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Microsoft Word - Feasibility Study 2nd CWCB Submittal.doc TOWN OF KEENESBURG, COLORADO Water System Improvements Feasibility Study for CWCB Loan Application February 2006 Prepared by: JB Wright & Associates, Inc. Municipal ▪ Civil Engineering Services Feasibility Study -Keenesburg, CO 2/17/2006 TOC-1 TOWN OF KEENESBURG, COLORADO FEASIBILITY STUDY FOR THE CWCB LOAN APPLICATION TABLE OF CONTENTS A. Introduction B. Study Objective C. Project Sponsor D. Loan Request E. Existing Water Supply F. Water Quality Issues G. Future Water Requirements H. System Sizing I. Description of Alternative Facilities J. Cost Comparison of Alternatives K. Selected Capital Improvement Program L. Funding of the Well and Water System Improvements APPENDICES Appendix A Water Supply Evaluation, TZA Water Engineering, Inc. Appendix B Water Line Alternatives Exhibit Appendix C Cost Opinion, Summary of Water Supply Alternatives Appendix D 2006 Waterworks Budget Appendix E Water Fee Resolution Appendix F 30-Year Financial Detail Feasibility Study -Keenesburg, CO 1/23/2009 1 A. INTRODUCTION The Town of Keenesburg has been planning to supplement its water supply source and improve the water quality since the early 2000s. The Town’s current water supply comes from 5 wells that draw from the Laramie Fox-Hill aquifer. This water has elevated fluoride and sodium levels. In addition, the distribution itself does not allow for adequate disinfection. TZA Water Engineers, Inc. performed a water supply evaluation for the Town board in July of 2002. This Water Supply Evaluation Report is attached as Appendix A and is the basis for referenced water supply needs. In order to remedy the issues of the water itself and the upgrades to the system, the Town has divided the improvements into 2 phases because of budgetary constraints. The purpose of Phase I is to prepare for the blending of the current water source, the Laramie Fox-Hill Aquifer, with that of the Lost Creek Aquifer which will be transported from Prospect Valley, approximately five miles east of town. The Town is negotiating with an owner of Prospect Valley water, PV Water Holdings, LLC, and hopes to purchase a well that will yield 139.6 acre feet of water per year. The water will be blended at the current water storage tank site, which is southwest of town. Modifications to the system include the following: • Disconnecting the wells from the distribution system • Installing new lines from each well to a common header • Connecting the header to a blending station prior to discharging to the storage tank • Constructing a new 12-inch supply line from the water tank to the distribution system Phase I has been financed through a matching grant from the Colorado Mineral and Energy Impact Assistance Program and this project is currently under construction and should be finished in April 2006. Phase II of the project will require the purchase of water from Prospect Valley and the development of the infrastructure to deliver the water. Implementation of this project will require $2.33 million and will be scheduled to be completed late 2007. Phase II of the project will be financed in part by the Town’s contribution of approximately $0.804 million. It is the Town’s desire to borrow the remainder of the money in the form of a low-interest loan from the Colorado Water Conservation Board (CWCB) and to obtain a grant from the Colorado Mineral and Energy Impact Assistance Program. Feasibility Study -Keenesburg, CO 1/23/2009 2 The information presented in this study follows the general format discussed with the CWCB staff and as outlined in the CWCB’s Guidelines for Financial Assistance. The relative locations of all facilities described in this report are shown on the Water Line Alternatives exhibit as Appendix B. B. STUDY OBJECTIVE The following sections provide the necessary background information about the Town’s current and future water situation. In addition, information is presented about the financial strength of the Town and its ability to service the debt, which will be associated with the Phase II project. More specifically, this engineering evaluation will include the following: • Description of the project sponsor, anticipated revenues and current operations. • A summary of the existing water supply and the Laramie-Fox Hill water quality issues. • Future water supply requirements. • Water system sizing necessary for transmission lines and lift stations. • Description of alternative water supplies and water transport facilities including piping, pump stations, and storage. These alternatives were developed to determine the least cost alternative for the current expansion and to develop alternatives for future expansions. • Presentation of a preliminary cost opinion