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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 03/06/2012 - FIRST READING OF ORDINANCE NO. 018, 2012, ESTABLISDATE: March 6, 2012 STAFF: Susan Smolnik Beth Molenaar AGENDA ITEM SUMMARY FORT COLLINS CITY COUNCIL 10 SUBJECT First Reading of Ordinance No. 018, 2012, Establishing Rental Rates and Delivery Charges for the City’s Raw Water for the 2012 Irrigation Season. EXECUTIVE SUMMARY This Ordinance approves 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. BACKGROUND / DISCUSSION The City is a shareholder in several local irrigation companies. Most years there is water in excess of that needed to meet City uses. To the extent there is surplus raw water, it can be rented to others for their use. Each year prior to the irrigation season and after the irrigation companies have established their annual assessments for water shares, the City Council approves rental rates and delivery charges for the use of the City’s raw water. Staff uses these annual raw water rates and delivery charges for the purpose of charging for various uses of Utilities’ 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 2009 through 2011 as well as proposed rates for 2012. Currently, the snowpack is near average in the Poudre Basin this winter. However, last year’s abundant snowpack provided steady streamflows that allowed storage reservoirs to fill. In addition, Utilities carried over water from the 2011 water year for use in 2012. To ensure that adequate supplies are maintained, staff will continue to closely monitor Utilities water supplies when making surplus raw water available for rental. The first priority will be to insure that adequate supplies will be carried over into 2013. In 2011, Utilities rented approximately 15,500 acre-feet of surplus water for just under $500,000. 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.). Staff is also proposing an option rate for the rental of collateral water by Windy Gap project participants. This rate allows Colorado Big Thompson Project (CBT) water to be held in reserve for a participant in the event that it is needed. Surplus Water Rental Market Those systems with active water rental markets include the 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 will likely have some CBT water available for rent this year. Staff recommends that agricultural rentals of CBT water be made at a price of $30 per acre foot. This is the same price that was charged last year. Staff further proposes that CBT water rented for municipal or industrial (M&I) purposes also remain at the same price of $49 per acre foot in 2012. CBT water for municipal or industrial uses is typically rented at a higher rate than for agricultural purposes reflecting the higher assessments charged to M&I water users. Utilities also expects to have surplus NPIC water that can be made available for rent. Each share of North Poudre Irrigation Company has an “agricultural” component and a “multiple use” component. 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 March 6, 2012 -2- ITEM 10 shareholders under the system. The multiple use portion of each NPIC share is available for 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 $30 per acre foot. This is the same price as last year. 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 2012, staff proposes a rental rate of $12 per acre foot to reflect its very limited use. The decreed use of 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 a very active rental market and the rental price of WSSC water is expected to be about $3,300 per share this year. In addition, it is anticipated that WSSC’s reusable return flow rental program will generate revenues of approximately $1,400 per share. Utilities occasionally has rental demand for reusable sources to satisfy state requirements for substitute supply and augmentation plans. Utilities’ primary reusable sources are Joe Wright Reservoir water and reusable effluent from Utilities’ water reclamation facilities. It is proposed that the rental price for these sources be $500 per acre-foot in 2012. Raw Water Delivery Charges This category covers sources that 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 Utilities’ raw water requirements. These other non-City entities with raw water agreements are mostly HOAs and the Poudre School District. Sources in this category include the Pleasant Valley and Lake Canal Company (PV&L) shares and other “Southside Ditches” shares. 