Faced with three different financing mechanisms for Longmont’s $47 million portion of the Windy Gap Firming Project, the council chose to gather more information from the public first.
Longmont public works and natural resources staff told the council on Tuesday that they have three options to finance the $47 million — completely through rate increases, through rate increases and by issuing $6 million in debt or by issuing $16.7 million in debt.
The decision directly affects Longmont residents’ wallets. Essentially, paying cash up front with rate increases means steep rate jumps in the next two years but is cheaper in the long term.
If the council chooses eventually to finance it completely through cash, water rates will need to jump 21 percent in 2017 and 22 percent in 2018, including 9 percent increases already approved.
Debt, on the other hand, would cause milder rate increases for more years, and cost the city more long term.
On the other end of the extreme, council could choose to ask the voters to issue $16.7 million in debt for the project, which would mean delaying adding an additional increase to rates until 2018. In 2018, they would need to be raised 14 percent and another 14 percent in 2019, then between 5 and 7 percent each in years between 2020 through 2026.
With a projected 4.25 interest rate, a $16.7 million bond would cost an additional $8.4 million in interest, for a total of $25.1 million over 20 years.
In the middle of the two extremes is an option of a mix of cash and debt. The City Council could vote to issue up to $6 million in debt to finance Windy Gap without a vote of the general public. This would cause water rates to jump 17 percent each in 2017 and 2018, by zero percent in 2019 and between 4 and 7 percent each in years between 2020 to 2027.
Dale Rademacher, general manager of public works and natural resources, told the council that staff has timed it out so that the city wouldn’t lose any of the options by commissioning a survey of residents on the Windy Gap financing issue…
The council opted to commission a statistically valid survey be sent to 3,000 randomly chosen Longmont households explaining the three options.
The Longmont City Council on Tuesday will make several high-level decisions on how to finance the Windy Gap Firming Project.
In March, the council opted for the costlier 10,000 acre-foot level of the $387.36 million project, which would bring the pricetag for Longmont up to about $47 million. In April, the council directed they would prefer to pay with cash rather than debt for the $47 million, which would save money in the long-term but mean steep rate hikes in the short-term.
Now, staff has come back with a third option — a mix of cash and debt financing.
The council has already approved and codified raises to rates of 9 percent in both 2017 and 2018. If the council chose to finance the complete $47 million through rate increases, rates would need to rise 21 percent in 2017 and 22 percent in 2018, staff wrote to council in a memo.
But, raising rates is a little unpredictable for staff, because people might use less water in order to save money. While that helps with the city’s water conservation goals, it could make financing a huge project like Windy Gap tough.
“What we do know is that if we have a rate increase, it dampens consumption because people do react to an increased cost. What we’ve seen over time is that initial reaction tends to go away over time,” said Dale Rademacher, general manager of Longmont public resources and natural works…
By contrast, if Longmont chose to finance the $47 million project with $16.7 million in bonds, rates would not increase beyond the planned 9 percent in 2017 and then by 14 percent in 2018 and another 14 percent in 2019. The downside to debt is that it costs more in the long-term.
At a projected 4.25 percent interest rate, bonding out $16.7 million would cost the city $55.75 million over 20 years.
In the middle, staff has proposed bonding out only $6 million of the cost and financing the rest through rate increases.
This option would mean rate increases of 17 percent each in 2017 and 2018, between the two extremes of 21 percent with all cash and 9 percent with the higher debt option.
Rademacher said council could choose to bond out $6 million of the cost without a vote of the public…
Council on Tuesday needs to decide which financing option they want, and by extension, how much rates should raise in 2017.
Rademacher said all the rate raises are projected to happen by January 1, 2017 and if a major bonding issue needed to go to the ballot, staff are projecting to put it in front of voters in November, 2017.
Council could also decide to wait on the financing decision and get more public feedback on the issue. While there were questions related to Windy Gap on the regular Longmont resident survey, staff decided to remove those questions and ask council about a more specific survey.
National Research Center submitted a bid in order to survey Longmont residents about whether they would prefer to pay cash or debt for Windy Gap. To do an online-only survey would cost $3,440. To mail out a survey to randomly selected households would cost between $5,130 and $11,850 depending if NRC targeted 800, 1,500 or 3,000 households.
