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HomeMy WebLinkAboutMemo - Mail Packet - 06/25/2024 - Memorandum from Jill Oropeza re Fort Collins Area Ditch Companies and City Ownership Issues (2) Page 1 of 7 Utilities electric · stormwater · wastewater · water PO Box 580 Fort Collins, CO 80522 970.212.2900 V/TDD: 711 utilities@fcgov.com fcgov.com/utilities MEMORANDUM Date: June 17, 2024 To: Mayor and City Councilmembers Through: Tyler Marr, Deputy City Manager From: Jill Oropeza, Interim Director of Water Utilities Subject: Fort Collins Area Ditch Companies and City Ownership Issues BOTTOM LINE This memo addresses several questions that have recently been raised by Councilmembers around ditch companies. Although mostly informative, this memo tries to address various ways the City can influence ditch company actions, including through the various City staff that hold ditch company board seats. Future discussion on these issues can be provided if requested by City Council. BACKGROUND There are numerous irrigation ditches that run through Fort Collins city limits and surrounding areas. These structures deliver water diverted from the Poudre and Big Thompson Rivers and other streams, including water that was diverted and stored in reservoirs. They deliver water to shareholders in the ditch companies that own the ditches and manage water deliveries. To effectively and efficiently deliver this water and avoid certain liabilities to its shareholders and the those around these ditches, ditch companies must have proper access to assure proper maintenance and water flow. However, these actions sometimes conflict with City policy goals. To better understand ditch companies and their activities, this memo addresses the following questions: DocuSign Envelope ID: B8C56646-1636-4AB4-A511-B1F16701836A Page 2 of 7 • How many ditch companies are in and around Fort Collins? There are numerous ditches that go through Fort Collins city limits and surrounding areas. Most of these ditches are owned and operated by ditch companies. The attached map shows the location of most of those ditches relative to Fort Collins. • How are ditch companies organized and operated? Ditch companies are special, limited purpose companies that exist to own and operate the ditch, related infrastructure (like diversion structures and headgates), and water rights, for company shareholders. Each ditch company exists as a separate legal entity organized pursuant to its articles of incorporation. Each operates pursuant to its article of incorporation, bylaws (to the extent they exist), policies (written and unwritten), rules and regulations (if any), and practices (formal and informal). Some ditch companies have vast irrigation systems and broad water right portfolios, while others have single structures and water rights. Some operate in a professional manner pursuant to detailed written procedures, while others carry on more informally. Some have relatively active and strong boards of directors that make most decisions, while others delegate various decisions and matters to ditch company staff. Some ditch companies hold water rights and interests that are vital to the City’s raw water supply, while others are less important. Some operate structures that are or may be relevant to various current and future City land use and environmental objectives, while others operate structures that generally lie outside of the Growth Management Area. Some have a history with the City (for better or worse), while others have had little historical interaction with the City. Overgeneralization of ditch companies and the related issues can therefore lead to inaccurate assumptions in a great deal of areas and unintended consequences. Any consideration of ditch companies should thus be specific to a particular ditch company. • Who owns and uses the water from these ditches? The ditch company typically owns the main ditches, and shares are owned by various users including large-scale and small-scale agricultural and livestock farmers, municipal water providers, businesses, homeowners, homeowners’ associations and many others. Uses can DocuSign Envelope ID: B8C56646-1636-4AB4-A511-B1F16701836A Page 3 of 7 range from crop irrigation, livestock watering, hay production, and various city landscape irrigation including for parks, large businesses, golf courses, natural areas, etc. • What are typical ditch company activities and why are