Loading...
HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 03/16/1999 - RESOLUTION 99-32 ESTABLISHING RENTAL RATES TO BE C AGENDA ITEM SUMMARY ITEM NUMBER: 26 DATE: March 16, 1999 FORT COLLINS CITY COUNCIL STAFF: Beth Molenaar SUBJECT: Resolution 99-32 Establishing Rental Rates to be Charged for the City's Surplus Raw Water for the 1999 Season. RECOMMENDATION: Staff and the Water Board recommend adoption of the Resolution. 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 1999, as well as the need for water by area farmers. 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 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 its February 25, 1999. 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 during the 1999 season. 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 supply and demand for 1999 as well as the need by area water users. In 1998 a DATE: March 16, 1999 2 ITEM NUMBER: 26 total of 19,670 acre-feet was rented for a total of$348,154. 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 1999 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. At its February 25, 1999 meeting,the Water Board unanimously recommended that the following rental rates be adopted: Type of Water Proposed 1999 Rental Charge* NCWCD Water(CBT)—Ag $ 18.00 /ac-ft NCWCD Water(CBT)—M&I $ 33.00 /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 $ 2,500.00 /share Pleasant Valley and Lake Canal Company $ 180.00 /share New Mercer Ditch Company $ 180.00 /share Latimer County Canal No. 2 $ 275.00 /share Arthur Irrigation Company $ 14.00 /share Warren Lake Reservoir Company $ 120.00 /share Joe Wright Reservoir Water $ 38.00 /ac-ft Sherwood Reservoir Company $ 5.00 /share Sherwood Irrigation Company $ 450.00 /share Reusable Effluent $ 34.00 /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. City of Fort Collins Water Assessments and Rental Rates Conversion Yield Source (Ac-Ft/Sh) 1997 1998 1999 $/Ac Ft NCWCD(CBT) 1 Assessment Rate($/unit) 15.25 16.00 16.80 Ag Rental Rate($/ac-ft) 17.00 17.00 18.00 18.00 Multiple Use Rental Rate($/ac-ft) 32.00 33.00 33.00 North Poudre 1 Assessment Rate($/sh) 85.00 85.00 85.00 Rental Rate($/sh) 100.00 Early Ag Rental Rate($/ac-ft) 10.00 10.00 10.00 Ag Rental Rate($/ac-ft) 22.00 22.00 22.00 Multiple Use Rental Rate($/ac-ft) 27.00 27.00 27.00 Water Supply and Storage 105 Assessment Rate($/sh) 730.00 760.00 760.00 Rental Rate($/sh) 2200.00 2400.00 2500.00 23.81 Pleasant Valley&Lake 30 Assessment Rate($/sh) 100.00 150.00 150.00 Rental Rate($/sh) 135.00 180.00 180.00 6.00 New Mercer 30 Assessment Rate($/sh) 250.00 150.00 0.00 Rental Rate($/sh) 300.00 180.00 180.00 6.00 Latimer County#2 43 Assessment Rate($/sh) 200.00 250.00 200.00 Rental Rate($/sh) 220.00 300.00 275.00 6.40 Arthur 3.5 Assessment Rate($/sh) 1.0.00 10.00 10.00 Rental Rate($/sh) 12.00 12.00 14.00 4.00 Warren Lake 7 Assessment Rate($/sh) 0.00 0.00 0.00 Rental Rate($/sh) 110.00 120.00 120.00 17.14 Joe Wright Reservoir I Rental Rate($/ac-ft) 30.00 37.00 38.00 38.00 Sherwood Reservoir Co. Assessment Rate(S/sh) 3.00 3.00 3.00 Rental Rate($/sh) 5.00 5.00 5.00 • Sherwood Irrigation Co. Assessment Rate($/sh) 400.00 650.00 400.00 Rental Rate($/sh) 440.00 700.00 450.00 Reusable Effluent I Rental Rate($/sh) 34.00 34.00 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. RESOLUTION 99-32 OF THE COUNCIL OF THE CITY OF FORT COLLINS ESTABLISHING RENTAL RATES TO BE CHARGED FOR THE CITY'S SURPLUS RAW WATER FOR THE 1999 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 25, 1999, the Board discussed the rental program and recommended the following rates for the 1999 irrigation season: Type of Water 1999 Rental Charge* NCWCD Water (CBT)—Ag $ 18.00 /ac-ft NCWCD Water(CBT)—M&I $ 33.00 /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 $ 2,500.00 /share Pleasant Valley and Lake Canal Company $ 180.00 /share New Mercer Ditch Company $ 180.00 /share Latimer County Canal No.2 $ 275.00 /share Arthur Irrigation Company $ 14.00 /share Warren Lake Reservoir Company $ 120.00 /share Joe Wright Reservoir Water $ 38.00 /ac-ft Sherwood Reservoir Company $ 5.00 /share Sherwood Irrigation Company $ 450.00 /share Reusable Effluent $ 34.00 /share * For late season rentals,rates maybe 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 1999 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 16th day of March, A.D. 1999. Mayor ATTEST: City Clerk • Excerpt from Water Board Minutes February 25, 1999 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 rental rates for the City's surplus raw water. A table included in Board packets showed the assessment rates set by the irrigation companies and the rental rates set by the City for 1997 and 1998 as well as proposed rates for 1999. The proposed rates for 1999 are based on several factors including past rental rates in the area, current assessments and anticipated supply and demand conditions. Staff recommends that the following rental rates be adopted: Tyyg of Water Proposed 1999 Rental Charge* NCWCD Water(CBT) -Ag $ 18.00/ac-ft NCWCD Water(CBT) -M&I $ 33.00/ac-ft North Poudre Irrigation Co. -Early Ag Use $ 10.00/ac-ft • North Poudre Irrigation Co. -Ag Use $ 22.00/ac-ft North Poudre Irrigation Co. -Multiple Use $ 27.00/ac-ft Water Supply and Storage Co. $ 2,500.00/share Pleasant Valley&Lake Canal Co. $ 180.00/share New Mercer Ditch Co. $ 180.00/share Larimer County Canal No. 2 $ 275.00/share Arthur Irrigation Co. $ 14.00/share Warren Lake Reservoir Co. $ 120.00/share Joe Wright Reservoir Water $ 3 8.00/share Sherwood Res. Co. $ 5.00/share Sherwood Irrigation Co. $ 450.00/share Reusable Effluent $ 34.00/ao-lt * For late season rentals, rates may be adjusted to reflect the remaining yield or the prevalent market price of the water stock being rented. Beth Molenaar explained that there were not many changes from last year to this year. There were a