25CA0724 Three-K-Nine v BOCC 07-16-2026
COLORADO COURT OF APPEALS
Court of Appeals No. 25CA0724 San Miguel County District Court No. 23CV30026 Honorable D. Cory Jackson, Judge
Three-K-Nine, LLC, a Texas limited liability company,
Plaintiff-Appellant,
v.
Board of County Commissioners of the County of San Miguel,
Defendant-Appellee.
JUDGMENT AFFIRMED
Division IV Opinion by JUDGE SCHUTZ Brown and Berger*, JJ., concur
NOT PUBLISHED PURSUANT TO C.A.R. 35(e) Announced July 16, 2026
Garfield & Hecht, P.C., Christopher D. Bryan, Haley M. Cramer, Aspen, Colorado, for Plaintiff-Appellant
Maura Fahey, County Attorney, Telluride, Colorado; Thomasson Law, LLC, Lane P. Thomasson, Ouray, Colorado, for Defendant-Appellee
*Sitting by assignment of the Chief Justice under provisions of Colo. Const. art. VI, § 5(3), and § 24-51-1105, C.R.S. 2025. ¶1 This appeal arises from the district court’s determination that
the employee housing impact fee adopted by defendant, the San
Miguel County Board of County Commissioners (BOCC), complies
with Colorado’s impact fee statute, section 29-20-104.5, C.R.S.
2025. Plaintiff, Three-K-Nine, LLC, appeals that determination. We
affirm.
I. Background
¶2 To understand Three-K-Nine’s appeal, we first briefly discuss
the nature of the employee housing impact fee (impact fee) and
related resolutions adopted by the BOCC. San Miguel County (the
County) first adopted the impact fee for building permits in 2007 as
part of section 5-13 of the San Miguel County Land Use Code (LUC).
The impact fee required developers “to pay to mitigate the impacts
of development and land use to the employee housing stock
managed or controlled by the County.” LUC § 5-1303G.II. The fee
schedule proposed in Resolution No. 2007-11 (2007 resolution) was
determined based on a “Residential Job Generation Study” (2000
study) and an update to that study completed in 2005 (2005 study).
The data from both studies informed the BOCC’s decision to adopt
1 the 2007 resolution, which included a rate schedule that extended
through 2015.
¶3 In 2021, County staff began a process to update the
methodology for calculating the impact fee. Initially, the County
considered hiring an outside consultant to conduct a new study to
update the data used to establish the original impact fee schedule
but ultimately decided not to do so. Instead, during the summer of
2022, a senior planner for the County, John Huebner, prepared a
report for the BOCC, detailing why the current impact fee model
was inadequate to address the scale of the County’s employee
housing challenges.
¶4 In the report, Huebner proposed a new method to update the
impact fee structure, based on a market-affordability gap approach
(MAG approach), which is also used in the towns of Telluride and
Mountain Village. To this end, Huebner drafted proposed language
for the BOCC to consider. After several public meetings, the BOCC
adopted an amendment to the impact fee schedule, based in
significant part on the recommendations in Huebner’s report. The
amendment, Resolution No. 2022-031 (2022 resolution), became
effective July 12, 2022.
2 ¶5 The 2022 resolution changed several components of the
impact fee schedule, including eliminating a sales tax credit,
adopting the MAG approach, and changing the mitigation rate from
a flat 37% to a sliding scale based on the size of the structure. The
2022 resolution faced significant backlash from the community. In
response, the BOCC held a public work session and more public
meetings to discuss amendments to the new methodology.
¶6 As a result of these sessions, the BOCC amended the 2022
resolution through Resolution No. 2023-09 (2023 resolution), which
took effect on March 1, 2023. The 2023 resolution exempted some
home improvements from the impact fee and adjusted the
mitigation percentage depending on the square footage of the new
development. The 2023 resolution also authorized a 50% reduction
on the impact fee retroactive to July 15, 2022, for any building
permit application submitted and deemed complete by May 31,
2023.
¶7 In August 2022, Three-K-Nine sought a permit from the
County to build an 11,300 square foot single-family house located
near Telluride but within the boundaries of the unincorporated
County. The County initially calculated an impact fee of $742,245
3 for the house based on the 2022 amendment. Three-K-Nine
appealed this assessment to the BOCC.
¶8 Based on the timing of its permit application and the 50%
reduction specified in the 2023 resolution, the County reduced
Three-K-Nine’s impact fee to $371,122. Three-K-Nine appealed the
new assessment to the BOCC, and the BOCC denied the appeal.
¶9 The County subsequently approved Three-K-Nine’s amended
building permit application and assessed a new impact fee in the
amount of $252,843 because of modifications Three-K-Nine made to
the building plans. Three-K-Nine paid that amount but reserved its
objection to the fee.
¶ 10 Contemporaneously, Three-K-Nine filed a lawsuit against the
County and the BOCC in district court. Three-K-Nine sought a
declaratory judgment under C.R.C.P. 57, alleging that the new
methodology adopted by both the 2022 resolution and the 2023
resolution (hereafter, disputed resolutions) and the resulting
provisions of the LUC do not comply with section 29-20-104.5.
Three-K-Nine also sought C.R.C.P. 106(a)(4) review of the BOCC’s
determination that the County properly calculated its impact fee
under the LUC provisions adopted pursuant to the disputed
4 resolutions rather than the LUC provisions that existed prior to
2022. See § 29-20-104.5(7) (allowing any person who has “an
interest in land that is or becomes subject to [an impact fee] . . . to
file an action for declaratory judgment to determine whether such
schedule complies with the provisions of this section” and “to
challenge the fee or charge imposed under [C.R.C.P. 106]”).
