To: Honorable Mayor and Members of Town Council
Through: David L. Corliss, Town Manager
From: Mark Marlowe, P.E. Director of Castle Rock Water
Matt Benak, P.E., Water Resources Manager
Title
Resolution Approving a Lease Agreement Between the Colorado Water Conservation Board and the Town of Castle Rock Water Enterprise for the Use of Storage Space in the Chatfield Storage Reallocation Project [Chatfield Reservoir, Douglas County, CO]
Body
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Executive Summary
The purpose of the memorandum is to request Town Council approval of a resolution (see Attachment A) approving a Lease Agreement (Exhibit 1) with the Colorado Water Conservation Board (CWCB). This Agreement will allow Castle Rock to store its water within storage space owned by CWCB which Castle Rock has under option to purchase from CWCB over the next 10 to 12 years. Currently, this storage space is 1,410 acre-feet (AF) in volume. Castle Rock has been storing water in this space under a temporary arrangement with the CWCB that expires on May 1, 2021 (see Attachment B). The cost to store in the optioned space will be $50 per AF annually, which equates to $70,500 for 2021. As Castle Rock continues to purchase additional storage space per our Purchase Agreement with CWCB, the annual rental cost will decrease in line with the amount of storage space we are leasing. In 2021, Castle Rock plans to exercise its deferment option on the purchase of additional storage space, but plans to purchase 129 AF of additional space in 2022.
History of Past Town Council, Boards & Commissions, or Other Discussions
In 2004, the Town Council approved a resolution consenting to the South Metro Water Authority (currently the South Metro Water Supply Authority) reserving 1,400 acre-feet of the storage capacity on behalf of its members. The Town’s current share of that capacity is 34.8 percent (34.8%) or 487.2 acre-feet.
In 2005, the Town signed a Letter of Commitment between the Town of Castle Rock and the Colorado Water Conservation Board (CWCB) to reserve permanent storage space in Chatfield Reservoir if the storage became available as a result of this project. The Town’s reserved capacity stood at 1,013.2 acre-feet.
In September 2012, Town Council approved a resolution to submit a letter to the US Army Corps of Engineers in support of the Chatfield Reservoir Reallocation Project.
Utilities Commission was updated on the status of the project on June 26 and July 24, and October 22, 2013.
Town Council was updated on the status of the project in October 2013.
The Water Resources Committee reviewed this project on May 6, 2014.
On May 28, 2014, Utilities Commission was updated on the status of the recommended reduced participation level of 200 AF. Utilities Commission voted 5-1 approving the recommended reduced participation level with one Commissioner stating that participation at a higher level was preferred. The primary reason for a reduction in participation was the financial impact that full participation would have had to our customer’s water rates.
On June 17, 2014, Town Council approved a resolution to reduce participation in the Chatfield Reallocation Project from 1,500.3 AF to 200 AF.
On November 18, 2014, Town Council approved a resolution to approve the Execution of the Articles and Bylaws of the Chatfield Reservoir Mitigation Company, Water Storage Agreement, Escrow Agreement and Water Provider Agreement for the project.
On April 21, 2015, the Town Council was provided with a discussion of the salient points of a draft option agreement with the Colorado Water Conservation Board (CWCB).
On May 27, 2015, the Utilities Commission unanimously supported the recommendation to Town Council to proceed with entering into an agreement with CWCB for the acquisition of additional project shares over a multi-year period.
On June 16, 2015, Town Council approved the option agreement for acquisition of additional Chatfield Reservoir project shares from the State of Colorado over time.
On October 5, 2015, the Mayor was presented with execution instructions and original forms for the:
• Articles of Incorporation and Bylaws of Chatfield Reservoir Mitigation Company, Inc.
• Water Provider Agreement
• Escrow Agreement
The Chatfield Storage Reallocation Project refined cost estimate was presented to Utilities Commission on April 27, 2016. The commissioners unanimously recommended that the Town continue its participation in the project.
On May 17, 2016, Town Council was provided with an update on the progress of the Chatfield Reallocation Project.
On May 25, 2016, Utilities Commission was provided with a discussion of the key points for an amendment to the CWCB Option Agreement to buy 1,713 AF of storage shares over the next nineteen years. The commissioners unanimously recommended that staff work with CWCB to develop an amendment to the existing CWCB Option Agreement.
In December 2016, the Town closed on an additional 87 AF of storage space, bringing our current total to 374 AF.
On October 25, 2017, Castle Rock Water Commission was provided with a discussion of the Chatfield Storage Reallocation Project updated cost estimate and off-ramp option, and unanimously recommended the Town continue its participation in the project.
On November 14, 2017, Town Council was provided with a discussion of the Chatfield Storage Reallocation Project updated cost estimate and off-ramp option, and approved the Town’s continued participation in the project.
On March 28, 2018, the Castle Rock Water Commission unanimously recommended support of the purchase of 87 AF of additional shares.
On April 17, 2018, Town Council approved the purchase of 87 AF of additional shares. The Town closed on this tranche of storage space before the end of 2018.
On September 26, 2018, the Castle Rock Water Commission unanimously recommended Town Council approval for entering into the Modified Agreement for Acquisition of Chatfield Reservoir Reallocation Project Shares with the State of Colorado.
