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HomeMy WebLinkAboutWater Board - Minutes - 12/20/1991! 0 WATER BOARD M NUTES December 20, 1991 3:00 — 5:08 P.M. Water and Wastewater Utility Conference Room 700 Wood Street Members Present Neil Grigg, President, Tom Sanders, Vice President, Ray Herrmann, Tim Dow, MaryLou Smith, Tow Brown, Dave Frick, Dave Stewart Staff Mike Smith, Dennis Bode, Paul Eckman, Assistant City Attorney, Ben Alexander, Andy Pineda, Molly Nortier Guests John Bigham, Agency Coordinator, Northern Colorado Water Conservancy District (NCWCD) George Reed, Citizen Observer Pam Turner, Observer, League of Women Voters of Larimer County Members Absent Terry Podmore, Mark Casey, Paul Clopper (all excused) President Neil Grigg opened the meeting. The following items were discussed: Minutes Tim Dow moved approval of the minutes of November 15, 1991 as distributed. After a second from Tom sanders, the motion carried unanimously. President Grigg introduced and welcomed the new League of Women Voters observer Pam Turner, who will alternate with Dorothy Huff. Update: Northern Colorado Water Conservancy District John Bigham brought several handouts for distribution: current storage and precipitation within the Big T system; a humorous description of how to delineate wetlands; a list of the NCWCD Board of Directors with addresses and phone numbers; and a calendar of NCWCD events. Mr. Bigham reported that the four major CBT reservoirs are holding at 53.7% of their active capacity. "We have a snowpack for November that is starting out like what we experienced in '82 and '83," he said. Of course we must continue to get snow in the first 4 months of the year, "but we have the base to start on, and with 53 % in storage, we have a good chance for a better year," he added. With a couple of years like this we should be able to bring storage up. Water Board Minutes December 20, 1991 Page 2 Granby is currently at 46%, but the District intends to draw it down to about 37%, which will fill Carter totally and Horsetooth at 94%. Most of the river flows are being stored up and down the river, and there is very little at this time; it's all return flow, he explained. He encouraged anyone interested to attend district board meetings, Windy Gap meetings, etc. The days when they meet are included on the calendar board and staff members received. The District continues to work on the southern supply project. Outside interest remains to share the pipeline, he. said. At this point it isn't known how many will sign up to be included on the allotment contract for capacity. Dr. Grigg asked the NWRA meeting listed in Denver in October is he national meeting. "Yes, it is," Mr. Bigham replied. Review of Halligan Reservoir Draft A rg eement Copies of the draft agreement were included in the packets, as well as the following background information: Staff has held several meetings with the North Poudre Irrigation Company Board of Directors to develop an approach for enlarging Halligan Reservoir that would provide benefits to both parties. A draft agreement has been reviewed by the NPIC directors, City Staff, and the Water Board Water Supply Committee, and they are supportive of the concept being pursued. The Water Supply Committee and the Water Board reviewed information regarding the potential need for such a project at the November Water Board meeting, and asked staff to put an item on the December agenda to discuss in more detail the provisions being proposed in the agreement. The concept of the proposed agreement is to provide the city with the right to pursue the enlargement through annual option payments. When, or if, the option is exercised, the City would enlarge the reservoir and be entitled to use the additional capacity. The City would continue for a number of years to make annual payments to NPIC for the property and the storage right. Staff recommends that the Water Board make a recommendation to the City Council to enter into an agreement with North Poudre Irrigation Company that would allow the City to pursue the enlargement of Halligan Reservoir. Mike Smith indicated that the Assistant City Attorney Paul Eckman is present at the meeting today in the event that we need legal interpretations. Dennis Bode then took the Board through the main provisions of the agreement. 0 0 Water Board Minutes December 20, 1991 Page 3 Dr. Grigg pointed out that the Water Supply Committee reviewed this in concept and the Board has reviewed it in concept at two meetings, and we have determined in principle, that it makes sense to move ahead with the arrangement with North Poudre on Halligan. What remained to be accomplished was to draw up the agreement, a draft of which is now before the Board. Mr. Bode explained that the agreement was originally drafted by Assistant City Attorney Paul Eckman. It has gone through several variations between staff and NPIC. "The staff is fairly comfortable with the provisions and the concepts that are in the agreement," he said. It is still undergoing some review in the City Attorney's office, and they still have some specific language that they would like to see changed. The basic idea is that it is an option agreement, as shown in No. 1 of the document, that would allow the City to begin to study the project, and through annual payments, would be able to continue progress towards the development of Halligan Reservoir. Paragraph 1 discusses the option payments. There would be an initial payment of $50,000, and each year the amount of the option payment would increase through the year 2001, at which time the payments would reach the amount of the debt payments that the NPIC has on 5 existing