¶ 11 The parties filed cross-motions for summary judgment focused
solely on the declaratory judgment claim. In its order resolving that
claim, the court first rejected Three-K-Nine’s request to exclude
expert opinions from Huebner and his supervisor, Kaye Simonson.
The court then evaluated the methodology used to calculate the
impact fee under the disputed resolutions. It determined that the
updates to the methodology were consistent with section 29-20-
104.5 and therefore entered summary judgment in favor of the
County on Three-K-Nine’s declaratory judgment claim. Three-K-
Nine appeals that judgment.
¶ 12 Three-K-Nine requested that the district court certify its order
as a final judgment for purposes of appeal under C.R.C.P. 54(b).
The County did not oppose the motion. The district court granted
the motion, finding that there was “no just reason for delay in the
5 entry of a final judgment on [Three-K-Nine’s] C.R.C.P. 57 claim.”
Because Three-K-Nine’s C.R.C.P. 106 claim remains unresolved
pending this appeal, our analysis is limited to whether the district
court erred by declining to declare that the disputed resolutions
violate section 29-20-104.5.
II. Discussion
A. Summary Judgment Standard of Review
¶ 13 We review a district court’s entry of summary judgment de
novo. City of Aurora v. 1405 Hotel, LLC, 2016 COA 52, ¶ 11. In
doing so, we apply the same standards as the district court. See
Babi v. Colo. High Sch. Activities Ass’n, 77 P.3d 916, 919 (Colo. App.
2003). Summary judgment is appropriate when “there is no
genuine issue as to any material fact and . . . the moving party is
entitled to a judgment as a matter of law. C.R.C.P. 56(c). On
review, our task is to determine whether a genuine issue of material
fact existed and whether the district court correctly applied the law
in granting the motion. Thomas v. Childhelp, Inc., 2024 COA 16,
¶ 13.
¶ 14 In reviewing a motion for summary judgment, the district
court may consider “the pleadings, depositions, answers to
6 interrogatories, and admissions on file, together with the affidavits,
if any,” and shall make its decision based on whether they “show
that there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law.” C.R.C.P.
56(c). When submitting motions for summary judgment, “the
parties may present materials outside the pleadings, including
affidavits and other records.” 1405 Hotel, LLC, ¶ 14.
¶ 15 A court may consider affidavits or sworn reports from expert
witnesses in deciding a motion for summary judgment. White v.
Jungbauer, 128 P.3d 263, 264 (Colo. App. 2005). But “affidavits
containing mere conclusions are insufficient to satisfy the burden of
showing the existence or absence of a genuine issue of material
fact.” Id.
B. The County’s Experts
¶ 16 Three-K-Nine argues that the district court improperly
considered expert opinion testimony from Huebner and Simonson
and should instead have treated the opinion testimony from its
expert — Michael Verdone — as undisputed and therefore
controlling on the court’s analysis. We are not persuaded by either
argument.
7 ¶ 17 The district court’s order begins by addressing Three-K-Nine’s
motion in limine to exclude the opinions of Huebner and Simonson.
In resolving the motion, the court began by noting that, to a large
extent, Huebner and Simonson were fact witnesses. In their
depositions, they testified about the County’s deliberative process
and explained the mechanics of updating the fee schedule,
including the MAG approach.
¶ 18 Although Huebner and Simonson were also designated as
expert witnesses and the County provided disclosure statements
summarizing their anticipated opinions, neither of them prepared a
written expert report for the litigation. See C.R.C.P. 26(a)(2)(B) (“If
the [expert] witness does not prepare a written report, the party’s
lawyer or the party, if self-represented, may prepare a statement
and shall sign it. The witness’s direct testimony expressing an
expert opinion shall be limited to matters disclosed in detail in the
report or statement.”). But Huebner’s report to the BOCC and the
transcripts of Huebner’s and Simonson’s depositions were attached
as exhibits to Three-K-Nine’s motion for summary judgment. And
in those sworn depositions, Huebner and Simonson explained
8 Huebner’s 2022 report. See C.R.C.P. 56(c) (the court may consider
depositions when resolving motions for summary judgment).
¶ 19 While Three-K-Nine attempted to limit the purpose for which
the district court could consider Huebner’s and Simonson’s sworn
deposition testimony, Three-K-Nine is the party that submitted
them as attachments to its motion for summary judgment. These
facts undermine Three-K-Nine’s reliance on McDaniels v. Laub, in
which the party opposing summary judgment attempted to create
an issue of fact based upon an unsworn expert witness report. 186
P.3d 86, 87 (Colo. App. 2008).
¶ 20 As the district court noted, in resolving a motion for summary
judgment, if “neither party disputes the competence or admissibility
of evidence offered . . . , [courts] may consider all this record
evidence in [their] analysis.” Woodward v. Bd. of Dirs. of Tamarron
Ass’n of Condo. Owners, Inc., 155 P.3d 621, 624 (Colo. App. 2007).
Moreover, the district court noted that the BOCC considered the
Huebner 2022 report, related staff memos, and Verdone’s reports at
the time it adopted the disputed resolution. Thus, the evidence was
independently relevant to the district court’s assessment of whether
the disputed resolutions quantified the “reasonable impacts of
9 proposed developments on existing capital facilities.” See § 29-20-
104.5(2)(a).
