Tuesday, May 31, 2011

Parks Water

My apologies for being out of pocket the last few weeks.  Our youngest son graduated from high school last weekend and we have been busy with the activities surrounding such an occasion.  A life changing event for him, and, no doubt, a life changing event for my wife and me.

Barry Noreen had a piece in the Gazette a few weeks ago saying new parks dedicated taxes were unnecessary; the city could save money by, in effect, getting back into the water supply business.  (Here) 

So, I thought I would take a look at this suggestion and what would it cost?  First a few details:  According to the City Parks Department, the city currently has approximately 879 acres of turf in regional and neighborhood parks and in street medians.  The recommended supplemental water for our climate is 24 inches per year (it does rain a little).  That works out to a total of just over 1,750 acre feet of water.  What would it cost to acquire this water, get it to the City of Colorado Springs, treat it (the city’s non-potable water delivery system is very limited) and distribute it to the city parks for irrigation? 

Fortunately, we have a very good comparable.  The Donala water system serving the Gleneagle development  just did this very thing to buy water for household consumption.  Donala paid about $17,000 per acre foot for water.  They are also paying the Colorado Springs Utilities (CSU) $2,200 per acre foot for the transmission, treatment and delivery of the water to their system.  Since Donala serves territory outside the city, CSU charges them a higher rate, so we’ll back that out, assuming that CSU would only charge the city their actual costs.  Consequently, transmission, treatment and distribution reduces to about $1,466 per acre foot.

Let’s tally this up.  Purchasing 1,750 acre feet of water at $17,000 per acre foot costs $29,750,000.  Because the city does not have this cash lying around, but would have to borrow it, or get CSU to borrow it for the general fund, we’ll need to factor in the time-value of money.  According the Wall Street Journal, AA rated 30 year municipal bonds are fetching just a tick over 5 percent.  The annual loan amortization cost: $1,916,000.  The cost of transmission, treatment and distribution for the 1,750 acre feet is $2,565,000.  Total annual cost:  $4,481,000.  Quite a chunk of change. 

How does this compare to what the city is paying this year?  The city parks department has, in its 2011 budget, approximately $2,660,000 budgeted for watering turf.  Even allowing for the fact that Parks is only planning to put 20 inches of supplemental water on the 550 acres of neighborhood parks  turf this year, the funds available in the city budget is still significantly less that the cost of Noreen’s proposed “solution.”  Furthermore, this capital cost is only for enough water to meet current needs, it includes no buffer for growth in the parks system. 

I should note that Noreen’s solution would have the city buying water rights gradually over the years “using any extra cash from the general fund” to make the purchases.  While this would avoid the interest expense, it does leave one with a question:  Where to get the money?  Hmmm . . .

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