Krupp v. Breckenridge Sanitation Dist.

• Decision Date: 26 February 2001
• Docket Number: No. 99SC491.,99SC491.
• Citation: 19 P.3d 687
• Parties: Marshall B. KRUPP; Renate D. Krupp; and CSA Real Estate Development, LLC, a Colorado limited liability company, Petitioners, v. The BRECKENRIDGE SANITATION DISTRICT, a Colorado Special District; The Board of Directors of the Breckenridge Sanitation District, and Andrew Carlberg, as Manager of the Breckenridge Sanitation District, Respondents.
• Court: Colorado Supreme Court

19 P.3d 687

Marshall B. KRUPP; Renate D. Krupp; and CSA Real Estate Development, LLC, a Colorado limited liability company, Petitioners, v. The BRECKENRIDGE SANITATION DISTRICT, a Colorado Special District; The Board of Directors of the Breckenridge Sanitation District, and Andrew Carlberg, as Manager of the Breckenridge Sanitation District, Respondents.

No. 99SC491.

Supreme Court of Colorado, En Banc.

February 26, 2001.

Kutak Rock LLP, Michael G. Martin, Craig N. Johnson, Denver, CO, Attorneys for Petitioners.

Vranesh and Raisch, LLP, Eugene J. Riordan, R. Woodruff Curran, Boulder, CO, Attorneys for Respondents.

Carolynne C. White, Denver, CO, Attorney for Amicus Curiae Colorado Municipal League.

Evan Goulding, Denver, CO, Attorney for Amicus Curiae Special District Association.

Justice HOBBS delivered the Opinion of the Court.

The Breckenridge Sanitation District (the District), a special district providing wastewater services, assesses a plant investment fee (PIF) on all building projects within the District. Petitioners Marshall and Renate Krupp challenged the PIF assessment on their new residential townhouse project, arguing, inter alia, that it amounted to an unconstitutional taking of property.¹ The court of appeals held that the PIF was not subject to a takings analysis. Krupp v. Breckenridge Sanitation Dist., 1 P.3d 178, 181-82 (Colo.App.1999). We affirm the judgment of the court of appeals.

I.

The District is a single-purpose special district that provides wastewater collection and treatment services. In March 1996, an engineering consulting firm tendered a final report to the District that addressed existing wastewater collection and treatment demands and future requirements. This report, contained in the record of this case, identifies the District's planning and service area as comprising 23,500 acres of the Upper Blue River south from Dillon Reservoir to Hoosier Pass on the Continental Divide. The report describes this geographical area as being the focus of increasingly intense recreational use and development, as the historic mining town of Breckenridge in Summit County has been transformed into an international skiing and year-round resort destination, along with greater Summit, Eagle, and Grand counties. The District has the powers necessary to implement state and federal regulations. The District's primary wastewater treatment plant discharges in close proximity to Dillon Reservoir, the largest water storage facility for metropolitan Denver's drinking water.² Dillon Reservoir also doubles as an economic and environmental resource of singular importance to Summit County. The Colorado Water Quality Control Commission has classified the Blue River waters, and the Dillon Reservoir receiving and releasing them, for all beneficial uses made in and through this basin, including aquatic life, recreational, water supply, and agricultural uses. 5 Colo. Code Regs. § 1002-33 at 9 (1999). These classifications are accompanied by water quality standards that require pollutant dischargers, like the District, to meet strict effluent limitations governing its discharge permits, which are issued and enforced by the Colorado Water Quality Control Division. Id.; see also § 25-8-203, 8 C.R.S. (2000) (authorizing classification of state waters); § 25-8-204, 8 C.R.S. (2000) (authorizing promulgation of water quality standards); § 25-8-501, 8 C.R.S. (2000) (authorizing discharge permits); §§ 25-8-701 to 703, 8 C.R.S. (2000) (addressing domestic wastewater treatment works). Dillon Reservoir is phosphorus-limited, which provides the significant degree of protection required to enable development in watersheds experiencing significant growth affecting standing water bodies, such as lakes and reservoirs.

As the report sets forth, the impact of human activity on water quality and quantity in this geographical area drives the District's service obligations and its revenue requirements. The Upper Blue River drainage is the subject of complex inter-governmental/private agreements and court decrees for the management and use of water rights, permitting out-of-priority diversions and exchanges paired with minimum stream flows in identified segments of the stream for protection of the environment.³ This combination of private and public purposes assists Colorado and its citizens in placing to use, on both sides of the Continental Divide, the State's share of Colorado River Compact waters,⁴ for traditional uses, such as municipal drinking water, and newly evolving uses, such as ski-area snowmaking and minimum stream flow water rights of the Colorado Water Conservation Board for preservation of the environment to a reasonable degree.⁵ In this context, the treatment of wastewater for return to the Blue River is an important public purpose and the reason for the District's existence.

