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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 03/19/2002 - RESOLUTION 2002-028 ESTABLISHING RENTAL RATES TO B AGENDA ITEM SUMMARY ITEM NUMBER: 16 FORT COLLINS CITY COUNCIL DATE: March 19, 2002 STAFF: Beth Molenaar SUBJECT: Resolution 2002-028 Establishing Rental Rates to be Charged for the City's Surplus Raw Water for the 2002 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 2002, 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("the 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 the February 28, 2002, meeting of the Board. The proposed rental rate for each type of water is 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. 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 2002 as well as the need by area water users. In 2001 a total of 27,782 DATE: March 19, 2002 2 ITEM NUMBER: 16 acre-feet was rented for total revenues of $660,093. 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 2002 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. The rental prices for CBT,North Poudre Irrigation Company,Water Supply and Storage Company, and Joe Wright Reservoir water are based primarily on market rental rates since there is an active rental market for this water. Typically, about 90% of the water rented by the City is from these sources. With the limited rental markets for the other sources,the rental prices are based primarily on assessment rates. At its February 28, 2002 meeting, the Board unanimously recommended that the following rental rates be adopted: Type of Water Proposed 2002 Rental Charge* NCWCD Water (CBT)—Ag $ 25.00 /ac-ft NCWCD Water (CBT)— M&I $ 38.00 /ac-ft North Poudre Irrigation Company—Early Ag Use $ 15.00 /ac-ft North Poudre Irrigation Company—Ag Use $ 25.00 /ac-ft North Poudre Irrigation Company—Multiple Use $ 30.00 /ac-ft Water Supply and Storage Company $ 2,900.00 /share Pleasant Valley and Lake Canal Company $ 200.00 /share New Mercer Ditch Company $ 250.00 /share Larimer County Canal No. 2 $ 400.00 /share Arthur Irrigation Company $ 20.00 /share Warren Lake Reservoir Company $ 150.00 /share Joe Wright Reservoir Water $ 100.00 /ac-ft Sherwood Reservoir Company $ 6.00 /share Sherwood Irrigation Company $ 450.00 /share Reusable Effluent $ 100.00 /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. RESOLUTION 2002-028 OF THE COUNCIL OF THE CITY OF FORT COLLINS ESTABLISHING RENTAL RATES TO BE CHARGED FOR THE CITY'S SURPLUS WATER FOR THE 2002 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 28, 2002, the Board discussed the rental program and recommended the following rates for the 2002 irrigation season: Type of Water 2002 Rental Charge* NCWCD Water (CBT) —Ag $ 25.00 /ac-ft NCWCD Water (CBT) —M&I $ 38.00 /ac-ft North Poudre Irrigation Company— Early Ag Use $ 15.00 /ac-ft North Poudre Irrigation Company—Ag Use $ 25.00 /ac-ft North Poudre Irrigation Company—Multiple Use $ 30.00 /ac-ft Water Supply and Storage Company $ 2,900.00 /share Pleasant Valley and Lake Canal Company $ 200.00 /share New Mercer Ditch Company $ 250.00 /share Larimer County Canal No. 2 $ 400.00 /share Arthur Irrigation Company $ 20.00 /share Warren Lake Reservoir Company $ 150.00 /share Joe Wright Reservoir Water $ 100.00 /ac-ft Sherwood Reservoir Company $ 6.00 /share Sherwood Irrigation Company $ 450.00 /share Reusable Effluent $ 100.00 /share * For late season rentals, rates may be 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 2002 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 19th day of March, A.D. 2002. Mayor ATTEST: City Clerk City of Fort Collins Water Assessments and Rental Rates Conversion Yield Source (Ac-Ft/Sh) 1999 2000 2001 2002 $/Ac Ft NCWCD(CBT) l Assessment Rate ($/unit) 16.80 17.64 18.52 19.44 Ag Rental Rate($/ac-ft) 18.00 19.00 21.00 25.00 25.00 Municipal Use Rental Rate($/ac-ft) 33.00 34.00 35.00 38.00 38.00 North Poudre I Assessment Rate ($/sh) 85.00 50.00 60.00 85.00 Early Ag Rental Rate($/ae-ft) 10.00 10.00 12.00 15.00 15.00 Ag Rental Rate ($/ac-ft) 22.00 22.00 22.00 25.00 25.00 Multiple Use Rental Rate($/ac-ft) 27.00 27.00 27.00 30.00 30.00 Water Supply and Storage 84 Assessment Rate($/sh) 760.00 775.00 950.00 950.00 Rental Rate($/sh) 2500.00 2600.00 2800.00 2900.00 34.52 Pleasant Valley&Lake 30 Assessment Rate ($/sh) 150.00 150.00 150.00 120.00 Rental Rate($/sh) 180.00 200.00 200.00 200.00 6.67 New Mercer 30 Assessment Rate ($/sh) 0.00 0.00 200.00 200.00 Rental Rate($/sh) 180.00 200.00 250.00 250.00 8.33 • Latimer County#2 43 Assessment Rate ($/sh) 200.00 200.00 400.00 300.00 Rental Rate ($/sh) 275.00 300.00 450.00 400.00 9.30 Arthur 3.5 Assessment Rate ($/sh) 10.00 10.00 10.00 11.50 Rental Rate ($/sh) 14.00 16.00 17.00 20.00 5.71 Warren Lake 7 Assessment Rate ($/sh) 0.00 0.00 0.00 