couple of major changes last year. One was that North Poudre began renting by the acre foot rather than by the share. "We also established separate rates for ag. versus municipal rentals of CBT water," she said. This year the biggest change is the addition of reusable effluent. "Right now we do not have any specific requests for that water," she said,"but it is possible that people may want to rent that this year, so staff decided to add it to the rental list." "Is that put out at the river by the treatment plant • or do you pump it up to Rawhide?" a Board member asked. "Just from the treatment plant," Mrs. Molenaar replied. "We have to do some special accounting to make it reusable. It could be from Windy Gap, Joe Wright or other reusable water we have," she added. "Where does the money go from rental ratesT' Tom Sanders asked. "It's its own fund," Mrs. Molenaar answered.Dennis Bode added that it goes into miscellaneous revenue of the Water Utility and is part of the general operating revenue. Dr. Sanders also asked what staff predicts will be the amount of revenue collected this year. "Last year we had $348,000.I am anticipating that this year it is.going to be less than that,"Mrs. Molenaar replied."I think we put$250,000 in the budget," she said, "but it may be a little more than that.We probably won't have much revenue from CBT rentals this year,and that was $77,000 last year."Dr. Sanders suggested staff include that information when this item is prepared next year. "We will,"Mrs. Molenaar responded. "Are the costs mainly to maintain our costs as far as delivery,"Dr. Sanders asked. "For the most part, yes. There are some cases like Water Supply& Storage, where we make significantly more than we pay in assessments,"Mrs. Molenaar explained, "but that is because of the market out there. Right now the company owns some shares that they rent to their customers, and they charge $2,000 a share more than the assessment which this year is $760.00. "Do we rent it at the same price?"Dr. Sanders asked. "Actually we rent it for a little less than the company,but we are trying not to compete. In fact we already have 55 shares requested to rent and we only own 24 shares," she explained "We have three weeks left until the request process closes, so I imagine we will have close to three times the number of requests for shares than we own." "Do we have a protocol for how the water is rented?"Dr. Sanders wanted to know. "It's random," Mrs.Molenaar replied."How is that done?" "I split every request into increments and I throw them into a `virtual' hat, (it's on the computer), and assign random numbers," she explained. Tom Brown asked what the CBT assessment rates are for M&I. "The M&I is up to $16.80 this year for a unit, and the ag. Rate is $6.96," she replied. "Would you explain the difference between the multiple use and ag.rental use?'Mr.Brown continued. "We pay$16.80 in assessments; e.g. last year we had a quota of 50%which means for every unit we received only a half an acre foot. To rent an acre foot of water,we had already paid $33.00 or$32.50 in assessments last year," she said. "But the ag. rental market, because the assessments are so much less, would be high if they had to pay the $33.00; in fact they probably wouldn't pay it. They would probably be able to rent it cheaper elsewhere. We really try to stick with whatever the market is on that water," she stressed. "Do you sell it at the$33.00 rate to anybody?' Mr. Brown wondered. "Sure," she answered. "What happens is individuals that are served by various water districts are charged a surcharge when they use more water than they are allocated. For example, people with a swimming pool or a couple of horses in their back yard, or a large lawn, may go into that surcharge rate. It's cheaper for them to come to us, rent an acre foot, and transfer it to their district, than it is for them to pay the surcharge," she responded, "and the water districts allow that." Dr. Sanders said he would like the extra above the maintenance costs to go into the water fund to buy more water. "What would it take to do that?$250,000 isn't chicken feed!" he insisted. "We pay a lot more in assessments than we receive in rental revenue," Mike Smith pointed out. "Last year we received about 58% of our assessments in rental income." Mrs. Molenaar noted. "Last year the assessments totaled almost$600,000," she added. "Then this money goes into the account that helps to pay for the assessments,"Mr. Sanders verified. "Can you explain why the assessments for New Mercer and Warren Lake are at 0 this year?" Joe Bergquist asked. "New Mercer is at 0 this year, two years ago it was$250.00 and Warren Lake is at 0," David Lauer pointed out. "New Mercer had a windfall by selling some stock they had. They had a lot of revenue, so they spread it out over a few years,"Dennis Bode explained. "They took whatever they needed for operating revenue out of that windfall and set the assessments at 0 and also sent dividend checks to the City for the remainder."He said Warren Lake sold some property a few years ago which resulted in a similar situation to New Mercer. They had more revenue than what the operating costs were so they were able to provide some dividends and also set the assessments at 0. "Is that because their charter doesn't allow them to keep that much money in the books?" Mr. Bergquist asked "Not necessarily,"Mr. Bode replied. "I don't think there was any reason for them to keep it. The shareholders were more interested in getting that money back than having the company hang onto it," he concluded. ACTION: Motion and Vote Tom Sanders called for a motion. Joe Bergquist moved that the Water Board recommend to the Council that they adopt the surplus water rental rates recommended by staff. After a second from John Morris, the vote for the motion was unanimous.