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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 03/16/2004 - RESOLUTION 2004-041 ESTABLISHING RENTAL RATES AND ITEM NUMBER: 19 AGENDA ITEM SUMMARY DATE: March 16, 2004 FORT COLLINS CITY COUNCIL STAFF: Dennis Bode SUBJECT Resolution 2004-041 Establishing Rental Rates and Delivery Charges for the City's Raw Water for the 2004 Season. RECOMMENDATION Staff and the Water Board recommend adoption of the Resolution. FINANCIAL IMPACT The revenue from the City's delivery of raw water is expected to be approximately $200,000 for 2004. 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. 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 26, 2004 meeting. 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. Due to the lingering effects of the drought and the uncertainty regarding this year's runoff,the first priority will be to maximize the amount of water to be carried over into 2005. The Water Utility uses its annual rates set by City Council for the purpose of charging for the rental of water to agricultural users, for delivery to meet various contractual raw water obligations and to assess charges to other 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. March 16, 2004 -2- Item No. 19 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 that 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 The sources with active rental markets include the Colorado Big Thompson Project (CBT), North Poudre Irrigation Company (NPIC), Water Supply and Storage Company (WSSC) and the City's reusable sources (primarily Joe Wright Reservoir or reusable effluent). For these sources the proposed rental rates are based on expected rental market conditions. Last winter and early spring (2003) the drought appeared to be intensifying and CBT water was actively moving from the agricultural sector to the municipal sector at prices of$400.00 per acre foot. Due to the March blizzard and subsequent wet weather, the CBT quota was raised from a record low of 30% to 50% for the 2003 water year. Much of this water was unused in 2003 and remains in the CBT system for use in 2004. With a minimum 2004 quota of 50%, there will likely be some 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$30.00 per acre foot and rentals to the municipal or industrial sector be set at $45 per acre foot to reflect the higher assessments charged to municipal and industrial shareholders. Each share of North Poudre Irrigation Company is typically split into an "early agricultural" component, a "seasonal agricultural" component and a "multiple use" component. The "agricultural" components can only be used for agricultural purposes on land served by the NPIC system and therefore will be made available for rent to those under the NPIC system. It is proposed that the "early agricultural" rate be set at $15 per acre foot to reflect its limited use, and the "seasonal agricultural" rate be set at $27 per acre foot. The "multiple use" portion of each NPIC share will be available for the City's use but not all of it will likely be needed. Staff proposes that the rental rate be set at $32 per acre foot. The City typically makes its WSSC 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 about$3,000 per share this year. With the recent drought and the State's increased scrutiny of well depletions, the City has seen an increased 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 limited sources be $400 per acre-foot in 2004. March 16, 2004 -3- Item No. 19 Limited Rental Market The second category of rentals this year is for those with a limited rental market. This category includes the Pleasant Valley and Lake Canal Company (PV&L) shares and the other "Southside Ditches" shares. 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 these users 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$150 per share. Based on this method, the charges would be set at$150 x 1.2 = $180 per share. For renters that have not satisfied the City's raw water requirements,staff is proposing that the rental rates be set to reflect a price of about $20 per acre-foot. Because the Pleasant Valley Pipeline will be available starting in 2004,the use of the City's southside ditches will be of more value to the City than in the past. Based on an estimated dry-year yield, the price per share was determined for each type of water. For example, it is estimated that PV&L shares will produce 25 acre-feet; therefore, the