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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 03/18/2008 - RESOLUTION 2008-031 ESTABLISHING RENTAL RATES AND ITEM NUMBER: 21 AGENDA ITEM SUMMARY DATE: March 18, 2008 FORT COLLINS CITY COUNCIL STAFF: Susan Smolnik SUBJECT Resolution 2008-031 Establishing Rental Rates and Delivery Charges for the City's Raw Water for the 2008 Season. RECOMMENDATION Staff recommends adoption of the Resolution. Each year prior to the irrigation season, the City's Water Board ("the Board") makes a recommendation to the Council regarding the raw water charges. The Board discussed the proposed rental rates and charges at its February 28, 2008 meeting and unanimously voted to recommend adoption of the proposed charges. FINANCIAL IMPACT The revenue from the City's delivery of raw water is expected to be approximately $500,000 for 2008. EXECUTIVE SUMMARY This Resolution approves rates for the rental and use of the City's raw water supplies. The Water Utility uses these rates to assess charges for agricultural use, for various contractual raw water obligations and for raw water deliveries to other City departments. The proposed rate for each type of water is based on several factors including market conditions and assessments charged by irrigation companies. BACKGROUND The City is a shareholder in several local irrigation companies. Part of the water available from these companies is typically used to meet raw water obligations of the City. To the extent there is surplus raw water, it can be rented to others for their use. Although the early winter snow pack is encouraging, the City will continue to closely monitor its supplies when making surplus raw water available for rental this year. The first priority will be to insure that adequate supplies will be carried over into 2009. March 18, 2008 -2- Item No. 21 The Water Utility uses its annual rates set by City Council to charge agricultural water renters, contractual water users and City departments that use raw water. The water rates are separated into two categories. The first category includes only those sources for which an active rental market exists. The second category includes sources with a limited rental market or which are used primarily to irrigate City facilities (parks, golf courses, etc.). With the exception of water from the Colorado Big Thompson Project(CBT),Joe Wright Reservoir and Reusable Effluent, water cannot be rented from one irrigation company system into another. Therefore,for most systems,the rental market is limited to individuals under each ditch system and the price is largely dependent upon the supply and demand within each irrigation system. This results in considerable variation in prices per acre-foot among the various supply sources. Active Rental Market Those sources with active markets include the North Poudre Irrigation Company (NPIC), the Colorado Big Thompson Project (CBT), and Water Supply and Storage Company (WSSC). For these sources the proposed rates are based on expected rental market conditions. Last year, there were complaints by several North Poudre Irrigation Company shareholders concerning the first-come first-served method used to allocate the City rental water.North Poudre supplies were extremely low at the start of the irrigation season and only a few shareholders(mostly full-time farmers) initially received water. As the season progressed, supplies improved and the City was able to not only meet the requests of every shareholder that was in line on rental day but also worked with the irrigation company to locate other shareholders that wanted additional rental water. In the fall, City staff and the Water Board's Water Supply Committee hosted a focus group of North Poudre shareholders to solicit information on how to improve the rental process. As a result of information received from that group,other shareholders and the Water Board committee, the City is implementing a proportional allocation method allowing all North Poudre requesters to receive at least some rental water. This is being implemented for the 2008 irrigation season. Each share of North Poudre Irrigation Company has an "agricultural" component and a"multiple use"component. The"agricultural"component can only be used for agricultural purposes on land served by the NPIC system. Therefore,this component of each NPIC share is of limited usefulness to the