HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 11/04/2003 - RESOLUTION 2003-121 APPROVING THE EXERCISE OF THE ITEM NUMBER: 18
AGENDA ITEM SUMMARY DATE: November4, 2003
FORT COLLINS CITY COUNCIL STAFF: Janonis/Bode
SUBJECT
Resolution 2003-121 Approving the Exercise of the City's Option from North Poudre Irrigation
Company to Proceed with the Development of the Halligan Reservoir Enlargement Project and to
Authorize Other Related Actions.
RECOMMENDATION
Staff and Water Board recommend adoption of the Resolution.
FINANCIAL IMPACT
The development and construction of the Halligan Reservoir Enlargement Project is estimated to cost
the City about$14 million during the next 5-7 years. Approximately$4.2 million is budgeted for
2004 and 2005,and the remainder will be budgeted in subsequent years. Bonds will be sold to fund
the project and repaid using cash collected under the City's raw water requirements. At the time of
exercising the option, the City must pay to North Poudre Irrigation Company a payment in the
amount of$188,223.51. In addition, a non-interest bearing revenue bond will be issued to secure
the City's remaining$4.15 million payment obligation to North Poudre for the rights it will convey
to the City.
EXECUTIVE SUMMARY
This Resolution will authorize the City to exercise the option the City has with the North Poudre
Irrigation Company (NPIC) to acquire from NPIC its property rights and the right to proceed with
the permitting and development of the Halligan Reservoir Enlargement Project. Under the option
agreement,the City will acquire all property and other rights necessary for the proposed enlargement
and this will allow the City to pursue permitting, design and construction of the enlargement. This
resolution also provides direction and authority to enter into agreements with permitting agencies,
NPIC,potential participants in the project and other entities necessary to develop and ultimately to
construct the project.
November 4, 2003 -2- Item No. 18
BACKGROUND
Halligan Reservoir,located on the North Fork of the Poudre River,currently has a capacity of 6,408
acre-feet, but could be enlarged to about 40,000 acre-feet. The project would supply the City with
long-term carryover storage that would be used primarily to supplement supplies during a multi-year
drought. The Halligan Reservoir project was identified in the 1980's as an excellent project for
developing long-term storage capacity. The projected unit cost of constructing an enlarged reservoir
at that site is much lower than most sites because of the topography. Since the project would enlarge
an existing reservoir, the environmental impacts would be relatively minor. Recent studies of the
City's water supply system have shown that additional storage capacity is needed to effectively
manage the City's water rights portfolio and provide long-term drought protection. The enlargement
of Halligan Reservoir would be a key component in meeting the future water supply needs of
residents in the Fort Collins area.
The City has paid approximately $1.025 million in annual option payments since 1993 in order to
preserve its option to proceed with the Halligan Reservoir project. After the payment of$188,223.51
is made at the time of exercise of the option,annual payments continue under the Option Agreement
through the year 2030, in the total additional amount of approximately $4.15 million. If the City
chooses not to exercise its option and the agreement terminates,NPIC is entitled to retain the City's
prior payments and the City relinquishes its conditional storage rights in Halligan Reservoir and has
no further rights under the agreement. If the City exercises its option to proceed with the project,
but fails to proceed to construct the project, it is required to relinquish its rights in the property,
conditional storage and the project to NPIC, together with all amounts previously paid to NPIC.
Development of additional storage capacity at Halligan Reservoir is consistent with the Water
Supply and Demand Management Policy that was adopted by City Council in September of this year.
This policy provides that the City shall pursue new storage capacity in the range of 12,500 acre-feet
to 14,000 acre-feet to meet both operational and long-term carryover storage needs. It has been
determined that approximately 12,000 acre-feet of storage capacity at Halligan Reservoir would meet
projected long-term carryover storage needs and help meet future water demands during a 1-in-50
type drought.
Under the Halligan Option Agreement,NPIC retains the storage rights for the first 6,400 acre-feet
in the reservoir. With the 12,000 acre-feet desired by Fort Collins, a reservoir with a minimum of
18,400 acre-feet is needed. Since the enlarged Halligan Reservoir may have a capacity of up to
40,000 acre-feet, there is an opportunity to form partnerships with other local entities and provide
needed storage capacity for others in this area. The Utilities'projected cost for Halligan would be
about $26 million if the City were to build a reservoir large enough to meet only the needs of
Utilities'customers. By building the 40,000 acre-foot reservoir with partners to serve the region in
and around Fort Collins, Utilities'cost would be about$14 million. These estimated costs include
engineering and environmental studies,environmental mitigation,project management,design and
construction. NPIC has expressed a desire for an additional 5,000 acre-feet of new storage capacity
at Halligan and the three water districts that serve areas in and around Fort Collins are interested in
acquiring the remaining capacity that may be available. This resolution would authorize the City to
enter into agreements with partners and others to work toward the cooperative development of the
project.
November 4, 2003 -3- Item No. 18
The City's share of the Halligan Enlargement Project will be paid by development fees collected by
the City. Projections show that approximately$90 million in cash is expected to be turned over from
developers in satisfaction of raw water requirements during the planning period from 2000 to 2040.
