Water costs drive NE Fort Collins home prices

Escalating water prices in parts of Fort Collins may soon wash away the city’s last and best hope of containing soaring home prices.

The cost to deliver water to the northeast part of the city’s growth management area — where much of the remaining buildable land in Fort Collins is concentrated — is rising to levels developers say they can’t recoup. That’s led several home builders to scale back, put projects on hold or develop in neighboring communities.

Already, developers have delayed construction of about 1,200 homes because of the rising cost and availability of water. That includes 190 lots in Waterfield, a proposed subdivision on the northwest corner of East Vine and North Timberline Road.

Waterfield, as of now, has no water.

Waterfield developer Curly Risheill, of Castle Rock-based Risheill Homes, said buying water rights and paying the East Larimer County (ELCO) Water District’s $7,614 plant investment fee would cost he and his business partner about $16,800 per lot, about $10,000 more than if they got water from Fort Collins Utilities.

Raw water costs for the project are “killing our competitiveness,” Risheill said.

ELCO and Fort Collins-Loveland Water District are two of three large delivery systems serving homes within Fort Collins’ city limits and growth management area. Fort Collins Utilities is the third.

Utilities, which was formed more than a century ago, owns senior water rights. They were bought when water was less expensive. The water districts, on the other hand, were created in the 1950s and own junior water rights purchased closer to the present day, which tend to be more expensive.

And unlike other water districts, ELCO requires developers to bring water with them.

That means developers have to hunt down and buy water rights from a select group of sellers at today’s higher prices, and still pay ELCO $7,614 per single-family lot. Those costs are being passed along to home buyers and threaten to push the price of homes out of range for middle-income earners.

“That’s our dilemma. We just can’t find water that’s even halfway affordable,” Risheill said. “ELCO only accepts water from a limited number of sources, therefore supply is basically very hard to come by,” he said.

For now, Waterfield is on hold as Risheill hopes to find a national builder who might have more resources to find and buy water rights.

Costs drive development elsewhere

ELCO general manager Mike Scheid said the water district has required developers to take on the risk of finding and buying water shares since the 1970s. It hasn’t been a problem until now, as demand for Colorado-Big Thompson water has driven up prices.

The district provides water to much of northeast Fort Collins known as the Mountain Visita subarea, roughly east of Lemay Avenue, north of Mulberry and west of Anheuser-Busch.

Critics say the sheer cost of water in northeast and southeast Fort Collins is driving how, when and where Fort Collins grows. If water prices in the most buildable areas of the city can’t be reduced, Fort Collins will be unable to provide housing to meet increased demand or create affordable options in a city where the 313 single-family homes sold in July for a median price of $335,000.

Risheill said homes in northeast Fort Collins need to be priced at less than $350,000 to be competitive with the surrounding market. However, water costs are pushing prices into the $385,000 to $400,000 range, he said. “I don’t think there’s a market for people to buy in that area at that price.”

Longtime developer Les Kaplan says at this rate, it won’t be long before Fort Collins home prices top $400,000, particularly in the northeast where much of the water is controlled by ELCO.

Kaplan counts himself among those pumping the brakes on northeast development. He’s sitting on a plan to build 106 units already approved by the city near the Interstate 25 Mulberry Road exit.

Those homes won’t be built, Kaplan says, at least not until water costs retreat.

When development costs increase, so do the prices of homes. Landon Hoover, president of Hartford Homes, which is developing two projects near the intersection of Timberline Road and Vine Drive, said water now costs as much or more than the land in northeast Fort Collins.

“We’ve had to limit the number of subdivisions we do and focus on certain ones,” he said. “We don’t have deep enough pockets to do them all.”

Lot costs at Hartford’s Timbervine project are between $30,000 and $40,000 more than in adjacent Dry Creek, serviced by Fort Collins Utilities, Hoover said, with about half the additional costs attributed to water. Hartford Homes has most of the water for the 145 single-family lots and 28 townhomes at Timbervine and much of the water for its East Ridge project.

“It took us 18 months and delayed us buying the project because we were concerned we wouldn’t be able to find (the water),” Hoover said.

Risheill has city approval for 190 homes on 75 acres at the northwest corner of East Vine Drive and North Timberline Road. The company increased Waterfield’s density at the city’s request, he said.

“They wanted a little more density than what we proposed to provide what they called workforce housing,” Risheill said. “With the cost of water it’s just enough ... to make us non-competitive. The most frustrating things to us is we are annexed into a city that won’t serve us and in a water district that can’t serve us. It’s very frustrating.”

If he were developing land served by Fort Collins Utilities, he could bring in his own water rights or pay about $6,500 in lieu of doing so, a fraction of ELCO’s costs.

No quick solutions

The city of Fort Collins is collaborating with the water districts on ways to apply a more consistent methodology for assessing water development fees across the three water providers. A proposal is expected to go to Fort Collins City Council Oct. 13.

Kaplan, a former city planner, said the water issue “has caught the city off guard. As a policy they don’t know what to do. Some council members think high water prices are a de facto growth management tool.”

Even the city’s five-year affordable housing strategic plan gives a nod to rising water costs.

“Since most of the developable land left in Fort Collins is in the ELCO and Fort Collins-Loveland Water District, these price differentials may have a negative impact on affordable housing,” the report states. “The city is exploring ways to a more equitable system for acquiring water rights within the growth management area. More equitable pricing of water rights could potentially lead to more affordable housing in Fort Collins.”

Cameron Gloss, the city’s director of planning, said the city will take a comprehensive look at water issues when it next reviews City Plan in two years. “We are going to comprehensively work with water districts and city water utility to address how to meet our water needs,” Gloss said. “It’s a complex issue and there are many components to that challenge.”

How severe the water cost issue is depends on which developers one speaks with, Gloss said. “I know of some developers who have obtained water rights at a cost that matches their needs and they’re moving forward. Other developers are telling us that’s not the case.”

Pat Ferrier is senior reporter covering business and health care. Follow her on Twitter @patferrier.