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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 02/20/2001 - FIRST READING OF ORDINANCE NO. 35, 2001, AUTHORIZI AGENDA ITEM SUMMARY ITEM NUMBER: 31 FORT COLLINS CITY COUNCIL DATE: February 20, 2001 STAFF: Michael B. Smith SUBJECT: First Reading of Ordinance No. 35,2001,Authorizing the Mayor to Enter into an Intergovernmental Agreement Between the City and the Fort Collins-Loveland Water District for the Sale and Delivery of Potable Water. RECOMMENDATION: Staff and Water Board recommend adoption of the Ordinance on First Reading. FINANCIAL IMPACT: The City will collect from (builders/developers) water plant investment fees and raw water requirements (at the City's prevailing rates) for properties located within the subject area (south of Harmony Road, east of the Union Pacific railroad tracks, west of County Road 7, and north of East Trilby Road extended east) as reimbursement for water treatment and transmission capacity to be utilized in delivering water to the Fort Collins-Loveland Water District. The City will also collect from the District the amount of$1.285 per 1000 gallons of water delivered to the District. This rate will be adjusted annually based on the cost of service. EXECUTIVE SUMMARY: The proposed Intergovernmental Agreement between the City and Fort Collins-Loveland Water District (the "IGA") will permit the City to sell treated water to the Fort Collins-Loveland Water District (the 'District") for customers within the city limits in an area located south of Harmony Road, east of the Union Pacific Railroad tracks, west of County Road 7 and north of East Trilby Road extended east (the "Service Area"). The City would then collect non-refundable water plant investment fees and raw water requirements from builders/developers in the Service Area. The IGA will only apply to developments in the Service Area that are now annexed into the city or if they are r� annexed within five years of the date of the IGA; provided, however, if the City and the District agree, the initial five year period could be extended for up to two additional five year periods. The IGA is an attempt to ensure city residents equitable fees as development occurs in the Service Area. The Service Area is adjacent to the City's existing water service area and could be directly served by the City in the future if it became necessary to do so. CKGROUND: The District was established in the 1960s to serve rural areas outside the city limits. In recent years, the District has experienced a considerable amount of urban growth as the city has expanded into DATE: February 20, 2001 2 ITEM NUMBER: 31 the District. Now, with the adoption of City Plan, the District will be serving developments with even higher density. Traditionally,the District's development fees have been oriented toward typical rural development and large lot urban development. With the higher density development now occurring in the City,the District's development fees can be considerably higher than the City's fees (see the chart below). This is compounded by the fact that the District only accepts Colorado Big Thompson ("CBT") water and North Poudre Irrigation Water (or cash-in-lieu of) to meet its raw water requirement for development. As previously reported to Council,the price of CBT water(and North Poudre)increased dramatically during the past year- from about$3000 per unit to$12-14,000 per unit for CBT water. City of Fort Collins Utilities FC-Loveland Water District Water Raw Water Raw PIF Water Total PIF Water Total Single Family $3,170 $3,460 $6,630 $4,000 $12,000 $16,000 8,000 sq. ft. Single Familv $5,410 $5,125 $10,535 $4,000 $12,000 $16,000 15,000 sq. ft. Multi-Familv $11,696 $19,296 $30,992 $22,400 $67,200 $89,600 8 Plex, Commercial $15,300 $13,500 $28,800 $10,000 $30,000 $40,000 1-inch tap The District is concerned about these issues and is in the process of reviewing its raw water policy and development fee structure. It is looking at the possibility of accepting other water rights, thus providing builders/developers lower cost options. The District is also looking at developing a different fee structure for high density development. However,it is anticipated that the development and implementation of a new raw water policy and new fee structure will take some time, possibly four to five years. In the spirit of continuing regional cooperation,the IGA was drafted as an interim solution while the District is developing and implementing its new policy. The following is a brief summary of how the IGA would function: It applies only to the Service Area (south of Harmony Road, east of the Union Pacific railroad tracks,west of County Road 7,and north of East Trilby extended east). The Service Area is adjacent to the City's existing water service area and could be served directly by the City in the future if it became necessary to do so. Developers and builders requesting water taps within the Service Area will be served by the District,but will be assessed the City's water development fees,whatever those fees may be at the time of the tap request. The City will collect and retain those fees. City's fees based on a lot area of 3,600 square feet per unit. District's fees based on 70% of single family fees multiplied times the number of units. DATE: February 20, 2001 3 ITEM NUMBER: 31 f For each tap sold, the City will sell to the District, in perpetuity, a corresponding amount of treated water to be delivered to the District at a predetermined site. The District will pay the City for all water delivered at a cost-of-service rate determined by the City Council. The initial rate of$1.285 per 1000 gallons is specified in the IGA. The amount of water sold to the District will be adjusted annually, corresponding to the number and size of taps sold the previous year (this is based on a formula specified in the IGA). The City's obligations under the IGA will initially exist only with respect to those subdivisions and developments located in the Service Area that are annexed into the City now or within five years of the date of the IGA; provided, however, the IGA provides that this five year period could be extended for up to two additional five year terms if agreed to by both the City and the District. The IGA was reviewed by the Water Board at its December and January meetings. The Board voted 4-1 in support of the IGA at its January meeting. Three members of the Board abstained from voting because they were not present at the December meeting and were not comfortable participating in the final vote. The one member who voted in opposition did so because he was not in favor of including the language in the IGA that allows for the two possible extensions of the initial five-year term. I i i I n s • ORDINANCE NO. 35, 2001 OF THE COUNCIL OF THE CITY OF FORT COLLINS AUTHORIZING THE MAYOR TO ENTER INTO AN INTERGOVERNMENTAL AGREEMENT BETWEEN THE CITY AND THE FORT