City and will likely be made available for rental in 2008. The multiple use portion of each NPIC share will be available for the City's use but may or may not be needed this year. When users under the NPIC system rent either"agricultural"or"multiple use"water,it is run through the North Poudre System in the same way. Therefore, it is proposed that the "agricultural" water and any excess"multiple use"water be made available at$35 per acre foot. In some years there is a special class of NPIC water available for agricultural users for a very limited time early in the irrigation season. If this"early agricultural"water is available in 2008, staff proposes a rental rate of$14 per acre foot to reflect its very limited use. Fort Collins has some 2007 water remaining in the Colorado Big Thompson Project(CBT)system for use in 2008. This carryover, along with a minimum 2008 quota of 60%,means there will likely be CBT water available for rental to the agricultural sector this summer. Staff recommends that agricultural rentals of CBT water be made at the rate of$35 per acre foot. Staff further proposes that CBT water rented for municipal or industrial (M&I) purposes be charged at$54 per acre foot in 2008 to reflect higher assessments charged to M&I shareholders. March 18, 2008 -3- Item No. 21 The City typically makes its Water Supply and Storage Company shares available to irrigators under the WSSC system. This has historically been a very active rental market and the rental price of WSSC water is expected to be $3,200 per share this year. Limited Rental Market The second category is for those sources that have a limited rental market. This category includes the Pleasant Valley and Lake Canal Company(PV&L)shares,other"Southside Ditches"shares and the City's reusable sources (primarily Joe Wright Reservoir or reusable effluent). There are few agricultural renters that remain in the areas irrigated by these irrigation companies. These shares are used primarily on City facilities, such as parks and golf courses, or by other entities that have turned over raw water or otherwise met the City's raw water requirements for their properties. The objective of the Utility for this latter group of users is to recover the costs associated with delivering this water. It is proposed that the charges for most sources be set at a rate that is 20% above the assessments charged to the City by the various irrigation companies. For example, the assessment rate for PV&L water has been set at $175 per share. Based on this method, the charges would be set at$175 x 1.2 = $210 per share. For users that have not satisfied the City's raw water requirements, staff is proposing that the rental rates be set to reflect the true value of that water to irrigators or, in some cases, to off-set the loss of that water's use within the City. For example, Pleasant Valley and Lake Canal water has a very early priority on the river and has been decreed in water court for use by the City's treated water customers. Although assessments are only $175 per share for this water, a rental rate of$550 is estimated to be more consistent with its value to the City. For several companies,the difference between the above two methods of calculating the raw water rate is significantly different. For example, the Arthur Irrigation Company has a very low assessment resulting in a low price for those having satisfied the City's raw water requirements. When based on the yield(and,therefore,value to an irrigator),the price is much higher but is in line with the prices for the other southside ditches. The City has seen an increase in demand for its reusable sources to satisfy state requirements for substitute supply plans and augmentation plans. The City also has a few ongoing obligations for reusable water, primarily for City facilities. The City's primary reusable sources are Joe Wright Reservoir water and reusable effluent from the City's Water Reclamation Facilities. It is proposed that the rental price for these sources be $500 per acre-foot in 2008. The City has obligations for small amounts of reusable water on lands where the City's raw water requirement has been met. However,there is no annual assessment upon which to base a charge as occurs in such cases within the Limited Rental Market. In this situation it is proposed that a fee of $100 per acre-foot be charged to help offset operation and administrative costs. March 