¶ 21 Relatedly, we reject Three-K-Nine’s argument that Verdone’s
opinions were “undisputed” and therefore binding on the court.
The district court was not bound to accept Verdone’s opinions as
undisputed facts, even if they had been uncontroverted. See White,
128 P.3d at 264; see also United States v. Shea, 989 F.3d 271, 278
(4th Cir. 2001) (“[A]n expert opinion is not fact that can be proved
true or false. It is opinion.”). Moreover, the district court did not
reject Verdone’s opinions because it found Huebner’s or Simonson’s
opinions more persuasive. Instead, the court considered Verdone’s
opinions at face value but found them unpersuasive because they
were unhelpful. For example, the court rejected various aspects of
the Verdone reports because they “misstate[d] the issue, were
“conclusory,” or “failed to explain the math or logic behind [the]
criticism.” Finally, the district court noted that “any calculation as
technical and nuanced as the MAG Approach is naturally going to
be subject to critique and experts will differ on the weight to give a
variety of factors to influence the resulting fee.” But as the district
court reasoned, this is not “legally problematic — the statute
10 demands only that the fee ‘reasonably’ reflect the impact.” See
§ 29-20-104.5(2)(a). And the court’s summary judgment order
reflects its focus on this statutory polestar.
¶ 22 For these reasons, we perceive no error in the district court’s
consideration of the substance of Huebner’s 2022 report and
Huebner’s and Simonson’s deposition testimony, including their
opinions. Likewise, we perceive no error in the district court’s
decision not to accept aspects of Verdone’s reports as binding on its
analysis.
C. Impact Fee Methodology
¶ 23 We next address Three-K-Nine’s assertion that the district
court erred by concluding that the County’s adoption of the
disputed resolutions did not violate section 29-20-104.5. The
impact fee statute reads, in relevant part:
(1) Pursuant to the authority granted in section 29-20-104(1)(g)[, C.R.S. 2025,] and as a condition of issuance of a development permit, a local government may impose an impact fee or other similar development charge to fund expenditures by such local government on capital facilities needed to serve new development. No impact fee or other similar development charge shall be imposed except pursuant to a schedule that is:
11 (a) Legislatively adopted;
(b) Generally applicable to a broad class of property; and
(c) Intended to defray the projected impacts on capital facilities caused by proposed development.
(2)(a) A local government shall quantify the reasonable impacts of proposed development on existing capital facilities and establish the impact fee or development charge at a level no greater than necessary to defray such impacts directly related to proposed development. No impact fee or other similar development charge shall be imposed to remedy any deficiency in capital facilities that exists without regard to the proposed development.
§ 29-20-104.5.
¶ 24 Three-K-Nine agrees that the disputed resolutions comply with
subsections (1)(a) and (b). It contests, however, the district court’s
conclusion that the disputed resolutions meet the requirements of
subsections (1)(c) and (2)(a).
1. Standard of Review and Applicable Law
¶ 25 We review matters of statutory interpretation de novo. Colo.
Prop. Tax Adm’r v. CO2 Comm., Inc., 2023 CO 8, ¶ 22. If a statute’s
terms are clear and unambiguous, we are obligated to apply its
plain meaning. Vigil v. Franklin, 103 P.3d 322, 328 (Colo. 2004).
12 When reviewing a municipal ordinance or code, we construe it using the same rules that we use in interpreting statutes.
. . . We . . . read statutes and municipal enactments in such a way as to give effect to every word; we must consider the language used in the context of the statute or code as a whole; and we must give effect to the ordinary meaning of the language and read the provisions as a whole, construing each consistently and in harmony with the overall statutory design, if possible. We should reject interpretations that will render words or phrases superfluous and must avoid interpretations that produce illogical or absurd results.
Treece, Alfrey, Musat & Bosworth, P.C. v. Dep’t of Fin., 298 P.3d 993,
996 (Colo. App. 2011) (citations omitted).
¶ 26 Likewise, we review a trial court’s ruling that an ordinance
complies with applicable constitutional and statutory provisions de
novo. See Town of Dillon v. Yacht Club Condos. Home Owners
Ass’n, 2014 CO 37, ¶ 22. If an ordinance violates the United States
Constitution or the Colorado Constitution, the ordinance is void.
See Town of Sheridan v. Valley Sanitation Dist., 324 P.2d 1038,
1043 (Colo. 1958) (declaring that an ordinance that authorized the
confiscation of private property without due process of law was
“unconstitutional and void”). Similarly, if an ordinance conflicts
13 with a state statute, the ordinance is void. See Colo. Mining Ass’n v.
Bd. of Cnty. Comm’rs, 199 P.3d 718, 724 (Colo. 2009) (any local
ordinance that conflicts with a state statute is void); see also § 30-
15-411, C.R.S. 2025 (“No county shall adopt an ordinance that is in
conflict with any state statute.”).
¶ 27 Generally, an ordinance is “presumed to be constitutional, and
the party challenging an ordinance bears the burden to prove its
unconstitutionality beyond a reasonable doubt.” Town of Dillon,
¶ 22. Likewise, an ordinance is presumed to be valid and the party
challenging an ordinance carries the burden of proving its
invalidity. See Tri-State Generation & Transmission Co. v. City of
Thornton, 647 P.2d 670, 677 (Colo. 1982) (“The Thornton PUD
ordinance is a legislative enactment and is presumed valid.”).
