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HomeMy WebLinkAboutWater Board - Minutes - 02/21/19929 :1• 1 IIIJI February 21, IM 3:15 - 5:12 P.M. Water and Wastewater Utility Conference Room 700 Wood Street Members Present Neil Grigg, President, Tom Sanders, Vice President, MaryLou Smith, Mark Casey, Tom Brown, Ray Herrmann, Terry Podmore, Tim Dow Staff Mike Smith, Dennis Bode, Linda Burger, Ben Alexander, Andy Pineda, Beth Voelkel, Molly Nortier Guest George Reed, Citizen Observer Members Absent Paul Clopper, Dave Frick, Dave Stewart President Neil Grigg opened the meeting. The following items were discussed: Welcome. New Staff Person Beth Voelkel, the new Water Resources Engineer, was introduced to the Board. She began working for the Utility on December 2nd, and was formerly an employee of the Northern Colorado Water Conservancy District. Water Board Minutes February 21, 1992 Page 2 Minutes It was moved and seconded, and unanimously approved that the minutes of January 17, 1992 be accepted as distributed. SSnowmack and Streamflow Report Because there was no report from the NCWCD, Terry Podmore asked about the projected stream flows and snowpack. Dennis Bode reported that the Poudre Basin is approximately 65- 70% of average currently. "So far it is probably the driest year in the last ten," he said. The southwest part of the state, on the other hand, has received an abundance of snow. The Water Supply Committee met prior to the Water Board meeting to discuss water rental rates. Mark Casey, committee chairman, reported that the questions that needed to be discussed were: 1) Do we approve the rental rates that staff has recommended? and 2) Do we support the policies that determine the way the rates are set, and the process for distribution of the rental water? Mr. Casey summarized the Committee's conclusions. The Committee recommended approval of the rental rates. They also recommended, after discussing some minor concerns, the current practice for setting those rates and the process for deciding who receives the rental water. The most significant concern the committee discussed was who gets the rental water. "The good news is that it really has not been a controversial matter," he assured the Board. There may be a few customers who think they have been treated unfairly, but the question of fairness can be somewhat subjective. The Committee agreed that the process appeared to be fair. The one area they had some concern about was the priorities that are being set. Currently, old customers are given priority to rental water before new customers. The Committee thinks the system is a workable one, although they discussed how an "old customer" is defined. For example, if a renter misses a year, is he still considered an old customer? The group wanted to make certain that the rental guidelines were applied as consistently as possible. Mr. Casey then turned the discussion over to Dennis Bode. Mr. Bode reviewed how the rates are set. He began by saying that it is different for different sources of water. The three sources that the bulk of the rental water comes from are CBT, NPIC, and WSSC water. For those three sources, as was mentioned in the background information, there is a well established rental market. The prices that staff recommends are based, as nearly as they can determine, on what that market is. That market will sometimes change from the first of the season to later into the season. 0 Water Board Minutes February 21, 1M Page 3 The Pleasant Valley and Lake Canal Co. is somewhat different from the others because the City owns over 60% of the shares, and there basically isn't any market other than the City, he explained. For PV&LC, staff has recommended a rate that is $100.00 per share, and that's slightly above the assessment rate, "so we try to recover the assessment plus some additional value," he added. Essentially, for New Mercer, Larimer No. 2 and Arthur, there is no demand for rental for those shares. "We very seldom have a request for any of them, but in the event that we do, we want to have a rate we can use," he said. In this case, the rate was set equal to the assessment rate. Warren Lake is somewhat difficult in that it usually falls in between something that has a market value and one that doesn't, Mr. Bode continued. There are 4 or 5 people who like to rent Warren Lake shares, so staff tries to set a rate that somewhat reflects what they would pay if they rented CBT water. Consideration is also given to a small shrinkage that may occur with Warren Lake shares when the water is delivered. Warren Lake water has been set at $120.00 per share. One source of water that staff would like to add to the list is Joe Wright Reservoir. At times in the past, staff has had requests for blocks of water that perhaps an irrigation company downstream might like during the summer or early fall. "Previously, we haven't had a direct way of leasing that water," he said. Mr. Bode then discussed some of the other questions about the process of renting the water. At a City Council meeting about a year ago, the Council asked some questions about how staff rents the water, who gets it, and how the prices are set. In the cases of PV&LC or Arthur, if there is no market, and the City is not using the water, what happens to it? Neil Grigg wanted to know. Part of the water is used for City facilities like golf courses and parks, Mr. Bode responded. If some of it is not rented, it may continue in the ditch system and be used by somebody else, or not as much may be taken at the headgate, he explained. "It's a little difficult to tell where some of it goes," he acknowledged. In the case of Larimer No. 2 where the water comes in a 2-3 week period at high flow rates, it is difficult to use effectively. A year ago, when the water rates were set by City Council, they wanted clarifications about the process of setting the rates and distributing the water, Mr. Bode continued. That is when staff asked the Water Supply Committee to undertake the whole issue of water rental rates and eventually respond to the Council's concerns. One of the Council's concerns was the general method of renting the water and the fairness of the process. With the number of people staff rents water to, and the timing of that, it would be Water Board Minutes February 21, 1992 Page 4 difficult to have a system where you put the water up for bid and have the 150 or so people, who consistently rent water, come in for bids. The other side of that is the supply and demand situation which differs throughout the water rental period. It's difficult to respond to the changing conditions throughout the year. Mr. Bode went on to say that the Water Supply Committee discussed the subject of who