HomeMy WebLinkAbout2005-12-13 WSB AGENDAWATER & SEWER BOARD
AGENDA
Tuesday, December 13, 2005
WATER BOARD CHRISTMAS DINNER
1. MINUTES OF THE NOVEMBER 8, 2005 MEETING. (ATT. 1)
2. ARTICLES FROM THE DENVER POST-"LIQUID ASSETS." (ATT. 2)
3. 2890 S. CLARKSON ST. -DIANA BRAY ENCROACHMENT AGRJ3EMENT
AND RIGHT-OF-WAY. (ATT. 3)
5. OTHER.
WATER AND SEWER BOARD
MINUTES
November 8, 2005
A TT. I
The meeting was called to order at 5 :03 p.m.
Members present:
Members absent:
Also present:
Clark, Bums, Higday, Cassidy, Otis,
Wolosyn, Habinecht
Moore
Stewart Fonda, Director of Utilities
Tom Brennan, Utilities Engineer
1. MINUTES OF THE OCTOBER 11 , 2005 MEETING.
The Englewood Water and Sewer Board approved the minutes from the October 11 , 2005
meeting.
Mr. Habenicht moved;
Mr. Otis seconded:
Ayes:
Nays:
Members absent:
Abstain:
Motion carried.
To approve the minutes from the October
11, 2005 Englewood Water and Sewer
Board Meeting.
Clark, Burns, Higday, Cassidy, Otis ,
Wolosyn, Habinecht
None
Moore
Bums
2. GUEST: THOMAS CASSIDY -7726 S. HUDSON CT.
Mr. Cassidy, owner of 7726 S. Hudson Ct. appeared before the Board to discuss
developments in a billing problem.
Sometime in the early 1980's approximately 83 accounts were miscoded to show that
they were in South Arapahoe Sanitation District instead of Southgate Sanitation District.
This resulted in 83 accounts being charged South Arapahoe's maintenance fees, which
are substantially more than South Arapahoe's fees. South Arapahoe's fee is about $70.00
as compared to Southgate's fee of about $5.00.
A meeting is scheduled November 15, 2005 with staff from Englewood, South Arapahoe
Sanitation District and Southgate Sanitation District to discuss the issue. South Arapahoe
may refund the over-charges to the Southgate customers, with reimbursement details to
be addressed at the scheduled meeting.
Mr. Cassidy requested that interest be added to the reimbursements. Stu noted that details
of the method ofreimbursements, including if interest will be applied, will be
forthcoming.
3. GUEST -TOM BRENNAN, UTILITIES MANAGER-STORMWATER
PERMIT.
Stormwater pollution is now being recognized as an environmental concern. As a result
the EPA, under the Clean Water Act, enacted the National Pollutant Discharge
Elimination system (NPDES) which now requires that stormwater discharges be
authorized under stormwater discharge permits. The EPA has designated Englewood as a
Phase II Municipal Separate Storm Sewer System. The permit requires that the pe1mittee
perform stormwater management, which creates an awareness of the contributing causes
of stormwater pollution and teaches best management practices to keep the environment
clean.
Tom reviewed how Englewood is meeting the EPA notification requirements for public
education and outreach, public part icipation and involvement and procedures for
responding to illicit discharge detecti on and remediation from spills and dumping.
4. SOUTH PLATTE NON-IRRIGATION SEASON ADMINISTRATION.
The Board received a copy of a letter from the State Engineer notifying municipalities
that the Supreme Court ruled that the State Engineer does not have the authority to
approve substitute water supply plans allowing wells to operate when they are out-of-
pnonty. The State foresees possible changes in administration and is seeking input
before implementing changes.
5. INFORMATIONAL ITEMS:
ARTICLE FROM WATER & WASTEWATER PRODUCTS-"SURVEY: U.S.
WATER COSTS ON THE RISE ."
An annual water survey by the NUS Consulting Group found the average price of water
in the U.S. climbed by 3.5 percent from July 1, 2004 to July 1, 2005. The survey showed
the highest price was Huntington , West Virginia at $5.49 per thousand gallons and
Greenville, Mississippi is $0.80 per thousand gallons. Stu noted that Englewood's water
is priced $2 .15 per thousand gallons, which is in the middle range.
ARTICLE FROM OCT. 29, 2005 ROCKY MOUNTAIN NEWS -"PLAN FOR VAST
UNDERGROUND RESERVOIR MOVES AHEAD"
Farmers Reservoir and Irrigation Company is partnering with developer Robert Lembke
to create a regional water system that could serve Brighton, Lochbuie and Centennial. It
would act as an exchange and hoi d ing station where farm water could be transferred for
urban use . Shi noted that this is re lated to the Bebe Draw Case.
ARTICLE FROM NOV. 1, 2005 ROCKY MOUNTAIN NEWS -"2 ND ADAMS DUMP
STUDIED."
A second Adams County landfill is being proposed that would be allowed to accept low-
grade radioactive waste if the State Health Department approves the proposal.
6. RISK ASSESSMENT PROPOSAL-WATER TREATMENT RESIDUALS.
Stu discussed Englewood's difficulty with the Allen Plant's alum sludge disposal and the
existing lack of established standards. Englewood will be participating with Denver and
Colorado Springs in a Risk Assessment Study by Stoller Corporation. Due to the time
sensitive nature of this study, Stu will be signing the contract. The total study is about
$60 ,000 with Englewood's share being approximately $20,000.
Mr. Bums moved;
Mr. Cassidy seconded: To approve Mr. Fonda signing the Risk Assessment
Proposal for Water Treatment Residuals with
Englewood's share being approximately $20,000.
Ayes:
Nays:
Members absent:
Motion carried.
Clark, Bums , Higday, Cassidy, Otis,
Wolosyn, Habinecht, Bums
None
Moore
7. LITTLETON/ENGLEWOOD WASTEWATER TREATMENT PLANT
EXPANSION.
The Board received recent newspaper articles regarding the Littleton/Englewood
Wastewater Treatment Plant Phase II Expansion that has become an issue in the City of
Littleton council race.
Stu discussed the necessity of the expansion and penalties that w ould be imposed in the
case of a project shut-down.
8. ENGLEWOOD WATER BOARD CHRISTMAS DINNER.
The Englewood Water and Sewer Board Christmas dinner will be held December 13,
2005 at 5:30 p.m. at the North Wood's Inn on Santa Fe Drive. Call Cathy Burrage to
confirm a reservation.
The meeting adjourned at 6:25 p.m.
The next Water and Sewer Board meeting will be Tuesday, De c ember 13, 2005 at 5:30
p.m. at Northwood's Inn.
Respectfully submitted,
Cathy Burrage
Recording Secretary
A TT. 2
"LIQUID ASSETS: TURNING WATER
INTO GOLD"
ARTICLES FROM THE DENVER POST
FROM NOVEMBER 20 -26, 2005
Print Article
Article Last Updated : 11/21 /2005 01:03 AM
liquid assets: turning water into gold part I
Turning water into gold
By David Olinger and Chuck Plunkett
Denver Post Staff Writers FIRST OF FOUR PARTS
Denver Post.com
Everyone who buys a house in Denver's growing suburbs pays a hidden price for water.
Page 1of12
That first twist of the faucet in a new suburban home costs as much as $24 ,424 -more than twice the
amount charged in any U.S . city outside metro Denver surveyed last year by the American Water
Works Association.
In semi-arid Colorado , there are well-known reasons for the high cost of water service. Among them:
scant reservoir space and an immense mountain range separating water from people.
A less-discussed reason is that in Colorado , water is property, and in much of the state , somebody
already owns a right to use ev ery gallon. Getting that water requires entering a volatile market where
prices can double in an instant -as Broomfield and its neighbors have learned.
After the FBI raided Rocky Flats in 1989 , Broomfield's city manager set out to replace more than a
billion gallons in the city reservoir, wh ich was downstream from the accident-prone nuclear trigger
factory .
By the time its s ix-year buying spree ended , Broomfield's current and future residents had paid millions
to a single broker and the city had acquired three times the water it originally asked him to buy .
As the largest purchaser of water rights from Colorado's Big Thompson system, Broomfield guaranteed
it would have enough water for economic and population growth. But it also spurred a buying stampede
that caused prices to jump more than 600 percent in less than four years -and raised new-home costs
north of Denver by as much as $15 ,000 for water alone.
In the West , the battle for water has long been depicted as a clash of greedy, growing cities against a
dwindling supply of life's fundamental bui lding block.
But the stories of Broomfield and other Denver suburbs illustrate something else : how the competition
for water to fuel metro Denver's growth has created an unregulated and often untraceable commodities
market in Colorado -one that is making a lot of people wealthy and has encouraged private investors to
look for new and profitable ways to deliver water to the Front Range.
And that competition has been felt in nearly every Denver suburb.
In Thornton , the City Council hired a broker in predawn meetings to buy an enormous water supply and
paid him $3.5 million. Today, two decades later, everyone in the city is still paying for that water -but
nobody has tasted one drop .
In southeastern Arapahoe County, new-home buyers are paying an extra $4 ,500 to finance a deal with a
developer who promises to deliver water through an unusuai 1-acre government district. He and his
partners stand to reap $21. 7 million.
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In much of the United States, getting municipal water is easy and relatively inexpensive. Cities pull it
from the river running through town, suck it out of an aquifer underground or collect rain in a reservoir
nearby. New suburban towns buy excess water from the big city or start their own water department
and get permits from the state to pull water out, clean it up and pump it to the residents.
In Colorado, the first person to declare ownership of unclaimed water gets to keep it forever -as long as
that person uses it. Those claims are approved by a court system that protects water rights more rigidly
than any other state and is mindful of Colorado's obligations and compacts with downstream states. The
result: New and growing cities pay dearly to buy those rights.
And the agents and brokers and sellers that many Front Range communities have come to depend on
over the past two decades have gotten rich as cities compete for water. They have become experts at
profiting from a system that makes water as valuable as land at th e base of a ski lift.
That brings rising costs home.
"The cities are fighting for it, and consequently they pay a higher price ," said Paul Tauer, who served as
Aurora's mayor for 16 years .
Unless something changes, "people are going to be shocked at the price of future (water) projects," he
said. "It is going to be a horrendous bill."
When Bill Berens, Broomfield's mayor during its buying spree, looked at a long-term city plan to
finance its water projects with hookup fees on new homes, he was stunned by the potential cost of a
market his city helped create.
"They're going to be spending more for a tap ," he said , "than I paid for my first house."
Rocky Flats sends worries downstream w it h waste
Broomfield's years of living next to a nuclear trigger
factory set the stage for a panicked hunt for water.
Broomfield's leap into the water market began with Operation Desert Glow. In 1989, about 75 federal
agents swarmed onto Rocky Flats, a now-dismantled plant just west of the city that made plutonium
triggers for nuclear weapons.
The raid followed allegations that radioac tive and hazardous wastes, and possibly medical wastes, were
illegally dumped or burned at Rocky Flats.
Suddenly Rocky Flats and Broomfield were on the front pages of the nation's newspapers.
A little stream called Walnut Creek flowed from the Rocky Flats site into Broomfield's primary water
supply, the Great Western Reservoir.
Rocky Flats had never been a good neighbor. Its history was replete with chemical and radioactive
spills , fires and other environmental disasters that made it one of the nation's most notorious weapons
plants. In 1973, an accidental release of trit ium into Broomfield's water supply brought a nightmarish
civic headache . Months later, residents learned they had been drinking water tainted with a radioactive
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element. Council members petitioned the federal government in vain to protect their reservoir with a
dam at Rocky Flats.
"I would get to work and wonder what Rocky Flats did today," said City Manager George Di Ciera,
who remains at the helm in Broomfield.
For decades, Broomfield tested the creek and reservoir waters, repeatedly assuring residents that traces
of plutonium buried in the reservoir sediments posed no threat to their health.
Still , the perceived health risk hampered city development plans. Corporations eyeing its high-tech
office park asked pointed questions about plutonium. Women called city hall and blamed Di Ciera for
their inability to bear children.
"Nobody knew who to trust," said Hank Stovall, a former Broomfield council member with a physics
degree who insisted that his family drink bottled water. "We'd already been violated with plutonium in
the sediment and a tritium spill. When do you say, 'Enough is enough'?"
The FBI raid was the last straw.
Panicked city officials swung into action . Without waiting for an environmental permit, they changed
the course of Walnut Creek by digging a trench around their reservoir.
They also began lobbying Congress to pay for a new water supply .