¶ 28 As a starting point, we briefly consider seminal United States
Supreme Court cases addressing the subject of governmental
assessments or impact fees incident to the issuance of a building
permit.
¶ 29 In Nollan v. California Coastal Commission, a couple sought to
build a house on beachfront property. 483 U.S. 825, 827 (1987).
The Nollans’ property was sandwiched between two public beaches.
14 Id. at 828. When the couple began the permitting process to build
the new house, the Coastal Commission imposed a condition
requiring them to permit a public easement across their beach so
that people could travel between the public beaches. Id. The
Nollans objected. Id. The Court determined that for a development
condition to pass constitutional scrutiny, there must be an
“essential nexus” between the condition imposed and the
government’s purpose for imposing it. Id. at 836-37. Because the
Court concluded that the Coastal Commission had not established
that necessary nexus, it concluded the easement condition was
unconstitutional. Id. at 841-42.
¶ 30 The Court refined Nollan several years later, in Dolan v. City of
Tigard, 512 U.S. 374 (1994). Dolan sought a permit to demolish
and rebuild a structure and related parking lot. Id. at 379. The
government granted Dolan a permit, subject to the conditions that
she could not build on the portion of her property situated within
the existing floodplain and she must dedicate a fifteen-foot strip of
land adjacent to the floodplain boundary for a “pedestrian/bicycle
pathway.” Id. at 379-80. Dolan objected and sought an exception,
which was declined. Id. at 380. In striking down the condition, the
15 Supreme Court determined that there must be “rough
proportionality” between the condition imposed on the permit and
the government’s justification for that condition. Id. at 391. In
determining rough proportionality, the Court held that “[n]o precise
mathematical calculation is required, but the [government] must
make some sort of individualized determination that the required
dedication is related both in nature and extent to the impact of the
proposed development.” Id.
¶ 31 Finally, in Sheetz v. County of El Dorado, the Court determined
that legislatively imposed fees — such as the impact fee presented
in this dispute — are subject to the “essential nexus” and “rough
proportionality” tests of Nollan and Dolan. 601 U.S. 267, 279
(2024).
¶ 32 Three-K-Nine does not argue that section 29-20-104.5 violates
the principles adopted in Nollan, Dolan, and Sheetz. Instead, it
argues that the disputed resolutions violate the provisions of
section 29-20-104.5, implicitly acknowledging that the statute is
consistent with Nollan, Dolan, and Sheetz. Thus, we focus our
analysis on Three-K-Nine’s contentions premised on the language of
16 section 29-20-104.5(1)(c) and (2)(a), mindful that our construction
of the statute is subject to the noted constitutional constraints.
¶ 33 We are also guided by Colorado Supreme Court precedent
addressing the proper interpretation and appropriate legislative
deference we must apply when reviewing the legality of a local
ordinance that imposes an impact fee. Thus, as the supreme court
explained in Bruce v. City of Colorado Springs, 131 P.3d 1187, 1190
(Colo. App. 2005):
While the amount of the fee must be reasonably related to the overall cost of the service, mathematical exactitude is not required, and the particular mode adopted by a city in assessing the fee is a matter of legislative discretion. Bloom v. City of Fort Collins, [784 P.2d 304 (Colo. 1989)]. Because the setting of fees is a legislative function involving many questions of judgment and discretion, we will not set aside the methodology chosen unless it is inherently unsound.
See also Dorotik v. Town of Breckenridge, 2026 COA 20, ¶¶ 3, 34
(applying Bruce when analyzing a municipal ordinance enacting a
charge on short-term rental owners to “defray[] the costs of housing
policies and programs for the local workforce essential to the
[t]ourism economy that benefits the short-term rental [owners]” and
17 concluding that “the particular mode adopted by a city in assessing
the fee is a matter of legislative discretion” and that the
“methodology chosen [will not be set aside] unless it is inherently
unsound” (quoting Bruce, 131 P.3d at 1190)).
¶ 34 With these authorities in mind, we turn to the ordinances at
issue and the parties’ appellate contentions.
2. MAG Approach
¶ 35 In the 2022 resolution, the BOCC adopted the MAG approach
to calculate the impact fee. Huebner described the MAG approach
at length in the report he submitted to the BOCC prior to the
passage of the 2022 resolution and in his deposition testimony.
¶ 36 Like many Colorado mountain resort communities, the County
has experienced a significant shortage of affordable housing that is
needed to provide homes for those residents who work in the
community. The County determined that the existing impact fee
was insufficient to meet the affordable housing needs generated by
new developments. When adopting the 2022 resolution, the County
found that “the employee housing impact fees are capped at a 2015
rate and the county has collected only nominal fees from residential
development in the Telluride R-l School District . . . , and such fees
18 have been insufficient to provide mitigation for affordable housing.”1
The County adopted the MAG approach in an effort to ensure that
future developments did not compound this problem.
¶ 37 As relevant on appeal, the MAG approach — as embodied in
the disputed resolutions — involves three important factors. First,
it uses an employee generation rate (EGR), which the County has
determined is the number of employees generated by the
construction of a residential unit and those needed for its ongoing
maintenance. Second, the County’s MAG approach factors in the
gap between what an average employee can afford and the cost of
housing in the Telluride R-1 School District, which is the area
where the needed employees are likely to live. And third, the MAG
approach applies a percentage mitigation rate, which represents the
portion of the affordable housing need created by the development
that the developer is required to pay.2
1 Telluride R-1 School District covers the eastern portion of the
County. 2 The formula also provides a credit if the developer elects to
construct a caretaker unit on the developed property. The credit is available if the developer places a deed restriction on the caretaker unit requiring that it be occupied by a qualified employee. LUC § 5- 1303G(XIX).
