January 31, 2018 News » Cover Story

City faced with changing the rules on Banning Lewis Ranch to spur development 

Growing plains

click to enlarge A view of Banning Lewis Ranch when cattle were its chief occupants. - COURTESY, SPECIAL COLLECTIONS, PIKES PEAK LIBRARY DISTRICT
  • Courtesy, Special Collections, Pikes Peak Library District
  • A view of Banning Lewis Ranch when cattle were its chief occupants.

On the city's eastern fringe, grassland and wire fences stretch for miles.

Back in 1988, the city and developers had high hopes for this 24,000 acres of shortgrass prairie, known as the Banning Lewis Ranch. Visions of thousands of new homes, businesses and industries — even a six-lane expressway cutting through the ranch — danced in their heads.

But the biggest change in the last 30 years to this golden flatland has taken place just outside the boundaries of the ranch, and the city. In unincorporated Falcon, fast food restaurants, a Safeway, a Walmart and homes by the hundreds have popped up. The ranch, which comes with a demanding annexation agreement that dates to those dreamy days in 1988, is apparently viewed by developers as too burdensome, and therefore not worth the bother.

Now, Mayor John Suthers and his staff want to knock down fences that have caused growth to "leapfrog" the city — the buzzword at City Hall these days. To do that, Suthers proposes a new annexation agreement to scale back how much developers have to pay, thereby encouraging them to turn the stagnant land into blossoming subdivisions that would bring new homes, economic activity, jobs and tax money to the city.

Armed with an economic impact study that shows the city would net $49 million in taxes and fees over 30 years should it develop, Suthers and his staff say the city could impose less-expensive development rules and still make the ranch pay for itself.

The city says the key to making developers pay less while not shifting their costs to taxpayers is lower-density development. But considering the proposal would lift requirements from developers for nearly every type of public infrastructure and service, it's a fair question how exactly the new agreement would accomplish that.

Several city councilors, noting the complexity of comparing the old and new agreements, which address everything from drainage to police and fire protection, objected to a schedule that culminated in final Council approval on Feb. 27. Mayor John Suthers' staff responded by adding two months and two public meetings to the schedule. Now final approval is slated for April 24.

As Councilor Tom Strand tells the Independent, "I want to take the time it takes to make sure we have all of our questions answered. They [city staff] need to come back with an answer or say, 'We don't know the answer.' We need to get that information and make sure we have all the data we can to make the best decision we can."

Unanswered questions include:

• Would the new agreement cause developers to absorb all costs associated with Banning Lewis Ranch?

• Did the economic projections take into account whether the city could actually keep all the new projected tax revenue, or is it possible the city might need to refund a lot of that money to citizens due to requirements of the Taxpayer's Bill of Rights? TABOR limits the amount of new revenue governments can receive based on new construction and inflation, unless voters allow the city to keep the excess money. Reports by financial analysis firm TischlerBise of Bethesda, Maryland, don't mention TABOR, and the city admits TABOR wasn't a factor in the projections, raising questions about their reliability.

• At least four exhibits referenced in the new agreement haven't been released, including: a list of ranch owners, a list of the wastewater facilities Colorado Springs Utilities' ratepayers would help fund, and a list of water rights owners agree to cede to the city. (In response to the Indy's records request, the city said, "These exhibits are in draft and have not yet been finalized.")

• No regional transportation study has been conducted to determine the ranch's impact on traffic and tocorroborate the city's decision to scale back the six-lane Banning Lewis Ranch Parkway to four lanes.

• The new proposal leaves untouched the existing high-density master plan, which includes zoning for roughly 8,000 acres of single-family homes, 6,500 acres of multi-family use, 1,320 acres of office space, 5,200 acres of industrial area and is predicated on attracting 175,000 residents. The city says it will entertain changes ad hoc as owners propose their subdivisions, no matter where they're located within the ranch. That means the city has no projections for how the ranch will evolve and when.

• The ranch's former owner, Ultra Resources, Inc., of Houston, retains the land's mineral rights, and could choose to drill at any time. What does that mean for new homeowners and parks when and if it becomes economically viable to drill for oil and gas?

