HomeMy WebLinkAbout1993-164-11/02/1993-AGREEMENT HALLIGAN RESERVOIR NORTH FORK POUDRE RIVER NORTH POUDRE IRRIGATION CO PHANTOM CANYON RANCH RESOLUTION 93-164
OF THE COUNCIL OF THE CITY OF FORT COLLINS
APPROVING AN AGREEMENT WITH NORTH POUDRE IRRIGATION
COMPANY FOR AN OPTION TO PURCHASE THE HALLIGAN RESERVOIR
WHEREAS, it is projected that the City of Fort Collins will need additional
storage water to meet the long-term water demands of the City sometime after the
year 2000; and
WHEREAS, North Poudre Irrigation Company (hereinafter referred to as "North
Poudre") is the owner of an existing reservoir known as Halligan Reservoir which
is located on the North Fork of the Cache la Poudre River; and
WHEREAS, the City has entered into an agreement with Halligan Resources
Company and Phantom Canyon Ranch Company, dated October 14, 1987, whereby the
City has, among other things, obtained an option to acquire certain property to
facilitate the enlargement of Halligan Reservoir and has acquired all engineering
plans, drawings and studies owned by Halligan Resources Company pertaining to the
Halligan Reservoir enlargement; and
WHEREAS, by subsequent assignment agreements, the City has obtained the
interest of Halligan Resources Company in that certain agreement dated December
30, 1985, between Halligan Resources Company and North Poudre and also the
interest of Halligan Resources Company in that certain decree entered in Case
Number 85CW435 in the District Court for Water Division No. 1; and
WHEREAS, the City has conducted feasibility studies evaluating the
engineering, environmental aspects and any permit process with regard to
enlarging Halligan Reservoir; and
WHEREAS, the City is presently in a position to, in cooperation with North
Poudre, conduct additional feasibility studies regarding the enlargement of
Halligan Reservoir, and the City desires to proceed with such enlargement if
feasible; and
WHEREAS, if the City subsequently determines that enlargement of the
Halligan Reservoir is feasible and desirable for the City, it wants to be able
to purchase the Halligan Reservoir from North Poudre; and
WHEREAS, in order to accomplish this, the City and North Poudre have
negotiated a proposed agreement granting the City the option to purchase the
Halligan Reservoir, a copy of which agreement is attached hereto as Exhibit "A"
and incorporated herein by reference.
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT COLLINS
that the Mayor be, and hereby is, authorized on behalf of the City to enter into
an agreement with North Poudre upon substantially the same terms and conditions
as are contained in Exhibit "A," subject to such modifications as the City
Manager and City Attorney may determine to be necessary to protect the interests
of the City and effectuate the purposes of the agreement.
Passed and adopted at a regular meeting of the Council of the City of Fort
Collins held this 2nd day of November, A.D. 1993.
ATTEST: Mayor
City Clerk
HALLIGAN RESERVOIR AGREEMENT
Page
Article 1 . Project Option
1 . 1 Definition of Project 3
1 .2 Option to Proceed with Project 3
1 . 3 Term 3
1 .4 Activities During Option Period 5
1.4 . 1 Diligence 5
1 . 5 Effect of Storage Restrictions Upon Option 6
1 . 6 Major Repairs 7
1.7 Title Review 8
1 . 8 Termination of Option by City 10
1 . 9 Memorandum 11
Article 2 . Exercise of Option
2 . 1 Exercise of Option 11
2 . 2 Conveyances and Payment for Project 11
2 .2 . 1 Conveyances 11
2 .2 . 2 Payment 12
2 . 2 .3 Easements and Retained Ownership 12
2 .2 .4 Title 13
2 .2 .5 Perfection of Conditional Decree 15
2 . 3 Design and Construction of Project 15
2 . 3 . 1 Termination Prior to Construction of
Reservoir 15
2 .4 Operations Advisory Committee 16
2 . 5 Construction 17
Article 3 . Security Arrangements
3 . 1 Option Period 18
3 .2 Option Exercise 19
Article 4 . Ownership, Operation, and Maintenance of
Enlarged Reservoir
4 .1 Storage Capacity Allocation 20
4 .1 . 1 Evaporation and Seepage 21
4 . 1 . 2 water Represented by North Poudre Stock 21
4 .2 Outlet Capacity 22
4 . 3 Temporary Storage Capacity Restrictions 22
4 .4 Recreation 22
4 . 5 Operation of Reservoir 23
4 . 6 Measurement Devices 23
4 .7 Exchanges 23
4 . 8 Maintenance and Repair 24
4 .8 .1 Routine Maintenance and Repairs 24
4 . 8 .2 Capital Reconstruction 24
4 . 8 . 2 .1 Reconveyance 25
4 .9 Liability 27
Article 5 . Miscellaneous
5 .1 Water Court Filings 27
5 .2 Notices 28
5 . 3 Default 28
5 .4 Assignment by North Poudre 29
5 .5 Assignment of City' s and Board' s Rights 29
5 .6 Binding Effect 32
5 .7 Survival of Agreement After Closing 32
5 . 8 Prepayment 32
5 .9 Agreement with The Nature Conservancy 33
Article 6 . Conditions Subsequent
6 . 1 Stockholder Ratification 33
HALLIGAN RESERVOIR AGREEMENT
THIS AGREEMENT is executed this D day of Alo✓ ('� LPG,
1993, by and between the CITY OF FORT COLLINS, COLORADO, a Colorado
municipal corporation (hereinafter referred to as "City" ) , the
BOARD OF THE FORT COLLINS WATER UTILITY, a City-owned enterprise
(hereinafter referred to as "Board" ) , and THE NORTH POUDRE
IRRIGATION COMPANY (hereinafter referred to as "North Poudre") .
W I T N E S S E T H:
WHEREAS, North Poudre is the owner of an existing Reservoir
known as Halligan Reservoir situate in Sections 32 , 33 and 34,
Township 11 North, Range 71 West of the 6th P.M. , in Larimer
County, Colorado; and
WHEREAS, the City has entered into an agreement with Halligan
Resources Company and Phantom Canyon Ranch Company, dated October
14 , 1987 (the "Phantom Canyon Agreement") , whereby the City, among
other things, obtained an option to acquire certain property to
facilitate the enlargement of Halligan Reservoir and acquired all
engineering plans , drawings, and studies owned by Halligan
Resources Company pertaining to the Halligan Reservoir Enlargement;
and
WHEREAS, by subsequent assignment agreements, the City
obtained the interest of Halligan Resources Company in that certain
Agreement dated December 30, 1985, between Halligan Resources
Company and North Poudre and also the interest of Halligan
Resources Company in that certain Decree entered in Case No.