19 ¶ 38 Three-K-Nine does not dispute that the County has a
legitimate interest in mitigating the impact that new developments
have on affordable housing capital facilities. Similarly, Three-K-
Nine does not contest that assessing fees on new building permits is
a reasonable way to help address that impact. Rather, Three-K-
Nine attacks the data and methodology used in the disputed
resolutions because, from Three-K-Nine’s perspective, they result in
an impact fee that is “greater than necessary” to defray the impacts
on affordable housing capital facilities “directly related to [Three-K-
Nine’s] development.” § 29-20-104.5(1), (2)(a).
¶ 39 More specifically, Three-K-Nine argues that (1) the EGR does
not “quantify the reasonable impacts of proposed development” on
affordable employee housing, § 29-20-104.5(2)(a); (2) the data used
to calculate the affordable housing gap result in fees that are
“greater than necessary to defray” the impacts of residential
development on affordable housing capital facilities, id.; and (3) the
mitigation rate improperly seeks to remedy existing deficiencies in
affordable housing, see id.
¶ 40 We turn now to those specific arguments.
20 a. Employee Generation Rate
¶ 41 Three-K-Nine contends that the County’s use of the EGR as a
variable in calculating the impact fee is improper because it
purportedly does not quantify the reasonable impact of new
residential development on the County’s workforce. Three-K-Nine
does not dispute that the number of new employees generated by a
development is an appropriate variable to consider when generating
an affordable housing impact fee. Indeed, Three-K-Nine recognizes
that “[t]he impact to be analyzed and quantified is . . . the number
of employees new residential development will bring into the
[C]ounty.” But Three-K-Nine argues that because the EGR is based
on outdated data originally generated by the 2000 study, it does not
accurately quantify the number of employees generated by
residential development. Relatedly, it argues that the EGR does not
adequately account for recent developments in the short-term
rental markets or the differences between primary and secondary
homes and does not set a cap on the number of new employees
generated for larger homes.
¶ 42 It is undisputed that the EGR used in the disputed resolutions
is based on data from the 2000 and 2005 studies. The 2000 study
21 included a “Residential Job Study,” the purpose of which was to
develop “residential employment generation rates” to be used by
“governmental jurisdictions . . . to make decisions regarding
approaches to mitigate the [i]mpacts on housing demand resulting
from residential development and operations. The data can be used
to support impact fees . . . .” A copy of this report was appended to
Huebner’s 2022 report to the County.
¶ 43 The 2005 study also addressed the EGR:
Employment generation refers to the number of employees resulting from a particular type of development of a specific size. Developing a vacant piece of land nearly always results in the need for additional employees that were not needed previously.
....
Residential land uses generate employees both during the construction phase and after the house is built. Once a house is built, it requires employees for ongoing maintenance and services such as landscaping, cleaning, interior decorating, etc. The [2000] study determined an exponential relationship between the size of homes and the amount of employment they generate. In other words, larger homes generate the need for more employees than do smaller homes.
22 ¶ 44 Consistent with these studies, Huebner testified in his
deposition that the EGR represents the “additional employees that
are generated by development” and “the effect of additional
employees that are needed for either the construction or the upkeep
of the . . . new homes that are created in the impact fee area.”
¶ 45 It appears that the district court misapprehended at least part
of the calculation of the EGR. The court began by describing the
EGR as “the increase in the size of the local workforce for which
affordable housing needs to be built . . . [because] [a] residential
development is predicted to need a workforce to build the
development, and then to maintain it.” This is consistent with
Huebner’s description of the purpose of the EGR and the data relied
on in the 2000 report and 2005 report. But, as Three-K-Nine notes,
the court seemed to confuse the EGR with a number utilized in a
2018 housing needs assessment — 1.6 — which referred to the
number of employees occupying a typical affordable housing unit.
Nonetheless, we conclude that the error does not undermine the
district court’s conclusion that the EGR formula utilized by the
County in the disputed ordinances did not violate section 29-20-
23 ¶ 46 Before adopting the disputed ordinances, the BOCC had
before it the 2000 study explaining the methodology for calculating
the EGR, the 2005 study, and Huebner’s 2022 report explaining the
function, purpose, and methodology for calculating the EGR. And
those reports all unquestionably explain the EGR as a means of
calculating the number of new employees generated by a particular
development. Or as contemplated by the language of section 29-20-
104.5(2)(a), the adopted formula for calculating the EGR generated
a variable used to “quantify the reasonable impacts of proposed
development on existing capital facilities.”
¶ 47 Three-K-Nine concedes that Verdone “did not quibble with the
County’s employment generation methodology.” Nor did Three-K-
Nine or Verdone offer the County or the district court a different
methodology for how to calculate the EGR. Likewise, neither Three-
K-Nine nor Verdone provided a specific EGR that they believe
should have been used in the MAG approach.
