Unfinished zombie housing developments haunt the rural West

by Allen Best

Matt Hail grew up in sweltering metropolitan Phoenix and spent 11 years selling women's clothing, mostly wholesaling to department stores on the West Coast and across the Southwest. The job was boring, but he enjoyed vacationing at ski resorts, including Colorado's Vail and Breckenridge. Like many other people, he imagined changing his life by moving to some mountain valley surrounded by snow-crested peaks.

But unlike most daydreamers, Hail took bold steps to realize his vision. In 2003, he became a real estate developer near a major resort town, Jackson, Wyo. He started small by building a house in Alpine, a bedroom community about an hour's drive from Jackson, using his credit cards to help finance it. Then he leveraged his equity to make a down payment on 40 acres in Idaho's Teton County, one of the most beautiful places on the planet -- particularly in the eyes of developers.

The towering arrowhead peaks of Grand Teton National Park dominate the landscape, often given a heavenly alpenglow by the late-afternoon sunlight. Below them, national forest rolls down to the gentle Teton River Valley, laced by tributaries, expansive wetlands and habitat for an array of wildlife ranging from wolves to huge flocks of migrating sandhill cranes. The drive to Jackson takes only 45 minutes on the well-maintained highway over 8,431-foot Teton Pass. Back in 2003, the private land here -- the raw material for developers -- was far more abundant and cheaper than in Jackson. Nearly 200,000 acres of this rural county, amounting to 67 percent of it, was undeveloped farmland or otherwise privately owned.

Even better, Teton County's government was gung-ho for development. Since the late 1800s, when Mormon settlers first staked out the valley, the population had scarcely grown. But the local ski hill, Grand Targhee, had gained a reputation for prodigious powder, drawing tourists and a few vacation-home buyers. People who worked in Jackson were discovering they could find much cheaper housing over here in Idaho. And the national real estate boom, driven by cheap loans and speculation as well as dreams of a better life, was finally reaching attractive rural settings. A grand development scheme launched in 2000 signaled the county's new direction: The Teton Springs Golf and Casting Club aimed to build 600 residential units, a golf course, tennis courts, a swimming pool, hotel, shops and restaurants on 774 acres. The Teton Springs salesmen held a seminar in Las Vegas to recruit customers, and speculators from as far away as Michigan paid as much as a quarter-million dollars for residential lots.

The county government allowed Hail to subdivide his 40 acres of farmland near Driggs, the county's largest town, home to fewer than 1,500 people. Even before scraping out roads, he sold three of his 14 lots. The land cost $400,000, the roads and utilities another $200,000. In return, he gained $2.9 million in revenue within three years. It was almost like printing money. "A lot of it was California money," says Hail. "The second-home buyers, about 90 percent, were real estate speculators, buying land for future vacation homes."

Buoyed by his success, Hail returned for seconds and thirds. Acquiring bank loans was easy. So was getting the additional approvals from the county government. Unlike regulation-prone Jackson, "There were no barriers -- no impact fees, and it was a rubber-stamp process," Hail says. As the market grew more feverish, land prices rose, but Hail easily justified paying almost three times as much -- $1.12 million -- for a parcel almost identical to his original one. Then, in 2007, he paid     $2.2 million for another 144 acres. He built a nice rustic barn-style home for himself, next to a pond in one of his developments, and moved in during 2008. The large windows framed a dramatic view of Grand Targhee and Grand Teton. Hail was $3.3 million in debt, but still optimistic.

Many farmers who had struggled for decades to grow potatoes or other crops in a hostile climate also thought their dreams had come true. Suddenly they could sell their land for many thousands of dollars per acre. The top of the market included River Rim Ranch, a development that aimed to build more than 600 homes, a lodge and a golf course on more than 5,000 acres -- OK'd by the county between 2004 and 2007. Another ambitious project, Huntsman Springs -- headed by two of former Utah Gov. Jon Huntsman Jr.'s brothers (their father, Utah billionaire Jon Huntsman Sr., was born in nearby Blackfoot, Idaho) -- was approved by the Driggs city government in 2007, with plans for about 680 new housing units, hundreds of hotel rooms and a golf course on about 1,340 acres. As more landowners got in on the action, many dozens of new subdivisions of just a few lots each, scattered throughout the valley, were also approved.