Sh01tly after the raid , Broomfield got an offer from an up-and -coming water broker named Craig
Harrison.
"You need Windy Gap water," he remembers telling Charles Ozaki, th en Broomfield's assistant city
manager, now deputy city manager.
Colorado's system puts officials such as Ozaki in an unusual situation. Though the water courts treat
water rights like real property, they do not require owners to document their holdings in public records
such as those required of land transfers.
Counties keep no index of water sales . State officials know where water rights exist but not who
actually owns them today . When the legislature instructed the state Division of Water Resources in
2003 to impose a new fee on water rights owners, its efforts to find and bill them proved disastrous.
The fee was repealed.
That's where people like Craig Harrison come in.
As one of a handful of Colorado experts who specialize in finding water rights and brokering deals,
Harrison was in a position to craft a plan for Broomfield that could bring the city clean mountain water
from the other side of the Continental Divide.
The drawback: Windy Gap was not a reliable water supply. In drought y ears, it could fail to deliver,
and in wet years , there was not enough reservoir space to store it.
But a pipeline bringing Windy Gap water woulJ also access a much larger supply delivered through the
same tunnel: Colorado -Big Thompson.
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In October 1989, Broomfield made its firs t new water purchase -Windy Gap water that Harrison
obtained from the city of Greeley. It paid $1.8 million in cash to Harrison and assumed debt payments
Greeley owed that will total an additional $7.5 million.
Harrison said he grossed $250,000 and pocketed $125,000 on that sale.
Broomfield's next purchase would be made with federal money.
Congress approved a two-part plan to assuage the fears of Rocky Flats' neighbors. The cities of
Thornton, Westminster and Northglenn, which drink water downstream from the weapons plant at
Standley Lake , got money for a dam and pipeline to keep contaminated runoff out of their water. To
this day, they drink from Standley Lake, which is deemed safe despite traces of plutonium in its
sediments.
Broomfield got the lion's share of the federal grant to shut down its Great Western Reservoir, which
was smaller and closer to the contaminated buildings than Standley Lake and also held sedimentary
traces of plutonium .
The money didn't come easily. Broomfie ld spent $917,000 to hire a Washington lobbyist and send its
own counsel, Matt Glasser, to persuade Congress and the Department of Energy , which oversaw Rocky
Flats and was unconvinced that the plant created health risks for downstream water users.
With its $56 million share, Broomfield built a new treatment plant and helped pay for a new pipeline. It
also bought rights from Boulder to about 1 billion more gallons of Windy Gap water.
By then, Broomfield had exhausted all but about $9 million of its federal money, and it still lac ked a
reliable new water supply. Delays hav e stalled the primary reservoir needed to make Windy Gap work
effectively. It probably won't be ready until at least 2011.
Windy Gap, a project at the confluence of the Colorado and Fraser rivers west of Granby, provides
water when storage space is available in the massive Colorado-Big Thompson system. The Big
Thompson system itself stores abundant Colorado River water in Lake Granby and other reservoirs and
delivers it through a mountain tunnel to counties north of Denver.
Big T comes with another attractive featu re. Unlike many Colorado water sources, this imported Front
Range supply can be sold from farmer to city without the risks , costs and delays of going through a
water court.
In 1995, Broomfield officials began buying Big T water directly. But while 11 other cities and water
districts shared the new pipeline, they struck out independently to find water.
Broomfield and other suburbs had been stung by the failure of a collaborative effort to develop a huge
new reservoir called Two Forks. After millions of dollars had been invested, the Denver-led project
was halted for environmental reasons. "Denver pulled out," Di Ciero recalled , "and said, 'Suburbs,
you're on your own."'
To shop for Big T, Broomfield officials turned again to the man who first brought them Windy Gap.
Di Ciero, Broomfield's city manager for more than a generation , hired Harrison using a 1981 city
ordinance that exempted water purchases from bidding requirements or council approval.
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Because of that ordinance, meant to gi v e the city an edge in the competitive water markets of Colorado ,
the council approved an annual budget for water purchases but left details to the city manager. Di Ciero
needed council approval for other purchases that exceeded $50,000 but could spend tens of millions of
dollars on water deals without the same scrutiny.
Baltimore man heads west to seek his fortune
Dreams of ranching gave way to a life reshaping the water market -and enough money to buy that
ranch.
In his Western-themed Loveland office , Harrison displays a brass plaque engraved with the praise of an
associate: "It's like mixing Walt Disney and Albert Einstein."
Harrison, 49, left his home in Baltimore at 19 without a college degree and came to Colorado to fulfill
his dream of someday owning a ranch.
He began selling houses and then ranches but soon saw an opportunity in water. He decided to study
the p1ivate world of water rights , and with the lessons that taught him, made his fortune.
"I believe in destiny ," he said .
The young man from Baltimore now owns a Colorado ranch , dri v es a Jaguar and wears cowboy boots.
He calls himself the premier broker in the nation's leading water sales market.
He began his focus on water rights in 19 77 , he recalled. To help him scout out bu siness , he eventually
built an elaborate , three-dimensional water supply map . By now , he ha s logged nearly half a billion
dollars in water and land sales to farmers , businesses and cities in northern Colorado .
"He's sharp," said Alvin Geist, his former real estate boss and mentor. "He gets in touch with the
various cities , gets to know the manager at the water department , finds out their needs , and he goes to
it."
Certainly Harrison had worked with other powerful buyers before Broomfield officials showed up at
his office in the summer of 1995 . But no other city had ever come to him with a job as large as
Broomfield's.
Broomfield agreed to pay Harrison a set price for water that was above the market value. The initial
contract let him buy up to 3,000 units, but city officials kept extending it until he had sold them more
than three times that much. One Big T unit supplies more than enough water for a year's use by a
typical urban family , averaging 0. 7 of an acre-foot of water a year , or 228 ,000 gallons.
In its first Big T purchase , Broomfield paid Harrison $1,990 a unit. Harrison had paid only $1 ,625 for
many of those units -22 percent less. By the time he was done five years later, his contract would be
amended three dozen times. At its peak price in 2000, Broomfield paid him $14,500 a unit -more than
seven times its original offer.
The biggest seller of that first block of w ater rights -442 units, for $880,000 -was listed as Harrison's
own Gateway Farms. He said he was leasing that water from a man in Florida, whom he would not
identify, and acquired it at a price he would not disclose. In other purchases , Harrison bought water
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from longtime farmers, ranchers or businesses, then immediately flipped the rights to Broomfield, often
at 7 percent to 10 percent more than he paid.
City Council members say they knew the city was buying water and raising hookup fees, but they never
saw the details of its purchases from Harrison.
In fact, the man who was Broomfield's mayor during the six years his city bought water from Harrison
claimed he never met Harrison and did not even remember his name.
"To be very candid with you, I'm totally surprised. This is the first time I've heard about that," Berens
said in an initial interview. "The more I think about it, the more shocked I am."
But after consulting top city officials, the former mayor, now a state representative for the area, called
their water purchases a good deal for Broomfield.
"I implicitly trusted my staff," Berens said. "I would go so far as to say I still love them. They've made
Broomfield what it is."
Former council member Steve Olstad also said he was unaware o f Broomfield's exclusive deal with
Harrison.
Had that been explained publicly, "I think several on the city counci l would have raised a stink," he
said. "They would have wanted to know just how much commission somebody was getting."
Di Ciero and his top assistants say they kept the council informed of the status of thei r water projects in
periodic reports and bond requests. In one memo to the council related to a water bond issue, they
mentioned a city contract with Harrison Resource Corp. that had already been amended 22 times.
Berens described the updates as summary in nature and said he thought Broomfield was buying directly
from the water district that controls Big T.
City administrators praised Harrison's work , saying he saved Broomfield considerable staff and legal
expenses and secured a new water supply in an increasingly competitive market. At their request,
Harrison compiled a list of transactions fo r reporters showing other cities sometimes paid as much or
more for Big T water than Broomfield had .
But that comparison consistently excluded those who paid less.
IfBroomfield's purchases from 1995 through 2001 are compared with average reported prices paid by
others for Big T water during the same months, Broomfield actually paid an extra $4 million.
Broomfield records also show the prices it paid Harrison did not match the prices he reported for years
to Water Strategist, an influential Western industry publication that tracks water sales .
City administrators acknowledge asking Harrison to tell Water Strategist what he paid for the water, not
the higher prices Broomfield paid him. They justified the practice by saying Harrison provided services
as well as water.
Besides, "we didn't want to drive the price up," said Dorian Brown, city public works director.
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Broomfield officials who were involved in the water deals said they regularly reviewed Water
Strategist -so at all times had access to the prices Harrison reportedly paid.
The differences between the prices Broomfield paid and the prices reported to Water Strategist show
what Harrison's company took in while serving as Broomfield's front for six years . He agreed that,
before expenses, he grossed $4.3 million -the equivalent of about $100 for every Broomfield resident.
Unquenchable demand feeds surges in price
In behind-the-scenes deals, Broomfield becomes the "900-pound gorilla" in the metro water-rights
market.
Di Ciero started amending Harrison's city contract just two months after Broomfield made its first Big
T purchase in 1995 for $1 ,990 a unit. The first amendment increased the amount of water Harrison had
the exclusive right to buy. Soon, the city was revising the price as well.
That December, Harrison offered Broomfield more water, but at $100 a unit more than the contract
allowed. In a letter, his attorney noted that the proposed price exceeded what Broomfield had agreed to
pay.
Broomfield bought it without bothering to change the contract.
Three months later, Harrison asked Broomfield to buy more water at $700 a unit above his contract
pnce.
Di Ciero changed Harrison's contract price the next day -and bought the water.
The real sticker shock lay ahead .
In October 1999, Broomfield began offering $6,000 a unit for Big T, three times its original price. But
it managed to buy little water at that price , and other cities paid as much as $7,700 as the year ended. In
March 2000 , Broomfield changed Harrison's contract again, more than doubling its offer to $14 ,500 .
In 3 1/2 years , the price Broomfield paid for water had jumped 628 percent.
Water experts say several things contributed to the amazing price surge that occurred while Harrison
was buying water for Broomfield. Some towns were requiring developers to supply a unit of Big T for
every house they wanted to build. Anti-growth bills were circulating in the legislature , spurring
developers to win permits as quickly as possible.
Then there was the Broomfield factor.
The Little Thompson Water District, which supplies water to an area between Longmont and Loveland ,
watched the prices it paid for Big T quadruple in one year.
Already, "there was a reasonable amount of growth happening" that inflated water prices, said Erik
Anglund, Little Thompson's water resource engineer. But "when Broomfield put such an additional
demand for those water rights, I think that's what drove the price up so quickly."
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"We were the 900-pound gorilla," former Mayor Berens agreed. "We moved the market."
By Harrison's anal ysis , Broomfield bought more than 30 percent of all the Big T units sold for six years
-and five times as much as any other city, town or water district bought directly.
That August, after Broomfield had spent $14 million for water in four months, Harrison sent city
officials a letter warning that the Big T supply was running out. If buying trends persist, "we will have
roughly a 7.4 year supply left," he wrote , and : "I am standing by to help y ou."
Broomfield heeded his advice. As Big T prices finally retreated from their peak, the city spent more
than $23 million in the next year for more water rights .
In two years , 13 individuals and companies sold Big T rights to Broomfield for more than a million
dollars each. The biggest seller: former Colorado Rockies owner Jerry McMorris, a neighbor to
Harrison whose Timnath Farms unloaded $8 million worth of water rights .
Despite all that buy ing, Broomfield officials still feared that the city 's population -which had shot fr om
24,638 to 38 ,272 in a decade -would outpace their supply . In late 2000 , they decided they needed
immediate access to water that the y had alread y bought and leased back to Harrison or the original
seller.
They said those long-term leases gave Harrison flexibility to close deals with farmers . The sellers could
profit immediately and keep using the water until Broomfield needed it.
But when Broomfield decided to cancel those leases , its records show , more than half the water was
controlled by Harrison himself.
In early 2001 , Broomfield spent $1.1 million to terminate leases of Big T water held by Harrison and
others. That included 200 units Broomfield le ased just months earli ~r -and paid $158,000 to cancel.
Harrison said he used some of that water on his own land and subleased the rest to others. He also said
it cost him money to cancel those subleases , but he declined to pro v ide figures.
"I'm telling you -I didn't get it all ," he said.
Di Ciera said Broomfield saved a great deal of money by buying out leases for $790 a unit instead of
purchasing even more new water in a volatile market.
