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
Title
Resolutions Approving a Purchase and Sale Agreement and Water Service Agreement with the Plum Creek Trust [Douglas County near Sedalia, Colorado]
Town Council Agenda Date: March 5, 2024
Body
________________________________________________________________________________
Executive Summary
The purpose of this memorandum is to seek Town Council approval of two resolutions (Attachments A and B):
1) A Purchase and Sale Agreement with Plum Creek Trust for a 145-acre parcel near Sedalia, Colorado, upon which current and future Castle Rock Water infrastructure resides and is being constructed; and
2) A Water Service Agreement with the PCT which describes how Castle Rock will service a potential future development on lands adjacent to the 145-acre parcel (see Attachment C).
Key terms of each agreement are as follows:
1) Purchase and Sale Agreement
a. Castle Rock will pay $2,269,794 for the 145-acre parcel.
b. All non-renewable groundwater underneath the parcel will be transferred to Castle Rock as part of the purchase.
c. All mineral rights under the property will be transferred to Castle Rock as part of the purchase.
d. Both parties agree to work with each other for easements that may be needed going forward at no cost to the other party.
e. The purchase is contingent on a Water Service Agreement to serve surrounding property owned by the Seller.
f. Closing this purchase agreement will essentially eliminate a 100-acre foot per year water service commitment to United Water and Sanitation District (United) associated with the property from our 2017 purchase of the United assets including the original 118-acre water infrastructure easement.
2) Water Service Agreement
a. Castle Rock Water agrees to be the retail water and sewer provider for the PCT development which could have up to a maximum of 500 housing units.
b. All non-renewable groundwater under the 145-acre parcel and the developable acres will be dedicated to the Town and be credited towards meeting the Town’s water dedication code requirements. This consists of approximately 397 acre-feet (AF) of non-renewable groundwater.
c. Castle Rock Water will agree to let PCT purchase “cash in lieu” groundwater credits for any additional credits needed for the development.
d. Castle Rock agrees to share the savings from the 100-acre foot water commitment to United that goes away and use some additional savings to reimburse for additional valuable property around the 118-acre water infrastructure easement, taking the total property interests to 145 acres. In total a 90 AF credit towards renewable water dedication requirements will be provided.
e. Castle Rock Water will allow PCT to sign an option agreement to purchase credits for any additional renewable water required for the property through expansion of one of Castle Rock’s existing renewable water projects.
f. Castle Rock Water will charge a 10% extraterritorial surcharge on all rates and fees associated with providing service to the property.
g. PCT will be responsible for all costs associated with extending services to the property to be served as well as all infrastructure within the property consistent with Castle Rock’s approach to any development.
h. Castle Rock Water will provide a “Will Serve Letter” consistent with the requirements of Douglas County for PCT to use in getting entitlements and zoning from Douglas County.
History of Past Town Council, Boards & Commissions, or Other Discussions
November 2017, Castle Rock closed on assets owned by United. A portion of these assets included a blanket easement for water infrastructure on 118-acres owned by PCT.
Discussion
In 2017, Castle Rock purchased the United Water and Sanitation District’s infrastructure and water rights assets in Douglas County, which included the Ravenna Diversion (now known as the Plum Creek Diversion) and Sedalia Reservoir (now known as Castle Reservoir No. 1 [CRR1]). Since then, Castle Rock Water (CRW) has improved the Plum Creek Diversion, constructed a 25.8 million gallon per day capacity Plum Creek Pump Station, built a 30-inch diameter pipeline (Plum Creek Raw Water Return Pipeline) back to Town, and is in the process of constructing Castle Rock Reservoir No. 2 (CRR2). These water assets are important elements of the Town of Castle Rock’s long-term water plan to maximize the use of our local renewable supplies. In total the investments to date and future planned investments around this key property are shown in the table below and total approximately $109 million.
|
Existing Town Capital Investment associated with PCT Parcel |
Onsite Cost |
Offsite Cost |
|
Diversion Structure, CRR1 Reservoir, Ravenna Pipeline |
$10,000,000 |
|
|
Plum Creek Pump Station |
$10,500,000 |
|
|
Plum Creek Raw Water Return Pipeline |
|
$14,800,000 |
|
Ravenna Pipeline Capacity/Roxborough Interests |
|
$2,230,000 |
|
CRR1&2 Reservoir Construction (completed work) |
$6,259,000 |
|
|
Subtotal = |
$26,759,000 |
$17,030,000 |
|
|
|
|
|
Estimated Future Town Capital Investment associated with PCT Parcel |
Onsite Cost |
Offsite Cost |
|
CRR1&2 Reservoir Construction (remaining work) |
$24,279,000 |
|
|
Plum Creek PS Capacity Expansion & Ravenna Pump Station Revisions |
|
$2,500,000 |
|
Diversion Structure Upgrades |
$3,000,000 |
|
|
Chatfield/Hwy 85 Wastewater Pump Back Infrastructure |
$1,100,000 |
$33,000,000 |
|
Indian Creek (Meadow Ditch) Pump Back Infrastructure |
$300,000 |
$1,500,000 |
|
Subtotal = |
$28,679,000 |
$37,000,000 |
|
Estimated Total (Existing & Future Capital Investment) = |
$55,438,000 |
$54,030,000 |
Attachment C provides a map showing the various infrastructure on the property and future improvements that are planned to go through the property.
