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
Angie Brown, Water Resources Program Analyst
Title
Ordinance Approving the Fifth Amendment to the Intergovernmental Agreement Between the Town of Castle Rock and Dominion Water & Sanitation District for the Option to Purchase and Right of First Refusal Regarding Ground Water Rights, Easements and Related Improvements (Second Reading - Approved on First Reading on April 20, 2021 by a vote of 7-0) [Cherokee Ranch, Douglas County, CO]
Body
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Executive Summary
The purpose of this memorandum is to request Town Council approval on first reading of an Ordinance (Attachment A) being the Fifth Amendment to the Intergovernmental Agreement between the Town of Castle Rock and Dominion Water and Sanitation District for the Option to Purchase and the First Right of Refusal Regarding Groundwater Rights, Easements and Related Improvements (Agreement).
This amendment will allow for the exchange of some of Dominion’s WISE infrastructure capacity for a portion of the Town’s Cherokee groundwater rights and option payment sums addressed under the current agreement. Dominion has decided to let the remainder of their option to purchase the remaining groundwater rights lapse, meaning they will not pay their option payment in 2021 and 2022.
A summary of the exchange is as follows:
Dominion agrees to trade its WISE system excess capacity for the following Cherokee Ranch groundwater takedown and the resulting option payment:
• Arapahoe Aquifer: 347 acre feet (AF), valued at $1,084,600
• Denver Aquifer: 107 AF, valued at $210,790
• Laramie Fox Hills: 53 AF, valued at $104,410
• Total value of trade: $1,399,800
The resulting WISE core and Binney connection capacity that Dominion will convey to Castle Rock:
• 0.65 million gallons per day (MGD) in the Western Pipeline
• 0.23 MGD in the Binney Connection
• 0.29 MGD in State Land Board Line
• 1.36% ownership in the DIA connection
• Total value of trade: $1,399,800
History of Past Town Council, Boards & Commissions, or Other Discussions
Staff discussed the proposed purchase option agreement with the Castle Rock Water Commission on May 23, 2018. Castle Rock Water Commission unanimously recommended that Council approve the agreement.
On Feb 5, 2019, Town Council approved Ordinance 2019-003 for the IGA for the Option to Purchase and First Right of Refusal Regarding Groundwater Rights, Easements and Related Improvements between the Town of Castle Rock and Dominion Water and Sanitation District, Acting in its Capacity as a Water Activity Enterprise.
On March 5, 2019, Town Council approved Resolution 2019-036 for the Tri-Party Agreement between the Town of Castle Rock, Dominion Water & Sanitation District, and Cherokee Ranch & Castle Foundation.
In a letter dated May 31, 2019, Dominion Water & Sanitation Districted requested a closing extension from the original agreement to August 2, 2019.
On June 18, 2019, Town Council approved the First Amendment to the IGA, extending the closing of the first block of water rights to August 2, 2019.
On August 2, 2019, Dominion closed on 300 acre feet of non-tributary Arapahoe Aquifer groundwater as part of the IGA.
On June 2, 2020, Town Council unanimously approved Resolution 2020-053 approving the Second Amendment to the IGA for the Option to Purchase and First Right of Refusal Regarding Groundwater Rights, Easements and Related Improvements between the Town of Castle Rock and Dominion Water and Sanitation District which provided the Town and Dominion until September 3, 2020, to develop an amendment to the agreement that would address a potential exchange of WISE infrastructure for groundwater and option payments addressed in the original agreement.
On August 18, 2020, Town Council unanimously approved Resolution 2020-071 approving the Third Amendment to the IGA for the Option to Purchase and First Right of Refusal Regarding Groundwater Rights, Easements and Related Improvements between the Town of Castle Rock and Dominion Water and Sanitation District which provided the Town and Dominion until October 15, 2020, to develop an amendment to the agreement that would address a potential exchange of WISE infrastructure for groundwater and option payments addressed in the original agreement.
On September 1, 2020, Town Council approved by a vote of 6 to 0 the First Reading of Ordinance 2020-018 approving the Fourth Amendment to the Intergovernmental Agreement for the Option to Purchase and Right of First Refusal Regarding Ground Water Rights, Easements, and Related Improvements, which conveyed Cherokee Ranch ground water rights to Dominion Water and Sanitation District in exchange for conveyance of additional capacity in WISE infrastructure components to the Town.
