44 / BUILDING DIALOGUE / March 2023 ELEMENTS Water Water Rights and Development in Northern Colorado I t’s difficult to recall a time when the is- sue of water rights was not questioned, or discussed, when the top- ic of real estate develop- ment in Northern Colo- rado was brought up. In recent years, the rising demand, inaccessibility, and increasing cost of water have added a level of complexity to development. The accessibility problem isn’t, howev- er, that Northern Colorado does not have enough water to keep up with development. Rather, the water isn’t where development needs it to be – it isn’t in the areas where current residential development is located and, more importantly, where future devel- opment is planned. When a developer wants to build a master planned community, the first question is, “Do you have water?” The answer has typically been, yes, at least in the past. More recently, there have been developers who say they do not have water for their development sites, but they can move water from other sites, or they can buy con- tracts in the Colorado-Big Thompson project. Both of these are good solutions, but they tend to drive up the cost of water for development. For instance, C-BT is the most well-known source of water for development in Northern Colorado and the most commonly traded type of water supply. One share of C-BT 10 years ago was about $10,000, and today that value is close to $70,000. Adding further complication, is the lack of a uniform and con- sistent view of how to deal with the water issue. Every community views the issue differently – some want to protect water rights for existing customers, while others want to share water supplies with neighbors. There is no one-size-fits-all solution. One hundred years ago, when officials from Colorado and six neighboring states in the West signed the Colora- do River Compact, there was no way to predict that the compact’s purpose – in part to allocate water supply to a region of the country with a dry climate and increasing agricultural developments – would end up disturbing the water supply and demand balance for development in the 21st century. Walking the line between honoring the compact, but also looking for ways to limit the im- pact to end users facing continual increases in the cost of water, has been difficult. What does that mean for those of us looking to build housing in line with population growth, while still com- plying with a century-old water compact? It means we need to be creative, we need to be proactive, and we need to ensure better coordination among the communi- ties and the development community striving for hous- ing affordability, while acknowledging the rising cost of water. This is the crossover between the two arguably biggest issues facing Colorado homebuyers today. If you are a new buyer looking to purchase a home in a community, you are given a specific cost for your home. Your assump- tion is that you are paying what it costs the developer to buy the land and build the home. And that is true. But the price now also includes the cost for the developer to find water, transport it to the development and have it available to every home. The cost of water ranges dra- matically. It can be $20,000, $40,000 or even $50,000 to transport water to a single homesite. So as water costs go up, that cost is passed along to the home buyer in the form of increased home prices. There has been recognition by state officials on the issue, and they have acted. However, putting in place a housing affordability policy for the state is not enough – you must also have a water policy, as the two issues go hand in hand. Now the question is, how do we stabilize water costs in order to stabilize home prices? Piper Sandler’s Special District Group has worked with four communities within Colorado on water-specific fi- nancings, and two within in Northern Colorado in par- ticular, to put that creativity and proactive approach in play to answer that very question. These financings helped finance water and wastewa- ter credits, facilities and allocation of water rights to Jonathan Heroux Managing Director, Piper Sandler Colorado River