Irrigation and Reservoir Companies in the City of Fort Collins Brian Janonis

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1 1 Irrigation and Reservoir Companies in the City of Fort Collins Brian Janonis Bottom Line: Water in Colorado is purchased and sold on the open market. Because water is very limited along the Front Range, the conflict between irrigation companies and growing cities is intensifying. The stresses of this highly competitive situation are bringing about new social, economic, ecological, and hydrologic conditions as adjustments are made to accommodate increasing demands for water due to municipal growth. The way Fort Collins interacts with local irrigation and reservoir companies will impact not only our water supply but the way the community looks. It is important to understand the complex water system in making decisions that affect the future of our community. Geographically, the Fort Collins Water Utility serves about half of the City s Urban Growth Area. Most business and industrial users are served by the Water Utility, while the water districts serve mostly residential customers. Because of the seasonal nature of ditch water rights, additional ditch water adds little value to Fort Collins Water Utility without additional storage, which is causing the Utility to reconsider accepting ditch water to meet its raw water requirements. Background: Water resource development along the Front Range started with the first irrigation diversion in 1856 and has proceeded in an incremental fashion to the present day. This has resulted in thousands of water transfers between water projects forming a complex interdependent network. As cities developed, they would first develop their own water projects to meet demands. However as the water resource development potential diminished, they turned to purchasing irrigation water from agriculture, the biggest single user in the state and the ones with the most senior water rights. As recently as the 1970s, over 90% of the water in Colorado was used for agriculture. Fort Collins is built over land that was historically irrigated by numerous irrigation ditches. In fact, its first water supply in 1873 was provided by the Fort Collins Irrigation Canal, later called Town Ditch, and presently Arthur Ditch. In 1882, Fort Collins built their first water treatment plant on the City Ditch, now known as part of Larimer Canal No. 2 (1). As Fort Collins developed, the Water Utility accepted water rights in the form of irrigation company shares (City Code Raw water requirements: satisfaction) to provide the raw water required to serve the developed ground, with the intent that that most of the irrigation water would be converted to municipal use, treated at the water treatment plant, and used by municipal utility customers. By 1975, the Water Utility held

2 2 considerable stock in Pleasant Valley & Lake Canal, Arthur, Larimer Canal No. 2, New Mercer, Warren Lake Reservoir, Water Supply & Storage, and North Poudre Irrigation Company. Those holdings have more than doubled since. A comprehensive listing of irrigation companies and currently known ownership by City departments is attached. (1) This is one example of the thousands of water transfers between water projects forming a complex interdependent network. The City acquired the properties in the 1880s through purchase and condemnation upon which the City Ditch was built. The ditch was later leased (99 years) to the Larimer No. 2 Company when the City s water treatment plant was moved up the canyon. Larimer No. 2 expanded the ditch to be their sole diversion from the Poudre River and used it under the lease agreement. Finally in 2010, the City granted Larimer No. 2 a permanent easement to use the ditch. Today, we have issues with Rose Brinks, over ownership of the City Ditch properties. Fort Collins served all of its residents, and then some, until the 1960s, when the City was unwilling to extend services to proposed development in outlying areas. By not providing water service to these areas, the water districts formed to serve areas surrounding what was Fort Collins at that time. Since then, the City has grown over areas served by the water districts. Currently, the Fort Collins Water Utility serves about 75% of city residents and half the area within the Fort Collins urban growth area. City Charter Article XII Municipal Public Utilities defines the operating principals of City owned utilities including the requirement that utility operating funds must be used to benefit their respective rate payers, which is different than city residents. Tabor issues also make it important to keep funds separate. The City, primarily through Parks, Golf and Natural Areas Departments, has acquired irrigation company shares for other purposes. It is difficult to tell how much of the various ditch company shares were purchased for the City or for the Water Utility because prior to 1995, the Water Utility was required to provide water for Parks and Golf. When it was realized that this practice conflicted with the City Charter, Golf and Parks were required to acquire their own water. The Water Utility manages most water shares on behalf of Parks, Golf and Natural Areas and charges 10% above annual ditch company water assessments for administration of the shares. With Water Utility and or City ownership increasing and the community looking at irrigation company reservoirs and ditches as an amenity, conflicts are increasing. The ownership of shares in the various ditches is recorded as the City of Fort Collins and Water Utility Staff tracks these shares to understand the purposes for which that water was acquired. A comprehensive list of how irrigation ditches are used is attached. The irrigation ditches and reservoirs also provide wildlife and aquatic habitat. Private recreational opportunities are provided to reservoir leasees.