On October 2, 2018, Town Council approved Resolution 2018-093, a Modified Agreement for Acquisition of Chatfield Reservoir Reallocation Project shares from the State of Colorado, ultimately increasing our optioned amount of storage by 500 AF, eventually allowing the Town to reach 2,000 AF of storage.
On August 27, 2019, Castle Rock Water staff informed the CWCB of its intent to defer the purchase of an additional 129 AF of optioned shares.
On January 22, 2020, Castle Rock Water Commission unanimously recommended Council approve the purchase of 129 AF of additional shares from the CWCB in 2020.
On February 4, 2020, Town Council approved the purchase of 129 AF of additional shares from the CWCB per resolution 2020-016. The CWCB acknowledged the receipt of the Town’s wire transfer of the funds for this additional storage space on April 30, 2020.
On July 7, 2020, Castle Rock Water staff provided an update to Town Council on the Chatfield Storage Reallocation Project.
On March 24, 2021, Castle Rock Water Commission was informed of the Lease Agreement with the Colorado Water Conservation Board for Use of Storage Space in the Chatfield Storage Reallocation Project and 6 - 0 Town Council approval.
Discussion
The Chatfield Reservoir Reallocation Project (Project) is a water storage 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. In 1994, the CWCB, on behalf of Colorado Department of Natural Resources (CDNR) and the project participants, initiated the study for the Project based on previous Congressional authorization for the US Army Corps of Engineers (USACE) to reallocate storage space within Chatfield Reservoir for water supply. On May 29, 2014, the USACE issued its Record of Decision approving the Project. Additionally, the State Fish, Wildlife and Recreation Mitigation Plan (122.2 Plan) was subsequently approved by the Colorado Parks and Wildlife Commission, satisfying all federal and state project review and approval requirements.
The Project consists of reallocating storage space in Chatfield Reservoir by USACE authorizing the use of 20,600 acre-feet of storage space by the project participants for municipal and other purposes. The Reallocation Report also included extensive hydrologic studies by USACE demonstrating that flood protection provided by Chatfield Reservoir would not be compromised by the Project.
The Town of Castle Rock is currently, and has been since 2004, a participant in this Project.
As the Town continues to develop and firm its renewable water rights on Plum Creek and the South Platte River, in addition to its fully reusable return flows, additional storage in Chatfield becomes beneficial. The Town entered into a multi-year agreement with the CWCB in July 2015 to purchase shares in the Chatfield Reservoir Reallocation Project. This agreement has allowed the Town to spread out the project costs over time while the Project had been undergoing design and construction activities.
Construction activities for the Chatfield Reservoir Reallocation Project were substantially completed in December 2019. The final Project construction costs were approximately $167,016,960, which is $3.97 million less than the last official Project estimate ($108,000 for Castle Rock). The Chatfield Reservoir Management Company (CRMC) has been directed to utilize the remaining funds to pay for the first five years of post-construction Project obligations, such as vegetation and habitat monitoring, erosion monitoring, weed management and new vegetation irrigation. Total Town investments in the project to date are $4.9 million, and total expected future investments in the reallocation project and related projects are $47 million. These planned investments are included in Castle Rock Water’s financial plan.
On February 4, 2020, Town Council approved the purchase of 129 AF of additional shares from the CWCB per resolution 2020-016. The CWCB acknowledged the receipt of the Town’s wire transfer of the funds ($1,070,825.13) for this additional storage space on April 30, 2020.
In early 2020, CRMC staff worked diligently to finalize the remaining USACE submittals that were a requirement prior to first storage. These final submittals were officially approved by USACE on May 13, 2020 who indicated that all recreation modifications, compensatory mitigation features, real estate interests, and other modifications to the Project have been satisfactorily completed. Payment for first storage was made by CRMC on May 14, 2020 to USACE. Given these final two critical path items, first storage of water into the reallocated storage space occurred on May 15, 2020, with Castle Rock Water being the first entity to store water. To date, Castle Rock has over 1,500 AF of water stored in Chatfield.
The CWCB provided a letter dated May 15, 2020 indicating that they would allow Castle Rock to store water in the storage space that it has under option, beyond the 590 AF currently owned. The CWCB did not require any payment for the storage of water in this optioned space, however, this allowance expires on May 1, 2021. Due to this deadline, and the fact that Castle Rock has been so successful in utilizing storage within the reservoir, Water staff initiated conversations with the CWCB in early 2021 to develop a lease agreement to be able to rent the optioned storage space from the State. Results of those conversations culminated in the Lease Agreement that is the subject of this resolution before Town Council.
Budget Impact
Funding for the lease of the storage space will be drawn from Account Number 211-4375-443.30-70, Water Resources/Capital Projects Division/Other Professional Services, Project Code <WR_CRP>. This account has approximately $110,100 remaining for 2021. The lease payment will be made prior to September 15, 2021, when Castle Rock officially notifies the CWCB that it is exercising its 2021 deferment on the purchase of an additional tranche of storage space.
Staff Recommendation
Staff and Castle Rock Water Commission recommend that Town Council approve the Lease Agreement with the Colorado Water Conservation Board for Use of Storage Space in the Chatfield Storage Reallocation Project.
Proposed Motion
“I move to approve the Resolution as introduced by title.”
Attachments
Attachment A: Resolution
Exhibit 1: Lease Agreement
Attachment B: May 15, 2020 Letter from CWCB - Castle Rock Use of Optioned Storage Space in Chatfield Storage Reallocation Project