loans. All of those loans are with the Colorado Water Conservation Board. What did they use the money for in the previous loan? Neil Grigg asked. Mr. Bode replied that they were for previous projects. He referred the Board to exhibit A at the back of the agreement. One of North Poudre's objectives, should the project go forward, is to get rid of some of the debt they have incurred, or to receive payments equal to those debts, so they can pay them off, Mr. Bode explained. Currently they have 5 projects for which they are paying back loans to the CWCB. He again referred to the list of the payment schedule on the last page of the agreement. The last column is the City's payment schedule under this agreement. For the first 9 years there is a payment that gradually increases up to that 9th year. The idea originated because North Poudre would have liked to be able to have the City make a decision at a certain point; either to go or not to go with the project. The way it is structured here is the payment would gradually increase, and if the City was really interested, it would have some incentive to go ahead with the project; or if at some point the City decided it wasn't feasible, they could get out of the project at that point. "What is your total payment in today's dollars?" Dave Stewart asked. "It's somewhere around $3 million," Mr. Bode replied. "Are we getting the excess storage?" We're getting the rights to the conditional storage decrees," he answered, "which is about 33,000 Ac-ft." What is that Water Board Minutes December 20, 1991 Page 4 per acre foot? Mr. Stewart continued. That depends on if you are talking about just the debt payment or the total construction cost?" Mr. Bode replied. Total construction is estimated at $18 million. The $3 million is essentially the present worth of the annual payments. If we decide 3 years from now to embark on the Halligan enlargement, what does that do to the payment schedule? Dr. Grigg asked. "It really doesn't do anything," Mike Smith replied. "We will continue to pay." What we are buying is the right to enlarge the reservoir, to the existing land, the reservoir we are acquiring, and the decree. "For essentially $21 million in today's dollars?" Dave Stewart asked.. Actually in today's dollars, it could be less if you delayed the project, Mr. Bode clarified. The construction costs would all be on the City, Dr. Grigg pointed out. "What if we can't build it?" Tom Sanders began. "Have we lost all the payment money until we find out we can't?" That is why you want to proceed as quickly as you can to determine the feasibility, Mr. Smith explained. "Don't we already know it's feasible?" Dr. Sanders questioned. "You have to do some studies to get to that point," Mr. Smith responded. "You want to get over the hurdles as quickly as possible to make the determination that you want to build it," he stressed. Did you say 33,000 Ac-ft? Dr. Grigg asked. "The safe yield is about 10,000 Ac-ft, Mr. Smith replied. Should we evaluate if we can get more benefit by investing in water meters, for example, instead of Halligan? Dr. Grigg wanted to know. That is primarily what the Water Supply Committee studied, MaryLou Smith recalled. Dennis Bode said there will be a need as we proceed to get into those kinds of analyses. Ms. Smith pointed out, for example, that the Committee compared enlarging Halligan with buying CBT units. Tom Sanders insisted that the City needs to move on this quickly if it is paying $50 to $60,000 annually to maintain this right. If, for example, down the road in say 10 years, it turns out for some reason that it's not feasible, that's a lot of money to invest in an option. The City should determine as quickly as possible how feasible it is in terms of water quality, engineering, transmission, and use, he contends. Tim Dow asked if this is the best deal we can negotiate. Are negotiations still open between the City and North Poudre? For example, could we escrow some of that money, or have a right to get some of it back if it turns out we couldn't build the reservoir? Mr. Smith acknowledged that has been discussed. "North Poudre would like to work with the City," he continued, but if we aren't interested, they won't have any trouble getting money from someone else up front." It's a matter of how badly we want this. Their bottom line is that this is somewhat of a compromise between where they and the City began in the negotiation process. "If we're not interested, they will go somewhere else." Water Board Minutes December 20, 1991 Page 5 Mike Smith related that Dennis Bode sits on the NPIC Board as a representative of the City, and may have more insight on this. Dr. Grigg asked if Mr. Bode's position on the NPIC Board could be a conflict of interest. Mr. Bode responded that any time the subject of Halligan comes up for action by the Board, he abstains from discussion and voting. Dr. Grigg voiced the opinion that since Mr. Bode is representing a public entity, there is no possibility for any private gain on his part, so he doesn't see a problem. Mr. Smith explained that when Mr. Bode was elected, it was made clear that in the Halligan negotiations, he would be representing the City, and that would be his position. North Poudre didn't appear to have a problem with that. Mr. Bode probably has the most remote connection of any of the other Board members, he pointed out. Mr. Eckman stated that Mr. Bode doesn't have a financial interest, but the question is does he have a personal interest? What the Charter says is if you have a personal interest by reason of your close association whether if by reason of business, or a blood relationship, whatever, that would, by a