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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 03/21/2000 - RESOLUTION 2000-47 ESTABLISHING RENTAL RATES TO BE AGENDA ITEM SUMMARY ITEM NUMBER: 13 DATE: March 21. 2000 FORT COLLINS CITY COUNCIL STAFF: Beth Molenaar SUBJECT: I Resolution 2000-47 Establishing Rental Rates to be Charged for the City's Surplus Raw Water for the 2000 Season. i I I RECOMMENDATION: j Staff and the Water Board recommend adoption of the Resolution. i FINANCIAL IMPACT: The revenue from the City's rental of surplus raw water is expected to be approximately $275,000. The actual amount of surplus water rented will depend on both the City's supply and demand for 2000, as well as the need for water by area farmers. 0 EXECUTIVE SUMMARY: This Resolution approves rates for the rental of the City's surplus raw water. Each year prior to the irrigation season,the City's Water Board("the Board")makes a recommendation to the Council on the rental rates to be charged for the City's surplus raw water. The surplus water rental program was discussed at the February 24, 2000 meeting of the Board. The proposed rental rates for each type of water are based on several factors including past rental rates, assessment rates, and anticipated supply and demand conditions. BACKGROUND: The City is a shareholder in several local irrigation companies. The water available from these companies is sometimes in excess of the City's immediate needs and prior obligations. The surplus raw water rental program benefits those in this area that otherwise may have an inadequate raw water supply. The City benefits from this program by collecting revenues that can be used to offset the . annual assessment charges levied by the irrigation companies. The City is expected to have about 15,000 acre-feet of surplus raw water. Most of this will be in the form of Colorado-Big Thompson Project water. shares in the North Poudre Irrigation Company, and shares in the Water Supply and Storage Company. The amount of surplus water actually rented will depend on both the City's DATE: March 21, 2000 2 ITEM NUMBER: 13 supply and demand for 2000 as well as the need by area water users. In 1999 a total of 16,313 acre- feet was rented for a total of$313,140. Municipal supply and demand will be monitored closely and quantities available for rent will be determined periodically. An adequate amount of water will be reserved to ensure that the City's needs are met. The proposed rental rates for 2000 are based on several factors including past rental rates in the area, current assessments,and anticipated supply and demand conditions. With the exception of Colorado Big Thompson Project (CBT) and Joe Wright Reservoir sources,water cannot be rented from one ditch company system into another. Therefore, for most systems the rental market is limited to individuals under each ditch and the rental price is largely dependent upon assessments as well as the supply and demand within each irrigation system. This causes considerable variation in prices per acre foot among the various supply sources. The rental prices for CBT,North Poudre Irrigation Company,Water Supply and Storage Company, and Joe Wright Reservoir water are based primarily on market rental rates since there is an active rental market for this water. Typically, about 90% of the water rented by the City is from these sources. With the limited rental markets for the other sources,the rental prices are based primarily on assessment rates. At its February 24, 2000 meeting, the Board unanimously recommended that the following rental rates be adopted: Type of Water Proposed 2000 Rental Charge* NCWCD Water (CBT)—Ag $ 19.00 /ac-ft NCWCD Water (CBT)—M&I $ 34.00 /ac-ft North Poudre Irrigation Company—Early Ag Use $ 10.00 /ac-ft North Poudre Irrigation Company—Ag Use $ 22.00 /ac-ft North Poudre Irrigation Company—Multiple Use $ 27.00 /ac-ft Water Supply and Storage Company $ 2,600.00 /share Pleasant Valley and Lake Canal Company $ 200.00 /share New Mercer Ditch Company $ 200.00 /share Latimer County Canal No. 2 $ 300.00 /share Arthur Irrigation Company $ 16.00 /share Warren Lake Reservoir Company $ 130.00 /share Joe Wright Reservoir Water $ 60.00 /ac-ft Sherwood Reservoir Company $ 6.00 /share Sherwood Irrigation Company $ 450.00 /share Reusable Effluent $ 60.00 /ac-ft * For late season rentals, rates may be adjusted to reflect the remaining yield or the prevalent market price of the water stock being rented. • RESOLUTION 2000-47 OF THE COUNCIL OF THE CITY OF FORT COLLINS ESTABLISHING RENTAL RATES TO BE CHARGED FOR THE CITY'S SURPLUS RAW WATER FOR THE 2000 SEASON WHEREAS,each year after the irrigation companies have established the annual assessment rates for their water, the City's Water Board ("the Board") makes a recommendation to the City Council on the rental rates to be charged for the City's surplus raw water; and WHEREAS, on February 24, 2000, the Board discussed the rental program and recommended the following rates for the 2000 irrigation season: Tyne of Water 2000 Rental Charee* NCWCD Water(CBT)—Ag $ 19.00 /ac-ft NCWCD Water(CBT)—M&I $ 34.00 /ac-ft North Poudre Irrigation Company—Early Ag Use $ 10.00 /ac-ft North Poudre Irrigation Company—Ag Use $ 22.00 /ac-ft North Poudre Irrigation Company—Multiple Use $ 27.00 /ac-ft Water Supply and Storage Company $ 2,600.00 /share Pleasant Valley and Lake Canal Company $ 200.00 /share New Mercer Ditch Company $ 200.00 /share Latimer County Canal No. 2 $ 300.00 /share Arthur Irrigation Company $ 16.00 /share Warren Lake Reservoir Company $ 130.00 /share Joe Wright Reservoir Water $ 60.00 /ac-ft Sherwood Reservoir Company $ 6.00 /share Sherwood Irrigation Company $ 450.00 /share Reusable Effluent $ 60.00 /share * For late season rentals, rates may be adjusted to reflect the remaining yield or the prevalent market price of the water stock being rented. WHEREAS, municipal supply and demand will be monitored and quantities available for rent will be determined periodically; and WHEREAS,an adequate amount of water will be reserved to ensure that the City's requirements are met. NOW THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT COLLINS that the rental rates set forth above are hereby approved for the City's surplus raw water for 2000 and the Utilities General Manager, or his representative,is authorized to rent such surplus raw water at said rates. Passed and adopted at a regular meeting of the Council of the City of Fort Collins held this 21 st day of March, A.D. 2000. Mayor ATTEST: City Clerk City of Fort Collins Water Assessments and Rental Rates Conversion Yield Source (Ac-Ft/Sh) 1998 1999 2000 S/Ac Ft NCWCD(CBT) 1 Assessment Rate($/unit) 16.00 16.80 17.64 Ag Rental Rate($/ac-ft) 17.00 18.00 19.00 19.00 Multiple Use Rental Rate($/ac-ft) 32.00 33.00 34.00 34.00 North Poudre 1 Assessment Rate($/sh) 85.00 85.00 50.00 Early Ag Rental Rate($/ac-ft) 10.00 10.00 10.00 10.00 Ag Rental Rate($/ac-ft) 22.00 22.00 22.00 22.00 Multiple Use Rental Rate($/ac-ft) 27.00 27.00 27.00 27.00 Water Sumlly and Storage 105 Assessment Rate($/sh) 760.00 760.00 775.00 Rental Rate($/sh) 2400.00 2500.00 2600.00 24.76 Pleasant Valley&lake 30 Assessment Rate($/sh) 150.00 150.00 150.00 Rental Rate($/sh) 180.00 180.00 200.00 6.67 New Mercer 30 Assessment Rate($/sh) 150.00 0.00 0.00 • Rental Rate($/sh) 180.00 180.00 200.00 6.67 Larimer County#2 43 Assessment Rate($/sh) 250.00 200.00 200.00 Rental Rate($/sh) 300.00 275.00 300.00 6.98 Arthur 3.5 Assessment Rate($/sh) 10.00 10.00 10.00 Rental Rate($/sh) 12.00 14.00 16.00 4.57 Warren Lake 7 Assessment Rate($/sh) 0.00 0.00 0.00 Rental Rate($/sh) 120.00 120.00 130.00 18.57 Joe Wrieht Reservoir 1 Rental Rate($/ac-ft) 37.00 38.00 60.00 60.00 Sherwood Reservoir Co. Assessment Rate($/sh) 3.00 3.00 4.00 Rental Rate($/sh) 5.00 5.00 6.00 Sherwood Irrieation Co. Assessment Rate($/sh) 650.00 400.00 400.00 Rental Rate($/sh) 700.00 450.00 450.00 Reusable Effluent 1 Rental Rate($/sh) 34.00 60.00 60.00 Note: For late season rentals,rates may be adjusted to reflect the remaining yield or the prevalent market price of the water stock being rented. Water Board Minutes February 24, 2000 Page 2 Excerpt from Water Board Minutes February 24, 2000 PROPOSED SURPLUS WATER RENTAL RATES Each year after the irrigation companies have established their annual assessment rates for water shares, the Water Board recommends to the City Council, the rates to be set for the City's surplus raw water. The Board received copies of tables in their packets showing the assessment rates as set by the irrigation companies and the rental rates set by the City for 1998 and 1999, as well as proposed rates for 2000. The per acre-foot price for the proposed rental rates were also shown for 2000. According to the background information, the proposed rental rates for 2000 were based on several factors, including past rental rates in the area, current assessments, and anticipated supply and demand conditions. With the exception of Colorado Big Thompson Project (CBT), Joe Wright Reservoir and reusable effluent, water cannot be rented from one ditch company system into another. Therefore, for these systems, the rental market is limited to individuals under each ditch, and the rental price is largely dependent upon assessments as well as the supply and demand within each irrigation system. This results in considerable variation in prices per acre- foot among the various supply sources. . Beth Molenaar, from Water Resources, said that the only major change this year was in the price recommended for Joe Wright Reservoir water and Reusable Effluent. The reason for the increase is market rate. Recently, the City has seen a huge increase in requests for that water. "There are a lot of substitute water supply plans out there." Apparently the word has circulated that Fort Collins has that water available from Joe Wright. Water Resources staff contacted other municipalities and found that some are charging upwards of$100 an aaft for reusable water. Fort Collins has already received requests for 300 ac-ft for the 2000 water year, whereas last year the City rented only about 60 ac-ft. "Who do you get these requests