• The new agreement doesn't demand open space from developers in exchange for concessions made by the city in changing the annexation agreement. Once it's approved without such a provision, the city loses its leverage.

City officials say it's unfair to impose more demands on the ranch's owners than is required of other annexations. As Director of Planning and Development Peter Wysocki says, "The obligations [of the 1988 agreement] are not equitable with other annexations." He's also said densities will be dramatically lower than the original plan contemplated, perhaps two-thirds lower.

But a federal judge upheld the ranch's agreement, and the ranch is unlike any other in the city's history. It covers 38 square miles, or about 20 percent of the city's 200-square-mile area. The distance from north to south is farther than the drive from downtown Colorado Springs to the Air Force Academy. One Gazette article in 1988 likened the ranch's size to the city of Fort Collins.

The city's other argument, ironically, was the basis for annexing the property in the first place — a fear development would leapfrog the city limits into El Paso County where development rules aren't as tough, thereby burdening the city with the cost of infrastructure, such as roads, from those developed areas into the city.

All that has led some to be skeptical, including the city's own former comprehensive planning manager. "Either developers pay or taxpayers pay," says Ira Joseph, who worked on the Banning Lewis Ranch project during his 24-year tenure.

The city argues the ranch's density under the new plan would be lower than that contemplated in the 1988 agreement (though it's not mandated in the new proposal), and developer requirements in the new agreement are designed accordingly. As Wysocki says, "It's not giving away the farm," an assertion echoed by Suthers' Chief of Staff Jeff Greene, who says, "We don't give any developer a bye."

But Councilor Bill Murray isn't buying it. "This agreement doesn't even come close to fulfilling reasonable requirements to protect the citizens," he says.

Nor'wood Development Group, the region's biggest developer, which bought 18,500 acres of the ranch in 2014, says the city can't afford to lose more growth outside its boundaries.

"Without a fair and equitable agreement for all Banning Lewis Ranch property owners," Nor'wood spokesperson Tim Seibert told Council on Jan. 16, "development will continue to leapfrog Colorado Springs to unincorporated areas, such as Falcon, Security, Widefield and northern El Paso County." That kind of growth, he added, will strain city services and negatively influence quality of life. "By amending the current annexation agreement to follow current city of Colorado Springs development standards ... the city can capture and manage growth for generations to come."

click to enlarge Peter Wysocki - GRIFFIN SWARTZELL
  • Griffin Swartzell
  • Peter Wysocki

Just how long ago the Banning Lewis Ranch became part of the city is underscored by how many of those involved in the matter have died. They include Councilor Frank Parisi, Mayor Bob Isaac, City Manager Jim Phillips, City Attorney Jim Colvin, manager of the Banning Lewis Ranch Development Company John Cassiani, and Arizona developer Frank Aries, who proposed the 24,400-acre project in April 1987.

Aries and others were riding a booming real estate wave that soon became beached in the savings and loan crisis brought on by relaxed regulation and unwise real estate loans. At the time, Aries produced glossy brochures promoting the ranch. His newsletter of the time said, "The City staff has developed a revenue model which demonstrates that annexation of the Banning-Lewis Ranch will have a positive economic impact on the city," a sentiment repeated by the city today.

Aries' annexation request came at a time of rampant growth. Tech giants such as Cray Research, Inc., Digital Equipment Corp. and Ampex Corp. planned to bring thousands of jobs to their new or enlarged facilities.

"It was a period of time where there had been rapid growth in Colorado Springs," then-Councilor Randy Purvis recalls in an interview. "There were concerns by the citizens who lived in Colorado Springs at the time that they did not want to subsidize development. Citizens didn't want to pay for Banning Lewis Ranch. They didn't want [Colorado Springs] Utilities building a wastewater plant that they were going to have to pay for. They didn't want to build water delivery systems and utility systems citizens were going to have to subsidize. It was those driving considerations that drove the annexation agreement and made it one where the Banning Lewis Ranch is going to pay its own way."

(The leapfrog phenomenon, which some Council members cited as a basis for approving the annexation, was used by some developers as a reason to deny Aries' request, Purvis recalls. Those included owners of undeveloped land in the Nor'wood subdivision, the Chapel Hills area and land west of Powers Boulevard. They feared a land rush to the east, leapfrogging their property, Purvis says. Those areas have since mostly built out.)

