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Pueblo County will have a say in the future of the Springs' Southern Delivery System project


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  • Colorado Springs Utilities

One of the few cities its size not located on a river, Colorado Springs has always wrestled with providing a water supply. Early on, citizens relied on shallow wells, followed by a trench to Fountain Creek and, eventually, a reservoir system and pipelines to bring water from Pikes Peak. In the middle of the 20th century, the city built two transmountain water systems.

The annexation of Banning Lewis Ranch in 1988 brought 25,000 additional acres into the city limits along the eastern border. Along with it came the need for more water. In 1996, the city adopted a plan that would deliver it from the Pueblo Reservoir, increasing Colorado Springs' water supply by up to 50 million gallons a day.

The hallmark Southern Delivery System pipeline represents more than 5,400 truckloads of pipes, 75 million pounds of steel and tons of acrimony.

Colorado Springs and Pueblo have battled over SDS for more than a decade, and now that the $829 million pipeline from the reservoir is due for activation in April, the debate has only intensified.

While Colorado Springs has pushed the project through despite objections from Pueblo over the years, this time may not be so easy.

That's chiefly due to Colorado Springs' negligence in dealing with its stormwater problem, which lies at the heart of the agreements permitting SDS to be built.

Most of the project's components are complete: the 50-mile pipeline, including a mile-long tunnel under Interstate 25 and Fountain Creek; three pump stations; and an outlet at the reservoir. A water treatment plant on the city's east side is in the test stage.

While city officials boast that SDS — the city's first major water project in 50 years — is on time and under budget to increase the city's water supply by 25 percent, none of it matters if the pipeline can't deliver.

Which is iffy, given three unresolved issues: the timing of Colorado Springs Utilities' payments to improve Fountain Creek, CSU's revegetation of land over the pipeline and, most importantly, the city's long-standing neglect of its stormwater system.

Pueblo County officials seem to be standing pat until they get what they want: protection against flood waters cascading down Fountain Creek, gobbling up farmland and threatening public safety. And with the pipeline so close to being tapped, it could be their last chance to hold Colorado Springs accountable for past promises. Still, there are several ways Pueblo County could block the pipeline.

Despite these threats, Springs officials hail the project as "generational," saying it will satisfy the city's water needs until 2046, noting that it couldn't have been built without the cooperation of elected officials and technical expertise of CSU staff.

"Twenty years, hundreds of millions of dollars, dozens of elected officials and a committed staff," says Jan Martin, who served on City Council from 2007 to 2015, "all stayed focused and will continue to overcome obstacles to ensure our community water needs are met well into the future with the SDS project."

As Colorado Springs negotiates to clear the path for turning on the SDS tap, it's worth noting how the project has unfolded over the past two decades as well as the remaining challenges keeping the project from going online.

The bottom line

Springs Utilities officials have engaged with dozens of contractors and say they've worked tirelessly to maximize efficiency and keep costs low. But there were a couple of false starts.

From 2003 to 2005, CSU lavished more than $6 million on property owners near Jimmy Camp Creek in northeast Colorado Springs where officials originally envisioned the water treatment plant. Most were paid far more than market rates, including one who was given $840,925 for a property the county assessor valued at $185,800.

The buyouts triggered an audit and overhaul of the city's real estate procedures. Meantime, an environmental study of the Jimmy Camp site revealed significant fossil finds, leading CSU to choose a site farther south.

Another hiccup came around 2009, when the city abandoned the original contract for the water treatment plant in order to redesign it with feedback from operators, says CSU project manager John Fredell. Tens of millions of dollars were scrubbed from the plant's cost due to the redesign, which places most treatment processes under the same roof, gaining efficiency, he says.

  • Casey Bradley Gent
  • John FREDELL

That kind of rethinking saved money on other aspects as well. Rather than impose a specific solution to tunneling the pipeline beneath two railroad beds, Interstate 25 and Fountain Creek, "We had people who do this every day tell us how they would do it," Fredell says. The winning contractor burrowed a shaft 80 feet deep, which avoided the need to remove water from the tunnel and saved the city $10 million in the process, Fredell adds.

Additional millions were saved in re-engineering the pumps, he explains, which will make them more efficient. "They're more money up front in terms of capital cost, but the life cycle cost was significantly less, so we made a change," he says. The pumps were manufactured in Japan, which required CSU engineers to fly there several times for "witness testing" of the machinery.

CSU also negotiated a deal with Mountain View Electric that allows CSU to supply power to a pump station that doesn't lie within CSU's service area, another cost savings. "It was really slick," Fredell says, noting only the first pump station near Pueblo Dam won't be powered by CSU. "We have plans for that one, too," he adds but declined to elaborate, because negotiations with Black Hills Energy are ongoing.

Fredell says he could "go on all day" about the savings CSU identified, which removed $50 million from the project cost before construction even began. "It was dozens [of people] that sat in a room for about two weeks figuring out all the things they could do to keep the project whole in terms of water quality, quantity and capacity but cut money out of it," he says.

That the SDS construction came amid the 2008-09 recession, when contractors were hungry for work and cut their margins to the bone, added to the savings.

