North Weld considers partial lifting of tap moratorium as more developers threaten legal action

LUCERNE — The North Weld County Water District Monday will consider a partial lifting of its tap moratorium, but it’s unclear whether the new policy will resolve a current lawsuit or prevent additional litigation.

The district’s board of directors will consider a proposal to lift partially the moratorium that it imposed on Sept. 29, when it blamed the 1041 regulatory process in Fort Collins and Larimer County for potentially delaying the proposed NEWT III pipeline, which would extend from North Timberline Road in Fort Collins 5.3 miles eastward into unincorporated Larimer County.

The tap moratorium prompted the town of Severance to impose a moratorium on building permits.

The North Weld County Water District’s board of directors Monday will consider lifting the moratorium in four identified zones within the district — Zones 1, 2, 7 and 7B — but would still limit tap sales to 120 per year.

Taps connect developments to the district’s distribution system. Without taps, projects cannot be served with water.

“Until the district is able to complete the construction of additional critical infrastructure, including its NEWT III project, or until the district is able to acquire sufficient additional treatment and transmission capacity from other water service providers, the district will limit its sale of taps and plant investments to no more than 120 per year,” according to a draft Tap Sale Criteria Policy.

After the district constructs additional infrastructure, including NEWT III, or if it’s able to acquire additional treatment and transmission capacity from other water-service providers, the board will establish a maximum number of tap and plant investment sales it will sell in subsequent years, according to the policy.

Eric Reckentine, district manager for the North Weld County Water District, said the district has about 30 active requests for taps, with about 400 potential taps outstanding. He said the partial lifting should help meet current demand.

“I do [think so]. I think it will,” Reckentine said.

He said the new policy could be modified based on capacity, either to increase or decrease the number of taps that are approved.

“Things can change as we’re moving forward through the year. We’re starting here, and then we need to evaluate it through the summer,” he said.

Legal issues

Details of the partial lifting of the moratorium come as the district faces one lawsuit, and the potential for more.

One developer — Eagle View Farms LLC — filed suit in Weld County District Court Feb. 3, alleging violations of a Water Service Agreement through which North Weld agreed to provide water service for the project, a 24-lot subdivision west of Lucerne and north of Greeley on Colorado Highway 392.

Eagle View is seeking monetary damages in an amount to be determined, an injunction forcing the district to provide water service via taps for the project and other judgments, including attorney fees and expenses.

Two other developers also are threatening litigation. In a Feb. 2 letter to the North Weld County Water District’s board of directors and its outside counsel — White Bear Ankele Tanaka & Waldron, a Centennial-based law firm — Benjamin Maresca, an attorney with Fox Rothschild LLP in Denver, said his clients have “serious concerns” related to the tap moratorium.

Fox Rothschild represents Babcock Land Corp., which is developing the Hidden Valley Filing No. 6 project in Severance, and HR Exchange, which is developing The Ridge at Harmony Road in Windsor.

Babcock “invested millions of dollars into the acquisition, entitlement, and development of this project,” Maresca wrote. “That investment included Babcock’s acquisition of approximately $6,000,000 worth of water and conveyance of that water to the district for use at Hidden Valley.

“Similarly, HR Exchange has been ready to commence development on The Ridge at Harmony Road Filing No. 5 and has invested millions in acquisition and entitlement of the project, including spending approximately $2,800,000 to acquire water.”

Maresca declined to comment to BizWest. He said in the letter that, as a result of the moratorium, Babcock “cannot sell any [of] its 265 lots in Hidden Valley, which Babcock is contracted to sell to homebuilders, resulting in a loss of $21,200,000 in cash flow from the Hidden Valley project. Similarly, HR Exchange is under contract to sell the 103 platted lots at The Ridge for approximately $7,000,000, but the district’s moratorium (and its refusal to execute the plat) has prohibited HR Exchange from moving forward with the sale and threatens to derail the sale altogether.”

Maresca’s letter also questions North Weld’s justification for the moratorium, the 1041 amendment processes in Fort Collins and Larimer County.

“We have asked on several occasions how pipelines that are not likely to be operational for years could affect the issuance of water taps in 2022,” Maresca wrote, “but no reasonable response has been offered by the district. The district’s failure to meaningfully respond suggests that the 1041 amendment processes were nothing more than a convenient excuse to issue the moratorium while the district fixes the actual problems behind closed doors in executive sessions, wholly outside the public eye.”

Maresca said the board’s justification for the moratorium “and the lack of transparency surrounding the board’s decision-making process suggests the board may be acting in bad faith, to the detriment of those served by the district, developers within the district, and governmental entities that rely on building permit revenues to fund their programs. Based on the limited information available to the public, it appears that the district has been, at the very least, negligent in carrying out its duties to the public as a water service provider, all while charging millions of dollars in fees and taking millions of dollars’ worth of water, and leading the development community to detrimental rely on the district’s ability to provide competent water service within its service area.

“The district has an obligation to conduct its business in the light of day, not behind closed doors, and not without accountability to those that it serves,” Maresca added. “It appears that, in a bad faith effort to avoid public scrutiny, the board failed to provide information, and in some cases provided misinformation, regarding the reasons for the moratorium. It further appears that the district has been badly mismanaged.”

Maresca’s letter further threatens legal action.

“Unless the board takes immediate action to lift the moratorium, our clients will be forced to take steps to protect their investments, to end the moratorium, and to investigate any potential wrongdoing with regard to this moratorium and the daily operations of the district. If appropriate action is not timely taken by the district, we have been authorized to immediately pursue all legal actions, including but not limited to, filing requests for access to district records and filing for declaratory relief to have the moratorium lifted.”

Reckentine said that while it’s true that the district has capacity issues beyond concerns over 1041 regulations, those regulations are still a factor.

“We have current capacity issues, but any delays that we see related to new infrastructure has an effect on what we’re doing,” he said.

He said rapid population growth within the district has contributed to the district’s problems.

“I think the rate of growth was much greater than we had been forecasting,” Reckentine said. “We would still have capacity issues, but we wouldn’t be as cautious as we are being now.”

The district’s board of directors meets at 1 p.m. Monday at 32825 Weld County Road 39 in Lucerne. The meeting can be accessed by telephone at 720-707-2699, Meeting ID 873 5785 0771, Passcode 475314.

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