In the end, the city's agreement required Aries to fund virtually all public improvements, including streets and drainage structures. It also required him to donate sites for parks and trails, a park-and-ride lot, and three sites for "satellite municipal services"; donate land and pay the costs to build and equip five fire stations and four police stations; pay $210,000 for a radio repeater station; give up property for electric lines and water pipes and fund pump stations and water storage tanks, as well as design and build a regional wastewater treatment plant.

click to enlarge Councilor Bill Murray - GRIFFIN SWARTZELL
  • Griffin Swartzell
  • Councilor Bill Murray

In addition, developers had to help fund the six-lane Banning Lewis Parkway, which was to cut through the ranch from north to south.

The high-rolling Aries agreed to all that and, ironically, officed in the swank Plaza of the Rockies building downtown, now owned by David Jenkins, who owns Nor'wood, the new owner of the largest portion of the ranch. Nor'wood is a driving force behind the current overhaul of the annexation agreement. Talks began after Ultra Resources bought the property in 2011 from a previous owner's bankruptcy and sought to set aside the annexation agreement.

By the time the court handed the city a favorable ruling in 2015 saying the agreement is enforceable and binding, Jenkins owned the property and threatened to appeal the case to the 10th Circuit Court of Appeals. To avoid an appeal, the city has bargained in private with Jenkins and other owners for more than a year to abolish the agreement and write a new one.

Councilor Murray takes issue with the lack of Council involvement. "The Council had minimal to no input," he says. "I raised a stink with the city attorney [Wynetta Massey] because up until about a year ago the Council wasn't even involved." Murray says Massey told him negotiations are taking place in private due to attorney/client privilege, making Murray wonder, "Who is the client? It [the annexation agreement] is legislative, so it should have been Council."

Land use matters lie within the purview of Council, not the mayor, according to the City Charter, but as Massey told Council in February 2016, the mayor, not City Council, enforces land-use agreements to assure all terms and conditions are "faithfully kept and performed."

After Murray complained, at-large Councilor Strand and Councilor Andy Pico, who represents District 6 that includes the ranch, were appointed to join the administration's negotiating team. Both report they attended about a half-dozen meetings in the last year, which they described as "informational" rather than negotiation sessions. Both said they feel comfortable with Council's role.

Thirty years after annexation, about 1,577 homes have been built in the north section of Banning Lewis Ranch, according to the Pikes Peak Regional Building Department. Most were built by Oakwood Homes, which bought about 2,400 acres when an owner went bankrupt. About $12.6 million in fees under the existing annexation agreement were paid from 2005 to November 2017 for 1,214 acres being developed. That's $10,410 per acre in fees. (The city deferred $3.6 million in fees for drainage work done by the developer that exceeded fees the city would have charged. The developer must document those costs, however.)

The entire ranch could support thousands more homes, but developers say it costs too much to build there, and city officials say developers have flocked to the Falcon area outside the city rather than pay the freight, which was one of the arguments for the 1988 agreement and now is the foundational reason for the mayor's desire to amend it.

In retrospect, then-Councilor Mary Ellen McNally, who supported the 1988 agreement, says it was "far too constraining and demanding of the developers" and should be changed. "That's where the future leads, out to Banning Lewis. My thought is, that's the last development in this city, and we should give residents an opportunity if they so desire to be able to move out there and build a home, because it is the city," she says. "Our city is growing, thankfully. We're booming. Yes, let's get that area of the city to be active and be part of the city in development."

Wysocki has repeatedly asserted that doing nothing assures that leapfrogging will persist, denying the city revenues while burdening the city with infrastructure needs to accommodate bedroom community growth. He's also noted the city has only about 6,000 developable acres within its limits, excluding Banning Lewis Ranch, about a 10-year supply.

click to enlarge Hundreds of homes have already been built in one section of the ranch. - PAM ZUBECK
  • Pam Zubeck
  • Hundreds of homes have already been built in one section of the ranch.

