April 18 , 2007 Minutes-Board Meeting

 

The regular monthly meeting of the Lower Arkansas Valley Water Conservancy District Board of Directors was held on Wednesday, April 18, 2007 at 10:00 AM, at 801 Swink Avenue, Rocky Ford, CO 81067.
Chairman Singletary announced a quorum was present with all Board Members Present.

DIRECTORS PRESENT:
John Singletary-Chairman
Pete Moore-Vice Chairman
Melissa Esquibel-Secretary
Wayne Whittaker-Treasurer
Loretta Kennedy
Lynden Gill
Leroy Mauch

DISTRICT STAFF:
Jay Winner-General Manager
Bart Mendenhall-Attorney
Bill Hancock-Conservation Program Manager
Kim Chavez-Financial Coordinator
Rachel Bogner-Administrative Assistant

MOTION TO ENTER INTO WATER ACTIVITY ENTERPRISE:
Director Moore moved that the Board convene into the Water Activity Enterprise, seconded by Director Kennedy. Motion unanimously carried.
At the conclusion of the Water Activity Enterprise meeting Director Moore moved to reconvene the District Meeting at 10:09 A.M., seconded by Director Mauch. Motion unanimously carried.

INTRODUCTION OF VISITORS:
Chairman Singletary welcomed each of the visitors to the meeting, asked them to introduce themselves and identify the organization which they represent.

VISITORS PRESENT:
Del Nimmo, Colorado State University (CSU) – Pueblo/Biology; Ken Weber; Virgil Cochran, SE Land and Environment; Gilbert Werdel, Larkspur Maintenance; Dan Henrichs, Highline Canal Company; Rich Kienitz, Aurora Water; Kevin Salter, Kansas DWR/KDA; Barbara Bolinger, La Junta Tribune Democrat; Alan Ward, Pueblo Board of Water Works; Tabitha Flening, Rocky Ford Daily Gazette; Chris Woodka, Pueblo Chieftain; John Rose, OCLT; Jake Klein, BOCC; Kevin Karney, Otero County; Brenda Fillmore, Arkansas Ground Water Users Association (AGUA); Kelly Roesch, High Plains/Pure Cycle; Fred Heckman, Fort Lyon Farmer; Pat Edelman, USGS; Tom Musgrove, USBR; Rebecca Mitchell, HDR Engineering; and Kristen Gibbs, Honey Creek Resources, Inc.

APPROVAL OF MINUTES:

• March 21, 2007 Monthly Board Meeting Minutes- Chairman Singletary asked if the Board members had reviewed the minutes for the March 21, 2007 Board Meeting, and whether there were any corrections or additions. Director Whittaker stated that Director Esquibel and Director Moore were present at the meeting and the minutes needed to reflect their attendance. Director Whittaker moved to approve the March 21, 2007 minutes with the attendance corrections, seconded by Director Esquibel. Motion unanimously carried.
• March 21, 2007 Work Session Meeting Minutes- Chairman Singletary asked if the Board members had reviewed the minutes for the March 21, 2007 Work Session Meeting, and whether there were any corrections or additions. Director Esquibel moved to approve the March 21, 2007 Work Session Meeting minutes, seconded by Director Kennedy. Motion unanimously carried.

TREASURER’S REPORT:
Director Whittaker reported that the financial report for the month of March was included in the Board’s Monthly Meeting Packet and that a correction had been made to the current report which was handed out to the Board Members. He reported March total revenues of $456,945.18 and total expenditures of $137,676.22. Director Whittaker moved to accept the March Financial Statement, seconded by Director Gill and carried unanimously.

GM REPORT:
General Manager Winner introduced Richard White of Grimsely & White to discuss the 2006 Financial Statements.

PRESENTATIONS:
Richard White – Richard White stated that all the Board Members had a copy of the December 31, 2007 Financial Statements. He stated that after the Board Members had time to review the document, if there were any questions, to contact him. Mr. White briefly discussed each financial statement in the handout and stated that the District was in complete compliance with their budget. He also stated that there were changes to guidelines that need to be considered for future financial documents. Mr. White said that a fraud program needed to be initiated and Kim Chavez has been working on setting up the program.
Director Kennedy moved to accept and approve the December 31, 2007 Financial Statements, seconded by Director Moore. Motion carried unanimously.
Director Kennedy thanked Grimsely & White for the comprehensive document.
General Manager Winner recognized and thanked Kim Chavez for the amount of work she has done getting the financial data completed and on the Fraud program.
General Manger Winner introduced Rebecca Mitchell of HDR Engineering, Inc. and Kristen Gibbs of Honey Creek Resources, Inc.
Rebecca Mitchell and Kristen Gibbs: Rebecca Mitchell and Kristen Gibbs gave a presentation on the Land Fallowing – Water Leasing Program. The presentation information is as follows:
Historical Buy and Dry-up:

• One time deal
• Shareholders are paid off and water is gone forever
• Land permanently dried up
• No more irrigation
• Limited/no further agricultural productivity
• Weed and erosion problems occur despite revegetation statute
• Cities (purchasers) realize the appreciating value of the water