85CW435 in the District Court in and for Water Division No. 1
awarding a conditional storage decree for the Halligan Reservoir
Enlargement; and
WHEREAS, the City has conducted initial feasibility studies
evaluating the engineering, environmental aspects, and permit
processes needed with regard to enlargement of Halligan Reservoir;
and
WHEREAS, the City is presently in a position, in cooperation
with North Poudre, to conduct additional necessary feasibility
studies regarding the enlargement of Halligan Reservoir, and the
City wishes to proceed with such enlargement if possible; and
WHEREAS, pursuant to Section 19 . 3 of the City Charter, as
amended April 6 , 1993 , and Ordinance No. 61, 1993 , the City has
established the City' s water utility as an enterprise within the
meaning of Art. X, §20 of the Colorado Constitution and authorized
the Board to issue its own revenue bonds and other obligations on
behalf of the City payable solely from the net revenues derived
from the operation of the enterprise; and
WHEREAS, the City, the Board and North Poudre desire by this
Agreement to set forth the rights and obligations of the parties
hereto with respect to said studies and enlargement and the option
to purchase described herein;
NOW, THEREFORE, in consideration of the mutual promises of the
parties hereto and other good and valuable consideration, the
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receipt and adequacy of which are hereby acknowledged, the parties
agree as follows :
Article 1. Project Option.
1 .1 Definition of Project: The Project that is the subject
of this Agreement consists of the enlargement of the existing
Halligan Reservoir which will include the existing Reservoir site.
The Project contemplates that a new dam will be built below the
existing structure to increase the storage capacity of the Reser-
voir. The Project includes the acquisition of all property or
other rights necessary for the proposed enlargement, and the design
and construction of the necessary facilities for such enlargement.
1.2 Option to Proceed with Project. For and in consideration
of the agreement of the City to pay North Poudre the sum of
$40, 000 . 00, the payment of which shall be due 60 days after
execution hereof, and the option payments which are due on or
before December 31 of each year as set forth on Exhibit A attached
hereto and incorporated herein by this reference, North Poudre
hereby grants to the City the exclusive option (the "Option" ) to
proceed with the Project upon the further terms and conditions set
forth in this Agreement.
1.3 Term. The initial term of the Option granted hereby
shall extend from the date of execution of this Agreement through
December 31, 1993 . The term of the Option may be extended by the
City for successive terms of one calendar year each up to and
including December 31, 2000, a 7 -year period, by payment by the
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City of the additional Option amounts set forth in Exhibit A in
advance of each year for which extension of the Option is desired.
There shall be one additional written extension of the option to
December 31, 2002, if the City requests same in writing if there
are problems in obtaining any necessary permits for the Project or
if litigation is causing delay in the Project. The City shall
continue making Option payments during any requested extension.
Nothing herein shall prohibit North Poudre from further extending
the time in writing by action of its Board of Directors should the
City request an extension and if there is a reasonable basis for
same, but North Poudre is not obligated to grant a further
extension beyond December 31, 2002 . After December 31, 2002 , if
North Poudre has not further extended the Option in writing in its
sole discretion, all rights and duties end and all option money
will be retained. However, during the initial option period and
any extension thereof, North Poudre shall promptly give the City
written notice of non-receipt of additional Option payments,
whereupon the City shall have twenty days to cure any failure to
pay. After expiration of such twenty day grace period without
payment, the City' s further rights under this Agreement shall
terminate. The obligations of the City to pay any additional
Option payment shall be subject to appropriation of such payment by
the City Council in advance of each year for which the Option is to
be extended. The failure to appropriate such payment does not
change North Poudre' s right to declare termination for non-payment.
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1 .4 Activities During Option Periods . During the Option
periods, the City shall prepare or commission at its sole expense
such technical studies prerequisite to construction of the Project
as it determines are necessary or desirable. The City shall,
before taking such action, apprise North Poudre of its activities
in this regard and shall invite its advice and comments upon all
aspects of the technical studies undertaken by the City. Such
consultation between the parties is anticipated to include frequent
briefings concerning progress of studies; sharing of all documents;
inclusion of North Poudre representatives on any advisory commit-
tees; participation, to the extent permitted by the City Code and
Charter and its purchasing policies, in interviewing and selection
of consultants . The City may, at its sole expense, obtain a survey
of the property that is the subject of this Agreement.
1 .4 .1 Diligence. During the term of the Option the
parties shall cooperate in connection with required diligence
applications for maintenance of the conditional water rights for
Halligan Reservoir Enlargement. In this connection, the City shall
prepare and file and further prosecute, in the City' s and North
Poudre' s name, any necessary diligence proceedings . The City and
North Poudre shall consult and cooperate fully in connection with
such proceedings . The City shall bear the costs and expenses of
such proceedings, except for such costs and expenses which North
Poudre may incur as the result of the use of its own staff, its
engineers, accountants, and its attorneys . The parties acknowledge
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that the City' s activities contemplated hereby in studying the
Project are of the sort ordinarily undertaken in connection with
the development of conditional water rights in the State of
Colorado. The parties agree that such activities may be cited and
relied upon to demonstrate reasonable diligence in the development
of the conditional water right for the Project in any water court
diligence proceedings during the term of the Option. The parties
further acknowledge that the City' s undertaking such activities
will not guarantee that findings of reasonable diligence will be
entered by the water Court.
1 .5 Effect of Storage Restrictions Upon Option. If after
December 31, 1995 and prior to termination or exercise of the
Option, the existing Halligan Reservoir is restricted by Order of
the Colorado State Engineer to storage of less than 3 , 200 acre-feet
of water, then the City shall have one (1) year from the date of
notification of the storage restriction to exercise the Option.