COLLINS-LOVELAND WATER DISTRICT FOR THE SALE AND DELIVERY OF POTABLE WATER WHEREAS, the City of Fort Collins (the "City") owns and operates a water utility which acquires, treats, transmits and distributes potable water within the City; and WHEREAS, the Fort Collins-Loveland Water District (the "District"), is a special district organized and existing under Colorado law that also owns and operates a water utility which acquires, treats, transmits and distributes potable water within portions of Larimer County and the City; and WHEREAS, the City and the District have in the past entered into agreements pursuant to which the City has sold and delivered potable water to the District and pursuant to which the City and the District have exchanged potable water; and WHEREAS,pursuant to C.R.S.Sections 29-1-203(1),governmental entities in Colorado are authorized to cooperate and contract with one another to provide any function, service or facility lawfully authorized to each of the cooperating and contracting governmental facilities; and iWHEREAS, the District's raw water requirements for providing water services to its customers are more costly than the City's raw water requirements because the District's primary source of water is currently Colorado Big Thompson Water ("CBT Water") which has recently greatly increased in price; and WHEREAS,the City owns more diverse water rights,so its raw water requirements have not been as adversely affected by higher CBT Water prices; and WHEREAS, the District is now in the process of developing new sources of water, so over time this should reduce the District's raw water requirements; and WHEREAS, in the meantime, the District has asked the City to enter into a proposed "Intergovernmental Agreement for the Sale and Delivery of Potable Water," a copy of which is attached hereto as Exhibit "A" and incorporated herein by this reference, (the "IGA") so that the District can more economically provide water service to its customers within certain areas of the District located within the city; and WHEREAS, under the IGA the City would sell and deliver potable water to the District to then be used by the District to provide water service to the District's customers in approved subdivisions and developments that are located solely and entirely south of Harmony Road, east of the Union Pacific Railroad tracks, west of County Road 7 and north of County Road 34 extended east (the "Service Area"); and WHEREAS, it is the expressed intent and understanding of the City and the District that the only subdivisions and developments in the Service Area that will be eligible to receive the benefit of the City'sobligations under the IGA,and for which the City will be obligated under the IGA, are those that have been annexed into the City and,if not already annexed,those that are annexed within five years of the date of the IGA, unless such five year period is extended by mutual agreement of the parties for up to two additional five year periods as provided in the IGA. NOW,THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS, as follows: Section 1. That the IGA is in the best interest of the City and its citizens and is necessary for the public's health, safety and welfare. Section 2. That the IGA is hereby approved. Section 3. That the Mayor be,and hereby is, authorized to execute the IGA on behalf of the City. Introduced, considered favorably on first reading, and ordered published this 20th day of February, A.D. 2001, and to be presented for final passage on the 6th day of March, A.D. 2001. Mayor ATTEST: City Clerk Passed and adopted on final reading this 6th day of March, A.D. 2001. Mayor ATTEST: City Clerk EXHIBIT "A" INTERGOVERNMENTAL AGREEMENT • FOR THE SALE AND DELIVERY OF POTABLE WATER This Agreement is made and entered into this _ day of 2001, by and between the CITY OF FORT COLLINS,a Colorado municipal corporation,(hereinafter referred to as "the City"),the FORT COLLINS-LOVELAND WATER DISTRICT, a political subdivision of the State of Colorado,("the District"),andthe FORT COLLINS-LOVELAND WATER DISTRICT ENTERPRISE, an enterprise of the District("the District Enterprise"). WITNESSETH : WHEREAS,the City is a home rule municipality organized and existing under Colorado law that owns a water utility which acquires, treats, transmits and distributes potable water ("the City Water Utility"); and WHEREAS, the City Water Utility distributes potable water to its customers through a variety of water transmission facilities located within the City("the City's Transmission Facilities"); and WHEREAS,the District is a special district organized and existing under Colorado law that also operates a water utility which distributes potable water through a variety of water transmission facilities located within Larimer County, Colorado ("the District's Transmission Facilities"); and WHEREAS, the District Enterprise was created by the District in order to comply with the provisions of Section 20,Article X of the Colorado Constitution and Article 45.1 of Title 37 of the Colorado Revised Statutes so that the District, acting through the District Enterprise, can issue 1 revenue bonds and enter into multi-year fiscal obligations in connection with the District's operation of its water utility; and WHEREAS,the District Enterprise is made a party to this Agreement solely for the purpose of entering into any multi-year fiscal obligation required of the District under this Agreement; and WHEREAS,pursuant to C.R.S. Section29-1-203(1),governmental entities in Colorado are authorized to cooperate or contract with one another to provide any function, service or facility lawfully authorized to each of the cooperating or contracting govemmental entities; and WHEREAS,the purpose of this Agreement is for the City to sell and-deliver potable water to the District to then be used by the District to provide water service to the District's customers in approved subdivisions and developments that are located solely and entirely south of Harmony Road,East of the Union Pacific Railroad tracks,West of County Road 7 and North of County Road 34 extended east("the Service Area");provided,however,that these subdivisions and developments in the Service Area must be annexed into the City,as hereinafter provided,before the City shall have any obligation with respect to them under this Agreement; and WHEREAS, it is the express intent and understanding of the parties that the only subdivisions and developments in the Service Area eligible to receive the benefit of the City's obligations under this Agreement, and for which the City will be obligated under this Agreement, are those that have been annexed into the City and, if not already annexed, those that are annexed within five (5) years of the date of this Agreement, unless such five (5)year period is extended by mutual agreement of the parties forup to two(2)additional five-year periods as hereinafter provided ("Eligible Subdivisions"); and 