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 Utilities’ administrative costs. For example, the assessment rate for PV&L water has been set at $175 per share. Based on this method, the raw water delivery charges would be set at $175 x 1.1 (110%) = $192.50 per share. Utilities has delivery obligations for reusable water where Utilities’ raw water requirement has been met. In this situation it is proposed that a fee of $100 per acre-foot be charged to help offset operation and administrative costs. Option Rate This year, staff is proposing an option rate of $3 per acre-foot to hold CBT water in reserve for use by Windy Gap participants. Windy Gap participants use the CBT system to deliver their Windy Gap water across the continental divide. Last year, all of the Windy Gap water that was previously pumped into the CBT system spilled due to the plentiful snow pack and the resulting high flows. This year, the Windy Gap system may not pump any water. In the event this happens, participants will need to rent CBT water. By paying the option rate, a participant can have Utilities- owned CBT water held in reserve until it can be determined whether the Windy Gap system will pump sufficient supplies. If the system does not pump enough Windy Gap water then option-paying participants will have the right to rent CBT water at the Council-set water rental price. If the Windy Gap system does pump sufficient supplies then these participants will not need to rent additional CBT water and Utilities can rent this water to other water users. Natural Areas- Owned Water The City’s Natural Areas Program owns some shares in the Boxelder irrigation system. Occasionally Natural Areas desires to rent these shares to other water users in this system. In the event that Natural Areas chooses to rent these shares in 2012, the rental price proposed is the same as the share assessment due to the very limited market for these shares. This Ordinance authorizes Utilities Executive Director to carry out the rental of these shares at the request of Natural Areas at that rate. FINANCIAL / ECONOMIC IMPACTS The revenue from the City’s rental and delivery of raw water is expected to be approximately $500,000 for 2012. The revenues generated by the rentals helps to off-set costs incurred by the City. March 6, 2012 -3- ITEM 10 ENVIRONMENTAL IMPACTS The City’s raw water rental program assists farmers in Northern Colorado and indirectly supports an open space agricultural landscape. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on First Reading. BOARD / COMMISSION RECOMMENDATION At its February 16, 2012 meeting, the Water Board discussed the proposed rates and charges and unanimously voted to recommend adoption of the proposed rates and charges. ATTACHMENTS 1. Proposed rental rates for 2012 2, Water assessment rates as set by the irrigation companies 3. Raw water rental rates and delivery set by the City from 2009 through 2011 and proposed 2012 rates and charges 4. Water Board minutes, February 16, 2012 ATTACHMENT 1 Table 1 Proposed 2012 Rental Rates and Delivery Charges Type of Water Proposed 2012 Rental Rates/Charges Surplus Rental Rates NCWCD Water (CBT) - Ag $ 30.00 /ac-ft NCWCD Water (CBT) – M&I $ 49.00 /ac-ft North Poudre Irrigation Co. – Early Ag Use $ 12.00 /ac-ft North Poudre Irrigation Co. - Ag Use $ 30.00 /ac-ft North Poudre Irrigation Co. – Multiple Use $ 30.00 /ac-ft Water Supply and Storage Co. $ 3300.00 /share Reusable Sources $ 500.00/ ac-ft Raw Water Delivery Charges NCWCD Water (CBT) – Ag $ 30.00 /share Arthur Irrigation Co. $ 27.50 /share Larimer County Canal No. 2 $ 550.00 /share New Mercer Ditch Co. $ 990.00 /share Pleasant Valley & Lake Canal Co. $ 192.50 /share Warren Lake Reservoir Co. $ 330.00 /share Sherwood Res. Co. $ 8.80 /share Sherwood Irrigation Co. $ 660.00 /share Reusable Sources $ 100.00 /ac-ft Natural Area Program Rental Rates Box Elder Irrigation Company $ 700.00 /share Option Rates Option for Collateral Water $ 3.00 /ac-ft 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 2009 2010 2011 2012 CBT (NCWCD, $/unit) 24.32 25.06 25.06 25.50 North Poudre Irrigation Co. ($/sh) 100.00 100.00 110.00 110.00 Water Supply & Storage Co. ($/sh) 2,300.00 2,500.00 2,500.00 2,700.00 Arthur Irrigation Co. ($/sh) 14.00 14.00 17.00 25.00 Larimer County Canal #2 ($/sh) 450.00 350.00 500.00 500.00 New Mercer ($/sh) 475.00 600.00 900.00 900.00 Pleasant Valley & Lake Canal ($/sh) 175.00 175.00 175.00 175.00 Warren Lake ($/sh) 300.00 300.00 300.00 