If the City fails to exercise the Option within the one
(1) year period, then the parties shall consult and North Poudre
may thereafter, alternatively, at its discretion, terminate or
elect not to terminate the Option. If it does not initially
terminate the Option, North Poudre may nevertheless, so long as the
storage restrictions remain in effect, elect to terminate the
Option at each annual renewal, by providing written notice to the
City no later than thirty (30) days in advance of the expiration of
the current Option term. If North Poudre terminates the Option,
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either initially or at an annual renewal, it shall remit to the
City within 60 days of its written notice of termination, without
interest, one-half of all Option payments previously paid by the
City pursuant to this Agreement, and this Agreement shall be
terminated and of no further force or effect.
If North Poudre elects not to terminate the Option, it
may, at its election, in each year that the Option and the storage
restrictions continue in effect, require the City to waive the use
of water attributable to one (1) share of North Poudre stock owned
by the City for each five acre-feet that the storage in Halligan
Reservoir is restricted below 3 , 200 acre-feet. This provision is
based upon a yield of a 5 acre-feet per share per year of North
Poudre stock. The formula will not be changed if it is subse-
quently determined that the yield of North Poudre stock actually
varies from 5 acre-feet per share per year. The formula will
operate as follows: for example, if storage is restricted to 2 , 000
acre-feet, the City may be required to waive delivery on 240 shares
of North Poudre stock. If, however, the Option thereafter termi-
nates by reason of the City' s nonrenewal thereof, following such
termination the City shall have no further obligation to North
Poudre to waive the use of share water.
1 . 6 Maior Repairs . If Halligan Reservoir requires major
repair or reconstruction during the Option period, the parties
shall negotiate in good faith to determine whether and how to
undertake and finance such repairs in a manner beneficial to both
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parties . If the parties are unable to agree concerning such
repairs, then North Poudre may terminate the Option by providing
written notice of termination to the City, and shall remit to the
City within 90 days of its written notice of termination, without
interest, one-half of all Option payments previously paid by the
City pursuant to this Agreement, and this Agreement shall be of no
further force and effect.
1 .7 Title Review. North Poudre has provided to the City a
title insurance commitment offering to insure the property that is
the subject of this Agreement in the amount of $1, 000, 000 .00 for
the land to be conveyed to the City pursuant to Paragraph 2 .2 . 1
below upon exercise of the Option. North Poudre has used access
over private property to the Project from the Laramie Highway (now
U. S. Highway 287) without hindrance over 18 years . There has not
been any public access over this route. Access over any State land
has been without any special use permit or right-of-way. North
Poudre will transfer only such rights of access as it has . Failure
of the title commitment or title abstract to evidence such right of
access shall not constitute a defect of title. The title commit-
ment or the title policy shall not be required to evidence a valid
and subsisting right-of-way for occupancy of lands needed for the
Project or access thereto which are owned by the United States of
America or the State of Colorado. North Poudre and the City shall
cooperate to identify, secure, and transfer any necessary rights of
way required for the Project from the United States of America and
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the State of Colorado. Any costs to acquire any rights required
shall be the City' s sole expense except for the cooperation to be
provided by North Poudre. In addition, North Poudre has disclosed
the existence and scope of any existing easements or encumbrances
upon the land not disclosed by the title commitment and known to
North Poudre. These are any rights of private owners, Poudre
Valley REA, a U.S. west underground cable, and The Nature
Conservancy. The City shall have 30 days from the signing of this
agreement by the City to provide written notice of defects of title
to which it objects. Existing exceptions in Schedule B of the
title insurance commitment for easements or encumbrances shall not
constitute defects of title. North Poudre covenants and agrees
that it shall not, after the signing of this Agreement, transfer or
convey the property required for the Project or by its actions or
omissions suffer or permit any liens, encumbrances, or other
detriments to title to such property without the prior written
consent of the City (which consent shall not be unreasonably
withheld) . The parties acknowledge that there is an existing
Recreation Lease, dated June 1, 1988 (the "Lease") , in effect for
the Reservoir by and between North Poudre and the North Fork
Recreation Association (the "NFRA") , which has been assigned by the
NFRA to the Landowners Association for Phantom Canyon Ranches (the
"Lessee") , which Lease includes a preferential right in the Lessee
for future recreation uses, and that the conveyance will be subject
to the provisions of the Lease upon exercise of the option. The
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City acknowledges receipt of a copy of the Lease, which is in
effect as of the date of this Agreement. However, North Poudre
agrees that during the term of the Option, North Poudre will not
renew the Lease or enter into any other recreation lease without
the prior written approval of the City which will not unreasonably
be refused.
1 . 8 Termination of Option by City. If the City either fails
to renew the Option in accordance with Paragraph 1. 3 above, or to
exercise the Option in accordance with Paragraph 2 . 1 below, the
Option shall terminate at the expiration of its then current term.
In such case, North Poudre shall retain all Option payments
previously paid, and all rights of the City to the Project shall
terminate and North Poudre shall own and hold the conditional
decree for the Project with no further obligation to the City. The
City shall promptly take such further actions, including execution
of quitclaim deeds and assignment of all rights in the conditional
decree and reservoir and site, as are necessary to vest the entire
conditional decree and its rights thereunder in North Poudre. The
City shall transfer ownership of and furnish North Poudre, without
charge, with copies of all technical and engineering reports,
studies, permits and data pertinent to the Project to the extent
same are City records that are by law open to inspection by the
public. Otherwise, same shall be furnished upon reimbursement from
North Poudre of the out-of-pocket cost paid by the City for such
information.
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1 .9 Memorandum. Either the City or North Poudre may record
a memorandum of this Agreement in the records of Larimer County,
Colorado. In that event, the parties will cooperate in the
drafting of such memorandum.
Article 2 . Exercise of option.
2 . 1 Exercise of Option. If the City elects to exercise the
Option, it shall notify North Poudre in writing in the manner
provided in Paragraph 5.2 that it is exercising the Option. The
Option can be exercised only in November or December of any year,
to enable North Poudre to plan for the appropriate assessments at
the next years annual meeting.
2 .2 Conveyances and Payment for Proiect.