¶ 48 That is not to say, however, that Three-K-Nine offers no reason
why the EGR adopted by the County should be rejected. It
generally argues that the EGR is per se unreasonable because the
County did not retain a private consultant to provide a new report
24 or otherwise update the data on which the EGR is based in
accordance with industry standards before adopting the 2022 and
2023 ordinances. Relatedly, Three-K-Nine asserts that the 2000
and 2005 studies did not account for recent developments in the
short-term rental market or the differences between primary and
secondary homes and did not set a cap on the number of employees
¶ 49 On the latter point specifically, Three-K-Nine contends that,
beyond a certain threshold, additional square footage has little, if
any, effect on the number of employees generated. Three-K-Nine
points to Pitkin County’s impact fee methodology, which begins to
plateau for homes that are 9,000 square feet or larger. As the
district court noted, however, neither Three-K-Nine nor Verdone
“explain[s] the math or logic behind this criticism. It is therefore
impossible to compare the reasoning between the Pitkin County and
San Miguel County models.” Moreover, Three-K-Nine fails to
articulate the particular square footage at which it believes the
employee generation rate no longer reflects the number of new
employees attributable to the particular development.
25 ¶ 50 Moreover, consistent with its generalized objection, Three-K-
Nine does not explain how updating the data underlying the EGR
would have affected the calculation. Nor does it explain how short-
term rental markets or the differences between primary and
secondary home usage should have been factored into the formula.
And it does not demonstrate how the failure to update the data or
factor in the identified variables led to an improper calculation of
the EGR that the County attributed to Three-K-Nine’s development.
¶ 51 We are not persuaded by Three-K-Nine’s appellate argument
that providing specific information was unnecessary because it was
“not Three-K-Nine’s job” to do the County’s work for it. That
argument misses the mark. First, the BOCC had before it
Huebner’s expert opinion that the 2005 study, though dated, “is
still valid.” Likewise the County’s interrogatory responses stated
that although building methods have evolved since 2005, the
employees generated by current construction have remained static
due to the increased complexity of residential systems. In short,
the court received evidence that the EGR based on the 2005 data
remained valid.
26 ¶ 52 Second, as the party challenging the disputed resolutions,
Three-K-Nine had the burden of proving that the resulting
ordinances were contrary to section 29-20-104.5. See Town of
Dillon, ¶ 22; Tri-State Generation, 647 P.2d at 677. And Three-K-
Nine’s burden was greater than simply criticizing the particular
approach that the County eventually adopted based on the prior
studies and the expert opinions of its staff. As the division
explained in Bruce, “[b]ecause the setting of fees is a legislative
function involving many questions of judgment and discretion, we
will not set aside the methodology chosen unless it is inherently
unsound.” Bruce, 131 P.3d at 1190. And judicial deference to a
local government’s discretionary legislative choices is particularly
appropriate when the local government is presented with alternative
formulas to calculate a reasonable fee. See id. (“Although the City
might have chosen a different calculation for imposing this service
charge, we find nothing inherently unsound in its methodology.”).
¶ 53 Finally, as the district court noted, to the extent the EGR may
be subject to criticism, section 29-20-104.5 does not require
mathematical precision when quantifying the reasonable impacts of
the proposed development. See § 29-20-104.5(1)(c), (2)(a) (a local
27 government must assess the “reasonable impacts of proposed
development on existing capital facilities,” and any impact fee may
be “no greater than necessary to defray such impacts directly
related to proposed development”). Nor does the Constitution
require such precision in this context. See Dolan, 512 U.S. at 391
(the Constitution requires “rough proportionality”; “[n]o precise
mathematical calculation is required,” only that the government
“make some sort of individualized determination that the required
dedication is related both in nature and extent to the impact of the
proposed development”).
¶ 54 Given these authorities, we cannot conclude that the district
court erred by rejecting Three-K-Nine’s arguments that the EGR
used in the disputed resolutions resulted in a violation of section
29-20-104.5.
b. Allegedly Excessive Impact Fees
¶ 55 Three-K-Nine next argues that the data used to calculate the
affordable housing gap results in impact fees that are far “greater
than necessary to defray . . . impacts directly related to [the]
proposed development.” § 29-20-104.5(2)(a). We are not
persuaded.
28 ¶ 56 Three-K-Nine’s contention has multiple components, and we
begin by addressing a central tenet to each: the proposition that the
County must calculate the affordable housing gap based on the cost
of existing subsidized housing provided by the County. Stated
otherwise, Three-K-Nine argues that the County cannot rely on the
free market — that is, non-subsidized housing — when calculating
the affordable housing gap. Three-K-Nine cites no authority directly
supporting that proposition, and we are aware of none. Nor does
the statute prohibit the use of free market data to calculate an
impact fee. Accordingly, we turn to Three-K-Nine’s specific
arguments regarding the County’s calculation of the affordability
gap.
¶ 57 First, Three-K-Nine argues that free market housing data does
not consider the cost of County-controlled or other subsidized
housing. Three-K-Nine argues that “the County’s approach wrongly
assumes that every worker will live in a free-market home” and that
assumption is incorrect given that “at least 20% of employees
presently live in County-supported housing.”
¶ 58 But this argument is inapposite. Recall that the affordable
housing gap used in the MAG approach represents “the difference
29 between the free-market price of housing in the Telluride region and
an amount that is affordable to those living in the community and
earning 100% of the Area Median Income.” The County calculated
the free-market price of housing based on publicly available
multiple listing service (MLS) data. Moreover, the County only
considers MLS data for multi-family and condominium-like homes
because they are similar in type and size to the affordable housing
the County would develop. In other words, this variable is an
indicator of the need for additional affordable housing, regardless of
the worker’s choice to live in a free-market or subsidized home.