Accordingly, District facilities are designed to deliver high quality effluent back to the Blue River and to Dillon Reservoir. The engineering consultant reported to the District in 1996 that the existing wastewater treatment works would reach 95% capacity, 3.0 million gallons per day, within the next two to three years. Under Colorado statutes and regulations, upon reaching 95% capacity, the District is required to undertake planning for the expansion of its wastewater collection and treatment capability, so that the necessary facilities and treatment technologies will be in place to accommodate reasonably anticipated future demand for wastewater services. See 5 Colo.Code Regs. § 1002-61.8(7)(a)(iv) at 90 (1999).

The ability to develop land in the Upper Blue River drainage is directly and inexorably tied to the District's service function. Human uses require safe and beneficial disposal of human-generated pollutants. Land use authorization for development in the area therefore depends upon — and assumes — the District's financial ability to serve its customers, thereby enabling developers to complete their projects while reliably and dependably meeting all applicable health, environmental, and safety standards.

Consistent with sound and necessary financial, planning, and regulatory requirements, the users of the District's services are together answerable for the cost of bearing the present and growing load they generate. Accordingly, in connection with its services, the District assesses a number of fees, including "connection fees" for physical connections to its facilities, "monthly service fees" for use of the facilities, and "plant investment fees" (PIFs). A PIF is a one-time charge designed to defray the cost of expanding the District's infrastructure as development increases demand for the District's services. The PIF must be paid to the District before the Town of Breckenridge issues a building permit or certificate of occupancy for a new building.⁶ The District assesses the PIF for a particular project by first calculating the project's peak effluent flow as the multiple of the peak flow from an average single family home in the District, measured in "single family equivalent" (SFE) units. One SFE unit contributes a maximum of 300 gallons of wastewater per day. The District has promulgated a schedule for the conversion of building projects into SFE units. Once a project is converted into SFE units, the District calculates the PIF assessment by multiplying the project's total number of SFE units by the unit PIF rate (currently $4,000 per unit).

The District's SFE conversion scale differentiates among residential units. The District uses one rate for single family residences, duplexes, and manufactured homes — unit types traditionally employed for long-term, year-round use. Another rate applies to short-term rental units such as apartments, townhouses, and condominiums. Because short-term dwellings tend to have higher peak occupancies and higher peak flows than comparably sized long-term dwellings, the SFE conversion rate for apartments, townhouses, and condominiums is significantly higher than the conversion rate for single family residences, duplexes, and manufactured homes.⁷ The District's conversion schedule does not include a conversion category for triplexes; the District Manager is authorized to assign SFE units to triplexes, taking into account the legislative fee design.

The Krupps, owners of property in Summit County, sought to construct The Woods at Breckenridge, a residential townhouse complex.⁸ The development plans called for twenty-five units, arranged in eight duplex and three triplex buildings. All relevant characteristics of the units (square footage, number of bedrooms and bathrooms, etc.) in triplex buildings are substantially identical to the units in the duplex buildings.

In August 1995, the District informed the Krupps that in calculating the PIF assessment for the Woods at Breckenridge project, it was using the lower SFE conversion rate for the duplexes and the higher conversion rate for the triplexes. The Krupps appealed to the District's Board of Directors (Board), arguing that since all the units — whether they were contained in the duplex or triplex buildings — were substantially the same, the lower conversion rate should have been used on all twenty-five units. The Krupps also argued that the District's PIF assessment for their project was subject to a constitutional takings analysis under Nollan v. California Coastal Commission, 483 U.S. 825, 107 S.Ct. 3141, 97 L.Ed.2d 677 (1987) and Dolan v. City of Tigard, 512 U.S. 374, 114 S.Ct. 2309, 129 L.Ed.2d 304 (1994). After a hearing, the Board decided to hire an expert in utility rate-setting to independently evaluate the District's SFE conversion schedule and unit PIF rate.

The expert report, submitted in February 1996 and contained in the record, concluded that the PIF assessment was not excessive in relation to the projected impact of the Krupps' project, and that there was no evidence that triplex units should be converted at the lower...