2 . 2 .1 Conveyances. Within 60 days of exercise of the
Option by the City, North Poudre shall convey to the City by
General Warranty Deed with the reservations provided in Paragraph
2 .2 .3 hereof all land described in Transamerica Title Insurance
Company Title Commitment No. 6418310 which has been furnished,
including any and all easements and other appurtenances owned by
North Poudre in connection with such dam and reservoir, and all
land or rights owned by North Poudre in Sections 32, 33 and 34 ,
Township 11 North, Range 71 West, 6th P.M. , and by Bargain and Sale
Deed, without covenants of warranty, all its interest in Sections
27, 28 and 29 , Township 11 North, Range 71 West of the 6th P.M. ,
and all its interest in the conditional water right awarded in Case
No. 85CW435 for the Halligan Reservoir Enlargement, also known as
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North Poudre Reservoir No. 16 , in the amount of 33 , 462 acre-feet
with an appropriation date of August 1, 1979 , and adjudication date
of December 31, 1985 .
2 .2 . 2 Payment. For and in consideration of the
conveyance set forth in Paragraph 2 .2 .1, the City shall, at the
time of delivery of the deed, make an initial payment in the amount
set forth on Exhibit A for the year of exercise of the Option, and
the Board shall thereafter continue to make payments to North
Poudre in accordance with the balance of the payment schedule
attached hereto as Exhibit A and incorporated by this reference,
which continued payments and all prior option payments made shall
constitute the purchase price. Each payment made shall be con-
sidered to cover the City' s obligation for the ensuing calendar
year. The obligation of the Board to make the payments specified
herein shall be evidenced by a non-interest bearing revenue bond
(the "Bond") issued by the Board to North Poudre. The Bond shall
be a special obligation of the Board payable from the net revenues
of the City' s water system as provided in Article V, §19 . 3 of the
City Charter and shall be issued upon the exercise of the Option by
ordinance duly adopted by the Board, or as otherwise provided by
law.
2 .2 .3 Easements and Retained Ownership. The convey-
ance set forth in Paragraph 2 .2 . 1 shall be subject to a permanent,
reserved easement of active storage space in favor of North Poudre
in the enlarged reservoir in the amount of 6,408 acre-feet, to be
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used for the lawful storage of any North Poudre water rights .
"Active storage" means a perpetual pool of 6408 acre-feet not
diminished by any silt or dead storage. In addition to such
reserved storage, the parties acknowledge and agree that North
Poudre shall reserve and retain water then in storage and the
storage decrees for Halligan Reservoir, which are set forth below:
Amount (af) Appropriation Adjudication
Name (Acre Feet) Date Date
No.Poudre Reservoir 16 3719 04/30/1900 12/09/1904
No.Poudre Reservoir 16 2689 08/16/1906 04/22/1922
No.Poudre Reservoir 16
(Refill) 4591 12/31/1921 09/10/1953
NO. Poudre Reservoir 16
(Refill) 1817 cond- 12/31/1921 09/10/1953
tional
Halligan Reservoir is also known as North Poudre Reservoir No. 16 .
2 .2 .4 Title. Title shown by the Title Commitment
previously furnished, Transamerica Title Commitment No. 6418310,
shall be acceptable to the City. A general Warranty Deed
containing the exceptions and restrictions and easements therein
mentioned is acceptable to the City if no written notice of defects
is provided within thirty (30) days from the date this Agreement is
signed by the City, provided such defects were not known to the
City at the execution hereof and such defects affect the merchanta-
bility of title for the City' s intended use. Title to the property
to be conveyed to the City shall be merchantable and free and clear
of all liens and encumbrances, but subject to exceptions in the
title commitment furnished the City and the Lease, reservations and
restrictions and any easements of record or existing as of the date
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of this Agreement, the existence of which have previously been
disclosed to the City and not objected to by the City as a defect
of title in accordance with Paragraph 1 .7 above.
Within 30 days of exercise of the Option, North Poudre shall
provide to the City updated title insurance commitments or ab-
stracts of title to the land to be conveyed pursuant to Paragraph
2 .2 .1 above. If there are new matters shown from those previously
disclosed by the title commitment described in paragraph 1 .7 above
which detrimentally affect marketable title and restrict or prevent
intended use, the City shall have 20 days thereafter to provide
written notice of defects of title, and failing such notice shall
have agreed that title is merchantable. North Poudre shall take
such action as is necessary to cure any title defects arising
subsequent to the approval of title provided for in Paragraph 1 .7
above of which written notice is provided by the City. If such
title defects are not cured within 365 days of notice of defects,
the City may, at its discretion, terminate this Agreement, and the
City shall thereupon be reimbursed without interest for all Option
or other payments made to North Poudre to date; provided, however,
that if the title defect was caused by intentional actions of North
Poudre, then the City shall not be limited to recovery of its
Option payments but shall be entitled to collect all consequential
damages resulting from North Poudre' s failure to cure title
defects . The parties acknowledge and agree that the imposition of
nonconsensual liens such as judgment liens upon the property shall
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not be considered to have been caused by the intentional actions of
North Poudre.
2 .2 . 5 Perfection of Conditional Decree. From and after
the conveyance by North Poudre to the City of all North Poudre' s
interest in the conditional decree for the Halligan Reservoir
Enlargement, the City shall in its own name be solely responsible
for the prosecution of any required diligence application for the
conditional decree. The parties acknowledge that the City' s
prosecution of such diligence cases will not guarantee that any
findings of reasonable diligence will be duly entered by the Water
Court, and the City shall bear no liability for the results of such
diligence proceedings, unless the City fails to timely file and
diligently pursue an application for a finding of reasonable
diligence.
2 . 3 Design and Construction of Project. Upon exercise of the
Option, the City shall undertake any further feasibility study and
facility design needed in its judgment for construction of the
Project. The City on a timely basis shall continue to advise North
Poudre of its activities in this regard and to consult with it as
set forth in Paragraph 2 .4 below.
2 .3 .1 Termination Prior to Construction of Reservoir.
