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HomeMy WebLinkAboutWater Board - Minutes - 09/18/1992WATER BOARD MINUTES September 18, 1992 3:00 - 5:00 P.M. Water and Wastewater Utility Conference Room 700 Wood Street Staff Su000rt Person Mike Smith Members Present Neil Grigg, President, Tom Sanders, Vice President, MaryLou Smith, Ray Herrmann, Terry Podmore, Tim Dow, Paul Clopper, Tom Brown Staff Rich Shannon, Mike Smith, Ben Alexander, Wendy Williams, Andy Pineda Beth Voelkel, Scott Harder, Molly Nortier, John Duval, Assistant City Attorney Guests John Bigham, Agency Coordinator, Northern Colorado Water Conservancy District George Reed, Citizen Observer John Carlson, Special Legal Counsel (Halligan Reservoir Agreement) Members Absent (all excused) Mark Casey, Dave Frick, Dave Stewart President Neil Grigg opened the meeting. The following items were discussed: Minute Paul Clopper moved that the minutes of August 21, 1992 be approved as distributed. After a second from Ray Herrmann, the Board approved the motion unanimously. Uodate: Northern Colorado Water Conservancy District (CWCD) District representative John Bigham distributed information on a precipitation enhancement project which has been approved by the NCWCD to be initiated in the fall of 1992 and operate through the spring of 1993 "if conditions are favorable." He also provided copies of the extended weather outlook for September through November of 1992, prepared by Dr. Art Douglas of Creighton University in Omaha, Nebraska. Mr. Bigham pointed out that Dr. Douglas' predictions have been about "75-85'% correct, so if he is accurate, we are probably Water Board Minutes September 18, 1992 Page 2 looking at above normal temperatures and somewhat below normal precipitation through November." He went on to say that the District Board approved a six-month precipitation enhancement program as mentioned previously. "We will try to keep you updated as the program progresses," he said. He explained that the primary target area will be the Willow Creek drainage area to enhance the precipitation on the western slope and supplement the runoff which is stored in Lake Granby for distribution on the eastern slope. He continued his report by saying that the entire District system is about 58% of capacity, "so we are approximately at 4 feet in elevation higher at Granby than we were expecting to be." Because of the rain there has been less demand. We also gained some water because the Board's allotment was more conservative this year. "We expect to have between 80 and 90,000 Ac-ft of water carryover from the carryover program that will not be delivered this year, and will be there for the pools," he concluded. The District is watching the Wilderness bill as it is moving in congress. There hasn't been a recent report. Considerable manipulation has taken place with this bill. He understands it has left the house, and there will be committee action on it. "We expect there will be some water language included in it, and some changes as it moves along." The District is also watching with great interest, the Tax Limitation Amendment, because if it passes, there will be some very serious ramifications. Tom Sanders asked if there will be an assessment of the results of the precipitation enhancement project. "Probably, if anything, it will be just a trend," Mr. Bigham responded. "People have been looking at this for years; it takes about 20 years before you can even see a trend," Dr. Sanders commented. He asked how much money the District is spending on this. "About $70,000," Mr. Bigham replied. North American Weather Consultants, an international firm, has been involved in weather modification for about 30 years, and they have considerable data to back up what they have accomplished. "We've worked with them previously; some of their trends and results have been great, but you have to go into it with your eyes open," he stated. Dr. Grigg asked if the $70,000 is per year. The first year is more expensive, because of the purchase of generators which will cost $22,000, Mr. Bigham replied. "It will then be less per year unless we expand the program, which we hope to do," he added. Tom Sanders asserted that the project might actually result in less rain. "I'm surprised you are doing something like this," he remarked. "If you're successful, those of us downstream will be the losers," Ray Herrmann observed. "You never take all of the moisture out of the clouds," Mr. Bigham explained. Potentially there is a great amount there; more than you could pull from it. 40 Water Board Minutes September 18, 1992 Page 3 Generally it's just the lack of the nuclei to get it out." "You get a lot more drops, but they are smaller, so they evaporate quicker," Dr. Sanders stated further. Mr. Bigham conceded that there is a difference of opinion about weather modification. Introduction of New Staff Person Scott Harder began working with the W & WW Utility on Monday, September 14th. He will be working in rates and finance and other related areas. Appointment of 3 Water Board members to City Council/Water Board Ad Hoc Water Qualitv Master Plan Committee Copies of Resolution 92-136 appointing Council Members Gerry Horak, Bob Winokur and Loren Maxey to a Water Quality/Water Treatment Master Plan Committee, and the Council agenda summary were included in the Water Board packets. The next step will be to select 3 Water Board members to serve on the Committee. According to the summary, staff is concerned about the increasing costs associated with providing the City's customers with high quality treated water. Studies conducted during the past couple of years indicate a potential need for various capital improvements at the City's water treatment facility. These improvements are related to a number of issues. It is estimated that these improvements could cost $8-10 million. Most of these issues are associated with treating water for existing customers, so the cost would be assessed to existing customers by means of higher monthly user fees. Taking into account the information from a recent customer satisfaction survey, and the fact that there are a number of pending capital projects which will impact monthly water rates, the W&WW Utility decided that the Water Board and City Council may need to be more actively involved in determining what the City's water quality philosophy or policy will be, and reviewing and adopting a Water Treatment Master Plan. Establishing a Water Board/City Council committee to review and make recommendations