from?" someone asked. "Primarily consulting engineers looking to meet replacement requirements for gravel pits and other projects," she replied. "How much of that water do we have in total?" Mrs. Molenaar said that it depends on the year, but usually the City has about 500 ac-ft of reusable water from Joe Wright Reservoir available for rent. Much of the water released from Joe Wright is reusable and goes to the water reuse plan every year. "Do you have more requests for reusable water than what you have?" Robert Ward asked. "Not at this point," Mrs. Molenaar responded. "If you get more requests for water than what is available, how do you handle that?"Mr. Ward continued. "If we have more requests than we have water available, we may do a pro-rats distribution so everyone gets a percentage of what they requested. When requests are significantly higher than available supplies, as is often the case with Water Supply and Storage Company, we use a `lottery' system," explained Mrs. Molenaar. In the case of Joe Wright and reusable effluent, we must take a totally different • approach. This is because we are making a commitment to them ahead of time. They have to Water Board Minutes February 24, 2000 Page 3 turn in their substitute supply plans to the state ahead of the water year, which begins in November. For example,November 1, 1999 began the 2000 water year. She said that staff needs to determine how much water the City will be comfortable with releasing to substitute supply plans. "If the requests are for too much water, it will be cut off," she pointed out. "They need to have that augmentation for the next year too?"Mr. Ward asked. "Yes and no," she replied. "The whole idea of the substitute supply plan, is that it is a temporary source of water. If the demand is not temporary, they are supposed to be coming up with a permanent plan for augmentation. In the case of Top Hat Car Wash, they were doing a short-term remediation project. They only needed the water for 2-3 years." "Does the City commit for 2 or 3 years?" Mr. Ward asked. "No, we commit for only one year at a time," she answered. The reason Mr. Ward was asking the question was that he has been approached by people from the Natural Resources Board who have been very interested in having some certainty in the agricultural operations in this area. He was wondering if the City's policy is running counter to another group in the City that is trying to encourage consistent and viable ag. operations. "It bothers me to think about having their operations dependent on our water," he said. "Have we ever discussed the idea of having two,three or even five-year agreements, so there could be some more certainty?" he wondered. "We have done that before. When we have acquired water, we have entered into some ten-year lease-backs,"Mrs. Molenaar answered. "Basically, they have the first right of refusal to lease that water at whatever the rental rate, or sometimes the assessment rate, was that year," she explained. "Those lease-backs have since expired. The only ones that are still in place are really not lease-backs; they are homeowners associations that have turned over raw water and have essentially entered into a perpetual agreement." She continued by saying that what Mr. Ward may be thinking about is a method that the City used years ago. Staff would go through the list and rent surplus raw water to whoever had rented that water in previous years. Any remaining surplus would then be available to new renters. She understood that, in the early 1990's, the City Council had asked that the rental water distribution method be changed. "Has Utilities staff discussed this issue with the Natural Resources staff or board?" Mr. Ward asked. Dennis Bode said he didn't think there had been discussions with the Natural Resources Board,but there have been other discussions in the community relating to the long-term agriculture lease program. "I think that is a policy issue that we need to visit and determine if there are any major hurdles. For example, there is some language in the Charter that may discourage leasing on a long term basis," he explained. "It sounds like there is an interest from the Natural Resources Board to try to make that all fit some way by trying, with our community policies, to influence the way the landscape is,"Mr. Ward stated. "Knowing the ag. community, the one word I hear from them all the time is that they must have certainty. Here we are running a situation where there is no certainty. I understand that we have goals that we want to achieve too, that sometimes don't move us towards certainty," he acknowledged. "Maybe some broader discussions with the Natural Resources Board staff will help." Water Board Minutes February 24, 2000 Page 4 Mrs. Molenaar explained that we have to be careful with that too, because there is some uncertainty with the yields from our allotted water each year. "There is probably a certain minimum amount that we could guarantee and could make available for lease each year, but we can't guarantee the maximum," she explained. "But you could