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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 03/05/2013 - FIRST READING OF ORDINANCE NO. 035, 2013, ESTABLISDATE: March 5, 2013 STAFF: Susan Smolnik Beth Molenaar AGENDA ITEM SUMMARY FORT COLLINS CITY COUNCIL 11 SUBJECT First Reading of Ordinance No. 035, 2013, Establishing Rental Rates and Delivery Charges for the City’s Raw Water for the 2013 Irrigation Season. EXECUTIVE SUMMARY This Ordinance approves procedures and 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 City departments and other entities. The proposed rate for each type of water is based on several factors, including market conditions and assessments charged by irrigation companies. Rentals in 2013 will be substantially limited and different than past years due to fire and drought related water supply issues. BACKGROUND / DISCUSSION As of February 1st this year, the snowpack was substantially below average in all of the basins in Northern Colorado. This raises concerns about raw water supplies in both the Poudre River and the Colorado-Big Thompson Project (CBT), which includes Horsetooth Reservoir. Regardless of snowpack conditions, it is likely that the Utilities’ ability to treat Poudre supplies will be limited due to water quality concerns after last summer’s fires. Although Utilities was able to maximize its limited ability to carry over supplies from 2012 for use in this year, it is expected that water restrictions will be implemented beginning April 1st. Utilities is unlikely to have excess water supplies, but is recommending that rental rates be set in the event that the water supply outlook changes. Also, there are raw water sale and delivery agreements between the Utilities and other entities requiring that charges be set annually. Similar to past years, staff is proposing two categories: (1) surplus raw water rental rates and (2) raw water delivery charges. The first category includes only those sources where an active rental market exists. The second category includes sources delivered under raw water delivery agreements that are used to irrigate greenbelts and City facilities (parks, golf courses, etc.). Given the drought conditions, this year staff is also proposing a CBT use rate. The CBT use rate enables Utilities to charge for the use of Utilities-owned CBT water used for the purpose of generating effluent for Platte River Power Authority (PRPA) as part of an agreement between the City and PRPA known as the Reuse Plan. SURPLUS WATER • Colorado Big Thompson Water (CBT) Rental Rates Beginning in the summer of 2012 and continuing to the present time, there has been little or no CBT water available on the usually active rental market. Given current snow pack conditions and the low volume of water currently stored in the CBT system, staff cannot accurately predict a market rental rate for CBT water. It is unlikely that any surplus CBT rentals will made until late in the irrigation season, if at all. Staff is, therefore, recommending that the CBT surplus rental rates be based on market pricing at the time the rental is made using rental information from the Northern Colorado Water Conservancy District’s website. Procedures Rental of surplus CBT water will be made only in the event that the City has (1) lifted all water restrictions; (2) met CBT delivery obligations to City departments and other entities with delivery agreements; and (3) maximized carryover supplies for 2014. Any surplus CBT water available will be offered first to water users on the ditches that run through town. These ditches, known collectively as the “Southside Ditches”, are 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 March 5, 2013 -2- ITEM 11 water would then be made available to other Poudre Basin water users. Finally, in the unlikely 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 does not expect to have much, if any, surplus NPIC water that can be made available for rent, since the Utilities intends to swap its NPIC Seasonal Ag water (which is not available for municipal purposes) to agricultural shareholders in exchange for their Multiple Use water which can be delivered out of Horsetooth Reservoir. In the event that any additional NPIC water is available for rent, staff recommends that it be priced at a typical agricultural water market rate given its limited use. Procedures Any water remaining after the swaps will either be rented through the North Poudre Irrigation Company or offered to shareholders that participated in the City’s swap. • Reusable Sources The Utilities occasionally has some small rental demand for reusable sources to satisfy requirements for substitute supply and augmentation plans. The Utilities’ reusable sources are Joe Wright Reservoir water and reusable effluent from the Utilities’ water reclamation facilities. As in recent years, it is proposed that the rental price for these sources be set at $500 per acre-foot in 2013. RAW WATER DELIVERY AGREEMENTS • PVLC and the Southside Ditches Delivery Charges This category sets charges for raw water used for irrigation of City facilities, such as parks and golf courses, or used by other entities that have met the Utilities’ raw water requirements. Non-City entities with raw water delivery agreements are mostly homeowners’ associations (HOAs) and the Poudre School District. As in recent years, it