3 3 A recent Colorado State University study, published through the Agricultural Experiment Station, documents the importance of irrigation ditches in wetland and habitat creation with the conclusion that Water transfers and changing agricultural practices to increase water efficiency put existing wetlands at risk, necessitating an understanding of policy and management implications on agricultural wetland ecosystems. Current wetlands may only be as permanent as the irrigation practices that sustain them. Recently, the remaining shares in the Coy Ditch, which irrigated the new Woodward Governor (Link-N-Greens) site, were acquired by City Natural Areas. Since the other Coy Ditch shares are owned by local water districts, Natural Areas intends to remove the Coy Ditch diversion on the river and abandoning the ditch. The water districts will take their water upstream at their plant intake. Recently, neighbors became upset when the Warren Lake Reservoir Company removed trees on the company s property for maintenance and safety of the dam. A nearby Home Owners Association has a private recreational lease with the Company. Warren Lake Reservoir Company shares are nearly 75% owned by either the City or the Water Utility. Most of the water is used for irrigating City Parks and Collindale Golf course. The relationship between the neighborhoods surrounding the various lakes throughout Fort Collins and the irrigation companies that operate them can vary. Warren Lake is a unique situation because the surrounding neighborhood does not own any shares in the Reservoir Company that owns the lake, but the Landings Community Association owns the recreational rights on the lake. When lake levels drop to an unacceptable level, the Landings will rent water to keep Warren Lake full. On Lake Sherwood, the Lake Sherwood Homeowners Association own a number of ditch company shares that are put to beneficial use (irrigation). On Long Pond, in Northeast Fort Collins, there is a similar situation to Lake Sherwood. The premise of the Water Utility s water supply is based on the principals of Colorado Water Law and State Statute. Whenever the Water Utility changes the use of an irrigation company share from agricultural to municipal use (via our water treatment plant), it is required to maintain historic return flow patterns. This means the Water Utility must match historic non-consumptive return flows to the Poudre River in the same quantity, location and time as when the water was being used for irrigation purposes, including water that used to seep through the ground to reach the river. Meeting these return flow requirements is why the Water Utility needs operational storage, such as the proposed Rigden Reservoir. Rigden Reservoir will allow the Utility to return flow back to the river in time and place to replicate return flows from irrigated land (now developed) that seeped through the ground to reach the river each year. Halligan Reservoir, or an alternative project, is needed to provide long-term storage to carryover water from year to year for treated water needs, since, many of these water rights yield significantly less in drought years.

4 4 As water becomes more and more critical to the region s economic wellbeing and public health, other utilities are acquiring irrigation company shares. The Poudre River basin is known as the last waterhole of the Front Range. As an example, the Thornton Water Utility secretly acquired 50% of the Water Supply and Storage Company shares in the 1980s with the intent to dry up and move that water south. Construction of diversion facilities to pipe the water to Thornton is expected to begin in Greeley and the local water districts have acquired ditch company shares with the same purpose. Other utilities, such as United Water and Sanitation District, Arapahoe County Water and Sanitation District, and East Cherry Creek Valley Water and Sanitation District are acquiring local irrigation company shares with the same intent. Irrigation ditches lose a considerable amount of their water to seepage and leakage. This ditch loss is called shrink. As water becomes more valuable, irrigation companies are lining ditches and tightening up gates to reduce shrink. This has the unintentional effect of drying up wetlands and ponds that were once considered natural habitat. One only needs to look at some of the abandoned ditches in Southern Colorado or New Mexico to see the effect on the landscape. Recent studies by CSU have shown the extent of wildlife habitat dependent on the losses from the North Poudre Irrigation Company s ditch system. Locally, residents around Avery Pond became upset when it dried up because the Pleasant Valley and Lake Canal replaced leaking gates. The conflict between irrigation companies and the City has a long history. The City built its first sewer in the 1880s to drain Mountain Avenue. Swampy conditions were the result of ditch seepage. The City sold $80,000 in bonds to cover the Arthur Ditch through town in the 1930s. The City studied ditch consolidation in the 1950s and the 1980s as a way to reduce the number of ditches traversing the City. Many homes near ditches require sump pumps in their basements that run all summer long when the ditches are flowing. Removal of trees along the ditches has upset nearby residents while falling trees and limbs pose liability issues. Bridges over ditches require maintenance and are expensive to replace. Several ditches overflow and flood homes and businesses during storm events; The Stormwater Utility has spent millions of dollars in flood protection for areas below irrigation ditches. The future of ditches and reservoirs, and the companies that operate them, is important to the future of the City and its residents. The complex relationship between the community, the water utilities, City Government, other water providers, the market and ditch and reservoir companies leads to competing interests and conflict. How we decide to manage this relationship, or not, will not only affect the Fort Collins Water Utility s ability to provide water to its customers, but how the community looks and its environment. There are a lot of questions remaining to be answered. I have attempted to answer several commonly asked questions below: Is the original premise for Fort Collins Water Utility accepting irrigation company shares still valid? This is being re-evaluated. Irrigation ditches especially those that run through the community are extremely important to our future water supply, but we need