Over six years , Broomfield paid Harrison a total of $58 million for water purchases. Di Ciera calculates
that if Broomfield had to buy the same amount of water at today 's prices, it would cost $110 million .
"I wish most o f my investments performed like that," he said .
Today, cities continue to amass a growing share of the once-agricultural Big T water supply. But as of
2004 , four years after Harrison warned that the window was closing , farmers still owned 38 percent.
Harrison, a one-man brokerage with two a ssistants, estimates he incurred more than $2.3 million in
legal, title , office and other exp enses to bring Big T to Broomfield -and that when those are deducted
from his gross revenues, his profit averaged 3 percent. He said he spent two-thirds of his time acquiring
water for Broomfield and sold Big T water to nobody else during those six years .
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During that time , Broomfield never asked Harrison for accounts of his expenses.
Harrison said he gave Broomfield one-stop shopping, took care of all the details and succeeded in
buying more water than anyone else in competition with dozens of water districts, cities , towns and
developers.
"Broomfield said, 'We don't need to look under the hood,'" he recalled, and was mainly concerned
about getting enough water.
"It was incredibly complicated. I should h ave charged more ," he said . "No municipality can do this .
They can't mo v e fast enough."
Other cities omit broker and buy water directly
Broomfie ld officials paid a bout $4 million more by using a broker, s hifting th e costs to homebuyers .
Pete Maysmith, head of Colorado Common Cause , questioned why any city would spend so much
money without public hearings and counci l approval of the contract and its numerous amendments.
Had there been hearings, "someone in Broomfield would have stood up and said , 'What are we getting
for $60 million ?"' he said. "That's a question that should have been asked."
Other cities have worked with brokers like Harrison . But the Broom field contract was unusual. Its City
Council had no vote on the original contract or on the long series of amendments that al!owed Harrison
to sell Broomfield more and more water at higher and higher price s.
In other cities , utility officials say they typ ically purchase water r ights with their own staffs or require
de v elopers to supply them , submit purchases for council appro val and expect the seller to pay any
broker's commission.
When Boulder buys water, "I take the lead , and I'm salaried," said Carol Ellinghouse, its water
resources coordinator. "I don't get any commission."
Utility officials in Louisville, which also bought water in the Big T market in the 1990s, discussed
hiring a broker with that town's City Council.
"We decided we could do just as good w ithout writing checks to brokers ," said Thomas Phare , its
public works director.
Louisville officials are required to submit w ater purchases for council approval. If they didn't, "I guess
there is some concern on how that would look from the outside," Phare said.
Some brokers in the Big T marketplace al so question Broomfield's contract with Harrison.
"I think several people thought (Harrison ) had a very sweet deal ," said Don Mackey, a longtime broker
for Prudential-Warnock Realty in Loveland.
Mackey saw the workings of the Harrison contract firsthand in the spring of 2001 , when he had a pair
of clients looking to sell 159 units of Big T . Broomfield was among the cities he called.
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Mackey said Mike Bartleson, Broomfield's deputy director of water resources, told him the city was
paying $11,250 for water, but he had to go through Harrison.
Harrison told Mackey he would buy the units for $10,500.
Mackey called Bartleson back and told him he could save Broomfield some money.
"I think they were surprised when I to ld them what Harrison was paying for it," Mackey said.
But he said Bartleson told him fees paid b y buyers of new homes in Broomfield more than covered the
cost.
Indeed , the fee for a new connection to Broomfield's municipal water supply, the "tap fee," in
Broomfield in 2000 was $15,500 and rising.
Harrison bought the units for $10 ,500 and sold them to Broomfield for $11,250 each.
Mackey say s he made a commission of about 5.25 percent. Harrison gained an extra 7 percent by
reselling the water immediately.
House prices increase as a direct consequence of these transactions .
"Hey, Broomfield can just turn around and charge the builder," said Jon Lee, a prominent local
developer, "which in tum charges the homebuyer. They've set it up so it charg~s the new homeowner."
New-home buyers don't know this . It is not disclosed in closing documents but is instead built into the
purchase price.
John Jenson, who bought a new home in Broomfield's Aspen Creek neighborhood two years ago, was
surprised to hear his city charges more than $24 ,000 for a water pipe to the house.
"I would say that's substantial," he said. "That's exorbitantly high."
"Per house ?" asked Brad Helms, Jenson's n eighbor. "I never would have guessed."
Economists note that rising prices for new homes also tend to inflate the cost of existing homes.
Di Ciero contends Broomfield benefited from its exclusive contract with Harrison.
"I think in retrospect it was a solid, good, innovative way to do it," he said .
But while the value of those purchases has grown, Broomfield could have spent $4 million less if it had
bought the same amount of water at the average prices others were paying at the time.
In 1995 , when Broomfield began paying Harrison $1,990 a unit, other communities were paying 15
percent to 25 percent less. By 1998 and 1999, others were paying comparable prices, but Broomfield
was buying less water. In December 2000 and August 2001, when Broomfield spent $23 million in tw0
big splurges, others paid an average of 11 percent and 7 percent less.
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Di Ciero questioned the fairness of a monthly price comparison, partly because other sales were small
when Broomfield made some of its biggest purchases.
But even if the city paid higher prices, he said that cost has been more than offset by the development
its new water supply made possible. According to a report he prepared, Broomfield's jobs and assessed
property value per person have tripled since 1995 , and its retail sales per person now rank first in the
Denver area.
"We probably did pay a little more, but what has it done for the community?" he asked. "The value of
the community today is excellent."
In the end, city gives thanks for plentiful supply
Hookup fees soar in other suburbs, and growing cities still struggle to make sure they have enough.
Across the United States, many cities charge less than $1,000 for a new residential water hookup . In
Colorado, the fees range much higher.
Denver, which bought its water rights long ago, charges $4,795 for a home with an average lot. Boulder
charges $7,345 for a typical single-family home with two bathrooms . Some cities charge $10,000 or
more for water service, and tap fees in fast-growing Denver suburbs have rocketed as high as $20 ,000.
In Broomfield, the fee has nearly tripled to $24,424 since it hired Harrison -and is projected to rise to
$36,000 in the next 30 years.
After spreading into four counties, Broomfield has become its own county. Rocky Flats never resumed
plutonium production after the FBI raid; a massive cleanup project is turning the site into a wildli fe
refuge.
Great Western Reservoir water is used for landscaping in Broomfield now but no longer reaches
kitchen faucets.
City officials give thanks that they don't need to buy more water in a market where it still costs five
times what they initially paid Harrison for it a decade ago.
As for the Windy Gap water that originally led Broomfield to Harrison, in the past seven years, the city
has received only about one-third of the water it owns. The city expects to spend $100 million for
reservoirs to improve that yield, the final step in its long-term strategy to secure a new water supply.
Harrison praises Broomfield's leaders for their innovation in what they believed was a crisis.
"I think they are some of the most brilliant city people I have ever worked with," he said. "I really do."
Post researcher Barbara Hudson contributed to this report.
Staff writer David Olinger can be reached at 303-820-1498 or d_olingg_r@dg__ny~[j]{)sj.~Qm.
Staff writer Chuck Plunkett can be reached at 303-820-1333 or ~]2_/unk ett@denverpost.co m.
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Article Last Updated: 11/21 /2005 01:16 AM
liquid assets: side article
Records sketchy on who owns water
By David Olinger and Chuck Plunkett
Denver Post Staff Writers
DenverPost.com
Nobody knows who owns all of Colorado's water.
Though the right to use water is treated like property, it's not recorded like property.
Changes in ownership often are not recorded publicly anywhere .
Page 1 of 2
The state keeps records of every water right -its amount, location and when it was appropriated -but
not necessaril y who owns that right today.
A ri ght acquired a century ago may still carry the name of the person who first claimed it. The records
are kept in the archives of seven regional water courts. Counties keep careful records of land sal es ,
including the price, and deeds sometimes mention water rights. But counties do not require separate
filings that detail water sales alone.
For example , when a large Weld County ranch was sold two years ago , the recorded county deed
showed the sale price as $3 .25 million. It contained no hint that w ater rights on the same ranch so ld for
$16.75 million.
Many Colorado water sales occur within private ditch companies that control much of the wate r
diverted from state rivers. The companies keep records of such transfers , but those are not public
records.
"It's just like selling stock in AT&T ," said Craig Harrison , the re a l estate broker who made the deals to
replace Broomfield's water supply .
Broomfield's water came from the Colorado-Big Thompson project, recognized in trade publications as
the nation's busiest water trading center. The water conservancy district that approves those sales lists a
buyer and seller -though not always the actual owners -and amount of water transferred , but not the
pnce.
And while land and building sales prices can be calculated from documentary taxes charged by
Colorado counties , no such tax is applied to sales of water rights alone.
The fog this creates benefits lawyers, engineers and title companies that get paid to ferret out the
identities of the owners and the values of their rights. Those experts don't come cheap , and their bills
contribute to the high price of Colorado water.
"We have a very good tabulation of water rights," said state engineer Hal Simpson, who administers
Colorado's seniority-based system, "but as to owner, we just don't know."
Simpson said the state doesn't have to know the owners in order to govern those rights. It just needs to
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know how much water to let through the headgates.
"For whatever reason, Colorado has never r equired a registry of ownership of a water right," he said.
In the private sector, "many attorneys have gotten wealthy doing title searches to prove someone owns
a water right," he said, so the owner "can turn around and sell it."
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Article Last Updated: 11 /22 /2005 01 :53 AM
liquid assets: turning water into gold part II
A radical new vision
Page 1 of 11
One ambitious man turns 1 acre of rural land into a tiny government with big powers to buy water to
resell it to future developments. Some see a novel solution; others protest that it's plain old speculation.
By David Olinger and Chuck Plunkett
Denver Post Staff Writers
DenverPost.com
In a conference room of a plush law office at Denver's Tab or Center, officials from a groundwater-
dependent Arapahoe County water district waited to buy rights to draw nearly 2 billion gallons of water
a year from the South Platte River basin. In another room down a sleek, curving hallway sat T. David
Perkins, the seller of a defunct Colorado hog farm that came with abundant water.
Between them, a serious, stocky man made numerous trips over smoke-gray carpet from room to room,
poring over maps and contracts. That man , Robert Lembke, is more than your average businessman. He
had also formed a special government district, on a little patch o f land in Elbert County, whose mission
is to become an unprecedented Colorado wholesale water netwo rk.
When they were done, 12 hours later on that day two years ago, a Lembke company pocketed an
immediate $1.2 million -and a written commitment of $20.5 million more from his n ewly created
government. The East Cherry Creek Valley Water and Sanitation District got rights to a renewabl e
water supply, but the cost of each new home in the district shot up $3 ,000 and continues to grow $1,500
'"year. Water rates for 50 ,000 people jumped $22 a month.
And Colorado's century-old system of allocating water was facing the prospect of radical change.
"Some think this is brilliant and wonderful ," Lembke said. "Some think I'm the devil incarnate."
There's not much to see at the United Water and Sanitation District.
It consists of a 1-acre patch of grass and thistles in rural Elbert County. No one lives there. There are no
buildings -not even a shed -in this special government district. No water or sanitation lines run
through it. There is no reservoir or water tank. Nor are there plans for such things.
The district has no customers in the county that authorized its creation. Elbert County records list the
acre as a helicopter pad site.
It's just a piece of ground to meet the legal requirement that special districts have defined boundaries.
Yet it serves as the vehicle for an ambitious scheme to create a water network serving future
developments throughout Colorado's booming Front Range.
"United," Lembke said, "is an anima l no one has seen before."
Already, every East Cherry Creek Valley homeowner is paying a monthly surcharge for a pipeline and
other facilities needed to bring the water Lembke sold, and his district gets $6 ,600 of the $16 ,500
hookup fee on every new house. Ultimately, Lembke's district could reap close to $22,000 from each
new home in the valley.
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In return, Lembke has promised to tum the water rights he bought from Perkins, and water rights he is
buying from farmers along the South Platte River, into much-needed water for their faucets.
One other developer already is looking at Lembke's model and has formed a 1-acre wholesale water
district.
Water brokers make millions in Colorado by navigating the state's jumbled water ownership records to
connect sellers who no longer need their water and buyers who do. But ifLembke's plan survives the
court challenges that await, he would take that business model a step further: He could buy and hold
water, then find customers for it, the same way a gas or electric company does.
But unlike the gas company, Lembke has taken on the form of a government. As a private company, he
wouldn't be allowed to amass water rights for prospective customers because that would violate the
long-held Colorado legal principle barring "speculation" in water ownership. As a government, he
could.