This assumes that about 50%of the City's raw water requirements for typical new developments will
be turned over in the form of cash-in-lieu payments. The balance will be in the form of water rights.
The cash turned over will be available during the planning period for financing for the enlargement
of Halligan Reservoir as well as for the development of gravel pits for storage and for other
improvements to the City's raw water system.
Engineering and environmental studies on Halligan Reservoir have been ongoing during the last
couple of years. Discussions have been held with federal and state agencies, adjacent landowners,
potential partners, and other interested parties. The City currently holds an option to acquire some
of the land surrounding the existing Reservoir for enlargement of the Reservoir,in exchange for the
grant of certain surface rights on the Reservoir upon completion of the project. Further progress on
completing the acquisition of these property rights, along with other property needed for the
enlargement project, is expected in the coming months.
City staff continues to believe the project will provide significant benefits to the City, is cost
effective,can provide environmental enhancements, and will be permitted by the necessary federal,
state, and local agencies. The National Environmental Policy Act(NEPA)permitting process will
require an environmental impact statement(EIS) that will require an extensive public process that
will include an analysis of alternatives and an evaluation of potential impacts. This process is
expected to take 2-3 years. Federal agencies will have final permit approval of the project. If the
project is successfully permitted, it will take another 3-4 years for design and construction, and the
enlarged reservoir could be completed and ready to use by 2009 or 2010.
Approval of this resolution allows the City of Fort Collins to be the project proponent on behalf of
the Halligan Enlargement Project. It does not assure that the Halligan Project will be built nor that
enlargement of Halligan Reservoir will be the selected option by the federal permitting agencies in
the EIS process. NEPA requires federal agencies to use the EIS process to evaluate potential adverse
impacts of the project, consider all potential alternatives, and permit the least environmentally
damaging alternative. Therefore,the EIS process will evaluate all practicable alternatives,including
a no-action alternative,that can meet the basic project purpose and need. This can be a complex and
protracted process, and will involve the evaluation of other alternatives such as Northern Colorado
Water Conservancy District's Northern Integrated Supply Project(NISP). Asa result,it could result
in the permitting of a project other than Halligan to meet regional water storage needs. As the
project proponent, City staff will work with other interested parties and the participants to develop
an environmentally sound,cost-effective approach to meeting the Fort Collins regional water needs
and to propose the most permittable project to do so.
The City is required, under the Option Agreement, to operate and maintain the Reservoir upon the
exercise of the Option. City staff has discussed with NPIC the possibility of an agreement that
would provide for operation and maintenance of the Reservoir by NPIC. The Resolution authorizes
the City Manager to enter into such an agreement,along with other agreements related to the process
of evaluating, planning and obtaining environmental approvals for the project.
November 4, 2003 -4- Item No. 18
Water Board and City staff recommend that the resolution be approved that would authorize the City
Manager to:
1. exercise the City's option contingent upon final approval of the issuance of the revenue
bond to secure the Water Utility Enterprise obligations for future payments to NPIC;
2. proceed with such work as may be necessary to pursue enlargement of Halligan
Reservoir to a capacity of up to 40,000 acre-feet, to the extent economically and
environmentally feasible,including acquisition of additional property rights required for
the enlargement project;
3. enter into an agreement with NPIC for operation and maintenance of Halligan Reservoir
pending the enlargement project;
4. negotiate and enter into agreements with NPIC and other local water suppliers to
cooperatively investigate,plan and obtain regulatory approvals for the project and share
related costs;
5. negotiate and enter into an agreement with the City of Greeley for cooperation,
coordination and cost-sharing for environmental approvals for the Halligan Reservoir
project and Greeley's proposed Seaman Reservoir enlargement project;
6. negotiate and enter into one or more agreements with the U.S.Army Corps of Engineers
for cooperation,coordination,investigation and analysis related to federal environmental
regulatory requirements; and
7. enter into negotiations with other interested parties to develop agreements forcooperative
financing of construction of the project and ongoing operation, in exchange for shared
use of the new water storage capacity to result, for presentation to the City Council for
approval.