to the Council regarding the City's water quality policy and water treatment master plan appears to be a viable method of addressing this critical issue. Committees established to explore other important water and wastewater issues in recent years, proved to be a valuable format. Committee action would also support the Framework for Environmental Action which suggests the creation of a formal treated water quality policy. Dr. Grigg asked what Water Board members served on the previous Council/Water Board committees. Neil Grigg, Marylou Smith and Tom Moore served on the Water Supply Policy Committee; Tim Dow, Mark Casey and Tom Sanders were members of the Wastewater Master Plan Group; and Marylou Smith, Terry Podmore and Tom Brown (after Tom Moore retired Water Board Minutes September 18, 1992 Page 4 from the Board) were appointed to the Demand Management Committee. Dr. Grigg said that the Water Quality Committee has several aspects to it that are unique. Even though it relates to water quality, it is not primarily a technical committee, but it has technical aspects to it. "It has a lot to do with relationships between the districts and the City." The Water Board has discussed the water quality issue in the past, in the agreement between the City and the South Fort Collins District. That issue was never fully resolved because the District agreed to purchase treated water from the City instead. However, the District said that in the future, they would be able to meet the higher standards when they modify their water treatment facility. Dr. Grigg said there are a number of issues that need to be faced, in addition to the time needed to serve on the committee, which could be significant. Mike Smith said that Council would like to get the first part, the water quality policy, wrapped up prior to April because there could be some changes on the Council. The water treatment master plan would probably be addressed after that. Dr. Grigg asked why the two issues have been "wrapped together" and what is the current thinking on the Council about working with the Districts on this? "One thing I have heard is that the Districts are interested in participating," he added. "There might be a difference between a task force they were on versus a task force they were not on in terms of cooperation," he pointed out. "I think the Council is very interested in having the public involved; not only the Districts, but the general public, and it's especially important for the water quality policy," Mr. Smith responded. He doesn't think that the Council has an expectation that the Districts will be sitting on the committee, but their input would be considered along with other members of the community. Public participation is a very important part of the process. President Grigg stressed that public participation should be addressed by the Water Board as well, because one of the Board's functions is to act as a liaison between the community and the Council on some specialized issues. Dr. Grigg asked what the thinking was behind putting the water treatment master plan with this. The first step before you can finish the master plan is to know what your policy on water quality is, because that will dictate some of the things you are going to do, Mr. Smith replied. "We could have put that off and had another committee do the water treatment, but the two are so closely tied, that we can get the one completed and move right into the master plan." Mr. Smith added that because of the need for expediency for developing a policy, a commitment to schedule adequate time for these meetings is going to be important to accomplish the task. President Grigg emphasized that whoever is appointed from the Water Board needs to be aware of that time commitment. On the other hand it's an important subject and very interesting, he added. He went on to say that water quality and water treatment are going to be important issues for the future of the Utility; they will be important for the future of regional cooperation, Water Board Minutes September 18, 1992 Page 5 and this subject could even involve the NCWCD in some ways. He then asked for volunteers. Tom Sanders, Tim Dow and Paul Clopper volunteered. Ray Herrmann moved that the three who volunteered be appointed to the Committee. After a second from Tom Brown the Board unanimously approved the motion. Neil Grigg said he would be willing to serve as an alternate. The secretary will forward the names of the Water Board appointees to the Council. Dr. Grigg emphasized the importance of the Water Board as a whole having the opportunity to review the actions and recommendations of the Committee as it progresses. "It's the purpose of the Board to be sounding out issues like that," he concluded. Review of Halligan Reservoir Draft Agreement Mike Smith explained that a few months ago the Board discussed a draft of the Halligan Reservoir Agreement and approved it with the direction that staff continue to negotiate with North Poudre on a couple of important items. The Board then requested that they again review the agreement when it was close to its final form, "and we are to that point now." He continued by saying that since that time our special legal counsel and the assistant city attorney have edited the agreement into a form which our legal counsel John Carlson was more comfortable with. It may not look like the agreement the Board reviewed previously; in format it is not, but in content it is nearly the same. Dennis Bode will take the Board through the agreement and indicate what has been changed since last time, and review all of the provisions contained in the document now. Assistant City Attorney John Duval and the Utility's legal counsel John Carlson are here to answer questions and explain anything that is not clear. Dennis Bode explained that there has been considerable effort in the last few weeks to rewrite the agreement. Thanks to John Duval and John Carlson there has been a thorough legal review. Mr. Bode then gave a brief overview of the document. He began by referring to the table of contents to get a feel for the organization of the agreement. Article 1 discusses the option period. This is the period between the time when we would sign the agreement to the time that we would exercise it. Basically it would be the time that the City would have to study the project to determine if we want to proceed with it. Article 2 relates how we would exercise the option if we decided to proceed with the project. It covers activities