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COUNCIL - AGENDA ITEM - 12/15/2020 - FIRST READING OF ORDINANCE NO. 164, 2020, AUTHORIZ
Agenda Item 21 Item # 21 Page 1 AGENDA ITEM SUMMARY December 15, 2020 City Council STAFF Liesel Hans, Interim Deputy Utilities Director Donnie Dustin, Water Resources Manager Eric Potyondy, Legal SUBJECT First Reading of Ordinance No. 164, 2020, Authorizing the City Manager to Execute an Agreement with the Developer of Montava for the Annual Use of Up to 25 Acre-Feet of Water of Fort Collins Utilities in a Plan for Augmentation for a Potable Water Supply for the Montava Property. EXECUTIVE SUMMARY The purpose of this item is to consider a perpetual agreement between HF2M Inc., the Developer of Montava (Developer), and Fort Collins Utilities (Utilities). Under the agreement, in exchange for cash payments, Utilities would annually deliver up to 25 acre-feet of augmentation water from the City’s Rigden Reservoir in southeast Fort Collins to the Poudre River. The Developer (and successor entities) would use the augmentation water to replace the steam depletions from groundwater wells that would provide a potable w ater supply for Montava. The cash payments and water deliveries contemplated in the agreement are contingent on the Developer acquiring various City and Water Court approvals. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on First Reading. BACKGROUND / DISCUSSION Montava is a multi-phase, long-term development proposal located in the northeast portion of Fort Collins. The project is located in the area covered by the Mountain Vista Sub Area Plan (MVSAP) first envisioned in 1999 and updated in 2009. A map from the Developer has been included. (Attachment 2) It is estimated to take about 20-25 years to build, will include about 4,000 housing units across ~1,000 acres, and is estimated to serve about 11,000 new residents. Summary of Montava development activity to date: • September 2018: Council approved the Montava Metro District Service Plan. • January 2020: Council approved the Metro District Public Benefits Agreement. • February 2020: Council approved the Montava Master Plan and Planned Unit Development (PUD) Overlay (the “Development”). • March 2020: The Developer submitted the first phase of the Development to City Planning for a Preliminary Design Review (PDR). By way of the Montava Metro District, the development is bound to certain additional public benefits outlined in the Public Benefits Agreement. These include the following, with some additional information for context: Agenda Item 21 Item # 21 Page 2 • Affordable Housing: The Montava Metro District is obligated to deliver 300 affordable and 300 atta inable housing units. One of the enforcement mechanisms is that they must build 65% of the affordable/attainable units before they can start the 2nd half of building permits. There will be a 20-year deed on the affordable units. o The City’s current goal based on the 2015-19 Affordable Housing Strategic Plan is to have 10% of housing stock be affordable by 2040. Staff estimates this requires about 300 more affordable units each year. Staff are updating this plan and aim to have it adopted by Council in e arly 2021. The term “affordable” refers to residents earning 80% or less than the Area Median Income (AMI). The term “attainable” refers to residents earning 81-120% of AMI. To learn more visit fcgov.com/housing. • Climate Action-related Requirements: All single-family units will be constructed to the Department of Energy Zero Energy ready standard , will require a 3rd party verification and cannot get Certificate of Occupancy without meeting this obligation. • Non-potable water for irrigation of common areas, using wells that have historically been used to irrigate the Montava property. City Planning will review and will withhold Certificate of Occupancy if not constructed. • Agri-urban Component: Development of a working 47-acre farm with a 5-year period to become operational. If the farm does not come to fruition in this time period, the City has an option to purchase the land. What is the status for water and sewer for the Development? The Montava property is within the East Larimer County Water District (ELCO) and the Boxelder Sanitation District service areas. At the PUD Master Plan stage, which is conceptual and very high level, the only requirement in City’s Land Use Code related to water and sewer is to prove that utility services are availab le for the site. Both ELCO (water) and Boxelder Sanitation District (sewer) have provided “will serve” letters, satisfying the requirement at this point. The Developer has stated that ELCO’s policies and cost of fees for water service are a barrier to financing the Development. To have certainty to finance a development of this size, the Developer states that it needs to show certainty around the water service, which they state will require the Developer to purchase or develop all of the water supplies for the development up front. ELCO requires that developers desiring water service meet a “water supply requirement” by transferring to ELCO Colorado -Big Thompson Project contractual units or shares from certain local ditch companies (not all water rights can be utilized by ELCO or will increase the firm yield of their water supply portfolio). ELCO will also accept up to 30% of this water supply requirement as cash - in-lieu payments. A map of the water districts has been included. (Attachment 3) The Developer has discussed the alternative groundwater-based approach discussed below with the ELCO Board in October 2020 and ELCO has opted to investigate the potential impacts to their system over the next 6-9 months before deciding how it will proceed with respect to the Developer’s proposal to use groundwater. Note that the Developer is planning to utilize Boxelder Sanitation District for wastewater services. GROUNDWATER FOR MONTAVA and AN AUGMENTATION PLAN What is the new proposed plan for a potable water supply for Montava? To meet the indoor potable water demands of the Development, the Developer is now proposing to pump and treat groundwater from the Boxelder Creek alluvial aquifer on or near the eastern edge of the Montava property. This would involve drilling several new wells. The existing wells on the property would be used for outdoor irrigation only. Agenda Item 21 Item # 21 Page 3 Why does the Developer need additional “augmentation water”? Wells that are tributary to surface streams can only pump groundwater on a permanent basis pursuant to a Water Court-approved “augmentation plan.” The aquifer in this case is a tributary of the Poudre River and Boxelder Creek, meaning pumping will cause depletions to both. Groundwater pumped must be replaced so as not to injure other senior water users downstream. Colorado water law is based on the doctrine of prior appropriation or “first in time, first in right”. These new wells’ rights will be junior to many other water rights downstream. In a case where a junior water right is diverting water “above” a senior water right, the senior water right is entitled to make a “call” on the river and limit those who are junior until the senior user is getting its full amount again. The effect of groundwater pumping is delayed in how it ultimately depletes the water available in the river. For this reason, and to avoid having to stop pumping, separate “augmentation” water must be delivered to the river when there is a downstream call by a senior water right. The full amount may not be needed every year, but to be allowed to pump the groundwater the Developer must have the augmentation water in place when this situation occurs . What water will be used to replace the groundwater depletions? Most of the depletions from the groundwater pumping (about 90%) will be replaced with treated effluent at the Boxelder Sanitation District plant, because most water used indoors is eventually collected and reclaimed at the sanitation facility. This water is effectively the groundwater that would be pumped and used by Montava residents. To account for the water that does not return to the system this way, a small amount of additional augmentation water is required for the other depletions. See the included chart provided by the Developer of overall water demands and supplies. (Attachment 2) Deliveries of augmentation water under the agreement with Utilities would be made between September 1 and April 30 each year. According to the Developer, the requested 25 acre -feet amount is based on the