City of Loveland staff members will ask for approval from the Loveland City Council Tuesday to buy up to an additional 3,000 acre-feet of storage space in the Windy Gap Firming Project.
The meeting will take place at 6 p.m. in the municipal building at 500 E. Third St…
The city of Loveland already has 7,000 acre-feet of storage committed in the project and has an immediate opportunity to buy 2,000 more, each 1,000 requiring an immediate payment of $159,851 to Northern Water, according to a council memo.
City staff members are bringing a resolution to council members to ask that they be allowed to purchase up to 3,000 acre-feet because council members previously expressed interest in bumping the city’s storage to 10,000 acre-feet, the memo stated.
“Modeling indicates that this storage acquisition would increase the City’s overall firm yield value, available during drought conditions, by 500 acre-feet,” the memo stated.
The city’s estimated costs for the 7,000 acre-feet is $32,866,434, $2,084,608 of which has already been paid, according to the memo. Adding the 2,000 acre-feet would make the city’s estimated payment costs $42,136,434. An additional 1,000 acre-feet would be another $4,635,000 in costs.
Staff members are seeking new resolutions to obtain the 10,000 acre-feet because the ones passed in 2008 were for lesser amounts.
The Loveland Utilities Commission unanimously approved the resolution being recommended to City Council.
Click here to go to the website. Here’s an excerpt:
The Grand County Learning By Doing Cooperative Effort (LBD) is a unique partnership of East and West Slope water stakeholders in Colorado.
LBD emerged from the Colorado River Cooperative Agreement, a five-year negotiation that became effective in 2013 and will be fully implemented with the successful construction of the Moffat Collection System and Windy Gap Firming Project. The agreement establishes a long-term partnership between Denver Water and Colorado’s West Slope, including several water utilities, nonprofit organizations and government agencies.
A Governance Committee oversees the LBD activities, with one voting member from each of these organizations:
Colorado Parks and Wildlife
Colorado River District
Middle Park Water Conservancy District
Northern Colorado Water Conservancy District
A Technical Committee, made up of representatives from the Governance organizations, as well as government agencies, regional water utilities and other partners, advises on LBD efforts and activities.
Click here to read the newsletter. Here’s an excerpt:
State endorses the Windy Gap Firming Project
During Northern Water’s April 13 Spring Water Users meeting, Mr. John Stulp, Governor Hickenlooper’s water policy advisor, read a letter from the governor endorsing the Windy Gap Firming Project.
The governor said, “Northern Water and its many project partners have worked diligently, transparently and exhaustively in a collorabitve public process that could stand as a model for a project of this nature.” Hickenlooper continued, “This is precisely the kind of cooperative effort envisioned for a project to earn a state endorsement in Colorado’s Water Plan.”
The state’s endorsement followed the Colorado Department of Public Health and Environment’s March 25 issuance of a 401 water quality certification for the WGFP. Project Manager Jeff Drager said, “This is the next to last step in getting the project permitted. The final step is the federal 404 wetlands permit from the U.S. Army Corps of Engineers, which we believe will be forthcoming in the next few months.”
This is the State of Colorado’s first endorsement of a water storage project.
LOVELAND – Mike King, the new director of planning for Denver Water, said at a recent meeting that beyond additional transmountain diversions through the Moffatt Tunnel into an expanded Gross Reservoir near Boulder, Denver Water doesn’t have other Western Slope projects on its radar.
King served as executive director of Colorado’s Department of Natural Resources from 2010 until January of this year, when he took the planning director job with Denver Water.
After speaking to a luncheon crowd of close to 200 at the Northern Water Conservancy District’s spring water users meeting in Loveland on April 13, King was asked from the audience “How much more water does Denver Water need from the Western Slope?”
“I think if we get Gross Reservoir approved, the answer is for the foreseeable future, you know, we need to do that first,” King said.
King is a native of Montrose, son of a water attorney, and has a journalism degree from CU Boulder, a law degree from the University of Denver, a master’s in public administration from CU Denver and 23 years of state government experience.
“And I can tell you that the reality is, whether it is from a permitting perspective or a regulatory perspective, the West Slope is going to be a very difficult place,” King continued. “If there is water available, it is going to be a last resort. And I so think that the answer is, that won’t be on our radar.”