"It's the great-and-growing cities doctrine ," said state engineer Hal Simpson, who administers
Colorado's water rights system. Like more traditional governments, special districts are "the one group
out there that can get around the anti-speculation doctrine."
Critics decry Lembke's special district as a business masquerading as government. They fear it could
lead to private water monopolies and unconscionable profits from a treasured public resource.
"Everybody calls Bob Lembke a big speculator up and down the river," said Steven Sims, a water
attorney for Aurora, which is challenging Lembke in state water court. "He's going out and offering to
buy a lot of water rights. And he's going out and offering to sell a lot of water rights."
Advocates say Lembke's ideas are just the kind of innovative problem-solving needed to deal with the
pressures a growing population puts on Colorado's complex water rights system.
They contend his model can bring water to homeowners at competitive prices and simultaneously offer
more money to farmers and ranchers , who use about 85 percent of Colorado's water.
David Kaunisto, East Cherry Creek Valley's manager, said farmers north of the district had talked for
years about offering water for munic ipal use . But until Lembke came along, "we were just kind of
spinning our wheels and never got anywhere," he said.
Lembke's acre and the vision it represents sprang from the former tax and real estate attorney's
introduction to the world of developers.
He and Theodore Shipman, owner of several Colorado Wendy's restaurants, bought thousands of acres
of cheap land as courts auctioned and sold properties financed by savings and loan institutions that
failed in the late 1980s.
With little experience, they scooped out the footprint for what is now the Bromley Park development in
east Brighton.
Today, Lembke and his partners own about 19,000 acres in booming Adams, Elbert and Weld counties.
He quickly learned the importance of getting water to his developments.
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With water and infrastructure, a $300,000 chunk of dry land can become a $30 million property, he
said. Without it, it's just dirt .
Lembke also learned the importance of special districts. He decided to form his own -with a twist.
"The thing that made United unique," he said , is that it was not designed to serve a particular
development. "We disconnected it from land ."
Special districts have become a powerful force in Colorado, especially since the Taxpayer's Bill of
Rights reined in the spending power of local governments.
Developers have used them to build everything from golf courses to wastewater treatment plants and
recreation centers.
But, with his plan to go statewide , Lembke is using his as they've never been used before -and drawing
fire .
"He is trying to cloak water speculation in the clothes of Colorado municipal government," said Jim
Witwer, a Denver lawyer who represents major water users. "Personally, from what I've seen , I think
it's abusive."
Traditional special districts provide a specific service to a specific group of residents, who pay fees for
that service. They must show a need for the service and an ability to provide it, ar..d a county
government must authorize them.
Like regular governments, spec ial districts gain powers to condemn land and tax residents .
Lembke devised a special distri ct with no residents -and a potential statewide service area. His
revenues come from ratepayers in other districts.
The contract he signed Dec. 18, 2003, with East Cherry Creek Valley could yield $76 million in water
payments from Arapahoe County residents.
But it was enabled 14 months earlier by a government with no other ties to the deal.
Despite doubts, Elbert County gives its blessing
But the record is blank on how and why a rural county helped put in motion a new approach to water
sales.
Elbert County is home to 22,000 of Colorado's 4 million people -and a Lembke development.
The acre that serves as his launching pad for a water network was carved out of his Elkhorn Ranch
project at the northwest end of the county.
He approached Elbert officials with a rough sketch of his idea for a new kind of district in 2002. From
the outset, he had to overcome doubts about its legal acceptability.
Before Elbert County commissioners voted on the United dist;-ict, their consultant reviewing the
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application questioned whether Lembke had met state standards.
Its report noted that his proposed district did not identify whom it would serve, failed to identify a
water source and had not demonstrated that its service was needed.
Because of "the unique nature of this request," the Chesney & Associates report recommended the
commissioners should "hold a hearing to take testimony" to satisfy those concerns.
How the county commissioners did that is umecorded.
The tape of the meeting at which Lembke's district was unanimously approved is blank. County
employees can't explain why. Written notes of the meeting simply state that no member of the public
spoke before the commissioners voted to accept Lembke's plan with seven conditions, including yearly
reports.
John Metli, one of the commissioners who authorized Lembke's district, said commissioners focused on
protecting their own water supply, not the regional implications of this new political entity .
"He promised he wasn't going to be shipping water out of Elbert County," Metli said. "I thought it was
a viable project. I saw no harm in it to the county."
With Elbert County's stamp of approval, Lembke registered his new quasi-municipal district with the
state.
The district is run by Lembke, Shipman and o thers who al so benefit from a limited-liability company
Lembke calls United District Water Providers (UDWP). Lembke said UDWP holds individual, ta x -
deferred retirement accounts for him, his family and some of his associates and employees. He formed
it in 2003, after Elbert County approved his United district.
Colorado has more than a thousand special districts. Many benefit investors who create new
subdivisions and provide services to them. But as the population of those districts grows, residents
commonly take over the quasi-government's board of directors. Not so with United, which deliberately
excludes residents from its plans.
Lembke's district sent ballots to nine voters -its own investors and their spouses -who unanimously
elected them. While they were at it, they agreed to waive any limits on the number of terms United's
officials could serve.
Lembke, meanwhile, had persuaded the leadership of one of the state's largest irrigation companies to
partner with his district. The relationship allows Lembke to use the Farmers Reservoir and Irrigation
Company's (FRI CO) vast network of reservoirs and canals and effectively gives him special access to
an immense supply of South Platte River water.
In return, FRI CO shareholders -most of them farmers who have depended on the cooperative for water
-get an opportunity to sell their water to the United system, and FRI CO stands to get millions of dollars
to improve its facilities.
With his investor group duly sworn in as government officials, and FRICO standing beside him as a
partner, Lembke used his retirement-plan company to sell his new district water.
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At the Tabor Center closing, Perkins sold water rights to his 70 Ranch, the former hog farm, for $16.75
million. The private retirement-plan company held the contract for those rights. According to Lembke,
it was formed specifically for that purpose. It handed the contract to the United district, which
immediately sold the water rights to the East Cherry Creek Valley district for $45 million.
East Cherry Creek Valley also agreed to a second phase of purchases, valued at $31 million, for water
United would acquire from FRICO farmers.
That left some room for profit.
For the work, risks and private investments that "made the United-FRICO system possible," Lembke
said, the United district -a government run by Lembke -paid UDWP -Lembke's retirement fund
company -an immediate $1.2 million. It also agreed to pay $20.5 million more out of available district
funds.
Lembke said about $7 million of that goes to FRI CO -leaving $14 million in profits "if all goes well,"
and he has not taken a nickel of that money since the closing.
He called that a modest yield, given the size, risk and duration of the project.
"If we take a risk," he said, "we're going to expect a return on the risk."
Perkins, the former hog farm owner who lives in Missouri, said he considered Lembke a developer who
needed water and did not know his water rights were destined for a southeastern Arapahoe County
district where Lembke owned no land.
"I suspicioned he was selling that day, but I didn't know for how much or to who," Perkins said. "I
didn't care, as long as I got a check."
Lembke said concealing the identity of a third party is simply good business.
East Cherry Creek Valley bought more than just water rights. It also bought Lembke's promise to seek
water court approval of a complicated plan to deliver it.
The water would not come directly from the 70 Ranch. Located in Weld County, the ranch got its name
because it is said to be 70 miles from everywhere. East Cherry Creek Valley, which got title to the
water rights at the 70 Ranch, won't use that water, which comes from the South Platte. Organizers hope
a water court will allow them to draw an equivalent amount of water from the South Platte at a spot
closer to their service area.
There should be no net loss of water in the river, according to the complex arrangement.
Lembke has agreed to build a well field north of Barr Lake in a historic channel of the South Platte,
called the Beebe Draw. Those wells would pump water from the ground into a treatment plant that East
Cherry Creek Valley would build. Because the wells would consume water that otherwise would trickle
back to the South Platte, state water law requires the United district to replace each gallon piped to East
Cherry Creek customers. United plans to do so from several locations on the South Platte, from a gravel
pit it owns by the river to the 70 Ranch.
East Cherry Creek Valley is laying a 31-mile pipeline to take the water from the Beebe Draw to its
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customers.
Entrepreneur finds good partner in himself
Some praise his creativity, and the many hats Lembke wears offer plenty of opportunity for profit.
Lembke says Colorado law allows him as a special district official to do business with himself. He says
it's OK for his investment group to make as much as $14 million through his government body.
In cases where developers create special districts to provide services to communities, conflicts of
interest are unavoidable, he said.
"It's the norm of special districts that you deal with yourself," he said.
The United district, like many other special districts, regularly discloses its conflicts to the secretary of
state's office, as state standards of conduct require. In two years, Lembke and his partners have filed 83
statements of potential conflicts, generally with little explanation of the conflict.
Among other things, Colorado law states that a government official shall not perform acts that "directly
and substantially" affect a business in which he "has a substantial financial interest."
The law calls voluntary disclosure an "affirmative defense" to any complaint but not a blanket excuse
for profiting at public expense. If a court found that a special district acted in bad faith, its contracts
could be canceled and reparations made .
A special-districts expert says the market also keeps such quasi-government bodies in line because
customers could turn elsewhere if the investors ask too much for their services.
Evan Goulding, executive director of the Special District Association of Colorado, said investors who
form special districts commonly benefit financially.
He called Lembke aggressive and creative but fastidious about following the law.
"Based on what I know, I don't see a problem," he said.
Some water lawyers do.
"I have concerns," said Witwer. He said Lembke was taking special districts "to a bizarre extreme" and
questioned whether the district is being used to violate the state's anti-speculation doctrine.
"It's an unproven assumption, if they think they can do this," Witwer said.
As a private investor, Lembke could profit in several ways besides direct payments from his
government to his retirement-plan company:
United has signed agreements permitting it to borrow money at 7 percent interest from other companies
owned by Lembke and his partners.
United's wholesale water network could increase i:he value of land Lembke and his partners hope to
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develop.
Lembke has offered 25 acres he owns near Interstate 76, which he bought in the early 1990s, for a new
East Cherry Creek Valley water treatment plant. His price: $1.6 million.
The generous terms that United -Lembke's government -offered FRICO farmers for their water also
benefited Lembke, who owned shares in FRICO . Lembke said he and his partners sold their FRICO
water to United for $951,975 , about twice what they paid for it.
The United district's contracts also raise questions about the $7 m illion that Lembke says the private
investors owe FRI CO out of their $21. 7 million payday.
One agreement shows United, not the investors , would pay FRICO that money. Lembke said the
investors are actually covering those costs and the agreement "probably should be re-clarified ."
Lembke said the United district lacks a detailed budget of anticipated expenses because "it costs what it
costs ," and he does not wish to lay out a road map for opponents challenging him in water court .
Overall, "is there a potential for some profit down the road? Yes ," he said.
A self-described libertarian, Lembke called United "looking at the world for what was needed" -a
voluntary alternative to municipal monopolies.
Yet he created a new government partly , he said, becau se East C!1erry Creek Valley wanted to d eal
with a permanent entity. And as U nit e d's b cmds explain, it could use the government power of
condemnation to carry out its projects.
United is offering water at prices competitive with municipal rates , Lembke said, but unlike city
governments, United forces nobody to buy it.
"There's no one out there who we can force to use our system," he said. "Our only role as a government
is for those who want to deal with us."
Success of venture hinges on court's views
Criticism is mounting, with Front Range cities challenging the hold he wants to place on water.
The success of Lembke's plans still depend on numerous filings before a state water court, where
attorneys for Front Range cities and towns have lined up to challenge him.
Lembke has his critics. They say he is try ing to amass water rights for speculative purposes and his
wholesale water network would be unprecedented in Colorado.
The Colorado Constitution establishes an undeniable right of its people to divert water from any stream
for "beneficial uses."
State legislation and a series of state Supreme Court decisions have since declared that speculation -
buying water strictly so you can hold it, then sell it to others for a profit -is not a beneficial use. The
court repeatedly has dashed plans of investo rs who could not prove they had identifiable customers or
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immediate uses for water rights they tried to claim.
Lembke says United's directors, who have a contract to deliver water to East Cherry Creek Valley and
own thousands of acres of developable land, are in no way violating that doctrine.
"We're not seeking to acquire water for speculative purposes. Never have," he said.
United's own documents speak of ambitious water delivery plans.
"The district intends to provide water to various special districts and municipalities throughout the state
and serve as a wholesaler of water," one of its bond issues declares. It also says the district could
change its policy of buying water only to meet existing contracts.
