COUNCIL DATE AGENDA ITEM

4/15/08 4G

CITY COUNCIL MEETING
Olympia, Washington April 15, 2008

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CITY MANAGER’S RECOMMENDATION: Move to authorize City Manager to sign Purchase and Sale Agreement for purchase of a surface water right from Jacob and Wendy Schoepfer.

Acquisition of Water Rights in Lake St. Clair Area

STAFF CONTACT: ORIGINATED BY: PRESENTERS AND OTHERS NOTIFIED: ATTACHMENTS: BUDGET IMPACT/ SOURCE OF FUNDS:

Rich Hoey, P.E., Director of Water Resources, (360) 753-8495, rhoey@ci.olympia.wa.us Public Works Department Jacob and Wendy Schoepfer 1. 2. Purchase and Sale Agreement Memo of Purchase Sale Agreement

Greater of $3,000 per acre-foot or $80,000. The source of funds is the Drinking Water Utility. Staff proposes to use funding allocated for water rights acquisition in the Drinking Water Capital Fund 461, Source of Supply Program #9700. Adequate funding exists in the program for this acquisition. None.

PRIOR COUNCIL/ COMMITTEE REVIEW:

BACKGROUND:

The City of Olympia’s primary source of drinking water is McAllister Springs, located at the headwaters of McAllister Creek in northeastern Thurston County. McAllister Springs has served the City effectively since the 1940s. Since the mid 1990s, the City of Olympia has pursued the development of an alternate water source that is more protected from potential water quality problems. The City determined that the best solution was to move the water production site from McAllister Springs to groundwater wells at an upgradient location, known as the McAllister Wellfield. Over the past seven years, the City has spent considerable time and money to develop a sophisticated groundwater model to better understand the effects of pumping at the McAllister Wellfield. The model is a powerful tool to use in assessing potential impacts of

pumping on groundwater levels and on nearby lakes, streams and rivers. The most recent model results predict that moving the water source from McAllister Springs to the McAllister Wellfield will result in significantly higher flows in McAllister Creek. At the same time, pumping at the wellfield may cause relatively small depletions of flow in other surface water bodies in the Nisqually and Deschutes Watersheds. One of these surface water bodies is Lake St. Clair, approximately one mile south of the McAllister Wellfield. In order to offset any potential impact to Lake St. Clair and other water bodies, the City has been developing a mitigation plan as part of its water right application for the McAllister Wellfield.

ANALYSIS AND OPTIONS:

In developing the mitigation plan for the McAllister Wellfield, City staff evaluated several potential alternatives for mitigating impacts of pumping on Lake St. Clair. These included pumping groundwater and putting it back in the lake, recharging the lake with reclaimed water, purchasing and retiring water rights and habitat improvements. Staff determined that purchasing and retiring water rights was the most effective and least costly option for mitigation. In 2007, the City hired Westwater Research to inventory existing water rights in the Lake St. Clair area, screen them based on selection criteria, and begin making contacts with water right holders. Westwater Research has represented the City in discussions with water right holders, including Jacob and Wendy Schoepfer, the owners of Whispering Firs Farms. Through these discussions, the Schoepfer’s expressed their willingness the sell one of their water rights used for irrigation. The surface water right held by the Schoepfer’s (certificate # S2*10249CWRIS) authorizes withdrawal of 0.20 cubic feet per second for irrigation of 20 acres of land. The water right is from a small lake that is in continuity with Lake St. Clair and therefore valuable for mitigation. The water right has also been put to beneficial use in recent years. Staff proposes to purchase the Schoepfer water right through a purchase price that is based on the number of acre-feet of water right successfully transferred by Department of Ecology, $3,000 per acrefoot, or$80,000, whichever is greater.This price is in line with other comparative sales of similar water rights in areas with few active water rights and growing municipal water demand. Staff estimates the transferable volume of the Schoepfer water right to be 27 acre-feet per year. Other key elements of the proposed purchase and sale agreement (Attachment 1) include: • A non-refundable payment of $1000 due at closing for 30 day due diligence review of the water right by the City. This payment is not credited to the purchase price.

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• Option 1:

A non-refundable “Transfer Application Payment” of $7000 due at end of the due diligence period (unless the agreement is terminated), which amount will be credited against the purchase price at closing. From the end of the due diligence period, the City has 90 days to obtain water right transfer approval by Department of Ecology. If there is a delay in the transfer process, the City and seller may negotiate a longer transfer period. The agreement outlines the various conditions for closing.

Authorize City Manager to sign purchase and sale agreement for purchase of a surface water right from Jacob and Wendy Schoepfer. Implications 1. The City will be able to address its McAllister Wellfield mitigation requirements in the Lake St. Clair area, provided that the Department of Ecology approves the water rights transfer as expected. 2. The Drinking Water Utility will expend capital funding totaling approximately $81,000 plus legal and other costs associated with the water rights transfer.

Option 2:

Do not authorize City Manager to sign purchase and sale agreement for purchase of a surface water right from Jacob and Wendy Schoepfer. Implications: 1. The City will be challenged to address its McAllister Wellfield mitigation requirements in the Lake St. Clair area due to limited water right availability and high cost of other mitigation alternatives.

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