for the needed improvement. • Financial analysis of the expected revenues that will be obtained from the Town’s water enterprise fund in order to service the debt. C. PROJECT SPONSOR The Town of Keenesburg is the project sponsor for Phase II. Keenesburg is a Colorado statutory town and manages its water utility through an enterprise fund. The Town relies on water sales, tap fees, and property taxes to fund operations, maintenance and expansion of its system. A copy of the budget is included as Appendix D. The Town currently serves approximately 461 water taps and an estimated population of 1100. Water customers within the Town are primarily residential, with approximately 78 other taps, which include commercial, schools, and other public type buildings. The base water rate was recently increased from $18.00 (4,000 gallons) to $22.00 (6,000 gallons) representing a 22% increase. Usages in excess of the minimum 6,000 gallons were also increased utilizing a stepped rate to encourage water conservation. Additional information pertaining to the adopted rates is included in the ordinance. Feasibility Study -Keenesburg, CO 1/23/2009 3 As indicated in the Town’2 2006 budget, projected water sales will generate approximately $195,000 per year and tap sales will generate an additional $140,000. Tap sales for 2006 and beyond are expected to increase from previous years due to development of a new multi-family project containing 60 units and a new residential neighborhood with 23 lots. The Town is also in the process of receiving annexation requests that will generate over 800 housing units over the next five to ten years and generating $5.6 million. The $140,000 of tap revenue represents the sale of 20 taps at $7,000 per tap. This revenue is expected to continue and most likely increase over the next several years. In the financial section of this report, a total of 30 taps per year was used for the next two years and then a change back to the 4% growth for 2008 on. The Town contracts with an operations company, which operates and maintains the wells, water storage tank and the water distribution system. The Town currently utilizes 5 wells, having a total capacity of 221 acre-feet per year. These wells are connected directly to the distribution system. A 250,000 gallon water storage tank is located southeast of the town and provides storage for fire protection and maximum day demand. The storage capacity will need to be increased by approximately 2013 due to the State design standards requiring 320,000 gallons per day when the population reaches 1500. One alternative that will be investigated will be installing back into service an existing 200,000 gallon storage tank and a new booster lift station to increase the system pressure to be the same as the pressure of the existing 250,000 gallon tank. The 200,000 gallon tank elevation is 30 feet below the 250,000 gallon tank. The Town’s water fund has one outstanding liability, a bond issued in 1989, which requires an annual payment of approximately $22,000 per year. The outstanding balance on this debt is approximately $90,000 as indicated in the 2004 Financial Report. It is not the Town’s desire to borrow money to pay off this bond. D. LOAN REQUEST The Town is requesting a 30-year loan from CWCB in the amount of $1.008 million and is applying for a $0.5 million grant from the Colorado Mineral and Energy Impact Assistance fund. The loan and grant represent approximately 65% of a $2.33 million project that will result in 139.6 acre feet of additional water rights and the associated infrastructure to transport the water to the Town’s distribution system. CWCB Loan Policy No. 8 states that “the cost of water rights acquisition are eligible for a CWCB loan if the purchase satisfies an existing water need or shortage”. Keenesburg needs these improvements because of the poor water quality (elevated fluoride and sodium), and inadequate disinfection as explained in Section F of this report, Water Quality Issues. In essence, implementation of Phase II of this project will enable the Town to acquire a much-needed water Feasibility Study -Keenesburg, CO 1/23/2009 4 supply to blend with its existing water and to upgrade its water supply system to resolve the disinfection issue. E. EXISTING WATER SUPPLY The Town of Keenesburg currently obtains its water from five wells located in or near Town that draw from the Laramie-Fox Hill Aquifer. A summary of the well information is included in the TZA Water Supply Evaluation Report in Appendix A. The Town also owns two wells at a site in Roggen, nine miles away that also draw from the Laramie-Fox Hill Aquifer. The Roggen wells are not being used at this time because there is no connecting pipeline from the wells to Keenesburg. F. WATER QUALITY ISSUES There are two