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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 03/20/2007 - RESOLUTION 2007-028 ESTABLISHING RENTAL RATES AND ITEM NUMBER: 20 AGENDA ITEM SUMMARY DATE: March 20, 2007 FORT COLLINS CITY COUNCIL STAFF: Dennis Bode SUBJECT Resolution 2007-028 Establishing Rental Rates and Delivery Charges for the City's Raw Water for the 2007 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 $400,000 for 2007. 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 22, 2007 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. Although the early winter snow pack is encouraging, the City will continue to closely monitor its supplies when making surplus raw water available for rental this year. The first priority will be to insure that adequate supplies will be carried over into 2008. The Water Utility uses its annual rates set by City Council to charge agricultural water renters, contractual water users and 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 March 20, 2007 -2- Item No. 20 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 Those sources with active markets include the Colorado Big Thompson Project(CBT),North Poudre Irrigation Company(NPIC), and Water Supply and Storage Company(WSSC). For these sources the proposed rates are based on expected rental market conditions. Fort Collins has some 2006 water remaining in the Colorado Big Thompson Project(CBT) system for use in 2007. This carryover,along with a minimum 2007 quota of 60%,means 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$30 per acre foot. Staff further proposes that CBT water rented for municipal or industrial(M&I)purposes be charged at$52 per acre foot in 2007 to reflect 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$12 per acre foot to reflect its limited use,and the"seasonal agricultural"rate beset at$30 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 $30 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. Limited Rental Market The second category is for those sources that have a limited rental market. This category includes the Pleasant Valley and Lake Canal Company(PV&L)shares,other"Southside Ditches"shares and the City's reusable sources (primarily Joe Wright Reservoir or reusable effluent). 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 obj ective 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 most sources be set at a rate that is 20% above the assessments March 20, 2007 -3- Item No. 20 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 users that have not satisfied the City's raw water requirements but have a need for rental water, 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 rate 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, doubled to $300 per share in 2005 due to ongoing legal expenses and increased to $350 per share for 2007. The rental rate has been adjusted to $380 to cover assessments and a minimal administrative cost. Similarly,major repairs have been pending for the Sherwood Irrigation Company and,beginning in 2005,their assessments changed from$400 per share in 2004 to$855 per share each year since 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 that the rental rate of$900 be maintained for 2007. Recent drought years, in addition to other factors, have increased the State's scrutiny of well depletions. As a result, the City has seen more 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 sources be $400 per acre-foot again in 2007. The City has obligations for small amounts of reusable water on lands where the City's raw water requirement has been met. However,there is no annual assessment upon which to base a charge as occurs in such cases within the Limited Rental Market(see below). In these cases it is proposed that a fee of$100 per acre-foot be charged to help offset operation and administrative costs. March 20, 2007 -4- Item No. 20 At its February 22,2007 meeting,the Board unanimously recommended that the following rates for raw water be adopted: Type of Water Proposed 2007 Rental Rates/Charges (1) RWR Not Satisfied RWR Satisfied Active Rental Market NCWCD Water(CBT) - Ag $ 30.00/ac-ft n/a NCWCD Water(CBT)—M&I $ 52.00/ac-ft n/a North Poudre Irrigation Co. —Early Ag Use $ 12.00/ac-ft n/a North Poudre Irrigation Co. - Ag Use $ 30.00/ac-ft n/a North Poudre Irrigation Co. —Multiple Use $ 30.00/ac-ft n/a Water Supply and Storage Co. $ 3,200.00/share n/a RWR Not Satisfied RWR Satisfied Limited Rental Market (2) Arthur Irrigation Co. $ 60.00/share $ 10.00/share Larimer County Canal No. 2 $ 500.00/share $ 420.00/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. $ 380.00/share $ 380.00/share Sherwood Res. Co. $ 10.00/share $ 8.40/share Sherwood Irrigation Co. $ 900.00/share $ 900.00/share Reusable Sources $ 400.00/ac-ft $ 100.00/ac ft Notes: (1) Rental rates may be adjusted to reflect significant changes in 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. ATTACHMENTS 1. Water Assessments Table 2. Water Rental Rates/Charges Table 3. Excerpt from February 22, 2007 Water Board Meeting Minutes ATTACHMENT Table 1 Water Assessments Source 2004 2005 2006 2007 Active Rental Market CBT (NCWCD, $/unit) 20.70 21.00 21.80 22.80 North Poudre Irrigation Co. ($/sh) 20.00 95.00 95.00 85.00 Water Supply& Storage Co. ($/sh) 950.00 1,750.00 2,100.00 2,100.00 Limited