Cave Creek approves Kava Springs Special District formation for $20 million infrastructure financing

Council Approves Kava Springs Special District Amid Water-Supply Concerns; Bike Week Road Closures Spark Ordinance Questions

On April 28, 2016, Cave Creek's town council delivered a fractious meeting spanning nearly two hours of public comment, with the centerpiece vote on a $20 million special district to finance infrastructure for a 1,000-acre residential development, set against an hours-long airing of resident frustration over the previous month's Bike Week festival, which locked down roads for nine days—exceeding the town's four-day ordinance limit for special events.

The council approved the formation of Kava Springs Special District by 6-0, but only after sustained questioning about the town's authority to create special taxing districts that residents feared could override local planning and zoning laws. The vote was procedural—a "declaration of intent" that allows additional hearings and attorney review before actual formation—yet it moved a contentious project forward after years of delays since the 2008 recession halted initial construction.

The Bike Week debate, while producing no formal action, exposed deep rifts within Cave Creek's identity: whether the town is a motorcycle-friendly tourism destination or a quiet residential enclave where residents should be able to reach their mailboxes without 17-minute traffic delays.

Key Speeches

On the special district—Developer Mark Sapp:

"This is private financing of public improvements. It's not a liability of the town. It's a long-term financing for us. It places financial burden only on those who benefit—that's us and the residents of that project as we develop it." — Mark Sapp, president, Kava Springs Development Corporation

On governance and town authority—Financial advisor Greg Schwarz, Piper Jaffrey:

"A district by definition is an area within your incorporated boundaries. It does not—repeat, does not—have the same authority as a municipality. You have not given up, nor will you give up anything by forming a district. Right now you have eleven districts that overlap the town of Cave Creek. None of those districts have authority that trumps your municipal authority." — Greg Schwarz, Piper Jaffrey

On Bike Week traffic—Town Marshal Adam Stein:

"The longest delay that I personally recorded was on Saturday the 28th. It was a 17-minute delay in the westbound direction. Throughout the day on the 21st on the 28th, the longest delay again was 17 minutes." — Adam Stein, town marshal

On Bike Week's benefit to the town—Business owner Lorie Stenberg:

"The amount of revenue that is generated during this time—I also live in the core of Cave Creek in the historic core, and I've seen this rally grow so much that it has put Cave Creek on the map and then some. I am very grateful to be a part of this community. If 10 minutes out of your day is too much to ask for a little bit of extra revenue, I happen to live on a dirt road. We need that revenue to help improve our town." — Lorie Stenberg, business owner

Timeline

Bike Week (March 21–29, 2016)

• Town Marshal report: Road closures began Saturday, March 21, at approximately 5:30 a.m. for the Fiesta Day Parade, then continued through Sunday, March 29, for Bike Week festivities. Town issued a permit for seven days of roadway restrictions. Right lanes restricted in both directions near downtown to provide motorcycle parking near the Tap House, Hideway, and Harold's.
• Public comment: Approximately 25 speakers over one hour; residents split between support for the event's tourism revenue and opposition to traffic disruptions and the violation of the town's 4-consecutive-day limit under Chapter 114 of the town code. Resident Carrie Smith noted that the ordinance requires council approval for longer closures and questioned whether that approval was obtained.
• Council discussion: Councilmembers asked about criteria for approving roadway restrictions, alternate routes, and whether the 9-day closure was properly authorized. Stein acknowledged no formal approval process and offered to work with businesses and residents on solutions. Councilmembers Lipsky and McGuire emphasized the need for alternative routes and balance between special events and resident access.
• No formal action: Council directed Stein to investigate alternate traffic routes and invited businesses to propose creative solutions at a future meeting.

Kava Springs Special District (Agenda Item C)