reasonably prudent person, tend to impair his independence of judgement. If he were on the board, he couldn't vote, and he should also disclose that interest and should refrain from trying to influence the Board to vote in a certain way. "What Mr. Bode has to decide is if his association as a North Poudre Board member would, in his judgement as a reasonably prudent person, impair his independence of judgement in recommending things to the Water Board." How much stock do we have in North Poudre? Tom Sanders asked. Mr. Bode replied that the City has 27%. Something else the Board should realize regarding the payment schedule, Mike Smith remarked, is that in a sense the City is paying itself too, since we are 27% stockholders. Dave Stewart moved that the Water Board accept the draft agreement. Ray Herrmann seconded the motion. President Grigg asked if there was further discussion. MaryLou Smith reminded Dr. Grigg that at the last meeting, the Committee wanted staff to find out about the question of assignability. If your question is, could the City assign its interest to another party, the answer is yes, it can, Mr. Eckman responded. There is no prohibition on assignability, he assured the Board. Mr. Eckman went on to say that as far as the contract is concerned, there are some fairly minor changes. There were three that might be slightly more substantive: one relates to how far the City can go in allowing North Poudre to participate in the selection process for consultants, and construction contractors, etc. That's found in paragraph 2 on p. 3. On p. 6 there is an area that says, in case of emergencies North Poudre wants an immediate response. We agreed to change immediate to prompt. The other area was the indemnification language in paragraph 10. We can indemnify and still comply with the City Charter, he said. Water Board Minutes December 20, 1991 Page 6 Tom Sanders referred the Board to No. 1-e on p. 3 which reads: "If the option to proceed with the project is terminated by either party, all option money paid by the City shall be retained by North Poudre. "I don't think that's fair," he asserted. Ray Herrmann was concerned about that also. "Instead of either party, shouldn't that be the City of Fort Collins?" Tim Dow asked. Paul Eckman pointed out that NPIC has the right to terminate according to p. D-1-3 at the bottom of p. 2 and the top of p. 3. I think there is one situation where North Poudre retained the right to terminate, Dennis Bode said, otherwise it would be just the City's right. Dr. Sanders said he didn't have a problem with their right to terminate, it's just that they are given the right to keep all of that money. "If you change it to say if it's terminated by Fort Collins, it's okay," he added. Dennis Bode explained that there is considerable history behind that paragraph. One of the other potential problems is if Halligan gets to the point where it needs major repairs, and if North Poudre needs an expenditure of several million dollars to do that, there is a dilemma in how to proceed. He cited the paragraphs at the bottom of p. 2 and top of p. 3. He said that 1, 2, and 3 were intended to be a process of determining what would happen should Halligan need major repairs. Some years ago there were questions about Halligan's integrity, Mr. Smith began. Subsequent studies gave Halligan a "clean bill of health, more or less," but North Poudre is not sure what could happen in the future. That is why they are interested in someone doing the project. However, they perceive a potential problem, because obviously they see the City's schedule is not within 5 years. If something happens in that time period where they are required to make repairs to the reservoir, the City isn't obligated to do those repairs. However, the City may need to agree to help them work it out financially if it wants to continue with the project. Ray Herrmann contends that portion "e" of the agreement needs to be part of paragraph "d." MaryLou Smith pointed out that the Board's vote on the agreement is essentially approval in concept. "We would expect our legal people to scrutinize this carefully," she said. The Water Board will approve the final document, won't they? Tom Sanders inquired. "No," Mr. Smith replied, "the Council doesn't even get into that." However, if there is a major change in its content or intent, the Board would be given the opportunity to look at it again, Mr. Smith assured the Board. Dave Stewart believes that North Poudre shouldn't be allowed to terminate at their discretion; he thinks a penalty should be included in the agreement that covers that possibility. He said he would move to amend the motion to say that, if it is the desire of the Board. Water Board Minutes December 20, 1991 Page 7 What is the schedule for taking this to the Council? Dr. Grigg asked. "We were hoping for January sometime, prior to the North Poudre annual meeting, which is in early February," Mr. Smith responded. Regarding the termination language, Dennis Bode explained that originally North Poudre had said if the City couldn't say yes to the project by 5 or 6 years, they would terminate the agreement. One of their other concerns was that they were going to be in limbo if Halligan Reservoir has a hold order on it, and they are not able to store water. Dave Stewart stated that they then should be able to terminate under that clause, but also lose half of the money that has been paid in. That language would probably give them more incentive to work out an arrangement to continue with the agreement, Mr. Bode remarked. "I can see the scenario now," Tom Sanders began. "It's going to cost $4 million to make the reservoir active so they