Department of Community Development
Reference: DHI Telluride Development Agreement Amendment
To: Mayor Gregory Mills and Members of City Council
Through: Michael P. Martinez, City Manager
Prepared By: Nick Di Mario, AICP, Senior Planner
Date Prepared: January 2, 2025
PURPOSE
The development agreement amendment application before the City Council is an amendment to the approved DHI Telluride Development Agreement (the “Agreement”). The Agreement was executed between the City and the landowner, Tamarack Land - Telluride Street, LLC (the “Applicant” or “Developer”) in June of 2024, and governs an approximately 11.18-acre property to the east of the Burlington Lateral Ditch, west of Telluride Street and between the Telluride Business Park 2 Subdivision and Eagle Ridge Academy (the “Property”). Brian Bratcher of D.R. Horton (the “Project Representative”), working on behalf of the Applicant, is requesting approval of the DHI Telluride Development Agreement Amendment (the “Amendment”), which would grandfather the payment of certain development impact fees to the amounts in effect April 1, 2024.
PROJECT BACKGROUND
The project began when a subdivision plan was submitted for the Property in November of 2021. In order to receive all land use entitlements to develop the Property, the following items were also submitted, reviewed, and approved: a Reimbursement Agreement, a Final Plat, a Development Agreement, and a Site Plan. The Property was fully entitled for the construction of a for-rent, 140-unit duplex project in July of 2024.
As detailed in the Agreement, the Developer is required to construct certain roadway and drainage improvements associated with the development of the Property. With respect to roadway improvements, the Developer is required to construct Telluride Street to its full width, both adjacent to the Property and continuing north to the intersection with E. Bridge Street. As the northern portion of Telluride Street is not adjacent to the Applicant’s Property and is considered outside of the Property’s impact, the City and Developer agreed to enter into the Reimbursement Agreement. Pursuant to said Reimbursement Agreement, the City is required to reimburse the Developer for the full cost to design and construct the northern portion of Telluride Street. A portion of the reimbursement from the City will include an approximately $52,000 cash escrow that was provided by the Telluride Business Park developer when that property was developed. The City required this cash escrow to pay for the Telluride Business Park’s portion of the construction of Telluride Street adjacent to their property.
Following approval of the Site Plan, in August 2024, the Developer submitted a permit for the construction of the public improvements, as well internal project roadways and utility lines. Pursuant to the Agreement, residential building permits would not be issued until all of the public improvements have been granted initial construction acceptance. Generally, initial construction acceptance occurs when the City’s public infrastructure inspectors have determined all required public improvements have been built in accordance with approved plans, are in good condition, and are in working order. As of the date of this Staff Report, the Developer has not fulfilled all of the requirements in order to obtain authorization to begin the construction of one of the major public improvements-the expansion of Telluride Street.
SUMMARY OF PROPOSED DEVELOPMENT AGREEMENT AMENDMENT
The Amendment before the City Council would allow the Developer to pay the development impact fees that were in effect on April 1, 2024. However, as the City also collects development impact fees on behalf of outside agencies, such as Metro Water Recovery, the Amendment expressly states that the City cannot waive or modify fees imposed by outside agencies. Additionally, the Amendment details that any remaining permits for the Property not issued by December 31, 2025, shall be subject to the development impact fees in effect at the time of issuance of such permits.
DEVELOPMENT IMPACT FEES
In accordance with the Brighton Municipal Code, development impact fees are paid at the time of residential building permit issuance. Examples of development impact fees include transportation, water, wastewater, stormwater, and park related fees. Development impact fees are collected and used to finance new capital improvement projects that increase the capacity of City services as needed to serve a growing community. Some examples of capital improvement projects funded by development impact fees include the Bridge Street Widening Project, the water treatment plant expansion, and the construction of Lutz Reservoir. The collected development impact fees are used to expand services that support our growing community and cannot be used to fund staffing or general operations. In the Fee Resolution for 2025, the City adopted the General Services impact fee. This is a new development impact fee that could be used to expand snowplow operations by increasing fleet size, and future capital improvement projects related to the Police Department. The City typically conducts development impact fee studies every five years to ensure the City is setting impact fees at a level that maintains a desired level of service for the residents and community. Certain external factors, such as inflation, may cause the City to conduct development impact fee studies more frequently.