worst-case scenario as determined by reviewing historical calls on the river during these months. The overall groundwater approach will require being prepared with additional augmentation water at different points in the river, and the Developer is working with different entities to secure rights to that water. The Developer has proposed this timeline of when augmentation water will be needed: • 2021-2022: Pursue decree for a plan for augmentation in Water Court. • 2023: Build potable water treatment facility. • 2024: Starting building first phase of homes. • 2026: Earliest need for augmentation water, and only if a call on the river. • 2084: Expected to reach full need for augmentation water, again, based on calls on the river . Other details related to the augmentation plan: An approved augmentation plan is set forth in a Water Court decree that: (1) quantifies the depletions from well pumping (in time, location, and amount); (2) defines when augmentation water must be delivered to the stream to replace those depletions (in time, location, and amount) so that other water rights are not injured; and (3) includes other terms and conditions needed to ensure that pumping the wells does not injure other water rights. The Developer would use the water provided under this a greement with Utilities to replace some of the depletions. In Water Court proceedings, agreements for augmentation water are generally required to be firm and definite, so that other water users and the Water Court can be sure that there will be augmentat ion water in the future to replace depletions from today’s pumping. Purpose of this groundwater: Note that the Developer has indicated that the new groundwater wells will primarily be for potable water use as well as some ancillary uses, such as purpos es related to replacing water that evaporates from an irrigation pond. The proposed agreement includes two points of delivery from Rigden Reservoir. Which one is used at any given time would depend on whether a call is being placed at the Fossil Creek Reservoir Inlet Ditch, or downstream. Agenda Item 21 Item # 21 Page 4 What about the rest of the Development’s water needs? As part of the Montava Metro District public benefits agreement, they are required to complete a non -potable irrigation system to meet the other needs of the Development. This water would come from existing non- tributary “Coffin” wells and some wells included in an already existing augmentation plan, all of which have historically served the farmland on the property, according to the Developer. Additional information about these wells and the non-potable irrigation system are not available yet. Where will the Utilities “augmentation water” come from? The water will be delivered via the City-owned Rigden Reservoir (Rigden) located in the southeast part of Fort Collins. Utilities has several water rights that are already allowed to be used for augmentation. Rigden was built in 2015 and has 1,900 acre-feet of capacity of which 1,600 acre-feet is allocated to Utilities and 300 acre - feet is allocated to Natural Areas. Utilities’ current and planned main use of Rigden is for meeting return flow obligations as Utilities grows into fully utilizing changed irrigation water rights, which will become more necessary with projected growth and the construction of the Halligan Water Supply Project. Utilities also uses Rigden to help meet some small (current) augmentation requirements for Natural Areas, managing reusable effluents from the Drake Water Reclamation Facility and making (small) annual leases on an “as available” basis. Natural Areas uses their 300 acre-feet in Rigden to store water rights they have changed to help meet augmentation requirements for various unlined gravel pits. POTENTIAL IMPACTS to UTILITIES The current Water Supply and Demand Management Policy water supply reliability criteria includes: • Meeting all demands through a 1-in-50-year drought; and • Maintaining 20 percent of annual demand in storage. Based on the Utilities water supply system model, releasing 25 acre -feet of water as contemplated in the agreement is not projected to impact the ability to meet demands, though the ability to meet the storage reserve is diminished slightly. This impact could be offset by using the financial compensation received under the agreement (described below) to acquire additional water supplies, particularly rights that provide storage. Water available at Rigden is below the Utilities treated water supply system intakes (i.e., well below the pipelines that deliver raw water to the Water Treatment Facility) and thus generally unable to increase the firm yield to our treated water customers. However, if there was an issue with delivering Rigden water to meet the needs of this proposed agreement (e.g., infrastructure failure, extreme multiyear drought, etc.) Utiliti es would have to draw from other supplies (e.g., Joe Wright and/or (future) Halligan Reservoirs) to meet Montava’s augmentation needs. What are the other potential risks and considerations? • Utilities is planning to update the Water Supply and Demand Management Policy in the next few years that will likely incorporate results of the recently completed Water Supply Vulnerability Study, which could result in a different outlook on the impact of the agreement. • Utilities or other City departments may want or need to use this volume of water stored in Rigden in the future and it would be hard to affordably replace this small amount via gravel pit storage or some other alternative to Rigden. • There is no existing code or policy around providing permanent augmentation water to an outside entity (non-Utilities customers). Utilities has never entered into an agreement of this nature and it would potentially set a policy precedent outside of a comprehensive policy -making process. • Utilities providing this water may imply that Utilities is able to provide other support or services related to the Development's water supply plan. • This agreement requires staff time and resources to administer and operate. Agenda Item 21 Item # 21 Page 5 • The City will need to be a party to the Water Co urt case to ensure that the augmentation plan does not adversely impact the City’s water rights. COMPENSATION When Utilities agrees to lease raw water on a short -term, temporary basis (e.g., one year), it does not require the user to satisfy a water supply requirement by providing water rights or a cash-in-lieu payment. These lessees only pay a volumetric rental rate up front. To compensate for permanent use of a Utilities water supply, any developer must generally satisfy a water supply requirement. Utilities’ water supply requirement for treated water service in City Code is helpful but is not truly analogous to the Developer’s request. For treated water service, Utilities can provide single -use and reusable water. However, the Developer desires deliveries of augmentation water requiring fully reusable water supplies, which are difficult to obtain and manage (e.g., requires storage to provide winter demands). Have we done a perpetual augmentation agreement before? No. Utilities has entered two other agreements to provide either augmentation or reusable supplies: • A permanent agreement with a Utilities customer that requires reusable water sources . • A 50-year augmentation lease for 1 acre-foot to a non-Utilities entity (US Fish and Wildlife Service) for rehabilitating the black-footed ferrets on previously owned City land. In both arrangements, Utilities applied a multiplier of 2.63 to the number of acre -feet (AF) requested since augmentation water requires fully reusable supplies, which, as no ted above, are harder to obtain and manage. The initial, one-time “water supply requirement” payment for a permanent use of a Utilities water supply would be: Cash payment = Cash-in-Lieu Rate x 2.63 multiplier Under the 2021 Cash-in-Lieu rate of $22,145, the total payment would be $58,241.35 per acre -foot, or $1,456,033.75 for all 25 acre-feet. It will likely take a few years to get Water Court approval of its augmentation plan and to acquire other City approvals. In the case that this agreement go es into effect after 2021, the payment will increase by 5% each year to account for inflation. The Developer will also have the option of paying for less than the full 25 acre - feet if, after receiving approval of the augmentation plan, they need fewer than 25 acre-feet. There are also the following additional costs: • Reserve Payment: Until the Developer