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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 03/04/2014 - FIRST READING OF ORDINANCE NO. 033, 2014, ESTABLISAgenda Item 7 Item # 7 Page 1 AGENDA ITEM SUMMARY March 4, 2014 City Council STAFF Susan Smolnik, Water Resources Engineer Beth Molenaar, Water Resources Engineer SUBJECT First Reading of Ordinance No. 033, 2014, Establishing Rental Rates and Delivery Charges for the City's Raw Water for the 2014 Irrigation Season. EXECUTIVE SUMMARY The purpose of this item is to set rates for the rental and delivery 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. The proposed rate for each type of water is based on several factors including market conditions and assessments charged by irrigation companies. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on First Reading. BACKGROUND / DISCUSSION The City is a shareholder in several local irrigation companies. In most years, there is water in excess of that needed to meet City uses that can be rented to other water users. Each year prior to the irrigation season and after irrigation companies have established their annual assessments, the City Council approves rental rates and delivery charges for the use of the City’s raw water. Staff uses these rates for the purpose of charging for various uses of this raw water. These uses include rental to agricultural users, meeting certain raw water delivery obligations, and uses by other City departments. The attached tables show the assessment rates as set by the irrigation companies and the raw water rates charged by the City for 2011 through 2013 as well as proposed rates for 2014. Currently, the snowpack is above average in the Poudre Basin. However, there is still lingering uncertainty regarding the Utilities’ ability to treat Poudre River supplies during the rainy season. To ensure that adequate supplies are maintained for use in 2014 and carried over for use in 2015, staff will be very conservative in making rental water available and will continue to closely monitor the Utilities water supplies and demands. Staff is proposing two categories for raw water rates and delivery charges. The first category includes only those sources for which an active rental market exists. The second category includes sources delivered under raw water agreements and used to irrigate greenbelts and City facilities (parks, golf courses, etc.). Agenda Item 7 Item # 7 Page 2 ACTIVE RENTAL MARKETS FOR SURPLUS RAW WATER Colorado Big Thompson Water (CBT) Rental Rate-The Utilities may have surplus CBT water available for rent this year. Staff recommends that agricultural rentals of CBT water be made at a price of $35.00 per acre foot. Staff further proposes that CBT water rented for municipal or industrial (M&I) is $50.00 per acre foot due to the higher assessments charged by Northern Water to M&I water users. Procedures -Rental of surplus CBT water will only be made in the event that the Utilities 1) has adequate supplies for use in 2014 that considers the ability to treat Poudre River water, 2) has maximized carryover supplies for use in 2015 and 3) has met CBT delivery obligations to City departments and other entities with delivery agreements. Any available surplus CBT water will be offered first to water users on the ditches that run through town. These ditches known collectively as the “Southside Ditches” include the Arthur, New Mercer, Larimer No 2, and Warren Lake. The Pleasant Valley Lake and Canal Company (PVLC) is also included in this first tier. Surplus CBT water will then be made available to other Poudre Basin water users. Finally, in the event that any surplus CBT water remains, it will be offered to others within the entire Northern Colorado Water Conservancy District. North Poudre Irrigation Company (NPIC) Rental Rates-The Utilities also expects to have surplus NPIC water that can be made available for rent. Each share of NPIC has an “agricultural” component and a “multiple use” component. The amount of each component varies each year and is set by the NPIC board and manager based on the company’s water supply availability. Due to legal constraints, the “ag” component can only be used for agricultural purposes on land served by the NPIC system and is rented to shareholders under the system. The multiple use portion of each NPIC share is available for the Utilities' use and is largely comprised of NPIC-owned CBT water. When users under the NPIC system rent either “ag” or “multiple use” water, it is run through the North Poudre system in the same way. Therefore, it is proposed that both the “ag” water and excess "multiple use" water be rented at $35 per acre foot. In some years there is