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
Lauren Moore, Water Resources Program Analyst
Title
Resolution Approving the First Amendment to the Intergovernmental Agreement for the Option to Purchase and Right of First Refusal Regarding Ground Water Rights, Easements and Related Improvements
Body
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Executive Summary
The purpose of this memorandum is to seek Town Council approval by Resolution (see Attachment A) for an extension on closing for the purchase option of the sale of certain Denver Basin aquifer water rights to Dominion Water and Sanitation District (Dominion) known as the Cherokee Ranch water rights under Ordinance 2019-003. Dominion has requested to purchase 300 acre-feet (AF) of Arapahoe aquifer water of the 3,570 AF of water rights 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. Dominion intends to exercise their option and formally requests a closing extension from June 17, 2019 to August 2, 2019.
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 February 5, 2019, Town Council approved Ordinance 2019-003 for the Intergovernmental Agreement 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 date of June 17, 2019 to August 2, 2019.
Discussion
Dominion has requested to purchase 300 AF of Arapahoe aquifer water of the 3,570 AF of water rights that Castle Rock owns under the Cherokee Ranch and Castle Foundation property (Property). Pursuant to the key terms of Ordinance 2019-003 and Resolution 2019-023, and as outlined in the memo to Town Council on February 5, 2019 (Attachment B), Dominion has completed its due diligence on these water rights (Attachment C) and formally requests a closing extension from June 17, 2019 to August 2, 2019. Upon closing, the Town will convey to Dominion all applicable deeds, title insurance, and assignments of rights and obligations for the 300 AF purchase.
Dominion will be required to pay an option payment of $302,120 on or before June 3, 2020 to maintain the option to purchase the remainder of these water rights unless Dominion elects to purchase all of the water rights prior to this date, or Dominion relinquishes its option to purchase by giving notice to the Town.
Budget Impact
The sale of these water rights will have a positive impact on the Town’s water enterprise budget, accounting for $870,000 in revenue for 2019. The Initial Option Payment of $50,000 was transferred into an escrow account upon execution of the Purchase and Sale Agreement on March 8, 2019. The remaining $820,000 ($2,900 x 300 AF) will be paid to the Town upon closing. Proceeds from the sale will be placed into Account Number 210-4275-392.10-00 (Water Fund - Capital Asset Disposals/Proceeds-Sale of Assets).
Recommendations
Staff recommend Town Council approve the closing extension for the water rights sale agreement with Dominion Water and Sanitation District.
Proposed Motion
“I move to approve the Resolution as introduced by title.”
Attachments
Attachment A: Resolution
Exhibit 1: Agreement
Attachment B: Memo dated Feb. 5, 2019
Attachment C: Dominion due diligence letter
Attachment D: Tri-Party Agreement