The property upon which this infrastructure exists is owned by PCT, however, Castle Rock enjoys a blanket easement on 118 acres of this property to construct, maintain and operate water facilities. The Town believes that outright fee simple ownership of this land makes sense and PCT is agreeable to the sale of the property. In exchange for the sale, PCT must have assurance that their adjacent land that they intend to develop will be able to be served with water and sanitary sewer services. CRW is in a good position to do this and has therefore negotiated a Water Service Agreement with PCT.
Through a property appraisal (see Attachment D) and negotiation with PCT, The Town is willing to pay $2,269,794 for a 145-acre parcel which includes the 118-acre easement and additional property located to the southwest and to the east which will allow for better access and use of the overall property by Castle Rock Water. Following closing, the Town’s reservoir contractor will be able to use a portion of this property for dam fill borrow material and excavated rock disposal which has the potential to cause significant cost increases for CRR2 construction if offsite borrow and disposal locations would need to be used.
As for the Water Service Agreement, CRW believes PCT will need approximately 125 AF of renewable water supply, with 50 AF credit given for the past United obligation and 40 AF credit for the value of the additional 27 acres of property. Thus, only 35 AF of additional renewable water credit (approximately) would need to be purchased by PCT for their planned development. Castle Rock would provide an option agreement to allow PCT the opportunity to purchase the additional needed renewable water credits through expansion of one of Castle Rock’s renewable water projects. Additionally, there will be a 10% extraterritorial surcharge to PCT which would apply to all System Development Fees and water and sewer rates.
All Denver Basin groundwater rights will be dedicated to the Town. CRW has estimated the amount of groundwater that could be used to meet the Town’s dedication requirements in the table below.
|
Western Parcel |
|
Aquifer |
Type |
Quantity (AF) |
Credit (AF) |
|
Denver |
Not non-tributary |
110.43 |
0 |
|
Upper Arapahoe |
Non-tributary |
152.86 |
152.86 |
|
Laramie Fox-Hills |
Non-tributary |
67.83 |
0 |
|
|
Subtotal = |
331.12 |
152.86 |
|
Central Parcel |
|
Denver |
Not non-tributary |
63.06 |
0 |
|
Upper Arapahoe |
Non-tributary |
83.22 |
83.22 |
|
Laramie Fox-Hills |
Non-tributary |
37.79 |
0 |
|
|
Subtotal = |
184.07 |
83.22 |
|
Eastern Parcel |
|
Denver |
Not non-tributary |
29.31 |
0 |
|
Upper Arapahoe |
Non-tributary |
34.79 |
34.79 |
|
Laramie Fox-Hills |
Non-tributary |
16.51 |
0 |
|
|
Subtotal = |
80.61 |
34.79 |
|
Southern Parcel |
|
Denver |
Not non-tributary |
110.33 |
0 |
|
Upper Arapahoe |
Non-tributary |
125.90 |
125.90 |
|
Laramie Fox-Hills |
Non-tributary |
56.26 |
0 |
|
|
Subtotal = |
292.49 |
125.90 |
|
|
|
Total = |
396.77 |
Based on a review of the table, CRW believes the development will be short on the needed groundwater. CRW recommends allowing PCT to purchase “cash in lieu” groundwater credits from CRW’s groundwater bank.
CRW would be amenable to a no (or low) cost lease back for stock watering until development starts and would charge our raw water retail rate for construction water (similar to what is being done for Dawson Trails development).
Budget Impact
The cost for the purchase of the 145-acre PCT property will be paid for out of the Water Resources Fund/Capital Projects/Reservoir Upgrades <Account Number 211-4375-443.79-15> which has a 2024 budget balance of $0. Thus, a budget amendment will be necessary to cover the $2,269,794 purchase price.
Proposed Motion
“I move to recommend to Town Council approval of both Resolutions as presented”
Attachments
Attachment A: Resolution - Purchase & Sale Agreement (Not Attached)
Attachment B: Resolution - Water Service Agreement (Not Attached)
Exhibit 1: Purchase and Sale Agreement (Not Attached)
Exhibit 2: Water Service Agreement (Not Attached)
Attachment C: Map of Property and Infrastructure
Attachment D: Property Appraisal