In 2022, the City hired Economic and Planning Systems (“EPS”) to analyze certain impact fees charged by the City and the level of services provided to the community. The goal was to analyze the fiscal impact of maintaining service levels in our growing community. The analysis was presented to City Council at a study session on March 14, 2023, and a follow-up presentation at a study session on April 23, 2024. After receiving feedback from the City Council, a final recommendation was presented to City Council at a study session on July 23, 2024. The Fee Resolution for 2025 incorporated the impact fee changes recommended by staff at the July 23rd session. Along with an update to the development impact fee amounts, the City also changed how certain development impact fees for utilities and stormwater were classified by land use type per Ordinance 2454, which was passed by the City Council on September 17, 2024.
As previously outlined, the potential of development impact fee increases was reviewed and discussed by the City Council, with input from outside consultants, and the opportunity for public feedback, over a period of nearly 18 months preceding the submittal of the Developer’s permit to construct public improvements.
FEE RESOLUTION
The 2025 Fee Resolution was approved by the City Council on October 15, 2024, via Resolution No. 2024-83, and was amended by Resolution No. 2024-103 on December 17, 2024 (the “2025 Fee Resolution”). The original Fee Resolution increased certain development impact fees; the amended 2025 Fee Resolution did not change any of the development impact fees. As mentioned, Ordinance 2454 amended how certain fees related to utilities and stormwater are
classified.
The table above shows a comparison of how fees for a residential product were charged on April 1, 2024, compared to the fees that became effective on January 1, 2025. As you can see from the table, the Fee Resolution and Ordinance 2454 reclassified and increased certain development impact fees. Additional information on this change can be found later in this Staff Report.
STAFF ANALYSIS OF THE PROPOSED AMENDMENT
On November 26, 2024, the Project Representative provided a letter to the City Council detailing its justification for the proposed Amendment (the “Developer Letter”). A copy of the Developer Letter is attached to this Staff Report. Below, staff provides a response to the assertions by the Project Representative contained in the Developer Letter.
Summary of Project Representative’s Assertions/Statements
Past Increases in Development Impact Fees
Project Representative: “We have already incurred an increase of roughly $5,600,000 in impact fees from the start of the project.”
Staff is unclear what the Project Representative considers as the “start of the project”, so it is difficult for Staff to determine how the Project Representative arrived at the number above. For reference, the Developer began this project in November of 2021 when the subdivision plan was submitted to the City. The DHI Telluride project required the submittal and approval of several land use entitlement applications. Specifically, it required a Subdivision Plan, a Reimbursement Agreement, a Final Plat and Development Agreement, and a Site Plan. All development impact fees collected for any development are charged at the rate in effect at the time of building permit issuance. A developer or homebuilder should not expect to pay development impact fees earlier than the issuance of building permits; this is standard language in the City’s code, development agreements, external utility providers fee resolutions, as well as common practice in other municipalities.
It is important to note that Staff informed the Project Representative that if the project proposed to provide affordable units, the development would have a path forward for a potential development impact fee reduction subject to City Council review and approval. Brighton Municipal Code Article 3-5 “Development Impact Fees” defines affordable housing as dwelling units for occupancy by a tenant or homeowner whose income is eighty percent (80%) or less of the current median income in the Brighton-Adams County area. The Project Representative elected not to provide any affordable units within the project.
Fee Resolution 2024-83 and Impact on the DHI Telluride Project
Project Representative: “[T]he proposed fees in the City’s 2025 budget would add an additional $693,929 that would push the project’s already strained budget over the edge, and would ultimately be detrimental to the feasibility of this development.”
