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Busting a Cap

As the economy sags, Berthoud's tough stance on growth comes under fire -- again.

It's spring. The birds are singing, the bees are strumming their little guitars, and in the petition-happy town of Berthoud, the locals are headed for another special election, locked in the throes of what Yogi Berra calls "déjà vu all over again."

For the fourth time in less than three years, Berthoud voters are being asked to decide whether they want a growth cap. The question has been asked and answered repeatedly in the affirmative; but like the Divine Yogi says, it ain't over till it's over.

Alarmed by a 60 percent growth rate over the course of the 1990s, voters approved the cap -- which limits new housing permits to around 100 a year, 5 percent of the existing total -- by a solid margin in November 2000. But the measure has come under relentless attack ever since, as various factions within the Front Range community and outside development interests vie to shape the future of the town. In a recent column in the Loveland Daily Reporter-Herald, Berthoud mayor Milan Karspeck called the cap "the most controversial and divisive issue during the 15 years I have lived here."

"It's been such a struggle to keep the cap from day one," says Karen Stockley, one of the leaders of the growth-cap campaign. "I don't think we had any idea it would be like this. We thought we'd get it in place and go on with our lives."

The growth cap was tested twice at the polls in 2001. The first initiative was backed by McWhinney Enterprises of Loveland, which had sought an exemption from the cap for a 4,200-acre parcel of land along the northern I-25 corridor; McWhinney hopes to build at least 4,000 homes over the next forty years on a 1,600-acre portion of that land ("Scenes From a Sprawl," August 9, 2001). Despite being outspent nearly ten to one in the campaign, supporters of the cap prevailed. The following month, an attempt to scrap the cap altogether, led by a local mortgage broker, was defeated by just 37 votes.

The latest effort to repeal the cap represents a different kind of challenge. The campaign is being spearheaded by a group of current and former town officials who've pledged to take no money from development or real estate interests. And it comes at a time when once-booming Berthoud is wrestling with a sharp decline in revenues and rising fees to local property owners -- an economic plunge that's being blamed in large part on the growth cap.

Like many Colorado communities, Berthoud has seen residential construction sputter over the past two years, but its downturn has been more drastic than most. In 2000, the town issued 104 building permits, in 2001 just 21, and last year only eight. Critics of the cap say that it's scaring away builders and their financing, that the 100-permit limit is too inflexible and doesn't allow sufficient economies of scale in planning larger developments. In addition, the cap prompted the McWhinney brothers to de-annex their I-25 property from Berthoud and seek to develop it in conjunction with Johnstown.

"All of the negative impacts of the growth cap are now becoming clear," says Jeff Hindman, a former mayor pro tem who's become one of the principal crusaders against the cap. "It's like a dark cloud over the town. It stops new businesses from coming, and it definitely stops large, master-planned projects."

Hindman notes that the drop-off in revenues from building permits has compelled the current town board to hike water fees. Berthoud is facing mounting bond obligations for new water and sewer facilities, which is expected to hike the fees even further. But campaign leader Stockley says the cap is being unfairly scapegoated for a bad economy and what amounts to poor planning by the town board.

"They're using a lot of scare tactics," she says. "They're going to have to raise the fees because of the huge indebtedness they brought on themselves paying for past growth and because of the drought. Somehow, I'm sure, that's going to be blamed on the growth cap, too."

Brian Anderson, another key advocate of the cap, also rejects the argument that growth limits have led to the town getting soaked with higher water bills. "They knew what was coming, but the prior board chose to go against the suggested [water] rates in the hopes that there would be an onslaught of permits," he says. "They could have spread this out over more time and then rebated it if the permits came through."

To defray the rising costs, the current board has scrambled to modify the growth cap by pre-selling water taps to builders for future homes and coming up with an allocation system that allows builders to "roll over" unused permits from the previous year as part of their assigned total. Anderson says that a 5 percent annual growth rate is a "reasonable" goal -- even at the height of the boom, Berthoud's growth hovered around that figure -- and that the allocation system should be given a chance to work: "Several of the developers in town have said that they can work with the growth cap if they know what the allocation is going to be."

Ken Weibel, one of the local developers, says that turnover in the city administration -- the town has had three planning directors and three city managers over the past four years -- and rising impact fees have contributed to the uncertain climate for construction. The allocation system has helped, he says, but so has the pre-selling of water taps, which has allowed him to double the number of permits he's obtained for his 69-home project.

"There's no way I could have started with just the 25 permits I had under the cap," Weibel says. "Most bankers don't want to put the money up to buy raw land if you're not sure you have the permits to complete the project."

Revenues from building permits are only a small percentage of the town's budget. Both sides agree that the town needs more retail and commercial development, boosting sales and use-tax revenues, but Hindman's group contends that the town needs more housing to attract major businesses such as Safeway, which has been considering building a store there. Their campaign literature stresses "growth management" rather than a growth cap, arguing that the "negative perceptions" associated with a cap may be more critical than how much building it actually allows.

"The cap gives lenders the feeling that Berthoud is totally anti-growth," says Tom Patterson, a former town board trustee who's working with Hindman on the repeal campaign. "As a consequence, you're not going to get a favorable loan if you want to open a business in Berthoud. If you want to start a subdivision, the fear is you won't be able to amortize your investment. Perception is reality."

Only six permits have been pulled so far this year in Berthoud. While dozens of more homes may come on line, town planner Wayne Reed is reluctant to predict how many of the projects will actually get done soon. The cap has forced builders to compete for a limited number of permits, but the number of homes getting built isn't the only consideration for the planning staff.

"I spend a lot of time crunching numbers that could otherwise have been devoted to quality issues," Reed says. "The growth cap alone has not made staff look at other tools to manage growth."

But supporters of the cap say that it was never intended to be the town's only tool for controlling development and that annihilating it won't magically lift Berthoud out of its current slump. Its removal, though, could invite more large-scale projects that will end up straining town services even further. "If you look five years out, there could be substantial growth," Stockley says. "There are 500- and 700-home developments waiting to come in if the cap goes away."

Hindman counters that larger projects are the best way to ensure quality and affordability of housing: "The larger chunk of land you're planning, the better."

Hindman, Patterson and other former town leaders involved in the repeal effort are urging their neighbors to have more confidence in their elected officials' ability to manage growth. But Berthoud's confidence in its leaders has taken a few hits lately. Last year, months after voters rejected the proposal to exempt the McWhinney project by the highway from the growth cap, Hindman and other town board members granted the project an additional 100 permits a year anyway. It wasn't enough to keep the McWhinneys from de-annexing their property and flirting with Johnstown; now, however, the developers are talking to Berthoud officials about another annexation, an elaborate mating ritual that may yet allow the town to control its I-25 gateway while getting the project out from under the cap at last.

"I see the McWhinneys putting their houses in and maybe putting in commercial development in twenty years," Stockley says. "They're drawing up their own development agreement, writing their own development codes. They want to make their own rules. I think it's crazy that Berthoud would let them do that, but it looks to me like the town board is leaning toward that."

The board has put off a final decision on the McWhinneys' latest annexation proposal until after the May 20 special election. Stockley believes there's a political motive for the delay: If voters know that 4,000 homes are going up along the highway, she reasons, they'll be less likely to vote to repeal the cap. But her greatest concern is whether people will bother to vote at all, after having to revisit the cap issue in one election after another.

"The development interests keep bringing it back over and over again, until they wear you down and you end up saying that growth is inevitable," Stockley says. "We don't have an answer for the voters, except to get angry and get out and vote again."

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