they done? Ditch companies are limited-purpose entities that focus on delivering reliable and efficient water to their shareholders. The main functions include operation of the ditch and/or reservoir systems during the irrigation season, complying with the State’s water administration rules, maintaining the ditch to assure proper flow and avoid water loss and/or leaks, and clearing and maintaining access easements along the ditch. The last two functions related to access and maintenance typically require vegetation removal (including trees). • What rights and obligations do ditch companies have? Ditch companies have the right to build, operate, and maintain these ditches across others’ properties. Although some of these rights are held via ditch company ownership or through landowner agreements, many of these rights are not written down, but created by historical use. Along with these rights, there are also obligations to maintain these ditches properly to deliver water to shareholders and to avoid damage to the adjacent properties. This typically includes preventing excessive leakage by assuring proper ditch embankments and removing trees or other vegetation to avoid embankment erosion around them and avoid leakage via root systems – both of which require well maintained access roads along the ditches to get the proper equipment that can perform these tasks. • How much does the City own of these ditches and how many boards members do they have? To help satisfy our water supply needs for various purposes, the City has purchased shares in numerous ditch companies and, along with other shareholders, often hold seats on the Boards of Directors for the companies. Most of the City’s shares are held by Utilities (Water Resources Division) for treated water supply needs, but shares are also held by Parks, Natural Areas, Sustainability, and Recreation generally for their irrigation needs. Although they don’t hold shares, the Utilities Stormwater Department is frequently involved with the ditch companies since stormwater enters these ditches. The number of seats the City holds varies by company, but generally ranges from 1-3 seats and is generally proportional to the DocuSign Envelope ID: B8C56646-1636-4AB4-A511-B1F16701836A Page 4 of 7 Table 1 City Total City Total % City Shares Company % Owned Board Board Board Ditch Company Owned Shares by City Members Members Members Arthur Irrigation Company 726 1,497 48%2 5 40% Baker Lateral Company 1 5 20%1 5 20% Box Elder Ditch Company 6 64 9%0 3 0% Buckhorn Highline Ditch Company 94 180 52%1 3 33% Cache la Poudre Irrigating Ditch Company 0.31 2,500 0.01%0 5 0% Dixon Canon Ditch and Reservoir Company 830 1,000 83%2 3 67% Horsetooth (CBT; Northern Water)18,855 310,000 6%0 12 0% Lake Canal Company 6 260 2%0 5 0% Larimer and Weld Irrigation Company 1 1,419 0.07%0 5 0% Larimer County Canal No. 2 Irrigating Company 104 147 71%3 5 60% Louden Extension Canal and Reservoir Company 7 600 1%0 5 0% Louden Irrigation Canal and Reservoir Company 19 600 3%0 5 0% New Mercer Ditch Company 81 141 58%2 5 40% North Louden Ditch and Reservoir Company 7 20 34%0 3 0% North Poudre Irrigation Company 3,568 10,000 36%1 5 20% Pleasant Valley and Lake Canal Company 202 255 79%3 5 60% Sand Dike Ditch Company 6 27 23%0 3 0% Sherwood Irrigation Company 3 12 23%1 5 20% Sherwood Reservoir Company 82 470 17%1 5 20% Taylor and Gill Ditch Company 0.06 69 0.09%0 3 0% Trilby Lateral Ditch Company 10 18 53%0 3 0% Warren Lake Reservoir Company 169 225 75%3 5 60% Water Supply and Storage Company 29 594 5%0 9 0% City share ownership in each company relative to other shareholders. Table 1 summarizes City percent ownership and representation in ditch companies. • How must City ditch company board members act when on these boards? First and foremost, a board director has a fiduciary responsibility to the ditch company and its shareholders. As such, City representatives on ditch company boards may voice and deliberate on broader City interests and objectives when making decisions on behalf of the company but ultimately cannot vote contrary to the interests of the company and its shareholders. In this case, holding fiduciary responsibility to the company pertains specifically to aspects of the business that support continuity and quality of service (water delivery) to shareholders, as spelled out in the bylaws of each company. Exerting influence through board representation may