long haul, that's really important, and that's where it's really important to have this vision to look decades out. Over the long-term, it makes a big difference."

Steamboat 700 Project Manager Danny Mulcahy has proposed similar measures. He has proposed a taxing district to pay for ongoing maintenance costs, and he has proposed a real estate transfer assessment to be devoted to affordable housing. Like Bromberg, Mulcahy said there should be a limit to how much the city exacts from the future residents of Steamboat 700. For example, Mulcahy said it wouldn't be fair to charge only his residents for traffic improvements the city will need with or without his development.

"I don't want our residents to be second-class citizens and pay disproportionately," Mulcahy said. "I don't think that they should have an exponentially higher burden than the rest of the community."

In addition to a taxing district and property transfer fees, Eastman said the city is contemplating a number of creative mechanisms, such as on-street parking fees, to at least make Steamboat 700 a revenue-neutral venture.

Thanks, but no thanks

"Residential annexation is something we're not interested at all in right now," Hayden Town Manager Russ Martin said. "We've got so much acreage in town that's already zoned residential."

Hayden approved its most recent annexation earlier this month when it added 16 acres west of town for Precision Excavating. At a Town Board meeting, Trustee Tom Rogalski called the annexation "just the kind of economic development thing we've been looking for."

Hayden approved the 47-acre annexation of the Dry Creek Village residential development in 2005. The deal required the developers to pay a number of fees and share in the cost of realigning Routt County Road 37, among other things. But the town since has lost its taste for expanding its limits for anything but commercial or industrial uses.

"Housing doesn't pay to bring in right now," Trustee Richard "Festus" Hagins said. "Right now, I'd rather see commercial growth."

Hagins said an increase in population - and also demand on town services - is inevitable due to resort activity in Steamboat and oil and gas development to the west. He said the town's strategy is to offset the cost of that growth with revenue from commercial and industrial activity.

"There's days I wish the phone would stop ringing," Martin said. "It's hard to keep concentration on existing services when you're constantly reviewing things. My focus is on making sure existing residents don't pay more."

Reasons for annexing property - and what to annex - vary across Colorado with the needs of the particular municipality and the wishes of developers. Unlike Hayden, Steamboat does not have an abundance of vacant land within city limits that is zoned residential. And unlike Granby, the city is not in a position where it needs to grow or die from an economic standpoint. Steamboat is concerned about the death of its character.

"People love Steamboat because of the working class nature of it," Mulcahy said. "At the end of the day, we have conflicting desires. We want the town to stay the same, but to keep it the same, we have to let it grow. If we want to have any opportunity to keep the same culture and character in the town, we have to keep the opportunities for the same people to live here."