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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 09/24/2013 - PROPOSED WATER RIGHT UTILIZATION FEEDATE: September 24, 2013 STAFF: Donnie Dustin, Kevin Gertig, Lance Smith Pre-taped staff presentation: available at fcgov.com/clerk/agendas.php WORK SESSION ITEM FORT COLLINS CITY COUNCIL SUBJECT FOR DISCUSSION Proposed Water Right Utilization Fee. EXECUTIVE SUMMARY The purpose of this work session presentation and discussion is to provide City Council with an explanation of the need for a Water Right Utilization Fee (WRUF) and how this fee is determined. In order to meet the water needs of new development or redevelopment within the Water Utility service area, developers are assessed a Raw Water Requirement (RWR). Many of the water rights accepted by the Water Utility require storage in order to provide that water supply throughout the year and during drought years. The WRUF would result in an increase in water development fees, but provides the capital associated with developing storage to utilize the water rights that are provided through the current RWR. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 1. What feedback does the Council have regarding the proposed WRUF? 2. Is this item ready for formal Council consideration? BACKGROUND / DISCUSSION When development occurs within the Water Utility service area, the development is assessed a Raw Water Requirement (RWR) and required to pay plant investment fees. The RWR provides the Water Utility with the necessary raw water to meet the water needs of the development and the plant investment fees allow the development to buy into the existing water treatment and transmission system. RWR may be paid in shares of irrigation companies which convey a portion of the irrigation companies’ water rights to the Water Utility, or may be paid by cash. An increasingly critical component to the overall infrastructure of the water utility is the need for sufficient raw water storage. Raw water storage is needed in part to firm the yields of most of the irrigation company water rights accepted by the Water Utility. In addition, many of those water rights require year-round return flows that must be met from storage. The WRUF is being proposed to ensure adequate capital is available to develop the necessary storage for new development. The yields from irrigation company water rights are variable and seasonal, and do not align with the timing of the City’s water demands. Some of these water rights come with short-term storage, but most do not have any storage associated with them. Storage allows water rights to be managed to September 24, 2013 Page 2 meet year-round demands. Many of these rights are for ditches which only flow during the peak runoff each year. Because the amount of storage needed to firm a specific irrigation company’s water rights depends on when their rights yield compared to when that water is needed to meet demand, the WRUF will vary by irrigation ditch. The amount of storage required for a particular irrigation ditch was determined via the Water Utility’s supply system model. The cost of storage is based on current cost estimates of proposed storage projects. Together, these two parameters determine the irrigation ditch or water right specific WRUF. Recognizing that storage is needed to utilize most of the water rights accepted and that costs to acquire or build storage are increasing, the Water Utility is proposing the WRUF to be paid by the developer at the time a water service permit is requested. This fee is in addition to the water rights and/or cash-in-lieu of water rights and plant investment fees that are also required at that time. The WRUF ensures that new development not only provides water rights necessary to serve the development, but also the capital associated with developing the water storage required to utilize those water rights. A September 11, 2013 memorandum to City Council explains the need for and development of the WRUF in more detail (Attachment 1). Impact to Total Water Development Fees The financial and economic impacts of a new development fee vary by the development. Some developments are so capital intensive that the WRUF will not significantly impact the decision process for the developer. Other developments are small enough that the WRUF could have a noticeable impact on the project from the developer’s perspective. The proposed 2014 water utility plant investment fees for smaller projects (developments requiring a 2-inch or smaller connection) are lower than the same fees in 2013, thereby partially offsetting the additional cost of this new fee. A standard 8,600 square foot single-family residence will require $14,967 in development fees under the proposed 2014 fee structure compared to $12,727 currently. September 