2 WHEREAS,Eligible Subdivisions will receive,for the foreseeable future,water service from the District; and WHEREAS, the District's raw water requirements for providing water services to its customers are presently higher than the City's raw water requirements because the District's primary source of water is currently Colorado Big Thompson Water ("CBT Water") which has recently greatly increased in price; and WHEREAS, the City owns more diverse water rights, so its raw water requirements have not been as adversely affected by higher CBT Water prices; and WHEREAS,the District is now in the process of developing new sources of water, so over time this should reduce the District's raw water requirements; and WHEREAS, in the meantime the City and the District have agreed to enter into this Agreement so the District can more economically provide water service to its customers in the Eligible Subdivisions; and WHEREAS, this potable water will be delivered by the City to the District at the following two delivery points: (a) the existing connection between the City's Transmission Facilities and the District's Transmission Facilities located in Fort Collins, Colorado, at the southeast corner of the intersection of Taft Hill Road and the newly relocated Harmony Road ("the Southwest Delivery Point") and(b) the existing connection between the City's Transmission Facilities and the District's Transmission Facilities located in Fort Collins, Colorado, on the west side of County Road 9, one- half mile south of Harmony Road ("the Southeast Delivery Point"); and WHEREAS, the City, the District and the District Enterprise previously entered into that certain agreement titled"Intergovernmental Agreement for the Sale and Delivery of Potable Water" 3 and dated January, 1999 ("the Exchange Agreement"),pursuant to which the City and the District have agreed to exchange water; WHEREAS,the City delivers its water to the District under the Exchange Agreement at the Southwest and Southeast Delivery Points; and WHEREAS,it is the intent of the City,the District and the District Enterprise that the water to be sold and delivered by the City under this Agreement to the District shall be in addition to the water that the City delivers to the District under the Exchange Agreement; and WHEREAS, subject to the following terms and conditions, the City agrees to sell and so deliver potable water to the District and the District agrees to purchase and take delivery of such potable water from the City to be used by the Company for its customers in the Eligible Subdivisions. NOW, THEREFORE, in consideration of the parties' mutual promises and agreements contained herein,and other good and valuable consideration,the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. Term of Agreement. The obligations of the parties under this Agreement shall be perpetual in duration and shall not expire unless terminated as provided in paragraph 10. or 11. below. However,the City's obligations under this Agreement shall only extend to the Eligible Subdivisions, meaning those approved subdivisions and developments in the Service Area that are currently annexed into the City or that are annexed within five (5) years of the date of this Agreement. Therefore,as to subdivisions and developments located within the Service Area that are not currently annexed into the City or are not annexed within five(5)years of the date of this Agreement,the City shall have no obligation with respect to them under this Agreement. Notwithstanding the foregoing, 4 the parties agree to meet within six (6) months before the fifth (5") anniversary date of this • Agreement to discuss whether the term "Eligible Subdivisions," as used in this Agreement, should be amended to include subdivisions and developments within the Service Area that are annexed into the City within the next five (5) year period after the fifth(5') anniversary date of this Agreement. If the parties agree to such an amendment,they shall enter into a written addendum to this Agreement which so provides. In the event that such addendum is entered into,the parties further agree to meet within six (6) months before the tenth (101) anniversary date of this Agreement to discuss again whether the term "Eligible Subdivisions" should be amended to include subdivisions and developments within the Service Area that are annexed into the City within the next five (5) year period after the tenth (loth) anniversary date of this Agreement. If the parties agree to such an additional amendment, they shall enter into another written addendum to this Agreement which so • provides. Nothing herein,however, shall obligate any party to this Agreement to agree to so amend the term "Eligible Subdivisions" as described above. 2. Amount of Water to be Sold and Delivered by the City to the District As the Eligible Subdivisions are developed,when a lot owner applies to the City for abuilding permit,the lot owner shall be required at that time to pay the City's applicable water plant investment fee as established in Division 4 of Article III of Chapter 26 of the City Code. The lot owner shall also be required to satisfy the City's applicable raw water requirements as established in Division 5 of Article III of Chapter 26 of the City Code. When a lot owner pays the City's water plant investment fee and satisfies the City's raw water requirements, as such fee and requirements are determined pursuant to paragraph 6 below, the City agrees to sell and deliver to the District in each fiscal year thereafter an amount of potable water equal to the raw water requirement satisfied by such lot owner in the Eligible • 5 Subdivision divided by a factor of 1.92. (When used in this Agreement, "fiscal year" shall mean November 1"of ayear to October 31s`of the following year). Therefore,as lots are developed in the Eligible Subdivisions and the City's raw water requirements are satisfied by these lot owners, the annual volume of potable water that the City will sell and deliver under this Agreement to the District shall increase accordingly. 3. Delivery of Water to the District. The City shall deliver to the District in each fiscal year, beginning November 1,2001,the total amount of potable water established pursuant to paragraph 2. above and the City shall deliver such water to the District at the Southwest Delivery Point and/or at the Southeast Delivery Point. These deliveries will be in addition to the potable water delivered to the District by the City in accordance with the Exchange Agreement. The maximum total amount of water that can be delivered daily and during any fiscal year under this Agreement and under the Exchange Agreement shall be as set forth in paragraph 3.C. of the Exchange Agreement. 