Agenda Memo

City of Boulder City Council Agenda Item Meeting Date: April 2, 2026 Agenda Title Consideration of a motion to authorize the city manager to execute a ten-year water lease agreement with the Town of Erie

Staff Contact  

Kim Hutton, Water Resources Senior Manager, Utilities Department Joe Taddeucci, Director of Utilities

Draft Motion Language Staff requests council consideration of this matter and action in the form of the following motion: Motion to authorize the city manager to execute a ten-year water lease agreement with the Town of Erie.

Executive Summary The purpose of this item is to authorize the city manager to enter into a ten-year water lease agreement with the Town of Erie (Erie). The proposed lease agreement is pursuant to the settlement between the city and Erie resolving the Panama Reservoir water rights case (Case No. 20CW3053). Under the lease agreement, Erie has the option to lease up to 370 acre-feet of Colorado-Big Thompson (CBT) water annually from Boulder to serve as an emergency water supply when its system is interrupted, insufficient, affected by water quality concerns, or otherwise compromised by emergency conditions. Because the lease will provide an emergency water supply, Erie may elect to not lease water in every year of the lease period. The lease protects Boulder’s water supply interests by allowing the city to suspend leasing in any year in

which water use restrictions are declared, for example, during drought conditions. Erie’s Town Council has approved the lease agreement, and the Northern Colorado Water Conservancy District (Northern Water) Board of Directors has approved the lease agreement terms.

Council Action Options Option

Outcome

Approve motion language as drafted

If the motion is approved, Boulder will enter into a tenyear water lease agreement with Erie effective spring of 2026, substantially similar to the form of lease agreement attached as Exhibit A.

Define and adopt a modified motion

Council would need to specify any modifications or amendments to the draft motion language. If council requests substantive amendments to the motion, staff may need to negotiate new terms with Erie, seek Northern Water Board of Directors approval, and bring back an amended version to council.

Deny the motion or take no action

If this motion is denied or no action is taken, council would need to provide direction as to when the item could return for consideration prior to end of year 2030. If the item is not to be reconsidered by this date, Boulder will not be fulfilling a key term of a negotiated settlement agreement.

Refer back to staff

If council refers this item back to staff for modifications of lease terms, staff will need to negotiate new terms with Erie and may need to seek Northern Water Board of Directors approval.

Alignment with City Plans and City Council History Sustainability, Equity and Resilience (SER) Framework and Citywide Strategic Plan Alignment SER Framework Goal Area Safe, Responsibly Governed

Citywide Strategic Plan Strategy 2: Advance efforts to enhance regional disaster prevention, preparedness and response that leverage existing partnerships and prioritize city investments. Strategy 12: Implement organizational and financial best practices to continuously improve asset management, customer experience, and project and program performance. Staff Notes Safe: Providing a ten-year emergency water supply option to Erie leverages Boulder’s historical water supply investments to enhance regional drought and emergency preparedness. Responsibly Governed: Executing this lease fulfills a key term of a negotiated settlement agreement with a neighboring community. Honoring negotiated agreements reflects sound organizational and financial best practices, reinforces Boulder’s credibility in Water Court proceedings, and supports strong intergovernmental relationships that improve long-term program performance.

Alignment with Additional City Plans The proposed water lease is consistent with Boulder Valley Comprehensive Plan Policy 3.27, which states water resource planning efforts will be regional in nature.

City Council History This item is being brought forward at this time because Erie plans to temporarily drain one of its reservoirs to complete state-required dam maintenance and seeks to have an emergency water supply in place beginning spring of 2026.

Analysis In 2020, Boulder, in partnership with Boulder County, applied for new water rights in Panama Reservoir in eastern Boulder County to enhance municipal and agricultural water supply reliability through additional water rights, storage space and reuse of existing water supplies. As part of the water rights application process, other water users may participate as “opposers” in the case to protect their water rights and hold the applicant to its burden of proof. Erie participated as an opposer, and Boulder and Erie negotiated a settlement agreement to resolve their interests without the case proceeding to trial. One of the terms of the settlement agreement is that Boulder, subject to city council approval, will provide Erie with a multi-year lease of up to 370 acre-feet of CBT water annually. For context, Boulder’s current annual municipal water use is approximately 17,500 acre-feet. The purpose of the lease is to provide Erie with an emergency water supply during times when deliveries of its water supply are interrupted or insufficient, to address a water quality problem, or another emergency