Thus, during the 2000s, Teton County became one of the West's fastest-growing rural communities. The population jumped more than 60 percent -- from 6,000 to nearly 10,000 -- not including all those who bought vacation homes here.

Today, several years into the nationwide recession and housing bust, Teton County is a real estate disaster, probably the worst in the rural West. The population appears to be declining; the 2011 U.S. Census didn't include a local estimate, but that's the general sense, as people leave seeking better opportunities in places like Salt Lake City and North Dakota's oilfields. And the problems go much deeper than that. The valley is trapped in a kind of development limbo. There are thousands of acres of incomplete subdivisions -- nicknamed "zombies" because they look partially or totally dead. An incredible statistic sums it up: About 7,200 lots that were approved and mapped out, or platted, still stand vacant. Many of these vacant lots are marooned without good roads and utilities; others are entangled with lots where houses were built, but some of those houses also stand vacant. The few that are occupied have the air of sheltering castaways.

Given the glut of unsold properties and a paucity of buyers, the average house price has plunged roughly 45 percent since 2008, with vacant lots down 70 percent, depressing the values of everyone's homes, and ruining some developers and investors. Like characters in a sci-fi movie, the county government is struggling to cope with the zombies, determined to either reshape them or kill them outright. At the same time, it has to keep spending taxpayer money to maintain the sprawl of access roads and other essential services. The damage to the landscape will take decades to fix.

Environmental groups say that Teton County's troubles prove that careful land-use planning is needed even in rural areas. But not everyone here agrees; political battles still rage over planning and regulations.

Hail is one of the real estate casualties. He barely avoided bankruptcy by selling his house and some lots in his first project for less than expected, even less than his costs. He returned the land in his second project to the man who held the mortgage, and sold most of his stake in the third, losing $600,000 in that deal alone. Today, he lives in a doublewide manufactured home in Driggs. He's learned lessons, he says, that go far beyond the obvious one that even the biggest booms inevitably go bust. Rural counties should impose regulations that encourage "slow and sustainable growth" and logical development patterns, he's concluded, rather than allowing -- and often encouraging -- a pell-mell rush. If you make mistakes like Teton County did, he warns, "It all happens fast, and you get no second chances."

The politics of growth in Teton County begins with the Mormons, who are generally strong proponents of property rights. In the early 1990s, they still made up about 70 percent of the county's population, according to the Idaho Falls Post-Register. Mormons owned most of the farmland and allied with developers to keep land-use regulations weak.

Teton County created a comprehensive plan in 1993, spurred by a state law that required all Idaho counties to have plans and zoning. But Teton County imposed only two zoning categories for developing the farmland, allowing 20-acre lots and 2.5-acre lots. And those general regulations were loosely enforced. As the number of subdivisions began to soar, Teton County spent several years crafting, and arguing over, a new comprehensive plan that was finalized in 2004 and a 2005 PUD (Planned Unit Development) ordinance. Those frameworks gave lip service to managing development more carefully, but mostly they allowed a hodgepodge of much denser rural subdivisions and the explosion of new lots. From 1998 to 2006, the county only had a part-time planning administrator, Larry Boothe, an ex-CIA agent who was a fervent property-rights advocate generally in favor of development. Another key leader, County Commissioner Roger Hoopes, even became a developer himself while in office: He helped launch River Rim Ranch in 2004.

Increased density is usually considered smart growth, at least when a project is in a town or close to one, or if it's carefully designed to preserve the landscape in a rural area. Most local governments use the PUD procedure to negotiate with developers, offering them "density bonuses" -- permission to have more lots and houses than the zoning allows -- if they cluster the houses to preserve wildlife corridors, open space and other public values. But many of Teton County's  subdivisions were either far from towns, or they formed a continuous suburbanization of farmland extending miles outward from town boundaries. And developers didn't have to make many concessions to get huge increases in density. Don Elliott, a senior consultant with Denver-based Clarion Associates, a land-use planning firm retained by Teton County recently to sort out its mess, says that a typical PUD awards a density bonus of 10 to 25 percent. Teton County gave density bonuses of 900 percent to 1,500 percent, expecting little or nothing in return. "These were very, very generous bonuses -- not something you would commonly see in a rural county," says Elliott.

