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HomeMy WebLinkAboutWater Board - Minutes - 11/15/1991WATER BOARD MINUTES November 15, 1991 3:00 - 5:03 p.m. Water and Wastewater Utility Conference Room 700 Wood Street Members Present President Neil Grigg, Vice President Tom Sanders, MaryLou Smith, Mark Casey, Tom Brown, Paul Clopper, Tim Dow, Ray Herrmann Staff Rich Shannon, Mike Smith, Dennis Bode, Linda Burger, Tom Gallier, Andy Pineda, Molly Nortier Guests None Members Absent Dave Frick, Dave Stewart, Terry Podmore Minutes The minutes of October 18, 1991 were approved as distributed. Offer to Sell Water Certificates to City of Fort Collinc Dennis Bode reiterated the background information which had been provided in the packets under agenda item No. 4. On June 21, 1991 the Water Board considered an offer from Mr. Robert Everitt to sell to the City of Fort Collins, 300 ac-ft of a City Water Certificate, owned by the Everitt Lumber Co. He offered it at that time for $1,000 per ac-ft. He recently contacted Water Utility staff and requested that the Water Board consider buying 250 ac-ft at 60% of market value. Based on current prices of about $1,500 per unit for CDT water, the price would be $900 per ac-ft, or a total of $225,000. Mr. Bode said that the information provided at the June Water Board meeting is still relevant and was included in the packets for review. After considerable discussion at that meeting, the Water Board rejected the offer, citing the position that the Utility should consider buying back certificates only if the price is 50% or less of the in -lieu -of rate. The Water Utility staff recommends that the City purchase water certificates only when they are offered to the city at not more than 50 % of the cash in -lieu -of rate and when adequate funds are available. Water Board Minutes November 15, 1991 Page 2 Mr. Bode pointed out the previous unanimous recommendation of the Board on p. 7 from an excerpt of the June 21st minutes. It read: "Ray Herrmann moved that the Board authorize staff to continue negotiating with Bob Everitt for the possibility of buying for 50% or less of the in - lieu -of rate; in other words, explain the policy, and let him decide what he wants to do after that." Paul Clopper said that it was his recollection that the 50% recommendation was more of a guideline rather than a policy statement. He also recalled that the Board agreed to have staff consider offers of certificates on a case by case basis. Neil Grigg pointed out that at 60%, Mr. Everitt's current offer would be $900 an ac-ft, and at 50% it would be about $750 an ac-ft. He said it might benefit the Board to review their thinking on the matter. Mr. Bode indicated that there may be factors related to the intrinsic value of a certificate in terms of the priority of what the City would buy. One of the goals the last several years has been to control additional water so that we have some surpluses built up. He added that there is some advantage in spending the money to buy certificates to reduce further obligations. Mr. Bode also said that at one point staff asked the Assistant City Attorney to render a legal opinion regarding the purchase of certificates. Paul Eckman stated that the City is under no legal obligation to buy back City certificates as long as it was clear up front when the City accepted the water shares from developers, and issued the certificate, that the owner of the water was not expecting that the city would either give them back their water, or buy back the certificates. Mr. Bode went on to say that there are market considerations in terms of where we put our priorities in spending money that we have on hand. One consideration was that when you buy back certificates you reduce a future obligation but you do not increase current water supplies. "I think we've been in a period where we felt it was important to increase the amount of wet water that we own," he emphasized. Another consideration was comparing certificates to other ditch company stock that is available, much of which is available at perhaps 60 or 70% of the cash in -lieu -of rate. He reiterated that staff believes it is better at this point to spend our money on "wet" water rather than buying the certificates back. Tim Dow asked how we would turn the certificates into water. Mr. Bode replied that "you basically don't turn them into water." You reduce the obligation that is out there. People who have the certificates can turn them in to satisfy their raw water requirements. E Water Board Minutes November 15, 1991 Page 3 Mr. Dow then asked what the incentive would be for the City to buy the certificates that are being offered. Mr. Bode said the incentive would be to reduce that obligation. If the price is low enough it might be a good business deal from the standpoint that you reduce the obligation at 50 % of its value, for example. Mark Casey commented that if someone has certificates and doesn't need them, they eventually will be put to use at some point; the question is at what point? MaryLou Smith presumed that the market for certificates must be fairly low or Mr. Everitt would be finding some other developers who would want them and would have the incentive of paying less than 100%. Mr. Casey pointed out that there aren't many developers who need that large a quantity. Paul Clopper asked what the demand is for the certificates. Sometimes people inquire about water certificates, so the Utility keeps a list of people who wish to sell them. MaryLou Smith stated that if we were a business rather than a government entity dealing with this, one