Further in the Developer Letter, the Project Representative states an additional increase of $501,760 is due to a change in how water-related impact fees are charged. The Developer Letter asserts that the Fee Resolution added $1,195,689 in impact fee charges to the project. However, this figure includes increases to Metro Water Recovery’s impact fee-a fee which the City did not set and has no jurisdiction to waive or change, as well as an incorrect calculation of the wastewater connection fee. With 140-units and a leasing office, the total development impact fee cost for the Property under the 2024 Fee Resolution would be $3,395,404.09, equating to a median development impact cost of $24,001.16 per unit. Under the 2025 Fee Resolution, the total development impact fee cost for the Property would be $4,496.612.21, equating to a median development impact cost of $31,448.16 per unit. The above calculations equate to a total difference of $1,101,208.12 for the entire development of the Property.
As mentioned, the City does not have jurisdiction to waive or change fees imposed by Metro Water Recovery, so those fees have been excluded from the City’s calculations.
Detailed earlier in this Staff Report, the City began studies on development impact fees nearly 18 months prior to the permitting of DHI Telluride public improvements. Through said studies, it is fair to state that a single unit within the Property imposes a financial impact of $31,448.16 to the City’s future capital improvement projects. It is Staff’s opinion that if the Developer is allowed to pay fees under the 2024 Fee Resolution, the Property would be paying less than its determined fiscal impact to City infrastructure, threatening the City’s ability to maintain an acceptable level of service for the residents and community. Additionally, allowing the Developer to pay fees that are outdated, results in a larger gap between the amount of fees that are collected and the future costs for design, labor, and materials of future capital improvement projects. That additional cost difference will have to be borne elsewhere and would likely result in the City’s taxpayers making up the difference; this is against the “development pays its own way” policy.
Reclassification of City’s Storm Drainage Impact Fee
Project Representative: “$317,800 of this increase is attributed to the revision language to the stormwater drainage impact fee that now classifies this duplex product, which consists of 26% one-bedroom units and 39% two-bedroom units, in the same category as single family detached houses that typically are much larger, consisting of three and four bedrooms.”
The Developer Letter asserts that the majority of the increase in impact fees, specifically $317,800, is attributed to the reclassification of the stormwater impact fee via Ordinance 2454.
This fee is charged in order to mitigate a residential unit’s impact to the City’s stormwater system. The amount of impervious surface of any given residential unit may vary as compared to others, but its impact has been quantified into a flat rate.
Prior to Ordinance 2454 and the 2025 Fee Resolution, duplexes and other attached residential products were considered multifamily. As such, duplex units were charged the multifamily rate of $2,310 per unit for the storm drainage impact fee the same rate that would have been charged per unit in an apartment complex. Ordinance 2454 defined all single-family products, attached and detached, in the same category separate from apartment complex units. Ordinance 2454 did this as attached residential products have a substantially higher stormwater impact than units in an apartment complex because duplexes and attached products are not typically stacked in multiple story buildings. The stormwater impact from an attached residential product is more similar to a single family detached product than a unit within an apartment complex. To reiterate, the Amendment would permit the Property to pay below its determined fiscal impact to City infrastructure, a variance that would be inherently subsidized by other users of said infrastructure.
Cost of Water Dedication
Project Representative: “In June 2024, we signed our development agreement and dedicated $3,428,600 worth of water shares to the City in association with the development.”
Staff is not made privy to the financial amount of private transactions when it comes to the purchase of water shares between a developer and a share provider. However, Staff does not believe this statement is relevant to the request to amend the Agreement. City code requires that water be dedicated for any given development. Furthermore, the Developer executed the Agreement which details the requirement to dedicate water. The cost to acquire and dedicate water is a cost that should always be borne by a developer, and in pursuit of the City’s Comprehensive Plan, development should pay its own way. Whether development impact fees increased or not, a specific amount of water would need to be dedicated for the Property.
Development Impact Fee Increase in Relation to Construction Permits
Project Representative: “[W]e committed to a budget and allocated significant capital towards this project, only to recently find out about the proposed 2025 fee increases.”
