Water-price surge forces towns to tap other sources

BERTHOUD — The price of Colorado-Big Thompson Project water has surged so dramatically in the past two years that the town of Berthoud, long reliant on the massive federal system, is turning away from the project and adopting a new water policy it hopes will keep development costs low and builders ready to invest.

Berthoud is one of several towns that once used Colorado-Big Thompson water prices as benchmarks for its own rates. But now, wary of driving development away with pricey water taps, it is looking to other sources as benchmarks. It is a move communities such as Longmont took years ago to ensure that residential building fees did not rise too precipitously.

Instead of relying on C-BT price points, now at about $52,000 an acre foot, the town has decided to base its cost of water on anticipated supplies from planned water storage projects, including the Windy Gap Firming Project and the Northern Integrated Supply Project. In this way, it hopes to keep its water prices around $31,250 an acre foot.

In another effort to cut water prices, it also has lowered the amount of water it requires for each new single-family home to 0.4 of an acre foot, 0.2 for potable water and 0.2 for non-potable water, from as much as 1 acre foot annually. An acre foot equals as much as 326,000 gallons, enough water to serve 2.5 households annually.

“We could not continue to price our water against C-BT if we were going to be able to continue to attract development,” said Walt Elish, business development manager for the town of Berthoud.

Reaching all-time highs

BizWest first reported last month that Colorado Big-Thompson Project water prices had reached historic highs after a Jan. 23 auction where Berthoud-based Little Thompson Water District bought two units of water for $26,635, and Western Equipment & Truck in Greeley bought six units at $26,250 apiece. The auction prices put C-BT water at the equivalent of as much as $52,000 per acre foot. The prices paid at the auction were nearly three times higher than the cost of a C-BT unit only two years ago.

Built in the 1930s to serve irrigated agriculture in Northern Colorado, the Colorado-Big Thompson Project is managed by the Northern Colorado Water Conservancy District. Cities and towns have since acquired the water to feed the needs of their growing populations. The project brings water from the headwaters of the Colorado River, and delivers it through the Adams Tunnel under the Continental Divide.

If developers do not bring their own water for new residential housing developments, water prices set by cities can significantly factor into whether they decide to locate their development in a city or town. That has led cities to find other sources of water to avoid tying their water prices to C-BT water, already largely owned by cities such as Fort Collins, farmers and more recently, oil and gas companies.

Brian Werner, spokesman for Northern Water, acknowledged that cities’ shift away from using high-priced C-BT water as a benchmark, even though it remains the “gold standard” because of its ease of transfer.

“But as the price continues to go up, as we’ve certainly seen, and you can’t find it as easily as maybe you once could, developers and others that have to bring water to the table are looking for whatever supplies they can find,” he said. “Those communities are trying to make it as easy as they can for people to find the water.”

From 2000 to 2010, Berthoud saw very little population growth – around 200 people, Town Administrator Mike Hart said, and developers idled residential housing projects that they planned in those years.

Scarce resources

“Water became the problem,” he said. “It’s very hard for the developers to go out and find C-BT to buy, and then the (town’s) pricing was so prohibitive, it was stopping the development process.”

Berthoud once had a policy that developers had to supply their own water, or it would charge them expensive C-BT rates. Town officials met with developers and ultimately decided to charge developers $12,500 per 0,4 acre feet for each home in a housing development. That translates to $31,250 per acre foot.

Like Berthoud, cities such as Greeley and Fort Collins take cash from developers who do not have enough water and give them surplus water units that the cities already possess, but the rate can vary.

The rate in Greeley totals $33,000 per acre foot, while in Fort Collins, which owns a variety of water rights, it totals $6,500 per acre foot.

Berthoud, too, has sought to increase its water portfolio through its new policy, which is designed to generate cash to do just that.

“We start accumulating the kind of reserves we need to go out and secure other resources” besides C-BT, Hart said. “C-BT is an option, but our new policy is designed to bring in cash.

“That’s the cash we need to go acquire the next resource,” he said. “If we were going to continue with the policy of acquiring C-BT, then that price point would have to be higher.”

Ryan Schaefer, president of Chrisland Commercial Real Estate in Fort Collins, welcomed Berthoud’s new policy, which he said showed that the town supported growth. Chrisland has brokered the 165-acre mixed-use development Badar Farm, which will include around 500 homes in Berthoud.

Hugh variations the norm

“The cost of water varies greatly by municipality and even among various districts within municipalities,” he said. “It’s pretty common that every municipality we do business in, we can’t take anything for granted as far as water is concerned.

“We have to research what the costs of water and municipal fees are in the appropriate jurisdiction,” he added.

The town of Windsor also relies solely on C-BT, and therefore its water rate for developers is $38,000 per acre foot, said Dennis Wagner, director of the town’s Engineering Department. Only a few years ago, the town priced its water at $21,400 per acre foot.

“It used to be that C-BT was readily available on the market,” Wagner said. “If you needed some water, you found it: you called a broker.”

C-BT has become scarce because of pressures from oil and gas development and population growth, according to experts, and developers and homebuyers have struggled with the pricing.

“We’ve heard from developers that it’s hard for them to find water,” Wagner said.

That problem has led Windsor’s Water and Sewer Board to study alternatives, and officials plan to hold a meeting with developers in March to share ideas.

Like Berthoud, the city of Longmont also once closely tied its water pricing to C-BT water, charging $13,000 per acre foot three years ago. About two years ago the city changed its policy when C-BT water prices surged. The city would have had to charge $19,000 per acre foot, Longmont officials said.

Rethinking pricing strategies

It now sets its water prices at $10,800 per acre foot, based not only on C-BT, but on costs of water rights in the St. Vrain as well as anticipated costs of building new water projects, including its stake in the expansion of Windy Gap Reservoir. The $223 million project, known as the Windy Gap Firming Project, will deliver 26,000 acre feet of water annually to cities and towns in Northern Colorado if approved by federal and state authorities.

The city’s largest supply comes from the St. Vrain River, but it also has Windy Gap and Colorado-Big Thompson supplies, said Dale Rademacher, director of public works and natural resources for the city of Longmont.

“We’re looking at a broader picture when it comes to the city’s water supply that really does reflect that we don’t get all of our water from Colorado-Big Thompson, nor have we ever,” he said. “If our fees were a lot higher, that would probably be a discouragement for people to build in Longmont.”

What water costs

Prices of water paid by developers in Northern Colorado and the Boulder Valley. If developers do not have water to supply their developments, they instead pay cash to cities and towns for units of water. The following are prices per acre foot:

• Berthoud $31,250

• Greeley $33,000

• Fort Collins $6,500

• Longmont $10,800

• Windsor $38,000

Sources: Towns of Berthoud and Windsor, cities of Fort Collins, Greeley and Longmont.

Steve Lynn can be reached at 970-232-3147, 303-630-1968 or slynn@bizwestmedia.com. Follow him on Twitter at @SteveLynnBW.

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