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HomeMy WebLinkAboutWater Board - Minutes - 11/21/1986U11P14M Water Board November 21, 1986 Members Present Norm Evans, President, Henry Caulfield, Vice President, Neil Grigg, Dave Stewart, Tom Moore, Marylou Smith, Stan Ponce, John Scott, Tom Sanders, Ray Herrmann (alt.), Jo Boyd (alt.) Staff Present Rich Shannon, Mike Smith, Dennis Bode, Curt Miller, Webb Jones, Linda Burger, Paul Eckman, Assistant City Attorney Members Absent Jim O'Brien President Norm Evans opened the meeting. The following items were discussed: Minutes The minutes for September 19, 1986 were approved as well as the minutes for the special meeting on October 9, 1986. Water Issues Committee Update Henry Caulfield reported that the Water Issues Committee met that afternoon, prior to the Board meeting, to consider a draft document prepared by staff called "Water Supply Policy, Review and Recommendations," November 1986. He complimented the staff on a substantial amount of analyses. The Committee focused on the section of the report on recommendations, Chapter 9. Basic- ally, the Committee discussed elements for the staff to look into further it connection with the recommendations. Since none of the Board members other than the Committee had seen the docu- ment, Mr. Caulfield reviewed the contents: Chapter I - History; Chapter II Present Supply and Demand; Chapter III - Potential Issues Which May Impact Present Supply; Chapter IV - Future Water Demands and Water Supply Require- ments; Chapter V - Present Water Supply Policy; Chapter VI - New Factors Which May Affect Present Policy; Chapter VII - Alternate Water Supply Poli- cies; Chapter VIII - Evaluation of Alternate Policies; Chapter IX - Recom- mended Water Supply Policy. Mr. Caulfield said that, at this time, the Committee is not prepared to make a recommendation to the full Board, but he did indicate some direction as to where they were going. Water Board Minutes November 21, 1986 Page 2 At this point Mr. Caulfield referred to a single sheet listing the highlights of the Water Supply Policy Report prepared by staff for the committee meeting. Section A, New Factors, lists the Drought Study and Metro Denver Water Acquisitions. Section B, Policy Elements, lists the following: (1) Reliability of Supply, (2) Demand Management, (3) Timing of Acquisitions, (4) Acquisition Mode, (5) Raw Water Requirements, (6) Regional Participation/ - Cooperation. Section C lists the Supply Reliability and Demand Alternatives which are: Alt A - 1 in 20 with Base Demand; Alt B - 1 in 50 with Low Demand; Alt C - 1 in 50 with Base Demand; Alt D - 1 in 100 with Low Demand; Alt E -1 in 100 with Base Demand. Section D lists the four staff recommendations. Mr. Caulfield said that the conclusion of the Committee at this point is that we should go with Alternative D, the 1 in 100 drought reliability with the low demands expected as the result of a phased metering program; this is also the first staff recommendation. With regard to the second staff recommendation, to purchase good sources of water at reasonable prices as opportunities arise, Mr. Caulfield made the following comment: "One of the problems here is that we have to say something of a general character, so we can't say specifically what we are going to buy or what we want to buy because that obviously affects the price. We have to be guarded in exactly what we are going to say." He then commented on the third recommendation which is to adjust the Raw Water Requirements by 20% and decrease in -lieu -of cash rate to encourage more cash. "If we move to a 1 in 100 standard of reliability, our raw water requirement viewed at a 50 year period, is 20% less than it should be." This matter evoked considerable discussion from the committee, he said. One element was the quality of the raw water that we are now receiving. In our current policy we are receiving waters that are of less quality than our base supply such as our river water. The outcome of this discussion was that Dennis Bode would prepare for the group's next meeting, about a two -page outline of a number of alternative ideas which emerged as a result of the Committee's discussion. The fourth and last staff recommendation was to work with Water Districts to assure adequate supplies are maintained in this area. The slight thrust the Committee intended to put on that without antagonizing any of the Districts, was to point out that the way our water system operates, we contemplate that in the future, Fort Collins -Loveland and ELCO are going to be substantial suppliers of our citizens. Therefore, as a City, we have a concern that our citizens have an adequate water supply. Through the now established regional group, we can help assure that steps are being taken to meet these obligations. Norm Evans added that this is a very key and important point in the overall picture because, to reinforce what Mr. Caulfield has said, that coordination is more than just encouraging the Water Districts to take care of their customers. It goes naturally and logically into joint arrangements for supply management and optimization of the supply that we have in the region. -1 • • Water Board Minutes November 21, 1986 Page 3 Mr. Caulfield concluded that he hoped this was an adequate summary