To: Honorable Mayor and Members of Town Council
From: Mark Marlowe, P.E., Director of Castle Rock Water
Matt Benak, P.E., Water Resources Manager
Kurtis Cotten, P.E., Water Resources Program Analyst
Title
Resolution Approving the Purchase and Sale Agreement between Plum Creek CA, LLC and the Town of Castle Rock [United Water & Sanitation District's infrastructure and water rights in Douglas County]
Body
________________________________________________________________________________
Executive Summary
One of the key pieces of the Town’s long-term water plan is to maximize the use of our local renewable and reusable supplies. For this reason, a diversion on Plum Creek has been a part of the long-term water plan since the Plum Creek Water Purification Facility (PCWPF) was first envisioned. Castle Rock Water is considering entering into a contract for the purchase of United Water and Sanitation District’s renewable water infrastructure and nonrenewable groundwater rights and infrastructure in Douglas County. This purchase will include:
Renewable Water Infrastructure
Plum Creek Diversion
Ravenna Pipeline
Sutton Reservoir
Nonrenewable Water Assets
Bell Mountain Ranch groundwater and infrastructure
Cherokee Ranch groundwater and well site easements
The Plum Creek Diversion is the key component of this purchase. The diversion structure is located downstream of the confluence of East Plum Creek and West Plum Creek and could be used in lieu of constructing the East Plum Creek diversion (known as CR-2) just downstream of the Plum Creek Water Reclamation Authority outfall. Benefits of purchasing this infrastructure in place of constructing CR-2 include:
• The Plum Creek Diversion is existing, and thus, will not have to go through a new, individual U.S. Army Corps of Engineers (USACE) permitting process. This will save the Town a significant amount of time and money compared to an individual 404 permit for CR-2.
• It includes the Ravenna Pipeline. The 12.5 mile long pipeline could potentially be extended another 1,000 feet to serve as a point of diversion from the South Platte River prior to the river entering Chatfield Reservoir. This could give us the ability to divert additional renewable water from the South Platte. It could also be used to move our reuse water in Chatfield from storage during very dry times.
• The diversion’s location will allow it to capture East Plum Creek and West Plum Creek water rights, as well as our fully reusable return flows from the Plum Creek Water Reclamation Authority treatment facility outfall, including Denver Basin groundwater, WISE water, and other future imported sources. This will also eliminate the need for a future well field and pipeline on West Plum Creek.
• The diversion has a 40 cubic feet per second (cfs) capacity. This is more than the capacity that CR-2 is expected to permit for and could be utilized to its full capacity under free river conditions. The capacity of this diversion may allow for future partnerships with other water providers.
• The Plum Creek Diversion has an existing 240 acre-foot water storage reservoir, expandable to 1,500 acre-feet. This eliminates the need to construct a presedimentation basin that would be required with CR-2. The reservoir would provide several days of storage, increasing operational flexibility.
• The location of the diversion will allow for an improved water quality relative to water taken out of the stream at the CR-2 location. This will delay or reduce the size of future unit process additions planned for at the Plum Creek Water Purification Facility, saving the Town money.
The benefits of the Bell Mountain Ranch and Cherokee Ranch water rights and infrastructure include:
• Additional deep groundwater to our portfolio that can be used in an emergency, or to further protect our existing supplies.
• Water rights with infrastructure and easements to utilize them.
The key terms of the purchase and sale agreement are:
• Town will acquire the Plum Creek diversion facility, Sutton Reservoir, Ravenna pipeline and United’s Bell Mountain and Cherokee Ranch Denver Basin groundwater for $22.5 million.
• United’s ownership and control over the assets in the Plum Creek drainage will be liquidated.
• Town will assume Lochbuie and Ravenna service commitments.
• Town will assume service commitments to 75 large lot homes on the Sutton property, adding a potential of approximately $1.5 million in future incremental cost.
• Town will lease up to 500 acre-feet per year of excess effluent, amount determined at our sole discretion, for five years to United for $150 per acre-foot.
• United and member and affiliates will not oppose Town’s Water Court applications upstream of Chatfield Reservoir.
