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PAWSD wrestles Water Fee

Pagosa Area Water and Sanitation District’s controversial Water Resource Fee was the topic of discussion for nearly two hours at the district’s board of directors meeting Tuesday night.

The board invited PAWSD attorney Evan Ela, of Collins, Cockrel & Cole (Denver), to the meeting to discuss the legality of the district’s WRF since its legality has been questioned by directors Roy Vega and Allan Bunch, as well as a number of the Water Supply Community Work Group.

The WRF is an assessment levied on all new construction to help pay for future water development made necessary by growth. The fee is not currently being assessed due to a moratorium in place that will expire Feb. 1, giving the board time to look into the matter.

PAWSD initiated the fee in 2005, as district engineers insisted new water storage would soon be necessary. At the time, a panel of community volunteers decided that new growth should pay its own way, thus resulting in the WRF and other “impact” fees imposed by other local districts, the town and Archuleta County.

Before implementing the WRF, PAWSD looked into how similar communities funded future water development, as attorneys from Collins, Cockrel & Cole analyzed legal options. Near the end of 2005, the district board approved the fee.

Over the past few months, the board, as well as the WSCWG, have looked into the matter, inviting Telluride attorney Jenny Russell to opine on the WRF and soliciting an eight-page memo from Collins, Cockrel & Cole.

Russell questioned the legality of the fee, while Ela stands firm behind PAWSD’s statutory ability to assess it.

Citing statutory authority to impose such a fee, the memo read, “The District, through its Board of Directors, is expressly authorized to impose fees, including a water resource fee, under Title 32 of the Colorado Revised Statutes.” It added, “ … the District is authorized to fix, and from time to time to increase or decrease fees, rates, tolls, penalties or charges for services, programs or facilities furnished by the special district … The board may pledge such revenue for the payment of any indebtedness of the special district.”

At Tuesday’s meeting, Ela reiterated the stance that the fee is “fully legal” under Title 32, explaining to the board how each Titles 29, 30, 31 and 32 relate to various governmental and quasi-governmental entities.

Ela explained that Title 29, which discusses impact fees, is “entirely directed” towards governments with land regulatory powers and that it is “no accident” such fees were under Title 29.

Ela continued that statutes have to be read precisely, also citing multiple court cases in which water districts were allowed to impose “rationally related” development fees for growth to pay its own way.

Ela added his belief that courts give latitude on the fees to be rationally related at the time the service is needed.

Vega then questioned Ela about Senate Bill 15, which gives entities under Title 29 the ability to charge impact fees, to which Ela responded that the bill was not directed toward special districts, but instead, “land development agencies.”

“Unless what the special district is doing all of a sudden has all the indicia of an impact fee,” Vega said.

“Well, I disagree,” Ela said, adding that he didn’t believe a court would look at the fee in terms of SB15 because the fee has nothing to do with the land development, but only the service from the water district.

Vega continued expressing his thoughts that the fee showed the “indicia” of the impact fee, leading Ela to tell Vega he could call it an impact fee if he wished, but that it did not have all of the characteristics of an impact fee as mentioned in statute, as Vega believed.

Vega then questioned the difference between the WRF and the Capital Improvement Fee, which Ela characterized later in the discussion (with CIF concerning the treatment and distribution of water, and WRF dealing with extraction and storage).

As the discussion continued, Vega questioned the legality of the WRF changes, asking how, if the rate varied, a rational nexus could be proved.

Ela explained that costs change over time and it would be negligence on the part of the board to not change the fee once it’s in place.

Board Chair Steve Hartvigsen noted that he felt the fee was not changed enough, causing Vega to question why four changes were not enough.

“Things have changed drastically,” Hartvigsen said.

In response to Vega, Ela said he would recommend the fee over a general obligation bond, causing Vega to reply that it was wise to advise about the fee in order to defend it and that the voters should have the say on the matter.

As the contentious discussion continued, Ela explained that it was industry standard to use revenue bonds and pledge fees collected from the rate payers to service debt, but did note the potential litigation against the district by Russell, while admitting no other district he was aware of had a history of litigation in the wings.

The discussion then turned to the difference between a fee and a tax if the water district were charging the WRF to customers prior to the need for additional water storage and the need (as expressed by Director Windsor Chacey) for additional water storage now in order to accommodate any possible future growth.

Ela noted that the drought of 2002 gave the water district an idea of its actual water amount, causing Vega to tell Ela he was confusing the merit of the Dry Gulch project with its methodology, with Vega adding later the possibility that the fee was “arbitrary and capricious”.

Following more discussion about the power to charge the fee when infrastructure is already in place, Bunch thanked Ela for his “chutzpah” in attending the meeting and added that the law firm was not the conscience of the board in his opinion.

Following was another look at the language of Title 32 and other Colorado water districts in comparison to PAWSD and at the Dry Gulch Reservoir project before conversation veered back to the legality of the fee and whether the fee was defensible or not.

Vega opined that it was a misconception that the district was obligated to provide water and that there was no power to force the size of the districts (a petition is required prior to joining or leaving the district).

Vegas also noted that the water CIF and WRF were divorced in 1999, to which Ela explained that the two were originally combined at his insistence, but that he was not asked about separating the fees.

Separate, the fee has more of the indicia of an impact fee, Vega said.

Ela said he didn’t feel the separation of fees was fatal, and would be defensible as a fee for raw water storage.

Rounding out the conversation with Ela, Vega noted that it was the rate payer’s money the attorneys would be using in any defense and the group discussed the definition of “reasonable” in terms of forecasting and planning for water needs (recent court decisions have indicated that 50 years is an acceptable planning period).

Two hours of discussion later and with no real headway seemingly made in terms of a consensus between the board members over the legality of the WRF, future discussions concerning both the presence of the fee and the possibility of WRF rebates will have to take place before the Feb. 1 moratorium expires.