ATTACHMENTS
Excerpt from Water Board minutes
Location Map of Halligan Reservoir
RESOLUTION 2003-121
OF THE COUNCIL OF THE CITY OF FORT COLLINS
APPROVING THE EXERCISE OF THE CITY'S OPTION
FROM NORTH POUDRE IRRIGATION COMPANY
TO PROCEED WITH THE DEVELOPMENT OF
THE HALLIGAN RESERVOIR ENLARGEMENT PROJECT
AND AUTHORIZING OTHER RELATED ACTIONS
WHEREAS,in 1987,the City acquired an interest in the Halligan Reservoir Enlargement Project
and the associated conditional storage right,pursuant to Resolution 87-161,adopted by the City Council
on November 3, 1987; and
WHEREAS,the City conducted extensive engineering and environmental studies in 1989,which
have since been updated in 2002 and 2003, and such studies show the project to be feasible and cost
effective; and
WHEREAS,in 1993,pursuant to Resolution 93-164,adopted by the City Council on November
2, 1993, the City entered into an agreement with North Poudre Irrigation Company ("NPIC") through
which NPIC granted to the City an option to acquire all the property or other rights necessary to
proceed with the enlargement of the Halligan Reservoir(the "Option Agreement"); and
WHEREAS, on September 16, 2003, the City Council adopted Resolution 2003-104, which
approved a Water Supply and Demand Management Policy that provides that the City will pursue the
acquisition or development of 12,500 to 14,000 acre-feet of water storage capacity in order to provide
carryover water and to provide operational flexibility and reliability; and
WHEREAS,City staff has since that time determined that 12,000 acre-feet of carryover capacity
that would be available to the City in an enlarged Halligan Reservoir would meet the long-term needs
of the City; and
WHEREAS,Halligan Reservoir can potentially be enlarged to 40,000 acre-feet and the City and
other local entities are interested in pursuing a partnership to provide an environmentally sensitive and
cost-effective project that meets the regional needs of several entities within the Cache la Poudre River
Basin; and
WHEREAS, by working cooperatively with other entities, the City can advance significant
environmental benefits to the North Fork of the Poudre River that can be achieved through the Halligan
Reservoir Enlargement Project (the "Project"); and
WHEREAS, the City needs to explore partnership agreements with other entities and proceed
with a comprehensive permitting process to secure the environmental approvals required for the Project
and to improve the environmental sensitivity and cost-effectiveness of the Project; and
WHEREAS,the Option Agreement is scheduled to expire if the City does not exercise its option
to proceed with the Project (the "Option")by the end of 2003; and
WHEREAS, Ordinance No. 5, of the Board of the Water Utility Enterprise of the City of Fort
Collins (the "Board"), authorizing the issuance of a non-interest bearing water revenue bond to secure
said Enterprise's payment obligations for the benefit of NPIC (the "Revenue Bond") pursuant to the
Option Agreement, is scheduled for consideration by the Board on first reading on this 4th day of
November, 2003; and
WHEREAS, pursuant to Article XIV, Section 18 of the Constitution of the State of Colorado,
Section 29-1-203 of the Colorado Revised Statutes, and Article II, Section 16 of the City Charter, the
City Council may authorize intergovernmental agreements through which the City may cooperate
together with other governmental entities to provide any function lawfully authorized to each.
NOW THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT
COLLINS as follows:
Section 1. That the City Manager is hereby authorized to take such actions as are necessary
to exercise the City's Option to proceed with the Project pursuant to the Option Agreement,contingent
upon the final approval of the issuance of the Revenue Bond by the Board.
Section 2. That the City Manager is hereby authorized, upon the exercise of the Option, to
proceed with such investigation, planning, regulatory review processes, site acquisition, design and
construction work as he determines to be necessary to pursue the enlargement of Halligan Reservoir to
a capacity of up to 40,000 acre-feet, provided that the final capacity and design shall be economically
feasible and in compliance with all applicable environmental standards and requirements.
Section 3. That the City Manager is hereby authorized, upon the exercise of the Option, to
negotiate and enter into a written agreement with NPIC for the operation and maintenance of Halligan
Reservoir pending the enlargement project.
Section 4. That the City Manager is hereby authorized,upon the exercise of the Option, to
negotiate and enter into written agreements with NPIC, Fort Collins-Loveland Water District, East
Larimer County Water District, North Weld County Water District, and other local water suppliers
interested in acquiring capacity in the Project,through which the City may share the costs of engineering
and environmental studies,environmental mitigation,project management and design,and other Project
work with such other interested parties, in exchange for possible future rights to a portion of the new
Halligan Reservoir capacity to be constructed.
Section 5. That the City Manager is hereby authorized, upon the exercise of the Option, to
negotiate and enter into a written agreement with the City of Greeley providing for cooperation,
coordination and cost-sharing for environmental review, planning and permitting, and other work
mutually beneficial to the City for its Halligan Reservoir Project and City of Greeley for its proposed
Seaman Reservoir enlargement project.
Section 6. That the City Manager is hereby authorized, upon the exercise of the Option, to
negotiate and enter into one or more written agreements with the U.S. Army Corps of Engineers
providing for cooperation, coordination, investigation and analysis related to federal environmental
regulatory requirements applicable to the Project.
Section 7. That the City Manager is hereby authorized, upon the exercise of the Option, to
enter into negotiations with NPIC, Fort Collins-Loveland Water District, East Latimer County Water
District, North Weld County Water District, the City of Greeley, and such other local water suppliers
as may be willing and able to cooperate in the enlargement of Halligan Reservoir as set forth herein,and
to develop agreements providing for cooperative financing of construction and ongoing operation of the
Project in exchange for proportionally shared use of the new Halligan Reservoir storage capacity on a
long-term basis, which agreements shall be presented to the City Council at a later date for final
approval.