major water quality issues associated with the Town’s water system. The first is the quality of the water itself. The Laramie Fox-Hill water is less than desirable for usage in municipal or irrigation applications. Analysis shows that it exceeds drinking water standards for fluoride. The maximum contaminant level (MCL) for fluoride is 2 mg/l and reported levels of fluoride in the Keenesburg water wells are at 3.1 mg/l. The Colorado Department of Public Health & Environment (CDPHE) has not issued any enforcement orders at this time other than requiring public notice. The Laramie Fox-Hill water also has a high Sodium Absorption Ratio (SAR). This ratio is used to determine the suitability of the water for use in the irrigation of crops and landscaping. A ratio of less than 10 is suitable for irrigation. The Laramie-Fox Hill water in Keenesburg has been recorded at a level of 26.9. As a result, special soil management is necessary for successfully irrigating crops and landscaping. Blending the water from the Laramie Fox Hill Aquifer with that of the Lost Creek Aquifer has been evaluated. Providing a 50-50 blend of the two waters shows that the SAR ratio drops below 10 and the fluoride drops to approximately 1.5 mg/l, which is below the MCL of 2 mg/l. The second water quality issue has to do with proper disinfection contact time. Currently, well water is pumped directly into the Town’s water distribution system, which results in some consumers not receiving the proper 30 minutes of disinfection contact time. As was previously discussed, the Phase I improvements project will allow ground water to be pumped to the water storage tank prior to being delivered to the distribution system. G. FUTURE WATER REQUIREMENTS Historical annual average water consumption is used to develop a projection that estimates the future water needs for the Town. In 2004, the Town utilized 167 Feasibility Study -Keenesburg, CO 1/23/2009 5 acre-feet and in 2005 171 acre-feet of the total 221-acre feet available in Wells No. 2, 4, 5, 7 and 8. In the Water Supply Evaluation Report, it was determined that 483.4 acre feet of water would be needed in 2030. This means that the Town needs to develop infrastructure to deliver an additional 262.4 acre-feet of water to its customers. The two wells at the Roggen site are decreed to have 247 acre-feet. These wells will nearly supply the water for the Town’s needs for the next 20 years. However, the Roggen wells would need to be pumped approximately 10 miles into Town to be used in the future. This option will be further described under Alternative 2A herein. It should also be recognized that the Roggen wells will not improve the water quality and their use should only be considered once an acceptable blending percentage is achieved utilizing the Lost Creek water or utilizing the appropriate treatment technology to remove fluoride and sodium. At this time, it does not appear that the Roggen wells will need to be used until after 2030 or if the Town wells need to be supplemented to improve reliability of the system. If the Town were going to implement an exact 50-50 blend, a total of 242 acrefeet of Laramie-Fox Hill and Lost Creek water would be required given the projected total flow needed of 483.4 acre-feet. The Town will be able to obtain an additional 21 acre-feet of Laramie-Fox Hill water as new land is annexed into Town due to the requirement that the developer dedicate their water shares to the Town as part of the development process. In the event that the Town is not able to acquire the total 242 acre-feet of Lost Creek water, it could accommodate the 50-50 blending and meet the projected needs for the next 5 years by only obtaining as little as 110 acre-feet. Therefore the amount of Lost Creek water that will need to be acquired over the next 20 years is in the range of 110 to 242 acre-feet. A summary of the required waster assuming a 50-50 blend is shown in the table below: Note: (1) Additional PV Water purchase will be required. Year Water Required Laramie Fox Hill Water PV Water Required PV Water Projected Available Projected Available Ac-Ft Ac-Ft Ac-Ft Ac-Ft Ac-Ft Ac-Ft 2010 220.6 110.3 221 110.3 139.6 0 2015 268.4 134.2 221 134.2 139.6 0 2020 326.6 163.3 221 163.3 (1) 23.7 2025 397.3 198.7 221 198.7 (1) 59.1 2030 483.4 241.7 221 241.7 (1) 102.1 Feasibility Study -Keenesburg, CO 1/23/2009 6 This table shows that the Town will not need to obtain additional PV water until after 2015. The current Laramie Fox Hill Water availability will increase as each parcel of land is annexed into the town. The current projected annexations that will occur over the next few years is 665.3 acres, which will yield approximately an additional 133.06 acre feet of Laramie Fox Hill water. However, this water will not be needed as shown