is proposed that the charges be set at a rate that is 10% above the assessments charged by the various irrigation companies. This helps offset the Utilities’ administrative costs. • CBT Delivery Charges It is unlikely that the Utilities will provide CBT water to the Parks or other entities with raw water agreements at the start of the irrigation season. In the event that there is CBT water available later in the year, staff recommends that the charge for this water be set at typical agricultural market prices. • Reusable Water Delivery Charges The Utilities has delivery obligations for reusable water. As in recent years, it is proposed that a charge of $100 per acre-foot be adopted for these charges. CBT USE RATE This is a newly created rate for drought-related operations of the Reuse Plan which are in place this year. The CBT use rate is charged for any CBT water converted to Windy Gap water. Under this year’s drought-related operations, the Utilities will allow PRPA to convert the CBT water it normally treats and uses into reusable Windy Gap water. The resulting converted Windy Gap water is used through the City’s system producing reusable effluent that PRPA may use at its Rawhide Power Station. PRPA has agreed that this effluent will not be rented to or used by other entities. Because this CBT water would have been used by the Utilities even if it was not converted to Windy Gap water, staff is proposing a rate that reflects a cost sharing of this water. March 5, 2013 -3- ITEM 11 Natural Areas Owned Water The City’s Natural Areas Program owns six shares in the Boxelder irrigation system. Occasionally, the Natural Areas will rent these shares to other water users within the Boxelder system. In the event that the Natural Areas chooses to rent these shares in 2013, the rental price proposed is the same as the share assessments as there is a very limited market for these shares. FINANCIAL / ECONOMIC IMPACTS Rental revenues are expected to be substantially less than previous years due to a lack of surplus water caused by the drought and subsequent fires. Typically, rental revenues are approximately $500,000 annually. ENVIRONMENTAL IMPACTS Typically the City’s raw water rental program assists farmers in Northern Colorado and indirectly supports an open space agricultural landscape. The expected reduction in water rentals will likely have a negative impact on these values. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on First Reading. BOARD / COMMISSION RECOMMENDATION The Water Board discussed the proposed rates and charges at its February 21, 2013 meeting and unanimously voted to recommend adoption of the proposed rates and charges. The unapproved minutes from that meeting are attached. ATTACHMENTS 1. Proposed 2013 rental rates and delivery charges 2. Water assessment rates as set by the irrigation companies 3. History of water rental rates/charges 4. Water Board minutes, February 21, 2013 ATTACHMENT 1 Table 1 Proposed 2013 Rental Rates and Delivery Charges Type of Water Proposed 2013 Rental Rates/Charges Surplus Water Rental Rates1 CBT Agriculture ($/acre-foot) market rate CBT Municipal/Industrial ($/acre-foot) market rate North Poudre Irrigation Co. – Early Ag ($/acre-foot) $ 15.00a North Poudre Irrigation Co. – Ag Use ($/acre-foot) $ 30.00a North Poudre Irrigation Co. – Multiple Use ($/acre-foot) $ 30.00a Water Supply and Storage Co. ($/share) n/ab Reusable Sources ($/acre-foot) $ 500.00 Raw Water Delivery Charges2 CBT Agriculture ($/acre-foot) $ 35.00 Arthur Irrigation Co. ($/share) $ 25.50 Larimer County Canal No. 2 ($/share) $ 660.00 New Mercer Ditch Co. ($/share) $ 990.00 Pleasant Valley & Lake Canal Co. ($/share) $ 203.50 Warren Lake Reservoir Co. ($/share) $ 660.00 Sherwood Res. Co. ($/share) $ 15.40 Sherwood Irrigation Co. ($/share) $ 660.00 Reusable Sources ($/acre-foot) $ 100.00 Natural Area Program Rental Rates Box Elder Irrigation Company ($/share) $ 700.00 . CBT Water Use Rate $ 30.90 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 Utilities’ raw water requirements are set at approximately 110% of the assessments charged by that company. (a) All North Poudre Irrigation Company rentals will be made through the irrigation company or to swapping shareholders. (b) Water Supply and Storage Company shares will not be rented this year. ATTACHMENT 2 Table 2 Water Assessment Rates as Set by the Irrigation Companies Source 2010 2011 2012 2013 CBT (Municipal Rate, $/unit) 25.06 25.06 25.50 26.44 North Poudre Irrigation Co. ($/share) 100.00 110.00 110.00 120.00 Water Supply & Storage Co. ($/share) 2,500.00 2,500.00 2,700.00 2,800.00 Arthur Irrigation Co. ($/share) 14.00 17.00 25.00 25.00 Larimer County Canal #2 ($/share) 350.00 500.00 500.00 600.00 New Mercer ($/share) 600.00 900.00 900.00 900.00 Pleasant Valley & Lake Canal ($/share) 175.00 175.00 175.00 185.00 Warren Lake ($/share) 300.00 300.00 300.00 600.00 Sherwood Reservoir ($/share) 7.00 8.00 8.00 14.00 Sherwood Irrigation ($/share) 600.00 600.00 600.00 600.00 Reusable Sources ($/acre-foot) n/a n/a n/a n/a ATTACHMENT 3 Table 3 History of Water Rental Rates/Charges Source 2010 2011 2012 2013 Surplus Water Rental Rates1 CBT Agriculture ($/ac-ft) 35.00 30.00 30.00 market rate CBT Municipal/Industrial ($/ac-ft) 54.00 49.00 49.00 market rate NPIC Early Ag ($/ac-ft) 14.00 12.00 12.00 15.00a NPIC Agriculture ($/ac-ft) 35.00 