Denver Water is seeking federal approval to raise the dam that forms Gross Reservoir, in the mountains west of Boulder, by 131 feet. That would store an additional 77,000 acre-feet of water and bring the reservoir capacity to 118,811 acre-feet. Ruedi Reservoir, by comparison, holds 102,373 acre-feet.
The $360 million project would provide 18,000 acre-feet of firm yield to Denver Water’s system and result in an additional 15,000 acre-feet of water being diverted from the West Slope each year. On average, Denver Water’s 1.3 million customers use about 125,000 acre-feet of West Slope water each year.
The water to fill an expanded Gross Reservoir would mainly come from tributaries of the Fraser and Williams Fork rivers, via the Moffat Tunnel, near Winter Park.
Beyond the Gross Reservoir project, King explained that any future Denver Water projects on the West Slope would need to fit within the confines of the Colorado River Cooperative Agreement, signed by Denver Water and 17 West Slope entities in 2013.
The CRCA, says that “if there is more water, it only comes after the West Slope says they agree with it and it makes sense,” King said. “That sets the bar so incredibly high and gives them the ultimate ability to say, ‘This is good for the West Slope.’
“And so I just don’t think Denver Water is going to be looking to the West Slope,” King continued. “I think anybody who manages natural resources, and water in particular, will never say ‘never’ to anything, but I think it is certainly not on our radar.”
Not on Denver Water’s radar, perhaps, but it is worth noting that Denver Water is the only major Front Range water provider to have signed the cooperative agreement with the West Slope.
When asked what he thought of King’s remarks about West Slope water, Eric Kuhn, the general manager of the Colorado River District said he thought the comments reflect “the concept that if Denver takes more water from the West Slope it could undermine the security/reliability of what they already take.”
Kuhn’s comment relates to the possibility that if Denver Water diverts too much water from the Western Slope, it could help trigger a compact call from the lower basin states, which could pinch Denver’s transmountain supply of water.
Editor’s note: Above is a recording of Mike King, the director of planning for Denver Water, speaking after lunch in front of about 200 people at Northern Water’s spring water users meeting, a public meeting held at The Ranch event center in Loveland on Wednesday, April 13, 2016. The recording, made by Aspen Journalism, begins shortly after King had begun his remarks. It is 26:34 in length. At 8:20, King discusses the development of the Colorado Water Plan. At 22:40, King answers a question about the governor’s endorsement of the Windy Gap project and another phrased as “How much more water does Denver Water need from the Western Slope?”)
A buoyant crowd
Earlier in the meeting engineers from Northern Water — which supplies water to cities and farms from Broomfield to Fort Collins — told the mix of water providers and water users from northeastern Colorado that they could expect an average spring runoff this year, both from the South Platte and the Colorado Rivers.
They were also told that Northern Water was making progress on its two biggest projects: the Windy Gap Firming Project, which includes construction of Chimney Hollow Reservoir near Berthoud; and NISP, the Northern Integrated Supply Project.
NISP includes two new reservoirs, Glade and Galeton, to be filled with East Slope water from the Cache La Poudre River, which runs through Fort Collins and into the South Platte River.
Just before lunch, John Stulp, the special policy advisor on water to Gov. John Hickenlooper, read a surprise letter from the governor endorsing the Windy Gap project, which would divert an additional 9,000 acre-feet of water each year, on average, from the upper Colorado River and send it through a tunnel toward Chimney Hollow.
Windy Gap is part of the Colorado-Big Thompson Project, which diverts on average 260,000 acre-feet a year from the Western Slope.
The Windy Gap project does include environmental mitigation measures for the sake of the Colorado River, and has approval from the required state agencies and Grand County, but it still needs a permit from the U.S. Army Corps of Engineers.
A political risk
After lunch, King shared some insights from his old job as head of the state’s department of natural resources.
“I think it’s important that you understand what the development of the state water plan looked like from the governor’s perspective and the state’s perspective,” King told his audience.
As head of DNR, King had oversight over the Colorado Water Conservation Board, which was specifically tasked by the governor in late 2013 to produce the state’s first-ever water plan, and to do so in just two years.