4. Compensation for Water Delivered. For the potable water delivered by the City to the District under this Agreement,the District and the District Enterprise shall pay the City for the fiscal year beginning November 1, 2001, $1.285 per thousand gallons of water delivered under this Agreement. After the fiscal year beginning November 1,2001,the City may annually review this rate and revise it based upon the City's then existing costs of service. The City shall give the District and the District Enterprise at least sixty(60)days prior written notice of any change in this rate. The City shall determine by November 15,2001,and by November 15'of each fiscal year thereafter,the total potable water to be delivered for the next fiscal year and the resulting charge under this paragraph. This charge shall be divided by twelve (12)months and the City shall bill the charge to the District 6 thereafter in equal monthly installments. The District shall pay the City the charges assessed under this paragraph within thirty (30) days after receiving a monthly billing from the City. 5. Water Delivered Excluded from Transmission Charge Owed under Exchange Agreement Under paragraph 5 of the Exchange Agreement,the District and the District Enterprise are required to pay each fiscal year to the City an annual transmission charge based on the number of gallons of water delivered to the District on the day of the highest peak delivery for that fiscal year. With respect to the water delivered under this Agreement, such water shall not be included in the total number of gallons used to calculate the transmission charge as assessed in paragraph 5 of the Exchange Agreement. Consequently, in order to determine the total number of gallons of water delivered for which a transmission charge will be assessed under paragraph 5 of the Exchange Agreement,the number of gallons delivered under this Agreement on the day of highest peak delivery • in any given fiscal year shall be subtracted from the total number of gallons delivered on that day under both this Agreement and the Exchange Agreement. To determine the number of gallons delivered under this Agreement that are to be subtracted from the total number of gallons delivered on the day of highest peak delivery, it shall be assumed that the percentage of water delivered under this Agreement during that day is equal to the percentage that the total number of gallons sold under this Agreement during that fiscal year is to the total amount of water delivered under this Agreement and the Exchange Agreement during that fiscal year. Byway of illustration, if during a fiscal year the total amount of water delivered to the District by the City under the Exchange Agreement and this Agreement is One Hundred Million (100,000,000) gallons and, of this total, ninety percent (90%), or Ninety Million (90,000,000) gallons, was delivered under the Exchange Agreement and ten percent(10%), or Ten Million(10,000,000)gallons,was delivered under this Agreement, it shall be • 7 assumed that of the total number of gallons delivered on the day of highest peak delivery,ten percent (10%) of such water was delivered under this Agreement. Therefore, if the amount of water on the day of highest peak delivery is Nine Million(9,000,000)gallons,ten percent(10%),or Nine Hundred Thousand(900,000) gallons,shall be subtracted from the Nine Million(9,000,000) gallons, and the transmission charge under paragraph 5 of the Exchange Agreement shall be assessed based on Eight Million One Hundred Thousand(8,100,000) gallons. 6. Determination of City's Water Plant Investment Fees and Raw Water Requirements. When the owner of a lot in the Eligible Subdivision requests a building permit from the City,the City's determination of the appropriate amount for the water plant investment fee and the amount of cash or water rights needed to satisfy the raw water requirements imposed by the City on such lot owners, shall be made by the City's utilities staff as part of the City's normal development review/building permit process. Such raw water requirements shall be satisfied using one or more of the following options: (a)cash at the City's then current cash in-lieu-of rate; (b)shares of stock from the following companies at the City's then current conversion factors for Arthur Irrigation Company, Larimer County Canal No. 2, New Mercer Ditch Company, North Poudre Irrigation Company, Pleasant Valley and Lake Canal Company, Warren Lake Reservoir Company, and Northern Colorado Water Conservancy District (Colorado Big Thompson Units); (c) City of Fort Collins water certificates (green originals) at face value; and(d)Josh Ames City of Fort Collins water certificates on the basis of.5625 acre feet per certificate. 7. Water Quality. All potable water delivered to the District by the City under this Agreement shall meet or exceed all quality standards for potable water that are required by the Environmental Protection Agency (the EPA"), required by the Colorado Department of Public Health and 8 Environment(hereinafter referred to as "the CDPHE"),and that are set forth in Exhibit"A"attached 40 hereto and incorporated herein by reference ("the Water Quality Standards"). Responsibility for ensuring that the Water Quality Standards are met for water delivered under this Agreement shall rest upon the City up to the point of delivery and rest upon the District after receiving the water at the point of delivery. 8. Metering. In order to accurately account for the potable water delivered under this Agreement,metering,recording and telemetry devices shall be installed and maintained at the points of delivery specified in this Agreement. Responsibility for furnishing, installing and maintaining such devices at the Southwest Delivery Point and the Southeast Delivery Point shall be as provided in paragraph 7 of the Exchange Agreement.. 9. Maintenance and Repairs. If the City anticipates that any scheduled maintenance or repair . of its facilities could significantly interfere with the delivery of potable water under this Agreement, the City shall give the District, if reasonably practicable,at least seven(7) days prior written notice of the scheduled maintenance or repairs. Also,when reasonably practicable, the City shall attempt to schedule such maintenance andrepairs during periods of low demandby the otherparty forpotable water under this Agreement. If, however, an unscheduled interruption of service under this Agreement occurs and in order to restore such service it is necessary to make repairs to the affected facilities, the City shall promptly notify the District of the problem and proceed with due diligence to make the needed repairs. 