rental price would be $20 x 25 = $500 per share. For several companies, the difference between the above two methods of calculating the raw water rates 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, the price is much higher but is in line with the prices for the other southside ditches. At its February 26,2004 meeting,the Board unanimously recommended that the following rates for raw water be adopted: Type of Water Proposed 2004 Rental Rates/Charges (1) RWR Not Satisfied RWR Satisfied Active Rental Market NCWCD Water(CBT) - Agricultural $ 30.00/ac-ft n/a NCWCD Water (CBT)—Muni. & Ind. $ 45.00/ac-ft n/a North Poudre Irrigation Co. —Early Ag Use $ 15.00/ac-ft n/a North Poudre Irrigation Co. —Seasonal Ag Use $ 27.00/ac-ft n/a North Poudre Irrigation Co. —Multiple Use $ 32.00/ac-ft n/a Water Supply and Storage Co. $ 3,000.00/share n/a Reusable Sources $ 400.00/ac-ft n/a March 16, 2004 -4- Item No. 19 Limited Rental Market Arthur Irrigation Co. $ 60.00/share $ 9.60/share Latimer County Canal No. 2 $ 450.00/share $ 360.00/share New Mercer Ditch Co. $ 450.00/share $ 360.00/share Pleasant Valley &Lake Canal Co. $ 500.00/share $ 180.00/share Warren Lake Reservoir Co. $ 300.00/share $ 180.00/share Sherwood Res. Co. $ 10.00/share $ 8.40/share Sherwood Irrigation Co. $ 480.00/share $ 480.00/share Notes: (1) Rates may be adjusted to reflect the remaining yield or the prevalent market price of the water stock being rented. City of Fort Collins Water Assessments Source 2001 2002 2003 2004 Active Rental Market CBT (NCWCD, $/unit) 18.52 19.44 20.30 20.70 North Poudre Irrigation Co. ($/sh) 60.00 65.00 85.00 20.00 Water Supply& Storage Co. ($/sh) 950.00 950.00 950.00 950.00 Reusable Sources ($/ac-ft) n/a n/a n/a n/a Limited Rental Market Arthur Irrigation Co. ($/sh) 10.00 11.50 26.00 8.00 Latimer County Canal #2 ($/sh) 400.00 300.00 200.00 300.00 New Mercer ($/sh) 200.00 200.00 200.00 300.00 Pleasant Valley &Lake Canal ($/sh) 150.00 120.00 150.00 150.00 Warren Lake ($/sh) 0.00 100.00 300.00 150.00 Sherwood Reservoir ($/sh) 4.00 4.00 7.00 7.00 Sherwood Irrigation ($/sh) 400.00 400.00 400.00 400.00 Water Rental Rates Source 2001 2002 2003 2004 Active Rental Market CBT Agricultural ($/ac-ft) 21.00 25.00 400.00 30.00 CBT Municipal/Industrial ($/ac-ft) 35.00 38.00 400.00 45.00 NPIC Early Agricultural ($/ac-ft) 12.00 15.00 n/a 15.00 NPIC Seasonal Agricultural ($/ac-ft) 22.00 25.00 n/a 27.00 NPIC Multiple Use ($/ac-ft) 27.00 30.00 n/a 32.00 Water Supply& Storage Co. ($/sh) 2,600.00 2,800.00 2,900.00 3,000.00 Reusable Sources ($/ac-ft) 75.00 100.00 750.00 400.00 March 16, 2004 -5- Item No. 19 Limited Rental Market(RWR Not Satisfied) Arthur Irrigation Co. ($/sh) 17.00 20.00 35.00 60.00 Larimer County Canal#2 ($/sh) 450.00 300.00 300.00 450.00 New Mercer($/sh) 250.00 250.00 250.00 450.00 Pleasant Valley&Lake Canal ($/sh) 200.00 200.00 250.00 500.00 Warren Lake ($/sh) 140.00 150.00 350.00 300.00 Sherwood Reservoir ($/sh) 6.00 6.00 10.00 10.00 Sherwood Irrigation ($/sh) 450.00 450.00 450.00 480.00 Limited Rental Market(RWR Satisfied) Arthur Irrigation Co. ($/sh) n/a n/a n/a 9.60 Larimer County Canal#2 ($/sh) n/a n/a n/a 360.00 New Mercer($/sh) n/a n/a n/a 360.00 Pleasant Valley&Lake Canal ($/sh) n/a n/a n/a 180.00 Warren Lake ($/sh) n/a n/a n/a 180.00 Sherwood Reservoir ($/sh) n/a n/a n/a 8.40 Sherwood Irrigation ($/sh) n/a n/a n/a 480.00 Notes: (1) Rates may be adjusted to reflect the remaining yield or the prevalent market price of the water stock being rented. (2) Rental charges 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 120% of the assessments charged by that company. RESOLUTION 2004-041 OF THE COUNCIL OF THE CITY OF FORT COLLINS ESTABLISHING RENTAL RATES AND DELIVERY CHARGES FOR THE CITY'S RAW WATER FOR THE 2004 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 26, 2004, the Board discussed the rental program and the use of raw water and recommended the following rates for the 2004 irrigation season: Type of Water Proposed 2004 Rental Rates/Charges (1) RWR Not Satisfied RWR Satisfied Active Rental Market NCWCD Water(CBT) - Agricultural $ 30.00/ac-ft n/a NCWCD Water(CBT)—Muni. &Ind. $ 45.00/ac-ft n/a North Poudre Irrigation Co. —Early Ag Use $ 15.00/ac-ft n/a North Poudre Irrigation Co. —Seasonal Ag Use $ 27.00/ac-ft n/a North Poudre Irrigation Co. —Multiple Use $ 32.00/ac-ft n/a Water Supply and Storage Co. $ 3,000.00/share n/a Reusable Sources $ 400.00/ac-ft n/a Limited Rental Market Arthur Irrigation Co. $ 60.00/share $ 9.60/share Larimer County Canal No. 2 $ 450.00/share $ 360.00/share New Mercer Ditch Co. $ 450.00/share $ 360.00/share Pleasant Valley &Lake Canal Co. $ 500.00/share $ 180.00/share Warren Lake Reservoir Co. $ 300.00/share $ 180.00/share Sherwood Res. Co. $ 10.00/share $ 8.40/share Sherwood Irrigation Co. $ 480.00/share $ 480.00/share Notes: (1) Rates may be adjusted to reflect the remaining yield or the prevalent market price of the water stock being rented. NOW T HEREFORE, BE IT RESOLVED BY THE COUNCII.