is through Water Court, an annual payment will reserve the augmentation water for the Developer. The rate is half of the applicable raw water rental rate (currently $400/AF). • Annual Payment: To compensate for administrative and operational costs, the Developer will pay an annual amount based on the total augmentation water delivered. The rate is the applicable raw water delivery charge(s) for fully consumable water (currently $120/AF). OTHER COMMUNITIES What do other Front Range cities do? City of Boulder • Boulder City Code prevents perpetual lease agreements (only 20 year maximum). Agenda Item 21 Item # 21 Page 6 • Only one (20 year) augmentation lease for 0.6 AF/year exists which was seen as a broad community benefit. • A reusable water requirement was not charged possible because it is not a permanent agreement. • Annual lease rate is $750/AF. City of Loveland • Loveland does not have any policy related to providing augmentation water. • Water is provided for three augmentation plans, each of which were in individually negotiated from about 10 - 30 years ago. • Water requirements were variable, but the two most recent were met with 2-3 times the CBT units per AF of need. • Staff has generally avoided more recent long-term augmentation requests. • Annual lease rate varies per agreement. City of Longmont • Longmont does not allow perpetual leases (only 10 year maximum). • A reusable water requirement is not defined most likely because the city does not have permanent agreements. • Annual reusable lease rate is $641/AF. City of Greeley • Greeley considers perpetual leases if the terms are such that the lease will substantially offset the potential impacts (i.e., get more water rights/cash than “normal”). • Several perpetual leases exist with various terms and conditions (and costs). ADDITIONAL CONSIDERATIONS The proposal presented here is a step the Developer needs to take to pursue use of groun dwater to provide potable water to Montava residents. There are many other issues to eventually address as part of this approach. A significant issue to eventually evaluate is the question of whether this water source is adequate for the population of the Development. Council has not had to address the question of water adequacy as other development within the City has been served by an existing, vetted water provider. The Colorado statute defines "adequate" to mean “a water supply that will be sufficient for build-out of the proposed development in terms of quality, quantity, dependability, and availability to provide a supply of water for the type of development proposed, and may include reasonable conservation measures and water demand management meas ures to account for hydrologic variability”. (C.R.S. §29-20-301 et seq) Given that land use decisions are local decisions in Colorado, the state also puts the determination in the hands of the local land use authority. Certain information is required and the statute allows the local authority to require additional information and analysis as it sees fit. There are, of course, additional items that Council and City Planning will need to consider later in the process of evaluating the Developer’s proposal, including: • Building a new water treatment plant; • Water quality of the groundwater; • Water reliability and resiliency; • Cost to build the treatment plant; and • Cost to customers (water bills), among others. Finally, this approach may lead to the creation of another water provider in the GMA that furthers complicates challenges the community already experiences. Agenda Item 21 Item # 21 Page 7 CITY FINANCIAL IMPACTS To compensate for perpetually dedicating a Utilities asset developed for the Utilities system and customers to an outside entity, the agreement includes a financial payment for the water supply requirement. BOARD / COMMISSION RECOMMENDATION Staff presented this item as an informational item to the Water Board on November 19, 2020. Staff returned to the Water Board on December 3, 2020 for additional discussion and for the Board to consider making a recommendation to Council. The unapproved minutes from the Dec ember 3, 2020 meeting are included. The Water Board’s unanimous motion was: “Water Board recommends that Council approve this 25 acre-foot augmentation agreement, conditional upon City determination of water adequacy, among other approvals – including the appropriateness of using groundwater to meet the Montava project’s water supply needs – and because the compensation will ensure this is neutral to Utilities customers, and because this only represents an incremental action that will lead to additional analysis.” PUBLIC OUTREACH Staff conducted outreach to peer organizations to help inform the proposed agreement and develop the potential impacts to Utilities. Otherwise, the technical agreement that did not require public outreach, but is one component of a larger discussion that will likely involve a public conversation. ATTACHMENTS 1. Water Demand Chart (PDF) 2. Map of System from Developer (PDF) 3. Water Districts Map (PDF) 4. Water Board Minutes (excerpt) (PDF) 5. Powerpoint Presentation (PDF) 1388 acre feet (AF) Total Water Demand 600 AF Total Potable Demand 788 AF Non-potable Demand Total Montava Annual Water Demand Potable vs. Non-Potable Demand Water Source Augmentation Need Above Fort Collins (summer time only) Water Use Description 18 AF irr pond evap ~ 770 AF from Groundwater wells not requiring augmentation & surface water i.e. WSSC/NPIC 618 AF from Tributary Groundwater Wells @ Rigden Reservoir (winter time only) These sources do not require augmentation 558 AF Replaced via treated effluent 25 AF augmented via Fort Collins Utilities 40 AF augmented via Seaworth, WSSC, Other 600 AF Potable Indoor Uses 200 AF irrigation for 3 PSD schools 30 AF Irrigation of Neighborhood Parks 170 AF irr. of Regional Park (mainly WSSC) 300 AF irrigation of lots / common areas 70 AF Irrigation of Native Hill Farm @ M Chart is not to scale. Values provided by Developer. ATTACHMENT 1 k G G #* #* #* k Text Depletion Point on CLP River Box Elder Creek Cache la Poudre River Montava Depletion Pointon Box Elder Creek I-25 Hwy 14 US Route287 Depletion Pointon CLP River RigdenReservoir SeaworthAugmentationPond Approx.Well Field IrrigationPonds BOXELDERWWTP FC WWTPNO. 2 FC WWTPNO. 1Lake CanalNew Mercer DitchLarimer County Ca n al N o 2 No 8 OutletFort Collins Irrigation Ditch Bo x e l d e r D i t c h Larimer and Weld Canal Jackson D i t c h Sources: Esri, HERE, Garmin, Intermap, increment P Corp., GEBCO, USGS,FAO, NPS, NRCAN, GeoBase, IGN, Kadaster NL, Ordnance Survey, EsriJapan, METI, Esri China (Hong Kong), swisstopo, © OpenStreetMapcontributors, and the GIS User Community FIGURE 1 November 2020 MONTAVAPROJECT ELEMENTS² 0 1 2 Miles Legend Montava k Montava Well Field Montava Irrigation Ponds k Seaworth Augmentation Pond Rigden Reservoir #*Fort Collins WWTP No. 1 #*Fort Collins WWTP No. 2 #*Boxelder WWTP G Well Depletion Points Canals Rivers/Creeks Cache La Poudre Res. Inlet Fossil Ck. Res.Inlet Ditch ATTACHMENT 2 !!! !!! !!!!!!!!!!!!!!!!!!!! !!!!!!!!!!!!!!!!!!!!!!!!! !!!!!! !!!!!!!!!!!!!!!!!!!!!!!!!! ! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! !!!!!!!!!!!!!!! ! !!!!!!!!!!!!!! ! !!! !!!!!!!!!! !!!!!!!!!!!!!!!!! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! !!! ! !!!!!!!!!! !!!!!!!!!!!!!! ! ! ! ! !!!!!!! !!!!!!!!!!!!!!!!! !!!!!!!!!!!!!!!HORSETOOTH MULBERRY SHIELDSLAPORTEUS HIGHWAY287 STRAUSS CABINLAUREL MOUNTAIN DRAKE PROSPECT WILLOX TAFT HILLVINE COUNTRY C LU B SUNIGA VINE RICHARDS LAKE TURNBERRYTRILBY COUNTY ROAD 38 M ULBERRY DOUGLAS ELIZABETH LEMAYMULBERRY COUNTYROAD38 E MOUNTAIN VISTA LIN COLN HARMONY GREGO RYKECHTER C O U N T Y ROAD54G STATE HIGHWAY 392HARMONY VINE MASONMAINSUNIGA ZIEGLERLINCOLN COUNTY ROAD 3CARPENTERJOHNFKENNEDY COUNTY ROAD 30 HARMONY COUNTY ROAD 5COUNTY LINEINTERSTATE25COUNTY ROAD 5TAFT HILLCOUNTY ROAD 19GIDDINGSCOLLEGETIMBERLINELEMAYLEMAYLEMAYZIEGLERRIVERSIDE OVERLANDTERRYLAKEZ I EGLERSHIELDSCOUNTYROAD5INTERSTATE 25TAFTHILL/ Fort Collins Area Water Districts 0 1 2 3 4 50.5 Miles Water Districts East Larimer County Water District Fort Collins Loveland Water District Fort Collins Utilities (Water) Sunset Water District West Fort Collins Water District GMA !!!!!!City Limits Major Streets Figure Updated: 10/23/2018 All boundaries are approximate ATTACHMENT 3 Excerpt from Unapproved DRAFT MINUTES - WATER BOARD SPECIAL MEETING December 3, 2020, 5:30-7:30 p.m. Online via Zoom 1 2 /03/20 20 – Excerpt from Unapproved DRAFT MINUTES Page 1 of 1 REGULAR ITEMS (Attachments available upon request) Developer Request for Perpetual Water Augmentation Agreement Interim Utilities Deputy Director-Water Resources & Treatment Operations Liesel Hans gave an overview of the request and draft agreement. The Montava developer (HF2M) requests a perpetual agreement in which Fort Collins Utilities would deliver up to 25 acre-feet of augmentation water to the Poudre River during winter months from Rigden Reservoir. The agreement would be conditional upon the developer (or a successor entity, such as a metro district) meeting certain criteria. Dr. Hans, Assistant City Attorney Eric Potyondy, Water Resources Manager Donnie Dustin, and Interim Utilities Executive Director Theresa Connor responded to board members’ questions. Discussion Highlights Board members commented on and inquired about various related topics including precedent; what proof City needs that water has been acquired (staff responded this development is within an existing service area; service exists and is available for this property); groundwater well water impact on the Poudre River; “Coffin wells” (refers to several wells adjudicated in the 1950s; the judge at the time, named Claude C. Coffin, determined these wells were non-tributary and were allowed to pump without an augmentation plan); water quality; water rights decreed for augmentation; other communities’ perpetual water augmentation agreements; Utilities water rights activity; future drought and return flow obligations; likelihood of a bigger housing development in the future requesting a similar agreement (staff responded this agreement does not obligate Utilities to another entity); unintended impacts such as the possibility of opening the door to Montava regarding other services, such as a secondary backup system (staff responded East Larimer County Water District (ELCO) would more likely provide backup); water adequacy issues; water supply planning as it relates to the Growth Management Area (GMA); reason for rushed feeling of developer’s request (staff responded that the developer is motivated due to the fact that it will take several years to go through the water court process, and there’s a possibility of other entities’ water court filings); parallel paths and appropriate safeguards; Boxelder Sanitation District; City offers lower cost water. Board Member Michael Brown, Jr moved that the Water Board recommend City Council approve this 25 acre-foot transaction agreement, conditional upon City determination of water adequacy, among other approvals – including the appropriateness of using groundwater to meet the Montava project’s water supply needs -- and because the compensation will ensure this is neutral to Utilities customers, and because this only represents an incremental action that will lead to additional analysis. ATTACHMENT 4 WATER BOARD SPECIAL MEETING 1 2/03/2020 – Excerpt from Unapproved DRAFT MINUTES Page 2 Discussion on the motion: A board member offered a friendly amendment to the motion to replace “transaction” with “augmentation.” Board Member Brown accepted the friendly amendment. The revised motion is as follows: Board Member Michael Brown, Jr moved that the Water Board recommend City Council approve this 25 acre-foot augmentation agreement, conditional upon City determination of water adequacy, among other approvals – including the appropriateness of using groundwater to meet the Montava project’s water supply needs -- and because the compensation will ensure this is neutral to Utilities customers, and because this only represents an incremental action that will lead to additional analysis. Board Member Nicole Ng seconded the motion. Discussion on the motion: A board member inquired whether the amendment wou ld add burden to the process. Staff replied that it would not. Vote on the Motion: it passed unanimously, 10-0. December 15, 2020 Montava: Request for Augmentation Water Liesel Hans, Interim Deputy Director, Utilities ATTACHMENT 5 2 ? Outline •Request •Review of Montava •Groundwater and augmentation water •Considerations •Discussion 3 Request for Consideration HF2M (Developer of Montava) requests a perpetual agreement where Fort Collins Utilities will deliver up to 25 acre-feet of augmentation water to the Poudre River via City-owned Rigden Reservoir. Conditional upon: •a final and unappealable determination that the proposed potable water supply for the Property is adequate •all necessary approvals under the Fort Collins Municipal Code and the City’s Land Use Code 4 What is Montava? 5 •About 4,000 homes built on ~1,000 acres in northeast Fort Collins over ~25 years •Master-planned community •Expected to serve ~11,000 people •“…connected community with new neighborhoods, parks, schools, town center, urban agriculture, businesses, and transportation connections…” Montava development progress 6 1st phase submitted to Planning for a Preliminary Design Review (PDR) City Council approved Master Plan and (PUD) Overlay City Council approved Metro District Public Benefits Agreement City Council approved Metro District Service Plan September 2018 January 2020 February 2020 March 2020 Wa ter and sewer “will serve” letters Ex: 600 affordable/ attainable housing units 7 8 9 Groundwater and augmentation water 10 11 New groundwater wells, junior water rights Wa ter rights, mostly surface water diversions Colorado Water Law “First in time, first in right” 12 Groundwater and surface water are a connected system. Pumping groundwater will deplete water in the river. Downstream users rely on that water being in the river and depletions need to be replaced. 13 New groundwater wells, junior water rights Senior water rights, mostly surface water diversions Colorado Water Law “First in time, first in right” Add water back to the river 14 Groundwater and surface water are a connected system. Replace depletions by releasing water into the river: 1) Treated effluent and 2) Augmentation water 15 1388 acre fe et (AF) To tal Water Demand 600 AF To tal Potable Demand 788 AF Non-potable Demand To tal Montava Annual Water Demand Potable vs. Non-Potable Demand Water Source Augmentation Need Above Fort Collins (summer time only) Wa ter Use Description 18 AF irr pond evap ~ 770 AF from Groundwater wells not requiring augmentation & surface water i.e. WSSC/NPIC 618 AF from Tr ibutary Groundwater We lls @ Rigden Reservoir (winter time only) These sources do not require augmentation 558 AF Replaced via treated effluent 25 AF augmented via Fort Collins Utilities 40 AF augmented via Seaworth, WSSC, Other 600 AF Potable Indoor Uses 200 AF irrigation for 3 PSD schools 30 AF Irrigation of Neighborhood Parks 170 AF irr. of Regional Park (mainly WSSC) 300 AF irrigation of lots / common areas 70 AF Irrigation of Native Hill Farm @ M Chart is not to scale. Values provided by Developer. AF = acre-feet Ti meline proposed by Developer Pursue plan in water court 2021-2022 Build groundwater treatment facility 2023 Deliver potable water to first homes 2024 Earliest need for aug.water 2026 Expected need for full aug.water amount 2154 17 18 Considerations Key impacts Based on the current Utilities Policy and water supply system model: •Does not impact ability to meet demands •Reduces ability to meet the storage reserve criteria The overall impact is neutral because the agreement includes the financial payment which can be used to acquire additional water supplies, particularly ones that provide storage Utilities is set to update the Policy soon; different policy criteria may result in a different conclusion 19 Financial compensation Wa ter Supply Requirement Payment = ~$58k per acre-foot •Utilities does not have a codified water supply requirement (WSR) for reusable or augmentation water •Proposed approach is based off the two “most similar” scenarios •Other payments: Reserve payment, Annual payment 20 Other entities and perpetual augmentation agreements 21 Greeley will consider perpetual agreements if benefits more than offset impacts. Various terms and conditions. Boulder does not allow lease longer than 20 years. $750/AF annual lease rate. Loveland has no policy. Has agreements (mostly older), significant WSR. Longmont does not allow lease longer than 10 years. $641/AF annual lease rate. Additional considerations 22 •No existing policy; No precedent •City may want or need the water in the future •Requires staff time to administer and operate •Utilities providing this water may imply ablility to provide other support or services related to the development's water supply plan •Current proposal may lead to the creation of another water provider in the GMA and furthers complicates those challenges •May result in a large development relying on a different water source Just one piece of the pie Augmentation Water Wa ter quality Wa ter costs Energy costs Wa ter Tr eatment Facility Water Adequacy ELCO 23 Wa ter Board recommendation Wa ter Board recommends City Council approve this 25 acre-foot augmentation agreement, conditional upon City determination of water adequacy, among other approvals –including the appropriateness of using groundwater to meet the Montava project’s water supply needs – and because the compensation will ensure this is neutral to Utilities customers, and because this only represents an incremental action that will lead to additional analysis. 