Passed and adopted at a regular meeting of the Council of the City of Fort Collins held this 4th
day of November, A.D. 2003.
Mayor
ATTEST:
City Clerk
EXCERPT FROM JUNE 26, 2003 WATER BOARD MEETING MINUTES:
Halligan Reservoir—Brian Janonis
Brian Janonis, Water Resources & Treatment Services Department Manager, said the City has
received a letter from the North Poudre Irrigation Company asking the City to consider transferring
ownership of Halligan back to them.Following is a brief background and the four alternatives staff
has prepared for discussion:
In 1987, the City of Fort Collins acquired a conditional storage right at Halligan Reservoir. This
right for 33,462 acre-feet is owned jointly with the Northern Colorado Irrigation Company(NPIC).
The City and NPIC entered into the Halligan Reservoir Agreement in November, 1993. The purpose
of the agreement was to give the City the option to enlarge Halligan Reservoir, which is currently
owned by NPIC. If the City exercises this option, the property and all rights would be conveyed to
the City and it could proceed with the construction of an enlarged reservoir. The City could also let
the option lapse, renegotiate or terminate the agreement.
Alternatives to Consider
Alternative #1 Do nothing and let the present option expire at the end of 2003 and relinquish all
rights to enlarge Halligan Reservoir.
Alternative #2 Exercise the Option Agreement and proceed to design and enlarge the existing
reservoir to 40,000 acre-feet and sell excess storage to other entities
Alternative #3 Exercise the Option Agreement and proceed to design and enlarge the existing
reservoir to 17,400 acre-feet.
Atemative#4 Enter into an agreement with North Poudre Irrigation Company(NPIC) to transfer
the project to them with 10,000 acre-feet of storage capacity reserved for the City.
Brian stated that staff recommends either Alternative#2 or#4.
Board member Ted Borstad asked why does alternative#3 say 17,400 acre feet for the City's use and
alternative #4 say 10,000 acre feet. Brian responded that if it is a 17,400 acre foot reservoir that
would provide 10,000 acre feet for the City, 6,400 acre feet for North Poudre and then 1,000 acre
feet would be granted to the property owners in lieu of the City having to purchase the property. Ted
Borstad asked if the 1,000 acre feet would satisfy the increases that NPIC stockholders want in
addition. Brian responded that it wouldn't, that it is a separate issue and that NPIC suggested that
they take it over because they have a need for 3,000 to 5,000 acre feet.
Chairman Tom Sanders asked why having the City operate and maintain the reservoir is listed as a
disadvantage.Brian replied that currently North Poudre maintains it and is part of their daily routine
but it is something that we would have to learn. Mike Smith responded that it would be problematic
but it is possible.
John Bartholow asked Steve Smith,of North Poudre Irrigation Company,about the low interest loan
that might be available if we went with alternative#4.
Steve Smith replied that NPIC has historically borrowed money from the Colorado Conservation
Board to do rehabilitation on reservoirs to bring them up to current state standards. As the
beneficiaries of the enlargements are primarily for agricultural users,NPIC has been able to access
fairly reasonable interest rates on those loans over a 40 year period. NPIC is currently in the process
of paying off seven or eight of such loans. So for those that have multiple benefits; that benefit
agriculture, recreation or municipalities, there would probably be a blending of interest rates that
would reflect the mix of beneficiaries. Because NPIC has only 35%agricultural shares and, with an
enlarged reservoir,the percentage of agricultural users would decline further,there is little guarantee
that Halligan would qualify for a truly low interest rate from the Colorado Water Conservation Fund.
Board member Doug Yadon asked Brian if there is any potential of partnering with the City of
Greeley, possibly combining or coordinating the Seaman and Halligan projects, and also visiting
with the Tri Districts about their participation.
Brian replied that staff works with Greeley and the Tri Districts on a routine basis. He asked Steve
Smith to speak about the relationship that NPIC has with Greeley and the Tri District.
Steve responded that NPIC does a lot of water exchanges with Greeley for CBT water. The Tri
Districts are individually represented as stockholders in the NPIC portfolio so NPIC works with them
as individuals. Between the three districts, they own about 30 percent.
Chairman Tom Sanders stated that there were two issues here: the first, do we all agree, or is there
a problem with expanding Halligan to it's maximum of 40,000 acre feet; and the second is, who
should be running it,should North Poudre run it or should we be running it. Does anybody think that
we should be considering less than 40,000?
John Bartholow voiced his concern about the number of projects already in the works and the
sacrifice of good habitat. If though,through proper planning and cooperation,some projects might
fall away from the larger scheme, then perhaps some sacrifices might be in order. His preference
would be for City Council to make a decision on the Water Supply and Demand Management Policy
before the Water Board makes a recommendation about Halligan. That aside,Halligan does seem
to be a cost competitive alternative for the City for the identified need of 10,000 acre feet. However,
cost isn't the sole decision metric that should be used here. Existing and draft water supply policies
and resolutions encourage us to look for regional cooperation and dedication to environmental
sensitivity, support for regional agriculture and an opposition to a main stem dam on the Poudre.