by the projection above. It is the Town’s desire to require new development to purchase Lost Creek Water for each development. The Town is considering the sale of excess water supply to those open lots and property within the existing Town limits. H. SYSTEM SIZING The volume of water produced by the existing wells and any new water from the Lost Creek Aquifer must meet the projected maximum day demand. Maximum day flow occurs during the hot weather season when irrigation demand is the highest. The available supply from the existing wells is 453,600 gallons per day or 315 gallons per minute (gpm). In 2005, the maximum day flow was reported to be 356,300 gallons (248 gpm) or 80 percent of the available well capacity. In 2004, the maximum day flow was reported to be 362,300 gallons (252 gpm) or 80 percent of the available well capacity. Projected maximum day flow for 2030, as indicated in the Water Supply Evaluation Report, is 1,052,233 gallons. This means that the Town would need to obtain a supply that will deliver the difference of 598,600 gallons per day or 416 (gpm). An eight-inch line would be able to handle the new supply at a flow rate of 416 gpm. I. DESCRIPTION OF ALTERNATIVE FACILITIES Two alternatives were researched In the development of the Town’s water system improvement Phase II. The least expensive and easiest to implement is the following Alternative 1. In the event that a successful contract is not able to be made between the Town and PV Water Holdings, LLC, then Alternative 2 below would need to be considered. The Water Line Alternatives Map, included in Appendix B, shows an alternative 2A which was originally included to provide cost information to the Town about bringing water to Keenesburg from the Roggen wells and is for future information only and is not a part of this request for funding. Alternative 1 The proposed facilities for this alternative include approximately 5.5 miles of water transmission line, wellhead facilities, a water blending station, a lift station, Feasibility Study -Keenesburg, CO 1/23/2009 7 and a day tank. The water blending station will be located at the Town’s existing water tank site. Current projections show that the Town only needs the volume supplied by an eight-inch line. The capacity of an eight inch line equates to 416 gpm compared to the existing total maximum day flow of the Town’s wells being 315 gpm. The facilities in this alternative would be designed, constructed and owned by the Town who would also operate them. In order to accommodate future growth that may exceed the projected 4%, the project will be bid with both 8-inch and 12-inch pipe sizes. Constructing a 12-inch line would increase the line capacity to 833 gpm and also allow the Town to sell wholesale water to Pioneer Community Developments and provide for purchase of water from Pioneer, should the Town’s system ever be inoperable for any reason. Alternative 2 This alternative involves the purchase of water from an unnamed landowner located in the Lost Creek water shed. Because the seller of water has not been identified for this alternative, an estimate was made based on a farm located in the middle of the Lost Creek water shed and along the alignment of the proposed pipeline route to the Town’s existing Roggen wells that are currently not being used. It is estimated that approximately 9.2 miles of 8-inch piping would be required to deliver water to the existing Town water tanks. The cost analysis presented includes two lift stations. This is required because the elevation lift is higher than what can be accomplished with one lift station. To provide backup reliability of the system, the project design would include the construction of a parallel 8-inch pipe for approximately 15,800 feet. This pipe would ultimately be used for sending water from the Town’s Roggen wells to a new water tank on the NE side of Town. The Roggen water alternative is further explained below in Alternative 2A. The cost for this additional piping is not included in the attached cost matrix for Alternative 2. The total cost for this parallel section would be in the range of $534,000 if it were constructed separately from the Alternative 2 project. Constructing this as a parallel line with Alternative 2 would reduce the pipeline costs to $267,000. Alternative 2A This alternative is a phased expansion of Alternative 2 to construct approximately 10.2 miles of new water line to transport the 247 acre feet of Roggen water to the proposed Keenesburg water tank site. Using the water from the two Roggen wells with a decreed capacity of 247 acrefeet will more than double the current decreed capacity of the Town’s wells, Feasibility Study -Keenesburg, CO 1/23/2009 8 which is 221 acre-feet. The Roggen wells are located approximately 10 miles, by