While the Project Representative asserts that the Developer did not learn of the new Fee Resolution until August 2024, as outlined previously, the proposed impact fee changes had been discussed at public meetings for almost 18 months prior to the Developer starting construction.
In Staff’s opinion, it is the responsibility of any given developer or homebuilder to stay up to date with proposed fee, application, and code changes that may impact their development plans. If the Developer is unwilling to do this, there are other industry partners that do so. By way of example, the Colorado Association of Home Builders (CAHB) has an office dedicated to governmental affairs that researches changes in municipal codes, applications, and impact fees, and any other change or proposal that may have an effect on their home builder members. In fact, a representative from the CAHB spoke on the record in front of City Council concerning the increase in impact fees.
DHI Telluride Development Agreement Language and Fee Resolution
Project Representative: “Upon this discovery we immediately contacted the Community Development and Building Departments to pursue any options to lock in the current rates. Unfortunately, we were informed that the fees can only be paid at the time building permits are issued.”
In the Developer Letter, Developer states that upon learning of the Fee Resolution, Developer immediately contacted the City to pursue options to lock in rates but learned that fees can only be paid at the time of building permit issuance. Despite its objections to the 2025 Fee Resolution, Developer has long been aware that impact fees are paid at the time of building permit issuance. This is explicitly stated in the Agreement, which went through many rounds of thorough review between City staff and the Developer’s legal counsel. Specifically, Section 2.2 of the Agreement states:
2.2 Development Impact Fees and Other Fees. Developer shall pay all fees related to development of the property described in the Final Plat(s) at the time of issuance of a building permit for any or all portions of the Development. The amount of the fees shall be the amount in effect at the time of construction permits are issued. Any amendment to the kind of fees or the amounts of said fees enacted by the City after the date of this Agreement are incorporated into this Agreement as if originally set forth herein.
(emphasis added). Not only was the Developer aware that building permit fees were due at the time of building permit issuance, but the Developer also specifically agreed that any fee amendments subsequent to the execution of the Agreement were incorporated. The Developer executed the Agreement in June of 2024, well over a year after the potential fee increase became public knowledge. While the City is required by the Brighton Municipal Code to charge impact fees at the time and in the amount due at building permit issuance, it is equally the responsibility of any developer to decide whether the City’s requirements are acceptable for the viability of their project during the negotiation of a development agreement. In this case, the Developer agreed to pay the development impact fees effective at the time of residential building permit issuance, as well as to incorporate any future fee increases into the Agreement but is now objecting to such obligations as unfair.
To put it simply, the Developer seeks to renege on what it had previously agreed to in the Agreement.
Construction of Significant Public Improvements
Project Representative: “This is extremely problematic for our development because we are required to construct significant public improvements on behalf of the City and cannot be issued building permits until these improvements are accepted. The requirement to construct these improvements was made by City Staff during our Subdivision Plan process without any justification from City code.”
Developer is required to complete certain public improvements with respect to the project, specifically, the requirement to expand the northern section of Telluride Street, a portion of which is not immediately adjacent to this Property, and certain pond improvements. Developer cannot obtain residential building permits until all public improvements have been completed and inspected by the City and initial construction acceptance has been issued. The Agreement specifically states:
2.8 Initial Acceptance and Warranty. “No Residential Building Permits shall be issued by the Community Development Department prior to Initial Acceptance of Public Improvements unless expressly permitted in Exhibit E of this document.”
Exhibit E of the Agreement does not modify this statement. To reiterate, the Developer negotiated and executed the Agreement long after the potential fee increase became public knowledge and understood that the Agreement included public improvements not adjacent to the property as a separate Reimbursement Agreement was executed with the City for these improvements. Additionally, Staff does not agree that they had no justification from City code to require the construction of the remainder of Telluride Street. Section 3.04(A)(2) of the Land Use & Development Code states: “Prevent the location or design of a subdivision from placing an undue burden on public utility systems and community facilities serving other areas.”
