Risk concerns linger for Steamboat 700 | SteamboatToday.com

Risk concerns linger for Steamboat 700

Attorneys, city staff maintain that taxpayers aren’t liable for annexation’s costs

Mike Lawrence

Steamboat Springs resident Chris Koebrick skis Thursday on the Nordic trails maintained on the Steamboat 700 property.

— Tim Rowse can sum up his opposition to the proposed Steamboat 700 annexation in two words.

What if.

"It's all about what happens 'if,'" Rowse said last week. "And given our current economy, that 'if' is a pretty big question."

Rowse has been the public voice for the Let's Vote committee, opposing Steamboat 700, for the past several months. But his concerns are shared by many in the community, which is about to begin a public vote on the annexation that could bring 2,000 homes and 380,000 square feet of commercial space to Steamboat's west side throughout a 20- to 30-year time frame. Ballots with the annexation question known as Referendum A will be mailed to city voters this week. The mail-only vote ends March 9.

Steamboat Springs City Hall, 137 10th St., is the only drop-off location for ballots.

The Web site for Let's Vote includes questions such as "What if Steamboat 700 runs into financial trouble at a point in time when the expansion of the water system becomes necessary? Who pays for a needed system if the developer can't?" Other residents have asked what happens if a secondary developer buys land from Steamboat 700 and then builds excessive or unsuitable homes that don't sell; if the city bonds for infrastructure that development can't support; or if other similar, failure-related scenarios occur.

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"It begs the question, who's going to come out of pocket for that?" Let's Vote member Bill Moser, a local Realtor, said last week.

The city hired annexation attorney Jerry Dahl to negotiate the annexation agreement with Steamboat 700. The city was Dahl's client, but the city required Steamboat 700 to pay for the costs of Dahl's services with funds passed through the city.

Dahl said the "what if" question, of who is liable in the event of failure, was central to the negotiations.

"I'll tell you, that question was probably the most important one to us," he said last week.

He said the agreement assigns a strict "pay to play" method to the proposed annexation.

"No, the city taxpayers aren't liable," Dahl said. "This is a phased project. The city is not obliged to grant final plat approval for any individual plat until the infrastructure that's going to service that plat has either been built or is financially secured. … So as the project gets approved, that infrastructure has to either be built or be financially secured."

Dahl said infrastructure funds from Steamboat 700 developers or property owners within the site must come before the additional build-out tied to that infrastructure, not the other way around.

"If the project gets halfway done, and the market goes bad and nobody is buying lots, the infrastructure for what's been approved, the money is in the bank for that," Dahl said. "The city wouldn't approve additional plats unless the money was available for the infrastructure. … There's never a circumstance where the city has approved plats for which the financing isn't in place."

The annexation agreement stipulates throughout that developers and property owners within the site are liable for the costs associated with development.

Steamboat 700's financing mechanisms would include five metropolitan districts established within the annexation.

A metro district is a taxing entity often used by municipalities to reduce financing costs.

"Metro districts have access to tax-exempt municipal financing … which is lower interest rates than what you would experience if you were privately financing all the infrastructure for the project," said Bill Ankele, a lawyer with White, Bear & Ankele in Highlands Ranch.

Steamboat 700 hired Ankele to establish the metro districts' financial plans. Ankele has worked with Colorado developers to form metro districts for financial purposes since 1982.

He said Steamboat 700 would use five metro districts because of its size, phasing and variety of development. Because Colorado assesses different property tax rates to residential and commercial properties, for example, metro districts would have financial plans according to their type of development.

Ankele echoed Dahl's resp­onse to liability.

"There's no risk to current city taxpayers — the only property that is subject to the metro district property taxes would be the property within the Steamboat 700 project," Ankele said. "Neither the city of Steamboat Springs nor its taxpayers has any of the responsibility for any of the debt that gets issued by any of these metro districts … that's really clear."

On tap

Despite his previous assertion, a letter Dahl sent to Steamboat Springs City Manager Jon Roberts on Feb. 1 includes a scenario in which the city could find itself on the hook for funds.

Tap fees from Steamboat 700 property owners are a designated funding source for water and wastewater infrastructure expansions outside the annexation site. Dahl wrote that the city could use those tap fees in three ways: deposit them into the city's capital facilities expansion account — which is required by the annexation and funded by Steamboat 700 revenue streams — then spend the fees when needed for infrastructure; require developers to prepay tap fees in situations where infrastructure is needed in anticipation of growth; or, he said, the city could choose to issue bonds to pay for infrastructure and then pay off the bonds with future tap fee revenues.

The third option could leave the city open to the kind of risk cited by Rowse: if the city issued bonds and then tap fee revenues were not generated by property sales.

Steamboat 700 attorney Bob Weiss acknowledged last week that "there could be a cash flow issue" if water or wastewater expansion was needed before the tap fees to pay for it were available.

"What the city has told us is, if necessary, they may require us to prepay tap fees," Weiss said. "They may require that when they record the plat."

Roberts could not be reached Saturday to comment about the city's preferred method for handling tap fee revenues.

Dahl noted in his letter to Roberts that the city would have no obligation to issue such bonds.

"The important point to bear in mind is that existing ratepayers within the city will not be responsible for contributing funds to provide for capital facilities expansion made necessary by the Steamboat 700 project," he wrote. "Instead, the developer, the metro districts and the owners of buildable lots, through the payment of tap fees, will fund that expansion."

Dahl said if development faltered at Steamboat 700, the annexation still would generate revenue for the capital facilities expansion account the city will create if the annexation occurs.

A real estate transfer fee of 1.2 percent of the sale price would be paid at the closing of every sale at Steamboat 700. Of that 1.2 percent, 0.5 percent would go to a city affordable housing fund, 0.5 percent would go the Steamboat Springs School District and the remaining 0.2 percent would go to the city's capital facilities account.

A 5-mill property tax levy also would feed that account.

"That revenue stream continues," Dahl said. "If the project sort of halts, there will still be some lots that have been sold … and that revenue keeps going into that fund until the obligations of the developer have been satisfied."

Danny Mulcahy, Steamboat 700 principal and project manager, responded to concerns about secondary developers building inadequate homes by saying traditional neighborhood zoning dictates what type of housing can be built.

"Our metro districts will have an architectural review committee and established design guidelines," he said. "Everything that is built in one section of that development affects the harmonious nature of everything else that's out there. … It's important to make sure that quality is developed out there, otherwise it lowers the value of the remaining land."

If you go

What: Community Forum about Referendum A and the proposed annexation of Steamboat 700, with moderator Cathleen Neelan

When: 5:30 to 7:30 p.m. Thursday

Where: Olympian Hall at Howelsen Lodge, 845 Howelsen Parkway


■ Learn more about the proposed Steamboat 700 annexation at http://www.steamboatpilot.com/news/steamboat700/.

■ Learn more about the Let’s Vote issue committee, opposing the Steamboat 700 annexation, at: https://letsvoteno.com.

■ Learn more about the Good for Steamboat committee, supporting the Steamboat 700 annexation, at: http://www.good4steamboat.com.