the water should be rented to. The current process involves taking requests; usually requests are discouraged before January first. After the first of the year, staff will take requests and record those names. Usually this is done through May first. Around April 15th, staff looks into the supply and demand situation, and determines how many shares of each of the sources can be rented. If there are more requests than can be satisfied with the available water, staff would then rent to the customers that have rented in previous years, rather than new customers who would be making a first request. This system provides a little more continuity and consistency for the regular customers, and probably is more logical than if you did it the other way, where you lease to the new customer, and not allow the old customer to have water. If there is a shortage of water, sometimes each customer's request can be reduced by a small amount to make the water go further. Mr. Bode also mentioned that there is one set of people who definitely receive priority, and those are the ones who have lease -back agreements with the City; "We lease to those first," he emphasized. Next, staff leases to old customers up to May first; then new customers who have their requests in by May first. After that period, it is done on a first come first served basis. Do we have many lease -back agreements? Neil Grigg asked. There are quite a number --perhaps around 30, Mr. Bode replied. Would those typically be people who have sold water rights to the City? Dr. Grigg continued. Most of them are from the shares the City bought during the purchases of 1989 "when we bought that large block of water," Dennis Bode explained. Dr. Grigg also asked if the City typically has lifetimes on those lease -back agreements. "Most of them are for 10 years," Mr. Bode said. Mr. Bode continued by saying that one of the questions from the Council was "why not do the distribution on a first come, first -served basis?" Staff's concern with that method is that it is likely there would be a scramble for the water on a particular date, for example, on January second. "I don't think that most customers would appreciate that system, and it would be a real headache for staff," he stated. Mr. Bode thinks that most customers consider the system to be fair, and it is fairly consistent too. The regular renters know what the rules are and how the process works. The system has been used for about 10 years, he pointed out.' "To put our action in context, there was some Water Board discussion last year about the fact that we needed to review this, and there must have been some of the same concerns at that time • Water Board Minutes February 21, 1M Page 5 also," Neil Grigg observed. He asked if the Water Board approves these rates once a year. "Yes," Mr. Bode replied. Ray Herrmann moved that the Water Board approve the rates as proposed by staff. Tom Sanders seconded the motion. Terry Podmore said that "given the potential shortage of water in the Poudre basin, do these rates reflect that there might be an increased demand for rental water? "It's hard to predict," Mr. Bode respdnded. Last year, for example, it started out very dry in the spring, and considerable water was rented. About June 1st, we received 2-3 inches of rain, and the rental market almost disappeared. What staff tries to do is come up with an amount that seems to reflect the market, recognizing that it is probably going to fluctuate quite a lot depending on the weather, he concluded. Tom Brown said that brings up one of the questions the committee members addressed, and that is the flexibility that staff has or doesn't have to respond to those situations --where the water season turns out to be quite different from what was expected. In that case, the rates might be coming up or down compared to what was set originally. It came out in the committee meeting that the City is a large player in the markets for at least three of the sources of water where there is any market at all. It seems to Mr. Brown that it is hard to say in January or February what the market rate is. "First, we don't know what the weather will be like, and second we are such a large player that whatever we decide almost creates the market, in a sense." He doesn't see a way around the dilemma other than good judgement. Neil Grigg commented that as we look at the future and how we can preserve our water in Northern Colorado, and how we can interact with the ditch companies in the best possible way, we might consider how it would be possible to begin doing more of the saletlease-back types of arrangements. The City might be like a centerpiece working with the agriculture community in common enterprise to manage our water. "If we were to evolve some kind of a concept for that end of the picture, some of these issues of leasing and making other decisions, could be correlated." He said he would discuss this further when reporting on the regional water boards' meeting in Greeley. Mark Casey expanded on the point about what the market is. "If the rental rates started to go up, is there a mechanism to take care of it? Would the people who are currently renting water, want to purchase their own shares and get out of the rental market?" "I doubt it," Mr. Bode responded, "but I suppose there could be some of that." He went on to say that if they are really interested in farming and not in a bad economic situation, maybe they would look into buying some additional water instead of trying to depend on the rental market. Water Board Minutes February 21,1992 Page 6 Mark Casey wanted to know why certain people rent instead of buying the water. "Certainly some of the people rent because they have had financial hardships and had to sell their water," Mr. Bode began. "They are hoping to rent it back for at least a few years until the City needs it, etc. Other people are a little short, so they supplement what they own with rental water," he explained. Tom Sanders has always thought that the City should get a little profit in the rental business, because the renters save on the capital liability. The City's implicit policy as pro agriculture, has always been fair, he continued. "We could even reduce the rate a little if we want to get people to sell us their water so we can be a broker in it," he suggested. He now considers the City's current policy to be fair, but he still wonders why the rental rates haven't changed much over the last three years. Mr. Bode commented that last year the City made some significant changes in particularly CBT water and Water Supply and Storage water. The thinking was that once we made that change, we were relatively close to the market. "We have not seen much of a change in