The politics of growth began to shift, though, as an increasing number of newcomers who favored landscape preservation allied with locals who felt the same way. They helped organize a key local conservation group, Valley Advocates for Responsible Development, or VARD, in 2001 to oppose a development in a wetland area. (They won a lawsuit, but the county eventually approved the project anyway, with only minor modifications.) VARD challenged other subdivisions and tried to persuade the county government to impose impact fees -- requirements that developers pay some of the county's costs of providing roads, schools, law enforcement and other services. VARD wanted subdivisions to be concentrated in and next to towns, rather than creating more rural sprawl. The group brought in pro-planning speakers and held workshops with the help of the Tucson-based Sonoran Institute and the Massachusetts-based Lincoln Institute of Land Policy, which work on these issues around the West.

Anna Trentadue grew up in Moscow, Idaho, a liberal college town, and worked as a river guide, then got a law degree and joined VARD's staff in 2007. She remembers attending Teton County meetings and "hearing developers say, 'I need to do this NOW, because the bank is willing to finance and ... I'm ENTITLED to this. You HAVE to approve my project because I'm entitled (and) the market is hot.' " Developers and landowners also intimidated county officials by threatening to file lawsuits if projects were delayed, says Trentadue.

Teton County's subdivisions were "chipping away at the very heart of why people come here, and that's what we were recognizing and why there was some panic in the conservation community," says Jeff Klausmann, a wetlands scientist who runs a local consulting firm called Intermountain Aquatics. He arrived in 1991 as a fishing guide, and eventually helped create a "wildlife overlay" map that was intended to shape developments to preserve wildlife habitat. The overlay didn't have as much effect as many hoped, but it was a step in the right direction, he says. He rhapsodizes about the songbirds in the aspen groves at the edges of the farmland, and the 2,000 greater sandhill cranes that migrate through, drawn by ripening barley in the autumn as well as the local wetlands.

The newcomers also included people who worked in outdoor recreation, as well as many who commuted to all kinds of jobs in Jackson. By 2006, the Mormon contingent -- a proxy for the Old West community -- had slipped to roughly 46 percent of the county's population. That year, voters elected two new Democratic county commissioners who wanted tougher regulations, with one defeating Hoopes, the incumbent who was developing River Rim Ranch. They formed a majority on the three-seat commission, and quickly imposed a moratorium on new subdivisions. But the property-rights camp rebelled, trying to recall them from office and filing a lawsuit against the moratorium; they survived the recall election, although the moratorium got overturned in court. Then, in 2008, the smart-growth camp won another county commissioner seat in a dramatic fashion: They elected Kathy Rinaldi, a former head of VARD, who also had worked as a wilderness guide. They thereby gained control of the county government. The political divide over planning "is really not partisan -- it's New West versus Old West," Rinaldi says. "It's almost generational."

The year Rinaldi was elected, the county commission finally imposed a modest impact fee -- $2,000 per lot in new subdivisions, not enough to cover the county's full costs of providing services, according to many. But by then, it was mostly too late. The bust had hit, and the county was overrun by zombies. David L. Kearsley, vice president of the local Bank of Commerce, remembers the boom collapsing almost overnight. Before then, "Some of the speculators and developers were offering (farmers) more money than they could see making if they worked for the rest of their lives," he says. "We were flying by the seat of our pants ... we just kept pushing developments (in) an artificial market ... then, in August of 2007, it quit. It was like a curtain dropped. We've only sold a few crumbs since then." Those who made their deals during the boom and backed off before the bust "made a lot of money. Those at the end, they lost a lot of money. Some made a lot of money -- then lost everything."