• Applicant presentation: Developer Mark Sapp, with attorneys William Hicks (Ballard Spahr), Susan Demit (Gammage & Burnham, PLC), and banker Greg Schwarz (Piper Jaffrey), presented the formation of a special district to finance approximately $20 million in off-site public improvements: a 12-inch water line extension along 26th Street from Joy Ranch Road to the project boundary; booster pump stations; bridge structures over Apache Wash and Saddle Mountain; underground electric lines; roadway improvements; and landscaping.
• Town attorney review: Bond counsel Fred Rosenfeld (not present) identified four concerns in draft documents: a typographical error in the legal description (corrected), clarification of the district name (changed from "utility district" to "special district"), comparison to The Villages development model in Florida where the developer retained control, and addition of language explicitly committing the developer to pay town costs. Mark Sapp and his team reported they had addressed three of the four issues; Rosenfeld's satisfaction with resolutions was not explicitly confirmed.
• Public comment: Approximately 15 speakers. Resident Carrie Smith raised three concerns: (1) no water-supply impact analysis despite the 2013 Cave Creek Water Master Plan estimating the town will be 65 acre-feet per year short of sufficient water at buildout, and projected shortfalls in Central Arizona Project water beginning in 2017; (2) the absence of a bond requirement to cover potential town costs if the district defaults, as allowed under Arizona Revised Statute Title 48, Section 261; and (3) no impact analysis under Arizona Revised Statute Section 262 assessing effects on residents outside the district boundary who would rely on the public water infrastructure. Resident Terry Smith, living on Long Mountain Road and receiving water by truck delivery, pleaded for approval, stating he had waited nine years for the town to activate the water line and arguing the district offered the only path forward.
• Council questions: Councilmembers asked for clarification on the differences between a Community Facilities District (CFD) and a Revitalization District (RD); the governance structure and handover to homeowners; and reassurance that the town's bond counsel concerns would be resolved before final approval.
• Vote: Motion to approve Resolution R 2015-12, declaring intent to form the Kava Springs Special District, carried 6-0.

Opposition

Number of speakers: Approximately 2–3 focused on the special district; approximately 12–15 on Bike Week.

Main Bike Week concerns:

1. Road closures violated Chapter 114 of town code, which limits special events to four consecutive days without council pre-approval; the 9-day closure (March 21–29) appeared not to have received such approval.
2. Extended traffic delays (up to 17 minutes) forced residents to take alternate routes to post office, hospital, and church, creating safety concerns and diminished quality of life.
3. Revenue sharing: Some residents argued that businesses benefiting from motorcycle parking and vendor fees should share revenue with the town and affected businesses that lost sales due to lane closures.
4. Resident-business conflicts: Motorcyclists parking in front of non-participating businesses (despite signage) trapped employees and customers inside.
5. Lack of ordinance language regulating commercial signage (e.g., "Bad Mother" clothing brand sign on a vendor lot), inflatable decorations (3-story tiger inflatable on Tap House roof), and permit enforcement.
6. Hell's Angels motorcycle club presence with colors displayed; concern about organized outlaw motorcycle gang activity.
7. Overcrowding and pedestrian safety, with intoxicated riders and lack of consistent traffic-control enforcement.

Main Kava Springs concerns:

1. Water supply: The 2013 Cave Creek Water Master Plan projects insufficient water for the entire town at buildout; Kava Springs alone will consume 120–130 acre-feet per year when fully developed. A shortfall in Central Arizona Project water is anticipated in 2017, which will affect small towns like Cave Creek before larger cities.
2. Special district authority overriding local control: Special districts can exercise independent governing powers (contract, hire, acquire property, levy assessments, impose taxes, sue) and may conflict with or override the town's general plan and zoning laws.
3. Lack of impact analysis: No Arizona Revised Statute Section 262 impact assessment documenting effects on non-owner stakeholders, particularly Cave Creek residents relying on the public water infrastructure.
4. Bond default risk: No bond requirement under Arizona Revised Statute Title 48, Section 261 to cover potential town costs if the district defaults; unclear what recourse town property owners would have.
5. Project abandonment history: The initial Kava Springs infrastructure (fire hydrants, conduit, partial water line) was installed in 2008–2009 and then abandoned; skepticism that this financing mechanism would fare better.
6. Governance uncertainty: Developer initially controls the three-person board; timeline for handover to homeowners not clearly defined, raising concerns about perpetual developer control.

Most compelling arguments:

• Carrie Smith's systematic citation of Arizona statute requirements for impact analysis and bond requirements, framing the special district as a potential workaround for local planning authority.
• Resident Terry Smith's nine-year wait for water service, lending urgency and pathos to the approval plea.

Organized groups: Desert Awareness Committee (not directly opposed to Kava Springs, but raised concerns about park funding); no formal opposition organization identified.

Support

Number of speakers: Approximately 12–13 on Bike Week; approximately 2–3 on Kava Springs.

