When Tap Fees Threatened to Derail a Deal — And How New Law HB25-1211 Changes the Playbook
Key Takeaway: Tap fees remain a material line item—but no longer an unpredictable curveball. HB25-1211 forces service districts to justify their fees, publish transparent schedules, and give developers the tools to challenge hefty charges. That clarity lets you set realistic assumptions early, protect your pro forma, and keep projects moving—without a surprise six-figure hit.
The Story
A client had assembled land for a large mixed-use community. Entitlements were on track, builders were ready, and the only thing standing between planning and funding was investment committee approval.
Then the water district dropped a tap-fee quote nearly triple what was expected—no breakdown, no justification. What should’ve been a line-item tweak turned into a deal-breaker. The project was pulled, builder schedules faltered, and pad sales went cold.
That was Colorado’s previous reality: even the most meticulously planned developments could be blindsided by opaque water-district fees.
What Changed in 2025
Colorado’s legislature passed HB25-1211 – Tap Fees Imposed by Special Districts. It doesn’t eliminate tap fees—but it fundamentally rewrites the rules:
Duty to serve: Districts with capacity must provide service.
Reasonableness standard: Fees must be reasonably tied to actual costs—including water rights acquisition.
Transparency requirement: Districts must disclose how they calculated the fee.
Conservation-based adjustments: Must consider at least one factor such as expected water usage, unit size, low-water appliances, fixture counts, or graywater systems.
How the Law Changes the Game
Before HB25-1211
Districts quoted opaque, arbitrary fee estimates with no justification.
Investment decisions stalled as assumptions unraveled.
Builders hesitated, pad sales cooled, and months of re-work piled up.
After HB25-1211
Developers tie PSAs or annexation terms to published fee schedules or indexed formulas.
Districts must disclose the cost basis behind fees.
If a fee seems unreasonable, developers can pay under protest, escrow the disputed difference, and keep the project moving.
Now, builder takedowns and pad sales stay on track, committees review defensible assumptions, and capital deploys without delay.
Why It Matters
Master developers gain stability in budgeting and builder economics.
Builders & pad buyers no longer face black-box utility costs—you get clarity upfront.
Smaller sponsors can now push back against six-figure surprises—and preserve momentum.
How I’m Advising Clients to Adjust
Lock in assumptions early: Tie PSA or annexation terms to published schedules or indexed formulas—no more “tap fee TBD.”
Realign timing: Push fee obligations to building permit stage—or even certificate of occupancy.
Escrow the dispute: If the fee seems unreasonable, pay under protest, escrow the difference, and keep vertical construction going.
Make credits transferable: Ensure tap-fee credits follow the land through pad sales or joint ventures.
Verify reimbursability: Confirm tap fees align with reimbursable costs under metro district or URA financing structures.
The Bottom Line
Tap fees aren't disappearing—but with HB25-1211, they become manageable. Whether you're orchestrating master plans or architecting single-site builds, you now hold leverage: you can demand transparency, validate assumptions, and keep deals on track—even when fees shift unexpectedly.
The next time you see “developer pays tap fees” in a term sheet, demand more. Spell out how the fee is calculated, when it’s due, and what happens if it’s unreasonable. That’s not just clarity—it’s where deals live or die.
About the Author
Nick Larson is the founder of Bear Peak Law, PLLC, a Boulder-based boutique transactional real estate firm. Recognized by Best Lawyers as a “One to Watch” for 2023–2025, he advises developers, investors, and municipalities on acquisitions, joint ventures, dispositions, and entitlement strategies. Through practice and ventures like Nookhaus, Nick blends entrepreneurial rigor with legal precision—driving innovative solutions for Colorado’s evolving real estate policy landscape.
Contact: bearpeaklaw.com