18, 2008 -4- Item No. 21 At its February 28,2008 meeting,the Board unanimously recommended that the following rates for raw water be adopted: Type of Water Proposed 2008 Rental Rates/Charges (1) RWR Not Satisfied RWR Satisfied Active Rental Market NCWCD Water(CBT) -Ag $ 35.00/ac-ft n/a NCWCD Water(CBT)—M&I $ 54.00/ac-ft n/a North Poudre Irrigation Co. —Early Ag Use $ 14.00 /ac-ft n/a North Poudre Irrigation Co. -Ag Use $ 35.00/ac-ft n/a North Poudre Irrigation Co. —Multiple Use $ 35.00/ac-ft n/a Water Supply and Storage Co. $ 3,200.00 /share n/a RWR Not Satisfied RWR Satisfied Limited Rental Market(2) Arthur Irrigation Co. $ 60.00/share $ 17.00/share Larimer County Canal No. 2 $ 500.00/share $ 420.00 /share New Mercer Ditch Co. $ 550.00/share $ 510.00/share Pleasant Valley&Lake Canal Co. $ 550.00/share $ 210.00/share Warren Lake Reservoir Co. $ 400.00/share $ 360.00/share Sherwood Res. Co. $ 10.00/share $ 8.40/share Sherwood Irrigation Co. $ 900.00/share $ 900.00/share Reusable Sources $ 500.00 /ac-ft $ 100.00/ac ft Notes: (1) Rental rates may be adjusted to reflect the remaining yield or the prevalent market price of the water stock being rented. (2) Rental rates are based on approximately$20/ac-ft for those who have not satisfied the City's raw water requirements. Charges for those who have satisfied the City's raw water requirements are set at approximately 120% of the assessments charged by that company. ATTACHMENTS I. Water Assessments Table 2. Water Rental Rates/Charges Table 3. Excerpt from February 28, 2008 Water Board Meeting Minutes ATTACHMENT Table 1 Water Assessments Source 2005 2006 2007 2008 Active Rental Market CBT (NCWCD, $/unit) 21.00 21.80 22.80 23.60 North Poudre Irrigation Co. ($/sh) 95.00 95.00 85.00 90.00 Water Supply & Storage Co. ($/sh 1,750.00 2,100.00 2,100.00 2,300.00 Limited Rental Market Arthur Irrigation Co. ($/sh) 10.00 10.00 8.00 14.00 Larimer County Canal #2 ($/sh) 330.00 350.00 350.00 350.00 New Mercer ($/sh) 300.00 325.00 325.00 425.00 Pleasant Valley & Lake Canal ($/sh) 150.00 150.00 150.00 175.00 Warren Lake ($/sh) 300.00 300.00 350.00 300.00 Sherwood Reservoir ($/sh) 7.00 7.00 7.00 7.00 Sherwood Irrigation ($/sh) 855.00 855.00 855.00 855.00 Reusable Sources ($/ac-fr) n/a n/a n/a n/a ATTACHMENT Table 2 Water Rental Rates/Charges Source 2005 2006 2007 2008 Active Rental Market CBT Agriculture($/ac-ft) 35.00 28.00 30.00 35.00 CBT Municipal/Industrial($/ac-ft) 50.00 50.00 52.00 54.00 NPIC Early Ag($/ac-ft) 15.00 12.00 12.00 14.00 NPIC Agriculture ($/ac-ft) 28.00 28.00 30.00 35.00 NPIC Multiple Use($/ac-ft) 35.00 28.00 30.00 35.00 Water Supply& Storage Co. ($/sh) 3,200.00 3,200.00 3,200.00 3,200.00 Limited Rental Market(RWR Not Satisfied) Arthur Irrigation Co. ($/sh) 60.00 60.00 60.00 60.00 Latimer County Canal#2 ($/sh) 500.00 500.00 500.00 500.00 New Mercer($/sh) 500.00 500.00 500.00 550.00 Pleasant Valley& Lake Canal($/sh) 500.00 500.00 500.00 550.00 Warren Lake($/sh) 360.00 360.00 380.00 400.00 Sherwood Reservoir ($/sh) 10.00 10.00 10.00 10.00 Sherwood Irrigation($/sh) 900.00 900.00 900.00 900.00 Reusable Sources ($/ac-ft) 400.00 400.00 400.00 500.00 Limited Rental Market(RWR Satisfied) Arthur Irrigation Co. ($/sh) 12.00 12.00 10.00 17.00 Larimer County Canal#2 ($/sh) 400.00 420.00 420.00 420.00 New Mercer($/sh) 360.00 360.00 360.00 510.00 Pleasant Valley&Lake Canal($/sh) 180.00 180.00 180.00 210.00 Warren Lake ($/sh) 360.00 360.00 380.00 360.00 Sherwood Reservoir ($/sh) 8.40 8.40 8.40 8.40 Sherwood Irrigation($/sh) 900.00 900.00 900.00 900.00 Reusable Sources(RWR Satisfied$/ac-ft) n/a 100.00 100.00 100.00 Notes: (I) Rates may be adjusted to reflect the remaining yield or the prevalent market price of the water stock being rented. (2) Charges for those who have satisfied the City's raw water requirements are set at approximately 120%of the assessments charged by that company. ATTACHMENT Excerpt from Water Board Meetine Minutes of February 28,2008 Raw Water Rental Rates and Delivery Charees—Susan Smolnik Susan Smolnik, Water Resources Engineer, provided information to the Water Board regarding proposed raw water rental rates and delivery charges. Fort Collins Utilities typically has surplus water in excess of the customers' needs that is made available for rent. Each year prior to the irrigation season, the City sets water rental rates and delivery charges for use of its raw water. These uses include rental to