If after exercise of the Option the City determines that because of
legal, technical, operational, or financial problems, the Project
is not feasible or is impossible, the City may, in its discretion,
terminate the Project. In such case, the City shall reconvey and
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transfer to North Poudre without charge any and all property
previously conveyed or transferred to it pursuant to Paragraph
2 .2 .1 above, free and clear of any lien or encumbrance created by
the City, except for any easements, permits, or restrictions placed
upon such property in aid of the construction or operation of the
Project, by deed or transfer carrying the same warranties of title
as the deed or transfer to the City; and shall convey or assign
and deliver to North Poudre any studies, reports, data, or other
documents prepared or received by it relating to the Project that
are by law open to inspection by the public; and North Poudre shall
retain all option and purchase payments previously received from
the City and Board and any due and unpaid shall be paid by the
Board. In addition, in such case the City will, upon request of
North Poudre and on payment of the City' s actual cost without
interest, convey to North Poudre any additional real property and
personal property that the City had acquired in order to complete
the Project free of all liens or encumbrances created by the City
except for any easements, permits, or restrictions placed on any
such additional real property and personal property in aid of or in
anticipation of construction or operation of the Project. Actual
cost shall not include any charge for time spent by City employees
nor any mark-up for consulting charges .
2.4 Operations Advisory Committee. No later than six (6)
months after the exercise of the Option, the parties shall
establish an Operations Advisory Committee, consisting of two City
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representatives appointed by the City Manager and two North Poudre
representatives, who shall not be City employees, appointed by the
North Poudre Board of Directors. The Committee shall develop
written operation guidelines to aid in the operation of the
Enlarged Reservoir (as hereinafter defined) after construction.
Such guidelines shall address reservoir operations, accounting, and
measurement, including specific recommendations on the location and
type of measurement devices needed for accounting to meet the terms
of this Agreement. In case of disagreements between the North
Poudre and City representatives, the Operations Committee shall
jointly select a neutral party possessing experience and expertise
in the operation of reservoirs storing water used for both
irrigation and municipal purposes to mediate the disagreement by
reviewing materials supplied by the parties and meeting with all
members of the Operating Committee. All costs and expenses of the
mediator shall be split equally between North Poudre and the City.
If the foregoing mediation is unsuccessful in resolving the
disagreement, or if the Operations Committee cannot agree in
selecting the mediator, the parties may pursue such legal redress
as they determine best, with venue for any action arising from such
disagreement in the District Court of Larimer County.
2 .5 Construction. Upon completion of any necessary design
and study after exercise of the Option and upon obtaining any
necessary permits, the City shall proceed in a timely manner with
construction of the Project at its sole cost. The City will
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continue to inform North Poudre and consult with it concerning the
progress and the status of construction. All construction shall be
planned so as to avoid or minimize any loss of water storage or
delivery capacity from the existing reservoir during construction.
In the case of any such temporary loss of storage capacity or
delivery capacity resulting from construction, the City will make
available to North Poudre to the extent reasonably feasible an
equivalent amount of substitute water from other sources of supply
available to the City. If such substitute water does not restore
the yield otherwise due the stockholders of North Poudre, North
Poudre may, at its election, require the City to waive the use of
water attributable to one share of North Poudre stock owned by the
City for each five acre feet of otherwise unreplaced shortage in
yield suffered by North Poudre stockholders . This procedure may be
invoked by North Poudre in each year of temporary loss .
Article 3 . Security Arrangements.
In order to secure the parties ' respective performance of
their obligations hereunder during the term of this Agreement, the
parties agree to the following security arrangements :
3 . 1 Option Period. Promptly after receipt of any money from
the City for option payments, North Poudre will place one-half of
the Option payments made by the City in an FDIC-insured savings
account in the State of Colorado. North Poudre shall be entitled
to regularly receive the interest on the funds so deposited. North
Poudre will, upon creation of the account, give the City a first
-18-
lien on such account which shall either be perfected by delivering
possession of the passbook for the savings account to the City or,
alternatively, by setting up the account so that no withdrawals of
principal may be made without the City' s express written approval
(as by making the City a required signatory for withdrawals) . In
either case, North Poudre shall also provide the City with the
depository bank' s written Waiver of Set-Off against the savings
account or make a trust account arrangement at the sole expense of
North Poudre so the bank cannot claim this money. The security
interest shall be released and the passbook returned to North
Poudre or the City' s signature removed from the account at such
time as the Option is exercised or earlier if there is a written
agreement providing for such release signed by the City and North
Poudre. The City shall not be obligated to consent to any release
of security interest prior to the exercise of the Option. if the
Option is not exercised by the City prior to its expiration, and
there are no conditions which have occurred which require the
return of Option payments to the City, then the security interest
shall be released and the passbook returned to North Poudre or the
City' s signature removed from the account.
3 .2 Option Exercise. Simultaneously with the delivery of the
deed conveying the Halligan Reservoir property to the City, the
Board shall execute and deliver to North Poudre the Bond evidencing
its obligation to North Poudre in order to secure the Board' s
payment of the purchase price described in paragraph 2 .2 .2 above.
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Upon termination of the Project in accordance with
Paragraph 2 . 3 . 1 above, and reconveyance by the City of the property
previously conveyed to it and compliance by the city with all
obligations under this Agreement, North Poudre shall return to the
Board for cancellation the Bond to be given to North Poudre by the
Board.
Article 4. ownership, operation, and Maintenance of Enlarged
Reservoir.
4 .1 Storage Capacity Allocation. Upon completion of the
Halligan Reservoir Enlargement (the "Enlarged Reservoir") , North
Poudre shall be entitled to independent, free, and unrestricted use
of its reserved easement of 6 , 408 acre-feet of active storage space
in the Enlarged Reservoir ("North Poudre Is separate storage" ) , and
the City shall be entitled to the balance of capacity within the
Enlarged Reservoir (,,city, s separate storage" ) . Each party shall
be entitled to store water owned and controlled by it in the
temporarily unused capacity of the other, without charge, subject
to such water supply being "booked over" or transferred to the
other party, or being spilled from the Enlarged Reservoir, as the
other party makes use of its separate storage capacity.
Further, provided that there is no interference with the
water rights identified in this Agreement, each party shall be
entitled to store any water supply available to it from any source
within its separate storage capacity without charge for such use;
the parties agree, however, to cooperate to ensure that the
-20-
introduction of water supply from other sources does not impair
water quality within the Enlarged Reservoir to the detriment of
either party.
4 .1 .1 Evaporation and Seepage. In the event of lawful
imposition of evaporation and seepage charges on Reservoir
operations by administrative authorities, so long as the City has
a water supply in storage within its separate capacity within the
Reservoir, all evaporation and seepage from the Reservoir shall be
deducted from the City' s share of water in the Reservoir. At any
time that the only water stored in the Reservoir is owned by North
Poudre, then, in the event of lawful imposition of evaporation and
seepage charges on reservoir operations by administrative authori-
ties, evaporation and seepage losses shall be borne by North
Poudre.