Main Bike Week arguments:

1. Tourism and revenue: Bike Week generates substantial sales tax, lodging, restaurant, and fuel revenue. Buffalo Chip owner stated approximately $15,000 in sales tax in nine days; business owners reported employees brought in from out of state, visitors from multiple states staying at hotels and eating multiple meals per day.
2. Economic sustainability: Without special events, the town faces property tax increases and business closures; recession-era empty storefronts demonstrated the cost of tourism decline.
3. Exposure and return visits: Visitors experiencing the town's charm during Bike Week return for regular visits and spend money year-round, providing residual benefit.
4. Inclusive community identity: Cave Creek is defined by diversity—mountain bikers, hikers, horse people, motorcyclists—and residents should tolerate short-term inconvenience for communal benefit.
5. Rider diversity and safety: Many motorcyclists are professionals (engineers, doctors, military), ride expensive bikes, and are not criminals; parade and event organization improves annually; traffic control by Marshal Stein and his team was praised.
6. One week per year: Multiple speakers emphasized that Bike Week is only nine days out of 52 weeks and that alternate routes exist.
7. Parade success: The Fiesta Day Parade, held March 21, was called "one of the best ever" by event organizers; moving the parade kickoff to the weekend before Rodeo weekend reduced conflicts and improved safety.

Most compelling arguments:

• Bill Bale (Harold's owner): Harold's was the town's largest taxpayer before Walmart; prior customers complained but returned, demonstrating the event's net benefit and the danger of banning special events entirely.
• Tracy Cali (Fiesta Days and Rodeo Association president): Traffic control for the rodeo received high praise from event organizers; all of Cave Creek's major annual events (rodeo, Fiesta Days, Bike Week, hot air balloon festival) are special events, and restrictions would threaten all of them.
• Lorie Stenberg: Owned two businesses thriving during Bike Week, employed out-of-state workers, and witnessed the event transform Cave Creek's visibility and economic trajectory.

Organized groups: Buffalo Chip; Tap House and Hideway (paid for traffic control); local merchant associations (informal support expressed during public comment).

Project Details

Bike Week Traffic Debate

• Event dates: March 21–29, 2016 (9 days; town ordinance limits special events to 4 consecutive days without pre-approval)
• Roadway closures: Right lanes restricted in both directions, approximately 1.5 miles, from near Galloway Drive eastward to near Schoolhouse Road westward
• Peak traffic delays: Saturday, March 28: up to 17 minutes; Saturday, March 21: 8–9 minutes; average Saturday/Sunday delays ranged 9–17 minutes
• Cost: Private businesses (Tap House, Hideway, Harold's) paid for off-duty deputy traffic control
• Incidents: No major accidents; five arrests from Sheriff's Office saturation patrol (Saturday–Sunday, March 28–29); minor skirmishes at bars (consistent with normal weekend activity); one horse-drawn carriage accident during Fiesta Day Parade (minor injuries)
• Permits issued: Seven-day roadway restriction permit (March 21–29) issued without evidence of council pre-approval for closure beyond the four-day ordinance limit

Kava Springs Special District

• Case number: Resolution R 2015-12 (intent to form)
• Applicant/developer: Mark Sapp, president, Kava Springs Development Corporation
• Attorneys: William Hicks (Ballard Spahr); Susan Demit (Gammage & Burnham, PLC); town bond counsel Fred Rosenfeld (absent from meeting)
• Banker/financial advisor: Greg Schwarz, Piper Jaffrey
• Location: North side of Cave Creek Regional Park, approximately 1,000 acres; bounded by Spur Cross Ranch Conservation Area to the north and State Trust Lands to the west
• District boundaries: Limited to land owned by Kava Springs Development Corporation; no other properties included or impacted
• Proposed improvements:
  • 12-inch water line extension along 26th Street from Joy Ranch Road to project boundary: $estimated segment of total
  • Booster pump stations for water pressure
  • Bridge structures over Apache Wash and Saddle Mountain on 36th Street and Saddle Mountain/32nd Street
  • Roadway improvements (Saddle Mountain, 32nd Street, Rockway Heights)
  • Landscaping and vegetation
  • Underground electric lines (26th Street to Joy Ranch Road to project)
  • Right-of-way acquisition (already deeded to town)
• Total infrastructure cost: Approximately $20 million
• Existing infrastructure: Water line and conduit installed 2008–2009 and abandoned; partial line already in ground (from Joy Ranch Road north to Saddle Mountain Road area)
• Activation of existing line: Estimated 4–6 months post-approval (dependent on Maricopa County approvals); includes pressure testing, chlorination, repair of known impingement (approximately $100,000 in work)
• Development: 230 acres previously gifted to town; 3.5 miles of trails gifted to county or town; full development plans recorded; market analysis by Fury Consulting completed (confirming adequate demand for residential units at projected price points)
• Density/units: Not explicitly stated in meeting; described as 1.5-acre minimum lots, Western-style residential development
• District financing:
  • Type: Choice between Community Facilities District (CFD) or Revitalization District (RD); developer preference is RD to minimize perceived town liability
  • Bond term: Estimated 30 years
  • Assessment mechanism: Annual special assessment on each lot, paid through property tax bill; assessments estimated at $2,418 per year for a 1.5-acre minimum lot
  • Governance: Initially three-person board of land-owner representatives; handover to resident-elected board "as quickly as possible" once sufficient homeowners occupy district
  • Town liability: Developer and counsel asserted zero town liability; bonds secured by land as collateral only; town obligation for cost/expense payment by developer added to revised petition after counsel feedback
  • Tax-exempt bonds: Bonds anticipated to be tax-exempt (federal and state), reducing borrowing costs for end users
• Comparison districts: Approximately 75–90 similar districts (CFDs or RDs) operate in Arizona; two retain ongoing operating authority; Apache Junction experienced largest bond default in Arizona history with zero impact on city (bond holders bore loss; city had no contingent liability)

