HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 03/16/2021 - SECOND READING OF ORDINANCE NO. 038, 2021, ESTABLI Agenda Item 5
Item # 5 Page 1
AGENDA ITEM SUMMARY March 16, 2021
City Council
STAFF
Meagan Smith, Water Resources Engineer
Donnie Dustin, Water Resources Manager
Eric Potyondy, Legal
SUBJECT
Second Reading of Ordinance No. 038, 2021, Establishing Rental Rates and Delivery Charges for Use of
Water Available Under Fort Collins Utilities' Raw Water Interests for 2021 Through March 2024.
EXECUTIVE SUMMARY
This Ordinance, unanimously adopted on First Reading on March 2, 2021, to obtain Council approval for the
proposed formulas for calculating rental rates and delivery charges for Fort Collins Utilities’ (Utilities) raw water
supplies for approximately three years, which includes proposed rental rates and delivery charges for fully
consumable water. The rates and charges would be effective through March 2024, to address the gap
between the end of 2023 and Council approval of new rates and charges in early 2024. Setting the rates and
charges via formula ensures Utilities will recoup its costs for rented water while increasing the planning
certainty for the water rental community.
Staff is recommending an increase in the rental rate for fully consumable water. This increase will only impact
customers of our year-to-year leasing program. The increase reflects the cost of administering these rentals
and is in line with market conditions for this type of water. This is the only significant change to the rental rates
and delivery charges.
STAFF RECOMMENDATION
Staff recommends adoption of the Ordinance on Second Reading.
ATTACHMENTS
1. First Reading Agenda Item Summary, March 2, 2021 (w/o attachments) (PDF)
2. Ordinance No. 038, 2021 (PDF)
Agenda Item 9
Item # 9 Page 1
AGENDA ITEM SUMMARY March 2, 2021
City Council
STAFF
Meagan Smith, Water Resources Engineer
Donnie Dustin, Water Resources Manager
Eric Potyondy, Legal
SUBJECT
First Reading of Ordinance No. 038, 2021, Establishing Rental Rates and Delivery Charges for Use of Water
Available Under Fort Collins Utilities' Raw Water Interests for 2021 Through March 2024.
EXECUTIVE SUMMARY
The purpose of this item is to obtain Council approval for the proposed formulas for calculating rental rates and
delivery charges for Fort Collins Utilities’ (Utilities) raw water supplies for approximately three years, which
includes proposed rental rates and delivery charges for fully consumable water. The rates and charges would
be effective through March 2024, to address the gap between the end of 2023 and Council approval of new rates
and charges in early 2024. Setting the rates and charges via formula ensures Utilities will recoup its costs for
rented water while increasing the planning certainty for the water rental community.
Staff is recommending an increase in the rental rate for fully consumable water. This increase will only impact
customers of our year-to-year leasing program. The increase reflects the cost of administering these rentals and
is in line with market conditions for this type of water. This is the only significant change to the rental rates and
delivery charges.
STAFF RECOMMENDATION
Staff recommends adoption of the Ordinance on First Reading.
BACKGROUND / DISCUSSION
The City is a shareholder in several local ditch and reservoir companies and holds allotment contracts for the
delivery of Colorado Big-Thompson Project (CBT) water. Utilities is responsible for most of these supplies. The
main use for these raw water sources is the treatment and delivery of potable water for the Utilities’ ratepayers.
There are also delivery obligations under existing agreements to provide raw water shares for use by certain
homeowner’s associations (HOAs), the Poudre School District (PSD), and some City departments. After all
treated and raw water demands have been met, in most years there is surplus water that can be rented first to
other City departments (if needed) and then to other water users.
This proposed ordinance defines the formulas and rental rates for annual water rentals and delivery agreements,
not the availability of surplus water. It is staff’s discretion to determine on an annual basis the availability of
surplus water, and the timing of this decision will vary by source. There are many variables which can impact
this availability, including snowpack in both the Poudre and Upper Colorado River basins, water quality in both
river basins, available water in storage, and infrastructure and maintenance considerations. Impacts from the
Cameron Peak and East Troublesome fires, as well as the ongoing drought will be weighed when determining
available surplus water for 2021 and subsequent years.
Staff proposes two categories for pricing raw water, as in past years:
ATTACHMENT 1
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Agenda Item 9
Item # 9 Page 2
Category 1 - Raw Water Rental Rates
Sets the price for surplus water for use by water users outside of the City organization.
There are active rental markets for many of Utilities’ surplus water sources.
Typical customers are local agricultural producers, both large and small.