factor would be good will. It occurred to her that a developer that has "been very good for this City" is now asking to sell us something after we rejected his original offer. Now he's returning with a better offer that is very near to the 50% recommendation, and again, we are rejecting it. "How do we as a Board look at the issue of good will?" she asked. "I think it's a legitimate issue," she asserted. Tom Brown said he would feel more strongly in that direction if the owner of the certificates didn't have the option of selling them to other developers, and without that option, would be "stuck with them." He pointed out that it is a convenience for the person selling a big block if the City purchases them. He added that there is some benefit for the City to reduce its future obligations. At the June meeting Ms. Smith asked if the City makes it clear to the people who take certificates that they are not very negotiable, and at that time Mr. Bode assured her that it is made clear to them at the time of the purchase. When you re -issue these, what is the equivalent exchange rate; "is it the actual in -lieu -of rate?" Paul Clopper wanted to know. The certificates are issued in terms of ac-ft, Dennis Bode replied. "Let's say it's a 100 ac-ft. certificate, and someone satisfies 20 ac-ft on some development, then the City would re -issue a certificate for 80 ac-ft.," he explained. Tom Sanders remarked that perhaps those who wish to sell certificates don't have the incentive to find developers to sell them to. MaryLou Smith stressed that in business time is money. Administratively it wouldn't be worth the time it would take to find individual developers who Water Board Minutes November 15, 1991 Page 4 would be in the market for certificates, she believes. Dr. Sanders said he stands by the three reasons he listed at the June meeting for rejecting the offer: 1) We already have the water and we can use it right now, so paying $300,000 (less for this offer) "doesn't bring us another drop of water." 2) We don't have a responsibility to buy these certificates back. The intention of purchasing the certificates was for development and speculation on the part of the developers. They buy them hoping that in the future the property will be developed. "I am not in favor of rewarding speculation," he asserted. 3) This would deplete the water fund, and we wouldn't be adding to our water reserves. He added a fourth point. 4) We don't have $240,000 to "throw around" at this time. Ray Herrmann commented that if staff wants to buy at 60%, they are the ones who should make that recommendation. At this time staff has recommended that the City purchase certificates only when they are offered at not more than 50% of the cash in -lieu -of rate, and when adequate funds are available. Mark Casey asked how many ac-ft of certificates are turned in a year to satisfy requirements. Mr. Bode pointed out the table on p. 14 in the handouts, which listed the years 1976-1990. Tim Dow recalled that when this was discussed last time there was still about $400,000 left in the water acquisition fund. Is that still the balance? "It would have increased somewhat," Mr. Bode replied. "There is about a $804100,000 balance from cash that has been turned in." Ray Herrmann offered the same motion he made at the June meeting: The Board authorize staff to continue negotiating with Bob Everitt for the possibility of buying the certificates for 50% or less of the in -lieu -of rate. Tom Sanders seconded the motion. Tim Dow wondered if some other person came to staff and offered to sell at 50%, is the Board giving staff authorization to do that? Also, are we setting limits on the number of dollars involved or quantity of water, or are we simply saying our policy is a 50% in -lieu -of rate? In other words, are we saying? "If you want to make us an offer, then we'll consider at the time of the offer, under circumstances that exist at that time, what decision to make." If Mr. Everitt offered the certificates at 50%, would staff go ahead and accept the offer? Dr Grigg asked. "We would come back to the Board," Mr. Smith replied. Water Board Minutes November 15, 1991 Page 5 One option might be that staff won't take an offer to the Board unless it is 50% or less, Mr. Bode suggested. It was the perception of most of the Board that it was basically left that way at the last discussion of this question. Ray Herrmann revised his motion to read: The Board authorizes the staff to consider buying outstanding water certificates for 50% or less of the in -lieu -of rate. The Water Board will not consider purchasing back any certificates offered above 50%. The second agreed to the revision. Tim Dow suggested that holders be informed that there is great reluctance to re -acquire certificates. The policy has been that we would examine them if adequate funds are available. Dr. Grigg said that was good guidance for staff. Mark Casey wondered if we run any legal risk of setting a precedent if someone else makes an offer. Tim Dow said he thinks it's clear that this is a policy situation. "We could change the policy at the next meeting," MaryLou Smith suggested. Earlier Neil Grigg had commented on MaryLou Smith's concern about good will. He said that as a municipality we have a responsibility to the taxpayers, just as a business has a responsibility to its stockholders. For the record, Ms. Smith wanted to say she still doesn't think that is exactly the case. She believes there is room for our being responsible to taxpayers by honoring that good will. "In the long run, these subjective things