All those things are, in one form or another, in the policies. His concern was that the proposed
40,000 acre feet reservoir, is excellent quality riparian and riveting habitat. For that reason, he
recommended that Council thank NPIC for their generous offer and look forward to partnering with
them on enlarging Halligan for the benefit of municipal and agricultural users,but inform them that
the City prefers to maintain the leadership role it's been planning for many years, so that we can
maintain our control of the project, our emphasis on environmental responsibility and in fact, lend
ourselves to leaning towards all the policies we have been encouraged to incorporate into decisions.
And,he added,we recommend to the Council that we go ahead and exercise our option to purchase
Halligan on or before December 31, 2003, but state that we are not explicitly ready to recommend
sizing Halligan to it's maximum 40,000 acre foot capacity or recommend who the full suite of
regional partners might be. That would come at a later time when all the environmental information
is really in, and we can look at those tradeoffs and the balance between the reservoir capacity we
really want as well as cooperate with partners to weigh cost and environmental concerns and issues
that will inevitably come up.
Chairman Sanders asked John Bartholow if he was making a motion. John replied that he would
make that a discussion right now and appreciate the Board's help in shaping it into a sensible motion.
Board member Robert Ward agreed with John Bartholow in that it seems premature to make a
decision on a size given so much uncertainty about what others are doing until more discussion has
taken place.
Doug Yadon stated that there is still is no guarantee that the current Halligan project that the City
is pursuing is permittable and will come on board in a best time frame. There is always potential for
issues to arise and derail the project. This is the City's water supply and we are interested in
maintaining as direct control on our water supply and our future. It puts a burden on staff and the
community to be the ones responsible for overcoming those hurdles and make the project happen
at reasonable prices and on a reasonable schedule. If we adopt Alternative#4, it shifts the burden
onto different folks who would then have Steve Smith and his group's responsibility to bring that
through. It can go either way but it's just a question for the City; does the City for their 10,000 acre
feet share want more direct control to shape, direct and marshal that process or will we take a little
bit more risk and trust another entity to provide us that source. He added that in an agreement you
could require guaranteed delivery of the10,000 acre feet no later than a specified date so that there
is protection. It would be putting the risk on the other party that way, but when in the business of
permitting and building dam projects there needs to be some pretty tough negotiating to be fair and
reasonable as possible.
Board member Bill Fisher stated he agreed with some of Doug's comments but since his firm
represents Cache La Poudre Water Users Association, he may have a conflict of interest in any
decision.
Brian Janonis responded that one of the things that we have been talking with Cache La Poudre
Water Users Association about is one eighth ownership in the Grey Mountain decree and how that
might be used to help Halligan fill.
Bill Fischer stated that he should excuse himself from the conversation because he works with the
Association and it would be a conflict of interest.
Chairman Tom Sanders questioned whether he really should excuse himself from the conversation.
Bill Fischer replied that it had just come to his attention and that he had not really thought it through
yet. Chairman Sanders asked him to just wait and listen and if we come to a vote you can withdraw
yourself from the vote.
Bill Fischer explained that his thinking was that if option #4 put NPIC and the City in a better
negotiating position with the Cache La Poudre Water Users Association and he voted,for example,
for Alternative#4, that means, that he would vote to put the City and NPIC in a better negotiating
position against his client, so he would have a conflict.
Chairman Sanders agreed that he understood and asked if anyone else wanted to raise their concems.
Board member Tom Brown responded that there was just a point, there is two big jobs that we are
lumping together in our conversation. One is, to design with the enlargement with the permitting
process and the other is to operate and maintain it in the future. They are two quite different jobs.
The City might want to be intimately involved in the first job and not involved at all in the second.
John Bartholow interjected that these are really three decisions in a way;size of reservoir,who leads,
who does O &M.
Mike Smith stated that the immediacy right now is that NPIC has sent a letter to the City Council
asking them to consider this and we owe them an answer. It could be an answer of thank you,we're
going to take this under consideration and get back to you, or whatever the Board wishes.
Board member Bill Fischer asked Brian, how would NPIC's ownership put them in a better
negotiating position than the City. Brian responded that NPIC is more of a regional entity than the
City and that NPIC represents all of the shareholders including a lot of municipalities and irrigators,
and when the City is in the lead it only represents the City. Bill Fischer responded that he did not
know how that improves a negotiating position to take the lead. Ted Borstad stated that he doesn't
even know how we are just representing the City when we would be enlarging a reservoir that is used
also by the agricultural users and perhaps some other municipal entities. Brian responded that that
is one of the key questions, do we enlarge it just for ourselves in which case we have all the extra
water going to the City or do we incorporate other entities into the enlargement. To summarize
briefly, there are huge economic advantages to building a larger reservoir and incorporating other
entities into this project, than there is if we go after it just as a city and just build it for our needs of
10,000 acre feet which is a total 17,400 acre foot reservoir. It relatively cuts the City's cost in half.