guarantee those shares, whatever they might be that year,"Dave Rau contends. Mike Smith answered, "not necessarily." "Couldn't you write the agreement that way?"Mr. Rau persisted. "Say you get a half a CBT share whatever yield it is that year for rent?" "The agreement we want is that you get something or nothing, because in some years we might want it all,"Mr. Smith responded. "That's why we rent it in the first place," Tom Brown remarked. Mr. Smith explained that staff decides in the 1 i out. "But there could be a year spring what the City needs, and if there is excess, we'll lease t o y P g where we don't want to lease any of it." "We have done that for CBT water the past few years at the beginning of the rental season,"Mrs. Molenaar pointed out. Mr. Smith said the ideal thing to have, as with electricity, is an interruptible customer; "we can say, we'll rent you water but we have the right to turn it off any time." Mr. Ward observed that there are all sorts of ways that this could be woven together. George Reed thinks it is a worthwhile endeavor to try to get some certainty, but he doesn't think the City ought to be totally out of context. "We ought to be aware that most of the farming community acts everyday with a lot of uncertainty. Most of the water they lease on an annual basis, in commercial farming these days, they have only on an annual contract. A good part of the land is either share-cropped or cash-leased, and in most of those arrangements the farmers push hard to get a 3-5 year lease. They are buying large equipment and expensive items to farm that land, so you can understand that they want something long term. We need to work with them to try to secure those goals and those the City has for this area." "I just want to make certain that something that we're doing is not causing another part of the City a problem. We need to work in concert,"Mr. Ward stressed. Chairman Sanders asked Tom Brown if this might be something the Water Supply Committee may want to look into. He wondered if the Board should re-visit the lottery system used to determine who gets to rent water. With that system, there is no certainty at all. "Are you balancing certainty against fairness?"Mr. Brown asked. "Those are two different goals," he added. "If you are always renting to farmer"a" and not to farmer"b" because you have always rented to farmer "a", «farmer b» never gets a chance,„ he pointed out. Those are two goals you have to consider." He said the Water Supply Committee discussed this issue several years ago. "I guess we came out voting in favor of fairness, which is the lottery." "Did that hamper the farmers' decision to sell the City water?"Dr. Sanders asked. "I don't know,"Mr. Brown replied, "but selling the water to us, I imagine was with a lease-back."Mrs. Molenaar pointed out that the City hasn't actually purchased water from a farmer for quite some time. "We have our system set up so developers turn in most of the water,"Dennis Bode explained. "Farmers are looking at the economics of selling that water versus farming and are willing to take a little risk from year to year." George Reed referred the Board to the fourth paragraph of the background information. He said that North Poudre now has a policy of renting by ac-ft instead of a share basis. "Is that the second or third year?" "This will be the third year,"Mrs. Molenaar replied. Mr. Reed recalled Water Board Minutes February 24, 2000 Page 5 that the North Poudre Annual Report said that last year they had delivered 6 ac-ft per share (0.5 Early Ag, and 3.5 Multiple Use). He wondered if people who are renting water from the City are getting that same spread. "Does someone have to rent early water from you in order to get any of the rest of the water?" he asked. "No, and that's what is nice because we have some farmers who just want to irrigate their hay. If they don't get a second or third cutting, they don't really care. They will come to us and rent 10 ac-ft of early water and it's cheap water at $10 an ac-ft. Other people can't use the early water because they are growing corn, for example. They need the water in June and July so they rent only the ag. water." "What's the demand for Multiple Use water from North Poudre?"Mr. Reed asked. "Is it high or low?" "It's quite small," Mrs. Molenaar replied. The City uses most of that water. "We rent some occasionally, but very little." ACTION: Motion and Votes Bill Fischer said that he would abstain from the voting on the Water Supply& Storage Co. shares, because he represents the company as their attorney, but he wanted to vote on the rest of the rates. He requested that the Board vote on the rest of the rental rates first, excluding WSSC, and then vote on WSSC second. George Reed moved that the Board recommend approval of all the new rates except for Water Supply& Storage Company. Tom Brown seconded the motion. The vote to approve was unanimous. Dave Rau moved that the Board recommend approval of the new rates for Water Supply & Storage Co. Dave Frick seconded the motion. The vote was 7 in favor with Bill Fischer abstaining.