CB council continues to explore Whetstone utility service

Intergovernmental agreement to be discussed September 18 

By Mark Reaman

Crested Butte and Gunnison County representatives have agreed to continue moving forward with a possible partnership in the proposed 231-unit Whetstone affordable housing project located near Brush Creek. While not yet willing to fully commit to extending water and sewer utilities to the development, the town council agreed on Tuesday to consider an Intergovernmental Agreement (IGA) with the county outlining conditions that could lead to a comprehensive utility extension agreement. 

The IGA is basically meant to put in writing assurances for both parties for a continual Whetstone partnership. The desire is to have a draft IGA before the council at the September 18 meeting, at which time a public hearing will be part of the deliberation process. Council also plans to hold philosophical discussions relatively soon about possibly annexing the property into town after the county completes construction. 

Town staff emphasized there was still a lot of information needed to fully analyze the fiscal and engineering impacts of a utility extension two-and-a-half miles south of town. Gunnison County representatives said providing that deeper information would take months to obtain and cost about $1 million. 

The IGA will basically include seven main points: A) The final engineering and feasibility analysis must demonstrate the town’s water and wastewater infrastructure has verified capacity to serve the development; B) The final analysis demonstrates the extensions to Whetstone will meet the town’s engineering design standards and maintenance practices; C) The county commits to the utility customers in Whetstone financing any unforeseen increases in costs caused by the operation and maintenance of the approved infrastructure; D) The final analysis demonstrates verified beneficial fiscal impacts to the long-term operation of the town’s entire water and wastewater system and Utility Enterprise Fund under the established rates or, in the event there is a negative impact, the county agrees to fund the differential impact between the increased cost and cost neutral for the enterprise; 

E) The county agrees that the utility rates established for Whetstone will be subject to any future rate increases approved by the council; F) The county agrees that it does not intend to make any financial requests of the town to support the Whetstone project; and G) The county agrees not to prohibit, and to negotiate in good faith, the town’s (possible) future annexation of the Whetstone development. 

Council made clear they did not intend to begin any annexation process that could slow down development of the Whetstone project. But they indicated they would like to engage in the philosophical discussion in the next several months of whether to annex the 231 units into town after construction is completed. Gunnison County officials leading the project, Cathie Pagano and John Cattles, said they hope the town is very involved with the design aspects of the proposal whether it annexes the property or not.

A fiscal impact assessment of possible annexation was conducted by the firm of TischlerBise. Company president Carson Bise told the council that based on 210 rental units owned by the county and 21 deed-restricted for-sale units, the firm estimated 325 people would live at Whetstone after build-out. That would increase the need for some town employees and equipment, primarily in the public works and Parks, Recreation, Trails and Open Space (PROST) departments. Overall, Bise said given the amount of sales tax expected to be generated by the new residents, the town would see minor deficits between what is spent by the town to service the development and what is generated through taxes over the first 10 years. If 66% of all sales tax generated by the residents went to the town, there would be an annual shortfall of about $30,000, which Bise described as essentially “break even” given the town’s annual budget. He said his gut feeling was that the town would retain between 50% and 60% of generated sales tax and it would take three years from the end of construction before the development was at full occupancy. 

Crested Butte councilmember Beth Goldstone pointed out that the town would receive the increased sales tax revenues whether the property was annexed or not. Councilmember Chris Haver noted that if annexed, residents would be subject to some higher town tax liability such as when they purchase a car.

One surprising expense not in the analysis was the absence of a budgeted expense for an additional marshal. But town manager Dara MacDonald said given the mutual aid agreement with the sheriff’s office, it was not anticipated to be needed.

According to Crested Butte public works director Shea Earley, a sewer feasibility study conducted by RG and Associates “at first blush indicates the town had the ability to absorb the utility extension.” But Earley was emphatic that staff hasn’t had time to dig deep into the engineering and fiscal analysis and they need a lot more information to properly make a recommendation. “The devil is in the details,” he said.

Cattles said the information requested by the town will take at least eight weeks to compile and cost the county a million dollars. Given that, the county wanted some assurance that if the numbers came in favorably, the town would continue to move ahead with the utility extension. “It’s a chicken and egg thing and part of the challenges,” said Pagano.

Crested Butte community development director Troy Russ said the two parties were working well together and the town would be “comfortable” with an IGA under the proposed terms.

MacDonald told the council that the IGA was very separate and different from an ultimate utility extension agreement.

“There are a lot of ways to skin this thing and protect both parties,” said Cattles. “We are hoping whatever scenario is chosen is good for both parties. We are trying to get to a ‘yes’ in a fiscally responsible way.”

Councilmember Mallika Magner again suggested the town include tangible requests not directly tied to utilities as part of any agreement. She used as an example PROST director Janna Hansen’s request to have some of the conceptual open space in the development be used as a field. “Things like that should be part of the IGA to protect the town,” Magner suggested. “It is good faith to bring such issues to the county now.”

Cattles said everything impacts rents and the goal is to protect the town and the county and keep rents affordable. 

“From our initial conversations we are cautiously optimistic that we will get there,” said MacDonald. “But we are not there yet. We don’t have enough information to understand all the costs.”

“We are confident we can get to the point that is fair to both parties. The initial numbers we are seeing are not deal breakers,” said Cattles.

Pagano said she was having some discomfort with proposed item “F” of the IGA. “We might come and ask the town for some money in certain circumstances as this moves forward,” she said. “We don’t know that now.”

“It is an attempt to put all the cards on the table,” said MacDonald. “It doesn’t prohibit a future ask. But we don’t want to see the council backed into a corner down the road. We need to know those asks sooner rather than later.”

“We don’t have that now and won’t by the 18th,” said Pagano.

“The intention is not to hold the project hostage in the future,” said Cattles. 

Goldstone said while she understands that starting an annexation process now would cost everyone time, she wanted to have the council discuss the idea of an annexation as soon as possible. “Now is the time to have that discussion, not in three years after construction is completed,” she said. “We have all the analysis and putting it off three years seems like we lose all our leverage. What are we waiting for? Waiting for the eleventh hour is not the best idea.”

“Discussing in the next three or four months whether annexing makes sense won’t hold up the project,” said councilmember Chris Haver.

Pagano again said the county was not a “hostile” partner with the town and she wanted Crested Butte representation included in ongoing discussions on how to best design the development. “We want to include and collaborate with the town whether there is an annexation or not,” she said.

Councilmember Gabi Prochaska said it would be appropriate for the council and town residents to have an annexation discussion without the county having to be involved and keeping it separate from utility extension discussions.

Council agreed to pursue the IGA and the two staffs will work on language that the council will review at the September 18 meeting. “This IGA seems a big enough subject to include a public hearing,” suggested mayor Ian Billick. 

During the public comment portion of the council meeting, several residents and second homeowners spoke against the idea of town annexing the development. Kimberley Barefield, Jim Watson, Karl Zachar, Haden Spencer and Jim Schmidt all brought up points against the possible annexation while endorsing the Whetstone development as a needed project. “I urge you to focus on what is important and timely and that is getting utilities to Whetstone and the budget,” said Zachar. “Annexation is a different and more robust discussion.”

Several councilmembers said they have not heard much public street feedback on the idea of annexing the property. While no date has been set to discuss possible annexation of Whetstone, the council indicated they wanted to conduct the discussion this fall or early winter.

The discussion will continue at the next council meeting with the draft of an IGA.

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