through construction. Article 3 addresses the question of how the ownership would be handled, and the operation and maintenance of the reservoir. Article 4 includes the miscellaneous items that need to be addressed. Water Board Minutes September 18, 1992 Page 6 The first page provides background about the previous agreements the City and North Poudre have entered into, about the fact that the City has acquired an interest in the conditional storage decree, and that the City has done preliminary feasibility studies regarding the reservoir. Paragraph 1.1 defines the project which is basically the enlargement of the existing Halligan Reservoir. Paragraph 1.2 talks about the option and how that works. There will initially be a payment of $20,000, and if the City decides to continue studying the project for several years, there would be additional payments according to exhibit A which is attached at the end of the agreement. This was one of the areas in the old agreement that elicited concerns. In that agreement the initial payment was $50,000. Staff was able to get that reduced to $20,000, and the annual payments were also reduced so that there were fairly substantial savings. During the early period when the City wants to determine whether to go with the project, it was particularly important to reduce those costs. Paragraph 1.4 discusses the activities during the option period which primarily allow the City to conduct the technical studies that are necessary. Also during this period the City would be required to perform any diligence and filing any applications necessary to continue diligence on the conditional storage right for the reservoir. Paragraph 1.5 addresses a concern of North Poudre's which was if the State Engineer's office should place some kind of a restriction on the project, how would we handle that? Our response was that if those restrictions should happen, the City would have one year to exercise the option, or if the City failed to exercise that option, North Poudre has two choices: they can either continue the option or terminate it. There are two ways they can do that: If North Poudre terminates the option, it would return half of all the option payments that had been paid up through that time. That was one of the other major concerns that the Water Board expressed with the early agreement. North Poudre would also have the option of continuing with the option and North Poudre could require the City to forgo the use of some of the NP shares to help lessen the impact of them not having water in Halligan Reservoir. Also in paragraph 1.6, if there was a need for major repairs before the City exercised the option, the City and NPIC could agree to make repairs, or North Poudre could terminate the agreement. If they did this, they would return half of the option payments. Paragraph 1.7 gets into questions about the title to the property. It discusses a title insurance commitment or a title abstract, etc. There is a lot of information in that section which is mostly legal and protects the City from title defects, and items of that nature. If there were defects, there is a provision that says if defects were not cured after 12 months, the City could terminate Water Board Minutes September 18, 1992 Page 7 the agreement, and all funds would be returned to the City. Paragraph 1.8 discusses termination by the City. If the City fails to renew the option, or to exercise the option, the option would terminate at the expiration of the current term. If the City chose to terminate the option, North Poudre would retain all the option payments that had been made up to that point. He then moved on to Article 2 which addresses exercise of the option. If the City chooses to do so, it would notify North Poudre in writing. Once that is done, there would be a conveyance to the City of all the land that North Poudre owns up in that area, and also conveyance of North Poudre's interest in the conditional water right. Once the option is exercised, an initial payment would be made, again, according to exhibit A for the year that that happens. Those annual payments would continue. Paragraph 2.2.3 explains the easements and retained ownership. North Poudre would continue to own the 6,408 Ac-ft of storage that they currently have, as well as the decrees that spell that out. It also mentions the title that would be conveyed to the City. Again, at the time that transaction occurs, North Poudre would provide the City updated title insurance commitments or abstracts of title for land to be conveyed. Paragraph 2.2.5 addresses perfection of conditional decree. The City would be responsible for the prosecution of any required diligence application. Paragraph 2.3 discusses design and construction of the project. The City would undertake any additional studies, and then they essentially would be in a position to construct the project. Paragraph 2.3.1 provides a last opportunity for the City to terminate the project. If the City were to terminate at that point, the City would re -convey any property it had received from North Poudre. In this case, North Poudre would retain the option payments. Paragraph 2.4 talks about the establishment of an advisory committee which would be done no later than 6 months after exercise of the option. There would be 2 City representatives, and 2 North Poudre representatives. The purpose of the committee would be to develop written guidelines to aid in the operation of the Reservoir. Paragraph 2.5 relates details about the construction. After the design is completed, the City would be entitled to proceed with construction of the project at its sole cost. There is also a provision that says all construction should be planned to avoid or minimize any loss of water storage or delivery capacity from the existing reservoir during construction. There is also language that addresses situations where, for some reason, you might lose existing water storage. Water Board Minutes September 18, 1992 Page 8 Article 3 goes into the ownership, operation and maintenance of the enlarged reservoir. Once the project is built, North Poudre would continue to be entitled to 6,408 Ac-ft, and the City would be entitled to the additional capacity which is planned at about 33,000 Ac-ft. Paragraph 3.1.1 addresses the question of evaporation and seepage. Currently the river commissioner in this area does not assess evaporation and seepage, but there are provisions in 3.1.1 that can provide for those possibilities, should they happen in the future. Paragraph 