King said that he, Stulp and the governor knew that a water plan in Colorado could be “the place where political careers went to die.”
“So the thing we had to make sure that came out of this, knowing that we weren’t going to solve the state’s water issues in two years, was that we had to do this in a manner that politically, this was viewed as a big win, and that future governors and future elected officials would say, ‘We need to do this again and we need to continue this discussion,’” King said.
“Not because the governor needed a political win,” King added, “but because to have the next stage of the water plan, to have the discussion in five years, you can’t have an albatross around this, and I think we were able to do that, and so we’re very proud of that.
“If we had a political mushroom cloud, no one would have ever touched the Colorado Water Plan again,” King continued. “That meant we aimed a little bit lower than maybe we would have liked, and I’ve gotten this at Denver Water, talking about lost opportunities in the Colorado Water Plan. Maybe we did aim just a little bit lower than we should have.”
King said the state was not able to “reconcile the inherent conflicts” in the various basin implementation plans, or BIPs, that were put together by regional basin roundtables as part of the water planning process.
And he acknowledged that the plan has been criticized for not including a specific list of water projects supported by the state, and for reading more like a statement of problems and values than a working plan.
“One of things that has been driven home to me time and time again in the two months that I’ve been at Denver Water is that planning is not something you do every five or six years,” King said. “Planning is a continuous process.”
King also said that there were some “tremendous successes” in the water plan, including the basin implantation plans, or BIPs, even though they sometimes conflicted.
“We got BIPs from every single basin,” King said. “The basins turned over their cards and said ‘This is what we need.’ So now we have a major step forward.”
Other plan elements
King said other successes in the Colorado Water Plan include the stated goal of conserving 400,000 acre-feet of water by 2050 and a nod to changing land use planning in Colorado.
King said tying land use to water availability “was something we never discussed in Colorado because it infringed on local control and it was just kind of a boogieman in the room.”
But he pointed out that “the vast majority of the basin implementation plans said, expressly, ‘We need to have this discussion’ and ‘We need to start tying land use to water availability,’” King said. “That’s a good thing. That’s a major step forward.”
When it comes to land use and Denver Water, King said driving down the per capita use remained a high priority and that if Denver proper grows, it is going to grow up through taller buildings, not by sprawling outward.
King also said Denver Water was working to manage, and plan for, the already apparent effects of climate change, especially as spring runoff is now coming earlier than it used to.
“We know that the flows are coming earlier, we know that the runoff is coming earlier,” King said, noting that reality is causing Denver Water to plan for different scenarios and ask questions about storage and late summer deliveries of water.
“For us, the most immediate thing is, is that we know it’s getting warmer,” King said. “In the last 20 years we’ve seen that, the way the [run offs] are coming earlier. We know we’ve had catastrophic events that are incredibly difficult for us to manage. And so we’re trying to work through that.”
Editor’s note: Aspen Journalism, the Aspen Daily News and Coyote Gulch are collaborating on coverage of rivers and water. The Daily News published this story on Wednesday, April 20, 2016.
The Longmont City Council reached a consensus Tuesday night — they would rather the city pay roughly $47 million in cash instead of using debt for a portion of the Windy Gap Firming Project.
Water rates are set to increase by 9 percent in 2017, 2018 and 2019, then 8 percent in 2020 and 2021, said Dale Rademacher, general manager of public works and natural resources.
Paying cash for Windy Gap is cheaper for the city in the long run, but staff estimates it will raise water rates by 21 percent in 2017 and then by another 22 percent in 2018, rather than the planned 9 percent. Debt financing would have cost almost $25 million more in the long term with a predicted 5 percent interest rate but resulted in more gradual rate increases between 5 and 14 percent in the short term…
City Manager Harold Dominguez said there are plans in the works to test utility rate discounts for low-income households. To qualify, a single Longmont resident would need to make less than $12,720 in a year or a married couple would need to earn less than $17,146 in a year, although those limits could have adjusted slightly since the test program was introduced.
The City Council also directed Rademacher to explore alternative financing so the entire burden of the $47 million doesn’t fall on ratepayers. There’s a Windy Gap surcharge on new water taps that sunsets at the end of 2017. Councilmembers said they’d rather the surcharge just stayed in place in order to generate funds for the Windy Gap project.