Land Fallowing-H2O Leasing:

• Creates new crop - water
• Additional source of revenue for farmers and ranchers
• Annual leases
• Multi-year leases
• Shareholders are paid annually to participate plus paid additional amounts in years when fallow their land
• Land not permanently dried up
• Agricultural productivity continues
• Most water remains in irrigation use every year
• Shareholders realize the appreciating value of the water

Engineering Studies Underway:

• Estimate potential supply of irrigation water available for lease
• Estimate demand for water leasing
• Identify existing and needed storage and conveyance facilities
• Consider water quality
• Examine economics

Primary Ditch Systems within Area of Interest
Ditch Systems Investigated

• Bessemer Ditch
• Rocky Ford Highline Canal
• Oxford Farmers Ditch
• Otero Canal
• Catlin Canal
• Holbrook Canal
• Fort Lyon Canal

Consumptive Use Factors

• CU factors from the H-I model used in the most recent Kansas vs. Colorado litigation
• CU Factor was multiplied by the diversion amount to obtain the consumptive use for each irrigation system

Yield Estimate at Headgate by Ditch by Year
Definition of Hydrologic Conditions
Yield Estimate at Headgate by ditch for Wet, Average and Dry Years
Summary of Annual Yields at Headgate
Exchange Potential - Percent of CU realized in Pueblo Reservoir
What Fallowing-Leasing must do:

• It must maximize the short- and long-term value of irrigation water in the Lower Valley
• It must recognize the differences in volumes and reliability between ditches … their relative yields
• It must equitably allocate lease revenues among shareholders in different ditches

Avoided costs, $/AF/year
Potential approach

• Tiered approach that supplies 3 markets
• Preliminary estimates:
• Dry year: $700/AF/year, + or - $150
• Avg year: $500/AF/year, + or - $100
• Wet year: $150/AF/year, + or - $100
• Maximizes market potential
• Explicitly recognizes different yields across ditches

Potential water volumes (65 % participation)

• Assumed participation rate: 65%
• Can be different for each ditch
• Assumed fallowing rate: 25%
• Can be different for each ditch
• Assuming no additional storage and 65% participation:

Market	Volume	Volume Available for Market	Reliability
Dry Year	14,020 AF	14,020 AF	Very Reliable
Average Year	14,609 AF	28,629 AF	Full delivery in 16 of 29 years; deliveries made in 27 of 29 years
Wet Year	16,787 AF	45,417 AF	Inconsistent, but deliveries will occur

Water available for lease, based on 65% participation rate, frequency, exchange factors, and no additional storage
Illustration of Potential Revenues based on current assumptions
65% Participation
Pipeline Alternatives

• Based on 80 cfs delivery rate, from point of diversion to same point in Northeastern El Paso County
• Alternative 1 - Diversion near Boone
• $410/AF/Year
• Alternative 2 - Diversion at Fort Lyon headgate
• $540/AF/Year
• Alternative 3 – Timber Lake
• Being investigated

Regional Economic Impacts

• Changes in spending at input providers and supporting industries
• (implement dealers, seed or fertilizer sales, etc.)
• Impacts to industries and users of Lower Ark irrigated crops
• Impacts related to how water lease proceeds are spent
• Underway, not completed

Legal Issues Analyzed

• Alternative legal structures for “Super Ditch Company”
• Ditch company restrictions
• 1041 permits
• Water court change case

“Super Ditch Company”

• Mechanism to lease water from irrigators who are willing to fallow land to municipalities and other users
• Created, Controlled and Owned by participating irrigators
• Power of collective bargaining to maximize short- and long-term value of water
• Managed by Board of Directors elected by participating irrigators
• Irrigators may participate to extent they wish, for example, 100% or 50% of irrigated land, or not at all
• Responsible for leasing water, obtaining water court approval, and 1041 permits
• Determine which lands will be fallowed each year based on supply, lease demand, and hydrology.

Issues to work through with potential participants

• Variation in yield and water value among ditches
• More reliable, more easily delivered, and/or higher quality water is worth more
• Delivery issues to irrigated land with less water in ditch
• Laterals
• What land will be fallowed and when
• Whether irrigator can permanently fallow some land, or whether there must be rotational fallowing
• Farmer concern about diminished productivity after fallowing
• Actual organization and creation of “Super Ditch Company”

Summary - Land Fallowing-H20 Leasing

• Advantages
• Irrigators get value of water
• Municipalities/Users get water they need
• Supports long-term irrigated agriculture
• Challenges
• Cooperation among ditch companies
• Creation of “Super Ditch Company”
• Time to get in place while economic forces continue to foster sell off of ag water

Conclusion

• Very complicated
• Much work remains to make concept a reality
• Confident that challenges can be met