the price of CBT units during the last year," he observed. "Aren't the rentals supposed to take care of maintenance and repairing reservoirs and things like that?" Tom Sanders asked. "The assessments do that in terms of each irrigation company," Mr. Bode replied. The rental prices are more complicated in that they reflect the demand somewhat too. For example, for WSSC, the assessment rate is only $650 per share, but the market rental rate is somewhere around $1800, and at times it has been even higher, he pointed out. The question was called and the Board voted unanimously to recommend the following proposed rental rates to the City Council: "TTom n . - NCWCD Water (CBT) North Poudre Irrigation Co. Water Supply and Storage Co. Pleasant Valley & Lake Canal Co. New Mercer Ditch Co. Larimer County Canal No. 2 Arthur Irrigation Co. Warren Lake Reservoir Co. Joe Wright Reservoir Water $ 18.00/ac-ft $ 85.00/share $ 1,800.00/share $ 100.00/share $ 250.00/share $ 170.00/share $ 9.00/share $ 120.00/share $ 18.00/ac-ft * For late season rentals, rates may be adjusted to reflect the remaining yield or the prevalent market price of the water stock being rented. Water Board Minutes February 21, 1992 Page 7 Amendment to the Bylaws Mike Smith explained that while Assistant City Attorney John Duval was examining various boards and commission bylaws, he found the Water Board's bylaws, paragraph A, Article V, need to be amended to reflect current requirements in the City code relating to boards and commissions going into executive session. Water Board members received copies of Mr. Duval's memo showing that change. Tim Dow asked if the Water Board is required to do this. Dr. Grigg observed that there doesn't appear to be a reason to be in conflict with the change. Tom Brown asked if section 2-429 of the City Code states all the reasons that the Water Board would go into executive session. Mr. Smith said that 2-429 refers to 231-B which lists all of the exceptions; one of those mentions the consideration of water and real property acquisition. That section also mentions meetings with legal counsel. Tom sanders asked what constitutes going into executive session, and do we need a 2/3 vote to approve the bylaws. Mr. Smith read in the Water Board bylaws that the bylaws are approved by a majority vote of its members; executive session is not defined. The Board reviewed the proposed amendment, and will approve the bylaws, as amended, at the March meeting. Report on Joint Meeting of Regional Water Boards President Grigg was gratified by the turnout of members of the Fort Collins Board at the Greeley meeting. He said a thank you letter has been sent to Greeley. Dr. Grigg said the item was placed on the agenda to encourage any follow-up thoughts or comments about the meeting. Tom Sanders reported that two points emerged from the meeting which he thinks are significant: 1) He learned that Boulder is actively pursuing the establishment of a water board. "At a time when our city council appears to be de-emphasizing the role of our Board, I think it's surprising that Boulder is in the process of creating one." he asserted. He suggested that President Grigg may want to send a letter to Boulder's mayor offering them some help with their effort. 2) The other significant point was discussion of the concept of a water bank, which Mr. Fan of Greeley has been promoting for a number of years. Greeley just spent about $7.3 million to buy water with the idea of leasing it back and establishing better control of water in the region. The City of Fort Collins spent an equivalent amount in 1989, but both cities are doing this independently. "I think the time is right for Fort Collins to take the lead in this and develop a policy," he began. We would then become a broker of water in this part of northern Colorado. Bonded indebtedness, to some extent, may be a way of going about it. This would also be a Water Board Minutes February 21, 1992 Page 8 catalyst for regional treatment of water and cooperation in wastewater treatment, "which we must have in the future," he contends. Regional cooperation is one area in which the Water Board can have some measure of impact, he emphasized. He went on to say that he has consistently held the belief that the City should make a profit on leasing of water. However, staff members have convinced him that the present system creates a more positive atmosphere with the agricultural community. With the positive attitude in the ag. community, it might be an appropriate time to approach the water banking and lease -back approach, he concluded. MaryLou Smith stated that every time the water banking idea is discussed, she wonders why someone isn't doing something about it. Could one of the reasons be that no one is taking the initiative because of the way the NCWCD guidelines are currently set? Apparently the rules do not allow cities to stockpile much water. If a water bank were established, would it prompt the District to make some changes in policies, considering that a large part of the water that would be banked would be CBT? Is that one of the obstacles? she repeated. Ward Fischer thinks it's a major obstacle, Tom Sanders responded. Dr. Grigg has been working with Ward Fischer on the Chamber of Commerce Water Committee. Mr. Fischer has been very interested in the water Bank concept. His idea of what a water bank could be is that an entity would be formed in northern Colorado which had the money to buy water rights, and lease them back. The reason that concept hasn't moved ahead is mainly financial, Dr. Grigg explained. There is nobody who has the incentive to step forward to provide that capital. Mr. Fischer has asked why the cities can't get together and provide the capital, and the answer is they are all going their separate ways. Neil Grigg went on to say that considering the question of why the District couldn't lead the water bank, you must look at the District's function as the operator of the CBT system. "It has water in the bank, but it can't put more water in the bank because it doesn't have the charter to buy water rights from all the ditch companies and manage it. The current president of the District anticipates that they will be operating on a regional basis in the future." Mr. Farr's central idea to "pool" the water is shared by the District. After considerable thought on this idea and discussing it with Ward Fischer, Dr. Grigg thinks the time may be right for an individual or group to step out and do something. He pointed out that there are discussions about this all over the west. "I suspect there are cities, particularly in California, that are doing some things we haven't heard about." His idea is that Fort Collins would develop the