10. Termination for Breach. Both the City and the District may terminate this Agreement upon a material breach by the other party of any term or condition of this Agreement if such breach continues for a substantial and unreasonable period of time, but in any event if the breach has 9 continued for a period of thirty(30)days after receipt by the breaching party from the non-breaching party of a written notice of the existence of such breach. Notwithstanding any provision contained herein to the contrary,in no event shall the City or the District terminate this Agreement if the party at fault proceeds, after receiving said notice, with due diligence to correct or rectify the material breach regardless of the duration of such breach. Termination of this Agreement shall not,however, be the sole remedy of either party and any exercise of this right to terminate shall not preclude the pursuit of any other remedy available in law or in equity to the non-breaching party. 11. Early Termination by the District. At any time and for any reason,the District may terminate this Agreement upon giving the City at least sixty(60)days prior written notice of such termination. The written notice shall state the specific date upon which such termination shall be effective. If the District terminates this Agreement pursuant to this paragraph,the District and the District Enterprise shall not be entitled to reimbursement of any previously paid water plant investment fees or to the return of any money or water rights previously provided to the City to satisfy raw water requirements under this Agreement. Further,the District and the District Enterprise agree to defend,indemnify and hold harmless the City, and its officers and employees, from any and all claims and causes of action brought against the City, and its officers and employees, by the developers of the Eligible Subdivisions,lot owners in the Eligible Subdivisions,the District's customers, and any other person or entity who may sue the City as a direct or indirect result of the District terminating this Agreement under this paragraph. In addition,the District and the District Enterprise agree to indemnify the City for all costs and expenses related to defending such claims and causes of action, including, but not limited to,litigation costs and attorneys fees,whether or not any such claims or causes of actions are groundless, frivolous, false or fraudulent. 10 12. Force Maj eure. Notwithstanding anything contained herein to the contrary, it is agreed that • in the event andto the extent that fire,flood,earthquake,natural catastrophe,explosion,accident,war, illegality, act of God, or any other cause beyond the control of any party hereto, or strikes or labor troubles(whether or not within the power of the party affected to settle the same)prevents or delays performance by any parry to this Agreement,such party shall be relieved of the consequences thereof without liability,so long as and to the extent that performance is prevented by such cause;provided, however, that such party shall exercise due diligence in its efforts to resume performance within a reasonable period of time. 11 Governing Law and Enforceability. This Agreement shall be construed in accordance with the laws of the State of Colorado. In addition, the parties hereto recognize that there are legal constraints imposed upon the City, the District and the District Enterprise by the constitutions, • statutes, and rules and regulations of the State of Colorado and of the United States, and imposed upon them by the City Charter and City Code,and that,subj ect to such constraints,the parties intend to carry out the terms and conditions of this Agreement. Notwithstanding any other provision of this Agreement to the contrary,in no event shall any of the parties hereto exercise any power or take any action which shall be prohibited by applicable law. Whenever possible, each provision of this Agreement shall be interpreted in such a manner so as to be effective and valid under applicable law. 14. Assignment. This Agreement shall not be assigned by any of the parties hereto without the prior written consent of all the other parties hereto. 15. Notices. Other than invoice billings which may be sent by first class mail,whenever written notice is required or permitted to be given hereunder by one party to another, it shall be given effect 11 by hand delivery or by mailing the same by certified mail, return receipt requested, to the party to whom given. Notices shall be addressed as follows: If to the City to: With a copy to: Fort Collins Utilities Fort Collins City Attorney Attn: Utilities General Manager City of Fort Collins 700 Wood Street 300 LaPorte Avenue Fort Collins, CO 80521 Fort Collins, CO 80521 If to the District and to the District Enterprise to: With a copy to: Fort Collins-Loveland Water District Attn: District Manager 5150 Sneed Drive Fort Collins, CO 80525 Any parry hereto may at any time designate a different person or address for purposes of receiving notice by so informing the other parties in writing. Notice by certified mail shall be deemed effective upon actual receipt thereof or three(3)days after being deposited in the United States mail,whichever first occurs. 16. Waiver. No waiver by any of the parties hereto of any of the terms and conditions of this Agreement shall be deemed to be or shall be construed as a waiver of any other term or condition,nor shall a waiver of any breach of this Agreement be deemed to constitute a waiver of any subsequent breach of the same provision of this Agreement. 17. Construction. This Agreement shall be construed according to its fair meaning and as if it was prepared by all the parties hereto and shall be deemed to be and contain the entire agreement between the parties hereto. There shall be deemed to be no other terms,conditions,promises,understandings, statements or representations, expressed or implied, concerning this Agreement, unless set forth in writing and signed by all of the parties hereto. Paragraph headings in this Agreement are for 12 convenience of reference only and shall in noway define,limit or prescribe the scope or intent of any . provision of this Agreement. 18. Severability. If any provision of this Agreement, or the application of such provision to any person, entity or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provision to persons, entities or circumstances other than those in which it was held invalid, shall not be affected. 19. Attorney's Fee. In the event that any of the parties hereto shall default in any of their covenants or obligations contained herein so as to require any other party to this Agreement not in default to commence legal or equitable action against the defaulting party, the defaulting party expressly agrees to pay all of the non-defaulting parties' reasonable expenses in said litigation, including a reasonable sum for attoiney's fees. • 20. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. IN WITNESS HEREOF THE PARTIES HERETO have executed this Agreement as of the date and year first above written. THE CITY OF FORT COLLINS, COLORADO, A Municipal Corporation ATTEST: By: Mayor City Clerk • 13 APPROVED AS TO FORM: Deputy City Attorney CITY OF FORT COLLINS WATER UTILITY ENTERPRISE, An Enterprise of the City ATTEST: By: President City Clerk FORT COLLINS-LOVELAND WATER DISTRICT, A Political Subdivision of the State of Colorado ATTEST: By: John Weitzel, President Michael D. DiTullio, Secretary FORT COLLINS - LOVELAND WATER DISTRICT ENTERPRISE, An Enterprise of the District ATTEST: By: John Weitzel, President Michael D. DiTullio, Secretary 14 AREA COVERED BY PROPOSED INTERG ❑ VERNMENTAL AGREEMENT Date: 02/07/2001 E. HARMONY ROAD T ¥ S c }' - N ems! ....