Rental Market Arthur Irrigation Co. ($/sh) 8.00 10.00 10.00 8.00 Larimer County Canal #2 ($/sh) 300.00 330.00 350.00 350.00 New Mercer($/sh) 300.00 300.00 325.00 325.00 Pleasant Valley& Lake Canal ($/sh) 150.00 150.00 150.00 150.00 Warren Lake ($/sh) 150.00 300.00 300.00 350.00 Sherwood Reservoir ($/sh) 7.00 7.00 7.00 7.00 Sherwood Irrigation ($/sh) 400.00 855.00 855.00 855.00 Reusable Sources ($/ac-ft) n/a n/a n/a n/a ATTACHMENT Table 2 Water Rental Rates/Charges Source 2004 2005 2006 2007 Active Rental Market CBT Agriculture($/ac-ft) 30.00 35.00 28.00 30.00 CBT Municipal/Industrial ($/ac-ft) 45.00 50.00 50.00 52.00 NPIC Early Ag($/ac-ft) 15.00 15.00 12.00 12.00 NPIC Agriculture ($/ac-ft) 27.00 28.00 28.00 30.00 NPIC Multiple Use($/ac-ft) 32.00 35.00 28.00 30.00 Water Supply& Storage Co. ($/sh) 3,000.00 3,200.00 3,200.00 3200.00 Limited Rental Market(RWR Not Satisfied) Arthur Irrigation Co. ($/sh) 60.00 60.00 60.00 60.00 Larimer County Canal #2 ($/sh) 450.00 500.00 500.00 500.00 New Mercer($/sh) 450.00 500.00 500.00 500.00 Pleasant Valley& Lake Canal ($/sh) 500.00 500.00 500.00 500.00 Warren Lake ($/sh) 300.00 360.00 360.00 380.00 Sherwood Reservoir ($/sh) 10.00 10.00 10.00 10.00 Sherwood Irrigation ($/sh) 480.00 900.00 900.00 900.00 Reusable Sources ($/ac-ft) 400.00 400.00 400.00 400.00 Limited Rental Market(RWR Satisfied) Arthur Irrigation Co. ($/sh) 9.60 12.00 12.00 10.00 Larimer County Canal #2 ($/sh) 360.00 400.00 420.00 420.00 New Mercer($/sh) 360.00 360.00 360.00 360.00 Pleasant Valley& Lake Canal ($/sh) 180.00 180.00 180.00 180.00 Warren Lake ($/sh) 180.00 360.00 360.00 380.00 Sherwood Reservoir ($/sh) 8.40 8.40 8.40 8.40 Sherwood Irrigation ($/sh) 480.00 900.00 900.00 900.00 Reusable Sources ($/ac-ft) n/a n/a 100.00 100.00 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 3 Excerpt from Water Board Meeting Minutes of February 22, 2007 Raw Water Rental Rates and Delivery Charges Dennis Bode, Water Resources Manager,presented an explanation on the proposed amounts for the 2007 raw water rates and charges. Each year,prior to the irrigation season and after the irrigation companies have established their annual assessments for water shares, the Water Board recommends to the City Council rental rates and delivery charges for the use of the City's raw water. The uses of the City's raw water include rental to agricultural users,meeting certain raw water delivery obligations and use by other City departments. Although the East Slope snowpack has been unusually plentiful, early winter snowpack in the upper watersheds and the West Slope is just about average or slightly below. The snowpack can change very quickly, so it is important that the City continues to closely monitor its supplies when making surplus raw water available for rental each year. The first priority will be to ensure that adequate supplies will be carried over to 2008, although current projections indicate that the City will have at least some surplus supplies available for rental this year. During the last couple of years, the City has rented approximately 20,000 acre-feet of water per year, resulting in approximately$600,000 - $700,000 of revenue to the Utilities each year. Staff is again proposing two separate categories for raw water rates and charges. 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 those used primarily to irrigate City facilities (parks, golf courses, etc.). The Board was provided with tables showing actual and proposed figures for assessments, rental rates and delivery charges for the years 2004-2007. Mr. Bode responded to several questions, and the Board briefly discussed the rental program history, purpose, function and proposed rates. Following this, Board Member Reagan Waskom made a motion, seconded by Board Member John Bartholow to recommend to City Council the staff s proposed raw water rental rates and delivery charges for the 2007 season. The motion passed unanimously. RESOLUTION 2007-028 OF THE COUNCIL OF THE CITY OF FORT COLLINS ESTABLISHING RENTAL RATES AND DELIVERY CHARGES FOR THE CITY'S RAW WATER FOR THE 2007 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 22, 2007, the Board discussed the rental program and the use of raw water and recommended the following rates for the 2007 irrigation season: Type of Water Proposed 2007 Rental Rates/Charges (1) RWR Not Satisfied RWR Satisfied Active Rental Market NCWCD Water(CBT) -Ag $ 30.00/ac-ft n/a NCWCD Water(CBT)—M&I $ 52.00/ac-ft n/a North Poudre Irrigation Co. —Early Ag Use $ 12.00/ac-ft n/a North Poudre Irrigation Co. - Ag Use $ 30.00/ac-ft n/a North Poudre Irrigation Co. —Multiple Use $ 30.00/ac-ft n/a Water Supply and Storage Co. $ 3,200.00/share n/a RWR Not Satisfied RWR Satisfied Limited Rental Market Arthur Irrigation Co. $ 60.00/share $ 10.00/share Larimer County Canal No. 2 $ 500.00/share $ 420.00/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. $ 380.00/share $ 380.00/share Sherwood Res. Co. $ 10.00/share $ 8.40/share Sherwood Irrigation Co. $ 900.00/share $ 900.00/share Reusable Sources $ 400.00/ac-ft $ 100.00/ac-ft Notes: (1) Rates maybe adjusted to reflect significant changes in 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 2007 and the Utilities General Manager 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 this 20th day of March, A.D. 2007. Mayor ATTEST: City Clerk