policy. "It would be a water rights acquisition policy that would generally be in our best interest." The City might go somewhat beyond its pure needs for water in the interest of banking some water. We could develop a policy in which Water Board Minutes February 21, 1992 Page 9 we would buy the rights to use that water in dry periods, leaving it in agriculture almost all the time otherwise. Mechanisms could be worked out as to how that could be done. After the policy was developed, we could announce that we would negotiate with agriculture water right owners as to whether or not we could go into business together. "If other cities in northern Colorado did the same thing, we would have a water bank," he concluded. Tom Sanders pointed out that, in a sense, Fort Collins was doing that when in its drought study it was preparing to have enough water to meet a one -in -one hundred year drought. "Now we have changed that to one in 50 years," he said somewhat regretfully. MaryLou Smith explained that the reason we did that at that time was because we were planning to depend on the raw water requirements from developers to pay for that additional water; whereas Dr. Grigg is suggesting another mechanism, for example, Tom Sanders' idea of using bonds. Ms. Smith recalled from her term on the Water Supply Committee, that they didn't want to put too big a burden on the immediate development for the water banking idea, but that it could be done through some other financing. "Wouldn't we still have the obstacle of the District's policy limiting cities on purchases of CBT water? she reiterated. Dr. Grigg replied that on CBT water he suspects we would have to get the District to approve our policy, and he thinks it would require some changes in their policy. "If we had a policy that was good for agriculture and would keep the water here, and it was good for the cities, I think they would go for it," he stated. The current president of the District Board also may be agreeable to the idea, he added. Does the Northern District charter prohibit them from taking the water banking role? Mark Casey wanted to know. They have the CBT system to operate as well as the sub -district, Dr. Grigg began. "I don't think their charter prohibits them from engaging in actions in general, because they are organized under the Water Conservancy Act, which would be their charter, and it is a broad state statute, Dr. Grigg explained. Mr. Casey thinks there should be a regional water bank, but he is skeptical of it happening soon. "I'm doubtful about what the incentive is for someone to step up and do that," he stressed. The Northern District has considerable expertise, and we do have input to them, although we wouldn't have the same kind of control we would have with a water bank. The District is a mechanism that ought to be looked at before a totally separate entity is formed, Mr. Casey believes. MaryLou Smith responded that "we've all been saying that since the regional water meeting we had after Thornton dropped its bomb shell, and that was at least 5 years ago." Everyone has Water Board Minutes February 21,1992 Page 10 been asking the District if there was any way they could fill that role. Her understanding is that the answer is no. Otherwise, she thinks it would be the perfect mechanism. "If we were to get serious about looking at this, and some other entity was considering it too, we would soon hear about it," she predicted. "That might bring the Northern District to the table too," Mr. Casey added. Ms. Smith continued by saying that the other reason we need to do something about this --and she can see both sides of the issue --is if we want to have enough water for growth in this area, we definitely need to start looking into how to secure the water before some other entity comes in and gets the water that is available. "However, I can understand that there are those who don't think we should have growth in the area, so we don't need to be obtaining water." She has also heard the argument that just because you don't have water doesn't mean you are not going to grow. California's experience has proved that, she pointed out. MaryLou Smith raises the key question about growth, Tom Brown said. "I prefer that we take a neutral stance on growth; neither making it easier or more difficult," he contends. That seems to have been the historical stance of the Water Board, that growth pays its own way. "If you took that position and you had the Water bank where you were buying water, the question then becomes: who do you sell that water too, and at what price? Do you sell or rent it at the below market price because a person is located near you, as opposed to a Thornton? Do you favor growth in your area versus the Denver area, the obvious dichotomy here, or are you impartial and get the greatest return for the existing citizens of the City? "I'm not talking about agriculture versus municipal," he clarified. "If you are going to take the impartial stance, then what's the benefit of banking water?" he concluded. MaryLou Smith thinks that you would want to favor those in your own area. Neil Grigg sees the main reason for creating a water bank is to keep the water from being bought off by the Denver area --so it becomes a protective measure. Tom Sanders pointed out what has happened in the Rocky Ford area because they lost control of their water. "I've never been pro growth, but I'm realistic enough to know you can't stop growth by cutting back the water." He knows the forces that are upon us will eventually dry up agriculture here. He also thinks the questions that have been raised are all legitimate ones, and must be looked into. The Water Board has always had a neutral position on growth. They have always considered what is best for the City of Fort Collins now and in the future, he stated. "Where is the Chamber committee in terms of this concept? Tim Dow asked. Dr. Grigg said that currently the issue is on hold. There were only a few people who have been active on the committee --Ward Fischer is one, and he's been very interested in the water bank. Craig Harrison is also interested in it. Water Board Minutes February 21, 1M Page 11 When the Committee talked with Mr. Farr about the water bank about a year and a half ago, they concluded there wasn't anywhere to go with the concept at that time, because of the lack of money to form a water bank. At that time the Committee decided to wait until the District completed their regional study. Now that the District has essentially finished that study, it looks like the District is going to become a regional wholesaler of raw water. They are planning to construct a pipeline to Broomfield and perhaps to Fort Lupton and that area. "As far as making