a special class of NPIC water available for agricultural users for a very limited time early in the irrigation season. If this “early ag” water is available in 2014, staff proposes a rental rate of $15 per acre foot to reflect its very limited use. Procedures- The City will most likely use a proportionate allocation method based on the requester’s acreage, as has been done in past years. Water Supply and Storage Company (WSSC) Rental Rates-The decreed use of the Utilities-owned Water Supply and Storage Company shares remains agricultural at this time and is rented to shareholders under that system. This has historically been an active rental market and the rental price of WSSC water is expected to be about $3,400 per share this year. In addition, the Utilities is participating in WSSC’s reusable return flow rental program which will generate revenues of approximately $37,000 for the Utilities. Procedures- Shares will be offered via lottery as in past years. Reusable Sources The Utilities occasionally has rental demand for reusable sources to satisfy state requirements for substitute supply and augmentation plans. The Utilities’ primary reusable sources are Joe Wright Reservoir water and reusable effluent from the Utilities’ water reclamation facilities. It is proposed that the rental price for these sources be set at $600 per acre-foot in 2014. Agenda Item 7 Item # 7 Page 3 RAW WATER DELIVERY AGREEMENTS PVLC and the Southside Ditches Delivery Charges This category sets charges for water used on City facilities, such as parks and golf courses, or water used by other entities that have met the Utilities’ raw water requirements. Non-City entities with raw water delivery agreements are mostly HOAs and the Poudre School District. It is proposed that the charges be set at a rate that is 10% above the assessments charged by the various irrigation companies. This is to help offset the Utilities’ administrative costs. Reusable Water Delivery Charges The Utilities has delivery obligations for reusable water where the Utilities’ raw water requirement has been met. In this situation it is proposed that a fee of $120 per acre-foot be charged to help offset operation and administrative costs. NATURAL AREAS PROGRAM WATER The City’s Natural Areas Program owns some shares in the Box Elder irrigation system. Occasionally, the Natural Areas will rent these shares to other water users in this system. In the event that the Natural Areas chooses to rent these shares in 2014, the rental price proposed is the same as the share assessment due to the very limited market for these shares. FINANCIAL / ECONOMIC IMPACT The revenue from the City’s rental and delivery of raw water is expected to be approximately $400,000 for 2014. The revenues generated by the rentals helps to off-set costs incurred by the City. ENVIRONMENTAL IMPACTS The City’s raw water rental program assists farmers in Northern Colorado and indirectly supports an open space agricultural landscape. BOARD / COMMISSION RECOMMENDATION At its February 20, 2014, meeting, the Water Board unanimously voted to recommend adoption of the proposed rental rates and delivery charges. PUBLIC OUTREACH Rental water is provided annually and renters have an opportunity to provide input on a continual basis. In addition, Utilities staff recently attended local irrigation company meetings and provided information to shareholders regarding proposed rental processes for the City’s surplus raw water. ATTACHMENTS 1. Proposed 2014 Rental Rates and Delivery Charges (PDF) 2. Water Assessment (PDF) 3. Water Rental Rates/Charges (PDF) 4. Water Board minutes, February 20, 2014 (PDF) ATTACHMENT 1 Table 1 Proposed 2014 Rental Rates and Delivery Charges Type of Water Proposed 2014 Rental Rates/Charges Surplus Rental Rates NCWCD Water (CBT) - Ag $ 35.00 /ac-ft NCWCD Water (CBT) – M&I $ 50.00 /ac-ft North Poudre Irrigation Co. – Early Ag Use $ 15.00 /ac-ft North Poudre Irrigation Co. - Ag Use $ 35.00 /ac-ft North Poudre Irrigation Co. – Multiple Use $ 35.00 /ac-ft Water Supply and Storage Co. $ 3,400.00 /share Reusable Sources $ 600.00/ ac-ft Raw Water Delivery Charges NCWCD Water (CBT) – Ag $ 35.00 /share Arthur Irrigation Co. $ 33.00 /share Larimer County Canal No. 2 $ 495.00 /share New Mercer Ditch Co. $ 990.00 /share Pleasant Valley & Lake Canal Co. $ 203.50 /share Warren Lake Reservoir Co. $ 660.00 /share Sherwood Res. Co. $ 60.50 /share Sherwood Irrigation Co. $ 880.00 /share Reusable Sources $ 120.00 /ac-ft Natural Area Program Rental Rates Box Elder Irrigation Company $ 400.00 /share Notes: (1) Rental rates may be adjusted to reflect the remaining yield or the prevalent market price of the water stock being rented. (2) Charges