300.00 Sherwood Reservoir ($/sh) 7.00 7.00 8.00 8.00 Sherwood Irrigation ($/sh) 600.00 600.00 600.00 600.00 Reusable Sources ($/ac-ft) n/a n/a n/a n/a ATTACHMENT 3 Table 3 Water Rental Rates/Charges Source 2009 2010 2011 2012 Surplus Water Rental Rates CBT Agriculture ($/ac-ft) 35.00 35.00 30.00 30.00 CBT Municipal/Industrial ($/ac-ft) 54.00 54.00 49.00 49.00 NPIC Early Ag ($/ac-ft) 14.00 14.00 12.00 12.00 NPIC Agriculture ($/ac-ft) 35.00 35.00 30.00 30.00 NPIC Multiple Use ($/ac-ft) 35.00 35.00 30.00 30.00 Water Supply & Storage Co. ($/sh) 3,200.00 3,200.00 3,200.00 3,300.00 Reusable Sources ($/ac-ft) 500.00 500.00 500.00 500.00 Raw Water Delivery Charges CBT Agriculture ($/ac-ft) 35.00 35.00 30.00 30.00 Arthur Irrigation Co. ($/sh) 15.40 18.70 18.70 27.50 Larimer County Canal #2 ($/sh) 540.00 385.00 550.00 550.00 New Mercer ($/sh) 570.00 660.00 990.00 990.00 Pleasant Valley & Lake Canal ($/sh) 210.00 192.50 192.50 192.50 Warren Lake ($/sh) 380.00 330.00 330.00 330.00 Sherwood Reservoir ($/sh) 8.40 7.70 8.80 8.80 Sherwood Irrigation ($/sh) 720.00 660.00 660.00 660.00 Reusable Sources ($/ac-ft) 100.00 100.00 100.00 100.00 Option for Collateral Water ($/ac-ft)n/a n/a n/a $3.00 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 16, 2012 1 ATTACHMENT 4 Raw Water Rental Rates and Delivery Charges (Attachments available upon request). Water Resources Engineer Susan Smolnik presented information on this item and stated it is presented to the Water Board every February. Ms. Smolnik provided additional information on this item at the request of Vice Chairperson Balderson, who requested additional information for the benefit of the new board members. Overview The presentation includes the following components: surplus water rental, the three active rental markets, raw water sale and delivery agreements, and reusable water. Surplus Water Rental Surplus raw water is water that is in excess of the City’s needs for the current water year. This is determined based on dry year demand. Sufficient supplies are factored in for carryover into the following year, and most years the City has surplus water. The City rents water to offset costs, to support the local agricultural economy, and to be a good basin neighbor. Ms. Smolnik stated the City owns shares in the three agricultural (ag) companies, and there are assessment costs that need to be paid on the share ownership each year. For 2008, the revenue exceeded the assessment costs. A board member asked for clarification on the word “assessment.” Ms. Smolnik stated the assessment is a payment made to the ditch companies for maintenance purposes. Even though the City’s water may not be delivered through the ditch, the City still has a responsibility as a shareholder to pay for their share of the upkeep of the ditch. Is this prorated per share? Yes. Does this include Colorado Big Thompson (CBT) water? Yes. Three Active Rental Markets The three active rental markets are the Colorado-Big Thompson Project (CBT), the North Poudre Irrigation Company (NPIC), and the Water Supply and Storage Company (WSSC). Colorado-Big Thompson Project CBT water is delivered from the Colorado-Big Thompson Project via Horsetooth Reservoir. The water is delivered from the west slope to the east slope via a tunnel under Rocky Mountain National Park. This water is available for municipal, agricultural, and industrial users without going to water court, and can be used anywhere within the Northern Colorado Water Conservancy District (NCWCD) boundaries. Ms. Smolnik presented a map detailing these boundaries. A board member asked for clarification on the term“district.” Does this include all of the South Platte Basin? Ms. Smolnik stated the NCWCD district is different from the state system. What is CBT Water? Excerpt from Unapproved Water Board Minutes, February 16, 2012 2 CBT water is delivered from storage so it can be used at any time. The annual yield of each CBT unit is typically between .5 to 1.0 acre-foot (depending on the quota set each April). The City of Fort Collins owns 6 percent of the CBT units and rents CBT water by the acre-foot. When the quota is set, is it set for both municipal and agricultural uses? Yes, it can be used both ways. North Poudre Irrigation Company Ms. Smolnik presented a map detailing the boundaries for the NPIC. NPIC is a mutual irrigation company. There are 10,000 shares and more than 600 shareholders. Approximately 70 percent of the ownership is by municipalities and water districts (the City of Fort Collins owns 35 percent). The remaining 30 percent is owned primarily by agricultural irrigators and others. Types of NPIC Water NPIC annually appropriates three types of water for each share. The three types of water are as follows: early ag, seasonal ag, and multiple use. Ms. Smolnik presented a graph showing the NPIC share allocation. The multiple use water consists primarily of 4 units of CBT per share and can be used for a variety of purposes by NPIC shareholders. Both ag components are currently decreed only for irrigation within NPIC boundaries. Only the multiple use component is available for use by the City at this time. The City rents NPIC water by the acre-foot. Water Supply and Storage Company Ms. Smolnik presented a map detailing the boundaries for the WSSC. WSSC is a mutual irrigation company. There are 600 shares and more than half are owned by municipalities and water districts. The City of Fort Collins owns 4 percent of the shares. The majority of these shares are still rented to farmers. The remaining shares are owned primarily by agricultural irrigators. Fort Collins shares can only be used for agricultural purposes within the WSSC boundaries at this time; however, a change of use case was filed in December 2011. This would allow the City to use the shares for municipal purposes. Each share of WSSC provides approximately 50 to 100 acre feet of water for use during the irrigation season. The City rents WSSC water by the share. Raw Water Sale and Delivery Agreements Ms. Smolnik presented information on raw water sale and delivery agreements. The ditch shares involved include the Pleasant Valley Lake and Canal Company and the Southside Ditches (Larimer County Canal Number 2, New Mercer, Warren Lake, and Arthur). The City has grown over the farmland served by these ditches. The ditches are also used to deliver raw water to City parks, golf courses, school grounds, industrial parks, and Homeowner Associations (HOAs). Utilities has perpetual agreements to serve these areas. The raw water sale and delivery rate is set on a per share basis at 10 percent over assessment. Ms. Smolnik explained the difference between the sale and delivery price and the rental price. The rental prices for surplus water are based on the probability that the City will get the water. The sale and delivery agreements are more permanent because of water rights to support them. A board member questioned the use of the water. Can it only be used for ag purposes? Ms. Smolnik stated the water is only used for ag purposes unless it was included in the change of use case. Excerpt from Unapproved Water Board Minutes, February 16, 2012 3 A board member asked for clarification on the difference between Utilities’ owned shares and non Utilities’ owned shares. These are listed separately because other City departments such as Natural Areas and Parks own some of the shares. Reusable Water This includes transbasin water such as Joe Wright Reservoir and Michigan Ditch. Transbasin water originates in a different basin. Reusable water also includes a portion of Southside Ditch water that has gone through a change of use case. This water is mostly rented to augment evaporation from gravel pits and is rented by the acre-foot. Proposed 2012 Rental Rates/Charges Ms. Smolnik presented the proposed 2012 rental rates and charges as part of her presentation handout. She stated that most of the rates have not changed from last year. Board discussion: Is there an advantage to the City to using NPIC water versus CBT water? Ms. Smolnik stated there is a small advantage to using NPIC water. Water Resources Engineer Beth Molenaar stated NCWCD charges a different assessment for agricultural users versus municipal users. It was determined by the federal government that ag users can only afford to pay a certain amount for their water. The municipal users subsidize the ag users. If water is leased into the City from NPIC, they have to pay the ag rate, and the City has to pay the difference between what the ag user is charged and what the municipal user is charged. Why is the CBT municipal rental rate higher? Ms. Smolnik stated the rates are higher because there is an incentive to rent to ag users. Ms. Molenaar stated this is water that stays in the NPIC system. How much revenue is expected from water rental for 2012? Ms. Smolnik stated this depends on the year and the availability of water. The NCWCD recently introduced a new rental program to control the