3.1.2 discusses what is called "stock water." Basically it says that the agreement does not convey any rights to the City for independently operating North Poudre storage. In other words, water that is associated with the shares of stock the City owned, that could be construed to be part of that capacity, wouldn't be operated independently. They may be able to use some of those shares to allocate that water into the enlargement, but we wouldn't be able to operate North Poudre's part of the storage. Paragraph 3.2 concerning outlet capacity, says that North Poudre has the right to up to 250 cfs of capacity. Paragraph 3.3 discusses temporary storage capacity restrictions in case those would develop after the Reservoir is completed. North Poudre would have the first 6,408 Ac-ft. Restrictions would first apply to the City's part of the capacity. Paragraph 3.4 pertains to recreation. The City would have the sole ownership and control of all recreational rights on the Reservoir subject to an existing recreation lease. Paragraph 3.5 relates to operation of the Reservoir. The City would operate the Reservoir and provide all necessary accounting of the water. Paragraph 3.6, about measuring devices, specifies that the City would install a gaging station below the Reservoir and any other measuring devices that the operations advisory committee might recommend. Paragraph 3.7, under exchanges, says that the City and North Poudre would have a first right of refusal to do exchanges with each other prior to arrangements with somebody else. Paragraph 3.8, pertaining to maintenance and repairs, states that each year the City would conduct a thorough maintenance inspection, and they would categorize repairs as either routine maintenance and repairs or capital reconstruction. Water Board Minutes September 18, 1992 Page 9 If it is routine maintenance, as stated in paragraph 3.8.1, the City would be responsible for that and would bear all of the cost. If it's capital reconstruction, as specified in 3.8.2, that's "another ball game." Essentially the idea here is that if major repairs were required or rehabilitation of the nature that is not reasonably foreseeable, then the City may relinquish use of the Reservoir and convey any acquired property back to North Poudre. If the need for reconstruction was the result of an act of God or something unforseen, the City would bear no further responsibility or liability to North Poudre. If, however, the cause was due to faulty design, or negligent operation, or something related, then the City would have an obligation to either reconstruct the Reservoir to a capacity to allow North Poudre continued use of its separate storage capacity, or alternatively provide equivalent storage capacity. "That's an attempt to look at the long term for this project," Mr. Bode pointed out. Liability is covered in paragraph 3.9. The City, to the extent permitted by law, would indemnify North Poudre. Article 4 delves into the miscellaneous items. 4.1 discusses water court filings. Either party to the agreement can make water court filings involving their respective interests in Halligan. 4.2 talks about notices; 4.3 deals with default; 4.4 binding effect. Paragraph 4.5 discusses stockholder ratification. Once the agreement is approved by both the North Poudre Board, and the City Council, it would go to the next North Poudre annual meeting and for ratification by the stockholders. Paragraph 4.6 addresses the assignment of the City's rights. This is a new idea that was added since the previous agreement. The attorneys tried to spell out the conditions in which the City could assign the project to some other owner, and basically it says that the City could assign its rights without restraint to a financially responsible municipal or quasi -municipal corporation if the assignee succeeds to the service obligations of the City. "It is intended to take care of the situation where, sometime in the future, say a water authority took over the obligations of providing raw water to the area, it could be assigned in that case." If it is a municipality that does not succeed to the service obligations of the City, then it could be assigned only with the written consent of North Poudre. Paragraph 4.7 talks about survival of the agreement after closing, and 4.8 about prepayment. The exhibit at the back shows the annual payment schedule, and those payments are structured such that they would be options up to the time that the City chose to exercise the agreement. Once it was exercised, then they would be annual payments for the land, the water rights, etc. Water Board Minutes September 18, 1992 Page 10 That concluded Mr. Bode's review of the document. He then asked John Carlson to discuss the three or four issues that continue to be discussed with North Poudre. Mr. Carlson began by saying there are 3 or 4 points still under discussion, and he thinks they have found a way to address them. North Poudre's legal counsel has strongly requested a provision in the agreement either for arbitration of disputes or non -binding mediation. His point is that North Poudre is a small company; Fort Collins is a big City, and this is an era when litigation is extremely expensive and frustrating to all concerned. He says, "shouldn't we do everything we can to avoid the prospects of litigating?" Mr. Carlson believes the City Attorney's office, as a general matter, is not too keen on arbitration as a binding matter for contracts with the City. The arbitration concept often sounds good, but it may work to the disadvantage of a public body such as the City. With respect to mediation, there seems to be a tide moving in the country and in this state, to urge that on parties; mediation being the kind of thing that is informally structured but does not bind or determine the result. It is more a conciliation process. Mr. Carlson believes that the negotiating team is comfortable with non -binding mediation, and North Poudre has also indicated that its comfortable with that. A second point, and this came up at the last minute, concerns the notion that if continued efforts to either reconstruct or rehabilitate the Reservoir, or continue with the project, are not in the City's best interests, the City can there upon walk away from the transaction. "We had originally provided that in such an event, all the property rights that North Poudre had conveyed to the City would be returned," he explained. The City may also acquire other property in the enlargement area. North Poudre raised the