Additionally, a property owner can either transfer non-historical water rights to satisfy a raw water requirement or pay cash-in-lieu. Staff will study limiting it to cash payment only in order to pay for Windy Gap.
Meanwhile, here’s the view from Grand County (Lance Maggart):
The long awaited development of Northern Water’s Chimney Hollow Reservoir cleared one of the final two hurdles on the road to construction in late March when the Colorado Department of Public Health and Environment (CDPHE) released its 401 water quality certification for the project, generally referred to as the Windy Gap Firming Project (WGFP).
The issuance of the 401 water quality certification from the CDPHE was one of two final steps in the permitting process required for construction on the project to begin. The 401 certification from the state comes after 13 years of work. According to Northern Water’s Public Information Officer Brian Werner Northern Water began the formal permitting process for the development of Chimney Hollow Reservoir in 2003. Since beginning the formal permitting process Northern Water and other participants have spent roughly 15 million dollars on the projects permitting process.
Now that Northern Water has received their 401 certification from the state the municipal water provider is awaiting a 404 wetlands permit from the US Army Corp of Engineers, the final permitting step before construction can begin on Chimney Hollow.
404 WETLAND PERMITS
As a matter of practice 404 wetlands permits from the Corp of Engineers require issuances of state certifications, like the CDPHE 401 water quality certification, before the Corp of Engineers can complete their own permitting processes. “This is the next to the last step in getting the project permitted,” stated Project Manager Jeff Drager.
Officials at Northern Water said they expect the 404 wetlands permit is forthcoming and anticipate its issuance in the next few months. Werner was quick to point out that Governor John Hickenlooper has officially endorsed the project, a first in the history of the state according to a press release from Northern Water highlighting the endorsement.
“Northern Water and its many project partners have worked diligently, transparently and exhaustively in a collaborative public process that could stand as a model fro assessing, reviewing and developing a project of this nature,” stated Hickenlooper in a letter read at Northern Water’s Spring Water Users meeting in Loveland last week by the Governor’s Water Policy Advisor John Stulp.
Once Northern Water has secured the final permit for the project from the Corp of Engineers work on Chimney Hollow Reservoir can begin. Chimney Hollow is eventually expected to store 90,000 acre-feet of water and will be located just west of Carter Lake Reservoir in southern Larimer County. The development of the reservoir will mean additional water diversions out of Grand County. The total estimated price tag for the WGFP is around $400 million.
Despite environmental concerns produced by the additional diversions both Grand County and the conservation group Trout Unlimited have endorsed the project, following sustained negotiations between Northern Water and various stakeholders from the western slope regarding environmental mitigation and adaptive management plans for the Colorado and Fraser Rivers. A press release from Trout Unlimited praised the river protections that were reaffirmed with the state 401 certification.
“We strongly believe these permit conditions establish a strong health insurance policy for the Upper Colorado River,” stated Mely Whiting, counsel for Trout Unlimited. In their press release Trout Unlimited outlines conditions within the 401 certification the organization feels will address both fish habitat issues and water quality needs including: monitoring of stream temperatures, key nutrients and aquatic life, providing periodic “flushing flows” to cleanse the river during runoff and requiring ongoing monitoring and response if degraded conditions are detected.
The 401 certification and the environmental protections included with it were made possible in part from a more collaboratively minded interaction between west slope stakeholders such as Grand County and Trout Unlimited and east slope diverters Northern Water and Denver Water. “This long-term monitoring and flexibility of response is called ‘adaptive management’ and it’s a critical feature of the permit requirements,” stated Whiting. “Adaptive management recognizes that stakeholders can’t foresee every problem, and it provides a process for ongoing monitoring and mitigation of river problems as they arise.”
Grand County local Kirk Klancke is the president of the Colorado Headwaters Chapter of Trout Unlimited and has long championed the health of both the Fraser and Colorado Rivers. Klancke spoke positively about the adaptive management and collaborative spirit that has made negotiations for the WGFP possible. “We wouldn’t be at this point without the leadership of Grand County and their persistent efforts to improve the health of the Colorado River,” stated Klancke. “The Northern subdistrict also deserves credit for listening to our concerns and working with all stakeholders to find solutions.”