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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 02/07/2017 - FIRST READING OF ORDINANCE NO. 022, 2017, AUTHORIZAgenda Item 9 Item # 9 Page 1 AGENDA ITEM SUMMARY February 7, 2017 City Council STAFF Adam Jokerst, Water Resources Engineer Carol Webb, Water Resources/Treatmnt Opns Mgr SUBJECT First Reading of Ordinance No. 022, 2017, Authorizing the City Manager to Enter into a Lease Agreement with the Landowners Association for Phantom Canyon Ranches for Recreational Use of Halligan Reservoir and Certain Surrounding Lands. EXECUTIVE SUMMARY The purpose of this item is the authorization of a lease agreement between the City of Fort Collins and the Landowners Association for Phantom Canyon Ranches (the Association) for recreational use of Halligan Reservoir and certain real property adjacent to Halligan Reservoir owned by the City (Halligan Property). The Association has leased the recreational rights to the Halligan Property for fishing, boating, and similar activities since 1988. Historically, the North Poudre Irrigation Company (NPIC) leased the recreational rights for Halligan Reservoir to the Association. Because the City now owns the Halligan Property, it has the right to lease recreational use of it. The Lease Agreement would maintain historic leasing practices and will benefit the City in various ways, such as gaining certain rights to access to the Reservoir using the Association’s Meadow Creek Road, assisting in the monitoring and maintenance of the Halligan Property, facilitating the ongoing federal permitting process for the enlargement of Halligan Reservoir, and generating a revenue stream. The Lease Agreement provides for three ten-year terms, but allows for early termination by the City, if the enlargement of Halligan Reservoir receives authorization or if the City decides to no longer pursue the enlargement of Halligan Reservoir. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on First Reading. BACKGROUND / DISCUSSION Fort Collins owns the Halligan Property, which is various lands under and around Halligan Reservoir, as shown on Attachment 1. Historically, recreational rights for the Halligan Property were leased by NPIC (the City’s predecessor-in-interest) to the Landowners Association for Phantom Canyon Ranches, a Colorado nonprofit corporation. In 1993 the City purchased an option to buy the Halligan Property from NPIC, which the City executed in 2004. The option agreement preserved a prior 1988 lease agreement between NPIC and the Association. The 1988 lease has since expired. In June 2016 the City issued the Association a one year, non- exclusive revocable permit for recreational use of the Halligan Property. However, the Association desires a lease arrangement providing exclusive rights and a longer term than the revocable permit. As noted below, the City will also benefit from a longer-term arrangement, as set forth in the Lease Agreement. The Association is composed of approximately 35 members owning property around Halligan Reservoir. The Association is focused on land conservation and habitat enhancement, and established some of the first conservation-focused land covenants in the state. The Association has historically been a good neighbor and steward of the Halligan Property, both before and after the City acquired ownership. Agenda Item 9 Item # 9 Page 2 Fort Collins is engaged in the National Environmental Policy Act process to obtain a Clean Water Act Section 404 permit from the U.S. Army Corps of Engineers (Corps) to enlarge Halligan Reservoir. A permit decision from the Corps on the Halligan Water Supply Project (Halligan Project) is presently scheduled for 2019. As explained below, the Lease Agreement will facilitate the ongoing federal permitting process. The subject Lease Agreement provides the Association exclusive recreational rights to the Halligan Property for fishing, boating, and similar activities. The Lease Agreement contemplates an initial ten-year term and provides the option to renew the lease for two additional ten-year terms, for a total term of up to 30 years. An ordinance is consequently required to approve the Lease Agreement. However, the Lease Agreement contains two early termination options that likely limit its length. Specifically, the Lease Agreement will be terminated if either of the following events occurs: 1. The Corps issues a permit for the Halligan Project and the City commences construction; or 2. The City withdraws from the Halligan Project and re-conveys the Halligan Reservoir property to NPIC pursuant to terms of the 1993 purchase option agreement with NPIC. Staff believes the Lease Agreement is in the best interests of the City and will benefit the citizens of the City for the following reasons:  Through the Lease Agreement the Association has provided to the City the right to use the Association’s Meadow Creek Road and to cross Association property to access Halligan Reservoir. Currently, the only means to launch a boat onto the reservoir is by crossing Association property. The City desires to periodically use Meadow Creek Road to launch boats into Halligan Reservoir for maintenance and monitoring activities. Access rights to the Association’s Meadow Creek Road greatly facilitates the ongoing federal permitting process, and is a key term for the City in the Lease Agreement.  