4 . 1 .2 Water Represented by North Poudre Stock. This
Agreement does not convey nor grant any rights to the City for
independently operating any North Poudre storage for the 6 , 408 acre
feet secured to North Poudre under this Agreement which may be
attributed to the City' s ownership of North Poudre stock; provided,
however, that at the City' s request and to the extent North Poudre
may legally do so, North Poudre may allocate all or some water
attributable to stock owned by the City for delivery to the City' s
enlargement space in Halligan Reservoir under the policies of North
Poudre.
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4 .2 Outlet Capacity. In the operation of the Enlarged
Reservoir, the City shall at all times honor North Poudre' s right
to the benefit of up to 250 c. f .s. of outlet capacity for releases
from the North Poudre separate storage.
4 . 3 Temporary Storage Capacity Restrictions . North Poudre' s
storage capacity of 6, 408 acre-feet shall be preserved inviolate
subject only to any temporary emergency restrictions which invade
such capacity. In the event that the storage capacity available in
the Enlarged Reservoir is restricted below the full, enlarged
capacity as a result of (a) hold orders issued by the State
Engineer or (b) sedimentation reducing storage capacity, or if a
portion of the capacity is dedicated to storage for purposes not
envisioned in this Agreement, the parties agree that any such
restrictions or deduction of capacity shall be deducted, first,
against the City' s separate storage capacity in the Reservoir, to
the end that North Poudre' s separate storage capacity will be
inviolate so long as the total usable storage capacity in the
Enlarged Reservoir is at least 6,408 acre-feet.
4 .4 Recreation. The City shall enjoy sole ownership and
control of all recreational rights on the Reservoir, subject to the
Lease and any preferential right to recreational rights as
contained in the Lease if it is extant upon exercise of the Option.
All such recreation rights shall be subject and subordinate to the
use of the Reservoir for water storage and release for the water
supply purposes of the parties .
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4 .5 OAeration of Reservoir. If the Option is exercised, upon
delivery of the deeds to City, the City shall operate the Reservoir
and provide all Reservoir accounting necessary to document the
operation of the Reservoir and the allocation of water supply
within the Reservoir between the City and North Poudre. If
requested by North Poudre, the City shall provide daily verbal
reports of storage and releases. In addition, the City shall
provide North Poudre with monthly written accountings broken down
to a daily basis of inflow, storage, and releases into and from
North Poudre' s and the City' s separate storage.
The City will effect releases or exchanges of North
Poudre' s water stored under its retained decrees and entitlements
within 24 hours after receipt of request for releases or exchanges
from North Poudre and approval, if required, of such requests by
the Division Engineer. The City will, if reasonably possible,
accommodate requests for earlier releases by North Poudre.
4 . 6 Measurement Devices . As a part of the construction of
the Project, the City shall install a gauging station below the
Reservoir and such other measuring devices as the Operations
Advisory Committee may recommend.
4 .7 Exchanges. In the event that either the City or North
Poudre determines to lease or exchange water in the Enlarged
Reservoir outside of their respective water supply systems, the
other party shall enjoy a first right of refusal of acquiring any
such water to be exchanged or leased on the same terms and
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conditions as offered to any other party. The first right of
refusal must be exercised or declined within seven (7) days from
the receipt of written notification of the terms of an acceptable
lease or exchange agreement.
Notwithstanding the foregoing, the first right of refusal
of North Poudre shall not apply to any water that might be required
to be delivered by the City to Halligan Resources Company and the
Phantom Canyon Ranch Company pursuant to the Phantom Canyon Agree-
ment, which can be up to 1000 acre-feet.
4 . 8 Maintenance and Repair. Once each year the City shall,
after notifying North Poudre and inviting its participation,
conduct a thorough maintenance inspection of the Enlarged Reservoir
for determining maintenance or repairs needed. The City shall
thereafter categorize repairs recommended or required as a result
of the inspection or otherwise as "routine maintenance and repairs"
or "capital reconstruction. "
4 .8 .1 Routine Maintenance and Repairs . Routine
maintenance and repairs shall include ordinary and foreseeable
preventative maintenance and upkeep generally required to maintain
the Enlarged Reservoir and its appurtenances in sound operating
condition. The City shall be responsible for and shall bear all
costs of such routine maintenance and repair of the Enlarged
Reservoir and its appurtenances and additions .
4 .8.2 Capital Reconstruction. Capital Reconstruction
shall include major repairs or rehabilitation of the Enlarged
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Reservoir of a nature not reasonably foreseeable, or the
reconstruction or rehabilitation of the Enlarged Reservoir at the
conclusion of its useful life. Such capital reconstruction
includes, but is not limited to, complete rehabilitation or
replacement of the dam and its appurtenant structures as a result
of an act of God, failure of the Reservoir, or otherwise.
If such capital reconstruction would be required to
maintain the Enlarged Reservoir at its enlarged capacity, then the
City shall, after consultation with North Poudre, determine in its
discretion whether it will expend the funds necessary for such
capital reconstruction. The City, in its discretion may relinquish
the use of the Enlarged Reservoir, transfer to North Poudre the
conditional decree for Halligan Reservoir and any other water
rights it has specifically appropriated for the Enlarged Reservoir,
and convey to North Poudre the land and appurtenances acquired for
the Project to North Poudre pursuant to the following paragraph;
provided, however, that nothing herein shall require the City to
convey to North Poudre any water rights it has changed to allow
storage in the Enlarged Reservoir.