water available to northern Colorado through the District, I think that will happen," he concluded. The thing we could do next is to invite Ward Fischer to our next Water Board meeting, President Grigg suggested. He could discuss the water bank concept with the Board; and as a representative of some of the agricultural community, he has a sense of what is going on. MaryLou Smith wondered how the current City Council would feel about the Water Board creating a committee to explore the water bank concept. "That's a pretty major thing to look into." Do we have the authority to do that? "Yes," Dr. Grigg replied. In fact if the Water Supply Committee weren't burdened with so many issues, it would be logical to approach them on this matter. "Let's see what Ward Fischer has to say, and then perhaps establish an ad hoc committee," Dr. Grigg proposed. "A lot is going to happen in the future on these subjects, and we need to be up to date on them," he stressed. Tom Sanders thinks that the District scares Greeley and Fort Collins "because we lose more control than we have now. There's got to be something below the District --a group that controls all the water banking, and something above just the individual cities," he contends. "That's the first step," he concluded. Neil Grigg pointed out that the District needs a role. In his vision, they would play the major role. The cities would be in partnership with them, and in partnership with agriculture, so the region would be unified. The Water Board agreed that a first step in this issue would be to invite Ward Fischer to a meeting to discuss the subject further. RRQ= on North Poudre Irrigation Co=a IC) Meeting President Grigg attended the NPIC annual meeting, and he wanted the Water Board to be aware of what transpired there, with the help of Dennis Bode. He said that Manuel Pineda, the president of the NPIC board, is very interested in the Halligan and Reservoir No. 6 situations, so he invited Dr. Grigg to the meeting. "I had the sense that for the future of our Board and our raw water supply, that the number of common interests we have with North Poudre are quite significant," Dr. Grigg observed. Moreover, in the future we might be looking to more joint meetings and joint activities with North Poudre. Dr. Grigg told the North Poudre Board that Water Board Minutes February 21, 1992 Page 12 our Water Board is very much interested in working with them. Mr. Pineda said he would also like to come and have a dialogue with our Water Board. Dr. Grigg said that Bob Stieben, Manager of the NPIC, stated that he was quite alarmed about some of the things that are happening to their water system as a result of city growth, and "this was the only time at the meeting when people applauded." President Grigg then asked Dennis Bode to explain what the Company is concerned about. Mr. Bode wrote the following background information on the board: (North Poudre Irrigation Company) SUDDIy Direct Flow and Storage 30,000 AF CBT (40,000 units) 30,000 AF Shares Total of 10,000 shares M&I (municipal and industrial) 4,500 shares (almost half) Each share has 4 units of CBT 1. Delivery capability to M&I 4500 sh x 5.0 Ac-ft per share = 22,500 Ac-ft CBT available: 40,000 x 60% = 24,000 Ac-ft 2. Transfer of Agricultural water He began by presenting some background information on the Company and explaining some of the issues the stockholders of North Poudre need to be addressing in the next few years. The Company serves an area basically around Wellington, and is the highest irrigation system in the area. North Poudre has a number of direct flow rights and roughly 20 reservoirs that serve that area. Historically, before CBT water came into the system, they had a supply of approximately 30,000 Ac-ft from the system. When CBT water became available in the mid- 50s, NPIC obtained 40,000 units; on an average, that yields 30,000 Ac-ft. The Company has close to 60,000 Ac-ft of supply. North Poudre holds a total of 10,000 shares. M&I users own approximately 4500 shares at this time; 2700 of those are owned by the City of Fort Collins. One way of looking at the 40,000 units of CBT, is that each North Poudre share contains 4 units of CBT water. The primary owners of the 4500 North Poudre shares are: Fort Collins, Kodak, and the Water Districts of Water Board Minutes February 21, 1M Page 13 ELCO, Fort Collins -Loveland and North Weld, In terms of getting the supply to the stockholders, the water from the direct flow and the storage reservoirs basically serve irrigated agriculture in the Wellington area, and water delivered in Horsetooth Reservoir serves the municipal and industrial customers. Mr. Bode thinks some of the issues that Bob Stieben was talking about relate to the delivery capabilities to the M&I customers. If all of the M&I customers wanted their full appropriation that North Poudre makes available, before long there would be a problem if the M&I customers' number of shares continues to grow. For example, with 4500 shares, if there is a 5 Ac-ft per share appropriation, it would yield 22,500 Ac-ft, which would need to be delivered out of Horsetooth Reservoir. With the amount of North Poudre water which comes from the CBT system, in a year where there is only a 60% CBT quota, there would be a yield of only 24,000 Ac-ft. It is obvious that the 24,000 and 22,500 numbers are very close. This could create a problem in delivering to the M&I customers. There is also a problem related to the transfer of the agricultural water as the M&I customers obtain those shares. If the M&I users want to use the ag. portion of the water, they need to go through a transfer case to change it from ag. to municipal use. Right now, there is probably less than half of it being used as CBT water. One of the issues is to look at how you might either go through a transfer or make some arrangement for exchanges in order to use the CBT water to meet the M&I uses. One of the key points is that you reach a time where all the CBT water is used up. In order to get any additional use out of it, the users would have to go through the transfer process. Mr. Bode said the situation is far more complex than he was able to depict here. He tried to simplify it to make it more understandable. If the City continues to take North Poudre water, and the other M&I users do too, is the Company's problem going to get worse, and if so, is there any policy that we could adopt that would help North Poudre and the City too? Neil Grigg inquired. Mr. Bode replied that we will get to the point where we are going to be required to go through the transfer process if we want to use some of the ag water in our system. If the M&I users were to take more than half of the North Poudre water, we would