Tyler Cunnington
COLORADO SPRINGS, Colo. (KRDO) – Questions are mounting about a Colorado Springs Utilities (CSU) wastewater infrastructure project after some claim the utility financed the near-$400 million project using ratepayer dollars rather than requiring the developer who stands to benefit most to cover the cost.
Mailed flyers, TV commercials and websites have been created by the development group behind the Karman Line Annexation, pushing voters to say ‘Yes’ to the vote happening in a special election on June 19 that will decide whether the land annexation moves forward. That land is located between Banning Lewis Ranch and Schriever Space Force Base out east.
They argue that Norwood Development Group, who owns not just Banning Lewis Ranch but a majority of the developable land in Colorado Springs, is sticking CSU ratepayers with a $400 million bill by having the utility pay for the wastewater plant instead of paying for it themselves.
The project in question is the East Wastewater System Expansion (EWSE), which would connect mostly undeveloped eastern Colorado Springs to CSU’s central infrastructure using large pipes and pumps to send wastewater to the Las Vegas Street treatment facility, which has capacity for more volume.
The city says without an expansive project such as this one, the city’s wastewater services could face an overload by 2028.
A video provided by Colorado Springs Utilities shows the infrastructure mapped out.
The project is just one of several costly large-scale endeavors by CSU after a multi-billion dollar budget was approved by the Colorado Springs City Council in November of 2024 for the next five years. KRDO13 Investigates previously reported the rate increases would raise utility bills for families by an average of nearly $1,000 per year by 2030.
In light of the concerns raised in the flyers and other mediums, former State Senator and current practicing attorney Bob Gardner drafted a seven-page letter to Colorado Springs City Council, requesting that the utility explain why the agreement was made to use ratepayer dollars as a loan, instead of having the developer group finance it.
Subsequently, on Wednesday, CSU held a press conference to outline all aspects of the EWSE.
The controversy stems from a 1988 development agreement between CSU and Banning Lewis Ranch, when the land was first annexed into the city. That agreement was amended in 2018, which stipulated that CSU would bear the responsibility of constructing core wastewater infrastructure off-site from Banning Lewis Ranch, while the developer would be responsible for all on-site infrastructure that connects to those central pipes.
Gardner believes that the city violated the development agreement, as well as the city code when making the decision to undertake the financing of the EWSE.
Specifically, he cited City statute 7.4.303.B.2, which states:
“Electric, Gas, Water, Wastewater, and Stormwater Systems: The subdivider shall pay for the design, installation, and construction of all the required electric, gas, water, wastewater, and stormwater systems necessary to serve the development in compliance with this UDC, this Code, the most recent version of the Colorado Springs Utilities Gas, Electric, Water and Wastewater Line Extension and Service Standard, the Engineering Criteria, and the rules and regulations of Colorado Springs Utilities and the Stormwater Enterprise.”
He also cited CSU’s 2023 Wastewater Line Extension & Service Standards, which require developers to cover all costs for system extensions, with the option to seek cost recovery from future users through a 20-year agreement.
However, CSU says that the utility has always reserved the right to serve as a developer for certain projects.
“We followed all of our processes, existing utilities, rules and regulations that have been in place for decades that give us the authority to evaluate large wastewater projects and act as the developer when it’s in the best interest of the community,” explained the utility’s CFO, Tristan Gearhart.
Gearhart says that it was the most cost-effective course of action, and the EWSE would enable development to begin eastward within the city instead of stunting it any longer, since wastewater infrastructure is required before any kind of development can take place.
“I believe that what we have decided on here is ultimately the best solution from both an operational and a financial standpoint for all of our customers,” Gearhart added.
CSU says that in 2019, the utility identified seven different plans for achieving eastward expansion of wastewater infrastructure, and ultimately arrived at a scenario to use the Las Vegas Street water treatment plant.
As a result, the $396 million dollar project was determined the best course of action, especially considering they’d be able to recoup the costs of the EWSE through Advanced Recovery Costs, which are essentially fees passed onto homeowners or other customers through one-time fees from the developer.
The utility says existing properties in the area – like homes, the Colorado Springs Airport, and CSU’s Horizon Campus – would pay those fees once the pipelines are in service, while future developments, including more homes in Banning Lewis or the Karman Line project, would also share those costs.
CSU says they fully intend on recouping all 100% of that $396 million through the recovery fees, which could be anywhere from $750 for residential single-family units to as high as $3,900, depending on how much a property uses and relies upon the EWSE.
Gearhart says this method of financing a project is in no way atypical for CSU.
“It has been smaller infrastructure, typically not to that same $396 million level. But the advanced recovery agreements and recovery agreements have been used for many, many years at the utilities as a way for development to pay for the infrastructure that they will specifically use,” Gearhart said.
Conversely, the utility says if they were to build an entire wastewater treatment plant instead, the ratepayers would bear the entire cost of that project, since it is not eligible to have advanced recovery costs. A project of that magnitude would cost upwards of $600 million, according to CSU, slamming ratepayers much harder.
CSU explained that by 2030, through their increased rates, utility customers will pay $365 specifically towards the EWSE.
Yet, when KRDO13 Investigates asked if or when ratepayers would be repaid, as their funds served as a loan for the utility, Gearhart stated it could be decades, and that ratepayers would not get a direct credit but rather would see “less rate pressure moving forward.”
So far, roughly $6 million has already been recouped, according to Gearhart.
During the presentation on Wednesday, the Karman Line Annexation was mentioned multiple times as developable piece of land that would greatly benefit from the EWSE.
KRDO13 Investigates asked the ownership of Karman Line for comment, in light of their campaigning efforts scrutinizing Norwood and CSU. The group sent this statement over text:
“CSU did hold project update meetings with the Home Builders Association, of which some in our development group are members. Nobody on our team was part of discussions about Norwood Development Group’s obligation to finance the project, nor did we have any input on how the wastewater expansion project would be built.”
“The founders of Karman Line support the expansion of wastewater services in Colorado Springs and acknowledge our project will benefit from the creation of the eastern wastewater system. However, we believe development should pay its own way and are committed to paying for all the legal obligations required by our annexation agreement, City Code, and CSU Standards, including the extension of wastewater services to our property and do not seek to shift those costs to ratepayers.”
The ESWE was not up for an approval or a vote on Wednesday; instead, the presentation was made to the utilities board and city council to clear the air amidst the swirling questions and accusations.
Construction is set to begin in mid-2026 with the goal of completion by 2030. CSU says there will be certain lines and infrastructure online and active before 2030, but that will be determined later during construction.
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