for those who have satisfied the City’s raw water requirements are set at approximately 110% of the assessments charged by that company. ATTACHMENT 2 Table 2 Water Assessments Source 2011 2012 2013 2014 CBT (NCWCD, $/unit) 25.06 25.50 26.44 28.00 North Poudre Irrigation Co. ($/sh) 110.00 110.00 120.00 130.00 Water Supply & Storage Co. ($/sh) 2,500.00 2,700.00 2,800.00 2,800.00 Arthur Irrigation Co. ($/sh) 17.00 25.00 25.00 30.00 Larimer County Canal #2 ($/sh) 500.00 500.00 600.00 450.00 New Mercer ($/sh) 900.00 900.00 900.00 900.00 Pleasant Valley & Lake Canal ($/sh) 175.00 175.00 185.00 185.00 Warren Lake ($/sh) 300.00 300.00 600.00 600.00 Sherwood Reservoir ($/sh) 8.00 8.00 14.00 55.00 Sherwood Irrigation ($/sh) 600.00 600.00 600.00 800.00 Reusable Sources ($/ac-ft) n/a n/a n/a n/a ATTACHMENT 3 Table 3 Water Rental Rates/Charges Source 2011 2012 2013 2014 Surplus Water Rental Rates CBT Agriculture ($/ac-ft) 30.00 30.00 market rate 35.00 CBT Municipal/Industrial ($/ac-ft) 49.00 49.00 market rate 50.00 NPIC Early Ag ($/ac-ft) 12.00 12.00 15.00 15.00 NPIC Agriculture ($/ac-ft) 30.00 30.00 30.00 35.00 NPIC Multiple Use ($/ac-ft) 30.00 30.00 30.00 35.00 Water Supply & Storage Co. ($/sh) 3,200.00 3,300.00 n/a 3,400.00 Reusable Sources ($/ac-ft) 500.00 500.00 500.00 600.00 Raw Water Delivery Charges CBT Agriculture ($/ac-ft) 30.00 30.00 35.00 35.00 Arthur Irrigation Co. ($/sh) 18.70 27.50 25.50 33.00 Larimer County Canal #2 ($/sh) 550.00 550.00 550.00 495.00 New Mercer ($/sh) 990.00 990.00 990.00 990.00 Pleasant Valley & Lake Canal ($/sh) 192.50 192.50 203.50 203.50 Warren Lake ($/sh) 330.00 330.00 660.00 660.00 Sherwood Reservoir ($/sh) 8.80 8.80 15.40 60.50 Sherwood Irrigation ($/sh) 660.00 660.00 660.00 880.00 Reusable Sources ($/ac-ft) 100.00 100.00 100.00 120.00 Notes: (1) Rates may be adjusted to reflect the remaining yield or the prevalent market price of the water stock being rented. (2) Charges for those who have satisfied the City’s raw water requirements are set at approximately 110% of the assessments charged by that company. Excerpt from Unapproved Water Board Minutes, February 20, 2014 1 2014 Raw Water Rental Rates and Delivery Charges (Attachments available upon request). Water Resources Engineers Susan Smolnik and Beth Molenaar presented information on this item. Water Resources Manager Donnie Dustin was also available to answer questions. Ms. Molenaar shared some background information on the item. Each year, City Council approves rates for the rental and delivery of the City’s raw water supplies. These rates are used to assess charges for agricultural use, for various contractual raw water obligations, and for raw water deliveries to other City departments. The City is a shareholder in several local irrigation companies. Usually, surplus water is available to rent to other water users. The shareholders are charged an assessment on each share. The City of Fort Collins pays approximately $1.3 million each year for assessments on their water rights. The three active rental markets include Colorado Big Thompson (CBT), North Poudre Irrigation Company (NPIC), and Water Supply and Storage Company (WSSC). CBT Ms. Molenaar presented a map showing the CBT Market Boundary. This water can be rented anywhere within the district boundary. The Utilities may have surplus CBT water available for rent this year. NPIC Ms. Molenaar presented a map showing the NPIC Service Area. The Utilities also expects to have surplus NPIC water that can be made available for rent. There are three types of NPIC water:  Early Agricultural (Ag) Water (delivered during a ‘free’ river and is only used for irrigation)  North Poudre Agricultural Water (delivered from North Poudre’s river decrees and only used for irrigation)  North Poudre Multiple Use Water (CBT water that can be used for many purposes) WSSC Ms. Molenaar presented a map showing the WSSC Service Area. This includes communities east of Fort Collins. This water is rented by the share. Shares will be offered via lottery as in past years. Reusable Water This includes water from Joe Wright Reservoir and Michigan Ditch. This water is used for road construction, industrial purposes, and natural areas. Raw Water Delivery Agreements These include City-owned facilities, such as parks and golf courses, and non-City entities such as Poudre School District and homeowner associations. The Utilities is reimbursed for the assessments to offset operational and administrative costs. Ms. Molenaar presented a table showing the Proposed 2014 Rental Rates and Delivery Charges. Excerpt from Unapproved Water Board Minutes, February 20, 2014 2 Highlights from the discussion:  A board member inquired about the cost per share difference with CBT water as reusable water. Ms. Molenaar stated CBT water is not reusable and can only be used one time.  