• Town will provide a first right of refusal to Cherokee Castle Foundation fort purchase of the Cherokee Ranch water rights.
One of the primary benefits of this purchase is that it is a more cost effective solution for recovering our reusable water than permitting and constructing CR-2. As further explained in the discussion section, extensive due diligence has been performed on the assets, and all indications are that the assets are worth the investment.
After United’s Douglas County assets have been acquired the next step will be to build the infrastructure to convey water diverted at the Plum Creek Diversion back to town and to file Water Court applications for direct flow water rights at the diversion and storage rights at Sutton Reservoir with 2017 priority dates. This will require a pump station, pipeline, and upgrades to Plum Creek Water Purification Facility.
Staff and the Castle Rock Water Commission (formerly known as Utilities Commission) unanimously recommended approval of the purchase and sale agreement. The resolution approving this purchase and sale agreement is provided as Attachment A.
History of Past Town Council, Boards & Commissions, or Other Discussions
On May 19, 2015, Town Council was updated on an agreement for the purchase and sale of capacity in the Plum Creek Diversion. The informational report was tabled.
On July 1, 2015, a memorandum was sent to the Town Manager to request the approval of a services agreement for the East Plum Creek Diversion Structure Preliminary Design with Leonard Rice Engineering, Inc.
On July 7, 2015, Staff recommended to the Water Resources Committee to develop an agreement with Plum Creek Water Reclamation Authority for an easement to construct a new diversion on their property.
On July 31, 2015, Staff recommended to the Utilities Director that a contract with Western States be approved for the Plum Creek Diversion Project preliminary design and permitting.
On August 18, 2015, Town Council received an update where Staff recommended annexing property owned by the Town to be utilized to construct the CR-2 diversion.
On August 31, 2015, the Town Manager was sent a memorandum requesting approval of a services agreement with AECOM for the design and bid phase services for the pump stations and transmission pipeline for a diversion constructed on East Plum Creek.
On August 16, 2016, Staff presented a proposal to Town Council in executive session to purchase United’s Douglas County assets.
On October 26, 2016, Utilities Commission unanimously recommended proceeding with purchasing United’s assets in Douglas County.
On November 1, 2016, Water Resources Committee recommended proceeding with the purchase of United’s assets in Douglas County.
On November 1, 2016, Town Council approved a budget amendment for the funds to purchase United’s assets in Douglas County on first reading.
On November 15, 2016, Town Council approved a budget amendment on second reading for the funds to purchase United’s assets in Douglas County and provided for its emergency adoption.
On October 17, 2017, staff presented the purchase of the United assets in Douglas County for Council discussion.
On October 24, 2017, Castle Rock Water Commission reaffirmed their support of the purchase of the United assets in Douglas County.
Discussion
One of the major goals of the Town’s Water Resources Strategic Master Plan (WRSMP) that was adopted in 2006 was to establish a renewable, sustainable water supply that accounts for 75 percent of the Town’s annual demand by the year 2050. In order to achieve this goal, the Town must have a portfolio of renewable water sources that includes capturing existing surface water rights, reusing our wastewater effluent, and importing surface water from outside of the Plum Creek Basin.
The Town has been working towards permitting and constructing a diversion located on East Plum Creek, just downstream of Plum Creek Water Reclamation Authority’s (PCWRA) outfall. A diversion downstream of PCWRA would be able to capture our East Plum Creek water rights, as well as our reusable effluent, which accounts for over one third of our renewable water goal. This diversion and location are referred to as “CR-2”. It is expected that the permitting process for CR-2 will take several years and a significant amount of money to complete. An alternative to proceeding with the permitting and construction of CR-2 is to purchase United Water and Sanitation District’s existing diversion, which would include appurtenant infrastructure and a significant amount of groundwater rights in Douglas County.
The infrastructure to be purchased includes the Plum Creek Diversion, pump stations, 240 acre-foot Sutton Reservoir, the Ravenna Pipeline, and three Bell Mountain wells with a pipeline system to convey water discharged from the wells to East Plum Creek. A portion of the pumping and pipeline infrastructure is reserved for Ravenna Metropolitan District in the amount of 800 gallons per minute and a maximum annual delivery of 424 acre-feet. The location of the infrastructure is shown in Attachment B. All of this infrastructure was inspected for the Town by AECOM on October 20, 2016 and found to be in working order.
