To: Honorable Mayor and Members of Town Council
From: Mark Marlowe, P.E., Director of Castle Rock Water
Matt Benak, P.E., Water Resources Manager
Title
Resolution Approving a Modified Agreement for Acquisition of Chatfield Reservoir Reallocation Project Shares from the State of Colorado
Body
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Executive Summary
Renewable water storage is a key component of the long-term water plan puzzle. Additional storage over time in Chatfield gives the Town unique access to renewable water sources and on July 22, 2015, the Town entered into a multi-year agreement with the Colorado Water Conservation Board (CWCB) to purchase shares in the Chatfield Storage Reallocation Project. This agreement has allowed the Town to spread out the project costs over time while the project has been undergoing design and construction activities. This option agreement has provided a creative way to leverage our financial resources in a way that mimics a long term loan at less than one percent interest. So far, the Town has purchased an additional 174 acre-feet (AF) of storage space on top of our original 200 AF participation amount (Town’s current ownership is 374 AF).
The purpose of this memorandum is to summarize the details of a modified option agreement with the CWCB to increase our optioned amount of storage space by 500 AF, so that we may eventually own 2,000 AF of storage space in the reservoir.
The key terms of this modified agreement are summarized below.
• The 15-year amortization period will continue (starting with year 2015) with 4 more years of optional deferments remaining. The Town cannot defer two years in a row (the Town elected to take a deferment in 2017).
• The 2018 Acquisition will be for 87 AF for which Castle Rock Water had budgeted. The purchase price for these units will be $8,300.97 per acre-foot, totaling $722,184.39. The unit price is based upon the most current Estimated Project Cost of $171 million divided by the total number of acre-feet in the Reallocation Project (20,600).
• Subsequent annual acquisitions will be for no less than 129 AF. The Town could elect to purchase more than this amount in a single take-down, if so desired.
• Castle Rock will be required to pay operation & maintenance and repair, rehabilitation, reconstruction, and replacement costs (O&M-RRR&R) for the entire optioned amount when applicable. These costs have been estimated at approximately $50 per acre-foot, or $100,000 annually.
• The Town will also pay the Chatfield Reallocation Management Company (CRMC) annual assessments on the owned and optioned space. These assessments have been identified at approximately $53/AF for fiscal year 2019. This equates to $106,000.
• If CWCB is able to lease any of the storage in any year, they will pay their prorated share of the operation and maintenance cost.
• Town will have the ability to purchase wet water to store within the optioned space.
There are multiple benefits to this option agreement:
• Reasonably priced storage capacity in the Plum Creek basin where most of our water rights reside as well as the South Platte River basin.
• The Town has a 2,000 acre-foot conditional junior water storage right in Chatfield (Water Court Case No. 89CW169) with an appropriation date of November 6, 1989 that has a value of millions of dollars’ worth of renewable water supply if we have the ability to capture it.
• Regional project that has had statewide support and will increase cooperation amongst water providers in our area.
• The value of this storage will likely increase in the future.
• The Town has the right to store water in Chatfield based on Water Court case (Case No. 09CW166).
• In-stream storage in the South Platte basin that will have potential value to many entities in the future, meaning Castle Rock might be able to lease excess water or sell or lease storage at attractive rates.
• Options to partner with other regional entities on treatment and transmission infrastructure.
• Gives us more future flexibility with our WISE or northern water supplies (may be able to trade water with Centennial or Central for example).
• Allows us to purchase spot water from Denver and Aurora.
• Provides us a way to capture free river flows into Chatfield.
• Water Court case (Case No. 12CW296) allows us to exchange water in Chatfield back up Plum Creek to Castle Rock.
• The Town has purchased the Ravenna pipeline which could eventually be used to move wet water in Chatfield back to the Town.
• The Town is working on a partnership with Denver Water and several SMWSA members to get a pump station in place to move this water back to the Town. A study is planned in 2018 and 2019 for $67,000 (Castle Rock’s share) to determine the best regional infrastructure approach to our water out of Chatfield.
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 becomes available as a result of this project. The Town’s current reserved capacity is 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 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 acre-feet. Utilities Commission voted 5-1 approving the recommended reduced participation level with one Commission member stating that participation at a higher level is 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 acre-feet to 200 acre-feet.
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 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 Com., 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 development 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 expects to close of this tranche of storage space before the end of 2018.
Discussion
The Chatfield Reallocation Project is estimated as a $171 million 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. The Town of Castle Rock is currently, and has been since 2004, a participant in the Chatfield Reallocation Project. On June 7, 2014, Town Council approved a resolution to reduce the current participation in the Chatfield Storage Reallocation Project from 1,500.3 acre-feet to 200 acre-feet based on staff’s recommendations of the then current need for storage in Chatfield by the Town. As the Town continues to develop and firm its renewable water rights on Plum Creek and its fully reusable return flows, additional storage in Chatfield will become beneficial. With that, the Town, entered into a multi-year agreement with the Colorado Water Conservation Board (CWCB) in July 2015 to purchase shares in the Chatfield Storage Reallocation Project which has allowed the Town to spread out the project costs over time while the project has been undergoing design and construction activities. Currently, the Town owns 374 AF of storage space, and will be exercising its option to buy 87 AF for storage space in 2018. Staff is seeking to expand this option agreement with the State by 500 AF, so that we may eventually own 2,000 AF of storage space in the reservoir.
Budget Impact
Purchasing additional storage capacity (1,626 acre-feet) from CWCB in the Chatfield Storage Reallocation Project over the next 17 years (if we use the four remaining deferments), will cost $13.5 million plus $206,000 annually for operation, maintenance, rehabilitation, repair, and replacement costs and CRMC assessment. The Town has already budgeted $14.37 million over a 13-year period (2018 through 2030) for purchasing additional storage capacity in the project and to cover the annual project costs.
Staff Recommendation
Staff recommends that Town Council approve the Modified Agreement for Acquisition of Chatfield Reservoir Reallocation Project Shares from the State of Colorado.
Proposed Motion
“I move to approve the resolution as introduced by title.”
Attachments
Attachment A: Resolution
Exhibit 1: Agreement