proposition that if the City walked away and abandoned the project, that it should have those properties acquired by the City. In the negotiations he thinks the City's position has been "that's okay up to a point, but perhaps the City should be repaid its out-of-pocket costs for land acquisitions and right-of-way acquisitions, if any." It is Mr. Carlson's understanding that North Poudre is agreeable to those terms. The third point, raised by North Poudre, and one that shouldn't cause us controversy, "but is easier said than drafted." It pertains to securing the promises of the City to pay the money. The document, as drafted, calls for the City essentially to secure it as an obligation, "which we all think is a pretty profound obligation." There is an alternative means other than general obligations, and that is a revenue pledge from the Utility which the City might choose to adopt in the future. It's nothing Fort Collins has ever done in the past, but it is a very common financing technique among other municipal operations. It may have merit depending on the result of the initiated constitutional amendment. "It may be a technique that municipalities are driven to." The attorneys tried to provide some flexibility on this point. North Poudre continues to be concerned that the City of Fort Collins might go bankrupt, and has asked that Water Board Minutes September 18, 1992 Page 11 we incorporate as an additional security device, a deed of trust on the Reservoir property. "I think we are willing to accede to the concept," but it is hard to work into the document for various reasons. Even though the concept is somewhat elusive, he thinks it can be done. The final point is discussed in the draft. Shares of stock in ditch companies under Colorado law, are "a unique animal." Owners of shares of stock are generally thought to own an undivided portion of the water right and the facilities used to deliver the water, subject to some control through the corporation. That line between what the corporation can say yes or no about, and what the stockholders can say yes or no about, is a fuzzy one. The agreement as drafted provides that after the stockholders vote, North Poudre and the City both can assess the adequacy of the vote and assess whether or not it's appropriate to go forward. It's an escape clause as proposed for the City. North Poudre, after thinking about it for awhile, wanted the same escape clause. This concluded Mr. Carlson's remarks on the points that continue to be discussed. President Grigg asked for questions from the Board. Dr. Grigg asked if this document is the final draft since there are still points of negotiation. Mr. Smith said this will not be the final draft. "Does the Board need to take an action today, or are we just studying this?" Dr. Grigg continued. Mike Smith explained that the goal is to try to get something approved by the Council by the end of the year, so the Board can act on it, and so it can be reviewed at the North Poudre annual meeting which is usually held at the beginning of February. It will probably take two council meetings to finalize the agreement. There is not a lot of time between now and the end of the year for Council to put this on their busy agenda. The Water Board could take action by saying after reviewing the agreement and discussing the provisions John Carlson brought up, it is okay to proceed, unless there are major changes, or that the Board would like to review the final document in October. "Our plans are to begin informing the Council of the issues in the agreement, and we will be sending out an FYI memo to them on the first of October." We don't anticipate that the Council will receive the agreement before November. Mr. Carlson said that all in all, North Poudre has agreed to the four points he discussed, and as far as he knows, those are the last four points. "It is my hope that we resolve that on Monday or Tuesday." Ray Herrmann moved that the Water Board recommend to the Council that they enter into this agreement. Paul Clopper seconded the motion. Dr. Grigg suggested that staff and the attorneys review some of the issues as they were in 1991 when the Water Board discussed this at length. He understands that essentially what we are doing here is buying the option to enlarge the Reservoir, and to pick up that option, we will also have the right to use the additional decree of 33,462 Ac-ft. of storage water. North Poudre would retain the right to their existing storage water. Fort Collins would own the dam, the Reservoir and the property, and we would get the Water Board Minutes September 18, 1992 Page 12 recreation rights. There are also some provisions for maintenance and a provision in the agreement about what we will do about unexpected capital expenditures. Dr. Grigg asked if he had heard correctly that this project means "a lot of obligations for the City." Mr. Carlson said he didn't say that, but stated that obviously it is a large economic project, and certainly the ownership and operation of a dam is a large undertaking. "The wrinkle you have here is that there is something in the nature of a retaining, permanent easement in favor of North Poudre for its 6408 Ac-ft of existing storage," he pointed out. That's the unique thing about this transaction, and that is perhaps what has caused it to be such a long document, he added. Dr. Grigg recalled that the Board, in a previous discussion wondered if this was the best "water supply deal" for us, because we hadn't done a lot of assessment of this versus other alternatives. The Water Board justified in their minds to go ahead because it looked like it probably would be a good deal, and by going with the option, the City hasn't said yet whether it is actually going to proceed with it. Mike Smith pointed out that in those discussions, "we provided a number of assessments of the options at today's cost, and that is why staff brought it to the Board, because it is an attractive option." Of course we don't know what future studies will reveal, "but if we could build it for the dollars that are estimated today, and get a permit for it, it is by far the better water supply option," he emphasized. Dr. Grigg added, "and it's somewhat of a sweetheart deal for us because we are major stockholders, and North Poudre wants to work with us." Tom Sanders recalled that the Board has liked the idea since it was first brought up by North Poudre several years ago, and since then there have been engineering feasibility studies which included three