Bozeman staff say citizen water-and-housing initiative would slow housing production, risk pushing growth outside city limits

City officials and subject-matter staff told the Bozeman City Commission on April 22 that a pending citizen initiative linking water-adequacy rules to strict affordable‑housing requirements would likely raise housing costs and push development outside city limits.

The work session featured legal, planning, utilities and housing staff who described how the measure — which would require developments of three or more residential units to reserve 33% of units as deed‑restricted affordable housing for 99 years (or as long as law allows) in order to use the city’s cash‑in‑lieu option for water — could alter project economics, timeframes and municipal water strategy.

“Plainly stated, we believe this legislation will do the exact opposite of what some believe,” Bozeman Interim City Manager said, arguing the measure “will drive up housing costs, it will reduce the number of affordable housing units being built, and will drive development to the county.”

City Attorney Greg Sullivan told commissioners his office’s role is narrow: it reviews citizen petitions for technical compliance with initiative statutes and drafts a ballot statement. “We do not review it for compliance with existing laws,” Sullivan said, stressing drafting land‑use regulations is complex and the initiative’s technical language — for example using the term “deed restriction” and a 99‑year requirement — raises questions about enforceability under Montana law.

Sean Coats, Bozeman utilities director, gave the water‑supply snapshot staff uses to test adequacy proposals. He said the city’s legal water rights total roughly 16,500 acre‑feet; 2024 actual use was about 7,100 acre‑feet. “We’re currently using about 43% of our water supply in a normal water year,” Coats said, and in a conservative 1‑in‑50‑year drought scenario the city would use about 60% of its reliable supply. He added the city’s 5‑year capital plan represents additional supply capable of supporting thousands of dwellings.

Coats and other staff explained the initiative would sharply reduce use of the city’s cash‑in‑lieu program — a tool in which developers pay the city for water rights so the city acquires and manages water supply at scale — and instead require developers to bring individual water rights and infrastructure. Staff warned the transfer and development of new water rights typically takes three to eight years and is technically complex, making small, parcel‑by‑parcel water‑supply development inefficient.

Housing and economic development manager David Fine reviewed affordability modeling and told the commission: “I understand the desire to find ways to make housing affordable. I’m not sure that this initiative does that.” Fine said municipal and federal subsidy tools (for example low‑income housing tax credits, tax‑increment financing and other gap funding) are generally required to deliver deep, long‑term affordability at the 60% AMI rent target and that a 33% requirement applied widely could render many projects economically infeasible.

Staff and commission members pressed practical questions: how the initiative would interact with the recently adopted Affordable Housing Ordinance and the Unified Development Code (UDC), whether administrative procedures — including applicant adequacy timing rules and “random lottery” allocations the initiative prescribes — are administrable, and whether there are transition provisions (staff noted the initiative has none). Sullivan said the city would likely need additional implementing legislation and administrative procedures if the initiative passed.

Public commenters and several neighborhood and industry groups spoke during the meeting. Supporters of the initiative argued voters should decide how a finite water supply is allocated and that linking water access to affordability is a legitimate community priority. Builders and trade groups said the measure would act as a de facto moratorium on development, raising costs and encouraging sprawl. Several commenters urged better coordination with Montana State University, saying student parking spills into neighborhoods and affects downtown parking demand.

The commission did not take a formal vote; staff presented analysis and commissioners asked follow‑up questions. Commissioners repeatedly said they share concerns about housing affordability and water conservation but said the initiative, as drafted, appeared likely to produce significant unintended consequences. Mayor Terry Cunningham said he could not recommend the measure as written.

The commission scheduled no formal action at the meeting; staff said they will continue work on long‑range planning, the integrated water resources plan and implementation details for the Affordable Housing Ordinance and UDC updates.

Ending: Staff urged public review of the slide materials and said they will post presentations and continue to meet with community groups. The city will continue its drought management and conservation programs while preparing more detailed legal and administrative analyses should the initiative qualify for the ballot.