GM REPORT:
General Manager Winner directed the Directors to Tab Four in the board packet. He stated that the District had been working on the Fountain Creek Project for six months. He stated that Phase I has a cost of $19,319.10 and is part of what it will take to make the Fountain fulfill everyone’s fantasy though it will not be a full fix. He stated if the Board approves Phase I, Phase II will be taken to the Arkansas Basin Round Table and believes the district should be able to get a portion of the funding back. General Manager Winner requested input on the subject from the Directors.
Chairman Singletary stated that sedimentation is the number one problem and that this is a real big step in Fountain Creek to get rid of sediment and use for financial benefit.
General Manager Winner stated that this is the beginning of a long process that is a complicated yet simple process. He requested approval to study the process of removing sediment from the Fountain. Director Kennedy moved to approve to study the process of removing sediment from the Fountain, seconded by Director Moore. Del Nimmo stated this project could allow him to study the aftermath downstream to see if aquatic life has improved. General Manager Winner stated the project should be up and running in about a month and have a test period of one week. The location would be the sight around the 8th Street Bridge in Pueblo. Motion carried unanimously. General Manager Winner stated he will let the Board know when the demonstration will take place and the next action on the subject will be a proof of concept.
General Manager Winner reported that Larkspur had received a lot of snow. He passed around pictures of the Larkspur taken by Gilbert Werdel.
General Manager Winner stated he had attended the Metro Round Table. They are interested in the leasing-fallowing program to be used on the South Platt.
General Manager Winner stated the Arkansas River Basin Water Forum (ARBWF) was very successful. He reported about 200-250 people had attended. He said the State Engineers from Colorado and Kansas were presenters.
General Manager Winner reported Lake County’s water advisory committee had voted to explore joining the Lower Arkansas Valley Water Conservancy District.
General Manager Winner directed the Directors to Tab Five of the board packet. The tab included a report of the flaws of the Aurora EA and problems with Aurora and Bureau of Reclamation (BOR). General Manger Winner turned the topic over to Chairman Singletary.
Chairman Singletary stated that Aurora would be second to everyone in the Basin.
After a brief discussion about storage and exchanges, Chairman Singletary suggested that the District monitor Aurora and BOR on this issue to be able to act with the BOR to be proactive to the District. Chairman requested direction from the Board.
Attorney Mendenhall stated he had a request for a motion from Attorney Nichols. The motion would be to instruct special water council, Peter Nichols and Trout, Raley, Montaño, Witwer, & Freeman to investigate all potential legal challenges available to the District and others with regard to the proposed contract between the Bureau of Reclamation and Aurora for the use of Fryingpan-Arkansas Project facilities. Director Moore made the motion to investigate all the legal challenges available to the District in this matter; seconded by Director Esquibel. Motion carried unanimously.

PRESIDENT’S REPORT:
Chairman Singletary gave a summation on the BOR and that the BOR is looking at exchange degrees to help constituents.
Chairman Singletary stated Steve Holdren has been doing a good job in keeping in touch with him about water legislation.
Chairman Singletary discussed his trip to Washington, D.C. He stated he met with Congressman Salazar and Mark Udall while in D.C. He stated he also visited with Senator Salazar’s office. He stated that the documents about easements may be finalized and he the Senator is happy with the Districts involvement with the Fountain project.

COMMITTEE REPORTS:
Personnel: Director Kennedy had nothing to report
Liaison: Director Kennedy had nothing to report.
Legal: Director Esquibel had nothing to report.

LEGAL REPORT:
Attorney Bart Mendenhall reported that the Board should note HB-07-1361, located in the board packet under tab one. He stated it is not pending in the Legislature. He said this bill has several requirements reflecting increased scrutiny of conservation easements. It has new reporting requirements for the donor, public reporting of easements, appraiser affidavits, appraiser qualification requirements, reporting of certain overvalued appraisals to the state board of real estate appraisers, and reappraisal in certain overvaluation situations. It also clarifies that the transferee of credits will have the same stature of limitations as the donor. It is not clear if a waiver of the statute of limitations by the donor will also waive the statute of limitations for the transferee.
Attorney Mendenhall reported the meeting on April 3rd with the Palo Verde farmers and HDR went well. The presentation by HDR filled in some of the information the farmers were wanting.
Attorney Mendenhall stated the ARBWF was well attended. There were a number of opportunities to further the business of the District. He said he and Bill Hancock had an opportunity to discuss the Super Ditch with Justice Hobbs.
Attorney Mendenhall reported the next Conservation Easement forum would be put on in Trinidad.
Attorney Mendenhall, at the request of Attorney Peter Nichols, requested the Board to approve a Statement of Opposition to the Application of the City of Fountain for Change of Water Rights and Appropriative Right of Exchange involving the Arkansas River, Case No. 06CW122. Director Mauch made the motion to approve a statement of opposition; seconded by Director Esquibel. Motion carried unanimously.
Chairman Singletary stated he was honored to have Becky and Kristen from HDR there to look at things from the view of the water owner, not the water seeker.

PUBLIC COMMENT:
There were no public comments.

ADJOURNED:
Chairman Singletary asked if there were any other matters to come before the Board. Hearing none, motion was made by Director Esquibel, seconded by Director Whittaker to adjourn the meeting. Motion unanimously carried. Meeting was adjourned at 11:55 A.M.