HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 03/15/2005 - RESOLUTION 2005-022 ESTABLISHING RENTAL RATES AND ITEM NUMBER: 19
AGENDA ITEM SUMMARY DATE: March 15, 2005
FORT COLLINS CITY COUNCIL STAFF: Dennis Bode
SUBJECT
Resolution 2005-022 Establishing Rental Rates and Delivery Charges for the City's Raw Water
for the 2005 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 $300,000 for
2005.
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 24, 2005 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. Current projections indicate that the
City will have more surplus supplies available for rental this year than what was available the
last couple of years. However, due to continued uncertainty regarding the drought and this
year's runoff, the City will closely monitor its supplies and insure that sufficient water is
available for its treated water customers. The first priority for any excess water will be to insure
that adequate supplies are available to carry over for use in 2006.
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
March 15, 2005 -2- Item No. 19
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. The second category includes sources with a limited rental market or
which are used primarily to irrigate City facilities (parks, golf courses, etc.).
With the exception of water from the Colorado Big Thompson Project (CBT), Joe Wright
Reservoir and Reusable Effluent, water cannot be rented from one irrigation company system
into another. Therefore, for most systems, the rental market is limited to individuals under each
ditch system and the price is largely dependent upon the supply and demand within each
irrigation system. This results in considerable variation in prices per acre-foot among the
various supply sources.
Active Rental Market
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.
Due to last year's generous summer and fall rains, many municipalities, including Fort Collins,
were left with abundant water supplies in the Colorado Big Thompson Project (CBT). Much of
this water remains in the CBT system for use in 2005 and, along with a minimum 2005 quota of
60%, there will likely be CBT water available for rental to the agricultural sector this summer.
Staff recommends that agricultural rentals of CBT water be made at the rate of$35.00 per acre
foot. Staff proposes that CBT water rented for municipal or industrial (M&I) purposes be
charged at $50 per acre foot to reflect the higher assessments charged to M&I 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 $28 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 $35 per acre foot.
The City typically makes its Water Supply and Storage Company shares available to irrigators
under the WSSC system. This has historically been a very active rental market and the rental
price of WSSC water is expected to be about $3,200 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 2005.
March 15, 2005 -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. Since the Pleasant Valley Pipeline
became available in 2004, the use of the City's southside ditches is of more value to the City
than it has been 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.
Warren Lake, on the other hand, produces only about 7 acre feet per share and would lease for
$140 at $20 per acre foot. The assessments for this water, however, have increased to $300 per
share in 2005 due to higher projected expenses. The rental rate has been adjusted to $360 to
reflect the minimum rate of 20% above assessments.
Similarly, major repairs are anticipated by the Sherwood Irrigation Company in 2005 and their
assessments have more than doubled from $400 per share in 2004 to $855 per share in 2005. In
this case, 20% above assessments ($1,026) seems excessive for the very limited rental market
(less than two shares each year). For this reason, staff is suggesting a rental rate of $900 for
2005.
March 15, 2005 -4- Item No. 19
At its February 24, 2005 meeting, the Board unanimously recommended that the following rates
for raw water be adopted:
Type of Water Proposed 2005 Rental Rates/Charges (1)
RWR Not Satisfied RWR Satisfied
Active Rental Market
NCWCD Water (CBT) - Agricultural $ 35.00/ac-ft n/a
NCWCD Water (CBT) —Muni. & Ind. $ 50.00/ac-ft n/a
North Poudre Irrigation Co. —Early Ag Use $ 15.00 /ac-ft n/a
North Poudre Irrigation Co. — Seasonal Ag Use $ 28.00 /ac-ft n/a
North Poudre Irrigation Co. —Multiple Use $ 35.00 /ac-ft n/a
Water Supply and Storage Co. $ 3,200.00 /share n/a
Reusable Sources $ 400.00/ac-ft n/a
Limited Rental Market
Arthur Irrigation Co. $ 60.00/share $ 12.00/share
Larimer County Canal No. 2 $ 500.00 /share $ 400.00/share
New Mercer Ditch Co. $ 500.00 /share $ 360.00/share
Pleasant Valley & Lake Canal Co. $ 500.00 /share $ 180.00/share
Warren Lake Reservoir Co. $ 360.00 /share $ 360.00/share
Sherwood Res. Co. $ 10.00 /share $ 8.40/share
Sherwood Irrigation Co. $ 900.00 /share $ 900.00 /share
Notes:
(1) Rates may be adjusted to reflect the remaining yield or the prevalent market price of the
water stock being rented.