-...v 3- ._...�:5 •," i, ¢ /i LBY ROAD - _ N ' GVtl3DVGPG Water Board Minutes January 25, 2001 Page 2 EXCERT FROM WATER BOARD MINUTES January 25, 2001 INTERGOVERNMENTAL AGREEMENT WITH FORT COLLINS-LOVELAND WATER DISTRICT The Water Board discussed, at length, the proposed intergovernmental agreement with Fort Collins-Loveland Water district at the December meeting. At the January meeting, Mike Smith began by giving some brief background information for the benefit of the new members, and those who weren't there in December. He explained that the water and wastewater utilities do not serve all the area within the City limits. The City is surrounded by special utility districts and water and sanitation districts that were formed in the 1960s. We have agreements with those, some informal, for service areas. Parts of the new areas developing within the City limits are served by the districts. Over the last 20 years, the City has worked closely with most of the Districts, especially with the Fort Collins-Loveland Water District, which is on the south side of Fort Collins and East Larimer County Water District on the north side. Through the years we have arranged various agreements to share and work together, enhancing regional cooperation. The agreement is the outcome of a joint request for assistance from the District and various builder/developers. Attorneys have developed an IGA where the primary areas of concern are in the southeast part of Fort Collins; basically south of Harmony Rd., east of Timberline, north of the Fossil Creek Reservoir area and west of County RV. It is an area that has been developing very rapidly in the last few years. This development is mainly in the District service area. For years, FCLWD has primarily been providing water to a more ryral area. With the development of City Plan, which focuses on high density development, that has changed. The growth that is occurring in southeast Fort Collins is primarily in the District's service area. The District has been providing water to a basically rural, low density area, and now they are faced with serving a very high density area. Currently, the District's water development fees are much higher than the City's fees. The difference is primarily a result of two factors: First, the rising price of Colorado-Big Thompson (CBT) water and the fact that the District accepts only CBT water to satisfy its raw water requirement. The City, on the other hand, accepts a variety of water rights, most of which are not impacted by the price of CBT water. Second, the District's fee structure does not recognize or give credit for the lower water use per unit associated with higher density development. The District charges the same for large and small residential lots. When applied to high density development, the fee difference is dramatic. The District is concerned about these issues and is in the process of reviewing their raw water policy and development fee structure. They are looking at the possibility of accepting other water rights, besides CBT water, thus providing builder/developers with lower cost options. However, it is anticipated that the development and implementation of a new raw water policy and a new fee structure will take possibly 4-5 years. They came to the City, and we presented them with various options-one was to sell the District treated water wholesale and we would collect the _ Water Board Minutes January 25, 2001 Page 3 plant investment fees and raw water requirements from these customers. "We would provide the raw water and treatment plant capacity. It's for a defined area, which I described earlier," Mike emphasized. How Proposed IGA would Function • The agreement applies to only specific subdivisions in the southeast part of the City. These are subdivisions that will be served by the District, but are within City limits. They are also subdivisions that could be served, with minimal effort, by the City in the future. • Developers and builders requesting water taps in these subdivisions will be served by the District, but will be assessed the City's water development fees, whatever those fees may be at the time of the tap request. The City will collect and retain those fees. • For each tap sold, the City will sell the District a corresponding amount of treated water to be delivered at a cost-of-service rate determined by the City Council. • The amount of water sold to the District would be adjusted annually, corresponding to the number and size of taps sold the previous year(This is based on a formula specified in the agreement.). Mike stressed that these will be District customers. The customer continues to receive the same service from the District. What they won't experience is the high development fees because the structure hasn't been modified yet for the District's high-density development. Issues Discussed • Why is there no time limitation? • How does this agreement affect the City? • Does this have a flavor of promoting growth and development? • Is the agreement subsidizing growth? • How does this affect the City's water supply master plan policy? In answer to the question of how long this agreement would go on, Mike said until the area is fully developed. There is a potential for 5,000 homes in this area. It was suggested at the December meeting that there should be a limit imposed. Should it be for 5 years, which would give the District time to change the rates and acquire more raw water, or perhaps 10 years? The December meeting was running late, so the Board decided to continue the discussion today. At the December meeting, the Board was assured that the agreement does not hurt the City. The City will be getting all its costs back, and it appears to be a win/win situation. As to promoting growth, some may say, let the developers pay the higher fees, but there are downsides to that in the long run. Staff also assured the Board that the City is not subsidizing growth. Perhaps with this arrangement, the homeowners may see less cost than if the developers had to pay the higher costs. Regarding the effect on the City's water Supply, staff had done several scenarios that showed . how the supply would be impacted if we had to serve people in the City that we don't serve now. Staff looked at a future scenario where there was an additional 10,000 ac-ft of storage. That Water Board Minutes January 25, 2001 Page 4 10,000 ac-ft. would have taken care of, not only the Utility service area, but an additional water district area that is inside the City. The impact is relatively small in the whole scheme of things; perhaps 1,000-2,000 ac-ft of new