of where the Committee is at this time. Tom Sanders wanted a clarification on the point that we are receiving water from developers of less quality now than our base supply. What waters are you speaking about and what quality parameters are you referring to? Mr. Caulfield clarified that he was referring to the reliability not the quality of the water itself. John Scott asked if the recommendations referred to are for the Council or internally. Mr. Caulfield responded that they would definitely come to the Board before anything is referred to the Council. The Committee and the staff are still in the process of working on them. Mr. Scott continued that he thinks there is an underlying assumption that water metering is going to happen. Mr. Caulfield replied that there is a correlation -in the way this is analyzed. It shows how water metering can help towards the long run reliability of our supply at a lesser cost. It is a way of bringing our two reports together. It puts them together in such a way that water metering is tied in with reliability studies which means a less costly reliability action. Norm Evans reiterated the intent of the committee by saying that they plan to bring a committee report to the Board at which time the Board would examine the report and offer reaction and comments. Neil Grigg, chairman of the committee, commented that when the sub -committee was formed, the purpose was to follow the Thornton initiative and track that, hold discussion with WSSC, etc., which the committee has done. This led to the initiation of the water supply strategy report. Dr. Grigg thinks, at this point, it seems appropriate to terminate the sub -committee, and reconstitute a different committee with a charge that would lead to planning into the future. Henry Caulfield explained that the reason the committee entered into the water supply strategy was because they had to have an overall new rationalization of the future, so "that they could put what they wanted to do in the way of action, like buying more water, into an analytical perspective." This is the reason that they are working at the expediency and analytical levels simultaneously. If the Board restructured the committee, would Dr. Grigg be'willing to continue on as chairman, President Evans wanted to know. Dr. Grigg agreed to continue as chairman. The main thing, he added, is that we would need a new title and a new charge. He also suggested that it might be opened up in order to accommodate any other Water Board member who desires to be a member of the committee or if any existing committee member wishes to withdraw. President Evans officially terminated the current committee and thanked them for the difficult tasks they accomplished, and redesignated the group as a long range planning committee. Henry Caulfield asked about the charge of the committee. He would like to make it as specific as possible. It was determined, after discussion, that the committee should be "The Committee on Water Supply, Policy, Planning and Implementation. The existing committee will be reconstituted under that title. Water Board Minutes November 21, 1986 Page 4 Mike Smith updated the Board on some of the opportunities which the Board had discussed at the September and October meetings. The Board will recall that Mr. Hugo Anderson offered the City the first right of refusal to 225 units of CBT water, which when Mr. Anderson decided to sell them, the City could purchase at the prevailing market price. The Water Board recommended the staff offer to purchase the 225 units outright from Mr. Anderson upon the sale of his land. Mr. Anderson refused to sell, and has gone elsewhere with his offer. Regarding the offer presented by Craig Harrison for the purchase of 1350 units of CBT water, staff made an offer which after some time, Mr. Harrison accepted. There were, however, some questions about leasing back the water to the landowner which have been worked out. Generally, in lease back situations, the City leases the water only if it doesn't need it. In this case the City leases the water for 11 years regardless. Mr. Smith wanted to get Board reaction on this situation. Dennis Bode assured the Board that within that 11 year period, he doubted that the City would have a problem meeting its demands. Dave Stewart is concerned about the City's setting a precedent here. Tom Sanders objects to the arrangement. "The whole idea is to have the water when we need it," he contends. Mr. Caulfield agreed that Dave Stewart has a good point. "On the other hand," he said, "the phenomenon we are dealing with is buying water ahead of our needs." In that case we can afford to do this. Norm Evans added that it fits our historic policy of acquiring water when it is available. This has the strong advantage of being a large block and that doesn't occur very often, he stressed. There was considerable discussion about how the ranch land will be used after purchase. It is staff's understanding that the prospective owner plans to break up the land into smaller parcels. Mr. Caulfield believes that Weld County, where the property lies, has a land use policy which reacts negatively towards subdividing the land. Jo Boyd pointed out that we as a City are trying to project a "holier than thou" attitude by saying that it is