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The Problem with a Ten Year Lease, Part Two |
Bill Hudson | 10/10/08
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Read Part One
“I’m in favor of making full use of the water rights that the Town owns, and doing joint ventures or leasing them — or however you want to do that with private enterprise. I think that’s the best way to get the best return on our money off the use of those water rights. But I think it’s been disingenuous of you guys to say, ‘We’re going to take this much of these water rights, and lease them to one single property owner in the community — with no timeline that dictates when they have to use them, or how they are going to put them to beneficial use, for the benefit of our community.”
Local developer J.R. Ford was standing at the microphone at Tuesday’s Town Council meeting. We were just starting the public comment portion of the Council’s lengthy discussion on a proposal from the Springs Resort — to lease 400 GPM. about 210 million gallons per year, from the Town’s geothermal wells.
 Ford was bringing up a key point that the Council had not yet discussed — but a point they would discuss at length, later in the meeting: Whether to tie the lease of geothermal water to development requirements.
Ford continued. “We want people to use those water rights. We want to encourage development. But I’d rather see you guys come up with a formula, where anybody who has property in the community — most likely it would be [the resort property] because that’s where it’s easiest to use it — but where anybody in the community could use those water right as long as they met certain stipulations. Then, if anyone wants to look for ways to develop a piece of property, they will stimulate the growth in our downtown.
“If you give all these water rights to one organization, and then you put no time line on when they will make use of those water rights, so they will become a beneficial use and generate tax income, I don’t think you’ve done anything for the community. I think you’d be taking a great asset — probably the best single asset this community has — and you’ve tied it down to one group.
“We’ve already seen what happens when the community starts tying itself to one group. Things go wrong; people leave the community, and things don’t happen.”
Ford didn’t clarify whom, exactly, he meant by the “one group” to whom the “community” had tied itself. I am guessing he was referring to developer David Brown, who began a campaign back in 2004 to “revitalize” Pagosa’s downtown. Brown had organized a private planning organization — the Community Vision Council (CVC) — and had made friends with Mayor Ross Aragon and other key leaders.
The CVC — working without any public discussion process — then developed planning documents and proposed land use guidelines for downtown Pagosa. Around the same time, Brown had purchased numerous downtown properties at reportedly inflated prices, demolished several familiar older (though also generally ‘run-down’) buildings, upgraded certain older buildings and landscaping — and pushed the Town for higher development standards and better planning.
While Brown apparently waited patiently for the Town to create a community-approved Downtown Master Plan, his properties remained generally vacant, and the economic vitality of downtown — hit by higher rental rates and vacant storefronts — declined noticeably. Brown was, however, unable to purchase a key property that was a cornerstone of his downtown development plan. That property — the County Courthouse — eluded his grasp when the Board of County Commissioners turned down his offer on the historic downtown property, built in 1928. Had brown been able to secure the Courthouse site, he would have owned two city blocks of property adjacent to the Town's geothermal wells.
This past summer, Brown announced he had put his elegant ranch on the West Fork of the San Juans up for sale and, with his family, was leaving Pagosa Springs. Brown’s downtown properties continue to remain mainly unoccupied — reportedly due to high rental rates — and the three large vacant lots he created downtown have remained undeveloped.
Ford continued: “And the second disingenuous thing I read in that article, is when the developers said, ‘Hey, we have to have this lease, so we can go out and get investors.’ Well, I have put together deals, I’ve had to get investors, and what you do is stipulate things into your agreement that are benchmarks that you’re going to have to reach — and when you reach those benchmarks, they loan you more money. And anyone who wants to use these water rights — the Springs or whoever — all they have to do is write that into their agreements, meet those benchmarks, come back to you and renegotiate those deals, and continue with the project.”
“I think its wrong for the community to give that much of an asset to one group — and I think it's totally wrong to do it without some kind of a time line.”
Several other members of the community stood up and echoed Ford’s sentiments. Former Town Manager Mark Garcia, whom I’d not seen in Town Hall since his resignation in April, brought up another possible use of the Town’s water rights — possibly drawn from his own earlier experiences as the manager of the municipal geothermal heating system.
“I think it’s premature to try and establish a value on the geothermal water rights. I think the current lease [giving the Springs Resort 200 GPM of geothermal ‘waste water’] expires in 2015 — and I think it’s too early to determine what the value will be in 2015, considering the energy crisis that we’re in, and considering changing technologies — there may be a lot more money at the end of that lease. It’s premature to determine what those values are.”
Apparently, some of the Town Council agreed with Ford’s comments about the need for benchmarks and a time line.
“In previous discussions we’ve had, there was — and this was a concern expressed by our attorney, Bob Cole — that they get water as they build, as they develop. And I don’t see that written in the lease,” noted Councilor Stan Holt. “I’d like to see that included — that they have to show some progress and not tie up the water resource while there’s no development for 20 years. Like what J.R. was talking about.”
It appeared, from comments by Holt as well as interim Town Manager Tamra Allen and Council Mark Weiler, that performance benchmarks had, in fact, been previously included in the lease — but for some reason had disappeared from the version presented on Tuesday.
“And I understand,” Holt continued, “that the Springs Resort will be required to install water meters on their pipes, so we’ll be able to see how much water they are taking.”
Although the Springs Resort has been drawing geothermal water from the Town’s geothermal wells since 1995 — and also from the Great Pagosa Hot Springs mother spring, under their own water right — the resort has never installed meters on any of its intake pipes to track how much water it has been drawing. District Water Commissioner Pete Casper had verified for me last week that the Springs Resort has been directed to install meters as part of its current expansion work on its new 29 room hotel and its five new bathing pools nearby.
A bit later in the meeting, Ford expanded on his suggestions to the Council:
“I agree with Councilor Weiler, the value of this water is in the sales tax revenue. But the way I read this agreement, you are binding yourself — you’re going to have to have a very good reason to get out of this lease for every ten years… and there’s also language in there that allows the [Town Charter] to be changed, so they can renegotiate the length of their lease.
“If you really want true development in the community, then you will make it truly competitive to get those water rights. If you really care about sales tax, you’ll make this competitive; if you’re not concerned about sales tax, if you’re just trying to help one project, then give the water to the Springs. But if you give yourself a year to look at some proposals — when this Springs lease doesn’t even take effect for three years — you might see some Mr. Browns come back to the table.”
Holt was, however, hesitant to consider making the leased water available to other possible bidders, as Ford had suggested.
“I’m trying to look at both sides. The Springs Resort has already come forth with a plan — and the Town has approved that plan. Now, are we going to say, let’s take a year or two to look at other options? He may walk away from the plan.”
This was about the time in the meeting — after an hour of public input and Council discussion — that the Mayor began to vent his frustration.
Read Part Three |
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