24 Request for Consideration HF2M (developer of Montava) requests a perpetual agreement where Fort Collins Utilities will deliver up to 20 AF of augmentation water to the Poudre River during winter months via Ridgen Reservoir. Conditional upon: •a final and unappealable determination that the proposed potable water supply for the Property is adequate •all necessary approvals under the Fort Collins Municipal Code and the City’s Land Use Code 25 26 Thank you 27 Additional Slides -1- ORDINANCE NO. 164, 2020 OF THE COUNCIL OF THE CITY OF FORT COLLINS AUTHORIZING THE CITY MANAGER TO EXECUTE AN AGREEMENT WITH THE DEVELOPER OF MONTAVA FOR THE ANNUAL USE OF UP TO 25 ACRE-FEET OF WATER OF FORT COLLINS UTILITIES IN A PLAN FOR AUGMENTATION FOR A POTABLE WATER SUPPLY FOR THE MONTAVA PROPERTY WHEREAS, the City owns and operates a water utility as part of Fort Collins Utilities (“Utilities”), which includes various water rights and contractual and other rights to use water (“Utilities Water Interests”); and WHEREAS, City of Fort Collins Charter Article XII, Section 4 provides that the use of water belonging to the City shall always be subject to the most comprehensive scrutiny, management, and control by the City; and WHEREAS, Charter, Article XII, Sections 3 and 6 prohibit actions that materially impair Utilities water system or do not benefit the citizens of Fort Collins and Utilities ratepayers; and WHEREAS, water attributable to some of the Utilities Water Interests can be used to replace out-of-priority depletions under a plan for augmentation approved by the District Court for Water Division 1 (“Water Court”) or substitute water supply plan approved by the Colorado Division of Water Resources (“augmentation use”) pursuant to the terms and conditions of their respective decrees, contracts, and other controlling documents (“Utilities Augmentation Water”); and WHEREAS, HF2M, Inc., a Texas corporation (“Developer”), is pursuing a development on approximately 1,000 acres within the City’s municipal boundaries, commonly referred to as the “Montava” development (“Property”); and WHEREAS, the Developer is pursuing the development of a potable water supply system for the Property as described further below (“Potable System”), which includes some ancillary non-potable uses, such as purposes related to an irrigation pond on the Property; and WHEREAS, implementation of this Potable System will require various permits and approvals, including from the City, a water adequacy determination under Colorado statute C.R.S. §29-20-303, and various approvals under City Code and the Land Use Code; and WHEREAS, for this Potable System, the Developer intends to initiate proceedings in Water Court to seek judicial confirmation of water rights and approval of a plan for augmentation for wells located on and/or near the Property that would pump ground water tributary to Boxelder Creek and the Cache la Poudre River for the primary purpose of a potable water supply for the Property (“Augmentation Plan”); and WHEREAS, the Developer thus requires water for augmentation use to be used pursuant to the terms and conditions of the Augmentation Plan or associated substitute water supply plans, -2- and Utilities Staff and the Developer have thus negotiated a proposed agreement, a copy of which is attached as Exhibit “A” (“Agreement”); and WHEREAS, under the proposed Agreement, Utilities would annually deliver up to 25 acre-feet of Utilities Augmentation Water to specific locations for augmentation use under the Augmentation Plan or associated substitute water supply plans, provided that the Developer and any successor(s) have strictly complied with all terms and conditions set forth in the Agreement; and WHEREAS, such terms and conditions in the proposed Agreement include those providing that, to be entitled to deliveries of water under the Agreement, the Developer and any successor(s) must first acquire from the City: (1) a final and unappealable determination that the Potable System for the Property is adequate pursuant to C.R.S. §29-20-301 et seq.; and (2) all final and unappealable approvals required under City Code and the Land Use Code to begin construction of the initial phase of the Montava development (together, “City Approvals”); and WHEREAS, with respect to the Potable System, the Agreement thus amounts to an incremental action in advance of additional analyses, including those associated with the City Approvals; and WHEREAS, such terms and conditions in the proposed Agreement also include those requiring the Developer and any successor(s) to make various cash payments to Utilities in compensation for the annual use of up to 25 acre-feet of Utilities Augmentation Water in the Augmentation Plan and any associated substitute water supply plans, which will result in the Agreement being neutral or beneficial to the City’s water utility and its water system, the City’s water utility ratepayers, or the citizens of Fort Collins; and WHEREAS, the Water Board has reviewed the proposed Agreement and has recommended that City Council approve it pursuant to terms and conditions consistent with those identified herein and set forth in the proposed Agreement; and WHEREAS, City Council has reviewed and evaluated the proposed Agreement and determined that the City can enter into the Agreement without adverse impacts or injury to the City’s water utility and its water system, the City’s water utility ratepayers, or the citizens of Fort Collins. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows: Section 1. That the City Council hereby makes and adopts the determinations and findings contained in the recitals set forth above. Section 2. That the City Manager is hereby authorized to execute an Agreement substantially in the form of Exhibit “A”, attached hereto and incorporated herein by this reference, with such additional terms and conditions as the City Manager, in consultation with -3- the City Attorney, determines to be necessary and appropriate to protect the interests of the City or effectuate the purposes of this Ordinance. Introduced, considered favorably on first reading, and ordered published this 15th day of December, A.D. 2020, and to be presented for final passage on the 5th day of January, A.D. 2021. __________________________________ Mayor ATTEST: _____________________________ City Clerk Passed and adopted on final reading on this 5th day of January, A.D. 2021. __________________________________ Mayor ATTEST: _____________________________ City Clerk Page 1 of 15 AGREEMENT FOR THE ANNUAL USE OF UP TO 25 ACRE-FEET OF WATER OF THE CITY OF FORT COLLINS IN A PLAN FOR AUGMENTATION FOR A POTABLE WATER SUPPLY FOR THE MONTAVA PROPERTY This Agreement, dated _______________________, is entered into by and between the following Parties: the City of Fort Collins, Colorado, a municipal corporation (“City”); and HF2M, Inc., a Texas corporation with an office located at 430 N. College Ave., Suite 410, Fort Collins, Colorado (“HF2M”). RECITALS A.The City owns and operates a municipal water supply system and various water rights and contractual and other rights to use water (“City Water Interests”). Water attributable to some of the City Water Interests can be used to replace out-of-priority depletions under a plan for augmentation or substitute water supply plan (“augmentation use”) pursuant to the terms and conditions of their respective decrees, contracts, and other controlling documents (“City Augmentation Water”). A list of some of the City’s Water Interests associated with City Augmentation Water is attached as Exhibit A. B.HF2M is pursuing a development on approximately 1000 acres within the City’s municipal boundaries, commonly referred to as the “Montava” development. The