Teton County's farming heritage still endures. The local drive-in theater is called "The Spud," and public schools give students a break during the 10-day harvest period, a legacy of the era when most kids helped in the fields. But zombies lurk everywhere.

Driving east from Driggs toward the Grand Targhee ski resort, you come to a subdivision near the Wyoming border that has streetlights and curving roads, but nothing else. Another development, between Driggs and Victor, has a giant horse barn and a smattering of semi-palatial houses; a woman in a local restaurant confides that she and her husband own one of those houses and are desperate to sell. Some people invested their retirement savings in lots and houses, figuring to flip the real estate after six months or a year of appreciation. Not only is there a shortage of buyers, they can't make mortgage payments on loans as large as $800,000. Couples have walked away from their houses and mortgages, convinced it will take many years before those houses will be worth as much as they owe. (Last March, one of every 175 housing units here was in foreclosure -- a rate more than twice  the national average. More than $155 million worth of property has been foreclosed on since 2010.) Many subdivisions never even broke ground and are just snow-covered weedy fields.

The developers often can't afford to finish roads and utilities, including ponds and hydrants needed for fire protection, or to fulfill other promises to buyers and investors. And in many cases, when developers' financing collapsed, ownership has reverted to banks, which are even more hesitant to shell out cash for maintenance or to fulfill the developers' promises. "The banks especially don't want to sink any more money into (zombies). They say, 'We're not developers,' " says Angie Rutherford, the county's planning administrator since 2010. She has a master's degree in environmental studies from Yale and used to work as a backcountry ranger in Glacier National Park.

Rutherford faces many complicated obstacles as she tries to untangle the problems caused by the zombies. Back in the gung-ho era, the county made loose contracts with developers, sketching out the basics of projects as well as the timelines for finishing infrastructure. Many contracts said infrastructure must be completed within two years; those deadlines are totally blown by now, but often no penalties were spelled out for missing deadlines. And in some cases there were no deadlines at all, or the county promised to complete infrastructure if the developer didn't. The county "allowed developers to sell lots to raise money to build the infrastructure" -- a gamble that many other local governments avoid -- so once the lot sales stopped, so did the infrastructure, Rutherford says.

If all of the zombies are completed as planned, and houses are built on all the vacant lots and occupied, the county government would suffer at least a $1.9 million annual shortfall in revenue -- the difference between the property taxes and the cost of providing road maintenance alone -- according to a study done for VARD in 2010. The county would also have to spend $15.5 million total on buying more snowplows, hiring more deputies and adding other infrastructure, according to the study. To limit those costs, the county commission is considering not providing some services to some of the zombies -- which would shift that burden to everyone who buys into those subdivisions. "There's going to be tough decisions as this plays out, and it will probably involve the word 'sorry,' " Rutherford says.

All the problems would be reduced -- at least somewhat -- if the developers, banks, other players and the county government could agree on new contracts reshaping the zombies. They could reduce the number of lots, the promises for services, and the impacts on wildlife habitat and other aspects of the environment. Or they could extend the deadlines for installing infrastructure, trying to keep subdivisions viable, so all the work that went into them isn't wasted and the county isn't saddled with more costs of cleaning up messes. Or the county can even "vacate" subdivisions, which means erasing the lots and officially reclassifying them as big parcels of farmland -- an option some developers are seeking to get them off the hook for all the promises they made.

The county government is reluctant to pressure developers and banks to do much, for fear they might sue the county; under Idaho law, a county's liability insurance generally does not cover lawsuits over planning. But in the fall of 2010, the county commission passed a "replat" ordinance that streamlines the process for modifying existing contracts with developers. Still, it's very difficult to put the toothpaste back in the tube. "We seemed to have an easy time getting into the mess, but ... there is no clear path to getting out of this mess," says Rutherford.