The Lease Agreement continues the Association’s stewardship of the Halligan Property. The Association maintains an aggressive invasive weed control program, hires a resident caretaker, and closely regulates recreational activities on the Halligan Property.  Fort Collins presently does not control or use any water stored in Halligan Reservoir. As such, the Lease Agreement will not impair the viability or operation of the water utility system.  The Lease Agreement will generate a revenue stream of $10,000 per year for the first ten years. From a comparison of lease agreements for similar reservoir properties in Larimer County, staff believes the Lease Agreement’s rental rate is equal to or greater than the fair market value of the Halligan Property. Rental rates for subsequent lease periods will be revised by the consumer price index. The Association desires to prohibit access to the Halligan Reservoir by all persons other than Association members. Exclusive use of the Halligan Property (subject to the City’s rights reserved in the Lease Agreement) is a key term for the Association. Presently Halligan Reservoir is not managed for public recreation. The only public access to potions of the reservoir is across State lands managed by Colorado Parks and Wildlife (CPW), formerly known as the Division of Wildlife. This public property provides limited access via hiking or seasonal 4x4 roads to the very upstream portion of Halligan Reservoir near the mouth of the North Fork of the Poudre River (Attachment 1). A small amount of fishing and boating occurs on the upstream portions of Halligan Reservoir, and is generally limited to periods when the reservoir is at or near full capacity. Also, a small number of more elite kayakers float the North Fork of the Poudre River into these upper portions of Halligan Reservoir. The Association has historically patrolled the Halligan Property border with the CPW land, and has asked non-members crossing this border to vacate the Halligan Property. The Lease Agreement permits the Association to prohibit public access to the Halligan Property only to the extent allowable by law. Following issuance of the permit decision and the termination of the Lease Agreement, City Council could decide to change the leasing arrangement at Halligan Reservoir, including making the City’s lands accessible to the public. The release of the draft Environmental Impact Statement (EIS) for the Halligan Project, currently scheduled for late 2017, will provide an opportunity for public comment. Future conditions could also be imposed by various agencies and entities involved in the Halligan Project’s permitting process that would require allowing public access to the reservoir. For example, CPW could seek to require the City to allow public access to Halligan Reservoir through that agency’s Fish and Wildlife Mitigation Planning Process. CPW Agenda Item 9 Item # 9 Page 3 currently manages land abutting Halligan Reservoir that could provide public access. As another example, Larimer County will have an opportunity to seek to impose recreational conditions through its County 1041 permitting process. As part of a now expired 1987 agreement with the City, the Association had agreed to provide land and access rights to the City for the Halligan Project in exchange for perpetual recreational use of the Halligan Property. The Association recently requested a renewed perpetual recreation lease agreement for the Halligan Property. However, staff does not recommend entering into a perpetual agreement given the uncertainties described above. CITY FINANCIAL IMPACTS The Lease Agreement will generate $10,000 per year for the first ten years, subject to early termination. Annual rental rates for subsequent lease periods will be revised by the consumer price index. BOARD / COMMISSION RECOMMENDATION At its January 19, 2017 meeting, the Water Board unanimously adopted the following resolution: The Water Board recommends City Council’s adoption of an ordinance authorizing the City Manager to enter into a lease agreement that