In addition , United has acquired pipeline rights that could be used to carry water as far south as Pueblo ,
and one of its court filings seeks a right to store up to 100,000 acre-feet of water -enough to supply
hundreds of thousands of people.
Lembke and his partners "are just plain trying to monopolize the rest of the water" in the South Platte ,
said Sims , the Aurora water attorney.
"How is the speculation doctrine going to cope with this new kind of creature , this water and sanitation
district that has an acre of land and no customers but touts itself as a water wholesaler?" he asked . "If
that is enough , the speculation doctrine has basically been gutted in this state ."
The United deal promises East Cherry Creek 5 ,500 acre-feet of water a year, or nearly 2 billion gallons.
The first 3 ,0 00 acre-feet come from the 70 Ranch rights, the rest from water rights Lembke is bu y ing
from FRICO.
Critics question whether water in the Beebe Draw -where Lembke is drilling his wells -will need to be
treated by highly sophisticated and ex pensive plants to be drinkable. They point out that Barr Lake ,
where Denver sends treated wastewater, seeps into the groundwater of Beebe Draw , which is also
polluted b y agricultural chemicals.
Because of the potential treatment costs , they question Lembke's claim that he is selling water at
competitive rates.
Kaunisto , who served on the FRICO board before he managed the East Cherry Creek Valley district,
expressed confidence that the United contract will deliver homeowners from their dependence on deep
wells that can run dry.
He called water in the Beebe Draw "remarkably clean" in comparison with the lower South Platte
River, which lies downstream of municipal sewage treatment plants. Brighton and Lochbuie already
drink from the same draw, he said.
But his district does plan to spend $20 million in startup costs for a reverse-osmosis plant to filter
Lembke's water. Until that plant is complete, East Cherry Creek Valley residents would drink a blend
of deep well water and Beebe Draw water treated with chlorine to kill organisms.
The East Cherry Creek Valley district serves about 50,000 people in Centennial and unincorporated
areas at the southeastern edge of Arapahoe County -and expects its population to reach 70,000.
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Like their neighbors in fast-growing Douglas County, the district's homeowners draw water from deep
aquifers unreplenished by a river.
When the district looked at the future of this supply, "it never got to the point where you get no more
water out of the ground," Kaunisto said . But "over the next 50 years, we would have had to drill 300 to
400 more wells at a cost of close to $400 million."
By contrast, Lembke's water comes from the South Platte basin, a supply renewed each year by melting
snow and rain. And Kaunisto said Lembke's offer was the cheapest alternative the district has seen.
"What makes this work was working with FRICO and United to move the water. It's a lot more
expensive to do it yourself," he said. "To say, 'We've never had these guys before; why do we need
them now?' is thinking inside the box too much."
But Kaunisto said his district's future water supply does not depend on their success.
"We will own all the water rights ourselves ," he said. "Even if United goes away and FRICO goes
away, we have vested interests."
The water won't come cheap. Already, the district has imposed a $22 monthly surcharge to help cover
the costs of the new pipeline and other facilities. It also has been ratcheting up the water hookup fee for
each home. To finance its bonds , the district raised the fee from $12 ,000 a home when it signed the
United deal two years ago to $16,500 today. It plans to evaluate tap fees each year but could keep
increasing them $1,500 annually for up to eight years.
That could elevate the water connection fee for each new home served by the district to as much as
$28,500 -three times the largest amount charged outside Colorado in a 2004 survey of more than 250
municipalities conducted by the American Water Works Association.
Kaunisto says it is incorrect to assume that house prices rise when tap fees increase because builders
pay them, not homeowners, and various market forces affect the ultimate price.
The Home Builders Association of Metro Denver disagrees.
The fees "are passed directly on to the consumer," said Roger Reinhardt, executive vice president of the
association. "It's a hard cost.
"The builder doesn't sit back and say, 'I'm going to absorb the water and sewer fees.'"
Tap fees in East Cherry Creek Valley already exceed those of many of its neighbors. Denver and some
of its suburbs charge less than $10,000 for water service. Nearby Aurora plans to raise its residential
tap fee to $16,641 next year but does not expect $1,500 annual increases.
For the $45 million first phase of its project, East Cherry Creek Valley gave United $18.5 million in
cash and a $26.5 million bond. To pay off that bond, it is giving Lembke's district 40 percent of each
new connection fee. In the second phase , United could get 75 percent to 80 percent of each tap fee,
Kaunisto said -or as much as $22 ,800 on each new home built in 2013.
While Arapahoe County residents have yet to taste a drop of Lembke's water, others are already
mimicking his 1-acre district.
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In nearby Douglas County, the newly formed Dominion Water and Sanitation District borrowed the 1-
acre wholesale water district model from the United plan.
But one of its investors, Harold Smethills, said Dominion intends to serve only its own proposed
development, Sterling Ranch , and some neighbors who fear their wells are going dry.
"All we want to do is break even," he said. "We're not out to make a profit."
So far, Dominion has no water to serve its potential customers.
East Cherry Creek Valley homeowners say they know little about their district's reliance on Lembke to
meet their water needs or about the tap fees financing the water projects.
But the $22 water surcharge did catch their attention.
"I wasn't happy about it," said Audrey Sewald as she stood holding her baby daughter, Ela, outside the
home she and her husband bought three years ago.
"All of a sudden we got this notice" of an increase on every month's water bill, she said.
Her husband called to complain, "and they said we could go to a board meeting. But by then, they had
already decided on it."
Post researcher Barbara Hudson contributed to this report.
Staff writer David Olinger can be reached at dolirig?.t_@de_JJ_ve_L]2Q_Sf. com or 303-820-1498.
Staff writer Chuck Plunkett can be reached at cplunkett@denverpost. com or 303-820-1333 .
THE TERMS
Acre-foot
A standard measurement in water transactions, it's the amount required to cover an acre of land in a
foot of water. It amounts to a little less than 326,000 gallons of water -enough to supply the indoor and
outdoor uses of two average urban households for a year.
Water right
The ownership right to pull a court-authorized amount of water from a river, reservoir or other
renewable source of water. Water rights are administered in a seniority system.
Water court
A court devoted to approving water rights and adjudicating disputes relating to water ownership or its
use.
Ditch company
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A cooperative of water users , it maintains a series of
water-filled canals serving farms. Its members may buy and sell shares to one another and sometimes to
outsiders.
Groundwater
Water pulled from a well instead of directly from a stream or river. Some wells actually take water
from the underground reaches of a nearby stream.
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Article Last Updated: 11122 /2005 07 :32 AM
liquid assets: turning water into gold part III
Suburban aggression
Page l of 7
Desperate to find enough water to grow, Front Range cities pu ll the plug on restraint, turning to secret
agents and meetings, willing to mortgage their future to make sure the glass is full years down the road.
By David Olinger and Chuck Plunkett
Denver Post Staff Writers THIRD OF FOUR PARTS
DenverPost.com
Vi Misztal's utility bills shot up in the 1980s to help pay for water her city purchased secretly from
farms in another county.
Now she can't help but laugh at the idea she may never taste a drop of the water she has been buying for
19 years.
"I'm an old gal," she said after a card game for pennies at a Thornton senior center. "I'm 83. My God , I
can't look forward to paying more and more and more of these bills. I don't appreciate that at all."
Like every other homeowner in Thornton, she has been paying for water the city bought two decades
ago hut has never delivered. Though most don't know it , ratepayers are financing a water project that
could easily cost half a billion dollars and still faces serious obstacles before any water pours through a
pipe .
In the first three years after Thornton hired a prominent water broker in 1985 to buy water rights from
110 farms in Weld and Larimer counties , Misztal's water rates shot up 3 7 percent. In the past three
years, the water connection fees for a new Thornton home have nearly doubled to $14 ,797.
Thornton spent 12 embattled years in court just to get the right to consume water it spent $50 million to
acquire. Though city officials say they still hope to pipe in the water by 2024 -38 years after they
bought it -they have not even begun to buy the rights of way along the proposed 56 -mile route .
Thornton's former longtime mayor is among those who doubt the pipeline will ever be built.
Instead, Thornton plans to spend the next 15 years turning irrigated farms into natural grassland so it
can claim the water it owns and trade it for water closer to home.
Aurora, its fast-growing neighbor, already takes water from three of Colorado's seven river basins. Now
it plans to spend half a billion dollars to pipe treated wastewater from the South Platte River to a new
purification plant -and back to its residents' faucets.
The painful lesson that Thornton, Aurora and other Colorado cities have learned: Buying water is just
the beginning . The other costs include everything from hiring secret agents at closed predawn meetings
to paying a farmer who now raises pheasants on a $200-a-day hunting range.
As Denver's suburbs reach farther to find water, they find themselves forced by state law and water
court decisions to compensate the communities they tap . In Aurora's case, ratepayers have been
required to do everything from reseeding 15,000 acres of farmland and paying a public school district
165 miles away to supporting a new kayak course in Pueblo.
"It's the cost of doing business ," said Peter Binney, Aurora's utility director. "Do I choke at the price of
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it now? Yes."
Thornton likewise is paying schools and fire departments for lost taxes and promising to reseed
thousands of acres as it takes water rights from farms. To get water, it also bought farmland, farm
buildings , tractors, sprinklers and other equipment it still owns.
"They came around for two years afterward trying to find out what the hell they had bought," said Gary
Simpson, who sold his farms to Thornton. "The only thing they knew for sure was that they owned the
water."
Man in a Cadillac makes offers farmers can't refuse
One by one , rural neighbors agree to sell , but even the rumor mill can't detect who the mystery buyer is .
Ken Nelson remembers how it all began. A gray Cadillac Seville pulled into the muddy dri v e ou tside
his Cactus Hill sheep farm near Ault, east of Fort Collins. Out stepped Duane Rennels , a local real
estate man.
Rennels had been talking to scores of Nelson's neighbors. He was offering hard cash on behalf of a
mystery buyer to farmers hard pressed by extraordinary interest rates . Rampant rumors held that the
buyer was someone big . Ferdinand and Imelda Marcos . The Catholic Church. Arabs. Maybe Aurora.
Men and women who had farmed the land for generations were selling, Rennels told Nelson. B ut the
whole deal could sour if he didn't join up .
And this was the only buyer in town.
Nelson knew what his neighbors faced . Some farmers had already been given "the linoleum room"
treatment at the bank. Simpson was one. When the bank loaned him money, he got to sit on the
carpeted main floor. But then they called him in and took him down to the basement, where the y sat in
a linoleum-floored break room . He said the bank had been lending money -payable on demand -to
cover his mortgage payments as he got deeper in debt.
"They said , 'We think it's time you get out of debt ,"' Simpson remembers . "'We want our money .' I onl y
owed $1.6 million."
Like most farmers in the area, Simpson put his farm up for sale.
And then the gray Seville pulled up with the promise of a fix.
When farmers asked who was buying, Rennels would say only, "I am ."
The Thornton council had met at 5 a.m. to plot its strategy. In a closed session, the members voted to
take over the Water Supply and Storage Company, a shareholder-owned agricultural ditch company
with rights to the pristine Cache la Poudre River.
It also hired Rennels secretly in September 1985 without competitive bids and let him buy farms when
farmers refused to sell water rights without land. Thornton sd a limit on what it would pay for land and
water, and would buy only if it could acquire a large block of shares at once.
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Thornton records show the council originally asked Rennels to buy 301of600 shares of Water Supply
and Storage Company. Ultimately, the city stopped short of buying a controlling interest. Mayor Noel
Busck, then a council member, insists Thornton quickly backed away from a takeover and agreed to
own just under half the company.
Busck also said confidentiality was crucial to protect the city's business strategy.
"Once we got word out that we were up there buying, Aurora and everyone else would be up there
wheeling and dealing with us," he explained.
Actually , Aurora already had passed on the chance. Rennels said he brought Thornton the idea of
buying half a ditch company -enough water for a quarter-million city dwellers -after Aurora, which
had other water projects in the works, turned him down.
He ended up with $3.5 million in commissions. And a car.
One farmer was $7 million in debt and so desperate to sell that he took Rennels out to his barn , filled
with a collection of antique Mercedeses, and told him he could take his pick if he would just move up
the closing date three months.
Rennels said he cleared the car deal with then-Thornton Mayor Margaret Carpenter, who said she
doesn't remember approving it.
As Thornton's secret agent, Rennels sometimes had to lose a man in an aging Chrysler who tried to tail
his Seville on dirt roads from farm to farm . Secrecy was essent iq l, he agreed, because "the price would
hav e skyrocketed" if Thornton had been identified .