So far, only one small development -- Warm Creek Manor, which was only 19 lots -- has been vacated, at the behest of the developer. Just three others are in the process of being vacated. In the negotiations over other zombies, conservationists are involved in an effort along three miles of Teton Creek, where cookie-cutter subdivisions have more than 600 vacant lots; the goal is to reduce the number of lots and impacts on the creek, along with creating more open space and trails. If those deals can be made, the area would become "an amenity for the whole county, and the green belt would add value to the remaining lots," Trentadue says. Meanwhile, the owners of the Canyon Creek development -- 350 lots on 2,800 acres straddling the border with Madison County -- are offering to reduce the number of lots there and reconfigure them to preserve more wildlife habitat; the Teton County government keeps pressing those owners to offer more concessions.

At the biggest stalled development, River Rim Ranch, millions of dollars of infrastructure have been installed, but fewer than a third of the 650 platted lots have been sold, and the 500 acres bladed for the golf course are just weeds. It's now owned by Montana-based Glacier Bank. The county negotiated with the bank for a year to try to reshape it, without winning much. The bank floated a bond to help pay for infrastructure, but refused to reduce the number of lots, Rutherford says. The recast county contract for River Rim Ranch extends the deadline for finishing the rest of the core infrastructure and half of the golf course to 2016; the deadline for completing subsequent phases has been extended all the way to 2026.

Are there any lessons from what's happened here that might help other rural Western communities sort out the wreckage of their real estate booms and busts? Arizona's Pinal County, between Phoenix and Tucson, has hundreds of thousands of vacant lots. The West's newest ski resort -- the bankrupt Tamarack Resort in rural Idaho -- and the countryside near Bozeman, Mont., are haunted by zombies. So are several golf-centered developments in rural Colorado resort country, including Orvis Shorefox, created from a ranch along the Colorado River near Granby; the golf course there is only partly completed, the hotel catering to well-heeled fly fishermen has been shelved, and a consulting firm is talking about reimagining the whole thing as a destination for RVs. And so on across the West.

Teton County has changed some regulations: In new subdivisions, for instance, developers can no longer sell lots until their infrastructure is completed. Any new development contracts will have to spell out hard deadlines and penalties. The county is also experimenting with a tool for calculating the financial impacts of proposed subdivisions -- the Financial Impacts Planning System, or FIPS. It's a system devised by conservationists: part of the study done for VARD, funded by a grant from the Sonoran Institute, and developed by the Rural Planning Institute in Durango, Colo. FIPS primarily focuses on road maintenance, and assumes that delivering those services to a house near a town or highway will be cheaper than for a house way out in the country. The county plans to use FIPS not only to evaluate new subdivisions, but also to help figure out how to reshape zombies to be less of a burden on the county budget.

The fundamental lesson, says the Sonoran Institute's Randy Carpenter, is that the bigger the real estate boom, the bigger the bust, and local governments should be leery of the philosophy that "whatever the market wants is, by definition, great." Or as VARD's Trentadue puts it, "You need to plan and really envision future growth scenarios, and your plan should be unambiguous with very clear zoning and regulations. If you don't do that, you're letting your future be determined by whoever walks in the door, and that system (or non-system) tends to be inefficient and illogical, and you lose any vision of what your community should be." It's infinitely harder to undo bad decisions than to make good decisions to begin with.

But of course making good decisions, using a lot of foresight, is rarely easy. That's evident in Teton County's current effort to craft a whole new comprehensive plan that, theoretically, would incorporate the lessons learned here. More than 800 people have responded to a county survey about what they want in the new plan, and a main committee and five subcommittees -- representing various interests, including farmers, real estate agents, planners and conservationists -- have been trying to hash out details. The county commissioners hope to approve the new plan by August. But the process has revealed that the divide within the community -- between property-rights advocates and planning advocates -- is far from healed.

At the biggest meeting with farmers, held in January, Rutherford presented many ideas for how the new plan could be an improvement. They included downzoning (reducing the allowable densities for subdivisions in rural areas) and more emphasis on "overlays" -- the various maps showing wildlife habitat, wetlands and other sensitive areas that should be protected. About 70 people attended the meeting, and most expressed opposition to all the ideas. "It was a pitchforks and torches meeting. The answer to everything was 'no,' " says one attendee. "The farmers are concerned about losing control and they're emotional, frustrated." Some even believe that the existing regulations, despite their looseness, caused the bust; in their eyes, the unfettered free market is always great, no matter what.