will benefit the taxpayers as well," she contends. She believes that it's a matter of principle. The question was called. Neil Grigg, Tom Sanders, Mark Casey, Tom Brown, Tim Dow and Ray Herrmann voted in favor of the motion. MaryLou Smith voted against it for the reasons she stated throughout the discussion. The secretary asked Paul Clopper his reason for rejecting the motion for the record. Paul Clopper voted against the motion because he agreed with what MaryLou Smith said. "If we choose to consider her argument, I think we have more flexibility than the motion allowed," he said. The motion passed 6-2. MaryLou Smith wondered why the record had to show why someone was voting against a particular motion. Molly Nortier related that the Boards and Commissions manual states that comments that summarize board members' positions on each item should be included in the minutes as support for each board member's vote on each issue. If the vote is split, the record should reflect those voting in favor and those voting against the motion. The secretary said she will include a copy of the page with this information in the next month's packets. Water Board Work Plan for 1992 A draft of the 1992 Water Board Work Plan was included in the packets. President Grigg proposed that committee reports be combined with the discussion of the work plan because, for Water Board Minutes November 15, 1991 Page 6 the most part, the items on the plan relate to the committees. The Board agreed that it would be efficient to approach it that way. Dr. Grigg explained that the work plan is basically the Board's statement to the City Council of what the Board is going to be doing. Staff is required to submit the plan to the City Clerk's office by the end of November. Water Supply A. Review progress and recommend direction regarding the Halligan Reservoir Project B. Periodically review status of NCWCD's Poudre Project and Thornton's Northern Project C. Examine City's Surplus Water Rental procedures D. Review NCWCD Regional Water Supply Study Chairman of the Water Supply Committee Mark Casey reported that the committee met for 1 1/2 hours prior to the Water Board meeting. He said that staff did an excellent job of compiling background information on water supply for the committee. Mr. Casey said there are two questions that need to be answered before the City exercises its option to proceed with the Halligan project as specified in the agreement with North Poudre Irrigation Co. (NPIC). 1) Is there a need for the storage? He believes the committee thinks there is a need for the storage. 2) Do we go with Halligan or do we buy CBT water? On that question there are a number of ways to look at it. First considering the economics, it works out pretty well. An acre foot of Halligan from staff's projections, is going to be 50-75% of the cost of CBT water. Actually it could be even less than that if CBT "really takes off;" more like 40- 60%. The one thing that clouds it is the substantial economic commitment, and the possibility of an economic veto because of the large investment of money. The conclusion of the committee, after asking all of these factors into account, is that this is something we ought to pursue. The next step would be to negotiate a final option agreement, and proceed from there. Mike Smith said the staff needs a recommendation from the Board directing staff to proceed with the agreement or not to proceed with it. He explained that this will be a new agreement establishing the ground rules from this date on relating to things like who owns what and how much option money the City pays each year. The agreement was prepared in August and copies were provided to the Water Supply Committee. Mark Casey thinks it's ready to go to the Board now. The Committee wanted to get the issues of assignability clarified, in case somewhere down the road, if we want to, we will be able to sell our interest to someone else. Water Board Minutes November 15, 1991 Page 7 In addition to looking at the legal and financial aspects of the agreement, we need to look at the water demand scenario too, Neil Grigg said. "It's been a couple of years since we have looked at that." It may also be necessary to have a briefing on the current status of our reserves and what we are going to be able to do with or without Halligan. Tom Sanders expressed his willingness to proceed with the Halligan project. Halligan is an opportunity to be able to refurbish and enlarge an existing dam rather than building a new one, as well as diversifying our ability to store water; and also it helps to maintain our control somewhat of what's happening in that water shed, he concluded. MaryLou Smith related that the Water Supply Committee spent considerable time revisiting the water supply issues. Neil Grigg pointed out that one of the things that killed Two Forks was documenting the need for the water. "You must defend your demand forecasts vigorously," he asserted. We should be sure we document the advantages with Halligan all along, he advised. Tom Brown, one of the Committee members, acknowledged that "it's clear we don't need Halligan this year," but he feels strongly enough that we may need it, to favor keeping our option open. If we decided to build it, further study would be required. Mike Smith said there was a lot more emphasis in the Committee work on the need and supply situation than on what was in the agreement. The important question at his time is why do we want to do this, and do we really need it? Without the right answer to those questions, there is no reason to go ahead with anything, he