Banning Lewis Ranch's future may depend on Colorado Springs easing long-standing agreement

By Conrad Swanson Updated: December 18, 2017 at 8:10 am • Published: December 17, 2017 0
photo - Looking west across a portion of Banning Lewis Ranch from Highway 24 Wednesday, March 6, 2013. Photo by Mark Reis, The Gazette
Looking west across a portion of Banning Lewis Ranch from Highway 24 Wednesday, March 6, 2013. Photo by Mark Reis, The Gazette

For decades various owners with divergent visions have juggled the massive Banning Lewis Ranch property on Colorado Springs' eastern side. Some were disrupted by bankruptcies or other financial setbacks, some were stymied by the 1980s annexation agreement with the city that called for developers - and not the city - to pay for infrastructure required to populate the sprawling expanse of high plains.

Early next year, city staff will propose changes to the 1988 annexation agreement that could lessen the financial obligations for developers, with the goal of spurring development. But for now, the specifics of those changes remain unclear, causing some to push back against relaxing the rules and others to urge caution.

The annexation agreement that absorbed the ranch into the city was meant to ensure that future developers would either build whatever new infrastructure the area needed or pay the city in lieu of doing the work, said City Councilman Andy Pico, whose district includes much of the property.

The city planners who drafted the agreement went above and beyond the city's regular practices in an effort to make sure developers "paid their own way" and didn't stick taxpayers with the infrastructure's price tag, Pico said. The costs and fees to be shouldered by property owners would be significant.

Those outsized costs are largely the result of one property owner's vision for his share of the acreage, said Mayor John Suthers. That owner, Frank Aries, envisioned what would amount to an additional city, a densely populated area that anticipated about 180,000 people living there.

At that scale, massive amounts of infrastructure would be required, and Suthers said he is unsure if Aries ever intended to develop the land.

Regardless, the costs outlined in the annexation agreement are so significant and "so onerous, that the property is undevelopable," Suthers said.

But City Councilman Bill Murray argues that changes to the agreement would be shortsighted and called the city's negotiations with the property owners "suspect."

A tangled history

Banning Lewis Ranch's history is fraught with deal-making that went off the rails and it precedes the 20th century. William Marion Banning staked out Banning Ranch near Colorado Springs in 1897. The land eventually came under the ownership of Raymond W. "Pinky" Lewis, the husband of Banning's daughter, Ruth. Around 1930, Lewis expanded his holdings on the Hereford cattle ranch to about 38,000 acres, framing the city's east side from Falcon to Widefield.

In the 1960s, a Phoenix-based company bought nearly 24,000 acres from Lewis, but defaulted on its loan a few years later and handed the deed to Colorado Springs Land Holding Co., based in New York.

That ownership group dangled the property before San Francisco-based Mobil Land Development Corp. in the late 1970s. Mobil dispatched one of its agents, Les Gruen, to Colorado Springs to investigate.

"I was a young guy, 25 years old, and my boss threw a map of Colorado Springs on my desk, highlighted, with a note that said 'check it out,'" Gruen said. "So in November 1979, I came out here to take a look at that property and assess whether it made any sense for Mobil to acquire it. The company ended up buying that property in 1981, even though it didn't fit in with the typical (Mobil) acquisition strategy."

But Mobil knew what it wanted, Gruen said: "To develop it and make money."

"We ended up selling enough land in the first couple years of ownership to where we returned our purchase price," he said. "Mobil was able to make a tremendous amount of money, with very little risk."

The rest of Mobil's land, 20,483 acres, was sold to Aries, of Tuscon, Ariz., in 1985 for $92 million. In under a year, and spending millions more, Aries boosted his holdings to more than 26,000 acres.

To realize the land's value as a veritable new city of housing developments, Gruen said, Aries had no alternative but to try to become part of Colorado Springs, and allow police, fire, water and other city services to reach his sprawling range.

"You're going to have a very difficult time selling homes if you and I have to haul bottles of water or trucks of water to take showers or wash our dishes," Gruen said. "He really had little choice."

The process began with Aries making unusual requests of the city, according to former city planner Ira Joseph. Rather than seeking a typical master plan for the property - which would offer future buyers and developers a general outline of the area's potential - Aries "hard zoned" the land.

"He wanted to show potential buyers that this was a very firm development opportunity, not subject to negotiating and back and forth," Joseph said. "He wanted to lock everything in."