30.00 30.00 30.00a NPIC Multiple Use ($/ac-ft) 35.00 30.00 30.00 30.00a Water Supply & Storage Co. ($/sh) 3,200.00 3,200.00 3,300.00 n/ab Reusable Sources ($/ac-ft) 500.00 500.00 500.00 500.00 Raw Water Delivery Charges2 CBT Agriculture ($/ac-ft) 35.00 30.00 30.00 35.00 Arthur Irrigation Co. ($/sh) 18.70 18.70 25.50 25.50 Larimer County Canal #2 ($/sh) 385.00 550.00 550.00 660.00 New Mercer ($/sh) 660.00 990.00 990.00 990.00 Pleasant Valley & Lake Canal ($/sh) 192.50 192.50 192.50 203.50 Warren Lake ($/sh) 330.00 330.00 330.00 660.00 Sherwood Reservoir ($/sh) 7.70 8.80 8.80 15.40 Sherwood Irrigation ($/sh) 660.00 660.00 660.00 660.00 Reusable Sources ($/ac-ft) 100.00 100.00 100.00 100.00 . Notes: (1) Rates may be adjusted to reflect the remaining yield or the prevalent market price of the water stock being rented. (2) Charges for those who have satisfied the Utilities’ raw water requirements are set at approximately 110% of the assessments charged by that company. (a) All North Poudre Irrigation Company rentals will be made through the irrigation company or to swapping shareholders. (b) Water Supply and Storage Company shares will not be rented this year. Excerpt from Unapproved Water Board Minutes, February 21, 2013 Establishing Rental Procedures, Rates, and Delivery Charges for the City’s Raw Water for the 2013 Irrigation Season (Attachment available upon request). Water Resources Engineer Susan Smolnik introduced the item and introduced Water Resources Engineer Beth Molenaar. This item is typically brought to the board in February of each year. Ms. Smolnik stated that even though no surplus water is expected this year, sale and delivery charges should be set. Highlights from the discussion:  A board member asked about the response to date from North Poudre Irrigation Company (NPIC) shareholders about swapping. Ms. Smolnik stated that 182 shares have requested swaps so far. Ms. Smolnik and Ms. Molenaar attended the NPIC Annual Meeting in February to explain the swapping process. The swap form and information was sent to the shareholders at the beginning of this week.  A board member asked about the number of shareholders. Ms. Smolnik stated there are approximately 2,000 – 2,500 shares that are not municipal.  A board member asked about the financial impact of the lost rental revenue. Donnie Dustin, Water Resources Manager, stated there could potentially be lost revenue of $500,000.  A board member asked about the future impact of the swap. Ms. Molenaar stated a North Poudre share is a combination of municipal water and agricultural (ag) water. The City owns around 3,500 shares of North Poudre water. Each share has a portion of ag water the City cannot use. This water is typically rented back to the North Poudre shareholders. This year, the City will give the shareholders 1.5 to 2.0 acre feet of ag water in exchange for 1 acre foot of municipal water. Discussion on the motion: There was no discussion on the motion. Vote on the motion: It passed unanimously. Board Member Eccleston moved that the Water Board recommend the proposed rental procedures, rates and delivery charges be adopted by City Council. Board Member Brown seconded the motion. ATTACHMENT 4 ORDINANCE NO. 035, 2013 OF THE COUNCIL OF THE CITY OF FORT COLLINS ESTABLISHING RENTAL RATES AND DELIVERY CHARGES FOR THE CITY'S RAW WATER FOR THE 2013 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 21, 2013, the Water Board discussed the rental program and the use of raw water and recommended the following rates for the 2013 irrigation season: Type of Water Proposed 2013 Rental Rates/Charges1 Surplus Rental Rates Colorado-Big Thompson (CBT) - Ag $ market rate/ac-ft2 CBT - Municipal/Industrial $ market rate/ac-ft2 North Poudre Irrigation Co. – Early Ag Use $ 15.00 /ac-ft3 North Poudre Irrigation Co. - Ag Use $ 30.00 /ac-ft3 North Poudre Irrigation Co. – Multiple Use $ 30.00 /ac-ft3 Water Supply and Storage Co. $ N/A4 Reusable Sources $ 500.00/ ac-ft Raw Water Delivery Charges5 CBT – Ag $ 35.00 /ac-ft Arthur Irrigation Co. $ 25.50 /share Larimer County Canal No. 2 $ 660.00 /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. $ 15.40 /share Sherwood Irrigation Co. $ 660.00 /share Reusable Sources $ 100.00 /ac-ft Natural Area Program Rental Rates Boxelder Irrigation Company $ 700.00 /share CBT Water Use Rate $ 30.90 /ac-ft *Notes: (1) Rental rates may be adjusted late in the irrigation season to reflect the remaining yield or the prevalent market price of the water stock being rented. (2) CBT rental rates will be set using the market pricing at the time the rental is made based on the rental board on the Northern Colorado Water Conservancy District’s website. (3) All North Poudre rentals will be made through the North Poudre Irrigation Company or to shareholders swapping share portions with the City. (4) Water Supply and Storage Company shares will not be rented in 2013. (5) 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 2013 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 5th day of March, A.D. 2013, and to be presented for final passage on the 19th day of March, A.D. 2013. _________________________________ Mayor ATTEST: _____________________________ City Clerk Passed and adopted on final reading on the 19th day of March, A.D. 2013. _________________________________ Mayor ATTEST: _____________________________ City Clerk