To: Members of the Castle Rock Water Commission
From: David Van Dellen, Assistant Director of Castle Rock Water
Matt Benak, P.E., Water Resources Manager
Lisa Bright-Unger, Water Resources Program Analyst
Title
Resolution Approving a Water Lease Agreement between the Town of Castle Rock and H&H Farms [Weld County, CO]
Town Council Agenda Date: March 5, 2024
Body
________________________________________________________________________________
Executive Summary
Castle Rock Water is seeking Town Council approval of a resolution (Attachment A) for a water lease (Exhibit 1) with H&H Farms. H&H Farms is a farmer located in Weld County adjacent to the Lost Creek Basin wells the Town purchased in 2017 as part of our Alternate Source of Supply Project. As part of their 2023 lease, the farmer used 138.59 acre-feet (AF) of water from these wells for irrigation and has paid the Town $5,058.54. H&H Farms is interested in an additional one-year lease of our Lost Creek Basin water rights. The Town of Castle Rock does not plan to export these water rights in 2024 as the infrastructure needed to move the water has not yet been designed or constructed. H&H Farms wishes to lease up to 275 AF at a rate of $43.60 per AF (an increase from $36.50 per AF), which could amount to $11,990.00 in revenue. The price is reasonable for agricultural leased water of this type at this location based on available data regarding other leases in the area. The agreement terminates on November 30, 2024. This lease agreement is consistent with Castle Rock Water’s strategic plan. A key tactic in that plan is to maximize leasing opportunities for idle water rights.
History of Past Town Council, Boards & Commissions, or Other Discussions
March 7, 2023, Town Council unanimously approved the 2023 water lease agreement with H&H Farms.
Discussion
As part of the Town’s hybrid renewable water program, the Town purchased several Lost Creek Basin wells in 2017 and 2021. These wells came with approximately 1,492 AF (annually) of fully exportable water rights which could be used for municipal and other purposes. Eventually, the Town intends to use these water rights directly or as an augmentation source. However, until infrastructure is built to transport this water to a treatment plant or place of augmentation, leasing this water for other purposes helps to generate some revenue for Castle Rock Water. In 2023, H&H Farms used 138.59 AF of water and has paid the Town $5,058.54. The farmer is also planning to use this water in 2024 with a lease rate of $43.60 (an increase from $36.50 per AF).
The key terms of the 2024 water lease agreement are summarized below:
• Agreement will terminate November 30, 2024.
• H&H Farms will lease up to 275 AF of water at a rate of $43.60 per AF.
The following table outlines the wells that will be used and the amount of water we will be leasing to H&H Farms. A map of the wells is shown in Attachment B.
|
Well |
Maximum Water to be Leased, AF |
Annual Water Rights, AF |
|
31640 |
275 |
297.2 |
|
Total |
275 |
297.2 |
As noted in the Executive Summary, maximizing the leasing of idle water rights is part of Castle Rock Water’s strategic plan. Revenues from this leasing help to offset the costs for purchasing and developing long-term renewable water supplies. Total revenues from water leases with H&H Farms over the last six years are shown in the table below.
|
Year |
AF |
$/AF |
Total Revenue |
|
2018 |
183.55 |
$ 35.00 |
$ 6,424.25 |
|
2019 |
142.74 |
$ 35.00 |
$ 4,995.94 |
|
2020 |
198.68 |
$ 35.00 |
$ 6,953.84 |
|
2021 |
198.60 |
$ 36.50 |
$ 7,248.90 |
|
2022 |
175.30 |
$ 36.50 |
$ 6,398.52 |
|
2023 |
138.59 |
$ 36.50 |
$ 5,058.54 |
|
Total |
$ 37,079.99 |
Budget Impact
If Council approves the agreement, Castle Rock Water would receive up to $11,990.00 in revenue in 2024. The revenue will be deposited into Water Resources Fund Capital Leases account 211-4375-393.70-00 <WRAWL>.
Staff Recommendation
Staff recommends approval of the 2024 Water Rights Lease Agreement with H&H Farms for 275 AF of water which will generate a revenue of up to $11,990.00.
Proposed Motion
“I move to recommend to Town Council approval of the Resolution as presented”
Attachments
Attachment A: Resolution (Not Attached)
Exhibit 1: Agreement
Attachment B: Location Map