exists to Erie’s water supply. Per the agreement, Erie has through the end of 2030 to request commencement of the lease agreement. Erie has requested that the lease agreement begin in the spring of 2026. Erie is currently developing additional water supplies to meet its future needs. In the near term, Erie must take one of its reservoirs (Erie Lake which has a capacity of 370 acre-feet) out of service to complete state-required dam maintenance. The proposed lease would allow Erie to maintain an emergency water supply during this maintenance period. After rehabilitation of the reservoir, and while additional supplies are being developed, the lease agreement would also provide Erie with an emergency water supply in the event its water supply is interrupted, insufficient, affected by water quality concerns, or otherwise compromised by emergency conditions. Boulder has developed its water system over many decades to meet future community needs in accordance with council-approved level-of-service goals known as the “Reliability Criteria”.1 To meet level of service goals during drier periods, Boulder has developed a water supply system that results in surplus supply during average to wetter periods. Boulder leases the surplus water to support other water users in the region. Water supply modeling that incorporates climate change scenarios suggests Boulder will continue to have surplus supplies during average to wetter periods over the next ten years. Historically, surplus water has primarily been leased annually to local agricultural irrigators, typically ranging from 2,000 to 11,000 acre-feet per year. Boulder also maintains multi-year leases with Lake View Village, the University of Colorado, and Eldora Mountain Resort. The proposed lease agreement with Erie will not compromise Boulder’s ability to meet the needs of its customers or its existing multi-year lease obligations and will have minimal effect on its agricultural leasing program. Additionally, the lease agreement protects Boulder’s water supply interests by allowing the city to suspend leasing if mandatory water use restrictions are implemented due to drought, infrastructure failure, or other catastrophic circumstances, or if events beyond Boulder’s control prevent Boulder from making leased water available. Per the agreement, Erie has until June 1 to elect how much water it will lease each year and may choose to lease the full amount or something less. Erie will pay for the amount

1

See July 31, 2025 City Council Meeting Water Supply Planning item for more information on the City’s Reliability Criteria.

of water leased each year, and the initial lease rate is set at $600 per acre-foot and may be adjusted through future code amendments.

Equity Analysis The Rapid Response Equity Assessment was used to evaluate the lease agreement. The lease agreement includes a provision stating that Boulder is not obligated to lease water in any year in which it has declared water use restrictions, ensuring that water will only be leased when doing so will not adversely affect Boulder municipal water customers.

Fiscal Note Estimated Fiscal Impact Narrative Annual revenue will vary depending on how much water Erie leases each year. The initial lease rate is $600 per acre-foot and may be modified in subsequent years through code changes. In FY 2026, the maximum revenue would be $222,000 and would accrue to the water enterprise fund. For planning purposes, we are conservatively estimating of $100,000 in revenue for FY 2026. Current Year Estimated Fiscal Impact Fund(s): Water Enterprise Fund (6100) Department(s): Utilities Program(s): Water Resources

FY 2026 Budget

FY 2026 Estimated Impact

FY 2026 Net Change

Beginning Fund Balance

$38,141,766

$0

$38,141,766

Total Forecasted Revenue

$50,509,947

$100,000

$50,609,947

Total Estimated Expenses

$55,837,628

$0

$55,837,628

Ending Fund Balance(s) After Reserves

$16,143,620

$100,000

$16,243,620

FTE

191.0

0

191.0

Item

Three-Year Estimated Fiscal Impact

Item

FY 2026

FY 2027

FY 2028

Total Forecasted Revenue

$100,000

$100,000

$100,000

Total Estimated Expenses

$0

$0

$0

Net Estimated Impact

$100,000

$100,000

$100,000

Climate, Resilience, and Sustainability Considerations Boulder conducts long-range water supply planning that incorporates hydrologic variability and climate change projections. Based on past water supply development and forward-looking water supply modeling, Boulder has sufficient flexibility to enter into this ten-year water lease agreement while maintaining its resilience to drought and climate change. From a regional perspective, providing a temporary, emergency water supply option to Erie enhances regional drought and emergency preparedness, and sharing resources benefits partnerships within the water community.

Community Engagement Staff provided an update to the Water Resources Advisory Board (WRAB) on the proposed lease agreement at the January 2026 WRAB meeting. None of the four WRAB members present expressed concerns with the lease agreement moving forward for city council approval.

Workplan Considerations Implementation of the lease agreement will be incorporated into the leasing program and water rights accounting work that is on the Utilities Department 2026 workplan.

Next Steps for City Council If the motion is approved, the water lease agreement will go into effect upon execution, and there will not be any subsequent steps by city council.

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Attachments Attachment A – Water lease agreement with Town of Erie