4 .8 .2 .1 Reconvevance. If the City determines that
because of legal, technical, operational or financial problems, it
is infeasible or impossible to complete the required capital recon-
struction so that North Poudre' s separate storage is maintained,
the City shall convey to North Poudre at no charge the entire
Project, including, all property previously conveyed or transferred
-25-
to the City under this Agreement. Such conveyances shall be by
instruments carrying the same warranties of title as received by
the City when the property was conveyed to it, free and clear of
all liens and encumbrances created by the City except for
easements, permits or restrictions placed upon the property in aid
of the construction or operation of the Enlarged Reservoir. If the
cause of the needed capital reconstruction is an Act of God, and
the City relinquishes its interest acquired under this Agreement,
the City shall bear no further responsibility or liability to North
Poudre for the relinquishment of the Enlarged Reservoir. If,
however, the cause of the needed capital reconstruction is faulty
design, faulty construction, or negligent operation of the Enlarged
Reservoir, or some other cause within the reasonable control of the
City, and the Enlarged Reservoir, if not reconstructed, is unable
to maintain an active capacity of at least 6 , 408 acre-feet, then
the City, if it determines that because of legal, technical,
operational or financial problems, it is not feasible or possible
to undertake a capital reconstruction of the Enlarged Reservoir,
shall either reconstruct the Enlarged Reservoir to a capacity to
allow North Poudre continued use of its separate storage capacity
in the Enlarged Reservoir or, alternatively, provide equivalent
storage capacity in another facility to which North Poudre' s
retained Halligan Reservoir decrees may reasonably be transferred
and used.
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Upon the reconveyance herein required, North Poudre shall
deliver the Bond to the Board for cancellation.
4 .9 Liability. Upon conveyance of the Project to the City,
the City shall, to the extent permitted by law, indemnify North
Poudre and hold it harmless from any and all claims or causes of
action arising from or caused by the negligent acts or omissions by
the City or its officers or employees in the construction and
operation of the Enlarged Reservoir, dam, and appurtenances. The
aforesaid indemnification shall not apply if the City has, in any
manner, been prevented by North Poudre from conducting maintenance
or repair of the Enlarged Reservoir or its appurtenances . Further,
this indemnification is subject to the requirements, defenses , and
limitations of the Colorado Governmental Immunity Act, Section 24 -
10-101 , C.R.S. , et sue. , as from time to time amended, and as
otherwise provided by law. North Poudre shall continue to be
responsible for all of its own actions but it is not responsible
for the acts or omissions of the City.
Article 5 . Miscellaneous.
5 . 1 Water Court Filings . Subject to the specific provisions
of this Agreement concerning applications for findings of reason-
able diligence, any party to this Agreement may make water court
filings involving their respective interests in Halligan Reservoir
without objection from any other party so long as such filings are
not inconsistent with this Agreement and so long as any filing is
not detrimental to other rights of a party to this Agreement.
-27-
water court filings may include new appropriations, and inclusion
of Halligan Reservoir in change of use, augmentation or exchange
plans .
5 .2 Notices . Any notices to be provided pursuant to this
Agreement shall be deemed delivered three (3) business days after
deposit in the United States mail, postage prepaid, addressed as
follows :
If to North Poudre: The North Poudre Irrigation Company
P.O. Box 100
3729 Cleveland Avenue
Wellington, Colorado 80549
with copies to its board of directors and manager. One
copy shall be sent to the North Poudre president at the
residence address.
If to City or Board: Water and Wastewater Director
City of Fort Collins
P.O. Box 580
Fort Collins, Colorado 80522
Notices shall be sent by certified or registered mail, return
receipt requested. These addresses may be changed by written
notice to the other parties.
5 .3 Default. Each and every term and condition of this
Agreement shall be deemed to be a material element of the
Agreement. In the event that any party should fail or refuse to
perform according to the terms of this Agreement, such party may be
declared in default. All payment obligations of the Board here-
under shall be merged into the Bond and the ordinance authorizing
the issuance thereof . The parties acknowledge and agree that the
subject of this Agreement concerns unique property and performance
-28-
by the parties, and the parties therefore agree that in case of
default by any party hereto, the other party shall be enitited to
specific performance by the other party of its obligations here-
under. In the event of such default, if the party that is not in
default commences legal or equitable action against the defaulting
party, the defaulting party shall be liable for the non-defaulting
party Is reasonable attorneys fees and costs incurred because of the
default.
5 .4 Assignment by North Poudre. North Poudre may assign its
rights and obligations hereunder only with the prior written
consent of the City and the Board, which consent shall not be
unreasonably withheld.
5 . 5 Assignment of City' s and Board' s Rights . The City and
the Board may assign their rights under this Agreement only as
follows :
(1) The City and the Board may assign their rights and
obligations under this Agreement without restraint to a municipal
or quasi -municipal corporation or enterprise thereof that succeeds
to the water service obligations of the City and/or the Board to
the City' s inhabitants and has demonstrated to North Poudre that it
is financially responsible. Any interest sought to be assigned or
conveyed by the City shall always be specifically and expressly
subordinate to the rights reserved in North Poudre described in
Paragraph 2 .2 .3 of this Agreement. Upon such assignment, the City
-29 -
and the Board shall be discharged from any further obligations
under this Agreement.
(2) The parties agree that should the City ever desire
to assign or convey all or any part of its interest in the Enlarged
Reservoir or water rights associated therewith to a public entity
(defined for purposes of this paragraph to mean the United States
or any agency or instrumentality thereof, the State of Colorado or
any agency, instrumentality or political subdivision thereof, a
municipal or quasi -municipal corporation or enterprise thereof, or
any other public district engaged in developing, managing or
supplying water in the State of Colorado) that will not succeed to
the City' s and/or the Board' s water service obligations to its
inhabitants, and that the City, in the good faith exercise of its
discretion, has determined is financially responsible, then the
City will consult with North Poudre concerning the reason for any
such proposed assignment or conveyance and whether such assignment
or conveyance can be avoided. In addition, in such case, North
Poudre shall have a Right of First Refusal to acquire any interest
in the Enlarged Reservoir or associated water rights sought to be
assigned or conveyed by the City at the same price and upon the
same terms and conditions as those contained in a bona fide written
offer made to the City by a public entity, which price and terms
and conditions are acceptable to the City. The Right of First
Refusal shall be exercised as follows: Upon receipt of an
acceptable bona fide offer from a public entity, the City shall
-30-
provide North Poudre with written notice of the price and terms and
conditions thereof; North Poudre shall have thirty (30) days
thereafter to provide the City with a written notice of exercise of
the Right of First Refusal. Should North Poudre not provide a
written notice of exercise of its Right of First Refusal within
that 30-day period, the Right of First Refusal shall be terminated
and the City shall be free to proceed with the assignment or
conveyance to the third party. Should North Poudre provide a
written notice of exercise of its Right of First Refusal, then it
shall have six months from the date of its notice of exercise in
which to close upon the assignment or conveyance of the interest to
be conveyed by providing the consideration therefor to the City.
