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
Title
Resolution Approving a Purchase and Sale Agreement between TDK Holdings, LLC and the Town of Castle Rock for Tributary Water Rights along Deer Creek [Jefferson and Douglas County near Chatfield Reservoir]
Body
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Executive Summary
The purpose of this memorandum is to seek Town Council approval of a resolution approving a purchase and sale agreement between TDK Holdings, LLC (TDK) and the Town of Castle Rock (Town) (see Attachment A). The Town desires to purchase senior water rights and enter into an option for junior water rights owned by TDK that exist on Deer Creek in Jefferson County. These water rights have historically been used to irrigate the Deer Creek Golf Course generally located north of State Highway C-470 between Wadsworth and Kipling Boulevards.
The senior water rights include priorities number 2 and 3 on Deer Creek and water rights with this type of seniority very rarely come up for sale in locations usable to the Town’s portfolio. The rights have been in use for what appears to be a long time so a change of these water rights from irrigation to municipal use should yield approximately sixty (60) acre feet every year, even in drought years. Because Deer Creek flows into Chatfield Reservoir, the Town could take delivery of the rights directly into our Chatfield Reservoir storage account. Because Castle Rock only has a very junior surface water right in Chatfield Reservoir (1989), these water rights have significant value to Castle Rock Water. For these reasons, Castle Rock Water is proposing to offer the seller $45,000 per acre foot or $2,700,000 and an earnest money deposit of $100,000 which would be included as part of the final purchase. Additionally, the Town would enter into an Option Agreement to potentially purchase the retained junior water rights from TDK if the Town deems these water rights to be a benefit to the Town’s portfolio.
History of Past Town Council, Boards & Commissions, or Other Discussions
Staff discussed this item with Castle Rock Water Commission on January 25, 2023, and the Commission was generally supportive of the purchase.
Discussion
Castle Rock Water staff is aware of several transactions that have occurred over the past five years for other senior blocks of water rights:
• Nevada Ditch (on the South Platte near Chatfield) - Castle Rock Water offered $25,000/AF but the rights were purchased by Denver Water for a confidential amount, likely a better deal than our offer.
• London Mine (flows on Middle Fork of South Platte River into the main stem) - Purchased by Aurora Water: $22,000/AF.
• Red Hill Water Rights (flows on Middle Fork of South Platte River into the main stem) - Deal between Aurora Water and Dominion Water and Sanitation District: $22,500/AF
• Senior Ditch Rights on South Platte River in Weld County - Aurora submitted bid pricing to Castle Pines North Metro District for approximately $30,000/AF.
Senior water rights with reliable yields in locations that work for Castle Rock rarely come up for sale on the market. These water rights on Deer Creek that flow directly into Chatfield Reservoir are reliable and would accrue directly into the Town’s Chatfield storage account with little if any new infrastructure that would need to be built. While sixty (60) acre-feet of water may not seem like much, it is renewable water that would be available every year and is water that would meet the needs of 130 or more Castle Rock residential customers. Furthermore, Castle Rock Water may be able to recoup all or a large portion of the sale price of this water with existing developers who are water short.
The junior water rights associated with this Purchase and Sale Agreement are much less reliable and would likely not be available in a drought year. Additionally, the junior water rights would likely need to be diverted from Deer Creek, pumped into Mann Reservoir located on Jefferson County Open Space and then either released back into Deer Creek or floated down Massey Draw to get into Chatfield. By entering into an Option Agreement for the junior water rights, the Town will have more time to study the value and infrastructure costs of how these water rights could be captured.
Budget Impact
The Town currently has $5,188,655 in the Water Rights Acquisition project budget (Account Number 211-4375-443.75-47, Project Code WR OWR) for 2023. The total purchase price for this agreement with TDK is $2,700,000.
Staff Recommendation
Castle Rock Water Commission was generally supportive of this purchase. Staff recommends that Town Council approve the purchase and sale agreement with TDK.
Proposed Motion
“I move to approve the Resolution as introduced by title.”
Attachments
Attachment A: Resolution
Exhibit 1: Agreement
Attachment B: Location Map