different choices for the project. Tom Sanders asked what the City has invested so far. Mike Smith explained that what the City bought from Halligan Resources was the right to be a partner with North Poudre on the water right. "We bought, for $100,000, a part of the share of their agreement from North Poudre." Dr. Sanders' problem with this is he doesn't see any real move on the part of the City to get the project constructed. "I question the need to continue buying these options," he asserted. "We haven't bought any options," Mr. Smith responded. The City had interest in pursuing the project 3 or 4 years ago. We purchased from Halligan Resources Company their part of the ownership of this conditional water right. Their ownership of that expired 2 years ago. North Poudre has continued it at no cost until we complete the agreement. What's in the agreement is to pay option money to North Poudre until we decide if we want to build Halligan or not. If we decide to build it, the payments continue according to the payment schedule. "These additional payments are for the extra 33,000 Ac-ft, and these costs would be in addition to the costs of building the dam; is that right?" Dr. Sanders asked. Yes, Mr. Smith replied. Water Board Minutes September 18, 1992 Page 13 Mr. Smith continued by saying that the City's incentive is to determine as soon as possible whether or not this is a feasible project. If we say no, our payments stop. If it's yes, we probably won't be able to determine that for 4 or 5 years. Then you are saying we might be spending $240,000 on options, Dr. Sanders calculated. "If we don't decide to construct it in 5 Years, we don't get any of that back either," he insisted. "We'll also spend a half million or more in studies, but you can compare that with the enormous amount Denver spent for Two Forks, and now they can't build it," Mr. Smith pointed out. Tim Dow was curious about how we came up with the numbers. "The numbers are pretty much in concrete," Mr. Smith replied. Dennis Bode ran some figures on what the present worth and the total of those are. Mr. Bode said the total over the approximately 40 years would be about $5.5 million in actual pay -out. If you look at a present value of that using 7%, it's about $1.6 million. If you look at what we basically get back because of reduced assessments, then that figures goes down to roughly $1.2 million in terms of present value. "Do we get the water rights and the real estate?" Mr. Dow asked. "Yes," Mr. Bode replied. "Then the extra cost is actual construction," Mr. Dow said. Mr. Dow's second question concerned default. North Poudre seems to be concerned about should the City default, but he wonders what would happen if they went "belly up," since we al hundred thousand dollars into option money. Does the City have some will have paid sever downside protection; a default remedy clause, for example? "I think that we feel we are secured in this sense," John Carlson responded. The agreement will be recorded. Before we really do anything we will have determined the state of their title. Our legal right to purchase the property will in essence, be a first lien. "We tried to structure this so we know what it is they have and what encumbrances they have, before we pay money." When we pay money, we will secure a position which will, in the event of their bankruptcy, give us protection. John Duval asked if Mr. Dow thinks it should require specific language. "I don't think we have that in this agreement," Mr. Dow replied. "I like Mr. Carlson's concept about having the equivalent of a first lien," he added. He isn't sure how it would be done since there is no secured debt as such, but he likes something like that because "ditch companies do 'go south' every once in a while." Mr. Carlson explained that what we are very anxious to do is to make sure we have, under the option, the indefeatable right to purchase this property; maybe the land, the annex rights, and this conditional water right. The whole set up of anal estate contract, what we're doing here, is designed to do that, he continued. He said he will look at it again, and if there is something we need to do in the event of default, we want to do it, he assured the Board. Mr. Carlson pointed out that it's worth remembering that the City, because of its very large stock ownership in the company, when it pays money to North Poudre, in some degree it's a set-off. Water Board Minutes September 18, 1992 Page 14 Mr. Dow offered another idea on default. If North Poudre should default during the option period, we ought to get our money back, or maybe as an alternative, get the water equivalent of our money back. "What we're hoping to do," Mr. Carlson began, "is create an obligation on the conditional water right that nobody else can have, and make sure that it is realizable. "The assets that North Poudre has for their protected absolute water rights, is in some simple minded sense, owned by the shareholders. We can secure and protect our own interest, but I don't know of a way we can get at anybody else's," Mr. Carlson explained. MaryLou Smith had questions about recreation rights and maintenance during the option period. At a previous meeting, the Board was questioning whether the City had any liability if something happens during that period, or only once we begin construction. Until we exercise the option, and go into possession, we don't have liability and responsibility, Mr. Carlson responded. That is the responsibility of North Poudre. Until we exercise that option, the recreation lease, which is to a private person, is going to be in effect. Under the recreation lease that is in place, North Poudre has the right to cancel it upon construction activities, and needed maintenance activities. There is an odd provision, however, that then says, thereafter, if North Poudre "gets the whole thing fixed up again," they are supposed to negotiate with that private entity. "We have told North Poudre that it would probably be the position of the City of Fort Collins, that it would want the exclusive control of recreation uses. I think they understand, and have agreed to that. Paul Clopper asked if there is any national forest land anywhere near Halligan that we would have to be concerned about? "The trouble with reservoir sites is that they all seem to be near public land of some kind or another," Mr. Carlson said. There are forest service lands that are upstream of the Reservoir and that will probably affect the sizing of it. North Poudre has not