roads, northeast of Keenesburg and draw water from the Laramie-Fox Hill Aquifer. Transporting the Roggen well water to Town will require lifting the water approximately 210 feet to the future water tank site. As with Alternative 2, two lift stations will be required to transport the water to town. It is assumed that the existing lift stations for alternative 2 can be expanded to include the pumps for this alternative. J. COST COMPARISON OF ALTERNATIVES Capital Costs The attached Table 1 shows the costs that will be required for each of the alternatives evaluated. This table shows that Alternative 1 is less expensive than Alternative 2. However, Alternative 2 does not have a cost for the purchase of water because that cost is not currently known. It is anticipated that this cost will be minimal due to the cost associated with the Town returning its wastewater to the landowner for irrigation purposes. The Alternative 2 costs include a 6.8-mile return pipeline and improvements on the farm to store water and pump the water into the sprinkler system. However, the added cost for the return pipeline is a project that the Town will most likely need to implement in the future. Alternative 2A is presented for planning purposes and may not need to be implemented in the near future unless the Town wanted to improve reliability of its well delivery system. Alternative 2A does provide additional storage in a location that will help the water system on the east side of Town. In summary, Alternative 1 is the least expensive option and is the preferred alternative. The Town and PV Water Holdings, LLC are very close to finalizing negotiation for purchase of a well in the Prospect Valley that will yield the Town an additional 139.6 acre-feet annually. Operational Costs Operational costs for the Town should not increase under Alternative 1. The reason is that the town will be operating only half of the well capacity it presently operates and the power and operation labor cost for the new lift station should nearly equal the present cost. Alternative 2 will have an operation and maintenance cost nearly the same as Alternative 1, again due to only operating half of the existing well capacity currently being operated. Feasibility Study -Keenesburg, CO 1/23/2009 9 K. SELECTED CAPITAL IMPROVEMENT PROGRAM The Town does not have the financial resources at the present time to fund the complete $3.3 million Alternative 1 project present herein. The project presented in this section is scaled back to a project that can be afforded by the Town. The water tank can be delayed for a couple years and the pump station and day tank can be replaced with a new replacement well utilizing a variable speed pump. The capital program would be as shown below: Item Unit Quantity Unit Cost Total Cost 5.5 Mile Pipeline LF 29,040 24.50 $711,480 Well, Pumps, Vaults & Structures Ea 1 200,000.00 200,000 Subtotal $911,480 Contenginces 15% 136,722 Subtotal 1,048,202 Engr, Legal & Admin @15% 157,230 Total Alternative 1 $1,205,432 The next section of this report will identify the various funding sources that will be required to purchase the new well and construct a new well and 5.5 mile pipeline to transport the water to the Town’s existing water tank. L. FUNDING OF THE WELL AND WATER SYSTEM IMPROVEMENTS A financial plan has been developed that demonstrates how this project will be funded. A summary of the costs and funding sources are as shown in the table below. Funding with CWCB Loan and DOLA Grant The Town desires to borrow $1.018 million from the CWCB, obtain a grant in the amount of $500,000 from the Colorado Mineral and Energy Impact Assistance Program. The Town will provide $$804,000 of its own reserves to complete this project. Currently the reserves are at $1,044,000 and the phase 1 construction will reduce the $1,044,000 by $240,000, leaving $804,000 for the Town’s share in funding the Phase 2 project. In addition, the Town projects additional revenue over the next three years through the sale of 60 taps, 20 taps per year and this will result in an additional $410,000. Project Component Project Cost EI Grant Loan Town Purchase Water $1,116,800.00 $1,008,000 $112,000 Phase 2, Pipeline & well $1,205,400.00 $500,000 $705,400 Loan Cost $10,000.00 $10,080 TOTALS $2,332,200.00 $500,000 $1,018,080 $804,000 Feasibility Study -Keenesburg, CO 1/23/2009 10 Meeting the annual debt payment will require a combination of revenue from water sales, revenue from tap sales and possibly obtaining revenue from a water rater increase. The Town Board has the authority to implement a water rate increase to meet its debt obligation without the vote of the public. This authority is the result of the Towns water utility being an enterprise utility fund. A 30-year loan for the requested $1,018,080 at