is substantially similar to the attached Lease Agreement with the Landowners Association for Phantom Canyon Ranches for recreational use of Halligan Reservoir and certain surrounding lands. PUBLIC OUTREACH None. However, the release of the draft EIS for the Halligan Project, currently scheduled for late-2017, will provide an opportunity for public comment. ATTACHMENTS 1. Halligan Landownership Map (PDF) 2. Water Board Minutes Excerpt, January 19, 2017 (draft) (PDF) HALLIGAN RESERVOIR NW j 0.1 0 0.1 0.2 0.3 Miles HALLIGAN RESERVOIR- ADDITIONAL INUNDATION AREA AND LAND OWNERSHIP ENLARGED RESERVOIR TOTAL STORAGE- 14,525 ac-ft Legend Contour Elevation- 6,398 ft* Section Quarter Section Existing Halligan Surface Area @ 6,357.6 ft Enlarged Halligan Surface Area @ 6,383.0 ft Land Ownership Bureau of Land Management City of Fort Collins Division of Wildlife Free Enterprises Inc. Landowners Association MAC T J LTD. &XUUHQWVSLOOZD\HOHYDWLRQIHHW Halligan Reservoir UtahColorado Kansas Nebraska New Mexico Wyoming Arizona Texas Oklahoma ATTACHMENT 1 Excerpt from Unapproved Draft Water Board Minutes, January 19, 2017 Lease Agreement between the City of Fort Collins and The Landowners Association for Phantom Canyon Ranches for Halligan Reservoir and Adjacent Property (Attachments available upon request) Water Resources Engineer Adam Jokerst, who is project manager for Halligan Reservoir, summarized the issue and showed maps of the property. The City owns the Halligan Property, which is various lands under and around Halligan Reservoir. Historically, recreational rights for the Halligan Property were leased by North Poudre Irrigation Company (NPIC)(the City’s predecessor-in-interest) to the Landowners Association for Phantom Canyon Ranches, a Colorado nonprofit corporation. In 1993 the City purchased an option to buy the Halligan Property from NPIC, which the City executed in 2004. The option agreement preserved a prior 1988 lease agreement between NPIC and the association. The 1988 lease has since expired. In June 2016 the City issued the association a one year, non-exclusive revocable permit for recreational use of the Halligan Property; the lease contains three 10-year periods with two termination clauses. However, the association desires a lease arrangement providing exclusive rights and a longer term than the revocable permit. The lease agreement would maintain historic leasing practices and will benefit the City in various ways, such as gaining certain rights to access to the reservoir using the association’s Meadow Creek Road for certain purposes, assisting in the monitoring and maintenance of the Halligan Property, facilitating the ongoing federal permitting process for the enlargement of Halligan Reservoir, and generating a revenue stream of $10,000 per year (with future adjustments for inflation). Discussion Highlights Board members commented and inquired about various related topics, such as access rights, other options, other possible lessees, details in the agreement regarding grazing, the lease rate, the lease duration, landowners’ opinions of the Halligan expansion, terms of the agreement with NPIC, citizens’ requests for recreation access, and other reservoirs the City leases. Ms. Webb asked Mr. Jokerst to expand on the relationship between the landowners and the City. Mr. Jokerst stated the City sees the landowners as good stewards of the land, and that the relationship is symbiotic. During dam construction, the reservoir will be drawn down, which will affect the landowners’ recreation; they have agreed to this. Ms. Webb stated all the issues board members have mentioned were considered and discussed among staff. Board Member Michael Brown moved that Water Board recommends City Council’s adoption of an ordinance authorizing the City Manager to enter into a lease agreement that is substantially similar to the attached Lease Agreement with the Landowners Association for Phantom Canyon Ranches for recreational use of Halligan Reservoir and certain surrounding lands. Vice Chairperson Brett Bovee seconded the motion Vote on the motion: It passed unanimously 8-0. ATTACHMENT 2 -1- ORDINANCE NO. 022, 2017 OF THE COUNCIL OF THE CITY OF FORT COLLINS AUTHORIZING THE CITY MANAGER TO ENTER INTO A LEASE AGREEMENT WITH THE LANDOWNERS ASSOCIATION FOR PHANTOM CANYON RANCHES FOR RECREATIONAL USE OF HALLIGAN RESERVOIR AND CERTAIN SURROUNDING LANDS WHEREAS, Halligan Reservoir, also known as North Poudre Reservoir No. 16 (“Reservoir”) is an on-channel reservoir located on the North Fork of the Cache la Poudre River, in portions of Section 29, 32, 33, and 34, Township 11 North, Range 71 West of the 6th P.M., Larimer County, Colorado; and WHEREAS, the City acquired various rights