SUBJECT: GENERAL BUSINESS
Title
A Resolution of the Board of Trustees of the Town of Erie Approving the Allotment Contact Between the Windy Gap Firming Activity Enterprise, Municipal Subdistrict, Northern Colorado Water Conservancy District and the Town of Erie, Acting by and Through the Erie Water Activity Enterprise
Body
DEPARTMENT: Public Works
PRESENTER: Todd Fessenden, Public Works Director
Paul Zilis, Water Attorney
TIME ESTIMATE: 45 Min
only required for non-consent items
FISCAL SUMMARY:
Cost as Recommended: $40.02 Million over 20 or 30 years
Balance Available: N/A
Budget Line Item Number: Rate Funded
New Appropriation Required: No
STAFF RECOMMENDATION:
Recommendation
Staff recommends the Board of Trustees adopt the Resolution authorizing the Town, acting by and through its Water Activity Enterprise to enter into the Windy Gap Firming Project Allotment Contract
End
SUMMARY AND BACKGROUND OF SUBJECT MATTER:
The Town of Erie has been a participant in the Windy Gap Firming Project (“WGFP”) since its inception in 2003. The Board of Trustees previously approved agreements with the Municipal Subdistrict of the Northern Colorado Water Conservancy District (“Municipal Subdistrict”) for the WGFP on July 23, 2002, February 11, 2003, August 10, 2004, January 24, 2006, December 11, 2007, June 9, 2009, June 22, 2010, January 10, 2012, August 28, 2012, March 25, 2014, October 28, 2014, January 12, 2016, August 10, 2017, January 23, 2018, and November 13, 2018 and December 31, 2019. The Allotment Contract will be the controlling agreement for Erie’s participation in the project into the future. It is the culmination of 17 years of efforts by the Municipal Subdistrict and the participants, and is a major step forward for Erie’s water supply.
The WGFP has always been contemplated as a component of the Windy Gap Project, because the Windy Gap water rights do not provide a firm yield every year. The WGFP will provide additional storage to firm the annual yield of the Windy Gap water rights, by storing water in years when ample water is available and making it available in years when water is unavailable.
There are 480 Units in the Windy Gap Project, and Town of Erie owns 20 Units, 6 of which were acquired in 2017. Windy Gap water is deliverable to the Town through the Town’s capacity in the existing Northern Colorado Water Conservancy District (NCWCD) Southern Water Supply Pipeline Project and the Town of Erie's raw water pipeline through its pump station which takes water from the Boulder Feeder Canal (via Boulder Reservoir). It is essential for the Town’s water portfolio because, unlike the Town’s other sources of water, Windy Gap water is fully consumable (i.e., available for total consumptive use, augmentation, reuse, etc.). It is the key to the Town’s Boulder Creek Project because it would not be possible without the Windy Gap reuse water for augmentation of the wells.
The Chimney Hollow Reservoir site for the WGFP was acquired in 2004 for approximately $4,000,000. All permitting for the project has also been completed, including but not limited to the Final Environmental Impact Statement (FEIS), issuance of a 1041 Permit from Grand County, a new Carriage Agreement with the US Bureau of Reclamation (BUREC), and the issuance of a Record of Decision by BUREC, as well as 401 Certification from the State for water quality. In addition, a final Water Court Decree has been issued and the design work has been completed.
The last hurdle is a legal challenge filed in Federal Court in 2017, by several environmental groups against BUREC and the U.S. Army Corps of Engineers (COE) regarding the environmental permitting for the WGFP. NCWCD, the Municipal Subdistrict, and the participants are optimistic that BUREC and COE will prevail, and it is imperative that the ongoing work continue while the lawsuit is pending.
The WGFP is permitted for 90,000 acre-feet, and Erie’s participation level is 6,000 acre-feet, which is sufficient to firm up its 20 Windy Gap Units. Therefore, the Town will have 6.67% of the capacity in the project, and its costs will be based on that pro-rata amount.
There are 12 participants in the WGFP, comprised of municipalities, districts and authorities. The next step is the Allotment Contract between those participants and the Municipal Subdistrict, which spells out the participants’ rights and obligations and addresses financing for the project.
The Municipal Subdistrict and the participants will seek pooled financing, which is quite beneficial to the Town because the assessments will not be construed as debt of the Town. Rather the bonds for construction will be debt of the Municipal Subdistrict. The total cost of the project will be approximately $600 million and it will be the biggest construction project in Colorado. The Town’s share of the financed costs will be approximately $ 40.02 million and to date, the Town has indicated that it plans to pay all of its share through the pooled financing. It should be noted that these assessments have been included in the Town’s recent rate study.
The Allotment Contract is also structured so that the Town could elect to make cash contributions or pursue independent financing if it decides to change its plans. It can also decide on a 20 or 30-year amortization. Any such decisions would need to be made 3 months prior to issuance of the bonds for the pooled financing. The Town has indicated that it currently contemplates participating based on a 20-year amortization, which would result in a maximum annual payment of $2.573 million.
The timing of the issuance of the bonds will be dependent on a favorable outcome of the federal litigation, which is expected. However, is not clear when that case will be resolved and it is important for the Municipal Subdistrict to enter into Allotment Contracts with all of the Participants this year. The Colorado Water Conservancy District has committed to make $90 million available for the construction of the project at an interest rate of 2.08%, but the Allotment Contracts are required in order to secure that financing.
The terms and conditions of the Allotment Contract have been discussed in detail among Town staff including Finance, Public Works and legal counsel. It is a very thorough agreement that has also received detailed input from all 12 of the Participants in the WGFP on all issues. One example of an issue that has been discussed in detail at many participant and legal committee meetings concerns the “step up” provisions. That is a condition that the bond holders will require in the event that a participant defaults on its payment obligations. The other participants would become responsible to pay those obligations and receive a portion of the defaulting party’s capacity in the project based on their pro-rata share in the project. Many hours have been spent on that issue, and the chances of a default ever occurring are extremely remote. A participant would have ample time to sell its capacity in a completed water project, which should be in very high demand, before it would ever default. In addition, defaults are extremely rare due to the impact on a participant’s credit rating. Despite the practical circumstances, that issue was discussed for many hours to arrive at provisions that would work for all of the participants.
Staff recommends the Board of Trustees authorize the Allotment Contract with the Windy Gap Firming Project Activity Enterprise of the Municipal Subdistrict, Northern Colorado Water Conservancy District, for participation in the Windy Gap Firming Project, by the Town of Erie, acting by and through its Erie Water Activity Enterprise.
Fiscal Impact: $40.02 million over 20 or 30 years plus interest (approximately 2.15 -2.5%)
Board Priority(s) Addressed:(Add an "x" in front of the appropriate priority)
ü Prosperous Economy
ü Safe and Healthy Community
ü Effective Governance
ü Environmentally Sustainable
ü Fiscally Responsible
ATTACHMENTS:
1. Resolution
2. Windy Gap Firming Project Allotment Contract