Category 2 - Raw Water Delivery Charges
o Sets the price for sources where Utilities has an on-going obligation to provide raw water for irrigation.
o Customers include specific HOAs, PSD, City Parks Department and Natural Areas Department.
o Typical uses include irrigation of some HOA greenbelts, some PSD fields, and some City parks and golf
courses, as well as some City augmentation needs.
Beginning in 2015, staff recommended, and Council adopted a formula-based approach to setting rental rates
and delivery charges for all of Utilities’ raw water sources except for fully consumable sources. The formulas are
a function of the annual assessment for each ditch and reservoir company plus an administrative fee. Staff
continues to receive positive feedback from the rental community regarding this formula-based approach to rate
setting.
In 2018, staff recommended, and Council adopted this formula-based approach to setting rental rates and
delivery charges for Utilities’ raw water supplies for three years (through March 2021). This was a change from
the historical practice of having rates and charges approved for only one year at a time. This process change
reduced the administrative burden of the rental program and increased the planning certainty for the water rental
community. Staff is again recommending Council adopt the proposed formulas for calculating rental rates and
delivery charges for Utilities’ raw water supplies for three years.
CATEGORY 1 - RAW WATER RENTAL RATES
Active raw water rental markets include:
North Poudre Irrigation Company
Water Supply and Storage Company
Colorado-Big Thompson Project
Pleasant Valley and Lake Canal Company
Southside Ditches
Fully Consumable Sources
The only recommended change to the proposed formulas and fixed rates for raw water rentals from the 2018
approved ordinance is for the raw water rental rate for Fully Consumable Sources.
North Poudre Irrigation Company (NPIC)
Rental Rates - In wet/average years, Utilities expects to have surplus NPIC water available for rent. Each NPIC
share has an agricultural (AG) component and a multiple use (MU) component. The volume of water for each
component varies annually and is set in April by the NPIC Board of Directors based on the company’s water
supply availability. Due to current legal constraints, the AG component can only be used on land served by the
NPIC system and is rented to shareholders under that system. The MU portion of each NPIC share is available
for Utilities' use and is largely comprised of NPIC-owned CBT water. When users in the NPIC system rent either
AG or MU water, both components are delivered through the system in the same manner. Therefore, for rentals
made into the NPIC system, it is proposed both types of water be rented at the same rate per acre-foot (AF).
Beginning in 2015, a formula was defined to set the raw water rental rate, incorporating the NPIC assessment
and share allocation to ensure the cost of the NPIC assessment was fully paid by the renter. This same method
is proposed for 2021 - 2023 and is defined below. The calculated rate is rounded up to the nearest dollar and is
defined by the NPIC allocation made annually in mid-April. The rental rate will remain fixed until the assessment
rate and allocation are defined for the next growing season.
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Agenda Item 9
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In some years there is a special class of NPIC water available for agricultural users for a very limited time early
in the growing season. This Early AG water has a limited rental market and thus warrants a significantly lower
rate. If Early AG water is available in 2021 - 2023, Staff proposes a rental rate of $15/AF to reflect its limited
use.
A possible range of calculated rental rates using the 2021 assessment of $180 with various potential allocations
is attached. Please note rates will change with any assessment changes in 2022 and 2023. (Attachment 1)
Procedures - If the total volume of rental requests is greater than the available surplus water, Utilities will use a
proportionate allocation method based on the requester’s acreage, as has been done since 2008. This allocation
method uses information provided by renters about their total land holdings served under the NPIC system.
These requesting acreages are then added together and divided into the total volume of City-owned NPIC water
available for rent in a given year. This AF/acre ratio is then applied to each of the requesters’ land holdings to
determine the maximum amount of rental water available for each requester. This allocation method was
developed at the request of NPIC renters to provide some water to all requesters each year.
Water Supply and Storage Company (WSSC)
Rental Rates - Water Supply and Storage Company shares can only be rented to water users under that system.
In 2019, Utilities began utilizing its WSSC ownership for treated water production, which reduced the number of
shares available to rent. WSSC continues to have an active rental market and the recent historical rental rate of
a WSSC share is $1,000 over assessment. It is recommended this method be used to calculate the WSSC share
rental rate for 2021 through 2023.
Procedures - Available shares will be offered via lottery as in past years.
Colorado-Big Thompson Water (CBT)
Rental Rate - Utilities receives CBT water through allotment contracts with the Northern Colorado Water
Conservancy District (Northern) and through its ownership of NPIC shares. Utilities does not typically rent CBT
water from its own allotment contracts with Northern, but when available, Utilities will rent CBT water available
through its ownership of NPIC shares. Utilities holds some of the NPIC MU water (largely comprised of CBT
water) for potentially high summer demands, then rents it to other (non-NPIC) renters later in the year if it was
not needed.