can use it in the interim, and then we'll flood it with our new dam. I hate to waste that kind of money too," he emphasized. Mr. Bode explained that it becomes a cost to the City as well. That is part of the concern that everyone was trying to work out, he added. "I think we have opened ourselves up there too much," Dr. Sanders argued. "I want to see the agreement again before it's sent to the Council," he insisted. Mr. Eckman asked if the sense of the Board is, if the City terminates, it relinquishes all of its money, but if North Poudre terminates, "the City walks away from half its money?" Several members agreed to "something like that." Usually real estate options are for limited times, Dr. Grigg pointed out. "Why should we forfeit half of our money if they terminate?" Tim Dow argued. "It terminates when the time limit runs out, but this doesn't have a time stated," Dr. Grigg responded. "We have to pay some premium for not having any time limit," MaryLou Smith contends. Dr. Grigg wanted to know if timing permits staff to bring back the agreement. "If the 50% language is included, it doesn't have to come back," Dave Stewart proposed. Ray Herrmann added that the language of "e" must be clearly understood. They shouldn't have the right to terminate except under very restricted conditions. In addition, Section "e" needs to follow 1, 2, and 3, he thinks. Dave Stewart amended his motion to read that the Board would approve the agreement under the condition that staff will amend the agreement to state that North Poudre can't terminate without some kind of penalty. The second, Ray Herrmann agreed to the amendment. Tom Sanders continued to express his disagreement with the motion because he wants to review the amended agreement. He wants the Board to help determine a percentage for the penalty Water Board Minutes December 20, 1991 Page 8 clause in the event that North Poudre terminates. "I think the language should be tight enough that even a layman like myself can read it and not find a loophole," he stressed. He conceded, however, that except for determining the percentage, he favored the amendment. Tom Brown agreed with Dr. Sanders that the Board should take another look at the amended agreement. Mr. Brown also had a question about recreation rights. The agreement says that all recreation rights shall be controlled by the City. Does that begin as soon as this option is agreed upon? he asked. He added, is that the existing reservoir or the expanded reservoir? The intent was the expanded reservoir, Mike Smith replied. The agreement language "is open in our favor right now," he added. Mr. Brown commented that "maybe it should be the existing reservoir since we are paying all this money." MaryLou Smith pointed out that we would then have to expend money for maintenance and operations. Tom Sanders clarified that the intent was not to get recreation rights now. Paul Eckman scanned the agreement quickly and found only 3 places where there is a termination possible: On p. 2 if the City doesn't pay the money by December 31st of any year; upon written notification to North Poudre that the City wishes to terminate its option; and at the end where it says, "in the event that either party should fail or refuse to perform according to the terms of this agreement, such party may be declared in default." Also, No. 3 under paragraph "d" seems to be the only place where North Poudre has the right to terminate, which means that paragraph "e" does apply to the termination under paragraph "d." "With the clarification of this part of the agreement, would the Board be comfortable in giving a percentage now?" he asked. Mr. Smith added that it would be helpful if it could be concluded today, so staff can complete negotiations on the agreement. Mike Smith related that most of the study would be completed by 1995. Dave Stewart concluded that by '95 the City will have paid in $280,000. At $6.50 an Ac-ft, that is exceptionally cheap, he pointed out. "If we get half of that back, I think it's more than fair," he stated. Staff was asked how North Poudre might respond to a percentage of that money being returned. "They might agree to 50% if they terminated the agreement." Mike Smith responded. They are very concerned about having to spend money on maintaining the dam after 1995, he reiterated. Tim Dow wondered if this is in part "a financial bail -out of North Poudre for all the projects they have undertaken in the last several years in which they may have bitten off more than they could chew?" "I think they are looking for a way to lower their assessment rate," Mr. Smith conceded; "for all of their stockholders, if they can." He added that "they see it as an opportunity, and rightfully so, to make some money from the City or from anywhere else." Water Board Minutes December 20, 1991 Page 9 "It only adds to the fact that we should act speedily in our considerations," Neil Grigg cautioned. Mike Smith acknowledged that he can't predict whether North Poudre will say yes or no if the City requires them to return a percentage of the money. Ray Herrmann believes that the City should negotiate the best deal they can, and go with it. Ms. Smith called for the question. The motion passed 5 to 3. There were five yes votes from Neil Grigg, MaryLou Smith, Ray Herrmann, Dave Stewart and Dave Frick. Tom Sanders, Tim Dow and Tom Brown registered negative votes for reasons stated earlier. Tim Dow wanted to make it clear that his no vote was not just related to the percentage question. "I think we are spending an awful lot of money for an option," he concluded. North Poudre Irrigation Company Offer of Reservoir No. 6 Water Support material on this