Vote Breakdown

Kava Springs Special District Formation

• Final: 6-0
• Yes: Tom Augherton, Councilmember Bunch, Councilmember Clancy, Vice Mayor Lipsky, Councilmember McGuire, Councilmember Leavitt, Joe Freedman
• No: None
• Abstentions/absences: None

(Note: Seven votes recorded in verbal roll call; six-member council plus mayor voting. One name unclear in transcript; reconciliation needed if discrepancy confirmed.)

Zoning Board of Adjustment Appointment (J. Johnson)

• Final: Unanimous (individual votes not named in transcript)
• Outcome: Approved

McDonald's/Quick Service Restaurant Site Plan (SPR 2014-01)

• Final: Approved (individual votes not named in transcript)
• Outcome: Approved

Outcome & Next Steps

Kava Springs Special District:

The council's approval of Resolution R 2015-12 declares intent to form the district and triggers a multi-step process:

1. Immediate: Developer to pay all town attorney and bond counsel review costs; revised petition submitted addressing four concerns raised by Fred Rosenfeld (legal description correction, district name change, governance provisions, explicit commitment to cover town costs).
2. Next hearings: Two additional public hearings required before final district formation; council retains authority to reject at any subsequent step.
3. Town attorney sign-off: Bond counsel Rosenfeld must review revised resolution language; council indicated preference to approve "as to form" once counsel confirms acceptability.
4. Timeline: If all approvals proceed, four-to-six-month window to activate the existing water line and begin construction of booster pumps, bridges, and other improvements.
5. Final formation: Contingent on council concurrence at additional hearings after further exploration of governance, financial, and legal details.

Bike Week Traffic:

No formal action taken. Council directed:

• Town Marshal Stein to investigate alternate traffic routes (Military Road connection through former Christian Pageant grounds property; School Bus Road connection through Bob Kite's property; possible connection via Fleming Springs or Scottsdale Road bypass).
• Continued communication between Stein, business owners (Mark Bradshaw, Tap House/Hideway), and resident representatives to propose creative solutions (e.g., Scottsdale's use of portable walkways, consolidated parking on private property).
• Future agenda item for comprehensive discussion and potential policy solutions.

McDonald's/Quick Service Restaurant:

Site plan approved for a 2,956-square-foot commercial building with drive-thru on the west end of the Park West Development property (Phase 2). Developer Stuart Jennings stated McDonald's will proceed with construction on an undefined timeline pending nationwide operational changes but retains the committed lease. The new quick-service restaurant will accelerate Phase 2 while awaiting McDonald's decision. Phase 3 (additional retail) anticipated pending traffic and parking resolution between McDonald's and new tenant.

Controversies & Context

Bike Week Road Closures vs. Town Ordinance

Chapter 114 of Cave Creek Town Code limits special events to a maximum of four consecutive days unless a longer period is "requested from and granted by the Town Council in advance." The Bike Week 2016 closure spanned nine days (March 21–29) with no documented evidence that the council approved an exception prior to the event. This prompted resident Carrie Smith to demand clarification at the meeting, and Tom Augherton asked Marshal Stein whether a formal approval process existed. Stein acknowledged none, stating the permit was issued at staff discretion based on business requests and historical precedent.

The ordinance violation, combined with the 17-minute traffic delays, a 13-year tenure by the marshal, and revenue-sharing disputes, raises questions about whether the town has a clear special-events approval framework and whether business interests (who pay for traffic control and benefit from event permits) effectively supersede resident interests and code requirements.

Water Supply & Development Density

Resident Carrie Smith's testimony highlighted a critical tension: the 2013 Cave Creek Water Master Plan estimates the town will fall short of sufficient water for full buildout before the Kava Springs bonds mature in 30 years. Central Arizona Project shortages are anticipated beginning in 2017. A special district that finances infrastructure for a 1,000-acre, 120–130 acre-feet-per-year residential project raises questions about whether development approvals have outpaced water-supply certainty. No impact analysis under Arizona Revised Statute Section 262 was presented, and the council did not formally address the tension between the district formation and the town's water constraints.

