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San Juan Water Conservancy District Agenda Item 27b May 17-18, 2017 Board Meeting(Updated May 19, 2017) Page 2 of 5 Background The District is located in Archuleta County and has a service area of approximately 100 square miles. The service area includes the Town of Pagosa Springs and approximately 90%of the municipal and industrial demand within the County. The purpose of the District is to conserve, maximize, and utilize the water resources of the San Juan River and its tributaries, with the primary function to address future water supply needs within its boundaries. The current population of Archuleta County is approximately 12,000 and the Colorado State Demographer has projected the county population at 2050 to be 27,500. Extrapolating the demographers growth rate for year 2045 to 2050 (1.6%) through 2070, and the population may grow to 37,400. Assuming a 10%water usage reduction for conservation, and the estimated water demand associated with a population of 37,400 is 6,800 AF/year. PAWSD currently has facilities estimated to provide up to 2,500 to 3,000 AF/year in a drought year. Therefore a gap of 4,300 AF/year could be seen by 2070. A water supply gap, though initially much smaller, could appear as soon as 2025. The Reservoir site has been in consideration since the 1960s when the Southwestern Water Conservation District filed for a conditional water right for a 6,300 AF reservoir. With the formation of the District in 1987, ownership of that water right was transferred to the District. There have been numerous studies and reports, including a review of more than 13 potential reservoir sites within the County to provide for future water demands. A 1989 report identified a 4,000 AF reservoir at the Dry Gulch site as the best site to store San Juan River diversions. After the 2002 drought, a 2003 report re- evaluated the reservoir options and again concluded the Dry Gulch site was the best. That report evaluated both a 41000 AF reservoir and a 12,500 AF reservoir, and noted the maximum potential capacity to be a 35,000 AF reservoir. The Colorado Supreme Court determined population projections could not justify a 35,000 AF reservoir and a settlement of the litigation resulted in a determination that the District could proceed forward with plans for an 11,000 AF reservoir at the Dry Gulch site. The District was the lead proponent of the Dry Gulch Reservoir until PAWSD entered into a Memorandum of Understanding (MOU) in 2002 between the two parties. PAWSD then took the lead in managing the development of the Reservoir and the District was a project partner. The Reservoir site includes land previously owned by the Webers (660 acres), land currently owned by the Lavertys (23.4 acres), and land currently owned by the United States Forest Service (USFS) (190.7 acres). PAWSD was approved for an $11 million CWCB loan and the District was approved for a 51 million WSRF grant at the January 2008 board meeting to acquire the Weber and Laverty property. The USFS property was not a subject of the 2008 loan. The Weber property (aka Running Iron Ranch)was purchased by PAWSD and the District with the loan and grant proceeds. However, before the Laverty property was purchased, PAWSD decided to no longer actively pursue the Project, closed out its CWCB loan in 2012, and terminated the MOU in 2013. In order to provide a way forward for the Project and provide PAWSD the financial flexibility to address its higher priority water issues, CWCB approved a restructuring of the PAWSD loan at the March 2016 board meeting. The 3-Way Restructure Agreement included transferring the project management from PAWSD back to the District, and included a clause obligating the District to acquire the remaining land necessary for the reservoir, namely the Laverty and USFS properties. Loan Feasibility Study Rod Proffitt, President and Chair of the District Board of Directors, with assistance from Steve Harris, P.E., Harris Water Engineering, Inc., prepared the Loan Feasibility Study titled, "Dry Gulch Water Storage Project Loan Feasibility Study for CWCB 2017 Loan Application,"dated March 25, 2017. The feasibility study was prepared in accordance with CWCB guidelines and includes an analysis of