property on which the development is located is: the E1/2 and portions of the SW1/4 of Section 32, Township 8 North, Range 68 West of the 6th P.M.; the W1/2 of Section 33, Township 8 North, Range 68 West of the 6th P.M.; the NW1/4 and portions of the NE1/4 of Section 4, Township 7 North, Range 68 West of the 6th P.M. (“Property”). The general location of the Property is shown on the map attached as Exhibit B. C.HF2M is pursuing the development of a potable water supply system for the Property, which includes some ancillary uses, such as purposes related to an irrigation pond on the Property.1 Implementation of such a potable water supply system will require various permits and approvals, including from the City. See, e.g., C.R.S. §29-20-303. Such permits and approvals are not the subject of this Agreement and nothing in this Agreement shall in any way affect or limit the City’s rights to exercise its authority or discretion with respect to any permits or approvals or their associated processes.. D.HF2M intends to seek judicial confirmation of water rights and approval of a plan for augmentation for wells located on and/or near the Property that would pump ground water tributary to Boxelder Creek and the Cache la Poudre River for the primary purpose of a potable water supply for the Property (“Augmentation Plan”). See C.R.S. §37-92-103(9); §37-92-305. HF2M thus requires water for augmentation use to be used pursuant to the terms and conditions of the Augmentation Plan or a substitute water supply plan approved pursuant to C.R.S. §37-92-308(4) associated with the Application, as the same may be amended (“SWSP”). A copy of the draft application for approval of the Augmentation Plan (“Application”) is attached as Exhibit C. Nothing in this Agreement shall be 1 HF2M is also developing a separate, non-potable water supply system for the development that is not the subject of this Agreement. EXHIBIT A Page 2 of 15 interpreted to affect in any way the City’s rights to fully participate in any proceedings associated with the Application and to take any position regarding any claims in the Application. E. HF2M intends to transfer the ownership of and rights and responsibilities for the potable water supply for the Property. HF2M and any assignees pursuant to Paragraph 7 are referred to herein as the “Montava Entity.” F. This Agreement has been approved by City Council pursuant to Ordinance No. ____________ (“Ordinance”). A copy of the Ordinance is attached as Exhibit D. Pursuant to the Ordinance and the findings therein, the City has determined that, pursuant to the terms and conditions of this Agreement, it can annually supply the Montava Entity with up to 25 acre-feet of City Augmentation Water for the Augmentation Plan or SWSP without adverse impacts on the City’s water utility and its ratepayers. Agreement 1. INCORPORATION OF RECITALS. The Recitals set forth above are hereby incorporated into this Agreement as if fully set forth herein. 2. CONDITION OF CITY APPROVALS. To be entitled to deliveries of water under this Agreement, the Montava Entity must first acquire from the City (collectively, “City Approvals”): • a final and unappealable determination that the proposed potable water supply for the Property is adequate pursuant to C.R.S. §29-20-301 et seq.; and • all final and unappealable approvals required under the Fort Collins Municipal Code and the City’s Land Use Code to begin construction of the initial phase of the Montava development. Nothing in this Agreement shall in any way affect or limit the City’s processes, or the City’s authority or discretion with respect to any determinations and approvals associated with the City Approvals. If the Montava Entity fails to acquire the City Approvals on or before December 31, 2025, this Agreement shall terminate by operation of law without any requirement for further action. 3. PAYMENTS. 3.1. Reserve Payment. 3.1.1. Purpose of Reserve Payment. It may be several years before the Montava Entity obtains all City Approvals and a final unappealable decree for the Augmentation Plan. In the interim, the City will be reserving 25 acre-feet of City Augmentation Water for the Montava Entity for the City’s planning and other purposes on a conditional basis. To compensate the City, the Montava Entity shall therefore pay the City an annual “Reserve Payment” pursuant to this Paragraph 3.1. All payments of the Reserve Payment shall be nonrefundable. 3.1.2. Amount of Reserve Payment. Each Reserve Payment shall be calculated as: Reserve Payment = Rental Rate x 0.5 x 25 Page 3 of 15 “Rental Rate” = shall be the applicable rental rate for fully consumable water (or an analogous classification of water that applies to City Augmentation Water delivered out of Rigden Reservoir) that was most recently approved by the City.2 Nothing in this Agreement shall be construed to affect in any way the City’s authority or discretion to change the rental rate. “0.5” is a factor to account for the Montava Entity’s conditional reservation of 25 acre-feet of City Augmentation Water. “25” refers to the 25 acre-feet of City Augmentation Water. 3.1.3. Reserve Payment for 2021. Within 28 days of the date of this Agreement, the City will send an invoice to the Montava Entity for the Reserve Payment for the 2021 calendar year. The Montava Entity shall pay the Annual Payment within 30 days after the date of the invoice. 3.1.4. Reserve Payments for 2022 Through 2025. On or before December 31 of 2021, 2022, 2023, and 2024, the City will send an invoice to the Montava Entity for the Reserve Payment for the following January 1 through December 31 time period, provided however, that no further Reserve Payments shall be required if the Montava Entity has paid the Water Supply Requirement Payment pursuant to Paragraph 3.2. The Montava Entity shall pay the Annual Payment within 30 days after the date of the invoice. 3.1.5. Effect of Failure to Timely Pay. If the Montava Entity fails to timely pay any Reserve Payment as required by this Paragraph 3.1, the City will notify the Montava Entity of that failure to pay and the Montava Entity shall have 10 days from such notice to make the Reserve Payment and if it fails to do so, this Agreement shall terminate by operation of law without any requirement for further action. 3.2. Water Supply Requirement Payment. 3.2.1. Purpose of Water Supply Requirement Payment. Under this Agreement, the City will be reserving the “Agreement Water” (as defined in Paragraph 3.2.2) for the Montava Entity’s augmentation use, as well as for the City’s planning and other purposes. To compensate the City, the Montava Entity shall therefore pay the City the Water Supply Requirement Payment pursuant to this Paragraph 3.2. The payments of the Water Supply Requirement Payment shall be nonrefundable. 3.2.2. Amount of Agreement Water. The Montava Entity has not yet determined the exact amount of City Augmentation Water (up to 25 acre-feet) that it requires for the 2 For reference purposes only, the current rental rate is $400 per acre-foot as set forth in Ordinance No. 038, 2018 of the City Council of the City of Fort Collins Establishing Rental Rates and Delivery Charges for Use of Water Available Under the City’s Raw Water Interests for 2018 Through March 2021. Page 4 of 15 Augmentation Plan, which may depend on the specific terms and conditions of the decree for the Augmentation Plan. When the Montava Entity makes payment of the Water Supply Requirement Payment pursuant to this Paragraph 3.2, it shall state the exact number of whole, nonfractional acre-feet of City Augmentation Water being paid for, which shall not exceed 25 acre-feet (“Agreement Water”). A notice from the City to the Montava Entity pursuant to Paragraph 12 confirming the amount of Agreement Water shall be considered to be part of this Agreement. The amount of Agreement Water shall thereupon be established for all purposes under this Agreement. If the Montava Entity pays for less than 25 acre-feet, nothing shall entitle the Montava Entity to subsequently pay an additional Water Supply Requirement Payment for the difference between 25 acre-feet and the amount of Agreement Water. 3.2.3. When Payment Due. Within 63 days after the date upon which the Montava Entity has acquired all the City Approvals and obtained a final unappealable decree for the Augmentation Plan, and provided that such payment occurs on or before December 31, 2025, the Montava Entity shall pay the City the Water Supply Requirement Payment for the Agreement Water. 