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Steamboat Springs — City officials expect to see this week the first draft of a study identifying needed improvements to water and wastewater systems, their cost and future rates necessary to pay for them.

Those who say the city was too inattentive to water-related issues in its review of Steamboat 700 have complained that the 487-acre annexation was approved two weeks ago before the water study's completion. The annexation is subject to a group of residents' efforts to force a referendum election.

Among the candidates in this year's City Council election, Kevin Bennett has been the most vocal about water issues and said they are the No. 1 reason he is running for council against Councilwoman Cari Hermacinski. Bennett has said Old Town residents and businesses will pay to provide water infrastructure for the new development, noting that the city water service area does not include the mountain area served by Mount Werner Water District.

Steamboat Springs Public Works Director Philo Shelton said Monday that the pending water study will identify and prioritize water projects. Within the existing city limits, the biggest project is a new million-gallon water storage tank in western Steamboat.

Although the cost of that and other water projects will be built into new tap fees and usage rates for the existing city, Shelton said water system improvements necessitated by Steamboat 700 and other annexed areas - such as a potential reservoir on the Elk River with a cost estimate of $12.5 million - will be covered by separate tap fees for those areas large enough to cover the costs.

That's the main reason City Council President Loui Antonucci said council was comfortable with voting on the annexation before the study's completion.

"The funding source is there," Antonucci said. "The rate is going to be what the rate needs to be."

Water and wastewater usage rates will not be similarly segregated, but Shelton said he would expect the annexation of Steamboat 700 to put downward pressure on those because 90 percent of the city's operation and maintenance costs are fixed.

"It's not how much water you sell that matters," Shelton said. "It's customers."

In addition to separate tap fees for the annexed area, the developer of Steamboat 700 also is paying for the cost of a new 1.5-million-gallon water tank and $960,000 for legal and engineering work to develop some of the city's existing water rights in Fish Creek, Stagecoach Reservoir and the Elk River. The city's annexation agreement with Steamboat 700 does not require that any new, "wet" water rights be dedicated to the city.

Bennett and some other critics of Steamboat 700 have questioned the city's refusal to force developers to bring water rights to the table as an annexation requirement.

City and Mount Werner Water officials, however, are relying on a recently adopted water supply master plan that concluded that "the ability of the city and the district to meet anticipated future demands is quite good" but that "the city and the district should continue to consider and pursue the development of alternative water supply sources to increase redundancy in the community's water supplies."

Bennett disagrees and says the surplus water is needed to serve areas already within city limits and in the case of emergencies.

The water supply master plan, created by Stantec, is based on historical population growth of 3 percent a year since 1980 and water demand growth during the same period of 1 percent a year. The study concluded that the city has several decades "to identify, design and implement the next significant expansion of water supplies."

Mount Werner Water and Sanitation District General Manager Jay Gallagher said he is comfortable with the study and its conclusions and noted that "firm yield" is based on a worst-case scenario, in this case, the drought year of 2002. The city's and district's combined water demand in 2007 was 3,141 acre-feet, according to the study, and the projected demand for 2027 is 7,206 acre-feet. The city's current firm yield is about 9,000 acre-feet per year and could be increased to 13,500 acre-feet with the water projects that could ultimately accompany annexed properties.

"I support the conclusions of the Stantec report. There's no reason not to," Gallagher said. "Under the worst conditions we have seen over the past 80 years, this information says we're in pretty good shape."

The study does note that the community is vulnerable to a fire or other natural disaster in the Fish Creek watershed, the source of about 80 percent of the city's current firm yield and capacity.

"That's why it's important to diversify the sources," Gallagher said, "and the city's doing the right thing."