The Plum Creek Diversion has a capacity of approximately 40 cubic feet per second (cfs) with 1.8 cfs reserved for Ravenna Metropolitan District. To put this in perspective, 40 cfs is equivalent to about 1-½ times our 2017 maximum daily water demand. The fact that this diversion is existing and already permitted will allow us to bypass the arduous permitting process through the U.S. Army Corps of Engineers that is required for CR-2. CR-2 would be located on East Plum Creek, making it impossible to directly divert our West Plum Creek water rights, thus a separate well field and pipeline would need to be built in the future. The Plum Creek Diversion is located downstream of the confluence of East Plum Creek and West Plum Creek, allowing us to capture our West Plum Creek water rights in addition to the East Plum Creek water rights that CR-2 would capture. The location of the Plum Creek Diversion further downstream than CR-2 also results in an increased distance from Plum Creek Water Reclamation Authority’s outfall, improving certain aspects of water quality and potentially delaying or reducing future improvements at Plum Creek Water Purification Facility to address unregulated contaminants.
Sutton Reservoir is currently 240 acre-feet in size with easements for the construction of an additional 1,500 acre-feet of storage. Temporarily storing diverted water in the reservoir prior to pumping back to Castle Rock will take the place of the pre-sedimentation basin that would be required with the CR-2 diversion and would allow several days of operational storage.
The Ravenna Pipeline is approximately 12.5 miles long, runs in a general northwesterly direction, and is 16 inches in diameter with the capacity to move 3,400 gallons per minute of water. The pipeline consists of 0.4 miles of class 250 ductile iron pipe beginning at the Sutton Pumphouse, and then 12.1 miles of 16-inch Flowtite GRP (glass reinforced plastic) pipe to the terminus point at Ravenna where the pipeline connects to a 10-inch pipe that is owned by Ravenna Metro district. The pipeline could potentially be extended approximately 1,000 feet to the South Platte River which would allow Castle Rock to divert water directly from the South Platte. According to the record drawings, the pipeline has a 5-foot minimum burial depth.
The Bell Mountain wells that are included with this purchase are currently utilized to supply raw water to Ravenna Metropolitan District and as augmentation water for the Town of Lochbuie’s Beebe Draw well pumping depletions. The Bell Mountain Well Field consists of three wells drilled in 2003 in the Denver, Dawson, and Arapahoe aquifers. All three wells are equipped with pumps and motors with varying flow rates. The flow from these wells is collected into a pipeline system that discharges into East Plum Creek for carriage down the stream. The well heads and vaults were visually inspected by AECOM on October 20, 2016. The Dawson and Arapahoe well heads are approximately 20 feet apart and the Denver well is 1,500 feet to the northeast. The Dawson and Arapahoe pumps are rated at 100 gpm and 320 gpm, respectively and the Denver pump is rated at 580 gpm. These wells supplement flow collected at the Plum Creek Diversion structure during dry seasons. Surface flow has been sufficient the past few years and as a result, these wells have not been operated for three years. The Cherokee Well Field has not been developed, but four wells have been decreed.
This purchase will also include Bell Mountain and Cherokee Ranch groundwater rights. The total unallocated groundwater to be purchased is approximately 5,292 acre-feet per year that could potentially be leased to other entities, or be used to protect the Town’s deep aquifer supplies. If this were a development, this would equate to enough water for 4,811 SFEs utilizing the Town’s water dedication code. See Attachment C for the location of the groundwater assets. The following table summarizes the groundwater that is included with this purchase:
Table 1 - United’s Groundwater Assets
|
Component |
Annual Acre-Feet |
|
Bell Mountain Ranch |
|
|
Lower Dawson |
33.0 |
|
Denver - nontributary |
630.7 |
|
Denver - not nontributary |
378.2 |
|
Arapahoe |
188.9 |
|
Laramie-Fox Hills |
438.7 |
|
Subtotal |
1,669.5 |
|
Cherokee Ranch |
|
|
Lower Dawson |
0 |
|
Denver - not nontributary |
1,614 |
|
Arapahoe |
1,574 |
|
Laramie-Fox Hills |
381 |
|
Subtotal |
3,569 |
|
Total |
5,238.5 |
As part of this transaction Castle Rock will assume service obligations to Ravenna and Lochbuie as described in this discussion. Town staff has met with both entities regarding taking over the operating agreements, and there are no objections.
