To: Honorable Mayor and Members of Town Council
From: Mark Marlowe, P.E., Utilities Director
Matt Benak, P.E., Water Resources Manager
Title
Resolution: Approving an Option Agreement for Acquisition of Chatfield Reservoir Reallocation Project Shares from the State of Colorado
Body
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Executive Summary
Renewable water storage is a key component of the long-term water plan puzzle. While we have secured much of what we need in terms of storage in Rueter-Hess Reservoir and Chatfield, additional storage over time in Chatfield gives the Town unique access to additional renewable water sources. The purpose of this memorandum is to summarize the details of an option agreement that the Utilities Department has been discussing with the Colorado Water Conservation Board (CWCB) for additional storage capacity in the Chatfield Reallocation Project. This option agreement provides a creative way to leverage our financial resources in a way that would mimic a long term loan at less than one percent interest. Key terms of this agreement are summarized below.
The Chatfield Reallocation Project is estimated as a $134 million project to reallocate flood storage space in the existing Chatfield Reservoir located in northwest Douglas County to space that can be used for storing renewable water supplies. The Town of Castle Rock is currently, and has been since 2004, a participant in the Chatfield Reallocation Project. On June 7, 2014, Town Council approved a resolution to reduce the current participation in the Chatfield Reallocation Project from 1,500.3 acre-feet to 200 acre-feet based on staff’s recommendations of the current need for storage in Chatfield by the Town. The Town’s estimated pro-rata share of the cost to participate at 200 acre-feet is $1,301,600. As the Town develops its water rights on Plum Creek and its return flows, additional storage in Chatfield may become beneficial. As such, $780,000 has been budgeted each year between 2016 through 2025 to purchase additional shares if that turns out to be beneficial.
For several months, staff has been discussing with CWCB, an option agreement to reserve additional future shares (1,300 acre-feet) at today’s costs. The key terms of the agreement are summarized below:
• 15-year amortization period with 5-years of individual deferments. The Town cannot defer two years in a row.
• Purchase price of $7,000 per acre-foot but payments will be reconciled when final project costs are known.
• Castle Rock has first right of refusal to purchase the orphan shares that we relinquished.
• Castle Rock could purchase 87 acre-feet or more of additional storage each year at an approximate annual cost of $609,000.
• Castle Rock would be required to pay operation, maintenance, rehabilitation, repair, and replacement costs to CWCB for the entire contract amount of 1,300 acre-feet. CWCB would request that the Town pays the same cost that CWCB pays the US Army Corps of Engineers for the storage shares which is approximately $50 per acre-foot, or $65,000 annually. If we think of this option agreement as a 20-year loan, $65,000 is less than 1% interest.
• If CWCB is able to lease any of the storage in any year, they will pay their prorated share of the operation and maintenance cost.
• Town will have the ability to purchase wet water to store within the optioned space.
The benefits of this option agreement are:
• Reasonably priced storage capacity in the Plum Creek basin where most of our water rights reside as well as the South Platte River basin.
• Gives the Town flexibility when considering purchasing new senior water rights along Plum Creek.
• The Town has a 2,000 acre-foot conditional junior water storage right in Chatfield (Water Court Case No. 89CW169) with an appropriation date of November 6, 1989 that has a value of millions of dollars’ worth of renewable water supply if we have the ability to capture it.
• Regional project that has had statewide support and will increase cooperation amongst water providers in our area.
• The value of this storage will likely increase in the future.
• Based on a recent Water Court case (Case No. 09CW166) that settled, the Town has the right to store water in Chatfield.
• In-stream storage in the South Platte basin that will have potential value to many entities in the future, meaning Castle Rock might be able to lease excess water or sell or lease storage at attractive rates.
• Options to partner with other regional entities on treatment and transmission infrastructure.
• Gives us more future flexibility with WISE water (may be able to trade water with Centennial for example).
• May be able to use WISE infrastructure to access supplies in Chatfield directly.
• Allows us to purchase SPOT water from Denver and Aurora.
• Provides us a way to capture free river flows into Chatfield.
• We have another Water Court case (Case No. 12CW296) pending that would allow us to exchange water in Chatfield back up Plum Creek to Castle Rock.
Additional information regarding the Chatfield Reallocation Project is included in the Staff Report.
Budget Impact
Purchasing additional storage capacity (1,300.339 acre-feet) from CWCB in the Chatfield Reallocation Project over 20 years if we use the five deferments, will cost $9.1 million plus $65,000 annually for operation, maintenance, rehabilitation, repair, and replacement costs. The Town has already budgeted $7.8 million over a 10-year period (2016 through 2025) for repurchasing additional storage capacity in the project. The Town will need to budget an additional $1.3 million to cover the purchase of additional storage shares at the cost negotiated.
Staff Recommendation
Staff recommends that Town Council approve the Option Agreement for Acquisition of Chatfield Reservoir Reallocation Project Shares from the State of Colorado.
Proposed Motion
I move to approve an Option Agreement for Acquisition of Chatfield Reservoir Reallocation Project Shares from the State of Colorado.
Attachments
Staff Report
Attachment A: Resolution
Exhibit 1: Option Agreement