FORT COLLINS - A proposed deal for Fort Collins to buy a portion of a property at the city's southeast entrance has fallen through.

The city council on Aug. 18 unanimously approved a proposal by developer Jay Stoner to sell to the city 128 acres of his 260-acre Riverwalk property at the southwest corner of the Interstate 25-Harmony Road intersection. The deal would have paid Stoner $5.8 million for the south portion of Riverwalk, with Stoner retaining the northern portion for a mixed-use, transit-oriented development.

But problems with the agreement - which focused on a tight timeline to expand an existing reservoir on the property for city use as a storage reservoir - led to cancellation of the deal, at least for now.

"It's still a good idea," Stoner said. "We just need to make some adjustments and put it back together again."

Stoner said the main sticking point was a requirement by the city to have the U.S. Federal Emergency Management Agency approve the expansion of the storage reservoir from 800 acre-feet to between 1,500 and 2,000 acre-feet.

"That made it impossible to meet our closing date," Stoner said, referring to a city requirement that the reservoir expansion be completed by Sept. 10, 2010.

The agreement would have provided the city with a major water storage reservoir at a point where effluent from the city could be put back into the nearby Poudre River, making the city's water system more manageable.

Dennis Bode, Fort Collins' water resources manager, said the FEMA requirement was unavoidable. "There's a number of requirements the city has to go through," he said. "It's basically a requirement before you can start moving things around in a floodplain."

Bode said he's waiting to see what might be done to revive the deal with Stoner. "I think everybody's kind of reorganizing at this point," he said. "We don't know exactly what's going to happen. Certainly the need for storage is still there."

The city was also looking at developing trails and open space recreation in the south portion of Riverwalk, linking to Fossil Creek and Eagle View Natural Areas, among others.

Mutually terminated

John Stokes, city natural resources department director, said there was little he could say about the situation at the moment. "We, along with the seller, Jay Stoner, mutually agreed to terminate the contract we had for the storage reservoir and land at that site," he said. "We will continue to explore opportunities with that site that could be of mutual interest to both the city and the seller."

Stokes said negotiations are under way to try to salvage an agreement on Riverwalk.

"We haven't figured out what we'll do, if anything," he said. "We'll see if we can follow up with another agreement. We're working on it."

Funds for the Riverwalk purchase were to come from the city's water utilities fund and its open space natural areas tax.

Stoner had agreed to expand the reservoir and haul away the dirt to the north end of Riverwalk where it would be used to relandscape the area and bring it above the floodplain, a plan that would have saved the city millions if it had to dig out and haul the soil away.

"I think it was a good try," said Stokes of the first agreement. "We tried hard to make it work. But it's a very complicated site with a lot of difficult engineering."

Stoner said his intention is still to sell the south portion of the Riverwalk property to the city. "The reservoir is still a good deal and makes sense for the city and for us," he said. "The only reason it had to be terminated was a technical one, but it was a good one."

Stoner said the original agreement seemed to have a good timeline but it turned out to be "undo-able."

"We didn't set it up to fail and thought there would be enough time," he said. "There's already a reservoir there and we were just going to make it bigger."

Stoner said he and the city are "looking at a couple of options" that may put things back on track for a sale. "I think it's still a good idea for everybody and we now have to see if we can put it back together with a new timeline."

The development of the Riverwalk property created tensions between Fort Collins and the town of Timnath in 2008 when Stoner offered to annex the property into Timnath after Fort Collins showed reluctance to annex it.

Under an agreement reached in January 2009, I-25 was formally recognized as the boundary between the two municipalities and any future Riverwalk development was to take place within Fort Collins.

Riverwalk was formally annexed into Fort Collins when the purchase was approved in August. The annexation remains in effect despite the termination of the purchase agreement.