Loading...
HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 07/17/2001 - FIRST READING OF ORDINANCE NO. 122, 2001, AMENDING AGENDA ITEM SUMMARY ITEM NUMBER: 35 FORT COLLINS CITY COUNCIL DATE: July 17, 2001 STAFF: Dennis Bode SUBJECT: First Reading of Ordinance No. 122, 2001, Amending Chapter 26 of the City Code Relating to Fees for Raw Water Requirements of the Water Utility. RECOMMENDATION: Staff and the Water Board recommend adoption of the Ordinance on First Reading. FINANCIAL IMPACT: It is expected that during the remaining months of 2001 the Utility will have approximately 100 acre feet of raw water requirements satisfied by developers through cash payments in-lieu-of water rights. Based on this, the proposed increase from $4,500 to $6,500 per acre foot would increase the amount of cash received in 2001 by about $200,000. Cash received goes into a water rights account in the Water Fund where it is kept in reserve for the development or purchase of additional water rights. EXECUTIVE SUMMARY: The proposed Ordinance will increase the cash rate charged developers for satisfaction of raw water requirements from $4,500 to $6,500 per acre foot. The cash rate, which is adjusted periodically to reflect the current price of raw water, is also the basis for a surcharge paid by nonresidential customers for water used in excess of their annual allotment. The proposed changes are to be effective September 1, 2001. BACKGROUND: When satisfying the City's raw water requirements, developers have the option of paying cash instead of turning over water rights. The cash rate, in-lieu-of water rights, is periodically adjusted to reflect the market price of water rights in this area. The last adjustment in the City's cash in-lieu-of rate was in August 2000 when it was adjusted from $3,500 to $4,500 per acre foot. The price of Colorado-Big Thompson (CBT) units normally sets the trend in water prices in this area, since there is enough market activity to establish the going price. During the period from January 1998 until mid-2000, CBT prices increased from approximately $2,800 per unit to $15,000 per unit (each unit delivers from .5 to 1.0 acre feet per year). Since that time, prices DATE: July 17,2001 2 ITEM NUMBER: 35 have dropped to about $11,000 per unit and seem to have somewhat stabilized at that level. Many communities and water districts in this area have relied primarily or solely on CBT water so they have tied their cash in-lieu-of prices to CBT prices. With the large increase in prices during the last several years, the raw water costs for many area developers have increased dramatically. Many of the cities and water districts in this area continue to have cash rates that exceed $10,000 per acre foot. The attached graph illustrates the changes in the price of CBT units,North Poudre Irrigation Company (NPIC) shares and the City's cash in-lieu-of rate. The City's cash rate needs to be set at a level that will enable the City to purchase or develop enough water to meet the water demands of new development. Local developers that build in the City of Fort Collins Water Utility service area can turn over shares in a number of local irrigation companies to satisfy raw water requirements. Because of this, it is appropriate to focus on the cost of acquiring local stocks or developing other local projects when adjusting the City's cash in-lieu-of rate. In recent months the City has received primarily cash and very little water stock. This is an indication that the price of local stocks is approaching or exceeding the present cash in-lieu-of rate of$4,500 per acre foot. Another consideration is the cost of developing water supply projects in the Poudre Basin. Since the price of acquiring many existing water rights has more than tripled in just a few years, the cost of developing alternative projects has become more competitive and attractive. Because many of the City's water rights deliver large quantities only during the peak runoff period, some of it cannot be used without some storage capacity to re-regulate it. Also, with the use of water that has been transferred from agricultural use to municipal use, there are requirements to make releases to the Poudre River year-around to meet historic return flow obligations. An examination of the projected cost for an enlargement of the existing Halligan Reservoir or local gravel pits indicates that new firm yield may be developed from these projects for about $5,000 per acre foot. These types of projects take several years to complete and face other uncertainties; so, it is appropriate to assume a somewhat higher cost than the $5,000 to recognize the risk associated with these projects. Taking all the above factors into consideration, the staff believes that the cash rate should be raised from $4,500 to $6,500 per acre foot. A new typical single-family lot of 8,000 square feet in the Utility service area has a raw water requirement of.77 acre feet. If a developer chooses to pay cash instead of turning in water rights to satisfy the raw water requirements, the cost for such a lot would increase from about $3,465 to $5,005. The proposed increase in the cash rate would go into effect for all permits issued on or after September 1,2001. The City Code provides that nonresidential customers pay a surcharge on water used in excess of their annual allotment. As this charge is based on the in-lieu-of cash rate, it also needs to be increased from $2.12 to $3.06 per one thousand gallons. The proposed increase in the surcharge would go into effect for all billings issued on or after September 1, 2001. The Water Board discussed this item at its May 24, 2001 meeting and recommended that the cash in-lieu-of rate be increased from $4,500 to $6,500 per acre foot and the surcharge be increased from$2.12 to $3.06 per thousand gallons. ORDINANCE NO. 122, 2001 OF THE COUNCIL OF THE CITY OF FORT COLLINS AMENDING CHAPTER 26 OF THE CODE OF THE CITY OF FORT COLLINS RELATING TO FEES FOR RAW WATER REQUIREMENTS OF THE WATER UTILITY WHEREAS,in order to satisfy the City's raw water requirements, developers have the option of paying a cash fee to satisfy those requirements or to provide the City with equivalent water rights; and WHEREAS, this cash fee, paid in-lieu-of water rights, is periodically adjusted to reflect the market price of water rights; and WHEREAS,the last adjustment in this fee was in