have to develop a way to get water from the North Fork into our system, he explained. Dr. Sanders and others, weren't sure what the major issue is here, so Mr. Bode explained further what the situation is. Currently, there are 4500 shares. Almost 50% of North Poudre is owned by M&I users. Each year the Company sets an appropriation of x number of Ac-ft per share, and that usually ranges from about 4-6 Ac-ft per share. Assuming that we had the right to take the full 5 Ac-ft per share, and realizing --right now at least --that we would have to Water Board Minutes February 21, IM Page 14 take it out of Horsetooth Reservoir, we would need to take 22,500 Ac-ft out of Horsetooth to meet our needs. In other words, the 40,000 units may yield anywhere from 20,000-40,000 Ac-ft. In many years with a 60% quota, there are only 24,000 Ac-ft available. For example, if M&I users have 5,000 shares, you are at 25,000 Ac-ft. Suddenly you don't have enough water to deliver to all the M&I customers out of Horsetooth Reservoir. "So what does that mean?" Dr. Sanders asked. Part of the issue relates to whether we buy more North Poudre shares, for example, Mr. Bode replied, or how we go through a transfer and get water that is coming from the north part of the system. "We have talked about an intake from the Munroe Canal that would get water into our treatment plant, for example," he related. "That's our problem, not North Poudre's," Dr. Sanders insisted. It just means we may not want to buy anymore North Poudre water, he added. Mr. Bode agreed that it is largely our problem, and it is probably a concern for the majority of the stockholders. "In addition, I think the stockholders in the Wellington area see it as a threat to their way of life, if Fort Collins continues to take more shares in the Company. It also becomes an issue of drying up the lands, etc," Mr. Bode pointed out. Mike Smith related that the City's policy has been to limit North Poudre use to not any more than 4 units of CBT water. Continuing this action could solve the problem, and "it's the right thing to do," he asserted. As a shareholder in North Poudre, the shareholders are only entitled to their proportion of what water is there. The Company only has 40,000 units, and if you own 5,000 shares, you only own half of the CBT units. "It's our problem that we have other water that isn't classified as M&I water, and the M&I users need to do something about that, with North Poudre's help, of course," Mr. Smith stressed. He added that "we shouldn't rob the ag. people of their proportion of CBT water because we haven't followed through with changing the other water," he continued. This could be solved if we had a pipeline from the River to our treatment plant, Dr. Sanders reiterated, "and change the use of the water," Mr. Smith added. However, there would still be some concern among the ag. users of their water disappearing, but that is an issue with agriculture in general, because some people want to sell their water, Mr. Smith pointed out. Mr. Bode returned to his information on the board. He said the CBT water is basically able to be used by anybody--ag. or municipal. The main requirement here is that the return flows from that go back into the system. About 30,000 Ac-ft is decreed for ag. use, although there is a small amount decreed for municipal use. In order for us to use it, we essentially would only get the consumptive use part of the water. Using a figure of 50% efficiency, about half of this is consumptively used; the other half is return flow. Water Board Minutes February 21, 1992 Page 15 Tom Sanders wanted to know if we bought the water strictly as drought insurance, could we still keep it as ag. water? "I think the banking concept will create a new definition of a decree," he went on to say. "On a temporary basis sometimes you can do that," Mr. Bode explained, "but when things begin getting complicated and there are many decrees that have certain stipulations, then you may not be able to do that." This appears to be behind Bill Farr's concept of pooling water too, Dr. Grigg commented, "because if you are ever going to pool water, you must have a way to change your uses without having to run into that obstacle every time." He added, "that's a major problem which I don't know how we are going to solve." President Grigg thanked Dennis Bode for his explanation. "I think this was something we needed to be aware of," he added. MaryLou Smith said she had not thought of the ditch companies as owning CBT water. "Is this common?" she asked. Mike Smith explained that shareholders of the various companies may own their own CBT water, but a company owning it is very rare. Does this mean that if we want to do much more with North Poudre in the future, that we must enlarge Halligan Reservoir and help them out, Tom Sanders asked. Also isn't it good for agriculture if the City becomes a partner in Halligan? "It's good for the Company and it's good for the City too," Mr. Smith responded. He added that the Halligan enlargement is all decreed for M&I use. "I think that is another reason for the City to move as quickly as possible on the Halligan decision," Dr. Sanders concluded. Mike Smith stressed that North Poudre is concerned about how to handle the CBT water, and they may adopt a policy saying that they are only going to deliver 4 units of CBT per share. "As I mentioned earlier, the City already restricts itself to that amount," he said. With the other water districts, it may be a problem, because they are counting on that extra water. MaryLou Smith pointed out that it makes the City more vulnerable, because each year a larger portion of our population is in those other districts, "and we don't have any control over them." That is a potential problem, Mike Smith acknowledged, because in a time of extreme drought we could find ourselves supplying our customers with water and the districts' customers won't have an adequate supply or will be restricted. A more regional approach in the future may help to alleviate this somewhat, Tom Sanders commented. Staff ReIrts Treated Water Production Summary Dennis Bode reported that the January use shows 86% of what was projected. Water Resources staff and staff from the Water Production Division are working together to double check some Water Board Minutes February 21, 1992 Page 16 of the numbers because there has been a decrease in water production from a year ago. "Our actual use was 200 Ac-ft less than what was projected," Mr. Bode related. "It's not a large amount, but we think we need to check it because we don't think there has been that much reduction in use from a year ago," he said. Update on Thornton Trial Mike Smith reported that Fort Collins completed its