"No one knew who I was buying for except my wife and my secretary," he said.
Thornton leaders were so concerned about their dependence on one man to acquire a future water
supply that , in his contract, Rennels agreed not to fly his private plane for nine months.
Nelson resisted selling to the end . He and his sons got into the truck and drove away from the gray
Seville to a Windsor restaurant. A persistent Rennels followed them there, finally persuading them to
sell about half their farmland .
That same night there was a meeting at a Holiday Inn in Fort Collins, "and all the big shots were going
to be there. They were going to tell us what was going on and who it was," Nelson said. "Turned out to
be the mayor of Thornton."
Overnight, Thornton officials said, their city had emerged as the largest landowner in a county
completely outside its borders.
"Holy Toledo," Busck said. "We wound up with 20,000 acres in Weld County."
City unveils pipeline plan that is quickly stymied
Northern neighbors pour into w ater court protesting. Thornton'~ millions fail to get clean mountain
water.
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At the Holiday Inn in 1986, Carpenter outlined an elaborate plan to benefit her city and local farmers.
Thornton would build two pipelines , one to carry water south, one to return treated effluent for
agricultural use. Its city manager said pipeline construction would begin within 10 years.
Opponents soon turned that schedule into a pipe dream. The ditch company, fearing a takeover,
promptly tried to dilute Thornton's ownership by issuing new stock. Thornton sued -then agreed in a
settlement to pay more than $8 million to use and improve the company's facilities.
In water court, farmers, cities and water districts protested the exportation of northern Colorado water
to a Denver suburb. Forty-eight parties filed objections , flooding the courtroom with lawyers and
engmeers.
In March 1998 , Thornton finally secured rights to the water it bought -with a long list of conditions
before the city could use it.
Many of the farmers who sold to Thornton asked if they could lease the farms back until the city
needed the water. Two decades later , the y grow the same crops on the same land, but as tenants of a
city that still owns 30 square miles of Weld and Larimer counties.
Thornton gets about $1.5 million by leas ing the land it owns back to farmers, said the city's water
resources manager, Mark Koleber, but spends $500 ,000 a year on maintenance.
Rennels said Thornton "made a hell of a deal" for the water, but he doubts it will ever be delivered in a
pipeline . So does Carpenter, the city's mayor for 20 years.
"U nless ii's financially feasible , I don't th ink the city can do it," she s aid. "Obviously there were lots
and lots of things we didn't consider."
If Thornton never completes a pipeline , it can still trade its farm water for water from the South Platte
and other streams .
But there is a disadvantage to that cheaper alternative.
Thornton went north for three reasons. It guessed correctly that Two Forks, a giant Denver-led
reservoir project, would never be built. It aspired to buy enough water for a city of 300,000 people. And
it wanted clean mountain water from the Cache la Poudre River. In court , it asserted that growing urban
pollution threatened the reliability of its existing water sources.
Today, about 106 ,000 people live in Thornton , and a regional forecast estimates its population will not
exceed 185 ,000 in the next 25 years. It continues to get much of its water from the South Platte River,
which is tainted by treated wastewater from Denver suburbs as well as parking-lot oils and landscaping
chemicals that run off urban streets.
Moreover, the 1998 water court decree requires Thornton to make "reasonable efforts" to protect and
treat its existing supplies before taking that clean mountain water.
So the city has spent $56 million for advanced treatment and filtration processes that make sure
parasites such as cryptosporidium and giardia cannot slip through. It may spend $14 million more to
cleanse its water of organic chemicals such as herbicides, pesticides and previously consumed
pharmaceuticals, a project that would temporarily give Thornton the most sophisticated treatment plant
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in Colorado.
"We're at the wrong end of the stream," Busck complained. "The water quality is atrocious."
Thornton now plans to use the water rights it bought by trading them. When its farms stop taking water
from the Cache la Poudre, which feeds the South Platte, Thornton gains credit to use equivalent
amounts upstream on the South Platte and Clear Creek. To accomplish this, it must first evict its
tenants, one farm at a time, and successfully turn irrigated cropland into native grassland as the water
court decree requires.
In its new timetable, the farm-drying project will take 15 years, and Thornton will begin to claim its
northern water rights by exchanges about 2011. But the exchange means that, for all its effort and
expense, Thornton will gain water from the river it complained was getting polluted -not the clean
mountain water it paid for.
Thornton officials insist they still plan to complete the pipeline that would physically deliver Cache la
Poudre water, but not until 2024. Fifteen years ago, Thornton estimated it would cost $427 million to
complete its northern water project. The city is revising that estimate, which may go higher. For one
thing, land values in booming northern Colorado have escalated , and Thornton has not acquired rights
of way for a 56-mile pipeline.
Thornton's mayor says every city buys water for the future, and the water it acquired for its citizens is
now worth several times what the city paid for it.
Busck said he has no regrets, "never a moment of doubt," about the project.
"It's a long-range vision, and the water is there," he said. "The w ater will come down when we need it.
Did it take a long time? Sure it took a long time ."
Farmers praise Thornton as a landlord who, until recently, threw them a Christmas party every year.
They say the city allowed them to keep farming land that otherwi se could have been seized by the
banks.
But they marvel at the cost to Thornton residents.
"If the citizens had known, they'd have thrown a fit," Nelson said. "The guy who paid taxes on it for the
last 20 years in Thornton hasn't gotten anything for it yet."
To gain water, Aurora pays for others' quality of life
It picks up part of the tab for Rocky Ford, helps a pheasant hunt ing retreat and struggles to clean water.
One hundred sixty-five miles south of Thornton's farms, pheasants hatch and grow to become prey for
hunting at a place that got a big check from Aurora.
Along the Arkansas River, Aurora is subsidizing the cost of highly efficient drip irrigation systems on
farms just to claim the water saved as a result. Elsewhere it has spent nearly $4 million in two counties
to transform into grassland 15 ,000 acres of irrigated farmland it bought.
And it gave some farmers the option of taking that money to reseed their own land.
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That's where the pheasants come in. On Hal Holder's farm near Rocky Ford, the revegetation check
"financed this operation," said Wesley Mason, Holder's partner, waving a hand around the pheasant
birthing room . "My seed money, basically."
Mason and Holder became partners in Newdale Ventures, raising birds on a former wheat field
converted to a hunting club. For $200 a day, hunters "get a guide and a dog and lunch -and we'll c!ean
your birds for you," Mason said.
Aurora's payments don't stop there. It agreed to make up the $1.5 million difference in taxes that Rocky
Ford schools will suffer in the next 90 years as tax-revenue-generating farmland is converted to dry
grass. It even supported an economic development study for the community.
Far upriver, Aurora also opened miles of a stream to public fishing and agreed to protect land near
Colorado's two highest mountains from development by donating it to open-space programs.
Aurora doesn't do these things just to be generous. It does so because state law permits counties to
demand compensation for lost water, and water courts have begun to require such programs as
conditions of approval.
Indeed, demands for South Platte water downstream of Denver keep rising despite this distasteful fact:
Though the river flows through Denver as a playground for kayakers and an attraction for trail-riding
cyclists, joggers and walkers, a major irrigation ditch called the Burlington Canal drains it as it leaves
the city.
Above the Denver metro wastewater plant, the river is often reduced to a trickle.
Below the plant, which treats and discharges water from the faucets , toilets and bathtubs of 1 1/2
million people , "we make up nine-tenths of the river for nine months of the year," wast ewater district
spokesman Steve Frank said . "The river as it goes north from here essentially comes from our outfalls."
Aurora plans to tum it into drinking water. It recently announced it would spend $500 million to collect
water it has already discharged into the South Platte.
It designed a "five-barrier" system to make sure the water is safe . The water will be drawn from wells
near the river, distilled for a month in gravel pits, then piped 34 miles to a new state-of-the-art
treatment plant, sent through three more purification processes and blended with mountain water.
Aurora water bills will go up 12 percent -$67 extra a year on a typical residential bill -to launch this
project. Residential tap fees for new homes will rise to $16,641 next year. More rate increases are
expected.
According to Binney, Aurora's utility director, most of its water rights allow the city to use it "to
extinction" -through the faucet, down the drain and back again.
"Obviously I'd love to have mountain water available to me. God didn't make it available. So I had to
go to the next best thing," he said. •
In Thornton, Koleber is struck by the fact that while Front Range cities in sight of the Rockies go to
such trouble for drinkable water, the city of New York gets its water from protected mountain lakes and
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simply chlorinates it.
He laments that Colorado's rigid water rights system often creates a winner-take-all bidding war that
prevents sharing a public resource.
In order to claim Thornton's water, "I can't put it back on these farms" once they're dried up. "The law
doesn't allow that," he said. "I've got to show that it's never used there again."
Post researcher Barbara Hudson contributed to this report.
Staff writer David Olinger can be reached at 303-820-1498 or dQJ_jnger @ denveroost.com.
Staff writer Chuck Plunkett can be reached at 303-820-1333 or cplunJs~lt@ (irp1y_erp_QSt.CQf]1.
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Article Last Updated: 11/22/2005 03 :30 AM
liquid assets: side article
For high-dollar rights to water, Colorado's the place
Many factors drive the price up, including the fact that a mountain range divides most of the state's
people from most of its water
By David Olinger and Chuck Plunkett
Denver Post Staff Writers
Denver Post.com
When Idaho bought water rights on the Snake River this year to protect trout, it paid farmers $325 per
acre-foot -about 326,000 gallons.
In Colorado, cities buying water for human use have paid farmers as much as $20,000 per acre-foot.
"Location, location, location," said Karl Dreher, Idaho's water resources director.
Colorado is a notoriously expensive place to shop for water.
Nobody maintains a complete record of Western water sales and leases, and many such transactions are
private.
But a series of studies based on available sales reports has ranked Cc.lorado at or near the top of the
price chart, even in comparison with desert states. One study published last year showed Colorado
water sales prices averaging three to se·ven times the prices paid in most Western states .
Why?
Water experts suggest several factors:
Unlike many states, Colorado lets cities permanently acquire water rights from those who previously
owned them. But it does so through a uniquely rigid water court sy stem that may take a decade to judge
how a single city's purchase affects the existing rights of everyone else on the river.
Colorado's population centers and water resources lie on opposite sides of the Continental Divide.
Eighty-eight percent of its people inhabit the South Platte and Arkansas basins -rivers that carry only
15 percent of Colorado's natural stream flow.
While Colorado's mountains spawn rivers that nourish much of the West , the giant federal reservoirs
corralling those rivers lie downstream. Among Western states , only rain-soaked Oregon has less water
stored in Bureau of Reclamation dams .
Some states freely allow cities to pump groundwater from river basins. Colorado requires such
pumping to conform to the seniority system of water rights on its rivers .
Many Colorado cities apply what amounts to a hefty newcomers' tax in the form of water connection
fees on new homes, using the principle that growth should pay its own way.
Eastern Colorado rivers are already overappropriated: The court-decreed rights to their water often
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exceed the water they contain. That forces the state to step in, shutting off junior rights until senior
rights downstream are met. On top of that, Colorado has obligations to make sure some water leaves
the state for neighboring states .
"We don't have water that hasn't been de veloped in the eastern half of the state," said Eric Schuck, an
assistant professor ofresource economics at Colorado State Uni v ersity . "The unappropriated water is
on the other side."
Moreover, "one of the things Colorado does very , very well is protect the downstream users. That tends
to drive up the price ," he said.
To avoid the time , expense and risks of water court cases , Broomfield and other northern Colorado
cities turned to a more convenient source: the Colorado-Big Thompson project. It imports Colorado
River water through a mountain tunnel -a federal project completed before environmentalists began
challenging giant dams.
Because its water is imported from a different river basin , it can be sold without affecting the ri ghts of
others downstream under a court-appro ved plan .
The Northern Colorado Water Conservancy District, which oversees the Big T supply , routinel y
appro v es water rights sales within its boundaries at monthly board meetings.
"It's the busiest water market in the United States," Schuck said. "When you buy it , it's the same thing
as bu ying a can of chili off the shelf at King Soopers. You're bu ying the water, and you don't have to
worry abou t the baggag e."
But conveni enc e has come with escalating prices . Big T water co sts eight times as much as it did in th e
early 1990s, and cities that relied on it to support recent growth ar e charging extraordinary fees fo r
water service .
Most municipal water utilities help pay for growth by imposing a service connection fee or capital
recovery charge , or both . That fee becomes part of the cost of a new house.
According to a 2004 American Water Works Association survey, service connection fees averaged
$458 nationally , and capital recovery charges averaged $1,000 .
