When the Council takes up the Granite Dells Estate water allocation request, it will not be a voting item, simply a time to understand the issues. We sat down to discuss the project with Fann.
In 2007, Mike Fann, who owns the real estate development, went to considerable effort and expense to get the property annexed into the City of Prescott. That decision has brought increased challenges. Asked whether or not he regrets being annexed now, Fann explained, "I will say, part of me does because it's been very trying. But in the big picture of things, no. The bottom line is, this 1000 acres was going to be developed at some point. If it wasn't by me, it would have been by somebody else. I believe in my heart of hearts that developing within the City of Prescott so you have paved streets and city water and city sewer vs. dirt roads, septic tanks and exempt wells, is better. It is clearly what's best for Prescott. I've lived here almost all my life and I'll die here. That's what's best for Prescott. So, no, in the big picture, no. As much hassle as it's been."
Looking ahead just a couple of years, Fann knows that in order to move into future phases, he’s going to need a larger allocation of water. "Currently, under my current water service agreement, I have 248.5 acre feet of an assured water supply,” Fann explained. We've built Phase One, which is this area right here, and then we've built 12 lots right here of the large estate lots. We've built a total of 220 single family homes in the first phase. What's approved already - in 2014 - was 918 single family homes. We want to take that to 1090 single family homes."
Fann said they’re trying to give the buyers what they want. And that’s meant adjusting the plan. "Really, what we're trying to do, when I planned this and it was first annexed into the City of Prescott in 2008, the market was different. There was still a demand for larger lots, larger homes, the term McMansion was still being used. But, today, the buyers, that's not what most of them want. There's still a market for that, but, really the market is smaller homes, smaller yards, less golf course, more natural amenities, trails, open space."
A conscious look at water
Mike Fann said this is a water wise community, by design. "We have no water features. We have no lawns or heavy water usage in the common areas. Lawns - I don't know this for positive, of all the homes, there's about 60 homes, being built or have been built already, and I don't know if there's any lawns out there. I can't think of a single lawn. Almost every home, if not every home, is xeriscape type landscaping."
"All of it is very water wise, water conscious,” Fann said. "As a matter of fact, it'll be interesting as the development moves forward because all of the waste water of this entire development goes through one final manhole before it leaves the development, and that manhole has a flow meter in it. We'll be able to, with great specificity, we'll be able to know exactly how many gallons of water, through all the meters, everything is metered going into this subdivision, and everything is metered going out. We'll have a very good idea of how many gallons each unit is using, and how many gallons are going back into recharging the aquifer from this development."
Granite Dells Estates by the numbers:
Phase 1: 220 residential lots
Infrastructure: $11.1 million of taxable sales
Permits and fees for infrastructure: $358,000
Permits, impact fees and meter fees paid per home: $8100
Total permits, impact fees: $600,000
Housing sales: $23.4 million
Average home price: $390,000
Total project expected gross revenues: $425 million
Total project expected taxable infrastructure: $55 million
Total project expected permits and fees: $8.8 million
The City-approved Master Plan changes in 2014
Fann renegotiated with the City in 2014 to change the Master Plan. But, the City didn’t give him all the water he needed then. "Well, the water, the 710 residential units was approved in 2008, under the original master plan. I went back in 2014 and asked them to modify it to 1308, and that was all approved. What they didn't approve at that time, they allowed me to change the Master Plan, change the zoning, they approved everything, but what they didn't do at that time was modify the water service agreement to be commensurate with the Master Plan."
"I think they wanted to make sure that I was the real deal at the time,” Fann said. "I think they were concerned about allocating water on a project that didn't move forward."
"So, what they did do, is they modified the water service agreement to say that I can come back to them once I've final platted 400 lots, and request more water at that time,” he continued. "Which is basically what I'm doing. I'm just asking now for a longterm plan to achieve the water necessary to make sure this doesn't end up being a half finished project. I'm not asking for a water allocation right now. I don't need any water, my current allocation will cover the project through 2017, 2018. We anticipate needing additional water in 2019. What we don't want to do is continue on with the plan that's been approved and then run out of water, and have a future council determine that they don't want to allocate any water to this project and now all the planning that the City has done with me, all of the infrastructure that has been built to service this and the adjacent properties, both infrastructure underground, sewer, water, dry utilities and the interchange that's there and the roads that go to it, as a community we've got a large investment out there. I've got a large investment, the community has a large investment, and it would be a shame to have a project that's half finished, roads that deadend to nowhere, not cul-de-sacs, roads that stub out and can't go on, because we didn't plan properly. I'm looking for just a long range plan. I think it's bad business to commit water for this year that's not going to be used immediately in a water service agreement. But to have an agreement that says, "If you perform, we'll perform going into the future." That's good business, that's good planning for the City of Prescott. Exclusive of who owns the property and whose development it is, making sure that there is a long range plan that is complementary to the Master Plan and the zoning - that's land planning. And water has to be a portion of that.”
Does the City have water to give?