be appropriate on issues where workable and agreeable outcomes are possible for all parties, or where there are various DocuSign Envelope ID: B8C56646-1636-4AB4-A511-B1F16701836A Page 5 of 7 alternatives that work for the company. There are also issues where the values and interests of the City and ditch company do not closely align and these situations may require a different approach so as to avoid City representatives being placed in a position to advocate for interests that are contrary to the interests of the ditch company. Given past City Council direction and as shown in Table 1, the City has increased the number of seats held on the boards of some ditch companies to be more proportional to the percent of shares the City owns. Generally, the number of director seats associated with an entity has typically been politically capped by the shareholder’s proportional ownership of shares and obtaining a higher percentage of board members than ownership is very difficult without favor of other shareholders. For example, if the City owns 55% of the shares of a ditch company with a five person board, it would be hard for the City to get a third board seat (unless they got more shares to get the ownership to 60% or higher). Also, pursuing increased board representation should be approached with caution as these efforts can create resentment, mistrust, and damage the important relationships between Ditch companies, the shareholders, and the City. Although the fiduciary responsibility City boards members must uphold to the ditch companies limit their actions on these boards, having more board members does provide help in influencing some actions. For example, the three City board representatives for the Pleasant Valley and Lake Canal Company influenced the ditch company to conduct better outreach around ditch rehabilitation and tree removal projects, including saving some of the trees that would have been removed otherwise. • Why do trees have to be removed in and along the ditches? The trees in and along the ditches in Fort Collins can be a tricky situation. While the trees provide lots of benefits in these corridors to wildlife, humans, and properties, the primary goal of the ditch is to effectively deliver water to the shareholders. Before large scale development in Fort Collins, many of these ditches ran through and served shareholder- owned farms where the owners or their livestock would clear the ditches and maintain access. Most of the trees currently along ditches have appeared from decades of deferred maintenance since the neighborhoods were built around them. The trees need to be removed to have proper access for delivering the water (e.g., avoiding debris dams) and maintaining the ditch to avoid potential liabilities like improper ditch bank heights and leakage that damages adjacent properties. In some cases where the ditch company owns DocuSign Envelope ID: B8C56646-1636-4AB4-A511-B1F16701836A Page 6 of 7 the land along the ditch, the trees are a liability if they fall on adjacent properties and homes. The longer ditch companies delay removing these trees the greater the liability builds and the higher the cost becomes to address them. • What are issues of concern and opportunities for partnership? There are many ways in which ditch company operations intersect with and affect the broader Fort Collins community, and where interests may conflict with other non-water related City values, including as recent examples, the removal of trees in and along ditches impacting tree canopy goals, installation of fences to restrict public access to the ditch right- of-ways, City efforts to retrofit water diversion structures to create fish passage on the river, increasing flows in the Poudre River, establishing ditch crossings to provide public access to City parks and natural areas, and using ditch company easements as City trails. The opportunities for partnerships between the City and the ditch companies will vary significantly. As noted above, ditch companies are diverse and an approach that works with one company may not work with a different company. Instead, strategic approaches should be considered and evaluated on a company-by-company basis. Partnering with ditch companies will benefit by understanding their needs and concerns. Generally, ditch companies need to be able to deliver the water to their shareholders avoid liabilities, and operate on limited funding, and