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<br />1838 <br /> <br />6. During Year 2, 5,814 FLC shares (7,384 af C.U.) will be leased for rental, to replenish the <br />quantity in storage, and to provide for losses and return flow obligations as discussed in <br />Assumption 7. Most (5,000 af C.U.) of the leased water will be available for rental to <br />municipal and industrial (M & I) users. The water bank will pay storage charges both in <br />Pueblo Reservoir and in Adobe Creek Reservoir, since water will be stored in both as <br />operations dictate. <br /> <br />7. The water bank will determine annually its goal for water acquisition, based on demand for <br />rental of M & I water, and will solicit bid offers from FLCC shareholders. The bids will be <br />arrayed, and the lowest priced bids accepted up to the point where sufficient water is leased. <br />The assumed average lease offer in a normal year will be $60/afC.U.6 In dry years (one year <br />in ten) the cost of a lease is assumed to average $150/af C.U., because more shares and more <br />fallowed acres will be needed to get the same yield as in a normal year. In wet years (also <br />one year in ten) the average lease offer, made in March, is expected to average $60/af C.U., <br />but late in the season when water is ample a new supply of start-up water for storage can <br />probably be leased for about $25/af C.U. The new supply of start-up water will be needed <br />because the storage reservoirs will fill and spill the low priority water in the water bank. It <br />is also assumed in wet years that only 3,500 af of water is rented. Of the total 3,500 af, 2,500 <br />af is the amount included in the long term contract with the renters. The remaining 1,000 <br />af is the amount assumed to be contracted during the wet year. <br /> <br />Because of the need to adjust for transit and evaporation losses and required return flows <br />to the system, the water bank must lease about 1.48 af C.U. for each 1 af C.U. rented to M <br />& I users. Thus, to rent 5,000 af C.U. to M & I users, the water bank must lease 7,384 af <br />C.U. from shareholders. Refer to Section 7.5. <br /> <br />8. The water bank will rent water to M & I users through competitive bids. A list of potential <br />renters is presented in Appendix 8, Exhibit 4. This list includes 23 M & I organizations <br />which have indicated an interest in renting or buying water in the Lower Arkansas Valley in <br />recent years, and is representative of the demand for M & I water. <br /> <br />Because many of the M & I users need an assured steaQy supply of water from year to year, <br />it is assumed that the water bank will enter into multi-year contracts with some renters, <br />although others may choose to rent annually. The advantage to a multi-year contract for the <br />renter is that the contract will have a preset price, rather than fluctuating during dry years. <br />The advantage for the water bank is that it will have a steaQy market for leased water from <br />those who choose a multi-year rental contract. For purpose of this analysis, it is assumed <br />that half of the 5,000 af C.U. will be rented on multi-year contracts and half on an annual <br />bid basis. <br /> <br />6n.e $60/af C.U.average lease price is based 00 an ana1ysis of returns to landlords who rent Ft. 4'00 acreage <br />and shares to others, and receive a share of the resulting crop as income. It includes the cost of fallowing at <br />$2S.0IYacre and provides some return on the shareholder's investment. <br /> <br />7-33 <br />