levels in Horsetooth Reservoir so they can better manage the inflows. This creates competition in the rental market. A board member asked for clarification on the fact that the rental rates are the same as last year when the snow pack is considerably different. Ms. Smolnik stated there were difficulties with renting water last year due to heavy rainfall in May and June. $30 per acre-foot seems to be a reasonable price for agricultural users to pay. What is the competition for water rental? The water districts are the competition. Are the rates flexible? Can the rates be changed based on rainfall? Ms. Smolnik stated there is language stating that rates can be adjusted. Since the rates are set by Council each year, they are typically not changed until September. Vice Chairperson Balderson asked for clarification on the “Option for Collateral Water” from the list of rates. Ms. Smolnik stated the Windy Gap water pumped into the CBT system spilled out last year. Since no more water could be pumped into the system, Windy Gap users borrow against the CBT water. Ms. Molenaar stated both Windy Gap and CBT water are stored in Lake Granby. The option allows collateral CBT water to be set aside until Windy Gap water replaces it by pumping. If Windy Gap does not pump, then the CBT water can be rented from the City. Excerpt from Unapproved Water Board Minutes, February 16, 2012 4 A board member asked for clarification on the term “carryover.” Ms. Smolnik stated that carryover is water that the City is allowed to keep in the CBT system for one year. A board member noted that revenues have decreased over the last four years. How recently have rental rates been changed? Ms. Smolnik stated rates were changed from $35 per acre-foot to $30 per acre-foot. Has competition in the marketplace increased in the last ten years? Ms. Smolnik stated there has been competition with NCWCD for the past two to three years. There has also been more runoff. Do the revenues go towards the assessment costs? Utilities Executive Director Brian Janonis stated that revenues offset the rates. How much water has been available during the last three years? What is the proportion of rental water? Ms. Molenaar stated that primarily CBT water has not been rented. The ag portion of NPIC water has been rented. All of the WSSC shares have been rented. Vote on the motion: It passed unanimously. Board Member Bovee moved that the Water Board recommend that the proposed rental rates and delivery charges be adopted by Council. Board Member Malers seconded the motion. ORDINANCE NO. 018, 2012 OF THE COUNCIL OF THE CITY OF FORT COLLINS ESTABLISHING RENTAL RATES AND DELIVERY CHARGES FOR THE CITY'S RAW WATER FOR THE 2012 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 WHEREAS, on February 16, 2012, the Water Board discussed the rental program and the use of raw water and recommended the following rates for the 2012 irrigation season: Type of Water Proposed 2012 Rental Rates/Charges* Surplus Rental Rates NCWCD Water (CBT) - Ag $ 30.00 /ac-ft NCWCD Water (CBT) – M&I $ 49.00 /ac-ft North Poudre Irrigation Co. – Early Ag Use $ 12.00 /ac-ft North Poudre Irrigation Co. - Ag Use $ 30.00 /ac-ft North Poudre Irrigation Co. – Multiple Use $ 30.00 /ac-ft Water Supply and Storage Co. $ 3300.00 /share Reusable Sources $ 500.00/ ac-ft Raw Water Delivery Charges NCWCD Water (CBT) – Ag $ 30.00 /share Arthur Irrigation Co. $ 27.50 /share Larimer County Canal No. 2 $ 550.00 /share New Mercer Ditch Co. $ 990.00 /share Pleasant Valley & Lake Canal Co. $ 192.50 /share Warren Lake Reservoir Co. $ 330.00 /share Sherwood Res. Co. $ 8.80 /share Sherwood Irrigation Co. $ 660.00 /share Reusable Sources $ 100.00 /ac-ft Natural Area Program Rental Rates Boxelder Irrigation Company $ 700.00 /share Option Rates Option for Collateral Water $ 3.00 /ac-ft *Note: (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. 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 2012 and the Utilities Executive Director is authorized to rent or deliver such raw water at said rates. Introduced, considered favorably on first reading, and ordered published this 6th day of March, A.D. 2012, and to be presented for final passage on the 20th day of March, A.D. 2012. _________________________________ Mayor ATTEST: _____________________________ Interim City Clerk Passed and adopted on final reading on the 20th day of March, A.D. 2012. _________________________________ Mayor ATTEST: _____________________________ Interim City Clerk