The Yampa Valley Housing Authority believes the Brown Ranch should not be required to adhere to a city policy requiring dedication of water rights or a fee to secure water rights for new annexed property in Steamboat Springs.

The water rights dedication policy was put in place in 2009 during the first attempt to annex land then called Steamboat 700. That land is now referred to as Brown Ranch.

As the Brown Ranch property does not have any water rights to contribute to the city, the housing authority would be subject to the fee-in-lieu aspect of the policy, if the city opts to require one.

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City Council President Robin Crossan said Wednesday, March 1, that council received a presentation about the policy in a closed-door meeting the night before, but had not made any decisions.

“We had all the options presented to us last night in executive session,” Crossan said during the Brown Ranch Annexation Committee meeting.

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As the draft annexation agreement read at the start of Wednesday’s meeting, the housing authority “shall comply” with the policy, but the committee agreed to mark that clause of the document for further review. YVHA Executive Director Jason Peasley said the housing authority does not agree with the clause as written.

“Just to be clear on our position, we believe that we should not be charged that,” Peasley said. “You have ample water rights that you guys have done a very good job securing and firming and that if you were to use them for any purpose, it would be to house the local workforce.”

“By adding a fee-in-lieu you would just be making our local workforce housing more expensive,” Peasley continued.

The policy stems from the Steamboat 700 annexation attempt, though it was not in place when that process started. Instead, it was added when concerns were raised about the city’s ability to meet the water needs of the proposed development.

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The policy requires a developer to dedicate water rights to the city that would supply 110% of the projected water need for the project, whether that water is tied to the annexed land or stems from elsewhere.

The fee-in-lieu option council “may, at its discretion, allow” if the city has sufficient water rights to meet the need of the development. As city officials explained in a February annexation meeting, the city does have water to accommodate Brown Ranch, though a new water treatment plant on the Elk River would eventually be needed.

The policy also includes a clause that gives council “the authority to substitute or waive any of the conditions or requirements of this policy.”

“The question is whether the city would be requiring the housing authority to pay that fee-in-lieu or if it would be waived or reduced,” said Jason Lacy, the third-party facilitator on the annexation committee.

Water proved to be a contentious issue during the Steamboat 700 annexation attempt, with officials with that development arguing a 1993 agreement between the former owners of the property and the city did not require water rights dedication for development, according to Steamboat Pilot & Today’s reporting at the time.

The so-called Brown water agreement, struck between Stephen and Mary Brown and the city 30 years ago, states “the city hereby irrevocably agrees to make water and sewer service available for the development of the property.” It goes on to say, “such water and sewer service shall be provided in accord with the terms and conditions that are in effect at the time service is requested.”

But city officials argued at the time that the Brown agreement did not exempt Steamboat 700 from the water rights dedication policy, which was adopted in May 2009.

In the end, the annexation agreement required Steamboat 700 to pay $960,000 over two years that the city would have used for legal and engineering work needed to firm up water rights it has, but was not using. In 2010, Steamboat voters overwhelmingly rejected annexation of the property.

Water was also an issue during the West Steamboat Neighborhoods annexation attempt by Brynn Grey, even though the city determined it had the water for that development, which contained about 450 single-family homes.

After council balked at early water proposals for the development, the annexation agreement would have required Brynn Grey to pay about $4.7 million to a city water firming fund, with some money coming initially and more when each house was sold. While voters approved that agreement, the developer failed to purchase the property and the project fell apart.

But unlike those previous two attempts, city and housing authority officials have stressed that the Brown Ranch annexation process is more of a partnership than negotiations with a developer typically are.

When discussing water on Feb. 15, the committee entertained splitting the costs of needed water infrastructure upgrades based on forthcoming modeling that aims to gauge how much value these improvements have for current city residents and future Brown Ranch residents. This modeling should be done by May.

The draft annexation agreement also states that the housing authority will utilize funds from the short-term rental tax passed last November to pay for off-site infrastructure, though a larger discussion on how that revenue would be utilized is still ahead.

Crossan said council would like to get results from a fiscal impact model before making any decisions on finances or how to utilize the STR tax. The fiscal conversation is set to start at the next meeting on March 15.

“We need the fiscal impact survey done,” Crossan said, referring to council’s conversation in executive session on Tuesday, Feb. 28. “We would reevaluate quite a bit of what we’re doing based on how much … will be coming out of the general fund.”

To reach Dylan Anderson, call 970-871-4247 or email danderson@SteamboatPilot.com.