not moral to buy water from farmers, yet that morality has already been trampled upon when the farmers willingly sold their water rights to Thornton. "Should we sit here and be very moral and say we won't take water from farmers in 11 years while all the rest of the North Colorado water is going to the suburbs of Denver?" Perhaps we are losing an opportunity to get water to lease it back just as Thornton is doing now. "We can be as moral as we want and end up rather dry." Tom Sanders suggested that we could compromise by quantify'ing in what kind of a drought we would need the water and allow the farms to use it the remainder of the time. Neil Grigg believes this is a good deal. He doesn't think we are going to need the water in 11 years. We have a good cushion of water, particularly in this period of slow growth. After-11 years, he can see Tom Sander's point. Water Board Minutes November 21, 1986 Page 5 Everyone who buys property has the obligation to look closely at the deal, he warns. Moreover, if those 40 acre farms were still there after 11 years, this would be a good place for us to lease surplus water in years that we don't have a place to lease it. Henry Caulfield asked for a clarification of the deal. Mike Smith explained that the farmer who owns the land now wants to sell. He is selling the land and water to a third party. This party with whom Craig Harrison is working, is going to sell the water and land separately. The City would lease the +rater back to the new owners. Tom Moore asked if the City has the money. Mr. Smith responded that it has to be appropriated. "Does Staff have a recommendation on this as far as the legal rights of the contract?" Paul Eckman replied that "we don't have a problem with the binding effect of the contract." With regard to the lease -back, he doesn't have a concern about our legal position as far as if we have any obligation to lease following the 11 year term. "It's a political problem, not a legal one," he added. Tom Moore moved that the City purchase the water under the current contract. Jo Boyd seconded the motion. Tom Sanders made it known that he is adamantly opposed because of the precedent we are setting and that we won't be able to use that water for 11 years. John Scott is opposed because he would first like to see if it can be negotiated with the buyer to get a payment plan instead of all of it up front. If he is getting that kind of deal and guaranteed 11 years worth of water, maybe he will take an 11 year payment plan. MaryLou Smith asked Mike Smith if that would be possible. Mr. Smith said they had discussed that. He said staff would inquire but his guess is that "it would not go over too well." Henry Caulfield called for the question. After a show of hands the motion passed 9 - 2 with John Scott and Tom Sanders casting the negative votes for reasons stated previously. Mike Smith related that the City has an offer to purchase 99 units of CBT water at $750. The City Attorney's office has drafted a purchase contract. Paul Eckman added that it is a straight purchase, payment on closing and it can be leased back if we don't need it. Tom Sanders moved that staff proceed with the purchase. Following a second from Ray Herrmann, the motion passed unanimously. Mike Smith related that Dennis Bode receives frequent calls from parties contemplating selling water. They usually "throw out" prices which puts staff in a dilemma. The City does not want to raise the market, but wants to be sensitive to the market conditions. Water Board Minutes November 21, 1966 Page 6 Neil Grigg thinks we need to have a mechanism for tracking sales. "Do we have that?" Dennis Bode replied that "we have a good idea of what the market is." Dr. Grigg also asked if we have any way of finding out about all of the transactions. Norm Evans said the problem is there is no requirement that transactions be recorded. CBT transactions are recorded after the fact, but the prices are not always available. Mike Smith suggested with regard to CBT water that staff can take a conservative approach if the Board agrees; in other words, try to renegotiate the lowest price consistent with the market. __ He then announced that staff had an offer to sell 2 shares of WSSC stock to . the City. After discussion, Henry Caulfield moved that the staff be given the discretion to negotiate with potential sellers for a price consistent with the prevailing market price and any purchase recommendation be brought back to the Water Board for their consideration. After a second from Neil Grigg, the motion passed with Tom Moore abstaining because of his association with WSSC. Mike Smith updated the Board on North Poudre reservoirs 5 and 6. Staff has met with North Poudre and discussed some options. Staff will be meeting with them again in the near future. Henry Caulfield suggested that before the Board gets into a further discussion about 5 and 6, that staff produce about a two -page outline stating the alternatives of how 5 and 6 would be acquired, and the alternatives regarding the exchanges. Other Business It should be noted that Tom Moore left the meeting at this point because the Water Supply and Storage Company/Thornton agreement was the agenda item. Rich Shannon explained that the Board will be discussing two agreements --the