5 5 storage to fully utilize these rights. At Council s direction, Water Utility staff worked diligently to minimize the size of the proposed Halligan Reservoir expansion. This required the modeling to include storage and use of South Side ditch water. Any change to this assumption would have a negative effect on the permitting process. The dilemma is that other utilities will likely buy local irrigation company shares with the purpose of filing a change of use case to take the water for their utility purposes. The Water Utility can use some ditch company water to supply raw water to local parks, golf courses and even HOAs. Although this is inefficient, and less secure, especially in drought years, it will preserve some of the wetland environment. During droughts like that of the early 2000s, some of these facilities were switched to treated water because the ditches were dry and would incur large amounts of shrink. The pipeline losses with treated water are much less. In the long term, consolidating the Pleasant Valley & Lake Canal, Larimer No. 2, Arthur and New Mercer ditch companies under one company seems to make the most sense. This would allow them to be professionally managed under one manager that could focus time and resources on maintaining a good working relationship with the community. Structural changes could also improve the efficiency of water delivery resulting in less wetland environment. Some irrigation infrastructure is considered a valuable amenity and affects private property values. Multi-million dollar homes have been built along the shores of irrigation reservoirs. What can be done to preserve these assets? The Water Utility can work cooperatively with the City and neighborhoods to determine which infrastructure is desired to be preserved and how it can be preserved in a manner acceptable to the community, without hurting water utility customers. Although irrigation reservoirs are considered an asset, we get calls every year from homeowners complaining about high groundwater when the ditches that feed those lakes start flowing. The City or neighborhood can keep water in a reservoir by acquiring or renting irrigation company shares. The Water Utility rents surplus water to others, including Homeowner Associations, whenever it is available. If the shares are not used for beneficial use or not for the purposes as defined in the water court decree, is the water right abandoned? It is important for anyone acquiring water to put it to beneficial use such as landscape irrigation to protect their right to that use. The State Engineers Office is getting more aggressive in their water audits. These audits are being done to comply with state responsibilities regarding the administration of water rights decrees and as a result, may find abandoned water. The State Engineers Office has recently begun auditing Fort Collins water portfolio. Recently, the State determined that the Fort Collins Water Utility abandoned a conditional decree on the Michigan Ditch. Although the Water Utility has water rights it is not currently using, the State

6 6 allows domestic water providers this type of flexibility to acquire rights ahead of their need given the difficulties in acquiring water supplies. What happens to the irrigation company property when the infrastructure is abandoned? There are statutes that help guide consolidation of irrigation companies. However, the underlying land grant probably will determine what happens to irrigation company infrastructure when it is no longer used. What will happen to the value of irrigation company shares if the City does not accept them to meet the raw water requirement? Many developers have acquired shares with the intent to meet their raw water requirements. Presently, raw water requirements can be met for the Water Utility using Arthur, Larimer Canal No. 2, New Mercer, North Poudre, CBT, Pleasant Valley & Lake Canal, Warren Lake Reservoir Company, Fort Collins Certificates and Josh Ames Certificates. If the Water Utility is no longer in the market, the risk is that it will go to the highest bidder -- Probably another water utility. Currently there are about 10 different City staff members serving on irrigation company boards and it is very difficult to get consistent representation. What can we do to improve representation of the City interests? We can probably reduce the number of board representatives to three and designate a lead coordinating representative. Since the Water Utility has almost $1 billion invested in water rights on behalf of its customers and the City, it is important that our representatives have a thorough understanding of water resources in Colorado as well as City interests. The people selected for this job must be able to think strategically about the future and must understand City values. They must also have a clear understanding of what the desired future should look like. Is there a way that the City can use ditches for trails, wildlife watching etc? It depends on the underlying property right. For example, the City acquired the land under the City Ditch and could build a trail on it. In the case of irrigation companies it would depend on how they acquired the property right when it constructed a ditch or reservoir. The City and County of Denver has a trail along the Highline Canal that connects with parks and open spaces. It would be good to check with them to find out how they worked with the irrigation company. How do we assure that we have accurate records? There needs to be accurate record keeping of real property assets by fund, especially water rights and real estate. Good accounting practices, City Charter or City Code (Charter Section 23 and Code Section 8-57). Section 23 of the Charter establishes separate utilities accounts as enterprise funds. Section 8-57 (a) (6) establishes enterprise funds to account for operations a. That are financed and operated in a manner similar to private business enterprises where the intent of City Council is that the costs of providing goods or services to the general public on a continuing basis be financed or

7 7 recovered primarily through user charges; Section 8-57 (b) states Assets in the above created funds shall be segregated into individual funds representing the financial resources from separate purposes for which such assets arose. Such individual funds include but are not limited to, funds created under this Article. The attached tables are an initial attempt to portray departmental ownership and use. Further research is needed and procedures need to be developed for the acquisition and sale of water rights.

8 8 Attachment 1 Irrigation Company Ownership Attachment 2 Irrigation Company Uses

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