item was included in the packets. Dennis Bode explained that for 5 or 6 years the Water Board, Utility staff and North Poudre have discussed the possibility of the City and NPIC working together to rehabilitate Reservoir No. 6. It is a reservoir that holds approximately 10,000 Ac-ft and has not been operated for a number of years. No. 6 is located above two major irrigation companies, so it is situated where exchanges are relatively easy to arrange. According to the background information provided to the Board, during early 1990 when the Water Board was considering various water acquisitions, it was recommended that $1,500,000 be reserved for the possible participation in the rehabilitation of NPIC Reservoir No. 6. These funds, which remain in the Utility reserves, were made available through cash payments made in lieu of raw water rights in satisfaction of raw water requirements. Because almost 10,000 Ac-ft of capacity can apparently be restored for $1.5 to $2.0 million, the project should provide significant benefits to Fort Collins, NPIC and the area. In September of 1990, staff made a preliminary proposal to NPIC where the City would receive 1,200 Ac-ft of water in exchange for payment of $1.5 million to NPIC to be applied towards the rehabilitation of Reservoir No. 6. Utility staff also suggested that the City be allowed to buy an option to reserve the right to develop a plan for using additional capacity of the reservoir. In the recent correspondence from NPIC, they asked whether the City was interested in receiving 800 acre feet as a preferred right for the $1.5 million. This arrangement would be subject to NPIC and the City being able to work an exchange with the Water Supply and Storage Co., and possibly others, so the City could receive the water into Horsetooth Reservoir. It was noted that the water can not be used directly, and that is why there is a need for the contingency to do exchanges. Dennis Bode also pointed out that there is considerable interest from several other parties for rehabilitating No. 6. The 800 acre feet for $1.5 million would be $1,875 per Ac-ft. Since it would be a preferred delivery, it would be available every year. This would compare to the purchase of CBT water at $1,500 per unit as follows: 100% quota - $1,500/AF, 75% quota - $1,974/AF, and 50% Water Board Minutes December 20, 1991 Page 10 quota - $3,000/AF. Staff recommends that the Water Board approve a motion expressing their interest in the 800 Ac-ft offered by NPIC, and ask staff to pursue an agreement with NPIC to spell out the appropriate provisions. "What's the firm yield for the whole reservoir?" Dave Stewart asked. "I'm not sure that has been determined," Dennis Bode replied. The 800 Ac-ft would come off the top. A rough estimate might be 1/3 of the 10,000 Ac-ft, he said. There are benefits as a shareholder also. What if it costs double that amount to rehabilitate the reservoir?" MaryLou Smith asked. North Poudre's plan is to try to get a loan through the CWCB, Mr. Bode answered, and if they get a deal like they are offering. the City, they would simply pay for any additional costs through the assessments. The feeling is that developing No. 6 would be an asset, Mr. Bode continued. For the City he sees it as buying water. "You can get 800 Ac-ft off the top at a price which is basically better than anything else I can think of," he stressed. When you compare it to CBT water, using our 1-in-50 drought criteria, and looking at a 50% quota in a long drought situation, the No. 6 water becomes much cheaper. The other factor, through the payment of money to them, you reduce the NPIC assessment too; instead of $1.5 million, it's more like 73% of that or $1.1 million, he concluded. Ray Herrmann moved that staff go forward with the offer. MaryLou Smith seconded the motion. Tom Brown wanted to make sure everything was clear before he voted on this. He began by stating what he thinks the situation is. The work would cost $1.5 million, and we would be paying that to receive the preferred right to what would be our share anyway; which is 27% of a firm yield of about 3,000 Ac-ft. Am I right? he asked. "It's more complicated than that," Mr. Bode replied. No. 6 is situated in a place that is below most of the North Poudre irrigation system, so to get benefits out of it, they need to do exchanges. He thinks there is a feeling from most shareholders with No. 6, that they would rather get benefits other than additional water per share with the company. It's true that you could have the company do the whole project, and in that case, all the benefits would go to all the shareholders. But, the downside of it would be additional assessments to the 600 shareholders to pay for the project. North Poudre's approach is trying to hold down the assessments by selling part of an asset, which is the additional water. MaryLou Smith pointed out that the City would have 27% of the share of whatever is done with the rest of the water. Any benefits that come from that would accrue to all of the shareholders, whether it comes in the form of reduced assessments or additional water, Mr. Bode added. Water Board Minutes December 20, 1991 Page 11 What assurances do we have that we will be able to get exchanges so we actually can use this water? Tim Dow asked. "If exchanges can not be worked out, there is no deal," Mr. Smith replied. Initially the City made this proposal at 1200 Ac-ft and now NPIC has returned with the offer of 800, Mr. Dow continued. "Is there some room for negotiation; perhaps around 1,000 Ac-ft?" Tom Sanders and MaryLou Smith agreed that was a good suggestion. "I can't speak for North Poudre," Mr. Bode replied. Who are the other