The city staff "didn't necessarily think (Aries' strategy) was a good idea," Joseph said, but acquiesced and moved forward with the agreement, taking about 20 months to hammer out the deal.

City seeks to avoid costs

City planners designed the annexation agreement, the largest in the city's history, to make sure taxpayers weren't left holding the bag for "a service extension and infrastructure maintenance that might create a significant financial problem," Joseph said, if Aries' intentions fell through.

But in doing so, they levied significant costs and fees against anyone who might want to develop the area in the future, said Pico, adding that the Aries plan envisioned housing density on the scale of Los Angeles.

Ultimately, Aries' grand design collapsed, and, unable to make payments on his loans, in 1989 he handed the ranch over to Western Savings. Since then, chunks of the property have changed hands multiple times. Some owners sought to drill for oil there, while others had hopes of building.

In the decades since, the bulk of the property has stagnated while developers "leapfrogged" the area in favor of Falcon or unincorporated El Paso County, costing the city large sums of sales and property tax revenue, Pico said.

Court upholds annexation

Now, the original ranch property has about 40 different owners, Pico said, from three major developers to small family holdings. The lion's share, approximately 18,000 acres, is owned by the Nor'wood Development Group and remains undeveloped.

Representatives from Nor'wood did not return multiple messages seeking comment on the property or the annexation agreement.

But Nor'wood's stance on the agreement appears clear. The company inherited a legal battle challenging the document when it bought the property in 2014 from Houston-based Ultra Petroleum, which had bought the property out of bankruptcy.

In August, 2015, a federal judge upheld the annexation agreement, saying Colorado Springs is allowed to pass on development costs for streets, roads, utilities, parks and police and fire stations to developers. The judge cited a 2007 study and fee schedule for property owners, which estimated the bill for all needed infrastructure to be about $1.1 billion. By comparison, the city's annual budget has a $288.9 million general fund.

The city fought Ultra's and Nor'wood's argument, Suthers said, to avoid setting the precedent that a bankruptcy could nullify a pre-existing annexation agreement.

At the same time, city staff understood the burden created by the annexation agreement and began negotiating with property owners to tweak the document.

Although Nor'wood's property sits dormant, Denver-based Oakwood Homes, which owns a 2,600-acre section of the ranch, has been building.

Oakwood's property is divided into six tracts, dubbed Village 1-6, which are slated for homes, parks, trails and schools. Village 1 is nearly complete, Village 2 is about half-finished and, in October, the council approved rezoning Village 3 to allow more than 1,000 homes.

Joseph said Oakwood's progress has likely been enhanced due to their property's location on the north side of the ranch, where infrastructure costs are lower because of proximity to existing services.

Altering the annexation agreement would make development in the remaining portions of the ranch more viable, Suthers said.

Murray argued that there is no need to rush to change the annexation agreement because about 3,500 homes will be built in the city next year regardless of the ranch's status.

Full build-out could take 90 years

Bob Cope, the city's economic development manager, maintained that lessening the burden on ranch property owners could bring even more growth to the city. Over the next 30 years, he said, that prospective development might generate $49 million in net revenue for the city, add $41 billion to the local economy and boost Colorado Springs Utilities net revenue by about $434 million.

And those lofty numbers are based on development of about 6,400 acres - about a third - of the Banning Lewis Ranch property, Cope said.

Without a change, new homes and businesses will continue to pop up in Falcon and in El Paso County rather than in the city, Cope said.

Because the projections estimate 24,000 homes on the ranch, housing considerably fewer than Aries' 180,000 people, less infrastructure is needed.

Pico said reducing the size of the planned Banning Lewis Parkway and connecting future developments to existing wastewater plants rather than building a new one, would significantly lower costs for property owners to build on the land.

But Murray said he's uncomfortable altering the entire annexation agreement based on projections for a third of the land.

Suthers said it's unreasonable to expect city staff to plan further ahead. Developing the entire ranch could take 90 years, he said.

Regardless of the timeline, Murray said there are also portions of the property that should not be developed at all.

City park staff would like to expand the nearby Corral Bluffs Open Space, which borders the ranch and some environmental advocates are looking to discuss Nor'wood's willingness to preserve some of its property there.

Pico said that even if the agreement is changed, the developers will still "pay their own way," meaning any infrastructure needed will still be built without charging taxpayers.

Cope said the council should be presented with proposed changes for approval by January or February.

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