Castle Rock has done extensive due diligence on these assets, utilizing three engineering consulting firms with various areas of expertise, our water rights attorney, and bond counsel. AECOM performed a high level qualitative appraisal of the condition of facilities on October 20, 2016; W.W. Wheeler provided a preliminary evaluation of the Ravenna Infrastructure on August 12, 2016, and an analysis of the current market value of the Denver Basin groundwater rights on July 19, 2016; and Lyons Gaddis produced a title opinion on the water rights as well as a fatal flaw analysis on the infrastructure. Staff has also consulted with the permitting experts at Leonard Rice Engineers, Inc. and met with the USACE to confirm that there are no permitting requirements associated with this infrastructure. The USACE provided a follow-up letter confirming that there are no additional permitting requirement. All indications are that purchasing United’s renewable water and nonrenewable water assets in Douglas County is a worthwhile investment.
Budget Impact
The purchase of United Water and Sanitation District’s infrastructure and water rights in Douglas County required an amendment to both the Water Resources Budget and Water Budget and a Water Budget transfer that was approved by Town Council on November 1, 2016 and adopted by emergency on November 15, 2016. The infrastructure component of the purchase is $10.5 million and will be taken from Water Resources account 211-4375-443.77-54 “Plum Creek Diversion Structure”. The groundwater component of the purchase will be made from Water account 210-4275-442.78-97 “Groundwater Rights Purch” for $12 million. The total purchase amount is $22.5 million plus standard closing costs as determined at closing.
The following table compares preliminary estimated costs of constructing CR-2 to purchasing United’s Douglas County assets:
Table 2 - CR-2 vs. United Comparison in 2016 Dollars
|
CR-2 Item |
Projected Cost |
United Item |
Projected Cost |
|
Design and Construction |
$9,200,000 |
Due diligence |
$100,000 |
|
Permitting |
$3,800,000 |
Infrastructure |
$10,500,000 |
|
HDD Infiltration Galleries |
$3,000,000 |
Water Rights |
$12,000,000 |
|
WPC Alluvial Wells |
$9,700,000 |
Upgrades |
$2,900,000 |
|
PCWPF Upgrades |
$31,600,000 |
PCWPF Upgrades |
$25,800,000 |
|
|
|
Pipeline to CR |
$11,800,000 |
|
|
|
Sutton Service |
$1,500,000 |
|
|
|
Ravenna Pipeline(1) |
-$7,700,000 |
|
|
|
Groundwater(1) |
-$6,400,000 |
|
|
|
Bell Mountain Inf. (1) |
-$400,000 |
|
|
|
Reservoir Storage(1) |
-$1,200,000 |
|
Total |
$57,300,000 |
Total |
$48,900,000 |
(1) Costs for these items were subtracted for purposes of comparing CR-2 since these are additional assets we will get with uses that have nothing to do with the diversion.
Dominion Water and Sanitation District has indicated an interest in purchasing capacity in the infrastructure and the groundwater, which could offset our investment by $6 million.
As shown in the cost comparison table, purchasing United’s Douglas County assets is a better value than proceeding with CR-2 in addition to providing the numerous benefits described in this memo.
Staff Recommendation
The purchase of the United Assets was unanimously recommended by the Castle Rock Water Commission on October 26, 2016, and by Water Resources Committee on November 1, 2016.
Staff recommends that Town Council approve the Purchase and Sale Agreement for the United Water and Sanitation District’s infrastructure and water rights in Douglas County as provided in Exhibit 1.
Proposed Motion
“I move to approve the Resolution as introduced by title. “
Attachments
Attachment A: Resolution
Exhibit 1: Purchase and Sale Agreement
Attachment B: Infrastructure Location Map
Attachment C: Groundwater Asset Location Map