To use CBT water from its NPIC shares, the MU portion of the share is transferred as CBT water into the Utilities’
CBT account. Beginning in 2015, Northern instituted a transfer fee for this type of operation. The transfer fee is
based on the CBT allocation, which varies from year to year. The 2020 fee for this transfer was $56.25/AF.
Depending on the CBT quota, the fee for this transfer in 2021 will likely be closer to $60/AF. The assessed
transfer fee is added to the cost of the rental (resulting in a rental price of $91.25/AF in 2020). Staff recommends
rentals of CBT water be made at a rate equal to the calculated NPIC rate plus the cost of any transfer fees
associated with the rental, rounded up to the nearest dollar.
Procedures - Utilities will first meet the CBT delivery obligations to City departments and other entities with
delivery agreements. If Utilities deems there is surplus CBT water available, it will then be offered to water users
on ditches that run through town. These ditches, known collectively as the “Southside Ditches”, include the
Arthur, New Mercer, Larimer No 2, and Warren Lake Reservoir. The Pleasant Valley Lake and Canal Company
(PVLC) is also included in this tier. Surplus CBT water will next be made available to other Poudre Basin water
users. Finally, in the event any surplus CBT water remains, it will be offered to others within the entire Northern
District.
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Agenda Item 9
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Pleasant Valley and Lake Canal Company (PVLC) and the Southside Ditches
Rental Rates - The rental market for raw water from the Southside Ditches and PVLC is very limited, however
Utilities can occasionally rent surplus water from these systems. Staff recommends the rate for these supplies
be set at 120% of the assessment rate, rounded up to the nearest dollar, for each ditch company.
Procedures - PVLC and Southside Ditch shares can only be rented to water users under each specific system.
As the market for these supplies is limited, availability of shares to rent will be determined by staff at the time the
request is made.
Fully Consumable Sources
Utilities has occasional rental demand for fully consumable water to satisfy State requirements for substitute
water supply and augmentation plans. Utilities historically only leases this type of water under short-term
arrangements of 1-year leases. In 2018, staff recommended, and Council adopted, a reduction in the rental rate
for this type of water from $600/AF to $400/AF. This reduction in rate was in response to increased availability
and flexibility of fully consumable supplies with operations at Rigden Reservoir. Over the past three water rental
seasons, staff has experienced that although operations at Rigden Reservoir allow for increased flexibility, the
administrative burden of managing leases for fully consumable water is greater than anticipated. Staff proposes
setting the rental rate for these sources at $600/AF for three years. Based on inquiries with entities
renting/leasing water with similar characteristics in Northern Colorado, this rate is well within the market range
for short term agreements for augmentation water.
Procedures - Utilities staff will monitor reusable sources and determine availability for rental at the time the
request is made.
CATEGORY 2 - RAW WATER DELIVERY CHARGES
Sources utilized for obligated raw water deliveries include:
Pleasant Valley and Lake Canal Company
Southside Ditches
Colorado-Big Thompson Project
Fully Consumable Sources
There are no recommended changes to the proposed formulas and fixed rates for raw water delivery charges
from the 2018 approved ordinance.
Pleasant Valley and Lake Canal Company (PVLC) and the Southside Ditches
This category sets charges for water delivered for use on City facilities, such as parks and golf courses, or water
delivered for use by other entities having met the Utilities’ raw water requirement. Non-City organization entities
with raw water delivery agreements are typically HOAs and the Poudre School District. It is proposed the delivery
charges be set at 110% of each ditch and reservoir company per share annual assessment, rounded up to the
nearest dollar. This is to help offset administrative costs.
Colorado-Big Thompson Water (CBT)
On occasion, Utilities will deliver CBT water to other City departments, typically for irrigation purposes. In those
instances, Utilities employs its available supplies through its allotment contracts with Northern. Staff
recommends setting the rate for delivery of this CBT water equal to the Northern assessment rate plus any
applicable Northern transfer fees, rounded up to the nearest dollar.
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Agenda Item 9
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Fully Consumable Sources
Utilities has limited delivery obligations for fully consumable water where the Utilities’ raw water requirement has
been met. For these obligations it is proposed to maintain the historical delivery charge of $120/AF to help offset
operational and administrative costs.