Ms. Molenaar explained last year’s rental rates for the benefit of the new members. Since there was no early ag water last year, ag water was traded for multiple use water.  A board member inquired why NPIC withdrew from the Halligan-Seaman project if the City owns the majority of the shares. Mr. Dustin stated the City of Fort Collins does not own a majority of the shares and only owns approximately 36 percent.  Chairperson Malers reminded the board that staff will be on the conservative side when forecasting since there will be effects from the High Park Fire. The full effect of this event is not known yet. Water Resources and Treatment Operations Manager Kevin Gertig reiterated it will be hard to predict supply; however, staff has a diverse portfolio of resources and will continue to fine tune the modeling.  A board member inquired about the article in The Coloradoan regarding the pine beetle outbreak in Larimer County, and if staff plans for these types of events. Mr. Gertig stated these kinds of events are taken into consideration.  Chairperson Malers reminded the board that the Northern Colorado Water Conservancy District (NCWCD) holds a Spring meeting to set the quota on how much water will be available. This meeting will be held in April.  Chairperson Malers invited a comment from an audience member. The individual inquired about the cost per acre-foot if the ag swap was permanent. Mr. Dustin stated the swap occurred because staff felt there would be a shortage on CBT water last year. This type of swap is not needed on a permanent basis. Also, both the Water Supply and Demand Management Policy and Plan Fort Collins support water for agricultural use.  A board member inquired about the timing for early ag water and if it is during planting time. Ms. Molenaar stated this occurs in the May and June time frame. Vote on the motion: It passed unanimously. Board Member Brian Brown moved that the Water Board recommend the proposed rental rates and delivery charges be adopted by City Council. Board Member Ortman seconded the motion. - 1 - ORDINANCE NO. 033, 2014 OF THE COUNCIL OF THE CITY OF FORT COLLINS ESTABLISHING RENTAL RATES AND DELIVERY CHARGES FOR THE CITY’S RAW WATER FOR THE 2014 IRRIGATION SEASON WHEREAS, each year prior to the irrigation season, the City staff and the Water Board make a recommendation to the City 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 and for other City departments, and the Natural Areas Department uses these rates for administering rentals of its shares; and WHEREAS, on February 20, 2014, the Water Board discussed the rental program and the use of raw water and recommended the following rates for the 2014 irrigation season: Type of Water Proposed 2014 Rental Rates/Charges Surplus Rental Rates NCWCD Water (CBT) - Ag $ 35.00 /ac-ft NCWCD Water (CBT) – M&I $ 50.00 /ac-ft North Poudre Irrigation Co. – Early Ag Use $ 15.00 /ac-ft North Poudre Irrigation Co. - Ag Use $ 35.00 /ac-ft North Poudre Irrigation Co. – Multiple Use $ 35.00 /ac-ft Water Supply and Storage Co. $ 3,400.00 /share Reusable Sources $ 600.00/ ac-ft Raw Water Delivery Charges NCWCD Water (CBT) – Ag $ 35.00 /share Arthur Irrigation Co. $ 33.00 /share Larimer County Canal No. 2 $ 495.00 /share New Mercer Ditch Co. $ 990.00 /share Pleasant Valley & Lake Canal Co. $ 203.50 /share Warren Lake Reservoir Co. $ 660.00 /share Sherwood Res. Co. $ 60.50 /share Sherwood Irrigation Co. $ 880.00 /share Reusable Sources $ 120.00 /ac-ft Natural Area Department Rental Rates Box Elder Irrigation Company $ 400.00 /share Notes: (1) Rental rates may be adjusted to reflect the remaining yield or the prevalent market price of the water stock being rented. - 2 - (2) Charges for those who have satisfied the City’s raw water requirements are set at approximately 110% of the assessments charged by that company. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS that the rental rates and charges as set forth above are hereby approved as the City’s raw water rates for 2014 and the City Manager and the Utilities Executive Director are authorized to rent or deliver such raw water at said rates. Introduced, considered favorably on first reading, and ordered published this 4th day of March, A.D. 2014, and to be presented for final passage on the 18th day of March, A.D. 2014. __________________________________ Mayor ATTEST: _______________________________ City Clerk Passed and adopted on final reading on the 18th day of March, A.D. 2014. __________________________________ Mayor ATTEST: _______________________________ City Clerk