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I I I I I I I I I I I I I I I I I I I Assessments paid by the city on acquired canal company stock could be earmarked to finance the development of a pressurized irrigation water system operated by the canal company itself, rather than having the municipality operate the secondary system. The enhanced revenue flowing to the canal company from providing secondary service with this stock could be used to finance upgrades to canal transmission and delivery system, leading to water conservation improvements in agriculture. An operating agreement for the secondary system could be signed jointly by the municipality and the canal company or companies involved, describing responsibilities for operating, maintaining and upgrading the secondary system as revenue from residential outdoor water use is generated from the secondary system over time. This is currently being done in other states where secondary systems are being developed in rural communities with the cooperation of canal companies.8 This strategy of linking the present and future economics of local canal companies and their water supplies to the provision of pressurized secondary water for municipal outdoor use also increases the economic value of canal company stock. A bid made by outside interests for this water stock can often be equaled or exceeded by a bid made by the canal company for this same stock, one that is predicated on the anticipated long- term compounded revenue value of the water for secondary water service to the municipality over many years. This increased economic value of canal company stock when it is earmarked for secondary system use can effectively counter the adverse consequences to both agriculture and the municipality resulting from the sale of canal company stock to interests outside the local area. In theory, having the municipality operate the secondary system with acquired water stock can accomplish many of the same objectives. However, additional benefits to the community may accrue as a result of having the canal company operate the secondary system. We should briefly explore these. Revenue to the canal company from secondary water service would potentially allow for improvements in the canal transmission and delivery system to improve efficiency and reduce loss to irrigated farms, a much needed capital improvement to irrigated agriculture. The improvement in canal transmission and delivery could act as an incentive for growers to upgrade their on-farm irrigation systems, while enhancing their ability to qualify for federal and state cost-sharing for capital improvements to their farms. This daisy-chain of economic incentives, initiated by a broader perspective on the part of the municipality to work with local canal companies to achieve mutual goals, ensures that agricultural production remains viable; the income generated from agricultural production travels through the local economy to create increased agriculturally-related and service sector employment in the community. In addition, the canal company stockholder benefits by ensuring that as land is converted from agricultural to residential use, water is banked in the canal company to 8 The Benefits and Costs of Pressurized Dual Water Systems in Colorado and the Potential Role of Canal Companies and Irriqation Districts in ProvidinQ the Pressurized Irriqation Water Supply Portion of Dual SYstems. Colorado State University, Sociology Water Lab website http://waterlab.colostate.edu. Project funded by the Colorado Water Conservation Board. Aqua Engineering, Inc. and Colorado State University May 19, 2004 Secondary Supply Feasibility Study -9-