¶ 59 Second, Three-K-Nine argues that the data used to calculate
the affordable housing gap is not adjusted for things like more
expensive finishes, scenic views, and “other qualities that make
free-market housing more valuable than [County subsidized]
housing.” But Three-K-Nine does not attempt to quantify those
qualities or explain how they would impact the affordable housing
gap calculation. In any event, the County uses an average of the
MLS data for multi-family and condominium-like homes, which is a
reasonable way of reconciling the range of prices. Moreover, the
County reasonably argues that to adjust for scenic view and
30 finishing values would inject unnecessary subjectivity into the
calculations, which are avoided through the use of MLS data. We
discern no error with the district court’s determination that using
average market data prevents particularly high-cost and low-cost
homes from skewing the data and thus is reasonable for
determining the market-affordability gap that the County seeks to
address.
¶ 60 Next, Three-K-Nine argues that the County’s methodology is
invalid because it only used data from the towns of Telluride and
Mountain Village, even though the impact fee applies to the entire
County. Three-K-Nine argues that the limited geographic pool
drawn on by the County unreasonably narrows the data. But the
County selected these two towns because they are major population
centers in the Telluride R-1 School District and the place where
most of the workers who serve new developments reside. Moreover,
the County determined that the bulk of the multi-family and
condominium-like units available to employees are in those two
towns, not the unincorporated area of the County. Thus, the use of
this data was reasonable.
31 ¶ 61 Three-K-Nine also argues that the affordable housing gap
calculation does not properly account for “grant funding, tax
credits, or other financial resources” that are available to help
reduce the cost of developing workforce housing. As the County
notes, however, the quantification of such programs is highly fact
specific and uncertain. In addition, the most recent affordable
housing project cited by Verdone was constructed at a cost of $525
per square foot, which is nearly identical to the cost of $527 per
square foot yielded from the County’s MAG approach, thus lending
objective credibility to the County’s calculation of cost for
constructing affordable housing, without injecting the uncertainties
of possible housing subsidies. And, in any event, the County was
not trying to replicate the cost of constructing additional low income
housing but rather intended the impact fee to be set in an amount
that did not further reduce the County’s existing affordable housing
supply.
¶ 62 Finally, at times Three-K-Nine seems to argue that the impact
fee must be married to the cost of replacing the County’s existing
affordable housing supply. But the MAG approach is clearly
premised on a policy decision to require new development to pay the
32 lion’s share of the affordable housing gap facing employees
generated by such development, without the use of public
subsidies. As Huebner explained in his 2022 report, “[t]he County’s
affordable housing program does not intend for the public sector to
subsidize affordable housing requirements.”
¶ 63 Under the LUC, affordable housing is defined as “[r]esidential
dwelling units in the Telluride Region that are permanently deed
restricted by the County’s R-1 Housing Deed Restriction to limit use
and occupancy to persons (and their families) who live and earn
their livings primarily in the R-1 School District.” LUC § 5-1305B.
Thus, the County does not have to construct or have fee ownership
of the capital facilities that it funds through impact fees. It can use
the impact fees to subsidize projects owned by other affordable
housing partners, or even privately owned homes that are deed
restricted, thereby ensuring that the impact fees are used solely for
housing that is deed restricted in accordance with the San Miguel
Regional Housing Authority, per LUC section 5-1303G.II:
The ownership of the Property is hereby limited exclusively to Employees and their spouses maintaining primary and sole Residence in San Miguel County, Montrose County, Ouray County or Dolores County, Colorado, and to
33 certain other persons and entities as permitted in Section 5-1305 of the [LUC], and the use and occupancy of the Property is hereby limited exclusively to such Employees who earn their incomes primarily within the Telluride R-1 School District and their spouses and children. . . .
In the event Affordable Housing is sold, transferred and/or conveyed without compliance with Section 5-1305 of the [LUC], such sale, transfer and/or conveyance shall be wholly null and void and shall confer no title whatsoever upon the purported transferee. Each and every conveyance of Affordable Housing, for all purposes, shall be deemed to include and incorporate by this reference all terms of that certain Section 5-1305, including but not limited to those provisions governing the sale, transfer or conveyance of property.
LUC § 5-1304A.
¶ 64 To these ends, the LUC provides that the collected affordable
housing fees are to be held in a separate fund and are intended
“solely for defraying the cost of capital facilities for deed-restricted,
affordable housing pursuant to State of Colorado Statute 29-20-
104.5.” LUC § 5-1303G.V.
¶ 65 Finally, although Verdone provided several alternative
methods to establish affordable housing costs, ultimately, none of
his objections to or alternate ideas for the County’s methodology
34 rendered that methodology unreasonable. Thus, we see no reason
to disturb the district court’s determination that the data used to
calculate the affordable housing gap used in the MAG approach
does not result in impact fees that are “greater than necessary to
defray” the impacts from proposed development. § 29-20-
c. Mitigation Rate
¶ 66 We now turn to Three-K-Nine’s contention that the mitigation
rate adopted in the 2023 resolution improperly seeks to remedy
deficiencies in the County’s existing capital facilities. See § 29-20-
104.5(2)(a) (“No impact fee . . . shall be imposed to remedy any
deficiency in capital facilities that exists without regard to the
proposed development.”). We are not persuaded.
