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<br />borrowing. The major thrust of the crtterta is that some form of option contract guaranteeing <br />insurance to C-BT water users must be developed. The option contracts. however. have not <br />been detailed in times of the economic anaiysis or the legal aspects, Dry year options are a <br />new and evolving means of assuring efficient allocation of water in times of scarcity. A number <br />of issues must be explored in order to formulate a program for the District. its allotment <br />holders. and the Subdistrict municipalities. <br /> <br />One obvious factor that must be examined Is prtcing. Option contracts typically involve <br />two cost components: the payment made initially to secure the option. and the payment made <br />when the option is exercised and water is transferred to the municipality. Reasonable <br />methods of dertving amounts for these payments. as well as specific figures. must be <br />developed. There are also a number of other matters to be considered. These include such <br />Items as the manner and timing of notice to be given that the option will be exercised. <br />determination of the quantity of water or land to be affected. and provision for adjustment of <br />contract prtces to reflect the passage of time or other changed conditions. <br /> <br />Other issues which may not enter directly into an option contract. but which will affect <br />the feasibility of such arrangements. are types of crops grown by the water rtght holder. the <br />ability of a particular agrtcultural operation to continue without the optioned water. and <br />various factors relating to costs and yields. Third-party effects that may result from such <br />contracts must be addressed in order to avoid negative impacts which could offset the benefits <br />to be dertved from option agreements for water supply. <br /> <br />To develop a feasible framework for the program. the District intends to research <br />similar programs that have been undertaken in the western United States to determine how <br />those programs have been implemented. Using this information as background. the District <br />plans to work with both the member cities of the Subdistrict and C-BT allotment holders who <br />are potential participants in the program. to develop a program for the C-BT and Windy Gap <br />Projects. The result will be a set of guidelines allowing the program to be implemented in <br />northern Colorado. <br /> <br />The District has been unable to complete development of the necessary framework <br />because of a lack of staff to undertake the work involved in researching dry-year options <br />programs and developing the guidelines. The District intends to use grant monies to retain the <br />services of an outside consultant to handle this work, The consultant will research dry-year <br />options. including programs in other states. and will then meet with municipal representatives <br />and C-BT allotment holders to determine how such a program would best meet the needs of <br />the particular parties and region involved in the District's project. Based on this information. <br />she would. In consultation with District staff. develop the framework for option agreements to <br />be used in the program. <br /> <br />Additional Information on the work to be done by the consultant is included in <br />Attachment A. <br /> <br />2. Monitoring and evaluation: <br /> <br />a) Monitortng <br /> <br />The District tracks water use for the C-BT and Windy Gap Projects through a <br />computertzed water accounting system. which will enable it to identlf'y specifiC quantities of <br />water involved in the options program. <br /> <br />[WPSIENGINEERING <br />SCOTT <br />'474 <br /> <br />2 <br />