agricultural users, meeting certain raw water delivery obligations and use by other City departments. Consistent with the last few years, staff is again proposing two separate categories for raw water rates and charges. The first category includes only those sources for which an active rental market exists, and this accounts for 95%of the City's water rentals. The second category includes sources with a limited rental market or which are used primarily to irrigate City facilities (parks, golf courses, etc.). The Board was provided with tables showing actual and proposed figures for assessments, rental rates, and delivery charges for the years 2005-2008. There was some discussion about setting the rates in relation to supply and demand, but because the water supply can change depending on a number of factors, it's difficult to project whether the rates will be proportional to the demand. There is some ability to adjust rates downward later in the season if it appears necessary. On the North Poudre Irrigation Company system,the City will return to using a proportional allocation method instead of the first-come first served method used last year. In the past, some North Poudre shareholders increased their requests if they thought they would not receive adequate supply, so this year, a reasonable upper limit request will be set by staff using data such as the number of acres irrigated and water delivery reports. If the supply is adequate, no upper limit will be necessary. North Poudre shareholders seem to prefer having a little bit of water rather than a lottery system that allows renters all or nothing. The early snow pack is encouraging and the City will continue to monitor its supply when making surplus raw water available for rental this year. The first priorities are to ensure that citizens have enough water, and that adequate supplies will be carried over into 2009. Current projections indicate that the City will have ample surplus supplies available for rental this year. Board Member Gary Wockner made a motion, seconded by Board Member David Pillard, to recommend to City Council the staff s proposed raw water rental rates and delivery charges for the 2008 season. The motion passed unanimously. RESOLUTION 2008-031 OF THE COUNCIL OF THE CITY OF FORT COLLINS ESTABLISHING RENTAL RATES AND DELIVERY CHARGES FOR THE CITY'S RAW WATER FOR THE 2008 SEASON WHEREAS, each year prior to the irrigation season, the City Staff and the Water Board ("the Board")make a recommendation to the Council regarding rental rates and delivery charges for the use of the City's raw water; and, WHEREAS, the Water Utility uses these rates to assess charges for agricultural rental water, for various contractual raw water obligations and for raw water deliveries to other City departments; and WHEREAS, on February 28,2008,the Board discussed the rental program and the use of raw water and recommended the following rates for the 2008 irrigation season: Type of Water Proposed 2008 Rental Rates/Charges (1) RWR Not Satisfied RWR Satisfied Active Rental Market NCWCD Water (CBT) - Ag $ 35.00/ac-ft n/a NCWCD Water (CBT)—M&I $ 54.00/ac-ft n/a North Poudre Irrigation Co. —Early Ag Use $ 14.00/ac-ft n/a North Poudre Irrigation Co. - Ag Use $ 35.00/ac-ft n/a North Poudre Irrigation Co. —Multiple Use $ 35.00 /ac-ft n/a Water Supply and Storage Co. $ 3,200.00 /share n/a RWR Not Satisfied RWR Satisfied Limited Rental Market Arthur Irrigation Co. $ 60.00/share $ 17.00/share Larimer County Canal No. 2 $ 500.00/share $ 420.00/share New Mercer Ditch Co. $ 550.00/share $ 510.00/share Pleasant Valley & Lake Canal Co. $ 550.00/share $ 210.00/share Warren Lake Reservoir Co. $ 400.00/share $ 360.00/share Sherwood Res. Co. $ 10.00 /share $ 8.40/share Sherwood Irrigation Co. $ 900.00/share $ 900.00/share Reusable Sources $ 500.00 /ac-ft $ 100.00/ac-ft Notes: (1) Rates may be adjusted to reflect significant changes in the remaining yield or the prevalent market price of the water stock being rented. NOW THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT COLLINS that the rental rates and charges as set forth above are hereby approved for the City's raw water for 2008 and the Utilities Executive Director is authorized to rent or deliver such raw water at said rates. Passed and adopted at a regular meeting of the Council of the City of Fort Collins this 18th day of March A.D. 2008. Mayor ATTEST: City Clerk