Should North Poudre fail to consummate the closing within such 6 -
month period, or any extension thereof granted by the City (which
extension will not be unreasonably refused provided North Poudre is
diligently pursuing appropriate financing to effect the closing) ,
then the Right of First Refusal shall be terminated, and the City
may assign or convey the interest to a third party upon the same
terms and conditions as the transaction that was not consummated
with North Poudre. Any interest sought to be assigned or conveyed
by the City shall always be specifically and expressly subordinate
to the rights reserved in North Poudre described in Paragraph 2 .2 .3
of this Agreement. Should North Poudre either not provide timely
notice of exercise of its Right of First Refusal upon receipt of
notice from the City, or should it fail, after providing notice of
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exercise, to close the transaction within six months of the notice
of exercise, and should the City thereafter not consummate the
contemplated transaction with a third party, then, if the City
subsequently seeks to enter into a new arrangement for assignment
or conveyance, it will again honor North Poudre' s Right of First
Refusal in accordance with the procedures set forth above.
(3) Nothing in this Agreement shall be construed to prevent
the City from discharging any duties or responsibilities hereunder
by or through its duly authorized departments, officials, agents or
employees including, without limitation, the Board or its duly
authorized officials, agents or employees .
5 . 6 Binding Effect. This Agreement is the entire agreement
of the parties with respect to the subject matter hereof and shall
be binding upon and inure to the benefit of the parties, their
successors and assigns .
5 .7 Survival of Agreement After Closing. Except as provided
in Paragraph 5 . 3 hereof, this Agreement shall survive any convey-
ance of property and shall not merge into any deed or deeds given
if the Option is exercised.
5. 8 Prepayment. The Board and the City shall not have the
right of prepayment of any sum due North Poudre under this
Agreement or the Bond without North Poudre' s written consent.
North Poudre shall not be obligated to accept any prepayment which
may create an income tax obligation upon North Poudre.
-32-
5 .9 Agreement with The Nature Conservancy. There is pre-
sently an Agreement in effect between The Nature Conservancy and
The North Poudre Irrigation Company, which was approved by the
North Poudre manager on December 9 , 1991 . It is for a three-year
term. A copy of this agreement has been furnished to the City.
Any conveyance to the City by North Poudre will be subject to the
terms of any existing agreement with The Nature Conservancy. North
Poudre agrees it will not make a new written agreement or extend
such agreement without the City' s written approval of any
agreement, which approval shall not be unreasonably withheld. The
City will have not less than thirty (30) days from written notice
to it of the proposed agreement to respond.
Article 6 . Conditions Subsequent
6 .1 Stockholder Ratification. This Agreement is conditioned
upon the ratification by a majority of the stockholders of North
Poudre present at the 1994 Annual Meeting of Stockholders . If the
Agreement is not so ratified by the stockholders of North Poudre,
then the Agreement shall be of no further force or effect, and any
payments previously made hereunder shall be promptly refunded to
the City without interest.
CITY OF F COLLINS ORADO, a
Colorado ipa1 co orati
By:
Mayor
P.O. Box 580
Fort Collins, CO 80522 -0580
ATTE T �qq
I-yi"1:6']City Clerk
_ V / -33 -
APPROVED AS T9 FORM:
P,," I i,
As istan't City Attorney
, A'w�
City Spe ial Water Counsel
City Sp cial Bond Counsel
BOARD OF THE F OLLINS UTILITY,
a City-owne usi ess a erpr' e
By. ahv -
P.O. Box 580
Fort Collins, CO 80522 -0580
ATTEST:
o ct"( THE NORTH POUDRE IRRIGATION COMPANY
By:
ident
3729 Cleveland Avenue
P.O. Box 100
Wellington, CO 80549
ATTEST:
Manager
APPROVED AS TO FORM:
HILL & HILL, P.C.
Qu'-, �L -DO /n 2�- 973
Alden V. Hill
160 W. Mountain Avenue
PO Box 421
Fort Collins, CO 80522
COUNSEL FOR THE NORTH POUDRE
IRRIGATION COMPANY
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EXHIBIT A
HALLIGAN RESERVOIR ENLARGEMENT PROJECT
SCHEDULE OF PAYMENTS TO NORTH POUDRE IRRIGATION COMPANY
Payment Due Date Payment
See Note Below $40,000. 00
December 31 , 1993 $30,000 . 00
December 31, 1994 $40,000 . 00
December 31, 1995 $50,000 . 00
December 31 , 1996 $60 ,000 . 00
December 31, 1997 $70,000 . 00
December 31 , 1998 $80,000 .00
December 31, 1999 $90,000 . 00
December 31 , 2000 $188,223 .51
December 31, 2001 $188,223 . 51
December 31 , 2002 $188 ,223 .51
December 31, 2003 $188,223 . 51
December 31 , 2004 $188,223 .51
December 31, 2005 $188,223 . 51
December 31, 2006 $188,223 .51
December 31 , 2007 $188,223 .51
December 31, 2008 $188,223 .51
December 31 , 2009 $188,223 .51
December 31, 2010 $188,223 .51
December 31 , 2011 $188 ,223 .51
December 31, 2012 $188,223 . 51
December 31 , 2013 $188 ,223 .51
December 31, 2014 $188,223 . 51
December 31, 2015 $188 ,223 .51
December 31 , 2016 $188,223 . 51
December 31, 2017 $188,223 .51
December 31 , 2018 $188,223 .51
December 31, 2019 $188 ,223 .51
December 31 , 2020 $188,223 . 51
December 31, 2021 $188,223 .51
December 31 , 2022 $188,223 . 51
December 31, 2023 $187, 925 . 67
December 31 , 2024 $110,611. 82
December 31, 2025 $110, 611 .82
December 31 , 2026 $43,420 . 31
December 31, 2027 $43 ,420 .31
December 31, 2028 $38,851 .24
December 31, 2029 $19,846. 68
December 31 , 2030 $19 ,846. 68
TOTAL $5, , -2-G
Note: An initial option payment of $40,000 is due within
60 days after signing the agreement, which extends
the option through December 31, 1993 .