completely disclosed all that is stated in the title, but they are obligated to before we spend funds. "It is my understanding that they presently occupy a very small amount of BLM land. We're hoping they can purchase this as an isolated tract. They have a right-of-way to occupy those lands. There may be a very small other tract of BLM land, and so far as I know, downstream of the Reservoir site, very near the confluence of the North Fork, and main stem of the Poudre, the River system again enters national forest land." To build this Reservoir there will be a great necessity to undertake a sophisticated, complex permitting process. "We have to go in with our eyes wide open." This is a river system that is already burdened with a reservoir. There are a lot of things that are favorable. In the most preliminary discussions with the Forest Service, they have been most concerned about the state of the forest upstream, which I think is unlikely that any attempt would be made to invade. That remains to be finalized. Mr. Clopper also asked, if staff could recap some of the hard numbers on annual yield and construction cost estimates that came out of the feasibility study. The feasibility dealt primarily with construction costs and the feasibility of putting a structure there, Mr. Bode began. There are estimates made for various locations and sites, but the preferred site, I think, was estimated Water Board Minutes September 18, 1992 Page 15 to cost $18 million, and part of that was about a 25% contingency; $14 million plus a 25% contingency. A previous study shows that in terms of safe yield to our system, that it would be somewhere around 10,000 Ac-ft. Water would be used during prolonged droughts that would enable our system to increase its demand level by about 10,000 Ac-ft./year. Actual use would probably average less than that, because in wet years, we would tend to hold the storage there, but the facility would be used to meet long term drought, he concluded. Tom Brown said The Nature Conservancy is a new neighbor that sits downstream of the Reservoir since we started talking about this a few years ago. Does that affect anything; are they positive or negative about the possibility of our enlarging the reservoir? Mike Smith said they seem to be positive about the idea. They see the benefits of having a large reservoir there because it will probably insure higher stream flows through their section of the river in low flow situations, and also regulate the high flows. Mr. Brown's other question concerned evaporation. He noticed it says in the agreement that if the Reservoir were at some time charged for the evaporation, it would go to storage, and the City would pick up the cost of that unless there were only the minimum of 6,000 Ac-ft of storage. If it got down to that point, the ditch company would pick up the cost. What is the logic of this? Mr. Carlson admitted that it is a bit illogical. It was a point that was "near and dear" to North Poudre. A more logical thing perhaps would be to apportion the evaporative costs on the basis of the total in storage. It didn't look like a lot of water to us, and it seemed very important to them, and it was bargained in the negotiation, Mr. Carlson explained. "It's a thorny problem. What they wanted us to do was to agree forever to keep a reservoir in place for them. I think it's fair to say that the water consequences of the evaporation charges were relatively small, and we were trying to keep our eyes on more consequential things." he concluded. Ray Herrmann observed that the City has a fairly complicated permitting process yet to go through. As it stands, the Forest Service is not one of the entities from whom we will be having to get a permit for this operation. "They will comment, but we don't have to obtain a special use permit for using their lands," Mr. Smith responded. The public agencies involved are the BLM on the land, and the State Division of Wildlife. And they are relatively small parcels, Mr. Carlson added. Does someone have a permit for the dam now? Dr. Sanders asked. It was built in the days before you needed permits, but North Poudre received a right-of-way for the pre-FLPMA right- of-way statutes, and that right-of-way is still upstanding, Mr. Carlson explained. Does the federal government have any way to change the minimum flow out of there? Tom Sanders continued. "Yes, they do," Mr. Carlson replied. There is something about the permitting Water Board Minutes September 18, 1992 Page 16 process that started with a small change and grown into a big change. "We can't hide our eyes to the fact that we will be asked to make a number of mitigations," he acknowledged. The one thing he thinks will be helpful is that, given where the Reservoir is located and how it will be operated, it would seem that our need to make releases will probably greatly correspond with the permitting authority's desire to sustain low flow. Tom Sanders also wanted to know, if the State DOW can abrogate our rights downstream for low flow. Mr. Carlson replied, no. However, there are two conditions: can an appropriate agreement be made with them for acquisition of any necessary lands?, and secondly, they will be heard and we have to expect that they will be very active. He admitted that "it is a new world out there." Dr. Grigg reiterated the motion which was to recommend to the Council that they enter into this agreement. Does staff still recommend that? "Yes, but we have a lot of studying to do and we may come back and say this is not a good idea," Mr. Smith replied. "Right now it's the best thing going, and we know enough that we should pursue the option," he stressed. Ben Alexander explained that if we expand our diversion capacity off of the Poudre River in the future, it appears now that it would be desirable to use south end versus North Fork water. We could use the North Fork water directly in Halligan, but might it be prudent to place that wording in the agreement with North Poudre, that we could use the Munroe exchange in that connection permit down to the new river diversion to use South Fork water. By doing this we could secure that option, as well as securing the Reservoir enlargement at this time. I think early on we talked about the possibility of agreeing to some operational items, and concluded that we probably need to do that separately, Dennis Bode responded. Tom Sanders was concerned about the condition of Seaman Reservoir since the water has to pass through it. John Carlson explained that if Seaman