first is a two-party agreement between WSSC and Thornton. He pointed out the agreement which each member had received. This is the agreement that has gone to all the stockholders, of which Fort Collins is one. Our role in reviewing this is as a stockholder; in other words, how do we want to vote our shares at the December 19th meeting? The Water Board will be making a recommendation to the City Council. The Council has a meeting on December 16th prior to the 19th meeting. Mr. Shannon advised the Board to set a meeting time to discuss this about two weeks from today, after having reviewed the agreement. At that meeting the staff will provide an analysis listing advantages and disadvantages. Henry Caulfield raised the issue about "our two hats;" one as a stockholder and the other as the City. Mr. Caulfield, backed by Paul Eckman's legal expertise, assured the Board that a positive vote on the agreement as a stockholder would not preclude our objecting in the Water Court on the water quality issue or any other issue as a City. Water Board Minutes November 21, 1986 Page 7 The Board agreed to meet on Friday, December 5 „ at 3:00 to review and discuss the agreement and make a recommendation to the City Council. Henry Caulfield advised the Board that he will not be able to attend the meeting on the 5th, but after having reviewed the agreement, he would vote for it as a stockholder. Tom Sanders asked where the Thornton return flows will go -- at what point in the ditch? Mr. Smith said that in the agreement it specifies the area where the water can be taken out and returned, between the headgate on the river and Rocky Ridge Reservoir. Dr. Sanders continued, "Is there any chance that this water will get back to our water supply? Mr. Smith said, "not directly into our water supply as we take it in the river now. The headgate of WSSC is below our diversion on the river." "Let's talk about the future," Dr. Sanders insisted. Mr. Smith speculated that there is a possibility that the Pleasant Valley headgate could be considered a headgate someday. Dr. Sanders stressed that this is a key item that everyone should consider very carefully. Rich Shannon focused next on the three party agreement with WSSC, Fort Collins and Thornton which serves as the basis of a settlement. Mr. Shannon announced that prior to the meeting, staff received a copy of the final language that has been drafted by attorney Ward Fischer which is supposed to support the summary statement. Mr. Shannon apprised the Board of what the City ended up with as a settlement and why. WSSC is very pleased with the agreement that was negotiated. On the other hand, WSSC is concerned that the City, in the process of negotiating the three -party agreement, does not hamper in any way the two-party agreement. "The harder we push, the more nervous they get," Mr. Shannon concluded. Concerning the dynamics of the meeting, Mr. Shannon stated that there have been issues on the table that if it were just between WSSC and the City, the Company would say, "you are right, we owe you these points, and we should give them to you." Since Thornton is now at the table as a stockholder, Thornton intimidates the Board members by warning them to refrain from doing anything which could jeopardize the assets of the Company, "or we will sue the Company as stockholders." Mr. Shannon related that three members of the Water Board have been a part of the meetings: Norm Evans, Henry Caulfield and Neil Grigg, and Gerry Horak has been kept informed as the Council liaison to the Board. Following are the discussion points of the agreement: 1) The 84 shares shall be "returned" to the Company. The Company would agree to enter into an arrangement with the City to pursue acquisition of the Southside Ditch water in exchange for CBT and/or WSSC water. 2) Fort Collins would have a representative at the WSSC Board meetings. That person would not have voting rights, but would participate in all discussion. Water Board Minutes November 21, 1986 Page 8 3) The City shall have a first right of refusal to purchase CBT units owned by the WSSC should WSSC choose to dispose of them within the next 10 years. (note) The Company has 3,000 units of CBT water. There is some question as to whether the Company can use CBT because the NCWCD is still opposed. 4) Fort Collins shall be reimbursed in the amount of $10,000 from the WSSC for legal expenses. Thornton used the next two points to try get Fort Collins in alignment with their interests. They are not a part of the final negotiations. 5) Should the WSSC choose to make substantial improvements to their system and in so doing allow other parties to participate in those improvements (and therefore benefit from the increased yields), then Fort Colins shall have the right to participate on an equal basis with any other party to said improvements. 