Telluride Street is a collector roadway, providing vehicular and pedestrian connectivity to Bridge Street and Southern Street. Furthermore, it is bound by an existing business park, a K-12 charter school and a residential subdivision containing 300+ single family units and an elementary school. At the neighborhood meeting held for the DHI Telluride development in April of 2021, surrounding residents expressed concerns that adding a 140-unit subdivision would further exacerbate existing traffic congestion on Telluride Street, especially in the morning and afternoon hours when school is starting and getting out. Lastly, the City Council has given Staff clear direction that the completion of streets, where practicable, is a high priority.
While the project’s traffic impact study did not recommend the Developer construct the remainder of Telluride Street, Staff believed it was necessary to require the expansion of the remainder of Telluride Street to address surrounding residents' concerns, to ensure completion of this segment of Telluride Street per past Council direction regarding complete streets, and most importantly, in order to improve safety and vehicular travel along Telluride Street.
To build on the above, Section 3.04(D) of the Land Use & Development Code states: “Whenever any portions of the required public improvements are part of a planned future facility for the City, serving an area larger than the subdivision and its impact, the City may require and the applicant may enter into an upsizing agreement.” As mentioned, the traffic impact study did not recommend the construction of the remainder of Telluride Street. Nonetheless, because Staff required the expansion of Telluride Street beyond the direct impact of the Property, the City and Applicant negotiated and entered into the Reimbursement Agreement. While the Developer will construct the remainder of Telluride Street, the financial burden of the portion not adjacent to the development will be the responsibility of the City via reimbursement. Staff believes the requirement to construct the remainder of Telluride Street was justified by City code.
Staff would also like to note that as the Applicant could not present a drainage solution to retain the Property’s stormwater runoff, the City allowed it to use City-owned property to remedy its runoff issue, without compensation. Absent the use of the City-owned property, the Developer would have had to find an alternative solution, which may have resulted in purchasing land elsewhere to make the development feasible, or it would have had to reduce the number of units on the property to accommodate on-site retention. Both options may have resulted in lost profit, increased costs, and/or potentially the project not being feasible altogether.
STAFF’S FINDINGS
Current Status of DHI Telluride Project
As of the date of this Staff Report, the Developer’s construction permit for the required public improvements has been in process approximately 4 months. The Developer has neglected to complete the required steps to obtain authorization to begin construction of Telluride Street. Also, the Developer submitted plans on December 30, 2024, to revise parking layouts and some architectural details for the duplex units. If these plans are approved, the Developer will need to submit new permits to reflect the changes. As mentioned, the Developer needs to complete the required public improvements prior to being issued residential building permits for their duplex units. With the Developer’s desire to change parking layouts and architecture, it is fair to state that the Developer is not ready to be issued residential building permits, even if the public improvements were completed. Thus, they would be paying the fees currently in effect.
Summary of Staff Analysis
Considering all of the above information, Staff finds no merit in the Project Representative’s assertions and statements.
1) The Applicant and Project Representative have neglected their responsibility to stay up to date with changing development impact fees.
2) As of today, the Developer is not close to having initial construction acceptance, which would allow for the release of building permits. In fact, the Developer has only begun initial grading of their site. The Developer has not yet mobilized the surrounding right-of-way to begin construction of the public improvements. Essentially, the Developer is not close to having building permits issued, so it does not warrant for it to pay fees pursuant to the 2024 Fee Resolution.
3) During the review of the Final Plat, negotiation of the Agreement, and negotiation of the Reimbursement Agreement, the Developer or Project Representative never stated a concern that the construction of the remainder of Telluride Street would cause a delay in the permitting of the residential portion of the Property. As noted, the Developer and its partners had ample time to discuss the payment of certain development impact fees in relation to the various land use applications required for the property and had every opportunity to learn about and comment on the 2025 Fee Resolution. Instead, the Developer executed the Agreement which detailed residential permits could not be issued until all public improvements were completed, and that all development impact fees would be those in effect at the time of residential permit issuance.