is in bad shape, they will want a good reservoir above it that will tend to hold peak flows away from Seaman in a way that threatens it, and make releases at a low flow rate. John Duval wondered if a clarification of the motion was needed because of the four points that were raised by John Carlson, which will probably be added to the agreement. That may be helpful to the Council. President Grigg agreed that the motion needed to be expanded because we discussed reviewing the agreement again in October. The Council will receive an FYI of some kind prior to this, but they need to have Water Board action before November. Ray Herrmann agreed to amend the motion that states the Board recommends that the Council enter into this agreement, to include the four issues that were discussed by Mr. Carlson, and if substantial changes occur before the October Board meeting the Board wishes to review the document again at that meeting. Dr. Grigg called for the question. The motion carried Water Board Minutes September 18, 1M Page 17 unanimously. Staff Reports Treated Water Production Summary Andy Pineda referred the Board to the water production report for August included in the packets. He reported that last month the City used just under 3100 Ac-ft, bringing the year-to- date deliveries to 85 % of the average projected. Report on meeting for Ideas to Use Old Water Treatment Plant Site Neil Grigg attended the meeting, called by the Natural Resources Board, at which this was discussed. The Natural Resources Board is very interested in exploring this, Dr. Grigg remarked. The group focused on three topics: (1) possible uses of the site; (2) problems that may come up; (3) and potential actions and actors who would be involved. Tim Johnson, president of the Natural Resources Board, began the program by showing slides of the site. The group suggested a number of good ideas for the site, but in each instance, it appears there will be a considerable number of problems related to each use. He pointed out further that representatives from Greeley stated that they are reluctant to have any kind of public use of the site because their intake is right down stream. "What I learned from that is it will probably be wise for the Water Utility and the Water Board to enter into discussions with Greeley; perhaps as a topic for our next joint meeting," Dr. Grigg proposed. Before Greeley proceeds with work on Seaman Reservoir, they want to know what the plans are for the site in case it could jeopardize some of their future actions. The Greeley concerns dominated the discussion, and it was a problem that Dr. Grigg hadn't anticipated. He suggested that staff try to obtain a complete set of notes from the meeting. It was stressed at the meeting that unless Council places this on the work plan, nothing much is going to happen in terms of staff resources, Dr. Grigg concluded. Reminder of Boards and Commissions Workshop Molly Nortier asked that any Board member who plans to attend the Boards and Commissions workshop, which was changed from September 17th, to the 30th, please let her know by the 15th. Each member should have received information from the City Attorney's office relating to the workshop. It will be held at City Council Chambers at 6:30 p.m. Topics for discussion will be Conflicts of Interest, Open Meetings, Liability of City officials and Quasi-judicial proceedings. Ms. Nortier will attend as a staff representative. Committee Reports Water Supply No report Water Board Minutes September 18, 1992 Page 18 Legislative and Finance No report Conservation and Public Education Chairperson MaryLou Smith reported that her committee met at 2:00 prior to the Water Board meeting. The committee heard a report from staff about what staff is doing to implement the resolution that Council passed a few months ago regarding demand management. Staff is making progress and plans to prepare a report in January that will be extensive in terms of exactly what is happening on each of the 12 resolution items. That report will be presented to the Council because part of the resolution requires that periodic progress reports be given to the Council. "We determined as a committee that we want to do that once a year," she said. Until then she won't go into any detail on what staff is doing on particular items, except to say that staff is spending most of its time working with the Planning Dept. on the items having to do with the Land Development Guidance System (LDGS), and the irrigation guidelines for landscape for developments. Staff thinks, and the Committee agrees, that these will have the most impact on water conservation for the City. The Committee will be meeting again in October at 2:00, prior to the Board meeting, to discuss the issue of zero interest loans. Some Council members are particularly interested in that, and "we want to convey, via our minutes, that we are going to be looking at that." If anyone from the Water Board or Council members have items they want the Committee to look at related to zero interest loans, please let us know. Engineering No report Regional Water Supply Strategy Up is ate There was nothing new to report. Regional Wastewater Service Issues UPatg Mike Smith reported that there hasn't been any change since the last time this was discussed. There may be some items relating to Boxelder Sanitation District coming up within the next two months. He also reported that the Utility is getting ready to begin the study for possible routes for the intercepter line which will go from Wastewater Plant 2 to the new regional plant. Montgomery Engineers, the firm that was hired to do the master plan work, will continue as consultants. He went on to say that the treatment plant expansion project will begin soon. The bids on the project were good, and the Utility has secured a $25 million loan at just a little over 4%. 0 Water Board Minutes September 18, 1992 Page 19 OtherOther Busing Mike Smith announced that a Stormwater Utility staff person will be at the next Water Board meeting to give an update on what they are doing. Board members received brochures in their packets explaining what the Stormwater Utility is and what it does, to provide them with some background information for the meeting. Environmental Fair Wendy Williams distributed brochures on the City's Environmental Fair in which the W & W W Utility will participate on Saturday, September 19th at Library Park. Adiourn Since there was no further business, the meeting was adjourned at 5:00 p.m. LYE fr48 :�.