On September 15, 2020, Town Council unanimously approved the Second Reading of Ordinance 2020-018 approving the Fourth Amendment to the Intergovernmental Agreement for the Option to Purchase and Right of First Refusal Regarding Ground Water Rights, Easements, and Related Improvements, which conveyed Cherokee Ranch ground water rights to Dominion Water and Sanitation District in exchange for conveyance of additional capacity in WISE infrastructure components to the Town.
Discussion
On March 5, 2019, the Town and Dominion Water and Sanitation District (Dominion) entered into an IGA whereby Dominion has the option to purchase the groundwater and easements that the Town owns under the Cherokee Ranch and Castle Foundation Property (Property). This groundwater and the associated easements were obtained as a part of the much broader purchase of water assets from United Water and Sanitation District, which the Town completed in 2017.
The Town is focused on using its scarce resources to develop renewable water, and as such, this non-tributary groundwater under the Property was available for sale to Dominion to allow Castle Rock to generate more revenue for renewable water investments. Dominion closed on the first 300 acre-foot (AF) tranche of this groundwater on August 2, 2019. To continue to maintain the IGA, Dominion is required to deliver an option payment to the Town on the remaining groundwater. This option payment is in the amount of $181,460 and per the Agreement is due on June 3, 2021. However, Dominion has decided to let the option on the remaining groundwater rights lapse, meaning they will not make the remaining option payments to the Town in 2021 and 2022. The Town will retain the remaining Cherokee Ranch groundwater which totals 1,307 acre feet in the Denver aquifer, and 308 acre feet in the Laramie-Fox Hills aquifer.
Dominion has determined that they have excess capacity in various portions of the WISE infrastructure and have provided a table (Attachment B) indicating the value of this infrastructure. Likewise, Castle Rock will need to acquire additional capacity in the WISE infrastructure over time, and this exchange agreement provides a way that the Town can acquire some of this infrastructure without a capital outlay. In exchange for this capacity, Dominion will be taking down some of the Cherokee Ranch groundwater it has under option, specifically:
• Arapahoe Aquifer: 347 AF, valued at $1,084,600
• Denver Aquifer: 107 AF, valued at $210,790
• Laramie Fox Hills: 53 AF, valued at $104,410
• Dominion will let the option to purchase all remaining groundwater rights lapse which includes 1,367 AF in the Denver aquifer and 356 AF in the Laramie Fox-Hills aquifer.
The total value of the trade equates to $1,399,800 and Castle Rock would receive at closing:
• 0.65 MGD of capacity in the Western Pipeline
• 0.23 MGD of capacity in the Binney Connection
• 0.29 MGD of capacity in State Land Board Line
• 1.36% ownership in the DIA connection
Upon closing, Castle Rock will have the following capacities in the various portions of the WISE infrastructure:
|
|
Capacity Needed |
Current Capacity |
Capacity from Dominion Exchange |
Capacity After Dominion Exchange |
|
*State Land Board Line (MGD) |
NA |
2.54 |
0.29 |
2.83 |
|
Binney Connection (MGD) |
6 |
5.06 |
0.23 |
5.29 |
|
Western Pipeline (MGD) |
9 |
7.13 |
0.65 |
7.78 |
|
Ridgegate Pipeline (MGD) |
9 |
4.00 |
0.00 |
4.00 |
|
**DIA Connection (percent ownership) |
NA |
22.03% |
1.36% |
23.39% |
|
*The State Land Board Line is the pipeline currently used for WISE deliveries and will only be utilized until the Binney Connection is completed. After such time, this pipeline will only be used for emergency flows or flows in excess of 30 MGD from Aurora. ** The DIA connection does not have a planned capacity at this time so the sale was conducted by percent ownership. |
Budget Impact
Since Dominion and the Town are conducting an exchange of WISE infrastructure capacity for the non-tributary groundwater rights, the Water Resources Fund will need to make the Water Fund whole by transferring the equivalent dollar value of the groundwater into the Water Fund ($1,399,800.00) [account no. 210-4290-442.91-55 Water Fund - Transfers Division Revenues - Water Resources Fund]. The Water Resources Fund has the capacity for this transfer.
Staff Recommendation
Staff recommends that Town Council approve the Fifth Amendment to the aforementioned IGA with Dominion Water and Sanitation District on First Reading.
Proposed Motion
“I move to approve the Ordinance on Second Reading as introduced by title”
Attachments
Attachment A: Ordinance
Exhibit 1: Fifth Amendment to the IGA
Attachment B: Dominion’s WISE Infrastructure Capacity and Value Table