testimony at the trial recently. The trial is adjourned until March 23rd, which will begin another 3-week session. After that we may be close to wrapping it up, and then Thornton will start their rebuttal case. Mr. Smith said he was impressed with the positive testimony from our water quality and water quantity experts. Neil Grigg informed the Board about a letter from Ward Fischer dated February 11, 1992, expressing concern at the testimony of one of our witnesses in the trial. Our legal counsel is preparing a response to that, Mr. Smith stated. "We don't share Mr. Fischer's perception." Mr. Smith assured the Board. Dr. Grigg explained that the issue appears to be fairly technical, in that it involves imposing volumetric limitations on the amount of water that would be used by Thornton in the future. Apparently any limitations applied to Thornton may apply to others, as well. "I think it may be good to hear both sides of that issue," he said. "What we were concerned about in the trial was Thornton's ability as a major stockholder in WSSC, to expand the use of that system and divert more water than they have historically, which would impact our water rights," Mr. Smith explained further. Even if the City is a stockholder in WSSC, we are concerned about the consequences, he stressed. Committee Reports Legislative and Finance Committee Chairman Tim Dow and staff support person Linda Burger met with the Legislative and Finance Committee on February 12th. Mr. Dow reported that the Committee selected a few bills they thought were of greater importance to the Utility this year. In the past the Committee has taken a position on more bills that had water involvement, he said. The Committee wants to recommend support for senate joint Resolution 3 by Sen. Bishop. It basically keeps Fort Collins Wastewater Treatment expansion on the eligibility list for a revolving loan. The two bills that the Committee recommended that the City Council Legislative Committee oppose are SB44 and SB92. Those are essentially basin of origin bills that, in short, require full impact studies with any proposed transfer. The Committee felt those were basically western slope sponsored initiatives that wouldn't necessarily be consistent with or favorable to Fort Collins. Water Board Minutes February 21, 1992 Page 17 The Committee had asked Linda Burger for additional information on two other bills. She said that SB 139 does a couple of things: It establishes a whole series of new responsibilities in the Office of Health Protection. Many of them are incentive or educational programs to help encourage compliance with environmental laws. The rest of the bill deals with enforcement. It applies to virtually all state environmental laws, not just those affecting water. There are already civil and criminal penalties in the federal law that are enacted through the discharge permit system, but this would create a whole new set of state laws with civil and criminal penalties on the state level. "It has been difficult to track the behind the scenes information about this bill," she said. As far as she has been able to gather, there is not someone proposing the bill because current enforcement is inadequate. It seems to be a revenue generation bill because the fines that come in from the new enforcement system would go back to the Office of Health Protection to support the programs that are proposed in the bill. It appears this is a part of the whole controversy over what the state program should be, where it should be located in the state government, and how it should be funded. There are some amendments offered on the bill. One is that if you do an internal audit, you don't have to turn that information over to the state to be used as the basis for enforcement. SB140 was introduced as a result of the NCWCD's program to build its pipeline to Broomfield and then to extend it to perhaps serve some of the communities in the South Platte basin. "As I understand it, the financial advisers have told them that if they are going to pro rate the costs of the capacity of the pipeline, they have to make some changes in the Conservancy District Act to make that possible," she explained. The Committee had some concerns when they met, so we had our legal counsel Mike Shimmin review it. He doesn't see particular problems with the bill unless the City of Fort Collins wants to take a position that we oppose the pipeline to Broomfield and that we don't want any extension going in that direction. In that case, it would be of value to oppose the bill because it does assist in making the pipeline project possible. At this point, the District is proposing to deliver raw water to Broomfield and the other communities. Mike Shimmin doesn't think it impacts one way or another whether they have the authority to provide treated water. The only other bill that is noteworthy, Tim Dow said, is HB1200, which has been introduced previously, and proposes a transfer of the Water Quality Control Program to the Department of Natural Resources. The Committee wanted more information as to why Tom Sanders has been concerned about water quality, and "perhaps getting the short end of the stick on it." Water Board Minutes February 21, 1992 Page 18 Linda Burger said that as of last week, HB1200 was still in committee. Her guess is that with all that has been occurring with the Natural Resources Dept., which no longer has a state engineer or director of the Water Conservation Board, that this is not going to be a propitious time for major reorganizations; "although I suppose it could work the other way," she added. If they are going to take action on it, it is going to have to be soon because the deadline is nearing for getting bills out of the House. Ms. Burger commented further about SB92, which the Committee has recommended that the City oppose. The Colorado Water Congress and some other water interests have been working with Senator McCormick to try to come up with some alternate language to that bill, and language has been drafted which totally changes the bill. It is no longer a mitigation bill, per se, but rather a bill that requires re -vegetation where land is dried up when, for example, it is transferred from agricultural to municipal use. The revised language has not yet been adopted by the Agriculture Committee, or it had not earlier this week. If it is adopted, it is a drastically different bill from the one the Legislative and Finance Committee discussed. Re -vegetation plans have been included in decisions on water rights transfers in the past. The new language says it is okay for the water courts to do that and to follow through and make sure that the re -vegetation occurs. "We have a lot of complex issues on all of