3.2.4. Amount. The Water Supply Requirement Payment shall be made as a cash payment to the City, with the Water Supply Requirement Payment cash amount initially being $58,241.35 per acre-foot of Agreement Water,3 provided that, on January 1 of 2022, 2023, 2024, and 2025, the Water Supply Requirement Payment cash amount from the previous year shall be increased for that January 1 through December 31 period by 5% to account for inflation. 3.2.5. Effect of Failure to Timely Pay. If the Montava Entity fails to timely pay the Water Supply Requirement Payment as required by this Paragraph 3.2, this Agreement shall terminate by operation of law without any requirement for further action. 3.3. Annual Payment. 3.3.1. Purpose. Under this Agreement, the City will be delivering the Agreement Water for the Montava Entity’s augmentation use, which will impose certain administrative and other costs on the City. To compensate the City for these costs, the Montava Entity shall pay the City (via its Fort Collins Utilities) an “Annual Payment” pursuant to this Paragraph 3.3. The payments of the Annual Payment shall be nonrefundable. 3.3.2. Amount. The Annual Payment shall be calculated as: Annual Payment = Acre-Feet of Agreement Water Delivered x Charge per Acre-Foot 3 This amount was calculated as the product of the 2021 City’s Water Supply Requirement cash-in-lieu rate of $22,145 multiplied by a water supply factor of 2.63. Page 5 of 15 “Acre-Feet of Agreement Water Delivered” shall be the volume of Agreement Water the City delivered under this Agreement in the previous September 1 through April 30 time period. “Charge per Acre-Foot” shall be the applicable raw water delivery charge(s) for fully consumable water (or an analogous classification of water that applies to the Agreement Water delivered out of Rigden Reservoir) that was most recently approved by the City.4 Nothing in this Agreement shall be construed to affect in any way the City’s authority or discretion to change the raw water delivery charge. 3.3.3. When Payment Due. On or before June 30 of each year, the City will send an invoice to the Montava Entity identifying the Annual Payment owed for the previous September 1 through April 30 time period, including the amount of the Agreement Water delivered during that time period and the current charge per acre-foot consistent herewith. The Montava Entity shall pay the Annual Payment within 30 days after the date of the invoice. 3.3.4. Effect of Failure to Timely Pay. If the Montava Entity fails to timely pay the Annual Payment as required by this Paragraph 3.3, the City shall be entitled to suspend all deliveries of Agreement Water until payment is received. If the Montava Entity fails to timely pay the Annual Payment for three consecutive years, the City shall be entitled to terminate this Agreement with notice under Paragraph 12. 4. MONTAVA ENTITY’S USE OF THE AGREEMENT WATER. The City agrees to deliver the Agreement Water to the Montava Entity pursuant to the terms and conditions of this Agreement. 4.1. Volume. The City agrees to annually deliver up to 25 acre-feet of Agreement Water to the Delivery Points (defined below) in each September 1 through April 30 period during the term of this Agreement and consistent with the provisions of this Agreement. 4.2. Approved Uses. The Montava Entity shall only use the Agreement Water delivered under this Agreement for augmentation use in: • the Augmentation Plan after it has received judicial approval in a final and unappealable decree; or • an approved SWSP (as defined above). Any such use shall be pursuant to the terms and conditions of the Augmentation Plan or SWSP. The Montava Entity shall not be entitled to claim or use any return flows of Agreement Water from the above-described uses. The City shall have no responsibility or liability regarding whether this Agreement meets the requirements of the Augmentation Plan or an approved SWSP. 4 For reference purposes only, the current such charge is $120 per acre-foot as set forth in Ordinance No. 038, 2018 of the City Council of the City of Fort Collins Establishing Rental Rates and Delivery Charges for Use of Water Available Under the City’s Raw Water Interests for 2018 Through March 2021. Page 6 of 15 4.3. Annual Delivery Schedule. The City will deliver the Agreement Water pursuant to an annual delivery schedule approved by the City, with the understanding that the Agreement Water will only be required and delivered during September 1 through April 30. On or before August 1, the Montava Entity shall provide the City with a proposed annual delivery schedule for the following September 1 through April 30 period. The proposed annual delivery schedule will identify the daily volume of deliveries at each Delivery Point, subject to adjustment of the Delivery Point for the applicable call as discussed in Paragraph 4.5. The City will approve the proposed annual delivery schedule if it is consistent with the terms and conditions of this Agreement, and may reject or modify the proposed annual delivery schedule if it is not. Following approval, the City, in its sole discretion, may make minor adjustments to the delivery schedule if the Montava Entity so requests, provided however, that the total annual volume of water to be delivered under this Agreement during September 1 through April 30 shall not exceed the amount of the Agreement Water. The City shall have no responsibility or liability regarding whether the annual delivery schedule meets the requirements of the Augmentation Plan or an approved SWSP. 4.4. Deliveries. Deliveries of the Agreement Water will be made in increments of 0.1 acre- feet and, at the City’s discretion, may be made in daily “slug” releases, as opposed to a constant flow rate throughout a single day. The City reserves the right to not make deliveries pursuant to the annual delivery schedule if there is no applicable downstream call (a.k.a. “free river” conditions) or if there are no other legal requirements to make the deliveries. The City shall have no responsibility or liability regarding whether actual deliveries meet the requirements of the Augmentation Plan or an approved SWSP. 4.5. Delivery Points. The Agreement Water will be delivered to the “Delivery Points”, being: • the confluence of the Foothills Outfall Channel and the Cache la Poudre River in the NW1/4 of the NW1/4 of Section 34, Township 7 North, Range 68 West, 6th P.M. (just below Rigden Reservoir); and • the Fossil Creek Reservoir Inlet Ditch, at the location where the City is able to pump water from Rigden Reservoir into that ditch in the SW/14 of Section 28, Township 7 North, Range 68 West, 6th P.M. The Montava Entity and the City will coordinate on which of the above Delivery Points is needed at any given time under the Augmentation Plan or SWSP, with the understanding that it will depend upon whether there is an applicable call at the Fossil Creek Reservoir Inlet Ditch. The Montava Entity must give the City at least 48 hours advance notice of any change of Delivery Points. Upon delivery of the Agreement Water to the appropriate Delivery Point under this Agreement, the City shall have no responsibility for the management and use of the Agreement Water. 4.6. Transit Loss. The City will bear any transit losses assessed on the delivery of the Agreement Water to the Delivery Points. The Montava Entity shall bear any transit losses on the conveyance of the Agreement Water from the Delivery Points. Page 7 of 15 4.7. Source of City Water. The Agreement Water will be attributable to the City Water Interests that are lawfully available for the Montava Entity’s augmentation use at the Delivery Points consistent with this Agreement, including5 those listed in Exhibit A. The City shall have the sole discretion to select which City Water Interest to use to deliver the Agreement Water to the Montava Entity. 4.8. Force Majeure. In the event that the City cannot deliver the Agreement Water to the Delivery Points due to circumstances beyond its control, the City will deliver the water to the Delivery Points as soon as practicable, but shall have no obligation or liability to the Montava Entity for the delay in such deliveries. In the event that the City cannot make the Agreement Water available to the Montava Entity for the uses described herein due to circumstances beyond its control (including physical issues (including infrastructure failure and river conditions), administrative and legal issues (including administrative interpretations or actions by the Colorado Division of Water Resources regarding the use of the City Water Interests)), the City shall have no obligation or liability to the Montava Entity. 