¶ 67 As previously noted, the mitigation rate is the percentage that
the MAG approach applies to reduce the total impact that the new
development has on the County’s existing affordable housing
supply. See id. The parties agree that the selection of a mitigation
rate is largely a political decision. The percentage cannot exceed
100% because logic dictates that anything over 100% would cause
the impact fee to exceed the impact created by the new
35 development, in violation of section 29-20-104.5. The political
decision comes down to what percentage, below 100%, should be
adopted.
¶ 68 Recall that prior to the disputed resolutions, the County
assessed a flat mitigation rate of 37% on new developments. The
37% mitigation rate was initially determined by the 2005 study,
which found that approximately 37% of the employees then working
within the Telluride R-1 School District were living in County-
subsidized housing. The 2022 resolution introduced a graduated
mitigation rate depending on the square footage of the new
development, as follows:
SQAURE FOOTAGE MITIGATION RATE
1-1,799 0%
1,800-2,500 30%
2,501-3,000 42%
3,001-4,000 66%
4,001-12,000 90%
¶ 69 But under the 2023 resolution, developments under 2,000
square feet are not assessed a mitigation fee, primarily on the
rationale that developments of that size tend to be primary
36 residences owned by local employees. Between 2,001 and 5,000
square feet, the ordinance sets a mitigation rate based on a
percentage of the total square footage because
residential improvements greater than two thousand (2,000) [square feet] of [f]loor [a]rea have a strong tendency for non-resident occupancy, and the employee generation for non-resident occupied residential structures (second homes) is significantly greater than that for resident-occupied improvements creating impacts beyond the County’s ability to mitigate without a fee assessed for the development.
LUC § 5-1303G.XI.e, .XV.
¶ 70 And for developments between 5,001 and 12,000 square feet,
the ordinance sets the mitigation rate at 90%, which is obviously
less than 100% of the new employment — and its associated
demand on the County’s affordable housing supply — created by
the development. LUC § 5-1303G.XV.
¶ 71 The previous 37% mitigation rate addressed only a portion of
the affordable housing needs generated by new developments.
While the County cannot now levy fees to make up for any prior
shortfall, see § 29-20-104.5(2)(a), the County can place fees on new
developments that more closely reflect the affordable housing needs
37 created by that development, provided the total fee never surpasses
100% of the affordable housing needs generated by the
development.
¶ 72 Three-K-Nine argues that the mitigation rate should be a flat
rate somewhere between 20% and 25%, which would be consistent
with the current percentage of local workers living in County-
subsidized housing. Basically, Three-K-Nine insists that the
County must use the paradigm for setting the mitigation rate that it
used in 2007 — that is, setting the mitigation rate based on the
present percentage of affordable housing the County is able to
provide. Because that figure has now eroded to 20-25%, Three-K-
Nine argues the County is compelled to use a mitigation rate
between 20% and 25%.
¶ 73 If, as Three-K-Nine argues, the County could only impose
impact fees that reflect the number of people currently living in
government-subsidized housing, then the County would never be
able avoid the inevitable decline of available housing. Indeed, this
seemed to be playing out in the County. In 2018, the housing
needs assessment identified a shortage of 441 housing units and
predicted that the housing shortage would increase by an additional
38 325 units by 2026 if the current 37% was maintained. As the
district court found:
To tie the mitigation rate to the existing level of service in this particular case leads to a perpetually shrinking program. The fact that the “level of service” has fallen may reflect an insufficient affordable housing program, rather than a fallen need for housing. This is the likely scenario here, as the County identified a significant housing shortage, . . . and found that the 37% mitigation was insufficient to fill it.
¶ 74 Given these facts, which Three-K-Nine does not dispute, we
see no error in the district court’s rejection of Three-K-Nine’s
argument that the mitigation rate percentage could not exceed 20%
or 25%.
¶ 75 The mitigation rate percentages adopted in the 2023
resolution do not exceed 100% of the affordable housing needs
generated by the development. Thus, we discern no basis to
disturb the district court’s determination that the 90% mitigation
rate is not intended to address past deficiencies in the affordable
housing supply in violation of the statute, see § 29-20-104.5(2)(a);
rather, the rate is intended to prevent future development from
creating yet more unmet demand for affordable housing. Thus, the
39 district court did not err by rejecting Three-K-Nine’s challenge to
the 90% mitigation rate.3
III. Fees and Costs
¶ 76 Three-K-Nine requests its appellate costs under C.A.R. 39.
Because Three-K-Nine has not prevailed on any of the issues on
appeal, we decline to award it appellate costs. Instead, because we
affirm the district court’s judgment, Three-K-Nine is obligated to
pay the County’s appellate costs. See C.A.R. 39(a)(2).
IV. Disposition
¶ 77 We affirm the district court’s determination that the
resolutions passed by the BOCC to update the impact fee structure
complied with section 29-20-104.5.
JUDGE BROWN and JUDGE BERGER concur.
3 At oral argument, Three-K-Nine’s counsel asserted that Simonson
admitted in her deposition that the impact fee adopted in the disputed resolutions is intended to redress the existing deficiency in affordable housing. We do not read Simonson’s deposition to say that. Rather, she stated that “the level of service to me is what’s actually served right now, and because, . . . it’s not meeting our community needs, that level of service needs to be increased, hence the mitigation fees.” This is not an admission that the impact fee will be used to remedy “any deficiency in capital facilities that exists without regard to the proposed development.” § 29-20-104.5(2)(a), C.R.S. 2025. Rather the impact fee is intended to prevent any further erosion of the County’s affordable housing capital facilities.