thus want to avoid additional costs. Successful partnerships will likely address these needs and concerns, and possibly find benefits for the ditch company. For example, getting ditch company permission to use land along ditches for City trails will likely require assuring the ditch companies can access and maintain the ditch at all times, the City taking on the liability of allowing citizens around the hazards of the ditch, and avoiding increased costs or defraying other costs to the ditch company (e.g., mowing and tree removal along the ditch). • What steps are the City staff and City ditch board members taking to improve ditch company relationships? There are several ways that City staff and/or board members are trying to make improvements, including: DocuSign Envelope ID: B8C56646-1636-4AB4-A511-B1F16701836A Page 7 of 7 o City ditch board members influencing outreach to neighbors along the ditch when significant work occurs; o Exploring the enlargement of the City’s Community Canopy Program (https://www.fcgov.com/forestry/treecanopy) that provides low-cost trees to citizens with additional funding based on the City’s ditch company share ownership; o City ditch board members stressing the importance of long-term fiduciary responsibility that has led to increased assessments and the creation of more healthy reserves for many of the ditch companies; o Having a long-term City ditch board representative on the City’s Strategic Trails Plan (https://ourcity.fcgov.com/stp) team to focus on collaboration with ditch companies for trails along ditches; o City ditch board members leading an effort to consolidate several local ditch company’s operations and maintenance to provide efficiencies and personnel redundancies to avoid impacts to both the ditch companies and the City; and o City departments (e.g., Forestry, Stormwater, Parks) providing help to the ditch companies when there are mutual benefits. NEXT STEPS • City staff can provide additional information on ditch companies, including presenting at a future City Council work session, if requested. CC: Kelly DiMartino, City Manager Jen Dial, Water Resources Manager Donnie Dustin, P.E., Water Resources Engineer Eric Potyondy, Assistant City Attorney Mike Calhoon, Parks Director Kendra Boot, Forestry Senior Manager DocuSign Envelope ID: B8C56646-1636-4AB4-A511-B1F16701836A !! ! ! ! ! ! ! ! ! ! ! ! ! ! ! B o y d L a k e H o r s e t o o t h R e s e r v o i r T e r r y L a k e Long Pond Fossil Creek Reservoir North Poudre R es No 6 Cobb Lake Windsor R eservoir Annex N o 8 Cache La Poudre River Rocky Ridge Lake Warren Lake Curtis Lake Water S upply Res No 2 & 3 Donath Lake Kluver Reservoir Elder Reservoir Seaman Reservoir Lindenm eier Lake Claymore Lake College Lake Richard's Lake Kitchel Lake Duck Lake Tim nath Reservior Water Supply Res No 4 Dixon Reservoir Lake Sherwood Robert Benson Lake Mountain S upply Reservoir No 9 Parkwood Lake Mountain Supply Res No 10 Lee Lake City Park Lake Portner Reservoir Harmony Reservoir / Fort Collins Area Irrigation Canals Legend City Lim its GMA Area Streets Ditches Arthur Cana lArthur Irrig. Co. Arthur Latera lBox Eld er Ditch C o. Boxelder D itchBox Eld er Ditch C o. Cache La Poudre Inlet DitchLittle Cache La Pou dre Irrig. Coy DitchCoy Ditch Co. Dixo n La teralWarren La ke R eservoir Co. !!! Dixo n R eservoir Ditche sDixon C anyon Reservoir Co. Fossil Creek Reservoir InletNorth Po udre Irrig. C o. Jackson DitchJackson Ditch Co. Lake CanalLake Canal R eservoir Co. Larim er Co unty Ca nalWater Su pply and Storage Co. Larim er Co unty Ca nal No . 2Larimer Co unty Ca nal No . 2 Irrig. Co. Larim er and Weld CanalLarimer and Weld Irrig. Co. Little Cache La Pou dre DitchLittle Cache La Pou dre Irrig. Ditch Co. Mail Creek DitchNew M erce r Ditch C o. New M erce r DitchNew M erce r Ditch C o. North Loud en D itchNorth Loud en D itch Co. Plea sant Valley and Lake CanalPleasant Valley and Lake Canal Co. Sand Dyke DitchLake Canal R eservoir Co. Sherwood LateralSherwood Irrig. C o. Taylor and Gill D itchTaylor and Gill D itch Co. Trilby LateralTrilby Lateral Co. North Po udre Irrig. C o. Ditches 0 52.5 Miles Note : This list includes City owned ditch companies and major ditches/laterals tha t are within the City of Fort Colins. It is not comprehensive and may not include all ditches, laterals, or other conveyance structures.Updated: 9/2 9/2 015 DocuSign Envelope ID: B8C56646-1636-4AB4-A511-B1F16701836A