4.9. Ownership and Assessments. This Agreement only authorizes the Montava Entity to use the Agreement Water delivered to the Montava Entity pursuant to the terms and conditions herein. The City retains all other rights pertaining to the underlying City’s Water Interests. 4.10. Accounting. The City will account for such deliveries of Agreement Water to the Delivery Points in the City’s accounting and report the same to the State Engineer’s Office on a monthly basis, and will reasonably cooperate with the Montava Entity as may be reasonably necessary for the Montava Entity to complete its own accounting. The City shall have no obligation or liability related to the accounting or other obligations associated with the Montava Entity’s use of the Agreement Water in the Augmentation Plan or SWSP. Upon request by the Montava Entity, the City will provide it with information on the specific City Water Interests used to deliver water to the Montava Entity under this Agreement provided, however, that the City shall have no obligation to provide such information to the Montava Entity until the City has submitted its final accounting for the subject time period to the Division Engineer for Water Division 1. 5. WATER COURT AND SWSP PROCEEDINGS. Nothing in this Agreement shall be construed to limit in any way the City’s right to fully participate in any proceedings associated with the Application, Augmentation Plan, and/or SWSP(s). 6. TERM AND TERMINATION. Provided that this Agreement has not terminated pursuant to Paragraph 2, Paragraph 3.1.5, or Paragraph 3.2.5, the term of this Agreement shall be perpetual, unless it is terminated pursuant to the terms of this paragraph or it is amended or terminated by written agreement of the Parties. The Montava Entity shall be entitled to terminate this Agreement at its sole discretion upon written notice to the City. 5 In this Agreement, “includes” means that the list that follows is not exclusive. See, e.g., Southern Ute Indian Tribe v. King Consol. Ditch Co., 250 P.3d 1226, 1233 n. 4 (Colo. 2010). Page 8 of 15 7. ASSIGNMENT. No rights or obligations under this Agreement shall be assigned or otherwise transferred to benefit lands other than the Property. 7.1. Assignment by the City. The City may not assign any rights and obligations under this Agreement without the written consent of the Montava Entity. 7.2. Assignment by HF2M to a Subsequent Montava Entity. HF2M, or a proper assign hereunder, may assign the entirety of its rights and obligations under this Agreement to a successor entity that is responsible for the Augmentation Plan. If HF2M (or a successor entity) desires such an assignment, HF2M (or successor Montava Entity) shall provide written notice to the City pursuant to Paragraph 12 identifying, at minimum: (1) identity and background information regarding the assignee; a contact person and contact information from the desired assignee; (2) certification that the proposed assignee is aware of and assumes HF2M’s (or then- current Montava Entity’s) obligations under this Agreement; and (3) an executed copy of the assignment. 8. DEFAULT AND REMEDIES. If any Party fails to comply with the provisions of this Agreement and such failure is not otherwise expressly addressed herein, the other Party, after providing prompt written notification to the noncomplying Party, and upon the failure of the noncomplying Party to achieve compliance within 35 days following receipt of such notice, may seek all such remedies available under Colorado law, including but not limited to specific performance, provided that neither Party shall be entitled to consequential or punitive damages. 9. NO THIRD-PARTY BENEFICIARIES. This Agreement is entered into between the Parties for the purposes set forth herein. It is the intent of the Parties that they are the only beneficiaries of this Agreement and the Parties are only benefitted to the extent provided under the express terms and conditions of this Agreement. 10. GOVERNING LAW AND ENFORCEABILITY. This Agreement shall be construed in accordance with the laws of the State of Colorado, insofar as any matter is not regulated by applicable laws of the United States. The Parties recognize that the constitutions, statutes, and rules and regulations of the State of Colorado and of the United States, as well as the parties respective bylaws, city charters and codes, and rules and regulations, impose certain legal constraints on each Party and that the Parties intend to carry out the terms and conditions of this Agreement subject to those constraints. Whenever possible, each provision of this Agreement shall be interpreted in such a manner so as to be effective and valid under applicable law. 11. WAIVER. A waiver of a breach of any of the provisions of this Agreement shall not constitute a waiver of any subsequent breach of the same or another provision of this Agreement. 12. NOTICES. All notices or other communications hereunder shall be sufficiently given and shall be deemed given when personally delivered, or after the lapse of five (5) business days following mailing by certified mail-return receipt requested, postage prepaid, addressed as follows: Page 9 of 15 To the City: City Manager City Hall West 300 LaPorte Avenue; P.O. Box 580 Fort Collins, Colorado 80522-0580 With copy to: Fort Collins City Attorney 300 LaPorte Avenue; P.O. Box 580 Fort Collins, Colorado 80522-0580 epotyondy@fcgov.com and: Fort Collins Utilities Attn: Water Resources Manager 700 Wood Street P.O. Box 580 Fort Collins, Colorado 80522-0580 To HF2M / Montava Entity: Registered Agent on File with the Colorado Secretary of State 13. COLORADO LAW. The Agreement shall be governed by the laws of the State of Colorado, insofar as any matter is not regulated by applicable laws of the United States. 14. ENTIRE AGREEMENT. The making, execution and delivery of this Agreement by the Parties has been induced by no representations, statements, warranties or agreements other than those expressed in this Agreement. This Agreement embodies the entire understanding of the Parties as to the subject matter hereof and there are no further or other agreements or understandings, written or oral, in effect between the Parties relating to its subject matter unless expressly referred to in this Agreement. Modification of this Agreement by the Parties may be made only by a writing signed by the Parties. [Remainder of Page Left Blank Intentionally] Page 10 of 15 CITY OF FORT COLLINS, COLORADO, a municipal corporation By: ______________________________________ Date: Darin A. Atteberry, City Manager ATTEST: By: ______________________________________ City Clerk APPROVED AS TO LEGAL FORM: By: ______________________________________ Eric R. Potyondy City Attorney’s Office Page 11 of 15 HF2M, INC., a Texas Corporation By: ______________________________________ Date: ____________, President ATTEST: By: ______________________________________ Page 12 of 15 EXHIBIT A (City Water Interests) The City Augmentation Water delivered under this Agreement will be attributable to City Water Interests, including those listed below, to the extent that they are lawfully available for the Montava Entity’s augmentation use under this Agreement. Water Interest Name Decree References6 and Notes Arthur Irrigation Company Shares or Effluent Case No. 1992CW129; Case No. 2005CW323 Halligan Reservoir Enlargement Water Right Case No. 2013CW3185 Joe Wright Reservoir Water Rights Case No. W-9322-78 Larimer County Irrigating Canal No. 2 Company Shares and Effluent Case No. 1992CW129; Case No. 2005CW323 Michigan Ditch Water Rights and Effluent Case No. W-1424; Case No. 1988CW206 New Mercer Ditch Company Shares and Effluent Case No. 1992CW129; Case No. 2005CW323 North Poudre Irrigation Company Shares Multiple Use Portion Rigden Reservoir and Effluent Case No. 2014CW3158 Warren Lake Reservoir Company Shares and Effluent Case No. 1992CW129; Case No. 2005CW323 Water Supply Storage Company Shares and Effluent Case No. 1992CW129; Case No. 2005CW323 Windy Gap Units and Effluent Case No. W-9322-78 6 The decrees identified in the table are for reference purposes only and are not intended to be a comprehensive list of all relevant decrees. Page 13 of 15 EXHIBIT B (General Location Map of the Development) [TO BE INSERTED] Page 14 of 15 EXHIBIT C (Application) [TO BE INSERTED] Page 15 of 15 EXHIBIT D (Ordinance) [TO BE INSERTED]