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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 11/06/2012 - FIRST READING OF ORDINANCE NO. 126, 2012, AUTHORIZDATE: November 6, 2012 STAFF: Mark Sears Tawnya Ernst, Donnie Dustin AGENDA ITEM SUMMARY FORT COLLINS CITY COUNCIL 21 SUBJECT First Reading of Ordinance No. 126, 2012, Authorizing the Conveyance of City-owned Property Known as the Maxwell Farm and Related Water Rights Subject to a Conservation Easement and Authorizing a Related Raw Water Transfer Agreement. EXECUTIVE SUMMARY The Natural Areas Department (NAD) purchased the 137-acre Maxwell Farm, along with 12 shares of North Poudre Irrigation Company (NPIC) water, with the intent of placing it under a conservation easement to help conserve a buffer between Fort Collins and Wellington; protect the open space and scenic values adjacent to I-25; and, sell it as an agricultural property with limited development rights. These purposes are supported by the Natural Areas Land Conservation and Stewardship Plan, the Council-adopted master plan for the Department. The land has been leased to Larry Maxwell, the previous owner, for farming and livestock feeding since the initial purchase in 2009. Natural Areas and Utilities have worked out an agreement for the NAD to sell eleven of the twelve NPIC shares to Utilities for approximately 50% of the estimated market value, which is $14,000 per share (based on recent sales information from NPIC). In exchange, Utilities will enter into a raw water transfer agreement with the buyer of Maxwell Farm, and per the terms of the agreement, Utilities will transfer the equivalent of eleven shares of NPIC water on an annual basis to the Maxwell Farm in perpetuity. The advantage to Utilities is that water decreed solely for agricultural use derived from other Utilities-owned NPIC shares, can be substituted for water decreed for municipal use derived from the eleven NPIC shares, which Utilities can use. The buyer will purchase the remaining share of NPIC water as it is a NPIC policy that a farm must own at least some NPIC water in order to receive any rented or transferred water. The single NPIC share to be owned by the buyer will also be tied to the land by the conservation easement agreement. The funds received from the sale of the land and water will be used to conserve additional land and water. BACKGROUND / DISCUSSION Maxwell Farm, near County Road 56 and I-25 (approximately two miles north of Fort Collins), is one of 10 farms conserved in the Wellington Community Separator through individual and combined efforts of the NAD, Larimer County and the Natural Resources Conservation Service since 2002. The seller, Larry Maxwell, was not willing or able to sell a conservation easement, so NAD purchased the property with the intent to resell the property with a conservation easement to limit residential or commercial development on the site. The water rights acquired are 3 augmented irrigation wells, 12 shares of North Poudre Irrigation Company Water, and one East Larimer County Water District (ELCO) water tap. The site improvements consist of an irrigation sprinkler pivot, a house, numerous out buildings, hay storage sheds, silage pit, loafing sheds and corrals that are in poor to fair condition. In October 2012, NAD closed on the purchase of Larry Maxwell’s house (0.83 acre parcel) which is surrounded on two sides by the farm and an additional ELCO water tap for $130,000 to resolve access and water service issues. This purchase will save the City in excess of $35,000 in costs to resolve access and water service issues and increased the value of the farm sale by $100,000, resulting in a net cost savings to the City and increased conservation value. Within the existing approximately 12-acre building envelope, there will be two primary home sites and one secondary home site. Staff recommends that Council approve the sale of the entire Maxwell property with a conservation easement, which restricts any further development, along with the following water rights: two ELCO water taps, one share of North Poudre Irrigation water, which is tied to the land via the conservation easement, and three irrigation wells. The partial mineral rights are to be retained by the City. Staff recommends that Council approve both the sale to Utilities of eleven of