Bill Fischer asked what is there to be negotiated with NPIC . Brian replied that staff has sent a
proposed agreement to NPIC on how we might store water in Halligan in conjunction with the Grey
Mountain decree, that's something we've got to negotiate. And with the Cache La Poudre Water
Users Association, owning money interests of Grey Mountain, if they were in behind the project,
they might give us a negotiating advantage. Bill Fischer stated he was not quite sure he 100 percent
agreed with him but understood his concern and thanked him for explaining it.
Ted Borstad asked what percent of NPIC does the City own. Brian replied about 35 percent. Ted
replied that it was closely divided and asked if our role changed significantly other than who leads,
whether it's Alternative 2 or 4, will we still have the same level of interest of involvement in the
project, or are we just going to sit back and wait for the 10,000 to show up if we turn it over. Brian
replied that could very well be the alternative. If we turn it over to NPIC then all the City would get
would be the 10,000. Ted Borstad asked if then does the role of the City Council change in either
scenario because of the water supply policy still being worked on,and with the Council's role,would
it impact either scenario one more than the other. Mike replied that the Council's role would be one
of confirming or not confirming or deciding on what degree of storage they think we need,regardless
of what we recommend. The Council ultimately will say what the policy is and if they,for example,
would agree and say the City ultimately needs 10,000 in storage somewhere, then that doesn't say
where it's at. The secondary issue is, if we are trying to resolve the Halligan issue, do we want to
pursue doing it ourselves,or do we want to give it back to North Poudre and just get 10,000 acre feet
of storage. If the Board recommended today to go do one of the Halligan options and the Council
decided that we don't need any storage for some reason, then the whole point would be moot. But
they are the ones that have to approve the option anyway. The recommendation of the Board doesn't
make it happen, it's just puts it on the Council's table "here's what the Board thinks".
Chairman Sanders reminded the Board that their function is to give the Council the best possible
technical advice they can and leave the political decisions to them. Mike added,that the Council's
decision could be somewhat political in that there are a lot of individual interests in this project for
other reasons than just water supply. In other words there are people who are interested in no growth
and so it could be that we make a water decision based on trying to control land use issues, which
he hopes doesn't happen.
Doug Yadon stated that he wanted to make this point that there is an astounding difference in cost
per acre foot of delivered water of the 40,000 acre feet, if those several parties all agree and are
successful, compared to buying the CBT shares and any of the other options. Doug asked what
would be in this agreement;we could say we'd like our 10,000 acre feet,or are we going to say we'd
like our 10,000 acre feet at a not to exceed per acre foot cost down here or up here or just wherever
it happens to come in. There would be some kind of understanding going into an agreement like
that. Brian replied that maybe Steve can speak to this, but it is his understanding that your interests
are in building the largest reservoir for the lowest cost. The Board agreed that that was the general
consensus. Doug Yadon agreed that that probably is something that the parties can come together
with in an agreement that that would be the intent.
Board member David Lauer stated that he thought the City of Fort Collins' primary role is to make
sure that it's customers are well served but a large part of serving them well is being a responsible
regional actor. He added that his second point was that, he would prefer to second John's motion
if we can get it down to a reasonable language so that at a minimum it recommends to City Council
that we exercise our option by the 31"of December and that we work with NPIC to build a larger
reservoir that will not invade the upper tract of the 40,000 foot perimeter that we were talking about.
Board member Jim Finley stated two things: one is that if part of the charge of the City and Board
in regards to evaluating Halligan is based on the environmental impact, that is pretty hard to make
a decision one way or the other,especially in regards to the size,before that assessment has actually
been made. Secondly,the whole idea of this 10,000 acre feet being a secondary right;whatever,the
negotiation is with the NPIC is a critical component. It's second in line for storage behind Grey
Mountain, so the whole issue with Halligan almost becomes secondary.
Mike Smith,responded that he doubted whether the issue will be resolved before the end of the year.
We are going to have to make a decision. He added that what he has heard from NPIC is they have
a number of shareholders that are very interested in getting additional capacity in the reservoir. His
concern was that if the City does it and for some reason decides to heck with everyone else,we don't
care what you want, we are just going to build what we want, and the company that we have
cooperated with to get this is going will be out in the cold. They are trying to protect their own
interest as a company. Right now, if we exercise the option, we control it. That's the bottom line.
Chairman Sanders added that if we throw out the 40,000 as an upper limit, I think that helps them
as well in being a good neighbor again. When we didn't build Rockwell and we didn't support Grey
Mountain, we turned off an awful lot of the farming community in the water supply. We made the
environmentalists happy but we really a had problem with them,particularly with Rockwell and that
issue. This is something that the Water Board was created for to be a good liaison between the water
users and the farmers and the irrigators and the City and we are supposed to be able to make that
work.
Bill Fischer stated that assuming the City exercised it's option, one would assume that that would
preclude further negotiations if desired between NPIC and the City for an option something along
the lines of number four. Let's assume that the City exercises the option,what's to prevent the City
a year from now in talking with NPIC in saying we'll take 10,000 or 15,000 acre feet, whatever we
feel appropriate.