There is water in the City’s portfolio, Fann explains. "There is sufficient water in the alternative water portfolio to go triple of what I'm asking for. If you look at the City's memo to the Study Session, without even going to the water policy, they identify 431.3 acre feet of water in the vacant residentially zoned tracs in their water portfolio, and there's another 200 acre feet in long term storage credits… Without a doubt sufficient there’s water available in the water portfolio, just not immediately available. It is to be metered out over time. What I'm asking for is a plan to get there that's commensurate with the plan for the land."
Good policy for the City
So, what is needed? Fann answered, "I need 210.25 additional acre feet to build out the entire project. What I am asking is to have a plan to do that while still leaving plenty of water for others, I think it's good policy for the City.”
Fann said that if the request isn’t approved, the project might have to stop after Phase 2. "I can't develop it properly without corresponding water. So, it will get interesting."
Purchasing water credits isn’t feasible in this project, Fann explained. "The available extinguishable credits that are out there are few and far between. They are extremely expensive and I don't think it would pencil out, and it's not something that I have considered doing. The City of Prescott is the water provider for the AMA. So, in the City of Prescott, they provide water. Other locations outside the City of Prescott, people need to bring their own, and that means purchasing it."
As far as the Big Chino pipeline? Fann nodded. "If the Big Chino pipeline was built, there will be enough water to go around for a long, long time. It won't be forever, just like there isn't any natural resource that's forever. But we'll be in good shape for a long, long time. And frankly, I think, the bottom line, at some point, that pipeline is going to have to be built, the City of Prescott only controls the water in the City of Prescott. As more and more exempt wells are drilled, which is going to continue to occur, we will never, through just water conservation, make safe yield. At some point, we will have to import water from somewhere. It's going to have to happen.”
An important project for the entire community
Fann explained why this project is important to the entire community. "If we're going to address PSPRS issues and that debt, we can either raise taxes or raise revenue, or both. And it might take both. Raising taxes is a difficult proposition and has to be approved by the voters, so there's no guarantee that it will occur. But raising revenues can happen by being business friendly, by being pro-active in a business standpoint to be out there and make sure that water is getting out and being used and stimulating the local economy. So, in the case of Granite Dells Estates, the infrastructure just for Phase 1 was $11.1 million of taxable sales. The fees paid through Phase 1, in just infrastructure, is $358,000. The permits so far, I think they've pulled about 75 building permits, average permit cost, with impact fees and meter fees and everything else, is $8,100 per single family residence. So they've generated $600K in permit fees. There is just so far, in Phase 1, about $23.4 M in housing sales. If this is approved as requested, exclusive of the multi-family and commercial land that's here, if I look at just single family home sales and if we hold an average home price to just $390K, which I think, in the long run, as we move into the larger lots, that price will be a little higher than that, that's gross revenues of $425M in revenues. The taxable infrastructure is anticipated to be about $55M - all taxable sales. And permits and fees, just under $8.8M."
According to Fann, "This project, in a very short amount of time, meaning in the big picture of things, six or seven years, but in relatively a short amount of time, is going to generate tremendous revenue for the City of Prescott, and frankly, more importantly, just to the north of it, immediately adjacent to the north of it, is almost 500 acres of commercially zoned, ready to go retail space. We all know that rooftops drive retail. So, the big sales tax boost will come if we can get these rooftops in that will create demand for that commercial property to the north and get some users in there that will start generating retail sales. That's where the big dollars come in."
"Ignore who the property owners are and anything else, if you step back and just say, ‘What's best for the City of Prescott?' I think there's a very strong argument that approving a long term water agreement, not necessarily consuming water immediately, but a water agreement over time is absolutely the best thing for the City of Prescott."
Council Packet description
"Granite Dells Estates is a 1,142 acre master planned development located south of the Granite Dells Parkway/State Route 89A traffic interchange. Annexation of the property occurred in 2007, which included a water service agreement supporting implementation of the master plan. A rezoning of 550 acres was subsequently approved in 2008, followed in 2013 by approval of a Master Plan amendment providing for a maximum of 1,310 residential units, another rezoning, and amendment of the water service agreement. To date, a total of 220 residential lots have been platted.
Reflecting continuing housing market changes, the owner of this large property has requested (Attachment 1) amendment of the Granite Dells Estates Planned Area Development (PAD) Plan, and the water service agreement, to provide water for buildout of the master plan, as amended (the second Master Plan of Attachment 1, dated 5/13/16).
"The water service agreement presently contractually commits 248.5 acre-feet (AF) of alternative water, sufficient for service to 710 single-family residential units, and provides that upon final platting of the 400th unit, the owner may apply to the City for an increase in the water allocation to serve the balance of residential units proposed to be developed.
"...The owner is requesting further modification of the water service agreement (City Contract No. 2008-165A1) to provide water for a total of 1,399 residential units, consisting of 1,090 single-family units (at 0.35 AF per unit), and 309 multi-family units (at 0.25 AF/unit), which would require a total of 458.75 AF. The difference between the water vested and requested is 458.75 AF – 248.5 AF = 210.25 AF (note that the figures of 440 AF total and additional water of 191.5 AF indicated in Attachment 1 were calculated with a slightly different unit demand for the single-family residences).
"The focus of this study session presentation and discussion is on the allocation of water for buildout of the development.”