the twelve NPIC shares purchased with this property for approximately 50% of the estimated market value and the Raw Water Transfer Agreement for the perpetual use of 11 shares of North Poudre Irrigation water. November 6, 2012 -2- ITEM 21 FINANCIAL / ECONOMIC IMPACTS The Natural Areas Department will recoup $700,000 from the sale of the property and $154,000 from the sale of the NPIC shares to Utilities. The total $854,000 in revenues will be used for additional conservation efforts.. The approximate fair market price of $700,000 for the sale of this agricultural land and its improvements with a conservation easement is based upon recent land appraisals in the area and discussions with an appraiser who recently appraised three nearby farms for the NAD. The land and water rights were acquired for $1,530,000 in two separate transactions: 136 acres and NPIC water in 2009 and 0.83 acres in 2012. The cost to conserve the 137 acres by removing the potential industrial, commercial and all but two residential development rights and tying the water rights to the property is $676,000. The economic health of Fort Collins and northern Larimer County will be positively impacted by this sale. The buyer is a local farmer/rancher and conducts business in and around Fort Collins. ENVIRONMENTAL IMPACTS The conservation easement will conserve the agricultural values of the property and scenic values along I-25, and help maintain the open space buffer between the City and Wellington. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on First Reading. BOARD / COMMISSION RECOMMENDATION At its September 12, 2012 meeting, the Land Conservation and Stewardship Board voted unanimously to recommend approval of the sale of the Maxwell Farm with a conservation easement and the associated water rights. At its January 19, 2012 meeting, the Water Board voted unanimously to recommend approval of the purchase of the 11 shares of North Poudre Irrigation Company water from the Natural Areas Department at approximately 50% of the current value and to approve the Raw Water Transfer Agreement for the purpose of delivering water annually to the Maxwell Farm as a part of a conservation easement. ATTACHMENTS 1. Location map 2. Land Conservation and Stewardship Board minutes, September 12, 2012 3. Water Board minutes, January 19, 2012 ATTACHMENT 1 ATTACHMENT 2 Water Board Minutes January 19, 2012 2 Maxwell Farm Conservation Easement Water Use Agreement (Attachments available upon request). Water Resources Engineer Susan Smolnik introduced the item and stated it was presented at the October 2011 Water Board meeting. In 2009, the Natural Areas program purchased Maxwell Farm along with 12 shares of North Poudre Irrigation Company (NPIC) water with the intent of placing a conservation easement on the farm. Utilities will purchase a portion of the shares from Natural Areas and provide agriculture (ag) water as part of a Raw Water Transfer Agreement. The price of the NPIC shares has increased slightly and staff is seeking the board’s approval of the higher price. Board discussion: For the benefit of the new members, Vice Chairperson Balderson requested a short explanation of a conservation easement. Natural Areas Program Manager Mark Sears stated that a conservation easement removes a portion of the development rights on a piece of property. Natural Areas would like to restrict development on the site and allow for future development of agricultural related structures, as they would like it to remain a viable farm in the future. Mr. Sears stated that a fixed price was presented at the October meeting. Currently, there is a price range of $12,000 to $16,000 per share. The price presented to Council will be within this range. How is the price set? NPIC tracks the market value of the shares. For the benefit of the new members, a board member asked for clarification on the difference between agricultural water and multiple use water. Ms. Smolnik stated the NPIC shares have three components. The early ag and seasonal ag components of the share must remain for use within the NPIC system. The Multiple Use component of the share is comprised of Colorado Big Thompson (CBT) water. This water is available for municipalities to use. Both parties benefit because Utilities will purchase the shares at half price and in exchange, an