TischlerBise analyzed the financial losses of the ranch's stagnation and whether the city would benefit if it develops under looser guidelines. It concluded the city would gain thousands of jobs and $451 million in taxes and fees — $49 million more in 30 years than the $403 million the city would spend serving the ranch. However, the city would receive an annual average of only $130,000 in new money in the first decade, after which annual surpluses would "plateau" between $1 million and $1.5 million per year. None of those figures include the city's 2C road tax and stormwater fees beyond their sunset dates of 2020 and 2038, respectively.

In short, as stated in a news release by the city's economic development officer Bob Cope, "The analysis indicates that future development in Banning Lewis Ranch will more than pay for itself over the short, intermediate and long term and will create significant positive economic growth for the city."

But that assumes that none of the $451 million in revenues the city would receive would be subject to TABOR, a tax limitation measure that caps the amount of new revenue governments can collect based on growth as defined by new construction and inflation.

The TischlerBise studies don't mention tax limitation — adopted by city voters in 1991 and by voters statewide in 1992. Nor did it take inflation into account.

"It is impossible to know the impact of TABOR due to all of the variables in the TABOR formula including inflation and local growth," Cope says via email. "In the event future revenue exceeded the TABOR cap, the excess would not be due to revenue generated in BLR alone, but due to revenue generated citywide."

He also notes that should the city exceed revenue caps, the city can always ask voters' permission to retain the extra money. "It is not reasonable policy to discourage economic and fiscal growth on the basis that some of the new revenue could possibly exceed the TABOR cap," he adds.

Douglas Bruce, who wrote TABOR and has campaigned vigorously through the years to limit government growth, called a 30-year revenue prediction "meaningless."

click to enlarge Looking westward from Banning Lewis Ranch's eastern border. - PAM ZUBECK
  • Pam Zubeck
  • Looking westward from Banning Lewis Ranch's eastern border.

"Even a 10-year projection of revenue is meaningless," he says. "They can't make this projection when there are a dozen variables," he adds, among them the steady march toward online sales that erodes local sales tax revenues.

It's worth noting that Aries predicted the county's population would expand to 907,500 by 2015, which was about 35 percent higher than the actual county population of 674,471 in 2015.

Asked about TABOR's impact, Strand says, "I wish I could answer that question." But while Strand acknowledges the economic analysis might be incomplete, he doesn't consider it meaningless.

It's hard to imagine that revenues would more than cover the city's costs, as the TischlerBise study forecasts, when a side-by-side comparison shows fewer requirements of developers in almost every category.

Take public safety. The 1988 agreement requires developers to convey land for, construct and equip five fire stations and four police stations. The new agreement, which calls for five fire stations but only one police station, would assess impact fees of $1,631 per acre for fire service and $677 per acre for police, which can be offset by donating land for those stations. Those fees will be subject to a "yearly escalation factor, as determined by the City."

If 6,000 acres develop in 30 years, fees would total $14 million, without an escalation factor. Another $51 million would be raised during that time by the city's Public Safety Sales Tax (PSST), TischlerBise predicts. The police and fire stations would cost $41.6 million, leaving $23.4 million extra. But TischlerBise doesn't detail personnel costs. The Fire Department reports the cost of staffing a fire station at $1.4 million a year, meaning the extra money would cover one station for about 16 years.

Of course, the city would collect other sales and property taxes on new construction the ranch would bring that would help fund those services.

Fire Department spokesperson Brian Vaughan says analysis of service calls suggests the ranch's first station will be needed in 2023 at a cost of $6 million for land, construction and equipment — in today's dollars. That need will come in the first decade when TischlerBise says the city will clear only $1 million in revenue from the ranch, a thin operating margin.

But Cope emphasizes the margin is above all the necessary infrastructure triggered by growth in the first 10 years.

"The point is," Cope says in an interview, "we're raising more revenue than the cost of the capital expenditures for the facilities. When the dust settles, the city does net $49 million over 30 years, so the development does pay for itself."