August of 2000,when it was adjusted from $3,500 to $4,500 per acre foot; and WHEREAS, the City Code also provides that non-residential customers pay a surcharge on water use in excess of their annual allotment, which charge is based upon this cash fee; and WHEREAS, both of these increases are required due to the continued high price of acquiring local water shares or developing additional supplies. NOW THEREFORE BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows: Section 1. That Section 26-129(c)(1)and(2)of the Code of the City of Fort Collins be, and hereby is, amended to read as follows: See. 26-129. Schedule D, miscellaneous fees and charges. (c) The fees and requirements for raw water shall be as follows: (1) To satisfy raw water requirements with in-lieu cash payments, the rate per acre-foot of RWR is Mffi,'� ve hundred dollars($6,500)= (2) The surcharge for water used in excess of applicable annual allotment shall be three dollars aar sik-cents ($3.06)per one thousand(1,000) gallons. Section 2. That the amendments recited herein shall become effective for all building permits issued by the City of Fort Collins and for all billings rendered by the Fort Collins Water Utility on or after September 1, 2001. Introduced,considered favorably on first reading,and ordered published this 17th day of July, A.D. 2001, and to be presented for final passage on the 21st day of August,A.D. 2001. Mayor ATTEST: City Clerk Passed and adopted on final reading this 21 st day of August, A.D. 2001. Mayor ATTEST: City Clerk FORT COLLINS WATER BOARD MINUTES May 24, 2001 EXCERPT FROM WATER BOARD MINUTES Adjustment to the Raw Water Requirement- Cash In-Lieu-of Rate Dennis Bode explained that when satisfying the City's raw water requirements, developers have the option of paying cash or turning over water rights. The cash rate, in- lieu-of water rights, is periodically adjusted to reflect the market price of water rights or the cost of developing additional water supplies in this area. The last adjustment to the City's cash in-lieu-of rate was made in August 2000, when it was increased from $3,500 to $4,500 per acre foot. The Water Board's Water Supply Committee met on May 11 to discuss adjusting the current rate. Mr. Bode pointed out that since January of 1998, the price of Colorado-Big Thompson (CBT)units has increased from about$2,800 per unit to about $15,000 per unit, recently stabilizing at about$11,000 per unit. He referred to a graph showing how the price of CBT water,North Poudre Irrigation Company shares, and the City's cash in-lieu-of rate compared over time. Many other communities and water districts in this area have relied heavily on CBT water and have tied their cash in-lieu-of prices to CBT prices. Many of the cities and water districts in this area continue to have cash rates that exceed $10,000 per acre foot. It was explained that the cash rate needs to be set at a level such that the City can continue to purchase or develop enough water to meet the water demands of new development. Local developers that build in the City of Fort Collins Water Utility service area can turn over shares in a number of local irrigation companies to satisfy raw water requirements. Because of this, it is appropriate to focus on the cost of acquiring local stocks or developing other local projects when adjusting the City's cash in-lieu-of rate. Since the price of many existing water rights has more than tripled in just a few years, the cost of developing alternative projects has become more competitive and attractive. Mr. Bode compared the cost of several projects that indicated that the cost of developing them may be in the range of$3,000 to $5,000 per acre foot of fine yield. However, because these types of projects take several years to complete and face other uncertainties, it is appropriate to add a risk factor to them. Taking these factors into consideration, the staff believes that a change in the cash rate from $4,500 to $6,500, as suggested by the Water Supply Committee is appropriate. The City Code provides that nonresidential customers shall pay a surcharge on any amount of water used in excess of their annual allotment, which is determined by the amount of raw water they provide to the City. This charge is based on the in-lieu-of cash rate and is presently $2.12 per thousand gallons. Using the proposed cash rate, the revised surcharge would-be increased proportionately to $3.06 per thousand gallons. Tom Brown confirmed that the Water Supply Committee supported changing the cash rate to $6,500 per acre foot and explained some of the committee's deliberations. Joe Bergquist asked if the committee had considered increasing the rate even more. FORT COLLINS WATER BOARD MINUTES May 24, 2001 Mr. Brown explained that although other entities are charging above $10,000 per acre foot,the proposed $6,500 is supported by cost estimates of developing other supplies. He added that while it is not our role to subsidize new development, he felt comfortable with the proposed change based on storage costs. In response to a question,Dennis Bode pointed out that most cities are no longer getting much CBT water and are looking more towards acquiring other supplies. For Fort Collins,there is a need to develop some additional storage capacity in order to more effectively use the water rights currently owned. Tom Brown made a motion to recommend to City Council that the cash rate be raised from$4,500 to $6,500 and the raw water surcharge be increased from $2.12 to $3.06 per thousand gallons. David Lauer seconded the motion. Chairman Sanders put the vote before the Board, which passed unanimously. City of Fort Collins Cash Rate In-Lieu-Of Water Rights and Prices of CBT and NPIC Water $15,000 $14,000 __- $13,000 Note: The Colorado-Big Thompson Project - (CBT) and North Poudre Irrigation Company $12,000 -- - (NPIC) prices are based on City Conversion -- ------ ---- - -- Factors of 1.0 and 5.00 Ac-Ft/Share, $11,000 respectively. ----- -- — $10,000 $9,000 - -- - - LL $8,000 - - - - - - $7,000 - --- - - - $6,000 tCash In-Lieu-Of Rate $5,000 --w-Colorado-Big Thompson Price $4,000 -+-North Poudre Irrigation Co. Price $3,000 --- - ---- --- $2,000 --- - -- - -- - -- $1,000 $0 C' O7 a0 O N V O W O N (o CO O N C C aD OD Ct aD 00 m m 01 O O O O C C C C C C C C C C C C C C C - C OI 01 O1 N (0 07 N M CO N Cu W M M N M Month/Year RWPncesChartCBTNP 07/02/2001