Tom Brown stated they could reach some other agreement,not give it all up after a year,but there's
lot of room for agreements with NPIC if we exercise the option now.
Mike replied that he doesn't think NPIC particularly wants to operate or maintain the reservoir or
oversee the construction but that they have shareholders that want some capacity and that will be the
issue. If we exercise the option and the Board and the Council decide no that we are going to build
a 17,400 acre foot reservoir, we're going to force those other shareholders to go elsewhere to look
at other water storage projects.
David Lauer stated that this is just reinforcing the responsibility we have to the regional players,not
only with the agricultural part of NPIC but with the Tri Districts. There are really three entities here,
the City of Fort Collins has 35 percent, the agricultural interests that have 30 percent and there are
the Tri Districts. We have to be responsible to those two other entities in that company,maybe not
to the same extent that we are to our own customers but close to it.
Mike replied that what staff is looking at is if we do option 2 or option 4 we really need to balance
the regional needs and the issues that John brought up on the environment. I think we are fairly
supportive of the environmental issues. So we have to weigh those,but to just say we are only going
to do what we need and to heck with anyone else in a regional sense, is irresponsible.
David Lauer stated that the other dimension or extension of that is our relationship with Greeley and
Seaman downstream. He asked Brian to talk a little bit about the inner relationship of an enlarged
Seaman at their present dam site and what that would mean for flows, both upstream and enlarged
Halligan in between.
Brian Janonis replied that he and Greeley staff have been discussing the possibility of Halligan on
how that would work with the Seaman reservoirs and how we might be able to manipulate stream
flows between the two reservoirs to improve both aquatic and mouse habitat. The U.S. Fish and
Wildlife Service have identified that as good mouse habitat. So,we have been talking with Greeley
staff about that, they are excited about the opportunity. He said that they met with the mouse
consultant, who then walked the whole river from Halligan to Seaman and went horseback riding
with the Greeley staff around Seaman Reservoir. So we have really been working closely with them
and are trying to work regionally to promote some regional environmental solutions as well as water
solutions, with Greeley, the Tri Districts and NPIC.
Doug Yadon asked Brian if his understanding is correct in that those discussions don't extend to
Greeley having a share in the Halligan project.
Brian responded that he thinks that the Tri Districts,NPIC and the City would take all of the capacity
in Halligan and Greeley hasn't expressed an interest in being involved in Halligan,it just expressed
concerns about how we can operate. He added that they seem to be very environmentally motivated
and advocate that kind of approach.
David Lauer stated they are they directly or indirectly doing that through the idea of a much larger
Seaman.
Mike responded that he thinks it boils down to an issue of not actually giving up the one right versus
the other, but managing the water that in a way is beneficial to everyone.
David Lauer asked if Halligan is enlarged to something just under 40,000 acre feet, what is that
going to do to the future potential capacity of an enlarged Seaman.
Dennis Bode responded that he thought the North Fork is not enough to support a very large
reservoir at Seaman without taking water from the main stem. David Lauer stated,right,this is his
point, this is what I want us to be aware of when we are talking about partnering with the City of
Greeley.
Mike added that there are two different pieces of the enlarged Seaman to him; there is the part that
is Greeley's issue and then there is a part that could be a piece of the Northern Integrated Supply
project which is the Grey Mountain Glade, a very large Seaman.
David Lauer stated here is another consideration if we want to have the City of Greeley on board
with us we would have to take that into consideration as to how much water in the North Poudre
system we would want to store in Halligan in order for them to be a willing partner.
Chairman Sanders stated what they need to stop at 5:00 o'clock no matter what,and what he'd like
to ask,is there anyone who would like to put a motion on the floor to accept number two as written?
Doug Yadon stated that he would move to make a motion that the Water Board's recommendation
to the City Council is to consider alternative number two as written in the memo from staff. It says:
Alternative#2 Exercise the Option Agreement and proceed to design and enlarge the existing
reservoir to 40,000 acre feet and sell excess storage to other entities.
Chairman Sanders accepted the motion. Bill Fischer asked Chairman Sanders if they don't already
have a motion on the floor. Chairman Sanders replied no.
Robert Ward seconded the motion.
Chairman Sanders thanked Bill Fischer who then left the meeting.
Doug Yadon stated that the intent of the motion is that our recommendation or approach be to
design and construct a maximum practical size Halligan for the benefit of the City and such partners
that we can attract in order to get the advantages of the cost and the permit ability on the project. He
thought staff meant the 40,000 acre feet to physically represent that upper end. Brian Janonis replied
that that was the intent.
Chairman Sanders asked Robert Ward if he agreed with that. Robert Ward replied that he liked the
way Doug worded it and seconded it. Chairman Sanders noted that Robert Ward seconded and
agreed to the motion.
The Board asked Board member Doug Yadon to repeat his motion.