ATTACHMENTS
1. Water Assessments Table
2. Water Rental Rates/Charges Table
3. Excerpt from February 24, 2005 Water Board Meeting Minutes
ATTACHMENT
Table 1
Water Assessments
Source 2002 2003 2004 2005
Active Rental Market
CBT (NCWCD, $/unit) 19.44 20.30 20.70 21.00
North Poudre Irrigation Co. ($/sh) 65.00 85.00 20.00 95.00
Water Supply& Storage Co. ($/sh) 950.00 950.00 950.00 1,750.00
Reusable Sources ($/ac-ft) n/a n/a n/a n/a
Limited Rental Market
Arthur Irrigation Co. ($/sh) 11.50 26.00 8.00 10.00
Latimer County Canal #2 ($/sh) 300.00 200.00 300.00 330.00
New Mercer ($/sh) 200.00 200.00 300.00 300.00
Pleasant Valley & Lake Canal ($/sh) 120.00 150.00 150.00 150.00
Warren Lake ($/sh) 100.00 300.00 150.00 300.00
Sherwood Reservoir ($/sh) 4.00 7.00 7.00 7.00
Sherwood Irrigation ($/sh) 400.00 400.00 400.00 855.00
ATTACHMENT 2
Table 2
Water Rental Rates/Charges
Source 2002 2003 2004 2005
Active Rental Market
CBT Agriculture ($/ac-ft) 25.00 400.00 30.00 35.00
CBT Municipal/Industrial ($/ac-ft) 38.00 400.00 45.00 50.00
NPIC Early Ag ($/ac-ft) 15.00 n/a 15.00 15.00
NPIC Agriculture ($/ac-ft) 25.00 n/a 27.00 28.00
NPIC Multiple Use ($/ac-ft) 30.00 n/a 32.00 35.00
Water Supply & Storage Co. ($/sh) 2,800.00 2,900.00 3,000.00 3,200.00
Reusable Sources ($/ac-ft) 100.00 750.00 400.00 400.00
Limited Rental Market (RWR Not Satisfied)
Arthur Irrigation Co. ($/sh) 20.00 35.00 60.00 60.00
Larimer County Canal #2 ($/sh) 300.00 300.00 450.00 500.00
New Mercer($/sh) 250.00 250.00 450.00 500.00
Pleasant Valley & Lake Canal ($/sh) 200.00 250.00 500.00 500.00
Warren Lake ($/sh) 150.00 350.00 300.00 360.00
Sherwood Reservoir ($/sh) 6.00 10.00 10.00 10.00
Sherwood Irrigation ($/sh) 450.00 450.00 480.00 900.00
Limited Rental Market (RWR Satisfied)
Arthur Irrigation Co. ($/sh) n/a n/a 9.60 12.00
Latimer County Canal #2 ($/sh) n/a n/a 360.00 400.00
New Mercer($/sh) n/a n/a 360.00 360.00
Pleasant Valley& Lake Canal ($/sh) n/a n/a 180.00 180.00
Warren Lake ($/sh) n/a n/a 180.00 360.00
Sherwood Reservoir ($/sh) n/a n/a 8.40 8.40
Sherwood Irrigation ($/sh) n/a n/a 480.00 900.00
Notes:
(1) Rates may be adjusted to reflect the remaining yield or the prevalent market price of the
water stock being rented.