As for utilities, the chief change from the current agreement involves construction of a wastewater treatment plant. The 1988 agreement laid that entire cost on the annexor; the new agreement requires developers to fund "collection system improvements" while all Colorado Springs Utilities ratepayers will pay for interceptor lines to carry sewage from the ranch to a treatment facility in the Fountain area, as well as expand the facility, says Utilities' systems extensions manager Brian Whitehead. He says the city can buy available capacity and will fund an expansion when needed. That wouldn't happen until about 2030, Whitehead predicts, "and by then who knows what other technologies will be available?"

Off-site road requirements, too, would change under the new agreement. A fee of 39 cents per square foot of building area, designed to fund infrastructure impacted by that development outside the ranch, such as neighboring arterial streets, would be abolished. Developers would still have to build roads within the ranch and contribute to off-site infrastructure deemed necessary by the city. The main road planned for the area, known as Banning Lewis Ranch Parkway, would be narrowed from an originally planned six lanes to four, but the new agreement is silent as to what developers would be charged for the parkway. It's worth noting that many infrastructure costs are apt to be paid via special districts set up by developers that would levy taxes on residents of those districts, a firmly established method of forcing development to pay for itself.

City traffic engineer Kathleen Krager told Council on Jan. 9 the city works with developers "so that we always get a usable street connecting to someplace where it needs to go." She likened those efforts to putting together a jigsaw puzzle. "We may ask a developer to build more than he should, but then he gets recovery from the other developer," she said. "Fortunately, we have pretty nice developers and we're able to get that."

Joseph, the former city planner, says off-site improvements have long been "a staple" of the city's annexation process, which has resulted in the city requiring developers to fund the upgrade of Powers Boulevard to a divided highway, plus the building of the Briargate interchange, the Interquest interchange and the stretch of Union Boulevard between Woodmen and Briargate Boulevard.

"To summarily drop all such obligations in BL Ranch inevitably means the city (i.e. taxpayers) will pick up their costs," he says via email. He later notes in an interview that the city has made those decisions without a new transportation study of the area.

Acknowledging the lack of a study, Krager says via email that city traffic engineers have come up with "a grid system of arterial streets that will accommodate typical suburban development." And the parkway, she says, doesn't need to be six lanes, "because without the intense office/commercial development of the original hard zoning there is no longer a need for interchanges." Moreover, she adds, typical residential development doesn't need and can't afford the cost of interchanges. By hard zoning, she meant the strict master plan that sets out exactly where certain types of development will take place.

On that note, Joseph, the former city planner, says the city's apparent lack of a phasing plan (an order in which the property will be developed) is problematic, as is the lack of a new master plan to replace the one the city considers inflexible. Rather, Wysocki and others have said the city would entertain master-plan amendments proposed by developers whenever they decide to develop, meaning the city can't possibly know what lies ahead (densities and other key components of urban planning are a mystery), Joseph says.

The issue of density aside, Councilor Strand wonders if the city has made a mistake in overlooking transit. The new agreement contains no requirements that developers provide bus stations or stops. "The presumption is young families are going to move out there who have minimal needs for transit and that might not be correct," he says. "If so, this is shortsighted. You're going to have people who are seniors, who have disabilities, who can't drive."

Other questions raised by citizens include whether the city has compared its development fees with those of other Colorado cities, which it has apparently not, and why the 2007 Banning-Lewis Ranch Annexor Shared Obligation Study put developer fees to cover public infrastructure at $1 billion, which appears much higher than the new agreement's charges. (The 204-page shared obligation study resulted from a lawsuit filed by a receiver of ranch property after a loan default. The receiver argued the agreement's demands made the land unmarketable.)

Walter Lawson, who spoke at a hearing about the ranch in 1988 and appeared about 30 years later at the Jan. 16 town hall, termed development of the ranch "sprawl and super sprawl."

"We're not paying our way now," he said. "We don't have the kinds of response times from police and fire that we should have. We're $1.8 billion behind in unfunded capital improvement needs."

