To: Honorable Mayor and Members of Town Council
From: Mark Marlowe, Utilities Director
Robert J. Slentz, Town Attorney
Title
Resolution: Approving the Settlement Agreement between the Town of Castle Rock and Meadows Metropolitan District Nos. 1-7, the Third Amendment to The Meadows (Fourth Amendment) Development Agreement and the Third Amendment to the Meadows Master Intergovernmental Agreement
Body
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Executive Summary
The Settlement Agreement and modifications to the Master Intergovernmental Agreement (MIGA) with the Meadows Metropolitan Districts Nos. 1-7 (Districts) and Meadows Development Agreement approved by this Resolution resolve a long-standing dispute with the Districts as to the proper allocation of water and wastewater system development fees between the Town and Districts. A confidential memorandum has been separately forwarded to Town Council as further background and explanation.
Background
With the initial development of the Meadows, the Districts constructed and paid for the bulk of water production, treatment, storage and transmission as well as wastewater collection. As a result, the Districts were rebated the bulk of the Town-imposed water system development fees (SDF) and a portion of the wastewater SDF. This allocation was fixed by a formula in the 1991 MIGA.
Because of the large amount of bond debt incurred by the Districts in the 80's, the Districts needed to direct all of its future revenues toward bond payments. Consequently, after 1991 the developer of the Meadows undertook the obligation to construct and/or fund water and to a lesser extent wastewater infrastructure, thereby supporting the continued capture of the SDF by the Districts.
It is important to note that the SDF fee rebate and the construction of water and wastewater infrastructure initially by the Districts and later by the Meadows developer did not encompass any renewable water resources. Accordingly, the Town has and will retain in its entirety the water resources fees collected on development in the Meadows, which is by far the largest component of utility impact fees currently imposed under the municipal code.
Beginning in 2006 the Districts objected to the financial equity of the SDF "split" between the Town and Districts under the MIGA. This is addressed in greater detail in the confidential memorandum. The basis of the dispute is complicated but can be summarized as a consequence of (i) the Town shifting its capital development from groundwater to renewable water and a corresponding reallocation of utility impact fees, and (ii) the Town's retention of a portion of the SDF as a "capital reserve fee."
After many months of discussion and negotiation, the Town, Districts, and the current landowner and master developer of the Meadows, Castle Rock Development Company, have reached agreement on an equitable cost-sharing of fees going forward and a release of any Districts' claims as to the allocation of the SDF collected to date.
Settlement
The financial parameters of the settlement may be summarized as follows:
1. The current Town share of the water SDF called the "Capital Reserve Fee" will no longer be received by the Town and will become a District-imposed capital fee. That fee, currently in the amount of $2,457 may be increased by the Districts up to 5% per annum. This will allow the Districts to retain the entirety of the water SDF imposed through the Town Regulations, except as noted in 2.
2. Neither the Districts nor the master developer will be required to develop additional water supply or storage as existing developed capacities will support water service to the Meadows through build out. However, when water demand reaches 7,548 SFE, thereafter the Town will retain the treatment component of the SDF, which is currently $986.
3. Rather than the current split of the wastewater fee of 70% Town / 30% District, the Town will retain 90% of the fee. The fee split may be adjusted if updated fee study demonstrates the need in order to maintain equity, but the Districts' share will never be less than 10%.
4. The current contractual right of CRDC to pay cash-in-lieu of water rights at a stated rate is adjusted to $2,244 per SFE. This compares to the rate in the Town code currently of $2,750 per residential SFE. This special rate is effective through 2027.
5. The Districts and master developer acknowledge they have no prior or future claim to the water resource fee.
6. The Districts and master developer acknowledge that this is a forward looking agreement and that they have no claim to water and wastewater fees collected prior to this agreement.
Under the Settlement Agreement the Town, Districts and Developer tender comprehensive release of claims and acknowledge that no party is currently in default of the subject agreements.
Staff Recommendation
Staff recommends approval of the Settlement Agreement, Third Amendment to The Meadows (Fourth Amendment) Development Agreement and Third Amendment to the Meadows Master Intergovernmental Agreement.
Proposed Motion
"I move to approve Resolution No. 2015- __, a Resolution approving the Settlement Agreement between the Town and the Meadows Metropolitan District Nos. 1-7, the Third Amendment to The Meadows (Fourth Amendment) Development Agreement and the Third Amendment to the Meadows Master Intergovernmental Agreement"
Attachments
Attachment A: Resolution