storage. Discussion By Tom Sanders' calculations, 5,000 houses would men an additional 3,000-5,000 ac-ft of water. "In terms of water use,typically we see about 4/10 of an ac-ft per house, so that would be roughly 2,000 acre fee," Dennis Bode replied. "How about commercial?" Mike asked. "Commercial would make it a little higher,"Dennis said. Mike said that anyone who built in that area would have to meet the City's raw water requirements. They would either turn the water in or give us cash in-lieu-of water. Tom S. asked about the District's policy. The District requires CBT,North Poudre or cash. The District's cash in-lieu-of is $12,000 and the City's is $4,500. David Lauer asked what happens to the City's capacity when the District takes back the responsibility, "or are we assuming they aren't going to take back the responsibility?" "The District can terminate the agreement. If they did that,they would take back the responsibility. As long as the agreement is in effect, we will continue to sell the District the water that is equivalent to what has been developed. That will go on even after the area is filled up," Mike explained. "Even if we stop at 5 years, whatever has happened until then, we would continue that permanently," he added."So this is envisioned as a permanent shift from the sources of water that the District is using now?" David asked. "That's right,"Mike answered. "What would change at that point?" David continued. "The only thing that would change after 5 years, is that any other new development would go straight to the District," Mike replied, "so any new development would be the responsibility of the District." Bill Fischer said any user in this service area would get a bill every month from a water utility. "Would it be Fort Collins or the District?" "It will be the District. We get the raw water and the plant investment fee," Mike responded. "In addition, we charge the District a rate for operation and maintenance of our system to get the water and to treat the water." Bill also asked the District Manager Mike DiTullio if they would prefer not to have a term limit on this agreement, particularly because of the construction of pipelines. "The only thing that would really change would be the economics of the supply of the water," Mike D. replied. Bill asked, "What happens, at the end of 5 years, if half of the area is developed and half is not?" "Two things: if we haven't developed our River water, developers would have to purchase CBT water at whatever the rate is. If we have moved forward enough to where we are accepting the Southside Ditch waters, they would do that. With either scenario, we would continue to provide the service. What this does now is allow the use of River water from the Southside Ditch waters that the City now has in its inventory, while we develop ours to put into the Pleasant Valley Pipeline," Mike D. explained. Mike Smith added that in the actual developments, the District will be overseeing the installation of lines. Their lines will be connected with their system. The connection to the City's system is not close to this. Mike D. said that all of this development drains into the South Fort Collins Sanitation sewer system, so that's the other tie, which we maintain on the south side. Water Board Minutes January 25, 2001 Page 5 • Paul Clopper assumes that this development is entirely in the urban growth boundary. "Yes, but it's not yet all in the City limits," Mike S. responded. "These subdivisions would have to be annexed into the City for this to happen," he added. Tom Sanders asked if there is any issue about the water going to South Fort Collins as far as the ability to exchange and use it in the future. Dennis Bode doesn't think that is going to be an issue. It basically ends up in the Fossil Creek drainage, so it's very similar to where our water ends up. Tom S. pointed out that somebody would have to pay$12,000 and we are allowing them to pay $4,500. "At the end of 5 years, let's say, if the agreement ends and responsibility reverts to the District, what are they going to deliver to the City?" "The only thing that will continue to happen is all the water that has been turned in to serve development up to that point, we will have, and we will continue to treat that and deliver it to the District,"Mike S. replied. "For future development, it will go directly to the District." Tom also asked how much Southside water the City has available. "The water can come from anywhere," Mike S. said. "We don't really care because we can use all of it," he added. "If we had to use some of our Horsetooth water, we may be getting the short end," Tom insisted. "It's hard to say where the water comes from. It's where water resources staff makes it come from on paper," Mike said. . John Morris said the scenario that was presented to the Board originally, was that we would help the District in the 4-5 year time frame while they get their fee structure and raw water policy up to speed. "It seems the discussion now is whether we should continue it forever." "The discussion was that it would take 4-5 years for the District to do that. The District's preference is to allow it to go on until the area is full," Mike S. responded. ACTION: Motion After a number of attempts, Bill Fischer presented the following motion, which John Morris seconded: Bill Fischer moved that the Water Board recommend to the Council that they approve the IGA between Fort Collins and the Fort Collins-Loveland Water District under the following conditions: (1) The IGA recites that it is for an initial 5-year term; and (2) At the end of the first 5 year term, the parties shall meet to determine the agreement's effectiveness and desirability, and at such time Fort Collins may elect to do either of the following: (a) Continue serving new users for an additional 5-year term under the term of the agreement, or (b) Not serve any new users. Water Board Minutes January 25, 2001 Page 6 (3) If the second 5-year term is elected by the City (paragraph (2)(a), at the end of the second 5- year term, the parties shall meet to determine the agreement's effectiveness and desirability, and at such time Fort Collins may elect to do either of the following: (a) Continue serving new users for an additional 5-year term under the terms of the agreement, or (b)Not serve any new users. Tom Sanders wondered if we should also include the conditions of termination, e.g. we get back all the water we received, etc. Assistant City Attorney John Duval said the agreement already addresses that whole issue. "Whatever water has been turned in, we keep as long as we are providing them the wholesale water that we are selling them and charging them for. The houses that pay us directly through the developments continue to get their service through the District. It's just the future development that goes directly to the District," John explained. John reiterated that the agreement allows the District to