The most recent police response data, for example, show it takes officers an average of 12 minutes and 15 seconds to get to priority 1 calls, which involve an imminent life-threatening situation, says police spokesperson Lt. Howard Black. The target is 8 minutes. At issue is underfunding, understaffing and the already unusually large footprint of sprawling Colorado Springs.

click to enlarge Councilor Jill Gaebler - GRIFFIN SWARTZELL
  • Griffin Swartzell
  • Councilor Jill Gaebler

But perhaps the biggest unknown centers on the fact that the land's prior owner, Ultra Resources, retains mineral rights on the ranch. Asked what consequences that brings, Cope says via email, "The City does not anticipate any impact on the development of BLR due to Ultra [Resources'] continued ownership of mineral rights. The owners of underlying mineral rights always have the right to extract those minerals in accordance with Colorado law. Banning Lewis Ranch is no different than other areas in Colorado Springs or Colorado."

At present, the city has no ordinance governing oil and gas drilling, a topic that has pitted cities against the state over what entity should have the final say. Some cities in Colorado have drilling rigs within their boundaries. An April 2017 explosion destroyed a house and killed two people near a well pad in Firestone due to a leaking underground line. The next month, a tank exploded near Mead. The Denver Post reported in December at least a dozen fires and explosions, two of them fatal, occurred in Colorado at oil and gas facilities after the Firestone incident.

Todd Hartman, spokesperson for the Colorado Oil and Gas Conservation Commission, says in an email that no mineral rights owner can begin drilling for minerals without drilling and location permits from the state. "Obtaining those permits requires meeting numerous requirements contained within COGCC's regulations," he says. Hartman also notes state rules prevent drilling from occurring within 500 feet of buildings and within 1,000 feet of higher occupancy buildings, such as schools.

"A mineral right is a property right," he adds, "so if an energy developer can meet the state's requirements then that operator generally does have a legal right to obtain those resources."

Councilor Jill Gaebler, who represents District 5 in the city's mid-section, comprised mostly of decades-old homes and buildings, has a list of questions, chief among them whether the ranch would pay its own way, especially in light of the city's track record.

"A question I have been asking is, they make these projections based on a number of residences and businesses popping up in the area, but they make it clear they don't actually know what's going to happen, because the developers can come in when they develop ... and it's only when they come in that we have an idea what they're planning to do," she says. "They're making all these grand estimations, but they don't really know. They say, 'This is our best guess.'"

To further refine her point, Gaebler notes, "OK, we're going to get this money [in taxes and fees] and we obviously had similar analyses done on previous annexations, and they've all said we're going to make money, but we're not adequately serving any of these communities right now. Yet, we're doing the exact same thing. How do we think we're going to serve this community adequately if we're not serving these other areas?"

Her skepticism of the ranch paying for itself is shared by Councilor Yolanda Avila, who represents District 4 on the city's southeast side, where residents feel forgotten. After listening to nearly two hours of debate about the annexation agreement on Jan. 9, Avila boiled down the topic to a simple concept. Noting myriad existing city needs ranging from a shortage of police officers to transit routes, she said, "It seems like you'd fix your house first before you'd add a room."

Avila has a different take on the mayor's "leapfrog" argument. "We talk about leapfrogging. With Banning Lewis Ranch, we're leapfrogging over southeast," she says.

She also laments that the city would absorb maintenance of developer-built streets, for which the city requires a warranty of a mere two years.

"Our city is responsible for having those fixed," she says. "I've lived in my area 13 years, and my road has never been fixed." She also expressed concern the city is "building around cars and not people," evidenced by the proposed agreement's lack of even a mention of transit.

"For people with disabilities," she added, "that's one of the worst things that happen already."

click to enlarge Councilor Yolanda Avila - GRIFFIN SWARTZELL
  • Griffin Swartzell
  • Councilor Yolanda Avila

Strolling her neighborhood, Avila tells the Indy she's not against growth but wants to make sure the city isn't shirking its existing obligations. She points to 6-inch gaps in the paving of her street and cracks throughout.

She also doesn't want to see new neighborhoods take shape without adequate parks, as her own area of town did. "No parks in the southeast have restrooms or shade," she says, adding that the closest public green spaces to her neighborhood are Evergreen Cemetery and Valley Hi Golf Course, hardly considered parks. Panorama Park is a mile away.

"The truth is," Avila says, "I don't have a closed mind. But I want to see if we can get equity for older parts of Colorado Springs. I want to make sure it's not taking resources from here. I'm not a no-growth ideologue, but I want it to be well thought out, because that growth is going to affect all of us."

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