these bills which we discussed for a couple of hours at the Committee meeting," Neil Grigg observed. He said, as a matter of procedure, the Board needs to endorse the Committee's recommendations that go to the Council. Tim Dow summarized the Committee's recommendations: that the Water Board pass on to the City Council's Legislative Committee, support for Resolution 3 and opposition to SB44 and SB92, as initially submitted. No positions were taken on the other items at this point. The question came up as to whether the Committee wants to condition its recommendation on 92 considering the change in language. Tim Dow stated that the recommendation would be for the bill as it was originally drafted and reviewed by the Committee. Tim Dow moved that the Water Board support the Committee's recommendations to the Council Legislative Committee. Mark Casey seconded the motion. Tom Sanders asked to amend the motion to state that the Board take a position opposing HB1200. Tim Dow related that the Committee made the decision to take no position on this bill because they didn't know why the change was being proposed or what effect that might have on the relative position of water quality considerations. Tom Sanders' reason for opposing it concerned the diminishing role in many areas of the country of public health in water quality decisions. He added that the Water Quality Control Water Board Minutes February 21, 1992 Page 19 program "is so weak and understaffed that water quality issues might be handled better in the State Engineer's office where there are more resources." His amendment died for a lack of a second. The question was called and the motion passed unanimously. Dr. Grigg assured Tom Sanders that the defeat of his amendment doesn't mean he can't pursue the matter further at another time. Conservation and Public Education Committee Chairperson MaryLou Smith announced that the Committee will be meeting in March. She asked if staff has forwarded the information that the Council requested at the work session on the Demand Management Committee recommendations. Mike Smith said that the responses to their questions have been sent with a note stating that the Demand Management Committee recommendations will be scheduled for a regular Council session in late March or early April, unless they advise staff differently. Neil Grigg informed the Board that a letter has been sent to Mayor Kirkpatrick indicating the Board's desire to work with her on Promoting the "Year of the River." Engineering Committee The Engineering Committee will meet February 25, 1992 at 10:30 A.M. in the W&WW Utility small Conference Room. (The meeting was subsequently changed to another date.) Other Business Governor's Statement Re Personnel Changes in State Engineer's Office Linda Burger furnished copies of the Governor's statement for Board members. Dr. Grigg began by saying that since the State Engineer was fired and the head of the Conservation Board resigned, it has been a volatile couple of weeks in Colorado water politics. Ms. Burger said that there seem to be a variety of interpretations of what the former state engineer Jeris Danielson said on the issue of the Colorado River Compact. "It seems to me that there is more than meets the eye to this issue," added Dr. Grigg. There is some dissension here as to who holds the reigns of Colorado water policy --at least in relation to the Colorado River Compact. Historically has it been the State Engineer who dictates the policy, and the Legislature just falls under his purview? Tom Sanders asked. The State Engineer doesn't develop any policy, Neil Grigg responded. "I meant by expertise, not charter," Dr. Sanders clarified. It might be said, at least in relation to the Colorado River Compact, that there have been very strong roles by the State Engineer, the State Attorney General and the Colorado Water Conservation Board. "I believe there may have been some conflict between the State Engineer Water Board Minutes February 21, 1992 Page 20 and the chairman of the CWCB on how the compact ought to be dealt with, but in the years of Governor Lamm's and Romer's administrations, at least, there was a feeling that the Board and the administrators had a strong role in developing policy," Ms. Burger observed. "It's my impression that Governor Romer has initiated discussions with California independently of those traditional ways of arriving at policies," she added. There are many complex issues here: Should Colorado be in the business of selling or leasing water across its borders? How do we keep our compact entitlements on the Colorado River when we have difficulty developing future uses? "There have been a number of stances taken on these issues," Ms. Burger concluded. Linda Burger continued by saying that the Water Congress invited representatives from California, Nevada and Arizona to its annual meeting. Nevada wasn't there, but the representatives from California and Arizona gave fascinating presentations conflicting very strongly on how the water division between the lower basin states is going to occur. There are concerns that Nevada is doing things behind the backs of the other two states that will impact their entitlements. The representative from Arizona was particularly critical of Governor Romer for initiating discussions with California and not including Nevada and Arizona. "We're talking about some very complicated interactions that involve several different states," she emphasized. What has been happening is that Arizona has been developing entitlements that are beginning to impact what has been flowing into California. The same thing is true of Colorado. "We're not using all of our Colorado River entitlements, which are being used in California, so there is a real concern as to whether Colorado could lose those entitlements over time," she concluded. Colorado Water Engineering and Management Conference Neil Grigg announced that on March 2nd and 3rd there is going to be a Colorado Water Engineering and Management Conference and AWRA Colorado Section Symposium in Aurora. Ken Salazar will speak about Colorado's environment; Gale Norton will be speaking on interstate and intrastate compacts, and Tom Sutherland will talk about water issues in the Middle East. Dr. Grigg said it will be an interesting and informative conference and encouraged Board members and staff to attend. He will send information to the Water Board secretary who will forward it to Board members and staff. Neil Grigg thanked Molly Nortier for providing Water Board members with copies of the 1991 Water Board Annual Report. Water Board Minutes February 21, 1992 Page 21 Since there was no further business, the meeting was adjourned at 5:12 P.M. Water BoardSecretary