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I I I I I I I I I I I I I I I I I I I This is based predominantly on the fact that the subject water rights have already been decreed for use at the District and require no additional action to continue to use them to meet the existing needs at the District. Further. the ability to develop an alternative. new. adequate and reliable legal supply of water at this location may be very limited. due to the physical resource and institutional challenges of developing nev,' water supplies in this area. An example of the cost to develop alternative water supplies is the construction of a small on-channel augmentation pond upstream of Dillon Reservoir. The construction cost alone was approximately $66.000 to $86.000 per acre-foot. The alternative costs to develop and obtain COUrl approval of such an alternative supply for the District are likely to far exceed the purchase price of the subject rights. Another approach to examining the value of the rights was to compare the purchase price to the cost of future payments under the existing Vidler agreement. The District completed such an analysis to examine the benetits of purchase versus lease of the rights. The existing agreement \vith Vidler is based on actual \\'ater usage at a rate that adjusts annually based on the Denver Consumer Price Index. In addition to grO\\1h and CPI cost increases. w-eather patterns that inOuence water usage determine the amount paid on the lease each year. A conservative approach assuming a low percentage increase in water usage and nominal gro\\1h until build out results in a present value of $3.4 million for the Vidler lease based on 30 years at a 5% rate. A factor in the decision of the District Board of Directors to purchase the water was the cost of purchase would be almost identical to projected lease payments for the next 30 years. A chart reflecting the District's analysis of the present value orthe lease is presented in Appendix E. The analysis using the comparable sale method to estimate the value of the rights relied on infonnation available for sales or leases of senior water rights in the geographic area upstream of Dillon Reservoir. In general market terms. lhis geographic area is characterized by a limited supply ofrcliable legal water supplies (senior water rights) and a high demand for such water because of new development in the area and the need to protect senior rights immediately downstream (Dillon Reservoir. Green ~vlountain Reservoir. eWCB instream flows). As a result. waler right values are considerably higher in this particular area than in other areas of Division 5 and the State. Based on comparable sale or lease information available in 1998. the price (0 purchase augmentation water in the project area was 53900 per 0.10 acre-feet (at). or 539.000 per af. This sa.!e would have included a storage component to provide for a reliable year-round supply. Applying a modest inflation factor of three percent per annum for three years to obtain 3 current value. increases the -20- I RI,'h"p.II,,'!.~It"I.l,,"n'II('.. 111<"