Doug Yadon stated that it is to recommend to City Council their adoption of staff's alternative
number two with the clarification that the portion to that alternative referring to 40,000 acre feet in
effect means that the City proceed with development of a Halligan enlargement project to the
maximum practical size with every intent to attract the appropriate partners for the project for the
purposes of both minimizing costs and maximizing permit ability to the project, or words to that
effect.
Chairman Sanders asked Ted Borstad if that was agreeable. Ted replied that he would be happier
if there was something in there about environmental effects.
Chairman Sanders replied the words"permit ability"are practical and conclusive. He stated that he
thought, if you look at other options I don't think anyone could be more sensitive to habitat and
environment than this City and this staff.
Doug Yadon replied that "permit ability" is definitely in there and he would be happy to offer the
clarification that the project is fully environmentally acceptable because if it isn't it is not permitable.
John Bartholow stated his problem is not that he disagrees with Board member Yadon's intent,but
he does disagree with the message that we are sending to Council that it absolutely be sized as large
as practical and permitable. I personally have not come to that decision yet myself. I also think you
are doing a good job at looking at the cost, but I think we have to be pretty careful about that,
Halligan might not be the most cost effective place.
Doug Yadon replied that the main reason he made the motion is it maintains the City's control of
the project and we don't have that with a Seaman or any other of those combined projects. I think
inherent in the motion is the idea that the City's been on a course to take that responsibility and to
have that control.
John Bartholow stated that in that sense he agreed with him.
Ted Borstad questioned that as this goes through the approval process, he would understand the
motion, let's say Council, for whatever reasons say they only want 7,000 acre feet, that doesn't
reduce the forty that the motion is recommending we design. That just means there is 3,000 freed
up for someone else, or whatever the maximum permitable is.
Mike Smith replied that what Council decides, they decide.
David Lauer stated that he has objections that are quite similar to John's. What he didn't hear you
say in the motion anything that sets specifically 40,000 acre feet.
Doug Yadon stated he didn't want to put the 40,000 in as an absolute number because we don't
know what the maximum permitable practical size is,because the habitat studies haven't been done
nor do we have permit applications in and negotiations done. He stated that this is an opportunity
to have a major future positive impact on the storage needs not only for ourselves but for others and
do it in a manner that we benefit from by having the most cost effective project that we can where
we still maintain control and meet all of the environmental requirements.
Chairman Sanders mentioned that apparently Halligan has been spilling this whole time,so if we had
this extra storage, we'd have enough storage for ten years.
Robert Ward stated that there is a large amount of uncertainty about the environmental side of this
and the other water rights involved and there is no way that we can get our hands around that by the
deadline. In his opinion, we are going to have to decide who we want to take the lead with a huge
amount of uncertainty. We can proceed to design and enlarge but he didn't think there was any way
we can begin to sort out and answer these questions by the deadline.
Mike Smith responded that the real issue here is exercising the option or not and to you just look at
that and just look at that only. We can address other issues later on.
Chairman Sanders asked since we have a motion on the table right now and we have to accept it or
reject it and we can ask for other motions. I haven't disagreed with you in twenty years on this but
I disagree with you on this today. Mike Smith responded that that was okay. Chairman Sanders
stated he would like to bring this to vote.
Board member Tom Brown stated he would just take this opportunity to say that he thinks that Mike
has a very good idea. He agrees with Robert that there is not going to be a whole lot of resolution
of uncertainty in the next month but there is one bit of uncertainty that would be resolved and that
is the precise wording of the motion as it has been stated but not precisely written down. This month
would at least give them the chance to have it clearly put down so that we know what we're voting
on in terms of the size issue He is perfectly willing to settle the first issue about whether we exercise
the option today but prefers to wait a month to settle the other.
Chairman Sanders stated that he thought that Doug explained it as well as you could on the size,but
if you voted against this motion, then another motion could be put on the board and then we could
split it up.
John Bartholow asked if it would be worthwhile to repeat the second part of his motion, which is
really kind of what Mike is saying although Mike may have said it better. John stated
that we recommend to exercising our option to purchase Halligan on or before December 3151, but
we are explicitly not ready to recommend sizing Halligan to it's maximum potential capacity or
recommend who the full suite of regional partners might be. In other words, it just recommends
exercising the option. So, if this motion is defeated, you will get this other one.
Chairman Sanders agreed that that was a reasonable thing to do. He stated that he just felt like they
have been putting it off and putting it off and trying to get more certainty in everything we're doing.
I don't know that we tell them in the first place what to build and how big to build it. It's not in his
motion, there, it's just getting more capacity to co-op.
Doug Yadon stated he had a concern that if we do go this other route, do we inadvertently send a
message to City Council that says NPIC can be on their own, we're not that concerned. That's not
the Water Board's general opinion,that we are very sensitive and committed and would like the City
to do a regional approach.
Chairman Sanders stated I think you all know what the motion is,I won't ask Doug to repeat it again,
or we'll be arguing another 25 minutes on the wording of that. If you vote "aye" you're voting for
going with option two with all of the ramifications, if you vote negative, then we're back here
discussing whether to make a motion on anything at all. Yeas: 5; Nayes: 3; Abstention: 1.
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