(2) Rental rates are based on approximately $20/ac-ft for those who have not satisfied the
City's raw water requirements. Charges for those who have satisfied the City's raw
water requirements are set at approximately 120% of the assessments charged by that
company.
ATTACHMENT
Excerpt from Water Board Meetine of February 24, 2005
Raw Water Rental Rates & Delivery Charges—Dennis Bode
Dennis Bode, Water Resources Division Manager, explained that every year the City sets water
rental rates and delivery charges for use of its raw water. The rates are divided into active rental
market and limited rental market categories. The active rental market is mainly used for
agriculture and includes Colorado Big Thompson Project (CBT), North Poudre Irrigation
Company (NPIC), Water Supply and Storage Company (WSSC) and the City's reusable sources.
The limited rental category is mainly used for city parks and facilities and includes Pleasant
Valley and Lake Canal Company shares and other"Southside Ditch" shares.
Dennis stated the rates are similar to what they were last year. The staff recommendation is that
agricultural rentals of CBT water be charged at the rate of$35.00 per acre foot and that CBT
water rented for municipal and industrial (M&I) purposes be charged at $50 per acre foot to
offset the higher assessments charged to M&I shareholders. He also summarized and briefly
discussed the other proposed rates.
Board member Waskom asked if the City would recoup their ownership and administrative costs
with these rates. Dennis replied that the administrative and assessment costs are recuperated
from the water that is rented out or delivered to others.
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
usually happened late in the season when there was a lot of rain, demands were low, and the
price was too high.
Board member Johannes Gessler asked what is the typical year's income. Dennis replied that it
averages around $300,000 to $400,000.
Board member Gina Janett made a motion, seconded by Board member Ted Borstad to approve
staff s recommendation for the 2005 Raw Water Rental Rates and Charges. The motion passed
unanimously.
RESOLUTION 2005-022
OF THE COUNCIL OF THE CITY OF FORT COLLINS
ESTABLISHING RENTAL RATES AND DELIVERY CHARGES FOR THE
CITY'S RAW WATER FOR THE 2005 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 24, 2005, the Board discussed the rental program and the use of
raw water and recommended the following rates for the 2005 irrigation season:
Type of Water Proposed 2005 Rental Rates/Charges (1)
RWR Not Satisfied RWR Satisfied
Active Rental Market
NCWCD Water (CBT) - Agricultural $ 35.00 /ac-ft n/a
NCWCD Water (CBT) —Muni. & Ind. $ 50.00 /ac-ft n/a
North Poudre Irrigation Co. —Early Ag Use $ 15.00 /ac-ft n/a
North Poudre Irrigation Co. — Seasonal Ag Use $ 28.00/ac-ft n/a
North Poudre Irrigation Co. —Multiple Use $ 35.00 /ac-ft n/a
Water Supply and Storage Co. $ 3,200.00 /share n/a
Reusable Sources $ 400.00 /ac-ft n/a
Limited Rental Market
Arthur Irrigation Co. $ 60.00 /share $ 12.00/share
Larimer County Canal No. 2 $ 500.00 /share $ 400.00/share
New Mercer Ditch Co. $ 500.00 /share $ 360.00 /share
Pleasant Valley & Lake Canal Co. $ 500.00 /share $ 180.00 /share
Warren Lake Reservoir Co. $ 360.00 /share $ 360.00 /share
Sherwood Res. Co. $ 10.00/share $ 8.40 /share
Sherwood Irrigation Co. $ 900.00/share $ 900.00 /share
Notes:
1. Rates maybe adjusted to reflect the remaining yield or the prevalent market price of the water
stock being rented.
NOW THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT
COLLINS that the rental rates and charges as set forth above are hereby approved for the City's raw
water for 2005 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
15th day of March, A.D. 2005.
Mayor
ATTEST:
City Clerk