All factors considered, CSU shaved $125 million from the project, originally estimated to cost nearly $1 billion, without financing costs.

"You need to talk to some of our contractors, because they will tell you we don't overlook costs on anything," Fredell says. "Whatever it is, we're pretty anal about it, let me tell you."

The cost savings translate to lower rates for customers than originally forecast. The project initially was to be funded with seven consecutive 12 percent rate hikes from 2011 to 2017, or an overall increase that would have more than doubled a customer's water bill. But keeping costs in check meant customers so far have seen just two 12-percent hikes and two 10 percent hikes, the last coming in 2014. Together, they have increased customer water bills by about half of what was expected.

Disaster downstream

While financing for SDS has gone well, the pipeline's neighbors haven't always been in much of a celebratory mood.

For Pueblo, more water through the SDS pipeline to Colorado Springs meant more water and sewage coming down Fountain Creek, toward its confluence with the Arkansas River just east of the city.

Pueblo County's district attorney sued Colorado Springs in 2005, alleging violations of the Clean Water Act for chronic sewage spills into Fountain Creek in the years prior.

"Look at that," Robert Rawlings, publisher of the Pueblo Chieftain and SDS opponent told the Indy that year, while gazing over the confluence of the creek and the Arkansas River. "Garbage and raw sewage, used condoms and a few dead cats. The sewers of Colorado Springs, dumped straight into Fountain Creek and sent to Pueblo. We send you that clear, pure mountain water, and that's what we get back — your sewer water!"

The case led to a compliance order under which CSU has spent about $160 million since to prevent spills. CSU even built a diversion pond on Colorado Springs' south side to siphon polluted waters from the creek, though it's rarely been needed. Hand in hand with curtailing sewage flows was controlling stormwater runoff — about which the city had done very little.

So when SDS's permitting process got underway, Pueblo was loaded for bear. CSU needed more than 200 state and federal permits, including an 800-page environmental impact statement. The EIS was expected to take two years but ended up spanning more than five, as a battery of public hearings were held and public comments received and addressed.

One of the more crucial required permits was the 1041 construction permit issued by Pueblo County, so-named for legislation in the 1980s that empowered counties to regulate projects of statewide concern.

Pueblo officials took full measure of their opportunity, building conditions into the 1041 as well as a related intergovernmental agreement that attempted to force Colorado Springs into controlling flood waters that had devoured hundreds of acres of farmland bordering Fountain Creek and clogged the channel with sediment.

  • Colorado Springs Utilities

How did CSU react? It filed suit, seeking to have Pueblo's 1041 rules declared "ineffective, invalid and/or unenforceable" with respect to SDS. After losing a bid to have the case heard in El Paso County District Court instead of Pueblo, CSU appealed to the Colorado Supreme Court. The case eventually was dropped after Pueblo issued the 1041 permit, which includes a raft of conditions, in April 2009, a legal battle that cost both sides a combined $900,000 in legal costs, according to the Chieftain.

Lawsuits also erupted when a few landowners refused to grant CSU access to their property to study pipeline alignments. Utilities also sued several landowners who weren't happy with the price CSU offered to pay for their land or access to their land, most notably Gary Walker, owner of Walker Ranches in north Pueblo County. Walker won a jury award of $5.8 million from CSU last May for acreage disrupted by the pipeline and resulting "damages." When both the city and Walker appealed, the city quickly settled the case for $7.1 million — part of $53.3 million CSU has paid for land alone.

The 1041

Now, the city faces renewed opposition from Pueblo interests as the project nears completion.

The Pueblo County Board of County Commissioners initially refused to sign off on CSU's revegetation of the pipeline's 20-mile path through Pueblo County, despite CSU's installing a $5-million sprinkler system to keep plants growing amid drought conditions. Restoration has reached 140 percent to 240 percent, depending on the site, of preconstruction levels — more than enough to meet the 1041 permit's required 90 percent.

Nevertheless, commissioners have drawn out the approval process over six public meetings spanning five months, most recently on Jan. 25 when they indicated they'll approve it, though CSU officials still object to a clause that requires it to maintain the land for the indefinite life of the 1041 permit, which could span decades, although CSU doesn't actually own some of that land..

Before revegetation in Pueblo County. - COURTESY SPRINGS UTILITIES
  • Courtesy Springs Utilities
  • Before revegetation in Pueblo County.
After revegetation in Pueblo County. - COURTESY SPRINGS UTILITIES
  • Courtesy Springs Utilities
  • After revegetation in Pueblo County.

At a Jan. 11 meeting, where CSU officials hoped for approval, commissioners merely scheduled yet another public hearing and failed to even acknowledge that Fredell and four other CSU officials sat in the audience — a breach of officialdom etiquette.

Another matter in dispute hinges on when CSU must pay $9.7 million to the Fountain Creek Watershed Flood Control and Greenway District, which oversees improvements along the creek. Four more payments of $10 million are due annually thereafter.

The 1041 states the payment must be made "on January 15th of the year following completion and commencement of water deliveries through the SDS Pipeline from Pueblo Reservoir to Colorado Springs."