contends. Neil Grigg asked if that means the Committee needs to prepare an argument for why we need to go ahead or are we ready to debate that on the Board, perhaps at the next meeting, or now if we have the time. Mr. Smith said staff would like to have an answer either today or at the next meeting. The group decided to finish discussing the work plan, and if there is time, take up the water supply issue. In the meantime, some of the information that staff prepared for the Committee on water supply, will be duplicated for the Board. Neil Grigg continued with the work plan under water supply: Regarding the NCWCD Poudre Project, Dr. Grigg thinks the Board should schedule a time to have a briefing on it and give the Board a chance to review it. President Grigg asked if the Committee plans to meet in December. Mark Casey replied that the Committee needs a break "If the burden on the Committee becomes too heavy, perhaps we could establish another committee to handle some of the load," Dr. Grigg suggested. Water Board Minutes November 15, 1991 Page 8 Committee member MaryLou Smith proposed that some of the items on the work list could be handled as a whole board, instead of compartmentalizing them, and possibly save some time. "Our work load as a Board hasn't been that heavy the past few months," she added. In that light, President Grigg concluded that the NCWCD study would be brought directly to the Board for a briefing and discussion. The Board then moved on to the next work plan item: Water Conservation A. Play an advisory role in implementing demand management measures as recommended in the resolution by the Demand Management Committee B. Continue to monitor volunteer metering program C. Help promote additional public education projects D. Provide a forum for determining which water conservation measures should be eligible for zero interest loans. Chairperson MaryLou Smith agreed with the items included under conservation. "This encompasses almost everything when it states that the Committee will play an advisory role in implementing the demand management measures," she said. She asked when the resolution will come before Council. Mike Smith replied that the Council hopes to schedule a work session possibly the second Tuesday in December. Staff will inform DMC members when the date is set. Neil Grigg wondered, in terms of education, is there anything we need to be doing that isn't being done. "I see so much activity in this area among districts and utilities," he said. He mentioned that he has been meeting with a new group called the Colorado Water Education Foundation, and he recently received their bylaws. He thinks it would be beneficial as a utility to participate with that group. Dennis Bode explained that the Utility's involvement in education is broader than just conservation. "So we are talking about water education across the board," Dr. Grigg said. Mike Smith related that the Utility has spent considerable time this year improving that program. Linda Burger explained that one of the most exciting things in the planning stage now, is a children's water workshop to be held on the CSU campus in May. It's modeled after the very successful children's water festival held in Greeley last year. She said that hopefully, it will bring in 1500-2000 fourth graders to the Student Center where there will be games, contests, demonstrations; about 40 or 50 different activities. They will be given trivia questions prior to the event, so they can participate in a trivia contest. She added that they are also working with Poudre R-1 on this project and are asking the 4th grade teachers to postpone their water units until closer to the workshop so they can all do the units at the same time. "Throughout our operations we're putting a lot more effort into • Water Board Minutes November 15, 1991 Page 9 education," she concluded. MaryLou Smith praised the efforts of Water Conservation Specialist Jim Clark in the past two years since he was hired by the Utility. With his background, he was the ideal selection for that position, she said. Dr. Grigg suggested that the Conservation Committee may wish to brainstorm what others are doing in the area of conservation education. There are always new and interesting ideas out there, he said. Legislative and Finance A. Review the financing of the wastewater expansion project B. Support efforts of the Utility to qualify for revolving loan program with Water Resources and Power Development Authority for new wastewater treatment plant. C. Review and make recommendations on water related legislation. D. Review Utility budget where appropriate Chairman Tim Dow said that A and D on the list are satisfactory. "We don't have anything on them right now, however. Regarding item C, he thinks he needs to visit with Council Liaison Loren Maxey and others about exactly how that function is supposed to work. There will be some important bills introduced in the legislature after the first of the year that the Committee ought to monitor and provide recommendations for. That process became somewhat confusing last year, as to what Council really wanted, he said. Dr. Grigg agreed that the process needs to be clarified. When Loren Maxey met with the Water Board a couple of months ago, and discussed Council/Water Board liaison issues, the subject of legislative items was one of the most controversial subjects. There are going to be many important issues coming from the legislature and the Councils committee probably will not be able to cover thoroughly all the items across the Board, so having a Water Board