To: Honorable Mayor and Members of Town Council
From: Mark Marlowe, P.E., Director of Castle Rock Water
Matt Benak, P.E., Water Resources Program Manager
Sheri Scott, P.E., Water Resources Program Analyst
Title
Ordinance Approving the First Amendment to Water Lease Agreement between the Town of Castle Rock and the Town of Wiggins (Second Reading - Passed 7-0 on First Reading on March 28, 2017)
Body
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Executive Summary
Castle Rock Water is seeking Town Council approval of an Ordinance (Attachment A) for an amendment (see Exhibit 1) to the water lease with the Town of Wiggins (Wiggins), Colorado, which is located in Morgan County. Wiggins is interested in extending the lease of our Rothe Recharge Credits which came with Castle Rock’s purchase of the Rothe water rights in 2014. Wiggins entered into the original three-year lease agreement on January 5, 2016, and is now requesting an extension of the lease by three additional years. Other than extending the timeframe of the lease and increasing the leased amount from 300 to 600 acre-feet per year, there are no other changes to the lease from the agreement approved in January 2016. Wiggins intends to use this water to augment their tributary well pumping for up to five years while they proceed through water court on other augmentation sources. The Town of Castle Rock will not be able to use this water in the next five to ten years and the water cannot be reasonably moved by exchange back upstream to the Town of Castle Rock. Wiggins wishes to lease 3,000 acre-feet (AF) over the course of five years at $100 per acre-foot for a total price of $300,000 or $60,000 annually. The price is reasonable for leased water of this type at this location based on available data regarding other leases in the area. Either party may terminate the agreement with 180 days’ notice.
History of Past Town Council, Boards & Commissions, or Other Discussions
December 9, 2015, Utilities Commission unanimously approved the draft lease agreement.
January 5, 2016, Town Council approved the Water Lease Agreement.
February 22, 2017, staff presented the draft amendment to the Water Lease Agreement to Castle Rock Water Commission who unanimously approved this be taken to Town Council for consideration.
March 8, 2017, Wiggins Board of Trustees unanimously approved the Water Lease Agreement (see Attachment D.)
Discussion
As part of the hybrid solution, the Town purchased the Rothe Recharge property in 2014. The property came with 770 AF of water rights which can used as an augmentation water source in conjunction with the Box Elder Creek Well Field for the Alternative Source of Supply Project hybrid solution.
The general concept of the Rothe Recharge Project is that water can be diverted from the South Platte River at the Riverside Canal which is located east of Greeley under a water right with an effective 1988 priority date (see Attachment B). This water is delivered from the Riverside Canal into several recharge ponds which then makes its way through the alluvial sands as groundwater return flow to the South Platte River approximately 16 miles downstream of the point where Box Elder Creek theoretically enters the South Platte River. The hydrogeologic transport of this water through the alluvium takes a number of years. The decree in Colorado Water Court Case No. 89CW027 defines the terms and conditions for operation of this project, including the specific timing of the recharge credits. The Town of Castle Rock will not be able to use this water in the next five to ten years, and the water cannot currently be reasonably moved by exchange back upstream to the Town of Castle Rock.
On January 5, 2016, Castle Rock Water entered into a three-year lease agreement with the Town of Wiggins. The Town of Wiggins is requesting a three-year extension of the original lease agreement which is included in Attachment C. The final year of this agreement will be 2021. The key terms of the amendment to the agreement are summarized below:
• Five-year lease agreement.
• Wiggins will lease 600 AF a year at $100/AF which equates to $60,000 per year.
• Either party may terminate lease with notice.
The benefit of this lease agreement is that it generates revenue for Castle Rock Water that would not otherwise be collected on the current water credits available. This allows the Town to recoup a portion of the 2014 purchase price, thus, decreasing the overall financial impact to the Town. Arrangements like this support the Colorado Water Plan by developing regional cooperation between other water providers and creating ways to utilize existing supplies within the state. The use of this water for municipal uses by Wiggins also helps set the stage for our future augmentation plan that we will have to take through Water Court which will include municipal use of this water by Castle Rock.
Budget Impact
The Town generated $9,000 in revenue in 2016 from the existing lease.
If Council approves the amended agreement, Castle Rock Water would receive an additional $300,000 in revenue over the next five years. The revenue will be deposited into the Water Resources Fund Capital Leases account 211-4375-393.70-00.
Staff Recommendation
Staff recommends approval of the water lease agreement with the Town of Wiggins, Colorado for 3,000 acre-feet of water over the course of five years which will generate a revenue of $300,000.
Proposed Motion
“I move to approve Ordinance 2017-010 as introduced by title on second and final reading.”
Attachments
Attachment A: Ordinance
Exhibit 1: First Amendment
Attachment B: Location Map
Attachment C: Original Lease Agreement
Attachment D: Wiggins