4) An alternative option was suggested by Staff to incorporate affordable units into the development, which if approved by City Council, would have resulted in a reduction of fees. The Developer did not wish to pursue this option.
5) Allowing the Developer to pay fees that are outdated, results in a larger gap between the amount of fees that are collected and the future costs for design, labor, and materials of future capital improvement projects. That additional cost difference will have to be borne elsewhere and would likely result in the City’s taxpayers making up the difference; this is against the “development pays its own way” policy.
CONSEQUENCES OF APPROVING THE AMENDMENT
Staff believes that approving this Amendment will have multiple consequences.
Reimbursement for Telluride Street
As mentioned, the City has agreed to reimburse the Developer for the design and construction of the remainder of Telluride Street. The Reimbursement Agreement details the maximum amount of reimbursement the Developer is entitled to, which is $903,357.95. This amount was determined through the Developer’s cost estimate of constructing the remainder of Telluride Street. The reimbursement would come from traffic impact fees generated by the development of the property, or any other reserves the City deems appropriate to use. If the Developer is allowed to pay the fees effective April 1, 2024, the City would only collect $238,000 in traffic impact fees compared to $495,880 due in transportation and multimodal fees under the 2025 Fee Resolution. Collecting the transportation and multimodal fee imposed by the 2025 Fee Resolution would reduce the City’s financial impact of the reimbursement.
Creating a Precedent
DHI Telluride is just one of many projects currently in the City’s entitlement process. There are several other large residential subdivisions building out or in the entitlement phases planned which also have public improvements and are subject to the increased impact fees. Staff is concerned that if the Amendment is approved, other developers and homebuilders would approach staff with the same request. In fact, some of the in-process residential subdivisions were fully entitled many years ago. Staff is concerned such developers and homebuilders would approach staff with a request to use development impact fees with an effective date of April 1, 2024 or earlier. City Council voted to implement the increased impact fees after hearing a presentation that the City’s previous impact fees could not provide the level of service desired by the residents and community. The approval of the requested Amendment would not support the level of service desired by residents and the community and could have far reaching impacts that handicap the City for years to come.
DEVELOPMENT REVIEW COMMITTEE (“DRC”):
The DRC is made of up internal review partners, including members of the Utilities Department, Public Works Department and the Parks and Open Space Department. The DRC reviewed this project and recommended denial for reasons outlined in this Staff Report.
STAFF RECOMMENDATION
Staff finds the Amendment is not in the best interests of the City and its current residents and future residents. As such, staff is, therefore, recommending denial of the DHI Telluride Development Agreement Amendment. Please refer to Staff’s summary beginning on page 8 of this Staff Report for justification on Staff’s reasons for denial.
Despite a recommendation of denial, Staff has drafted a resolution for approval if the City Council chooses to approve the Amendment. If City Council is to approve the Amendment, Staff recommends directing staff to include the requirement to pay the general services impact fee in the Amendment. As mentioned, this is a new fee enacted by the 2025 Fee Resolution. It is a development impact fee that can be used for capital improvements related to general services such as adding more snowplows to the snowplow fleet and expansions to the Police Department, including increasing the number of cruisers in the Police Department’s fleet. The foregoing requirement to pay the general services impact fee is not included in the draft Amendment as staff and the Applicant could not come to an agreement on the inclusion of such language. However, the requirement to pay the general services impact fee is included in the draft resolution.
OPTIONS FOR COUNCIL CONSIDERATION
The City Council has four (4) options when reviewing this Application. City Council may:
1.) Approve the Resolution as drafted;
2.) Approve the Resolution with modifications;
3.) Not approve the Resolution; or
4.) Provide further direction to staff.
ATTACHMENTS
● Draft City Council Resolution
● Justification Letter Provided by the Project Representative
● Draft Development Agreement Amendment
● Original Development Agreement
● Aerial Map by City Staff
● Draft Staff Presentation