equivalent amount of water will be provided back to Maxwell Farm as part of the conservation easement. Does this model only work if one department within the City is selling to another department within the City? Also, would this model work outside of the Natural Areas Program? Ms. Smolnik stated this is something that could be considered. Do ag users rely on CBT water during low flow years? Ms. Smolnik stated they do. Utilities would substitute the ag portion from more of the Utilities’ owned shares to make up the difference. Vote on the motion: It passed unanimously. Board Member Eccleston moved that the Water Board support the Utilities proposed purchase of eleven shares of North Poudre Irrigation Company water from the Natural Areas Program at approximately 50 percent of the current value and to support the Utilities entering into a Raw Water Transfer Agreement for the purpose of delivering water annually to Maxwell Farm as part of a conservation easement. Board Member Brown seconded the motion. Water Board 1/19/12 ATTACHMENT 3 ORDINANCE NO. 126, 2012 OF THE COUNCIL OF THE CITY OF FORT COLLINS AUTHORIZING THE CONVEYANCE OF CITY-OWNED PROPERTY KNOWN AS THE MAXWELL FARM AND RELATED WATER RIGHTS SUBJECT TO A CONSERVATION EASEMENT AND AUTHORIZING A RELATED RAW WATER TRANSFER AGREEMENT WHEREAS, the City is the owner of certain real property known as the Maxwell Farm, located in Larimer County, Colorado, as more particularly described in Exhibit “A”, attached and incorporated herein by this reference (the “Property”); and WHEREAS, the City purchased 136 acres of the Property, including twelve shares of North Poudre Irrigation Company (NPIC) water, in 2009, and the remaining .83 acres of the Property in October, 2012; and WHEREAS, the City purchased the Property as part of the Wellington Community Separator and to protect the view from I-25, with the intent of eventually selling the Property subject to a conservation easement that would maintain the agricultural and open space values of the Property; and WHEREAS, the Natural Areas Department is proposing to sell the Property and related water rights, including two ELCO water taps, one share of NPIC water and three irrigations wells, for $700,000, subject to a reserved conservation easement that would limit future commercial and residential development on the Property; and WHEREAS, the Natural Areas Department is also proposing to sell the remaining eleven shares of NPIC water associated with the Property to the City’s Water Utility for $154,000, which price is approximately one-half of the fair market value of the shares; and WHEREAS, in exchange for the conveyance of the NPIC shares to the Utility, the Utility would enter into an agreement with the proposed buyer of the Property that would allow the NPIC shares to continue to be used for the benefit of the Property in perpetuity; and WHEREAS, City staff is in the process of negotiating with the proposed buyer of the Property conservation easement terms and conditions subject to which the Property would be conveyed, as well as the terms and conditions of the water agreement; and WHEREAS, copies of the proposed conservation easement and the proposed water agreement, both dated October 26, 2012, are on file in the Office of the City Clerk and available for public inspection (respectively, the “Conservation Easement” and the “Raw Water Transfer Agreement”); and WHEREAS, under the proposed Raw Water Transfer Agreement the owner of the Property would be responsible for paying any assessments and other charges due to NPIC for the eleven shares of NPIC water delivered to the Property, but the owner would not have to pay any fees or charges to the City for use of the water; and WHEREAS, Section 23-111(a) of the City Code provides that the City Council is authorized to sell, convey, or otherwise dispose of any and all interests in real property owned in the name of the City, provided that the City Council first finds, by ordinance, that such sale or other disposition is in the best interests of the City; and WHEREAS, Article XII, Section 3 of the City Charter states that the City Council shall establish by ordinance rates, fees or charges for water, electricity or other utility services furnished by the City. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows: Section 1. That the City Council hereby finds that the conveyance of the Property subject to the Conservation Easement and the conveyance of eleven shares of NPIC water to the Water Utility in exchange for the execution of the Raw Water Transfer Agreement, all as provided herein, are in the best interests of the City. Section 2. That the Mayor is hereby authorized to execute such documents as are necessary to convey the Property on terms and conditions consistent with this Ordinance and subject to the Conservation Easement in substantially the form for the same dated October 26, 2012, and on file in the Office of the City Clerk, together with such additional terms and conditions as the City Manager, in consultation with the City Attorney, determines are necessary or appropriate to protect the interests of the City or effectuate the purposes of this Ordinance, including, but not limited to, any necessary corrections to the legal description of the Property, as long as such changes do not materially increase the size or change the character of the property to be conveyed. Section 3. That the City Council hereby finds that the execution of the Raw Water Transfer Agreement is for the betterment of the Water Utility, will be beneficial to the rate payers of the Water Utility, and is for the benefit of the citizens of Fort Collins. Section 4. That the Utilities Executive Director is hereby authorized to execute the Raw Water Transfer Agreement in substantially the form for the same dated October 26, 2012, and on file in the Office of the City Clerk, together with such additional terms and conditions as the Utilities Executive Director, in consultation with the City Attorney, determines are necessary or appropriate to protect the interests of the City or effectuate the purposes of this Ordinance. -2- Introduced, considered favorably on first reading, and ordered published this 6th day of November, A.D. 2012, and to be presented for final passage on the 20th day of November, A.D. 2012. _________________________________ Mayor ATTEST: _____________________________ City Clerk Passed and adopted on final reading on the 20th day of November, A.D. 2012. _________________________________ Mayor ATTEST: _____________________________ City Clerk -3- Page 1 of 2 General Warranty Deed Maxwell Farm Legal Description PARCEL I: THE N 1/2 OF THE SE 1/4 OF SECTION 16, TOWNSHIP 8 NORTH, RANGE 68 WEST OF THE SIXTH PRINCIPAL MERIDIAN, EXCEPT A STRIP OF LAND OFF THE WEST END OF SAID LAND AND BEING 25 FEET EAST OF THE CENTERLINE OF THE RAILROAD RIGHT OF WAY; ALSO EXCEPTING THEREFROM THOSE PARCELS OF LAND AS CONVEYED BY DEEDS RECORDED JUNE 29, 1949 IN BOOK 877 AT PAGE 28, RECORDED JANUARY 7, 1965 IN BOOK 1276 AT PAGE 259, AND RECORDED AUGUST 9, 1971 IN BOOK 1471 AT PAGE 674, IN THE RECORDS OF THE LARIMER COUNTY CLERK AND RECORDER, COUNTY OF LARIMER, STATE OF COLORADO. PARCEL II: THE S 1/2 OF THE SE 1/4 OF SECTION 16, TOWNSHIP 8 NORTH, RANGE 68 WEST OF THE SIXTH PRINCIPAL MERIDIAN, COUNTY OF LARIMER, STATE OF COLORADO; EXCEPTING THOSE PARCELS OF LAND AS CONVEYED BY DEEDS RECORDED JANUARY 11, 1909 IN BOOK 237 AT PAGE 256, NOVEMBER 16, 1911 IN BOOK 304 AT PAGE 390, SEPTEMBER 28, 1917 IN BOOK 359 AT PAGE 501, JANUARY 10, 1918 IN BOOK 364 AT PAGE 99, MAY 26, 1949 IN BOOK 874 AT PAGE 177, AND JANUARY 7, 1965 IN BOOK 1276 AT PAGE 259 IN THE RECORDS OF THE LARIMER COUNTY CLERK AND RECORDER, COUNTY OF LARIMER, STATE OF COLORADO. PARCEL III: A TRACT OF LAND IN THE SOUTHEAST QUARTER OF SECTION 16, TOWNSHIP 8 NORTH, RANGE 68 WEST OF THE 6 TH PRINCIPAL MERIDIAN, COUNTY OF LARIMER, STATE OF COLORADO, MORE PARTICULARLY DESCRIBED AS FOLLOWS; CONSIDERING THE EAST LINE OF THE SAID SOUTHEAST QUARTER AS BEARING NORTH 00 DEGREES 08 MINUTES WEST AND ALL BEARINGS CONTAINED HEREIN RELATIVE THERETO IS CONTAINED WITHIN THE BOUNDARY LINES WHICH BEGIN AT A POINT ON THE WESTERLY RIGHT OF WAY LINE OF INTERSTATE 25 WHICH POINT BEARS SOUTH 89 DEGREES 52 MINUTES WEST 233.01 FEET FROM THE EAST QUARTER CORNER OF SAID SECTION 16 AND RUNS THENCE SOUTH 00 DEGREES 16 MINUTES EAST 131.00 FEET ALONG THE WESTERLY RIGHT OF WAY LINE OF INTERSTATE HIGHWAY Page 2 of 2 General Warranty Deed 25; THENCE NORTH 89 DEGREES 30 MINUTES WEST 277.50 FEET; THENCE NORTH 00 DEGREES 30 MINUTES EAST 131.00 FEET; THENCE SOUTH 89 DEGREES 30 MINUTES EAST 275.70 FEET TO THE POINT OF BEGINNING.