Based on initial analysis, Staff recognizes this rate does not capture the full cost of administering these
obligations, however due to Staff and resource constraints Staff is not recommending a rate increase at this
time. Staff recognizes the need for additional analysis and outreach to potentially impacted customers of fully
consumable delivery obligations.
The water assessment rates as set by the ditch and reservoir companies for 2018-2020 are included, as well as
the proposed assessment rates for most companies for 2021 due to COVID-19 related delays in annual ditch
company meetings. (Attachment 2) Also included are a list of the proposed formulas and fixed rates for raw
water rentals and delivery charges for 2021-2023 and the raw water rental rates and delivery charges set by the
City for 2019 and 2020, with the rates and charges for 2021 calculated from the proposed formulas and
assessments. (Attachment 3-4)
CITY FINANCIAL IMPACTS
Staff anticipates impacts to the availability of surplus supplies from both the Cameron Peak and East
Troublesome fires for 2021 and subsequent years. As such, revenue from the rental and delivery of raw water
will likely see a reduction and could be less than $500,000/year for 2021 - 2023. The average annual revenue
generated from the raw water rental program over the last five years is about $900,000. Revenues generated
by rentals typically off-set about 50% of the annual cost to Utilities of raw water assessments.
BOARD / COMMISSION RECOMMENDATION
On February 18, 2021, Water Board unanimously recommended Council adopt the proposed formulas for
calculating rental rates and delivery charges for Utilities raw water supplies, as well as the proposed rental rate
and delivery charge for fully consumable water for 2021 through March 2024. (Attachment 5)
PUBLIC OUTREACH
As this program has a targeted customer base, staff has historically provided outreach to specific audiences.
Announcements were made in 2021, as in years past, at NPIC and WSSC company annual meetings regarding
the availability of rental water and the processes for making requests.
In late 2020, staff created a website to communicate updates and accept rental requests for the Raw Water
Rental Program (<https://fcgov.com/water-rental>). Communication avenues also include a dedicated email
(waterrental@fcgov.com) and a dedicated phone line (970-416-2409).
ATTACHMENTS
1. NPIC Rental Rates for 2021 (PDF)
2. Water Assessment Rates (PDF)
3. Proposed Rental Rate and Delivery Charge Formulas (PDF)
4. Raw Water Rental Rates and Delivery Charges (PDF)
5. Water Board Minutes Excerpt, February 18, 2021 (draft) (PDF)
ATTACHMENT 1
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ORDINANCE NO. 038, 2021
OF THE COUNCIL OF THE CITY OF FORT COLLINS
ESTABLISHING RENTAL RATES AND DELIVERY CHARGES
FOR USE OF WATER AVAILABLE UNDER FORT COLLINS UTILITIES’
RAW WATER INTERESTS FOR 2021 THROUGH MARCH 2024
WHEREAS, the City holds title to or otherwise has ownership interests in various water
rights, water right decrees, shares in ditch and reservoir companies (“shares”), and contractual
rights to the delivery of water that are sources of supply of raw and untreated water (together,
“Raw Water Interests”), many of which pertain to Fort Collins Utilities (“Utilities”); and
WHEREAS, the amount of water available under Utilities’ Raw Water Interests, at certain
times, may be greater than the immediate needs of Utilities and its ratepayers, and is thus
potentially available for use by persons outside of Utilities as a rental; and
WHEREAS, the City, through Utilities, has various agreements and understandings
pursuant to which Utilities allows persons outside of the City and certain City departments to use
water available under Utilities’ Raw Water Interests, provided that a charge for the delivery of
such water is paid; and
WHEREAS, pursuant to Article XII, Section 4 of the City Charter, if at any time the water
supply is greater than the immediate needs of the City and its inhabitants, the City Council may
authorize the City Manager to permit the use of such surplus water by consumers outside the City
at such rates as the City Council may prescribe, provided that no vested right shall accrue under
such permits; and
WHEREAS, pursuant to Article XII, Section 6 of the City Charter, the City Council shall
by ordinance from time to time fix, establish, maintain, and provide for the collection of such rates,
fees, or charges for water furnished by the City as will produce revenues sufficient to pay the cost
of operation and maintenance of the City’s utilities in good repair and working order and to provide
and maintain an adequate working capital fund for the day-to-day business operations of the
utilities; and
WHEREAS, Utilities staff has made a recommendation regarding the rental rates and
delivery charges for the use of water available under Utilities’ Raw Water Interests for a period of
approximately three years, through March 2024, which the Water Board has approved; and
WHEREAS, City Council finds that the rental rates and delivery charges set forth herein
are appropriate and will provide revenues that offset the cost of operation and maintenance of
Utilities’ Raw Water Interests and associated infrastructures and to keep the City’s utilities in good
repair and working order and to provide and maintain an adequate working capital fund for the
day-to-day business operations of the utilities.
NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT
COLLINS as follows:
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Section 1. That the City Manager and the Utilities Executive Director are hereby
authorized to make water available under Utilities Raw Water Interests for use by persons outside
of the City and certain City departments, provided; that such water can be rented or delivered
without adversely affecting the City or Utilities and its ratepayers; that no vested right shall accrue
under such use; and that appropriate rental rate or delivery charge set forth herein is applied, which
may be adjusted as the City Manager or the Utilities Executive Director determine necessary to
reflect the remaining yield for the prevalent market price of the water or shares being rented in
order to prevent undue economic loss to the City; and that the final price may be rounded up to the
nearest dollar.
Section 2. That the City Manager and the Utilities Executive Director are hereby
further authorized: to impose on such rentals and deliveries such additional terms and conditions
as they deem appropriate to protect the interests of the City and Utilities in and to Utilities’ Raw
Water Interests; and to deny any request for a rental or delivery, to the extent allowed by law, as
they deem appropriate to further the interests, policies, and values of the City.
Section 3. That all previous authorizations to make water available under Utilities’
Raw Water Interests are repealed in their entirety.
Section 4. That the rental rates set forth in the table below are hereby approved as the
City’s rental rates for 2021 through March 2024 for Utilities’ Raw Water Interests, provided that
the rental rate for fully consumable water shall apply through March 2024.
RATES FOR RENTALS OF SURPLUS RAW WATER
Type of Water Rate Per Acre Foot
Arthur Irrigation Company 120% of Annual Assessment
Colorado-Big Thompson Water from the
Northern Colorado Water Conservancy
District (Northern) associated with Shares in
the North Poudre Irrigation Company
Rental Rate for North Poudre Irrigation
Company (Seasonal Agricultural and Multiple
Use Water) + any Northern transfer fees
calculated at the time of transfer
Larimer County Canal No. 2 Irrigating
Company
120% of Annual Assessment
New Mercer Ditch Company 120% of Annual Assessment
North Poudre Irrigation Company:
Early Agricultural Use Water
$15.00 per acre foot
North Poudre Irrigation Company:
Seasonal Agricultural and Multiple Use Water
(Annual Assessment / (Sum of Allocation of
Seasonal Agricultural Use and Multiple Use
Water per share)) + $2.00 per acre foot
Pleasant Valley and Lake Canal Company 120% of Annual Assessment
Fully Consumable Sources $600.00 per acre foot
Sherwood Reservoir Company 120% of Annual Assessment
Sherwood Irrigation Company 120% of Annual Assessment
Warren Lake Reservoir Company 120% of Annual Assessment
Type of Water Rate Per Share
Water Supply and Storage Company Annual Assessment + $1,000.00 share
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Section 5. That the delivery charges set forth in the table below are hereby approved
as the City’s delivery charges for 2021 through March 2024 for Utilities’ Raw Water Interests.
RAW WATER DELIVERY CHARGES
Type of Water Rate Per Share
Arthur Irrigation Company 110% of Annual Assessment
Colorado-Big Thompson Water from the
Northern Colorado Water Conservancy
District
Rental Rate for North Poudre Irrigation
Company (Seasonal Agricultural and Multiple
Use Water) + any Northern transfer fees
calculated at the time of transfer
Larimer County Canal No. 2 Irrigating
Company
110% of Annual Assessment
New Mercer Ditch Company 110% of Annual Assessment
Pleasant Valley and Lake Canal Company 110% of Annual Assessment
Sherwood Reservoir Company 110% of Annual Assessment
Sherwood Irrigation Company 110% of Annual Assessment
Warren Lake Reservoir Company 110% of Annual Assessment
Type of Water Rate Per Acre Foot
Fully Consumable Sources $120.00 per acre foot
Section 6. That City Council reserves the right to, in its sole discretion, amend, change,
or otherwise modify the rental rates and delivery charges set forth herein before March 31, 2024.
Introduced, considered favorably on first reading, and ordered published this 2nd day of
March, A.D. 2021, and to be presented for final passage on the 16th day of March, A.D. 2021.
__________________________________
Mayor
ATTEST:
_______________________________
City Clerk
Passed and adopted on final reading on the 16th day of March, A.D. 2021.
__________________________________
Mayor
ATTEST:
_______________________________
City Clerk