a 3.75 percent interest rate results in an annual payment of $57,100. The CWCB requires that the annual payment be increase by ten percent for a 10-year period to create a debt payment reserve. This 10 percent increases the annual debt payment from $57,100 per year to $62,826 per year. A summary of how the dept obligation would be paid in the first year is shown in the table below. Revenue Required With DOLA Grant Item Cost Percent of Total Projected Revenue From Water Sales $35,600 56.7 Revenue From $3.66 Rate Increase ($25.66) $20,226 32.2 Revenue From Tap Sales (1 tap) $7,000 11.1 Total Dept Service Required $62,826 100 It can be seen that a rate increase of $3.66 may be required to fund the debt. Comparing the new rate of $25.66 to the state average of $34.68 shows that the Town is in a good position to fund this project. The Town expects to receive approval of the $500,000 grant in July of 2006. Should the DOLA Grant not come to fruition, the Town will need to borrow the $500,000 that it was counting on receiving from DOLA. This would result in the need to borrow $1,518,000 and the annual debt payment would be $93,700, which includes the ten percent annual loan reserve. A summary of how the debt would be paid is as indicated below. Revenue Required Without DOLA Grant Item Cost Percent of Total Projected Revenue From Water Sales $35,600 38.0 Revenue From $7.97 Rate Increase ($29.97) $44,100 47.0 Revenue From Tap Sales (2 taps) $14,000 14.9 Total Dept Service Required $93,700 100 The two respective summaries show that the town will require the sale of two or three taps to cover the dept service for the two funding scenarios. With the 80 plus residential units being platted and available for purchase of building permits this year, the Town will most likely be capable of making the annual dept payment and will not need to raise the rates. However, to secure a strong loan position, the Town Board will need to implement a resolution acknowledging the Feasibility Study -Keenesburg, CO 1/23/2009 11 need to raise the rates should the tap fees not cover the annual debt service. The Town has been informed that this stipulation will be part of the loan agreement. Appendix F Shows the 30-Year Financial Projection used for this analysis and for each of the loan scenarios. The indicated population, water use and number of taps are based on a 4% growth, which is consistent with the Town’s Comprehensive Plan. Census data shows that the Town experienced 5% growth from 1990 to 2000. The “Capital Costs” section of this spreadsheet shows the costs being spent over a two-year period. The same costs as were identified in the proposed capital improvement table above can be found in this section of the spreadsheet. The cost of the water purchase is shown at $1,116,000 and the real cost will be $1,018,080, which includes the one percent loan origination fee. The next line item is the actual cost of purchasing the well and constructing the replacement well and the pipeline to bring the water to the Town’s water tank. Again this is spread over two years to allow design to start in late 2006 with construction starting in early 2007. In the past, the Town has experienced interest income of approximately $10,000 to $18,000 and projected $28,000 for 2005. Interest income has been shown in the financial projection and is based on a 2% return of the previous year’s water fund balance. Loan funding includes first obtaining a loan for $1,018,080 which includes the loan origination fee of $10,080, for purchase of the water rights. Next the Town water fund contribution will be $1,057,400 and will be expended over a two year period. The $196,000 includes the $75,000 of engineering, legal and administrative expense that will be expended in 2006 along with a downpayment for the water purchase of 112,000 . In 2007, a matching Energy Impact Grant is shown at $500,000 along with the Town matching funds of $608,00 being used to complete the well and pipeline construction. The next section of the spreadsheet is the “Cash Flow Calculations”. This section is important to demonstrate how the loan proceeds will be funded and to monitor the water fund balance to assure that reserves are maintained to cover any emergencies that may occur, such a the need to replace an existing well. The cash flow calculation, shown at the bottom of this spreadsheet, starts with annual water fund revenue of $210,200. This figure is obtained from the 2006 budget and is modified slightly. To obtain this value, the water tap fees and State Funds must be subtracted from the $535,958 total indicated. The water sales in Feasibility Study -Keenesburg, CO 1/23/2009 12 the 2006 budget were reduced from $195,000 per year to approximately $186,000 to be more conservative should a wet weather year occur.