CSU says that means the payment is due in January 2017, after the pipeline is activated in April and delivers water to customers.

Fountain District Director Larry Small, a Springs city councilor from 2003 to 2011, says the first installment is due now, because CSU took delivery via the pipeline of 10 million gallons last fall to test the water treatment plant.

The district, composed of representatives from both El Paso and Pueblo counties, has struggled financially relying on grants and small partner allocations. Small, who's paid $30,000 annually, has donated $58,000 in various operating costs to the district since he was hired in April 2011.

"We need that money to continue doing the mission we have," Small says. "We developed a master plan for the corridor between Colorado Springs to the confluence with the Arkansas. But we've had so many issues that developed because of storms we've had since 2012 — loss of land, sedimentation build-up, flooding of farm lands. It just continues to get worse, and that money is specifically to be used in that corridor on projects that benefit Pueblo County."

Small also notes the 1041 permit doesn't say the system must be finished, but rather delivering water. "And that delivery of water from the reservoir to Colorado Springs occurred in September," he says.

On one hand, Fredell says the 1041 and city stormwater issues should be kept separate, but he freely admits he wants to use the payment to the Fountain Creek district, a 1041 requirement, as "leverage to get the deal done" with Pueblo County regarding the city's stormwater obligations.

If Pueblo agrees to the IGA to settle the stormwater debate and not interfere with the activation of SDS, he says, CSU "would be willing to make the first payment ... a year early [in January, 2016]." But if not, CSU will hold the first payment until next year.

The final stretch?

Colorado Springs' failure to deal with drainage issues hangs like a dark cloud over SDS. That neglect, some say, translates to stormwater roaring down Fountain Creek, destroying roads and threatening to swamp homes in Pueblo. All that despite an IGA in which SDS was required to bring benefits to Pueblo.

Though City Council started the fee-based Stormwater Enterprise in January 2007, voters detested the "rain tax" and approved a ballot initiative in November 2009 that led City Council to shut it down just two years after it began and mere months after the 1041 permit was issued requiring that the city "shall maintain stormwater controls."

Since then, the city hasn't replaced the enterprise with anything, and stormwater work has been hit and miss at best. Some work was done in the aftermath of flooding in 2013 caused by the Waldo Canyon Fire the year before, but funding came largely from reserves and grants, not an ongoing dedicated source of revenue.

Relations soured further during former Mayor Steve Bach's term. He opposed a 2014 ballot measure widely endorsed by other elected officials that would have created a fee-based regional stormwater authority, but it failed at the ballot box.

"That really infuriated them," says Small, who works with Pueblo officials through the Fountain Creek district.

Most recently, the Environmental Protection Agency and the Colorado Department of Public Health and Environment have armed Pueblo with two highly critical reports saying Colorado Springs has violated terms of its federally required stormwater discharge permit.

The violations not only breach the city's 2004 IGA with Pueblo City Council and the Pueblo Board of Water Works regarding SDS, they also bring threats of monetary fines or federally mandated spending on stormwater.

Mayor John Suthers, who took office in June and is dealing with the aftermath of prior administrations, and City Council have promised to spend $19 million a year on stormwater, $3 million of that from CSU. A pending intergovernmental agreement would extend that spending for 10 years.

On Jan. 19, Colorado Springs won a small victory when Pueblo's Water Works board postponed action on a resolution that called for the city to fund stormwater "for as long as the SDS is operational, not limited to a fixed term."

At the meeting, Jay Winner, general manager of the Lower Arkansas Valley Water Conservancy District, called the city's prior broken promises regarding stormwater "the definition of hoodwink."

On Monday, Suthers reiterated the city's 10-year commitment at a Pueblo County commissioner work session, saying, "We're going to solve this problem and not kick the can down the road. A federal consent decree or judgment cannot be ignored, and neither can an IGA with Pueblo."

But Pueblo officials are playing hardball this time — because it might be their last chance.

As the Chieftain's Rawlings says in an interview, referring to the 1041, "This is the last thing we've got, and we're really going to make certain we get things solved before Colorado Springs can turn on the water."

While those close to the negotiations won't say publicly what options are open to Pueblo County, confidentially they say the county could seek a court order to prevent the pipeline from being used in Pueblo County, essentially halting any water deliveries. Or, the county could conduct a show cause hearing on whether the 1041 permit conditions have been met and if not, rescind the permit, forcing CSU into court. Or, the county could ask the Bureau of Reclamation to reopen the Record of Decision on the basis that conditions of the permit weren't satisfied.

While neither the county nor the city say litigation is the answer, the county's distrust of Colorado Springs was on full display at the Monday meeting. Commissioners asked for an IGA that lasts as long as SDS is operational, more money for Fountain Creek, suspension of the project until the IGA is complete, and even the county's participation in talks with the EPA. None of those ideas gained much traction with Suthers, though he said Pueblo might be given a role in the EPA negotiations.

"Whatever we do going forward, we can't base it on promises," Commissioner Terry Hart told Suthers. "Our community feels like most of the promises that have been made to us in the past have been breached."


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