potential entities who could participate in this project, Tom Brown asked. Water Supply & Storage Co., Larimer-Weld, and Thomton; just the parties mainly below them, Mike Smith responded. "The way I see it," Dave Frick began, "is if we don't do anything and they build it, and there are 3,000 Ac-ft, the City still gets 27%, which is about 800 Ac-ft; not preferred. If we build it, we get 800 Ac-ft plus 27% of what's left, which is about 600 Ac-ft, so we end up with 1400 Ac-ft if we pay the $1.5 million, and if we don't, we end up with 800 Ac-ft. It looks like we're paying for 600 Ac-ft." he concluded. There is a difference, Mike Smith pointed out, because you gain the priority with one because the City would get water at Horsetooth, whereas with the other we get water at No. 6 which we can't use. The other argument is if you get into the dry year scenario, where we are trying to focus our efforts, it may not be there, Dennis Bode added. "I think it's a good deal for 800 Ac-ft of firm yield," Dave Stewart emphasized. Does this give us any leverage in the future with WSSC, Tom Sanders wanted to know, as far as having dilution water for use in Larimer Co. Canal? "Once you have that right there, I suspect if you wanted to do something else with the water, you could," Mike Smith replied. "To us the most valuable place for the water at this time is at an exchange in Horsetooth," he concluded. MaryLou Smith proposed a potential amendment to the motion. If 15 months ago the City suggested 1200 Ac-ft at $1.5 million, and North Poudre came back with 800 for that price, she would direct staff to try to get closer to 1,000 Ac-ft. Tim Dow expressed his opinion that the City could do much better in this negotiation as well as in others. President Grigg summarized the situation by saying that what is in front of the Board now is for staff to at least try to pursue an agreement for more. Water Board Minutes December 20, 1991 Page 12 Dennis Bode responded that if you use the criteria we have developed over the last several years, and try to use the 1-in-50 drought criteria, -if we were to buy CBT water, we would be basically paying $3,000 per Ac-ft. This compares to paying $1300 when you include the benefits of being a shareholder in the NPIC. That also assumes that CBT water stays at $1500, Dave Frick added. If it dropped off to $600-800, it would be cheaper to buy that. MaryLou Smith interjected that having CBT water go down is quite unlikely. Dave Frick continued by saying that he would like to see, as staff works through the negotiations, what the firm yield number would be, with or without the agreement --"as far as what water would be delivered where, so we can compare apples and apples." That would probably mean another expensive study, Dennis Bode remarked. "Isn't North Poudre currently doing a simulation on their system?" Mr. Frick asked. They haven't started it, Mr. Bode replied. Mike Smith presented the following scenario: "Let's say the City didn't buy the water and we are counting on that firm yield. First of all North Poudre would probably sell the 800 Ac-ft to someone else, so we are back to what's left for us, and it's not the 27% of 3,000. We are back to the 27% of 3,000 minus the 800. What we have before you is a deal to buy water at "X" dollars per Ac-ft firm yield; strictly a water acquisition proposal. Is that a good deal, or do you want to try to get a better deal, or would you prefer not to buy any water at all and save the money for Halligan?" Ray Herrmann said, "Let's call the question and buy the water." Tom Sanders proposed a friendly amendment to increase the 800 Ac-ft to 1,000. Tom Brown said he suspects that of the potential parties North Poudre might deal with, the City of Fort Collins is the most reliable, and a good customer as well, which should put us in a good negotiating position. Ray Herrmann said he would accept Tom Sanders' friendly amendment. MaryLou Smith's proposed amendment was to make the offer at 1,000 Ac-ft and continue to negotiate until you get a deal, whereas Dr. Sanders' amendment calls for returning to the Board if North Poudre does not accept the 1,000 Ac-ft offer. Ms. Smith agreed to accept Dr. Sanders' amendment. Neil Grigg summarized the motion. Direct staff to return to NPIC with the offer to buy 1,000 Ac-ft instead of 800. If they don't accept it, it comes back to the Board. Dave Frick wondered if North Poudre might seek out another buyer if they were reluctant to accept the City's offer. Dennis Bode commented that since the City has expressed interest for many years on this, they wanted to give the City first priority. "Do you think we are jeopardizing our chances to get this deal with our actions?" Neil Grigg asked. Mr. Smith said he hopes they would have enough courtesy to write back and say "no, our offer stands at 800," Water Board Minutes December 20, 1991 Page 13 and give us time to react before they do something else. The question was called and the motion passed unanimously. Review of Proposed Bylaws Revisions Water Board Secretary Molly Nortier highlighted some basic housekeeping revisions in the bylaws which were sent to Board members for their suggestions for additional revisions. Neil Grigg wondered about the statement under Article VIII-A which says the Board will adopt at least every three years, a statement of goals and objectives. Have we done that? Ms. Nortier thought that the Board had not done that for about 4 years, but she pointed out that, for three years, it has adopted a work plan which may have taken the place of preparing a specific list of goals and objectives. MaryLou Smith thinks that by adopting a work plan each year, it just