group to monitor water issues, becomes even more imperative. Mike Smith suggested that Mr. Dow talk directly with Gerry Horak who is chairman of the Council's legislative Committee. "You will probably get more direct feedback," he said. Tim Dow emphasized that the process and the lines of communication need to be re -defined and made clear so the Legislative and Finance Committee knows where its efforts are supposed to be. Engineering A. Review NCWCD Regional Water Supply Study B. Review planning and designing phases of construction projects as needed Water Board Minutes November 15, 1991 Page 10 Since Dave Stewart is still chairman of that committee," we may need to review his continuing with that position due to his absences from Board meetings, recently," Neil Grigg asserted. It seemed that the Board, at this point, approved of what was listed under engineering. Mike Smith pointed out that B covers a multitude of potential items. Liaison Issues A. Pursue cooperation and interaction with related City Boards. B. Meet with regional water boards to discuss issues of regional interest. C. Review issues with regional water and sanitation districts as needed. Dr. Grigg raised the question of how the Water Board can find out in a non -aggressive way what's happening with other City boards with common issues; e.g. Natural Resources, Storm Drainage and Parks and Recreation. Molly Nortier receives the minutes of the Natural Resources Board, and would be happy to share those. Linda Burger pointed out that the Utility is currently working with a staff committee of several City departments, including Natural Resources, to produce a quarterly newsletter on environmental issues. She wasn't certain when the first issue will come out, but it will replace the current Natural Resources newsletter. Dr. Grigg pointed out that the Board has already discussed joint meetings and possibly inviting a member of a related board to attend one of our meetings when a common interest in an item is at hand. Mike Smith also said that communication between the Water Board president and other related board presidents would be helpful. The Water Board secretary will provide Dr. Grigg with the names and telephone numbers of the presidents of boards with common interests. Regarding item B, a joint meeting of the Water Boards from Fort Collins, Greeley and loveland has been announced by Greeley who will host the meeting. The date they have selected is Thursday, February 6, 1992 for dinner and discussion. Further details will follow when the date has been confirmed. Mike Smith said that item C, reviewing issues with regional water and sanitation districts, "is kind of in limbo at this point, but we may have some issues coming up." MaryLou Smith is concerned that the City and the Board are not taking a more proactive approach in establishing what our future relationships will be with the districts. "It's always interesting to me what a large part of our City is increasingly being served by the Districts," she said. Tom Sanders agreed with Ms. Smith that it's an issue of continuing concern. He thinks that eventually it will be the Fort Collins residents who bring this to a head, because of two types of service with differences in costs and water quality. However, he acknowledged that "the politics aren't there yet." MaryLou Smith concluded that her feeling about being a good Water Board Minutes November 15, 1991 Page 11 neighbor is that you should look at each situation and "weigh it." Mike Smith said that these issues are being discussed. Water Quality Provide input and review for the development of a policy regarding City goals for raw water quality protection and standards for treatment of drinking water. President Grigg pointed out that the Water Board does not have a committee related to this, "so we rely on staff to be advancing the policy and then allow the Water Board to review it." Mike Smith reported that it is in the early stages of being drafted. Routine Items The Water Board will review and consider as needed such items as raw water rental rates, cash in -lieu -of water rights rates, purchase of water rights, and Water Board attendance goals. Dr. Grigg said the Board will be reviewing those as they come up, and again those will be driven by staff. President Grigg then asked for any general suggestions or additions for the 1992 work plan. One item he noticed that was missing is the Poudre River National Water Heritage Area. It's an important water topic that the Board should be monitoring, he said. It will be added as number 8 on the list. Tom Sanders thinks keeping track of the status of the Thornton project is important enough to be listed as a separate item under Water Supply. In the revised plan it will be removed from item B and listed as item E. Related to the Thornton issue, Paul Clopper asked if the Thornton Strategy Committee should be revived. Mike Smith responded that if an issue presents itself, it will probably be one in which the entire Board will be involved because it would have to be dealt with quickly. MaryLou Smith moved that the Water Board adopt the 1992 Work Plan. After Ray Herrmann's second, the motion carried unanimously. Staff Report A. Treated Water Production Summary Dennis Bode referred to p. 2 of the handout, You will notice that for October staff converted most of the numbers to metric in compliance with a request from a Board member, he said. He went on to say that for October water use was 6% above the projected average supply. We concluded the water year, which ends November first, at about 4% of what was projected. He