CB council approves utility extension to Whetstone

Still issues to resolve and entities give themselves 100 days to settle

[  by Mark Reaman  ]

While giving themselves 100 days to figure out the details of a couple of major issues still in limbo between the town of Crested Butte and Gunnison County, the Crested Butte town council voted unanimously on July 15 to approve what was described as a “very complex” utility extension agreement to provide water and sewer service to the proposed Whetstone workforce housing project two miles south of town. The county is the developer of the project.

The action is meant to allow the county to take the next major step forward with the project by providing them the documentation needed to apply for Colorado Department of Public Health and Environment (CDPHE) permits necessary for the development. That state process, along with Gunnison County Land Use Resolution review, is expected to take anywhere from between six and nine months, so in order to get started in a timely fashion next spring, the county said the town needed to provide a so-called “will-serve” letter as soon as possible. They did so Monday. 

The agreement council approved stated that the entrance to Whetstone on Highway 135 would include an $8 million roundabout basically in conjunction with the start of construction for the project. It also stated that $7.5 million in System Investment Fees (similar to tap fees) would be paid by the county “as a proportionate share of upcoming capital improvements needed to maintain and improve the town’s existing utility system.” Those fees are meant to be paid no later than 60 days prior to the commencement of utility service to the 252-unit development.

But the county has said the cost and timing for either of those elements raises the amount that needs to be borrowed for the development and could kill the project if a way is not found to stretch out the utility fee payments over 15 years, or push back construction of the roundabout several years until financing for its construction is obtained. Thus, the council said town would work diligently to come to some sort of compromise on both those issues within the next 100 days. If none can be found, the project could be dissolved by the county.

The Monday discussion took several hours and drew several public comments both for and against entering the proposed utility extension agreement. Crested Butte Public Works director Shea Earley said while not all the requested engineering information had yet been supplied and analyzed, the town had built in safeguards to make sure the needed information and analysis would take place in a timely fashion that protected the town’s interests. Earley said infiltration and inflow concerns impacting system capacity are being addressed through the town’s I&I reduction program and he gave an optimistic view that Whetstone would not tip the scales to a point where town needed to expand facilities. Whetstone would amount to about 7% of the town’s overall water and sewer treatment capacity. Monthly service fees would be billed at 80% of current in-town rates. He said the county would own and maintain all the new infrastructure needed for the utility extension. 

Mayor Ian Billick said given the complexity of the agreement and the need to iron out details, the 100 days provided opportunity to work out solutions while being transparent with the public. 

“We understand the need for due diligence and hope council understands the urgency from us to get this in motion to meet CDPHE timing,” said Gunnison County commissioner Laura Puckett Daniels. “The terms right now are financially untenable to the project and our hope is to use the time period to come to a balanced agreement with the outstanding issues. Let’s all remember the big picture to get housing done.”

Assistant county manager for operations and sustainability John Cattles said when it came to putting the financing package together, the fewer outstanding issues, the better the chance to sell the bonds. “We have urgency to get things rolling now,” he said. “We want to button up as much risk as possible for a stronger financial package.”

Billick also mentioned three primary risks in delay coming with potential construction cost inflation, uncertainty with where interest rates might go, and the loss of a $10 million state grant that has to be triggered by December 2026.

“The other risk is that the county is spending money on a project that might not succeed,” added Puckett Daniels. “If there is no Whetstone project at the end, we would rather cut our losses sooner than later.”

Public concerns raised

Several members of the public, including many with legal backgrounds that have experience reviewing such agreements, brought up specific concerns about wording in the proposed agreement and possible ramifications to the town. Answering concerns raised by Marcus Martin, Jim Watson, David Leinsdorf and Paula Martin and reiterated by council members, town attorney Karl Hanlon assured the council the agreement was tight and protected the town.

“Due diligence is there not to kill a deal but to make a successful deal,” said Paula Martin. “What level of due diligence do you need as councilmembers to resolve uncertainty and to feel comfortable signing this document?”

“This is a phenomenally complex transaction which isn’t unusual. But this is less an agreement and more a listing of issues that need to be resolved before an agreement,” said Watson. “I recommend commencing full bore talks but not doing something that creates significant risk by entering into a premature agreement.”

“You have heard from various people on the legal aspects but listen to your own attorney,” urged former attorney Jim Starr. “You can get as many legal opinions as hands raised. This project is critically needed for the community.”

“From a contractual standpoint, there are a series of contingencies that allow the contract to be terminated. It is like a contract you sign when buying a house,” said Hanlon. “The town and county legal teams have gone back and forth a lot, and tonight is about a policy decision by council. I am comfortable with this agreement. Understand there are risks but there is risk with anything.”

Other citizen concerns included that the free-market units making up 20% of the total Whetstone unit count were also getting tap fee and monthly service charge breaks. There was some thought that the agreement was biased toward the county and set up town for any blame if the project is killed. The somewhat high rents (down to about $2,700/month for a two-bedroom) made some feel the project was geared toward high income workforce housing and not the middle class. The idea was brought up that the council was depending on too many “assumptions” and there was too much uncertainty in the proposal.

“Every developer talks about urgency,” said John Hess, a former Crested Butte town planner. “But that urgency is not your problem, it’s theirs. You have to make good decisions.”

“The community comments need to be considered,” said Scott Desmarais, president of the Valley Housing Fund. “I see tonight’s agreement getting down to specifics within 100 days. If we want to do this, I do believe there is some urgency. The housing problem will only intensify. Whetstone is an important opportunity. Let’s get some workers living in the community again.”

It’s definitely not a done deal

“The bottom line is that if we can’t reach agreement on the outstanding issues, the project dies,” said Puckett Daniels. “But I’m hearing the council is willing to explore pathways to get there. This agreement gets us one step closer. Let me also remind you that the people that Whetstone will serve aren’t here tonight because they are working or watching their kids. Not everyone can come to a Monday night meeting. Frankly, housing is the issue of the moment everywhere. We can control our own little slice of the world, and this gives us a path to work out the details while moving the project ahead.”

“It seems the county is more exposed to risk than the town,” noted councilmember Jason MacMillan. “I think this is a good small step with limited risk to the taxpayers and it moves the project forward. This started in 2021 and it always feels rushed at the end but I’m ready to get in the trenches and figure it out.”

“Risk doesn’t go away by not doing anything,” said Billick. “There is still a lot to work out.”

“I am feeling better with our town attorney backing the contract,” said councilmember Kent Cowherd. “The 100 days gives us time to do our due diligence.”

“If we have Karl’s endorsement that the ambiguities pointed out are not so significant, I am comfortable with it,” said councilmember Gabi Prochaska. “To me, this project is really important. At some point we need to take a leap of faith and this agreement is structured where we can negotiate the missing details.”

“I’ve never signed a real estate deal and I represent a group that is important to the running of town that might not either,” said councilmember Anna Fenerty. “This project represents opportunity for some members of the community to step into a good space. It is a great chance to make a dent in our housing situation. Now is the time during the 100 days to get into the minutia of things like the roundabout to see if it can be worked out and if the project happens or not. The real risk is losing our community, and that is happening.”

“To the point that the urgency is their problem and not ours, the county is us,” said Billick. “It’s not a private developer hoping to make a lot of money. I’ve spent a lot of time in my life dealing with agreements and I’ve seen some crappy agreements. This isn’t a crappy agreement. If it was, I wouldn’t hesitate to call it out. Like Gabi said, we need to step into the breech and move forward.”

The council voted 5-0 to enter into the utility extension agreement. Councilmembers Mallika Magner and Beth Goldstone were not in attendance.