100.00 Rental Rate ($/sh) 120.00 130.00 140.00 150.00 21.43 Joe Wright Reservoir I Rental Rate($/ac-ft) 38.00 60.00 75.00 100.00 100.00 Sherwood Reservoir Co. Assessment Rate ($/sh) 3.00 4.00 4.00 4.00 Rental Rate($/sh) 5.00 6.00 6.00 6.00 Sherwood Irrigation Co. Assessment Rate ($/sh) 400.00 400.00 400.00 400.00 Rental Rate ($/sh) 400.00 400.00 450.00 450.00 Reusable Effluent l Rental Rate ($/ac-ft) 34.00 60.00 75.00 100.00 100.00 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. Surplus Water Rental Rates Excerpt Water Board Minutes February 28, 2002 Page 1 Proposed Surplus Water Rental Rates-DRAFT Beth Molenaar explained that each year the Water Board forwards a recommendation to City Council regarding water rental rates for the coming spring. The proposed rental rates for 2002 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), Joe Wright Reservoir and Reusable Effluent, water cannot be rented from one ditch company system into another. Therefore, for these 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 results in considerable variation in prices per acre-foot among the various supply sources. The rental prices for CBT,North Poudre Irrigation Company(NPIC), and Water Supply and Storage Company shares are based primarily on market rental rates since there is an active rental market for these shares. Typically, about 90 percent of the water rented by the City is from these three sources. With the limited rental markets for the other sources, the rental prices are based primarily on assessment rates. STom Sanders asked if some rates have increased. Beth stated that the most significant rate increase is for Joe Wright. She stated that it is the most expensive because it is a reusable resource and a much scarcer type of water for which demand is very high and we have a limited supply. Most of our reusable water is provided to Anheuser Busch through our reuse agreement. Any excess reusable water can be is used to meet various substitute supply plans. Regarding the CBT prices, Tom Brown asked if demand is expected to be so much more than the available supply, then why aren't we considering raising the price so that it equalizes the supply to the demand. Beth explained that, for CBT water, the assessments an irrigator pays for the water is less than what municipal users must pay. When we rent to municipal users, we charge higher rates; when we rent to an irrigator, we are trying to match market rates. Also, we are not the only source of CBT water available to rent. Most of the people who have requested water from us have also made requests to several other entities because they are trying to get on any list possible and will rent from whoever gives them a"nod" first. David Lauer asked what is the margin of difference between Agricultural and Municipal rates. Beth stated that for CBT water we are paying $19.44 per unit so if we get an 80 percent quota, we will be paying $24.30 per acre-foot. Agricultural users are charged $7.80 per unit,which would be $9.75 per acre-foot. So, in an 80% quota year, we pay about $24 per acre-foot and rent it for about $25 an acre foot to agricultural users. Tom Sanders asked if we would loose money on any of the shares by renting them for less than Surplus Water Rental Rates Excerpt Water Board Minutes February 28, 2002 Page 2 our assessments? Beth explained that if the CBT quota is set very low then our assessment cost per acre foot may be higher than our rental rate. Dennis Bode pointed out that the primary value of this water to the City is having the water available for our own use. Any revenue received through rental of any excess water just helps to offset the costs of owning the water. Beth stated that total rental monies average around$300,000,but last year it was $660,000 in rental money. She reported that the increase was partly due to renting 3,000 acre-feet to Platte River Power Authority(PRPA). They needed CBT water because not enough Windy Gap water was available last year, and they had to rent it from us at the higher municipal rate. The North Poudre Irrigation Company water allocation was also very low last year, and some of the municipal water under that system was made available(at municipal rates) on the rental market to their irrigators. Bill Fisher made a motion to adopt the staffs recommendation for all rates excepting the recommendation for the Water Supply and Storage Company. He stated that he did not believe he had a conflict of interest as he did not own any shares of the company, but he did represent the Company. Ted Borstad seconded the motion. The motion passed unanimously. Joe Berquiest moved to adopt the Water Supply and Storage Company rates. The motion was seconded by David Lauer and passed unanimously with Bill Fisher abstaining.