Water Board Minutes November 15, 1991 Page 12 thinks that was essentially due to some of the timely rains we received. The graph on p. 3 shows we were just a little below the projected average, he concluded. Tom Sanders asked if we will have carryover water. Mr. Bode replied that we will have about 4,000 Ac-ft of carryover water in Horsetooth to use next spring and summer. The NCWCD Board voted to continue with the carryover program. B. Northern Colorado Water Conservancy District Fall Meeting Mike Smith reminded the Board of the fall water users meeting on November 21st at the University Park Holiday Inn. A copy of the notice and agenda were included in the packets. MaryLou Smith pointed out that the District already sends these notices to Water Board members to their homes, so there is no need to send another copy to them. Molly Nortier appreciated knowing that. "It saves time and paper," she said. The secretary also reminded the Board that reservations for the meeting were due today if they plan to stay for lunch. C. Notice of Joint Meeting with Greeley and Loveland Water Boards The meeting scheduled in Greeley on February 6, 1992 was discussed earlier. Other Business Chamber of Commerce Water Symposium MaryLou Smith said the water symposium put on by the Chamber was excellent. Other Board members and staff who attended agreed. Tom Sanders recalled an important point brought up by one of the farmers who attended. The farmer wondered why municipal water use is given priority, particularly in the summer months when a good percentage of the water is used on grass. Why is that more important than crops? he asked. Dr. Sanders thinks the farmer expressed his feelings on an issue that should be explored further. MaryLou Smith agreed. Further Discussion of Water Supply Issues Related to Halligan Neil Grigg estimated that with the time left, the Board will now be able to deal with the water supply issues postponed earlier in the meeting. Staff had made additional copies of water supply information for the Board members who had not received it. It was Neil Grigg's understanding that it's important to structure the discussion so that the Board can consider whether to affirm the need for Halligan Reservoir. Dennis Bode agreed that an affirmation of need is part of it. "I think it is important to realize that it's an option that allows us to study the issue more closely," he said. Staff thinks there is potential for the Halligan Project, and that it is important to continue with additional studies. Dr. Grigg asked if the agreement will allow us to proceed with additional studies "That's right," Mr. "Bode replied. The agreement is set up so it provides the City with an option to continue the study, and basically have exclusive rights as long as the City wants to pursue it. If the Water Board Minutes November 15, 1991 Page 13 Board is convinced as a result of this discussion that it looks like a good idea to keep developing this water, then is the next step, to delve into the agreement? Dr. Grigg asked. Mr. Bode said the concept is fairly well together, but the agreement is still in draft form. Dr. Grigg wanted to know if the Board takes an action, what will it be? Mike Smith explained that we need the Council to authorize our entering into an agreement. In doing that the Council will be concerned about the Board's recommendation as to whether this project is needed, but less on the terms of the agreement, because it is not very comprehensive. Dennis Bode extracted some of the key elements from the information given to the Water Supply Committee. He referred to a graph on p. 8 which shows three growth scenarios for water demands. He acknowledged that projecting population is sometimes difficult. Staff incorporated the Demand Management Committee recommendations for the gallons per capita uses that are basically met through conservation and metering programs. He clarified that the gallons per capita numbers are the same for all projections of high, low and medium. It shows that the growth rate is important in determining the timing of additional supplies and the magnitude also. "I think we are in fairly good shape for several years," he pointed out; "certainly we need additional supplies, but there is no attempt here to say what additional supplies we would acquire. " The horizontal line is simply a way of saying what our present safe yield is. In other words, we have the ability to meet an average annual demand of about 35,000 ac-ft with our current supply, meeting the criteria of a 1-in-50 drought. He continued by saying that some of the background information gets into strategies that have evolved in the last five years with the Water Supply Policy and the desire to be a little more aggressive in terms of acquiring water for the future. Under the water supply acquisition policy, we decided to acquire a certain amount of water and we have completed most of those acquisitions, Dr. Grigg began. The other element under that is water which is turned in. Will we be acquiring any more water by actual purchases? Mr. Bode replied that we can go various ways, "and those are issues we will be grappling with as we go along." If there is a desire to do projects, that costs money. We would have to alter our policy so we would receive more cash to put towards those purposes, and we would anticipate that we would continue to acquire some of the Southside Ditch stock, for example. "As we are growing over those areas, that is a logical supply to obtain." When we did the analysis of how much water we would need for the future, we determined