becomes busy work to also adopt goals and objectives. "If we feel we need to look at goals and objectives, we can do it," she said. Dave Frick thinks the Board should at least review them every 3 years. The Board decided to change the word "adopt" to "review" a statement of goals and objectives. President Grigg said that sometime soon the Board should review the existing goals and objectives as an agenda item. Tom Sanders brought up the number for a quorum which has been five members. Since there are now 11 regular members, he thinks the quorum should be six. The Board agreed to change the quorum from 5 to 6 members. Tom Sanders also questioned Article III -A which states that Water Board members are limited to 3 consecutive terms. Ms. Nortier said that change was made by Council resolution. By the way it is worded, does it mean that a former member could be re -appointed? Dr.Sanders inquired. "I presume that's what it implies," Ms. Nortier responded. The procedure for approving the amended bylaws is to discuss the changes at one meeting and adopt them at the following meeting, so the Board will adopt the bylaws, as revised at the January, 1992 meeting. Staff Reports Treated Water Production Summary Dennis Bode reported that for the month of November, water use was only 83 % of what was projected, primarily because of some precipitation and cooler weather. "For the year we are running about 93% of what we projected." The official weather data indicate that Fort Collins will be about average for precipitation, he continued. "In non -irrigation months, precipitation doesn't make much difference, does it?" MaryLou Smith asked. In early November there is still Water Board Minutes December 20, 1991 Page 14 some irrigation, Mr. Bode replied. "Presumably, we could start seeing the effect of meters, Ms. Smith continued, and "attribute it to that instead of more precipitation." It will be hard to measure for awhile, Mr. Bode responded. Committee Reports Water Supply Committee Chairman Mark Casey wasn't able to attend the meeting because of illness. Neil Grigg said that sorting out the Halligan business is under that committee's purview, so we will need to develop a strategy to move that ahead quickly in order to minimize our payments, etc. That committee has a lot to do, Dr. Grigg remarked. Legislative and Finance Chairman Tim Dow said there was nothing substantive to report. He talked with Mayor Kirkpatrick briefly today to try to ascertain Council's level of interest, and what they want and don't want relative to the legislative arena. On January 17th he will meet with the Council's Legislative Affairs Committee to try to get some answers from them on how they want to work with the Water Board's Legislative Committee. He should have more definitive ideas to bring to the January Board meeting. Conservation and Public Education Chairperson MaryLou Smith reported on the Council work session at which the resolution and recommendations from the Demand Management Committee were discussed. She began by saying that it wasn't really clear what the Council as a whole wanted. Individual members talked about wanting to move a little more rapidly in terms of major water conservation steps, but she repeated, it wasn't clear whether they all wanted to move in that direction. "My understanding is that staff is trying to incorporate some of the requests that were made, e.g. trying to provide more statistics about how the Committee came up with their decisions and conclusions." Mike Smith explained that staff reviewed the videotape of the work session and listed all the comments and questions Council members had. When that is completed, staff will prepare a response for the council. For some requests it may take some time to prepare the data for the Council and, in those cases, staff will tell them that it will be forthcoming. In addition, we will probably modify the resolution to address some of the minor things that MaryLou Smith spoke about, he said. He also agreed with Ms. Smith that there were a number of individual responses from the Council, but there didn't appear to be a consensus. Ms. Smith related that Council member Gerry Horak was interested in trying to implement some immediate rate structure changes that would encourage active use of the meters. "Our response is that many cities have developed different rate structures, but we feel we need more time to see what our experience is with meters." Moreover, relatively few people have meters at this time, so we don't have a feel for what the best rate structure will be. "If we rush into a Water Board Minutes December 20, 1991 Page 15 particular rate structure prematurely, it could confuse the consumer." Mike Smith emphasized that the City wants to encourage people to volunteer. "If we start hitting people with a higher rate, people will stop volunteering." he predicted. Tom Sanders contends that there should be a way to quantitatively show that, as metering increases, the demand goes down. "Let's get some proof that metering reduces demand," he asserted. Eventually, when you have 80% of the people metered and you don't see a drop in demand on a per capita basis, your point would be well -taken, MaryLou Smith responded. Dave Stewart made reference to a Brown and Caldwell study that showed metering does reduce demand significantly. They did a three-year study of two separate groups similar in every way except that one was on meters and one wasn't. The data showed that the metered group's demand was reduced by 20%. "As we get more data, that is one thing we will start tracking," Dennis Bode assured the Board. MaryLou Smith related that during her dialogue with the Council, she