to the Reservoir and certain surrounding lands (“Property”) pursuant to: the Warranty Deed, dated January 22, 2004, recorded with the Larimer County Clerk on January 26, 2004 at Reception No. 2004-0007821; and the Bargain and Sale Deed, dated January 22, 2004, recorded with the Larimer County Clerk on January 26, 2004 at Reception No. 2004-0007822; and WHEREAS, The Landowners’ Association for Phantom Canyon Ranches (“Association”), is an organization, the members of which own an interest in one or more of the parcels of the Phantom Canyon Ranches in the vicinity of the Reservoir; and WHEREAS, the City’s predecessor-in-interest to the Reservoir and Property historically leased certain recreational rights to the Reservoir and the Property to the Association and its predecessor, and the Association desires to continue to have access to the Reservoir and Property for recreational purposes; and WHEREAS, the City desires access to the Reservoir using the Association’s Meadow Creek Road for certain purposes, such as: conducting studies required for the permitting process by the U.S. Army Corps of Engineers or other federal, state, or local agencies associated with the City’s proposed enlargement of the Reservoir; for maintenance and safety inspections of the Halligan Dam; for regulatory compliance, and for water quality studies; and WHEREAS, the City and the Association has negotiated the proposed Lease Agreement attached hereto as Exhibit “A”, pursuant to which the City would lease to the Association certain recreational rights to the Reservoir and the Property, and the City would gain certain rights to access to the Reservoir using the Association’s Meadow Creek Road for certain purposes; and WHEREAS, said Lease Agreement will benefit the City by, among other things, gaining certain rights to access to the Reservoir using the Association’s Meadow Creek Road for certain purposes; assisting in the maintenance of the Reservoir and Property, facilitating certain aspects of the federal permitting process for the City’s Halligan Water Supply Project, and generating a revenue stream from the Reservoir and Property; and -2- WHEREAS, the City Manager and City staff have recommended to the City Council that it approve the Agreement as set forth herein. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows: Section 1. That the City Council hereby makes and adopts the determinations and findings contained in the recitals set forth above. Section 2. That the City Council finds, pursuant to Sections 23-111(a), 23-113(a), and 23-113(b) of the City Code, that the lease of the Reservoir and Property pursuant to an agreement that is substantially similar to the attached Lease Agreement is in the best interests of the City. Section 3. That the City Council finds, pursuant to Sections 23-111(b) and 23-113(a) of the City Code, that the lease of the Reservoir and Property pursuant to an agreement that is substantially similar to the attached Lease Agreement will not materially impair the viability of the water utility system as a whole and that it will be for the benefit of the citizens of the City. Section 4. That the City Council finds, pursuant to Section 23-114 of the City Code, that the lease of the Reservoir and Property pursuant to an agreement that is substantially similar to the attached Lease Agreement will result in the City receiving a value in an amount equal to or greater than the fair market value of the Property. Section 5. That the City Council hereby authorizes the City Manager to enter into an agreement with the Association that is substantially similar to the attached Lease Agreement, with such additional terms and conditions as the City Manager, in consultation with the City Attorney, may determine to be necessary and appropriate to protect the interests of the City or effectuate the purposes of this Ordinance. Introduced, considered favorably on first reading, and ordered published this 7th day of February, A.D. 2017, and to be presented for final passage on the 21st day of February, A.D. 2017. __________________________________ Mayor ATTEST: _______________________________ City Clerk -3- Passed and adopted on final reading on the 21st day of February, A.D. 2017. __________________________________ Mayor ATTEST: _______________________________ City Clerk EXHIBIT A SÎ " # # # ## # Ì ! # # ÂÎÆ Î ÎÎ ¶ÎÎ °ÎIÎ {2Î `cÎÎ²Î d}xÎÎ vÎÎ ÊÎUÎ p Î 6 Î 4 Î ? Î @Î 0Î 1Î AÎ .9Î !"'5Î :"«Î e³Î ÇºÎ ÎR»ÎÎPÎ inÎ¤Î 7Î #ÎWÎ·¿Î¬Î 8Î )Î~BÎTÎ ¼ÎQÎÎ $%/Î (1-8 ,.8 )*0358 +2/4 ÎÎ;3;Î ÁÎ *ÎÀÎqÎµÎCÎZÎ D¾ÎÎmÎYÎ HÎ½(Î$8Ë Î JÎÎXÎsÎ yEÎ#8 rÎÎFÎlÎ§Îª ÍÎ\ÎÎÎwÎÉÎ ¨Î V´Î_Îa©ÎtÎ f[®¡Î M Î oÎ¢k|bgÎ ¯h]£Î 68 7''"8 jÎ jÎ jÎ N±ÎOGzÎ ¦Î uÎ +<Î KÎ ,=Î ¥^LÎ &>Î -Î #!# # " # # # # &!%8 8 8 8 8 ÄÅ¹È¸Ã A