how much we would buy now Dr. Grigg explained, and that was 10,000 ac-ft. With that and the water that would be turned in with growth, we determined we would be okay to the year 2035. Water Board Minutes November 15, 1991 Page 14 Mr. Bode believes the question is where do you get that additional supply? We assumed a certain scenario when we did those projections, he said. Do we want to concentrate on CBT water, North Poudre shares, or Halligan, or some combination of those? There needs to be additional study on what combination works best, he stressed. He said staff is beginning to focus on those kinds of issues. MaryLou Smith clarified that we are talking about what the developers turn in, which may be money as well as water. That provides the money for water, and in some cases the actual water, but we need to have a source of water that's a good buy for the money, she emphasized. Tom Brown pointed out that the water we would buy with the money we get would essentially change the horizontal safe yield line. Mr. Bode agreed. Ms. Smith remarked that the way Neil Grigg phrased his comment about going to the year 2035, helped her understand the concept better. It seems that as part of the Water Supply Committee, we made a decision that the 10,000 ac-ft we purchased would be all the additional water that would be needed other than what developers would be supplying to the year 2035 in terms of a 1-in-50 drought. Neil Grigg added "depending on what kind of water is turned in." We may need to take additional actions as a City to acquire water even though the developers are turning in water. We can't assume that we're okay because we bought the 10,000 ac-ft. Tom Sanders would like to go a step further and "be visionary," by employing the concept of being a water bank or even selling treated water to the south. "I think that is a chance in the future for us to keep control of our water system in Northern Colorado," he contends. Others in the area are thinking along these lines too, he added. Neil Grigg said if we are going to be visionary, and think about what's going to happen in the next 45 years, you could see some kind of regional entity becoming the water broker "up here." Dr. Sanders continued by saying that we have to stop reacting and begin acting. "The whole thing with Thornton has been a reaction," he asserted. He is afraid that we are going to decide not to proceed with Halligan because we don't need it right now, and in his opinion that would be a mistake! Dennis Bode pointed out a complicated graph on p. 11. This attempts to look at some of the direct flow rights the City will own in the future and what storage needs there may be. Staff looked at several different demand levels. This one shows 40,000 ac-ft of treated water demand level, which is about 10,000 ac-ft above what exists now. On this graph and the following one, the basic difference is the type of supply year we used; one is the dry year of 1977 and the other is the wet year of 1986. Water Board Minutes November 15, 1991 Page 15 "If you ignore the black shaded area, the rest of the graph shows our projected demands over the year," he explained. The white part at the bottom shows what we can take directly from the Poudre through our pipeline, and it includes primarily our senior direct flow rights and them some other direct flow rights like Pleasant Valley & Lake Canal water; and perhaps some Michigan Ditch water which is released down the river. Currently we have a capacity constraint on the pipeline of about 30 cfs. from the pipeline that is coming from the Poudre River into our water treatment plant, so the horizontal line in the summer months represents that 30 cfs. Mr. Bode went on to say that if we had additional pipeline capacity, we could take some of what the cross hatched area represents on the graph through the pipeline directly from the river. Since we don't have the capacity, that cross hatched area water needs to be put into storage, so with exchanges, we are able to get it into Horsetooth, he explained. The area with the diagonals represents the amount of water that we need from storage that must be stored in Horsetooth to use directly from the reservoir into our water treatment plant. As our demands increase, that quantity gets greater and greater. There are fewer direct flow rights, particularly in the winter period. The small dark area on top of the graph represents the direct flows that would be available above our demand level. In order to use those flows, we need to get them into storage, or be able to exchange them into storage. Neil Grigg asked if we are able to do that now. To some extent we can through exchanges with the Munroe Canal, Mr. Bode replied. During peak runoff, there is often a period where exchanges aren't very feasible because people are generally happy with what they have, so there is no real potential for exchanges, he explained. The graph on p. 12 indicates that during a wetter year that quantity is larger. "It shows that we would be losing water in a wet year," Dr. Grigg pointed out. With Halligan, would we create any more exchange opportunities? Dr. Grigg asked. "I think the potential is there to get some of this water into storage," Mr. Bode replied. Oftentimes, if you can get it into storage, you have opportunities later in the season to do exchanges, or sometime in the future there may be opportunities to use that water directly from storage, he added. Mr. Bode summarized the major points of these pages: 1) We have some direct flow rights in peak periods that we can't use. 2) We have pipeline constraints