6) Fort Collins and WSSC agree to enter into an exchange agreement involving North Poudre Reservoirs 5 and 6 (should the City acquire an interest in 5 and 6), so long as said agreement does not injure WSSC. Tom Sanders asked, "Is the City of Fort Collins being pushed around?" Henry Caulfield responded, "We have no bargaining chips. If we still had the 84 shares, that might have given us some leverage." Mr. Caulfield also reiterated that WSSC considers this two-party agreement to be "such a rich contract that they will not do anything to prevent its going through." Any idea of generosity to Fort Collins is "out the window." On the other hand, as a stockholder, we are benefiting greatly by the amount of money that Thornton is putting into WSSC, and therefore, we are better off then we otherwise would be. Norm Evans commented that there is another point of view that we ought not to lose sight of. "When the panic button was hit" over the Thornton matter, everyone rushed to see what they could do to "head them off at the pass." Even our City Council took a lead in that endeavor, so it is rather hard to come back and respond to Thornton in a different light; although it is true we responded to WSSC's call for help. Henry Caulfield added, "It should be noted that the agreement stipulates that majority control is firmly kept in Northern Colorado." That much has been accomplished. Tom Sanders asked why Fort Collins doesn't have a vote. Rich Shannon responded that the stockholders were looking at the WSSC Board and said, "You just gave municipal interests 5 seats on a 9 member Board which tips the balance away from the agricultural community." That was the argument they used. Neil Grigg had a question about the Northern Colorado interest. He can see how the agreement will maintain majority control in this area, but what about the scenario where South Adams County which is adjacent to Thornton, decides Water Board Minutes November 21, 1986 Page 9 they want to get out of the well building business and they decide to buy into the pipeline, and they secretly buy 100 shares from the farmers. They have been secretly talking to Thornton and agree to split the cost of the pipeline. Suddenly, instead of 200+ shares, it could be 300 or more shares and they have 2/3 control. There is nothing in the agreement to prevent that. Dave Stewart said there is a provision to prevent that. They vote for whoever the Northern Colorado people put up and the Northern Colorado people vote for whoever they put up -- it is a 5-4 split. Henry Caulfield added, technically speaking this Board is going to stay in the hands of representatives from Larimer and Weld County in perpetuity. Mr. Caulfield does, however, have some concern that if the Thornton and other metro area interests achieved 90% of the stock, would a court let something like that stand? Dave Stewart has the same concern. If 20 years from now, 90% of the shareholders were from outside of Northern Colorado, would it be logical to assume that control of the Board would remain with Northern Colorado? Marylou Smith stated that at this point, this seems to be our best alternative and to our advantage to accept what has been worked out; seemingly the best agreement. Henry Caulfield stressed, "it's either this or go to court." Rich Shannon reminded the members that this is the subject of our special meeting on December 5. He also advised that it might be best to include both of the agreements on the agenda for the meeting. Henry Caulfield wanted to make a final comment. He pointed out that the City is the second largest stockholder in WSSC after Thornton which has approximately 280. This is the nature of the players," he added. Dr. Evans complimented Rich Shannon for the prudent manner in which he has been representing the City at the meetings. He recalled that the Water Board was formed about 25 years ago because the City Manager was not willing to cooperate with the surrounding water entities. "We are still reaping the results of his negative comments after all of these years." It always pays to develop a cooperative spirit and a willingness to compromise when we are dealing with our "neighbors" he emphasized. Norm Evans asked the Board to crystalize their comments and ideas for the meeting in two weeks. Speaking of cooperation, MaryLou Smith asked about the meeting with the Loveland Water Board. There was agreement that the meeting was productive and that both Greeley and Loveland have expressed an interest in further meetings in the future. John Scott asked when the water metering issue will be back on the Board agenda. Norm Evans believes that issue integrates with the newly Water Board Minutes November 21, 1986 Page 10 the Council at the same time. Rich Shannon said that the third piece, as far as the Council is concerned, is the Poudre dam project. They are continually referring to how much water do we need and "Fort Collins is the only one that isn't metered." The questions are, how much water do we need to store and how many non-structural options are there? Henry Caulfield assured the Board that, by implication, the metering study is fully involved in the new report. "It ties it all together." MaryLou Smith asked about the newspaper article in the Coloradoan talking about updating the Utility billing system and the reference that the Water Board had agreed to 3,300 meters per year for the next three years. It was irritating to her to see it here, because she believes it is misinformation. Dennis Bode explained that the reference may have come from the Water Board accepting the metering recommendation some time back. Since there was no further business, the meeting was adjourned at 5:00 p.m. ;'-n L�� i%G lL _ Water Board Secretary