24, 2013 Page 3 Without the WRUF, the entire rate base will be required to cover the cost of the storage necessary to meet the water demand of the new development. Water Board Input The WRUF was been discussed with the Water Board at its August 15, 2013 meeting and will be again at the September 19, 2013 meeting when action is being requested of them. The Board’s input can be discussed during the September 24, 2013 Council work session. In addition to the Water Board, the WRUF will be discussed with the proposed 2014 rate adjustments with the Chamber of Commerce in early October, as well as at the Key Accounts Luncheon, before the First Reading of the rate Ordinances on October 15, 2013. ATTACHMENTS 1. September 11, 2013 Memorandum to City Council Re: Proposed Water Right Utilization Fee 2. PowerPoint presentation ATTACHMENT 1 ATTACHMENT 1 ATTACHMENT 1 ATTACHMENT 1 ATTACHMENT 1 1 Water Right Utilization Fee (WRUF) City Council Work Session September 24, 2013 ATTACHMENT 2 2 Agenda  What is the WRUF?  Why is a WRUF necessary?  How much is the WRUF?  How will the WRUF impact costs? 3 What is the WRUF? • A water right specific fee designed to cover the cost of raw water storage • Paid in addition to any Raw Water Requirements and any Plant Investment Fees 4 Why is a WRUF necessary? • Many water rights accepted by Utilities require storage to provide water supply: • Throughout the year • During drought years • Meet legal return flow obligations • Sufficient capital needed for acquiring storage • e.g., Halligan enlargement & gravel pits 5 0 20 40 60 80 100 120 140 160 180 Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Date Flow (cfs) Direct Flow Rights Water from Storage 2008 Actual Demands 130% of Average Poudre River Flows (1986) Water Supplies and Demands for Fort Collins Utilities Direct flow rights in excess of demands. Storage required to meet demands. 5 6 0 20 40 60 80 100 120 140 160 180 Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Date Flow (cfs) Direct Flow Rights Water from Storage 2008 Actual Demands 30% of Average Poudre River Flows (2002) Water Supplies and Demands for Fort Collins Utilities Significant variation in water right yields. Some excess even in dry year. Much more storage required. 6 7 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 Fort Collins Loveland Westminster Boulder Thornton Greeley Denver Water Aurora Water Colorado Springs… Pueblo Storage Per Capita (AF/capita) Front Range Storage Per Capita Comparison Storage Per Capita Owned or Controlled by Provider Pro Rata Portion of CBT Project Storage Note: Based on 2010 population 7 The Water Utility currently owns very little storage outside of CBT storage 8 How much is the WRUF? Water Right Utilization Fee Water Source "Storage Ratio" (per AF) Colorado‐Big Thompson Units a 0.00 $0 North Poudre Irrigation Co. b 0.00 $0 Pleasant Valley & Lake Co. 0.77 $3,080 New Mercer Ditch Co. 0.90 $3,600 Arthur Irrigation Co. 0.91 $3,640 Larimer No. 2 Irrigation Co. 1.00 $4,000 Warren Lake (same as Lar. No. 2) 1.00 $4,000 None (Cash in lieu) 1.00 $4,000 Credits or City Certificates ‐ $3,500 a CBT water comes with associated storage and is not currently planned to be firmed with new City‐owned storage. b The City currently only utilizes the CBT portion of NPIC rights, which comes with the associated storage. 9 - 10 20 30 40 50 60 70 80 90 Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Flow (cfs) Date City of Fort Collins Potential Poudre River Supplies Available to City Variation among ditches Ditch company: Pleasant Valley & Lake Canal River Scenario: 90% of Average 10 - 10 20 30 40 50 60 70 80 90 Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Flow (cfs) Date City of Fort Collins Potential Poudre River Supplies Available to City Variation among ditches Ditch company: Pleasant Valley & Lake Canal River Scenario: 30% of Average 11 - 10 20 30 40 50 60 70 80 90 Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Flow (cfs) Date City of Fort Collins Potential Poudre River Supplies Available to City Variation among ditches Ditch company: Larimer No. 2 River Scenario: 90% of Average 12 - 10 20 30 40 50 60 70 80 90 Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Flow (cfs) Date City of Fort Collins Potential Poudre River Supplies Available to City Variation among ditches Ditch company: Larimer No. 2 River Scenario: 30% of Average 13 How will the WRUF impact costs? Single‐family Residence on 8600 sqft lot 2013 2014 Total RWR (acre‐feet) 0.800 0.800 Cash in‐lieu‐of water rights $5,203 $5,203 Plant Investment Fees Water $4,084 $3,472 Waste Water $3,440 $3,090 WRUF $0 $3,202 Total Water Development Fees $12,727 $14,967 % Increase 18% 14 Questions: • What feedback does the Council have regarding the proposed WRUF? • Is this item ready for formal Council consideration? 15 Thank You