By comparison, many growing Denver suburbs charge $10,000 or more for water service to a new
house. Louisville charg es $20 ,000 , and Broomfield $24,424 .
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liquid assets: turning water into gold part IV
Law makes, breaks men
By David Olinger and Chuck Plunkett
Denver Post Staff Writers LAST OF FOUR PARTS
Denver Post.com
Bill McCracken watches the years go by with fading hopes for his farm.
Page 1 of 7
He has been unable to harvest a crop since 2002, the last year he had a Colorado permit to pump any
water from his wells.
This year, at the age of 79, he made a little money doing construction work up in Wyoming. He paid
property taxes with Social Security checks. Slowly, he has been selling off a cattle herd he no longer
can afford to feed.
The snow that finally blanketed the Rocky Mountains after a series of dry winters brought him no
relief.
Neither does the irrigation canal that runs right through his yard, nor the South Platte River wending
past his unplanted fields.
His farm survived the worst drought in a century . But it may not withstand a regulatory reversal that
has shut down more than a thous and farm wells across northeastern Colorado .
"I had a farm worth probably close to a million dollars. Now it's worth almost nothing," McCracken
said.
Glen Kobobel , a neighboring well user, is onl y slightly better off. He spent $61,000 to buy into a plan
that let him water less than half his fields this year.
In a year with good snowpack and full reservoirs, "we're sitting here turned off. It doesn't make any
sense to me," he said. "We need to be compensated for what's been taken from us ."
Colorado law disagreed. And McCracken's and Kobobel 's loss is someone else's gain.
In drought years , Vince Gerkin's century-old river rights failed to deliver water to his fa1m while
upstream neighbors with wells pumped away . But a 2003 Colorado Supreme Court ruling that ruined
McCracken made Gerkin's rights suddenly more valuable . That ruling didn't just level the playing field.
It upended it.
The stakes were enormous.
By one critic's estimate, the wells were taking at least 170,000 acre-feet of water they had no right to
use each year, or more than enough water to supply every Denver home .
Now, those with senior river ri ghts have the million-dollar farms , and those who dep ended on wells are
searching for water they can ill afford to buy .
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"I feel sorry for them. I know what they're going through. I went through it in the drought," Gerkin
said . "The price for water now has just skyrocketed."
The economic and emotional disaster that has struck McCracken and hundreds of other farmers along
the South Platte sprang from two hard facts about Colorado water rights. On one hand, its courts
vigorously uphold a status quo generated by the "first in time, first in right" logic of 19th-century
mining camps. Yet for a generation, its state water regulators kept granting extraordinary yearly permits
that enabled farmers to sidestep that same strict seniority system .
As a result, McCracken and his peers have seen their land value drop to as little as one-tenth of its
previous worth, while river rights fetch record prices .
Like an earthquake, the disaster along the South Platte sent shudders through the West. Though
Colorado is the only state so far that has ordered a massive shutdown of groundwater wells depleting its
rivers , similar crises are fast developing on dry prairies, in desert cities and in pristine watering holes
that protect some of the West's rarest animals.
In Idaho , potato farmers are going to court against fish farmers who claim well users have drained th e
spectacular springs that raise most of the nation's trout.
In Arizona, one town faced this dilemma: drill wells almost a mile deep for water -or truck it in .
"All across the West, we're seeing the conflicts erupt," said Karl Dreher, Idaho's Department of Water
Resources director. "Generally it's the result of groundwater use. You can't see it. It's sort of out of
sight , out of mind. Now , in many cases , y ears or even decades later we're seeing that the groundw ater
depletions that have been occurring are taking a toll."
Stricter water law leads farmers to pool resources
For years , irrigation wells keep pumping under the auspices of a group hoping to replace what it
pumps .
McCracken was one of many farmers who belonged to an association called GASP -Groundwater
Appropriators of the South Platte. It formed after Colorado passed a landmark 1969 law requiring
tributary groundwaters to be regulated as part of its rivers, just as creeks flowing into a stream are part
of that stream.
That posed an immediate problem for all the farmers who had drilled wells and pumped groundwater to
fields stretching from the Denver area to the Nebraska line. The oldest water rights on the South Platte
belong to those who dug ditches in the 19th century from the river to their land. Pumps came later.
They proliferated in the 1950s and 1960s , turning dry prairie land into prosperous farms growing corn,
alfalfa, sugar beets and melons .
Under Colorado's seniority system, the new law put well users in line behind all those who previously
took water directly from the river.
GASP offered them a way to save their farms. They could sign up, pay a small yearly assessment and
share any water GASP rented or bought to replace what they pumped.
But GASP never owned enough water to replace what its members consumed.
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Tim Buchanan, a lawyer who represented senior water rights owners , said he calculated that GASP was
"shorting the river about 170,000 acre-feet a year."
But the true amount the farmers pulled from the river was probably higher and impossible to divine, he
said, because GASP accounts were riddled with errors and "the state just never kept any records -they
would just pat us on the head and say, 'Don't worry about it.'"
For decades, the state Division of Water Resources, headed by the state engineer, let GASP wells keep
pumping about 75 billion gallons of water a year.
With the state engineer's support, GASP submitted yearly applications to replace water it was using -
called substitute supply plans -until it could secure permanent sources such as reservoir storage, treated
municipal wastewater or senior rights of retiring farmers.
The permanent plan, called an augmentation plan, would require a water court judge's decree that
GASP was replenishing the river water the farmers were taking when others should have gotten it first.
Except GASP never went to court.
Each year, GASP renewed its request to keep pumping temporarily. And although state records showed
its replacement water fell far short of the water it consumed, the state engineer always granted a permit
to pump one more year.
"It worked very, very well for a long, long time," said Jack Odor, GASP's manager for 32 years .
By his estimate, member farmers pumped from the ground 40 to 100 times what GASP owned in the
river. GASP made up that difference in two ways: by renting water and by counting on wet months
when there was enough water in the South Platte to satisfy everyone.
GASP was always supposed to be a temporary organization, and farmers knew it, Odor said, "but they
didn't get out. What would you do if you could spend a co uple of hundred dollars a year, or many
thousands of dollars to buy your own water, plus attorneys' fees?"
This might have gone on much longer, if not for a feud over a couple of fish ponds far away in the
mountains .
South of Leadville, the Empire Lodge Homeowners' Association filled the ponds through the use of
yearly permits from the state engineer. The homeowners got into a fight with a ranch downstream over
creek water diverted to the ponds, and it escalated into a water court battle in Pueblo.
There, Judge John Anderson issued a scathing assessment of the state engineer's permit system. He
declared that the state engineer had approved 528 of the supposedly temporary substitute supply plans
but had n((ver forced permit holders into water court. He called the state engineer's testimony in his
courtroom "preposterous." He concluded that the homeowners' association "has abused and been
allowed by the state engineer to abuse" Colorado water law.
State engineer Hal Simpson was stunned. "That was probably the only decree I've ever seen like that,"
he said.
Dry year and wet ponds become catalysts for court
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Day of reckoning evolved when those with senior rights to scarce water demanded their fair share.
For 30 years, Simpson and his predecessors managed to keep water available to both the farmers who
shunted South Platte water into canals and those who pumped it from the ground. The Front Range
population was much smaller in the 1970s, and when it began to grow, Colorado enjoyed a string of
exceptionally wet years. Often there was enough rain and snow to avoid calls from senior water rights
holders to shut down the supply to their juniors.
Simpson knew a day of reckoning would come. But he never denied GASP a yearly permit, as too
many family farms were dependent on the wells. Instead, he occasionally sent what he described as
"arm-twisting" letters reminding GASP that it needed to find sufficient replacement water and get its
plans approved in water court .
GASP did neither. Meanwhile, the price of water grew.
In 2002, a record drought year, demands for water far outstripped supply, and only the oldest water
rights -claimed by Colorado's pioneer families -got their full allotments from the South Platte . The
Empire Lodge case struck at the same time.
"It was the perfect storm ," Simpson said.
The fish-pond fight caught the attention of city officials -and farmers -who had grumbled for y ears
that groundwater pumping along the South Platte cheated those who held or acquired senior water
rights on the river. They also sued.
In a pair of rulings , the Colorado Supreme Court protected the rights of the seniors and limited the state
engineer's authority. GASP promptly collapsed, leaving members who had prospered w ith state permits
bone-dry.
The state engineer, compelled to enforce Colorado's seniority system, started "red-tagging" pumps
along the river. This year, 1,500 wells on the South Platte were shut down, and many more pumped at
reduced rates.
Simpson was a reluctant enforcer. Profound concern for thousands of farmers had kept him from
shutting down their wells in the past.
"There are people who, their livelihood is lost," he said. "Their land and their water was their 40l(k).
It's sad, but that's how our water law operates."
For irrigators with wells, life has changed drastically
Some wonder how they'll be able to to grow food , and the quandary over wells may spread to other
states.
"This is my mosquito hatchery." Bill McCracken pauses in a pickup truck beside a big hole in one of
his fields. He had spent about $50,000 on what he hoped would become a court-approved augmentation
plan: a storage pond with a pipeline and a flow meter.
Ifhe could get the pond filled somehow , he could sontribute a measurable quantity of water to offset
the groundwater he would pump in an irrigation season. At the moment, his augmentation pond barely
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held enough water to breed insects.
"A lot of money for nothing -so far," he said. "This is the third year that I've been out of water."
With water, his 320 acres in Morgan County could have fetched $800,000. Without it, he figures the
land loses 90 percent of its value -and he loses the crops that fed his cattle.
"I about got all my cattle sold," he said. "I had close to 100 head. I'm down to 20-some. Can't afford to
buy feed."
Vic Quint, McCraGken's friend and fellow farmer, managed to get water from a ditch company to
compensate for the groundwater he once freely pumped as a GASP member.
But at the price he paid, he figures he is losing money on every acre he plants.
"I've got my fields wet, but I can't afford it. If we had $5 com, I could do it. We've got $2 corn ," he
said. "I'm probably as bad off as Bill is with his wells shut off. I just don't know it yet."
Many GASP farmers jumped to another association, the Central Colorado Water Conservancy District,
which was facing its own crisis. The Central district owned better water rights than GASP, but not
enough to offset all the groundwater use of its own members.
This year, many long-term members of the Central district were able to pump only half as much water
as they once did, a curtailment that created a checkerboard effect of rich, irrigated cropland ?..nd dusty
fields stretching across the Colorado plains .
New members joined a separate subdistrict and paid a higher price. It cost them $5,000 per well plus a
property assessment to join. That alone cost some farn1ers $60,000 or more -for the right to irrigate a
fraction of their fields.
The newcomers still need water court approval of their augmentation plans. This year they were able to
pump only 40 percent of their previous use, and next year they may get as little as 15 percent.
Tom Cech, the district's executive director, warned farmers at a mass meeting that there would be years
when new members might not be able to pump at all.
To get all the water they need, "they'll have to buy their farm a second time. That's how much it will
cost," he remembers telling them. "I'll never forget seeing 700 sets of shoulders slump in their chairs.
That's how drastic this revision is to our groundwater irrigators.
"Many view this as extremely unfair, and poor public policy," he said. "Others say that's how the
system of prior appropriation works, and you've gotten away with taking too much water out of the
river for years."
To help save its farmers, Central may sell some of its senior river rights near Denver, which have
become extremely valuable, and use the profits to buy cheaper water farther downstream .
According to Cech, one city is offering $18,300 a share for water his district bought for $2,400 in 1990.
On a volume basis, that's about three times what Central paid for other agricultural water as recently as
last year.
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Farmer-run ditch companies with 19th-century water rights were among the beneficiaries of the
Supreme Court's rulings. So was the city of Boulder.
At times, Boulder had strugg k d to keep water in its reservoirs -and couldn't figure out why a reservoir
with senior rights downstream kept shutting down its access to the river. Finally it found a suspected
culprit: The downstream reservoir was not fillin g because thousands of wells along the river were
draining it -and doing so with the state's blessing.
When the drought struck, Boulder clamped down on car washing , lawn watering, swimming pools and
commercial uses of water while junior wells irrigated around the clock. In 2003, Boulder estimated that
senior rights could claim one-third of its yearl y use if the wells kept pumping without replacing water
to the river. Permanently acquiring that much replacement water could have cost Boulder $84 million.
The groundwater wells "jeopardized our ability to make it through drought periods , and it increased the
cost of the water that we do have to supply," said Carol Ellinghouse, Boulder's water resources
coordinator. "The drought exposed the shell game that was going on."