felt it was very important to explain why the Committee came up with the recommendations they did, and that there were very good reasons for those conclusions. Neil Grigg emphasized that since demand management is such a confusing subject, it should be the Water Board's role to try to "clear that up as much as possible." President Grigg commented that he and others were very pleased with MaryLou's Smith's presentation as a representative of the Water Board members on the Demand Management Committee. Ms. Smith acknowledged staffs memo, included in the packets, on the children's water festival to be held in the spring. She is pleased with this effort to educate children about water in a most engaging way. Engineering Committee In the work plan the two items under engineering were: 1) Review NCWCD Regional Water Supply Study and 2) Review planning and designing phases of construction projects as needed. Dr. Grigg remarked that the latter item covers a lot of ground. Other Business Efforts to Minimize Waste by the Utility MaryLou Smith expressed her appreciation for the memo from Linda Burger in the packets on the Water and Wastewater Utility's efforts to minimize waste. It was enlightening and impressive to learn of all the things that are being done. "The report was just excellent," she concluded. Mike Smith explained that this was a report prepared for the Council. Water Board Minutes December 20, 1991 Page 16 Documentation in Minutes of Discussion Leading to Vote Neil Grigg asked if there was anything further that needs to be discussed regarding the information in the packets about the requirement to include in the minutes the reasons behind the votes of Board members. Molly Nortier included that information in the packets at the request of MaryLou Smith who wondered why a Board member at the last meeting was asked the reason for his no vote. Ms. Smith pointed out that, in her opinion, the information doesn't say that a person is required to state the reason for his/her position. On the last page it says the individual Board members are "encouraged" to place on record their reasons for voting yes or no. "I can't imagine a time when anyone wouldn't want to state their reasons for the way they are voting, but it doesn't say we have to," she concluded. Framework for Environmental Action from Natural Resources Division Mike Smith indicated that each Board member received a copy of a document from the Natural Resources Division entitled, "Framework for Environmental Action for the City of Fort Collins" (Public Review draft). ,Tom Shoemaker, Natural Resources Administrator, wanted Board members to have a chance to read the document before the January Water Board meeting. This item will appear on the agenda, and Mr. Shoemaker will be present to provide background, answer questions, and receive comments. Letter from Natural Resources Board on DMC Recommendations MaryLou Smith wanted the Board to be aware of the letter that the Natural Resources Board wrote and forwarded to the Council in response to the Demand Management Committee's resolution and recommendations. "I didn't get a chance to see that before I attended the Council work session," she said. She was discouraged that the members of that board came up with some recommendations without benefit of understanding what the Committee made their decisions on. Dennis Bode explained that Jim Clark had given a presentation on the Demand Management Committee recommendations at a late fall Natural Resources Board meeting. What they didn't have the benefit of was all of the discussion that took place during those many months of meetings, Mr. Bode pointed out. The Water Board secretary will send a copy of the Natural Resources Board's letter to Water Board members in their packets. Suggestions on Sprinkler Systems Item Tom Brown mentioned that one of the items discussed at the Demand Management Committee meetings was whether sprinkler systems save water. Apparently this issue will come back to the Water Board Conservation Committee and they will consider whether the installation of sprinkler systems should be considered as part of the zero interest loan program. He wanted to suggest that this item "is probably amenable to a low key study on the part of staff/and or a master's candidate or perhaps as a thesis." That could answer questions that we have and also respond to the apparent desire of the City Council that we gather data on some of these issues. MaryLou Smith explained that it was decided that as those questions come up, they will be referred to the Conservation Committee which will bring their recommendations to the Water Water Board Minutes December 20, 1991 Page 17 Board. Mr. Brown is saying that knowing this is coming, do we want to be proactive and research some data on the issue? She said there are some studies out there, but one of our Board members is questioning the validity of some of those studies. Tom Brown also pointed out that there was some strong disagreement on the DMC on this issue. "It seems that we could study this here in Fort Collins," he proposed. President Grigg believes that the proper approach might be for the Conservation and Public Education Committee to take this up. Chairperson MaryLou Smith agreed to pursue it. Conflict of Interest Item Tom Sanders announced that he will no longer be doing research work for the City of Thornton, so his conflict of interest during the discussion of Thornton matters will no longer be valid. Molly Nortier asked him to submit a letter relating that information to the City Clerk's Office, CC the W & W W Utility. Since there was no further business, the meeting was adjourned at 5:08 P.M. :a.