To: Honorable Mayor and Members of Town Council
From: Mark Marlowe, P.E., Director of Castle Rock Water
Title
Resolution Approving the Tri-Party Agreement between the Town of Castle Rock, Dominion Water and Sanitation District and the Cherokee Ranch and Castle Foundation
Body
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Executive Summary
The purpose of this memorandum is to seek Town Council approval of a Resolution (see Attachment A) approving a Tri-Party Agreement between the Cherokee Ranch and Castle Foundation (the Foundation), Castle Rock, and Dominion Water and Sanitation District regarding the Cherokee water. (see Exhibit 1).
On February 5, 2019, Town Council approved Ordinance No. 2019-003 on second reading regarding the sale of certain Denver Basin aquifer water rights to Dominion Water and Sanitation District (Dominion) known as the Cherokee Ranch water rights. The Tri-Party Agreement is required before Ordinance No. 2019-003 goes into effect. The purpose of the agreement is to clarify the Foundation’s right of first refusal (ROFR) under Castle Rock’s original purchase of the United Water and Sanitation District’s (United) assets in Douglas County.
The Town acquired these water rights as part of the United Water and Sanitation District (United) transaction in November 2017. Since the initial negotiations began with United, Castle Rock Water had always intended to sell all or a portion of these water rights in order in recoup some of the costs of the transaction and because they are not readily usable by the Town. Dominion has requested an option to purchase 1,574 acre-feet (AF) of Arapahoe aquifer water; 1,614 AF of Denver aquifer water; and 381 AF of Laramie Fox Hills water that we own under the Cherokee Ranch and Castle Foundation property (Property). The purchase will also include use of the well site easements and the easements to the south of the Property that provide for access for pipelines and appurtenances to deliver replacement water from the Property. The option to purchase the water rights will extend until September 30, 2022, and the initial purchase would be for a minimum of 500 AF of water rights. The price for the initial purchase is $1,450,000. The total price is $8.4 million with potential option payments of $0.8 million.
Key provisions of the Tri-Party Agreement include:
• Dominion will assume Castle Rock’s responsibilities under the First Amended Operating and Maintenance Agreement dated March 6, 2008 (“2008 O&M Agreement) between the Foundation and the Town’s predecessors, Bromley District Water Providers, LLC and Robert A. Lembke, as amended by the 2017 Amendment upon closing on the initial purchase.
• The Foundation will retain a first right of refusal to purchase up to 500 acre-feet of the Arapahoe water in 100 acre-feet blocks over a four year period at the same price offered to Dominion in the Purchase Agreement approved in Ordinance No. 2019-003. This is an increase over the 200 acre-feet FROR in the 2017 Amendment and in the Purchase and Sale Agreement with Dominion.
• Dominion will provide the Foundation with access to capacity in future wells they plan to drill
to use the water rights.
Discussion
More information on the ordinance approving the sale of water rights is provided in the Council memo from February 5, 2019 (see Attachment B).
Staff Recommendation
Staff recommends approval of the Tri-Party Agreement as presented.
Proposed Motion
“I move to approve the Resolution as introduced by title.”
Attachments
Attachment A: Resolution
Exhibit 1: Agreement
Attachment B: Feb. 5, 2019 Council packet