Special District Governance & Municipal Authority

Multiple residents expressed concern that a special district's independent governing authority and debt-issuing power could circumvent local planning and zoning controls. Carrie Smith asserted that special districts "can ignore…our general plan and our zoning laws" and that their independent boards "may have different development ideas of what our town should and shouldn't be."

Developer and counsel countered that special districts, while separate legal entities, operate within municipal boundaries and retain no planning-and-zoning authority independent of the town. Greg Schwarz noted that Cave Creek already hosts 11 overlapping special districts (school, fire, water/wastewater, etc.), none of which override municipal authority. Yet the ordinance violation on Bike Week and the absence of documented town pre-approval for the district demonstrate that the council may not uniformly enforce its own authority.

Tourism vs. Residential Quality of Life

The Bike Week debate crystallized a broader identity question: Is Cave Creek a tourism destination with a resident minority, or a residential enclave with tourist attractions? Business owners stressed revenue necessity and community identity; residents stressed safety, ordinance compliance, and the ability to conduct daily life without disruption. Councilmember Clancy noted that Bike Week "takes up almost twice the days of closures than all the other events combined" and advocated for creative solutions that preserve both special events and resident access to public roads.

Developer Accountability & Project History

Mark Sapp's presentation acknowledged that Kava Springs began in 2008, stopped during the recession, and is now revived. Resident complaints noted that the initial infrastructure (water line, conduit, fire hydrants) installed in 2008–2009 was abandoned and partially vandalized (theft of irrigation components). The special district mechanism is framed as a solution to town budget constraints (the town cannot fund the remaining improvements), but it also transfers both financial burden and governance risk to future homeowners and removes the town's obligation to fund or maintain the line.

The absence of a bond requirement under Arizona Revised Statute Title 48, Section 261 (which allows for bonding to cover public costs from special taxing districts) left unresolved what happens if the district defaults: would town property owners subsidize recovery, or would the town be wholly insulated?

Hell's Angels and Outlaw Motorcycle Gangs

Tom Augherton asked whether the town ordinance restricted "outlaw motorcycle gangs flying their colors." Marshal Stein confirmed the club (identified in context as Hell's Angels) set up three vendor tables and that no town ordinance prohibited this. The question raised security and historical-precedent concerns about organized motorcycle club activity during large rallies, though the marshal reported no major incidents.

Duration

• Bike Week discussion (agenda item number 1): Approximately 70–80 minutes (public comment, council questions, town marshal presentation)
• Kava Springs Special District discussion (agenda item C): Approximately 60–75 minutes (applicant presentation, council questions, public comment, attorney and financial advisor testimony)
• Total meeting: Approximately 2 hours 45 minutes (including appointments, other items, consent agenda)

Other Notable Items

Gateway Trail Project (Agenda Item B): Desert Foothills Mountain Bike Association, in partnership with REI and Oran Trails Construction, proposed construction of approximately one-mile multi-use trail connecting Phoenix Sonoran Preserve to Cave Creek trail system. The project, fully volunteer and privately funded, is scheduled for October 17, 2015, construction event. Council took no formal action; the presentation was informational and received unanimous approval of the concept. Cost to town: property survey only; all labor, permitting, and ongoing maintenance supported by club donations and volunteers.

Zoning Board of Adjustment Appointment: J. Johnson, general counsel for Central Arizona Project with 20+ years of legal experience, unanimously appointed to fill board vacancy. No controversy.

McDonald's/Quick Service Restaurant Approval (SPR 2014-01): Council approved a 2,956-square-foot quick-service restaurant (presumably Chipotle, based on closed references, though name not explicitly stated) on the west end of the Park West Development property at 53rd Street and Carefree Highway, pending McDonald's decision to proceed with its separately leased building. Resident Cheryl Mitchell raised concerns about traffic congestion and ingress/egress nightmares at the site, particularly on Elow Street. Councilmember Lipsky noted the development had been pending for years and expressed hope for expedited construction.

Desert Awareness Park Funding: Resident Leavon Lindall presented a request on behalf of the Desert Awareness Committee for $400 in town funding to install posts for shade structures and replace worn picnic tables before a fourth-grade field trip on April 30. The committee noted the park won a 1996 Governor's award for beautification and Forestry and is maintained largely by volunteers. Council took no formal action but acknowledged the request.