terminate any time they want, but the City doesn't have to give any water back. If they want to take over the service and not buy water from us, that's their decision to make. He emphasized that they don't get any money from the City, the raw water requirements or the plant investment fees. Tom Sanders asked if the City can terminate any time. "No, we can't," John replied. "Our agreement provides that as long as the raw water requirements etc. are paid, that we will provide water at the wholesale cost in perpetuity, unless the District breaches the agreement. If they decide to provide the water themselves, they have agreed to indemnify the City from any claims that may be brought against us for not providing service, because they terminated the agreement." Tom asked if these customers will eventually be in the City. "For them to be involved in this agreement, they have to be in the City," Mike S. answered. He added that they will be paying District rates, which are a little higher than the City's. Mike DiTullio said that the District will charge a rate that reflects the cost of the City's charges. "That area will have a different rate from the rest of our customers." Bill Fischer asked for comments on his motion. Tom Sanders said he liked the idea of an assessment at the end of 5 years and the opportunity to terminate the agreement. Bill added, "and it has flexibility. If it is working well, we can extend it too." Bill also asked Mike DiTullio if he had a problem with that. "I don't think we will have a problem," he replied. Paul Clopper said it seems to be a straightforward task to track where we are at any point in time. He agrees with Bill about the flexibility of his proposal. It sounds like an ideal way to structure this. Ted Borstad asked if it would be better to know, from the City's standpoint, that you are going to forecast growth all the way through the 5,000 homes. "For a 5-year period, does that make planning easier or harder for either water provider." "It's a little hard to not know,"Mike Smith replied, "but when you are talking about this increment, it's probably not a critical issue. When Water Board Minutes January 25, 2001 Page 7 . we make projections on future needs for storage, staff has already made projections showing one or the other option. We have a window of flexibility." Chuck Wanner commented that we should assure ourselves that this agreement won't cause the rates of Fort Collins ratepayers to go up because we commit supplies that we can't retract, and we end up in somewhat the same situation that the District is now. "Is this going to cause enough constraint on our supplies that we can use out there to cause our rates to go up?" he asked. Mike Smith said it shouldn't. Tom Brown asked if this agreement, in any way, constrains the City from changing its cash in- lieu-of rate and its raw water requirement. "We could, next year, raise the cash in-lieu-of up to $12,000 if we felt we needed to; is that correct?" Mike S. replied in the affirmative. "We don't anticipate a change in the raw water or cash in-lieu-of rate in the near future. We are going to be reviewing our plant investment fees this year. One of the Council members is encouraging us to do that," he said. David Lauer said he has been struggling with this ever since it came up in the Water Supply Committee. "I have been trying to find a compromise where I can vote in favor of it," he related. He emphasized that he has nothing at all against the Fort Collins-Loveland Water District, "in fact, they do an excellent job." He also said he has nothing against IGAs. They create greater efficiencies. He contends that this is a public subsidy of growth. "In my point of view it's excessive growth. I would much prefer it if we could keep it at 4-5 years, and that would be it. Even though, as Mike Smith says, things aren't going to change that much, that would give the District a long enough period of time to adjust their rates from a rural orientation to an urban orientation." He emphasized that that is all Fort Collins should be required to do. Bill said, under his scenario, that is all we would be obligated to do, but this would simply allow Fort Collins the option, with or without cause, to continue it for 5 more years or cease it at 5 years. "All we are doing is leaving the door open," he said. ACTION: Vote Bill Fischer repeated his motion. Chair Sanders clarified that the Board would be voting to approve the agreement with a time period. He asked if there was further discussion. Rami Naddy returned to the idea of this agreement encouraging growth. "Would it be possible to increase the rates to what the rest of the people in Fort Collins will be paying, and perhaps use that extra money for some of the other things we deal with, such as stormwater." "It wouldn't be allowed under the City Charter to charge people water fees and put it into the Stormwater fund," Mike S. responded. He added that the rate that the City is charging the District is a little less than we charge other customers because it's a wholesale rate, and we don't have some of the costs that we have with certain other customers. As he understands it, the District is going to pass that rate along to the customers, so those customers will actually be paying more than other District customers. "It could very well be as much as or more than our rate," he said. • Water Board Minutes January 25, 2001 Page 8 Tom Brown asked David Lauer what he meant when he suggested this agreement would subsidize growth. "I have heard many times that you shouldn't be using water as a policy tool for land use or open space, etc.," David began. "The more I think about that, the more I realize that every entity in the City of Fort Collins can make the same argument that they are not responsible for looking at the large picture. They are only responsible for looking at, in our case, supplying water to citizens that are in our boundaries. It doesn't hold water with me. I can't help but think that current residents, that we are responsible for representing as an advisory group, are going to pay for new residents coming in at the expense of the natural environment. The more people there are,the more threat and degradation there is to the Colorado Front Range. I think that, whatever solutions there are to that, should not be at the expense of the current residents of the City of Fort Collins," he concluded. Rami Naddy asked if it is appropriate, as a new member, to vote on an item on which he has little information. Tom Sanders said he is going to abstain because he missed the last meeting when the Board went into great depth on this issue. "If you are a new member and you feel you don't have enough information and background, it is appropriate to abstain," he said. Vote The motion passed 4-1 with 1 no and 3 abstentions. David Lauer voted no because of what he stated earlier. Tom Sanders and new members Rami Naddy and Ted Borstad abstained.