that make it necessary to negotiate exchanges or somehow get the water into storage before we can use it. Neil Grigg asked if staff has done a multi -year analysis to show how much of the water is lost over time. If we were theoretically able to build a main stem reservoir, would it make sense to build it and capture that ourselves? In other words, are we losing a lot of direct flow? Mr. Bode responded that some analyses have been done, "but we don't have a nice neat summary Water Board Minutes November 15, 1991 Page 16 to show that." Mr. Bode brought up another element of this scenario. We have assumed that we would continue to acquire Southside Ditch shares, so some of this water is some that we anticipate we would own down the road 10-15 years. He concluded that nearly every year there are peaks that we can't use directly. Tom Sanders asked if this tells us that there is a need to make a commitment to the expansion of Halligan. It is certainly an issue, Mr. Bode replied. Is there any chance that we could start losing the rights to those waters if we don't put them to use? Dr. Sanders asked. Mike Smith said that most of them haven't been converted to municipal use yet. That's direct flow above demand and not direct flow above pipe capacity, Dr. Grigg pointed out. Mr. Bode directed the Board's attention to the next table on p. 15 where staff summarized the quantities in each of the areas. If you do not increase the pipeline capacity, you must add columns 3 and 5 to determine the amount of water needed in storage to get to the point where you can use it at the right time. As the demands increase to 40-50,000 ac-ft, that becomes a fairly substantial number; something like 30,000 ac-ft. Right now most of that water comes from CBT water,from Joe Wright water that's stored, and North Poudre shares that we are able to take in Horsetooth Reservoir. We need to be looking at ways of getting that additional water into Horsetooth as demands increase. How much storage do we have? Tom Brown asked. We were estimating that in one of the dry critical years, there would probably be about 20,000 ac-ft that we could get into Horsetooth and use with a combination of those sources, Mr. Bode replied. Does this imply that we might need more storage water like we can get in Halligan? Dr. Grigg asked. Mr. Bode answered, "I think so." Mike Smith said that it implies that as you acquire more water in the future from developers, that "it had better be a lot of storage water." "But it might not be storage water," Dr. Grigg added. "If it isn't then we are going to have a problem," Mr. Smith stressed. "What's the current storage in Halligan, Ray Herrmann asked. The conditional decree is about 33,000 ac-ft, Mr. Bode said. "If you are comparing numbers to numbers, it's about 10,000 that we will have," Mr. Smith added. Mr. Bode referred to the table on p. 22 which was an attempt to represent several present value scenarios for enlarging Halligan as compared to buying an equivalent number of CBT units that would do basically the same thing. Under the column labeled present value, staff assumed that the present costs would increase at an inflation rate of about 4% per year. Each of those numbers assumes you would build the reservoir in that year. It would cost $13.53 million or the amount of money you would need to Water Board Minutes November 15, 1991 Page 17 put in the bank today to build Halligan in the year 2000. With CBT water staff made some assumptions with price increases of 6% and 8% and also showed what it would take to put in the bank today what it would take to buy units under several different scenarios. For the most part, the Halligan numbers were significantly less. Next Mr. Bode referred to the final table that showed what CBT prices have done in the past. The three lines on the graph indicate the average annual increase. "You can see that they are all fairly high," he said. From what the table shows, it looks like it could be a much better financial deal to go into Halligan than to purchase CBT shares, Neil Grigg surmised, and with the fluctuation of CBT prices, it could get worse. He concluded that the information seems to point to the general desirability of going to Halligan. If we go with Halligan, does Seaman Reservoir have to be in good shape? Dr. Sanders asked. Halligan water does go through Seaman, Mr. Bode said, and certainly that is a factor. Dr. Sanders' second question dealt with being able to get the water from Halligan without constructing a larger pipeline capacity. There are several options of how you would use Halligan water Mr. Bode responded. Is there any chance that we might be functionally unable to use it? Tom Sanders wanted to know. "It's so high in the system that the potential for exchange is excellent, " Mike Smith responded. Linda Burger pointed out that the greater difficulty would be the water quality and being able to treat it to water quality standards. Is the quality that bad? Tom Sanders asked. "If you use it directly and couldn't exchange it." Mr. Smith replied. Tom Sanders moved that staff provide copies of the agreement for Board members for the next meeting, and then the Board can officially decide whether to proceed with studies on Halligan. Tom Brown seconded the motion and also pointed out the concern of the Water Supply Committee about the clarification of assignability. Staff will provide copies of the agreement in the December Water Board packets. The question was called and the Board approved the motion unanimously. Since there was no further business, the meeting was adjourned at 5:03 p.m.