Boulder has not reduced its water rates , but Ellinghouse said its yearly supply is now more secure.
David Getches , dean of the U niversity of Colorado law school, blames the "hard-edged nature of
Colorado law" for the GASP disaster. As state director of natural resources during the mid-1980s, he
reviewed the GASP plan to gradually acquire new court-approved supplies and considered it workable
and smart. He laments that Colorado gives its state engineer so little power to negotiate compromises
when there are conflicting water claims.
The Suprem e Court ruling that led to GASP's demise "was well-reasoned, if not good," he said.
Gregory Hobbs, a water lawyer who became a Colorado Supreme Court justice, said he did not blame
the state engineer for his efforts to protect famil y iarms. But he strongly defends the state's "first in
time , first in right" doctrine because it protects personal property and brings certainty to a market.
When you buy a senior water right in Colorado , you're not buying just water, Hobbs said. "You're
purchasing the enforcement."
He predicts others will soon find themselves in Colorado's predicament. In states that let wells deprive
holders of senior water rights , "the crunch time has come," he said.
It's coming to Kansas , where irrigation wells regularly drain the Arkansas River so dry that on
weekends , four-wheelers roam the riverbed. State scientists are plotting the extent of the damage and
may soon force farmers to use less water so that senior water rights -held by state and national wildlife
refuges -can nourish wetlands visited by whooping cranes, least terns and other protected birds.
Protests are sure to follow whatever the state decides. "You call me back in a year, and we'll talk
lawsuits," said Sharon Falk , the region's groundwater district manager.
In Arizona, well owners in unincorporated Star Valley are battling the nearby city of Payson, which is
coping with a water shortage by letting developers drill wells outside of town.
"They're trying to take our water," said Cris Lecher, a Star Vall ey fire department captain who fears
groundwater raids could make it harder to fight fires. "That's a big worry with us."
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The widespread reliance on groundwater in Arizona caused a bigger problem in Williams , a town
outside of Flagstaff. A prolonged drought forced it to choose between hauling in water by truck or
drilling some very deep wells.
The water it finally found has to be pumped up from between 3,500 and 4,000 feet underground.
In Idaho, the court battles have begun in earnest. At issue is the water that cascades through a canyon
wall from a vast aquifer into the Thousand Springs area of the Snake River.
The litigation pits farmers who rely on groundwater to grow Idaho potatoes, com and cows -and
reduce the water flows to the Snake River as a result -against fish farms that rely on the springs to raise
most of the trout shipped to the nation's restaurants and supermarkets. Idaho Power Co., which supplies
hydroelectricity, jumped into the fight. So did farmers who draw water directly from the Snake River.
Dreher, the state's water resources director, has issued a series of orders, all of which are being
appealed. He also faces four lawsuits.
The saddest part, said Lynn Tominaga , who heads a groundwater association , is th at most ofidaho's
farmers draw from both rivers and wells .
"In essence we're suing ourselv es ," he said. "All we're doing is taking money from both pockets to pay
for the legal costs."
Post res earcher Barbara Hudson contributed to this report.
Staff write r David Olin ge r can be reach ed a t 303-820-1498 or doli nge r @d enverpost.com.
Staff writer Chuck Plunke tt can be reach ed at 303-820-1333 or CQ !un ~nverpost .com.
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Print Article
Article Last Updated: 11 /26 /2005 03:38 AM
Lawmakers urge cities to pool water resources
By Chuck Plunkett and David Olinger
Denver Post Staff Writers
DenverPost.com
Page 1of3
Legislators and leading experts in Colorado's competitive water-rights system say it is time for new and
growing cities along the Front Range to consider banding together, possibly as a metropolitan water
authority, in an effort to bring down the high costs of delivering water to residents.
"I start with the premise that what we're doing isn't working," said House Speaker Andrew Romanoff of
Denver. "It's not a good, sustainable, long-term strategy."
And though there is no organized effort underway to assemble a metro water authority, the lawmaker
says it's time to begin the discussion.
"Ifwe can save money by pooling our resources," he said, "that could overcome that turf battle."
Such an effort would require unprecedented cooperation by Denver suburbs who have been using
federal funds and local charges for water hookups to stockpile water rights for years.
But several water experts said a central authority is a logical step.
"Knowing what we know now, it would make such good sense to have a Front Range-wide water
authority , charged with the responsibility for providing water throughout the area ," said David Getches.
the dean at the University of Colorado's h w school and former state director of natural resources.
"We need to do something drastic, and not just more hoarding by a few cities with a big tax base ," he
said .
Stockpiling called absurd
Critics say the mad dash for municipal water, conducted in competition and secrecy, has helped push
Denver-area utility fees to record levels and encouraged absurd stockpiling.
Getches cited purchases by the city of Thornton , a city of 106 ,000 that regional forecasters say could
grow to 185,000 in the next 25 years. The city hired a broker in secret and bought enough water for
300,000 two decades ago , but court battles and delivery obstacles have kept the city from using it.
The purchases, documented by The Denver Post in a series of articles last week, drove up water bills
for Thornton residents and swelled the price of water for other cities.
Like Thornton , Broomfield also bought through a water broker to acquire rights to billions of gallons of
water.
When it did so, the price of water in that :>t:ction of northern Colorado shot up 628 percent in 3 112
years.
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A result is that, in Broomfield, it costs $24,424 for a new user simply to hook up to water service -
more than twice the amount charged for a water connection by any city outside Colorado in an
American Water Works Association survey. Other Front Range suburbs also charge between $10,000
and $20,000 for connections.
Peter Binney, the utility director for Aurora -another big buyer of water -said rising prices and demand
are posing extraordinary challenges for small towns and water districts that can ill afford long pipelines
and new treatment plants.
"If nothing else, the law of economics" will demand greater cooperation, he said. "We're going to have
to look at some form ofregionalization" to replace "the Balkanized way we're doing it."
No state log of records
Beyond dealing with competing interests on the Front Range, any effort to create a metro water
authority also would need to take into account statewide political pressures.
If a central water authority is not accompanied by sound urban planning, "you become like Los
Angeles," Getches said.
And on the Western Slope, the prospect of "a behemoth water power agency is very scary," he said,
"unless you build in some kind of protection" for areas of the state where water is plentiful and cities
are scarce.
Lawmakers also say they were surprised to learn from the Post series that the state does not require an
ownership registry of water rights.
Though the state keeps records on the location, amount and appropriation date of every water right, it
doesn't track changing ownership.
The lack of such records creates a fog that benefits those brokers and attorneys skilled in ferreting out
the information, who charge hefty bills for their services.
And there are other concerns.
"I come from an end of the state that would like to see us keep our water (for agricultural use)," said
Rep. Buffie Mcfadyen of Pueblo West, who sits on a House committee that deals with water issues. "It
should concern us that, like property, there's no central location to go to find out by whom the water
right has been purchased.
"It would help southern Colorado to help us see when speculators are buying water."
Another member of McFadyen's committee, Mary Hodge of Brighton, started a process last week in
which she plans to interview the state's water engineer and some water lawyers and owners to ask
questions about the benefits of such a registry.
But another member of the committee, Ray Rose of Montrose, says that the registry isn't needed and
that he would oppose efforts to create one.
"I haven't seen any examples of (anyone) taking advantage of the system," Rose said.
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Also, legislators say the state's strapped budget could prevent creating a new recording system.
Staff writer Chuck Plunkett can be reached at 303-820-1333 or c12lzm}c_§J.J@,@ !JJ!_<:_!J20S1.co_m.
Staff writer David Olinger can be reached at 303-820-1498 or dolinger @denverpost.com.
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..,
TO:
FROM:
DATE:
RE:
MEMORANDUM
Englewood Water and Sewer Board
ni,'1]'-----
Bill McCormick;~operations Supt.
December 6 , 2005
McBroom Ditch Pipe Repair at Mullen High School
A T T . 3
The Utilities Department is requesting that the Englewood Water Board approve an
agreement between Mullen High School and the Englewood Utilities Department to
establish a permanent easement for this section of McBroom Ditch and allow for remo va l
and replacement of the section of the ditch crossing the Mullen High Schoo l athletic
fields .
Repairing this section of the McBroom Ditch through the Mullen High S chool's athleti c
field would enable Englewood to use water rights on Bear Creek at the Allen Filter Plant.
This affords the Allen Filter Plant an alt ernate source of water supply to the South Platte
Ri ver.
City Attorney's office is completing and agreement and obtaining Mullen's approval on
the final draft. The resulting agreement will grant Englewood access to the ditch to
investi g ate and make necessary repairs. When repairs are comp leted , Mullen High
School will confirm and convey a deed to the McBroom Ditch for the right-of-way
through the Mullen property.
Appro v al of the pending agreements would need to be a recommendation from the Wat er
and Sewer Board authorizing Stewart Fonda to sign the appropriate documents , upon
appro v al of the McBroom Ditch Board.
-~ Printe d o n necycled Paper ~~
""
OR~fJ BEAR CREEK IMPROVEMENTS AT McBROOM DITCH
uorco PROJ ECT NO. 2448
MEC PROJECT NO. 01009.30
ITEM
NUMBER
I
2
3
4
5
6
7
8
9
10
11
12
13
14
DESCRIPTION
Demolition
ENGINEER'S OPINION OF PROBABLE COSTS (DRAFT)
November 22, 2005
QUANTITY
I
Earthwork (unclassified excavation and embankment). 150
Topsoil stripping and replacement. 50
Check dam . I
Vehicle tracking control pad. I
Seeding and mulching. I
Bank protection. 30
Grouted Boulders 110
Grout Cutoff Wall 10
Stop Log Assembly I
Debris Log
Restore Trail I
Mobilization. I
Water control (surface and subsurface). I
UNIT ITEM
UNIT PRICE COST
LS $ 2,000 .00 $ 2,000.00
CY $ 10 .00 $ f,500 .00
CY $ 10 .00 $ 500.00
EA $ 1,500.00 $ 1,500.00
EA $ 1,000.00 $ 1,000.00
AC $ 2,200.00 $ 2,200.00
LF $ 75.00 $ 2,250.00
SY $ 180.00 $ 19,800.00
CY $ 300.00 $ 3,000.00
CY $ 3,000.00 $ 3,000.00
LS $ -$ -
LS $ 5,000.00 $ 5,000.00
LS $ 3,000.00 $ 3,000.00
LS $ 5,000 .00 $ 5,000.00
SUBTOTAL= $ 49,75 ·'.l .OO
CONTINGENCY (5%)= $ 2,487.50
Notes:
I) Structure excavation and backfill is not incorporated in the above quantities and shall be accounted for in the associated items
(riprap, grouted boulders, etc.). ·
TOTAL= $ 52,237.50
..
Date
December 19, 2005
INITIATED BY
Utilities Department
A TT .
COUNCIL COMMUNICATION
Agenda Item Subject
License Agreement & Grant
of Temp. Construction
Easement for 2890 S.
Clarkson St.
STAFF SOURCE
Stewart Fonda, Director of Utilities
COUNCIL GOAL AND PREVIOUS COUNCIL ACTION
The Englewood Water and Sewer Board , at their November 12, 2003 meeting, recommended
Council approval of the License Agreement and Temporary Construction Easement to
encroach into Englewood 's Ditch easement at 2890 S. Clarkson St.
RECOMMENDED ACTION
The Englewood Water and Sewer Board, at their December 13, 2005 meet ing, recommended
Council approval of the license agreement , construction easement, access agreement and
new right-of-wa y to allow a 6-ft. fence and retaining wall in the City Di tc h right-of· way.
BACKGROUND, ANALYSIS, AND ALTERNATIVES IDENTIFIED
Mr. and Mrs. Leigh Bray at 2890 S. Clarkson Street are planning to install a 6-foot fence and
retaining wall over and along the City Ditch right-of-way. In order to accomplish this a
construction easement , access agreement, license agreement and new right-of-way will be
requ ired.
The Licensee expressly assumes full and strict liability for any and all damages of every nature
to person or property caused by the point or points where the Licensee performs any work in
connection with the encroachment into the City Dtich right-of-way provided by the Licensee.
The C ity reserves the right to make full use of the property necessary in the operation of the
City Ditch , including the conveyance of stormwater runoff.
FINANCIAL IMPACT
None.
LIST OF ATTACHMENTS
License Agreement, Construction Easement, Access Agreement
Bill for Ordinance
FI NA l. OOCV"'1 E"N 7..S
Lt.JI I.. L f3 € Ft>((THCO~I~