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 2004 and the Utilities General Manager, or his representative, 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 held this 16th day of March, A.D. 2004. Mayor ATTEST: City Clerk Excerpt from Water Board Meetine Minutes of February 26,2004 Proposed Surplus Water Rental Rates—Dennis Bode Dennis Bode, Water Resources Division Manager, explained that each year prior to the irrigation season, staff proposes rental rates for surplus raw water to the Water Board. This includes rates for agricultural renters, other City departments, and for others for which the City is obligated to deliver raw water. This is done in order to set the rental rates for possible users if and when the supplies become available. Due to the lingering drought, staff is proposing that the water rental rates be separated into two categories this year. The first priority will be to maximize the amount of water to be carried over to 2005. The first category will be the active rental market which will include Colorado Big Thompson Project (CBT), North Poudre Irrigation Company (NPIC), Water Supply and Storage Company (WSSC) and the City's reusable sources (primarily Joe Wright Reservoir or reusable effluent). The proposed rental rates on these sources are based on expected rental market conditions. The other category of rentals will be those with a limited rental market. Some of these users have turned in raw water or have met the water requirements for their properties. The objective of the City for this group is to recover the costs associated with delivering this water. Examples of this type of customer would be City facilities such as parks and golf courses, or other entities that have already met the water requirements. Dennis referred the Board to a table that showed the water assessments for each water source for the past three years and the difference in rates that customers would pay if they have not satisfied the raw water requirements. Board member Tom Brown commented that the rate for water delivered to those that had satisfied a raw water requirement was more of a "delivery charge" than a rental rate. Dennis concurred. Chairman Sanders asked if the City rented from someone else last year and what was the cost. Dennis confirmed that the City rented and traded some water and spent around $900,000 for 5,800 acre feet which enabled the City to carry over plentiful supplies into 2004. He said the cost on some of the water that was rented was as high as $400 per acre foot. Much of it was rented early in the year when water supply projections were low and prices high. Board member Gina Janett asked if the City ever changed the rental rates during the course of the year in response to the market rate changes. Dennis replied that the City has in the past but it has usually happened late in the season when it was obvious that there was a lot of surplus water that would be lost. He said that staff tries not to change the rates but some situations come up when it just makes sense to change them. The Board questioned whether the staff has the flexibility to change the rates when market conditions change. Dennis noted that it would be prudent to have that flexibility and that Note #1 in the rental rates table would allow this to occur. Water Board Meeting Minutes January 22,2004 Page 2 Board member Bill Fischer stated that since he represents the Water Supply and Storage Company he moved that the Water Board recommend that Council approve the 2004 Water Rental charges including the footnote#1, with the exception of the Water Supply and Storage Company. Board member Reagon Waskom seconded the motion. The motion was approved unanimously. Board member Ted Borstad made a motion, seconded by Board member Rami Naddy to include the rental rate for the Water Supply and Storage Company including the footnote. The motion was approved. Board member Fischer abstained.