Jaydell Buxton, whose grandfather homesteaded in Teton County in 1888, has already sold a thousand acres of his farmland to a developer, and he's among those who are leery of any tougher regulations. "I get really angry," he says. "We've been overtaken by the Easterners" -- his term for the conservationists and others who want regulations. "I see bicycle riders here, young people riding in the middle of the day!" And in fact more than a few of the leaders and staffers of the conservation groups did come from the liberal West and East coasts, and have family wealth and degrees from top private colleges. "Some locals still see us as outsiders, and don't want to hear from outsiders," says one. "But half the county is outsiders now."

The votes in the last general election, in November 2010, indicate that the county is split 50-50. Rinaldi, the former VARD director, retained her county commission seat by a thin margin (a few hundred votes), and another pro-planning commissioner got beaten by a similar margin by a native political novice, Republican Kelly Park. Park has a reputation as a property-rights proponent with an open mind, rather than a kneejerk ideologue, but his victory is another indication that many people don't like the county commission's recent pro-planning direction.

Now the government is trying to reach out to farmers with a series of smaller meetings. If the farmers continue to oppose tougher regulations, the pro-planning camp might try to impose regulations through the new plan anyway. But that would probably cause another political backlash. "Things may change" in next November's election, when two of the three county commission seats are again up for grabs, Buxton says.

Bruce Arnold is a farmer who straddles the political fence; he serves on the county's planning and zoning commission as well as on the subcommittee that's trying to involve more farmers in the process of crafting a new plan. He says, "A lot of people -- I mean especially the old-timers -- see VARD as a group that came in, wanted to do no development, meant to leave everything natural. So to them, VARD is a dirty word. If I had never been in the planning process here, I might think that myself. I don't agree with everything they do, but they do a lot of good by getting people to come together and talk things over." He thinks that if Teton County does impose tougher regulations, that "would increase the value of our land because we wouldn't have so many lots, and we would still have a rural feel."

"It would be nice," Rinaldi says, "if we could focus on the good things of Old West meeting New West, instead of all the differences and the fear of change." And it turns out, some good things are happening here lately. The real estate bust hasn't affected the scenery or the other amenities of life in Teton County, and many of those who've been able to hang on here say they like the slower pace. Prices have fallen so much that small homes in Driggs can be bought for less than $100,000, Rinaldi says; even "teachers can afford to buy houses now."

As for Matt Hail, despite having to downsize to a doublewide, he's found contentment among the Teton County zombies. He now works selling real estate for the Sage Realty Group and finds it interesting. He supports the county's efforts to reshape zombies and adopt tougher regulations, and hopes that when the market eventually improves, he'll be able to make a profit by selling a few lots in a small parcel he still owns -- which is next to a zombie that he hopes will be reconfigured to have more open space and a wildlife corridor.

Hail, who is 39, got married last summer. His wife, Julie Reggio, moved to Teton County to work as a backcountry ranger, but she lost that job in the recession, so now she works as a hairdresser in a spa in one of the stalled developments, Teton Springs. They celebrated their wedding ceremony at Hail's former house -- he's on good terms with the current owners -- next to the pond with the view of the Tetons, and then honeymooned in Thailand. This winter, Hail has enjoyed skiing the powder at Grand Targhee. Like many locals, he can get time off from work to go skiing when there's fresh powder. "The whole point of this" -- his move to Teton Valley -- "was so I could live where I wanted to live," he says. "I'm extremely happy."

This story was funded with reader donations to the High Country News Research Fund.

Allen Best writes about energy, water, transportation and other issues of the Rocky Mountains and Great Plains from his base in Arvada, Colorado. His reporting appears frequently in Planning, Colorado Biz, WyoFile. net and other publications and websites. He also publishes a monthly e-zine called Mountain Town News.

HCN senior editor Ray Ring contributed to this story.

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