sds whitepaper

Southern Delivery System

IntroductionBy Jerry Forte, Chief Executive Officer, Colorado Springs Utilities

Colorado Springs has a long history of responsible planning for its water needs. As early as the 1870s, citizens determined that the provision of safe and sufficient water was a core function of the municipal government. For years, Colorado Springs Utilities has served that traditional function by developing, protecting and enhancing our water supply and the necessary infrastructure to collect, transport, treat and deliver water for our community.

This is illustrated in a letter written by former Colorado Springs City Engineer Edwin A. Sawyer, which he left in a time capsule for his 21st Century counterparts. Dated August 2, 1901, the handwritten letter describes the community’s diligent pursuit of water and water infrastructure from about 1880 to 1900. Sawyer wrote,

“ It seems to me that nothing except the lack of water can stop the growth of a city so desirable for residence as this.”

“Our people are becoming aroused to the need of securing at once all the available reservoir sites and water rights …”

— Former Colorado Springs City Engineer Edwin W. Sawyer, 1901His words echo more than a century later as an inspiration for our community to keep looking ahead to plan responsibly for the future. Our community has worked hard to acquire a diverse portfolio of water rights and to build complex water projects to deliver water to our citizens. For decades, a stable water supply has served as a foundation for our city’s prosperity and our excellent quality of life.

Fast forward to today. Our major pipelines are nearly 50 years old, and our system is nearing capacity. The Southern Delivery System (SDS) is needed to deliver additional water and back up our existing pipelines. But SDS is more than a pipeline. SDS will serve as an engine, driving more efficiency, effectiveness and reliability in our system, while protecting our water rights from future threats. SDS makes our entire water system more than the sum of its parts.

This report provides you an overview of the events leading up to the construction of SDS. History has proven that the community cannot wait until it has committed the last drop of water before it begins building for the future. It is my privilege to work with you as leaders of our community to bring this essential project online – enabling us to continue our long tradition of serving customers for generations to come.

The Southern Delivery System:

SDS Drives the Efficiency and Reliability of Our Water SystemTABLE OF CONTENTS

Our Water System: A History of Visionary Planning . . . . . . . .2

SDS and the 1996 Water Resource Plan . . . . . .4

What is SDS? . . . . . . . . . . . .6

The Right Solution . . . . . . . .7

Planning and Permitting – How We Got Here . . . . . . . .7

Essential Investment . . . . . .9

Funding Major Water Projects . . . . . . . . . .12

The Economic Impact of SDS . . . . . . . . . .13

A Future without SDS . . . . .14

Advantages of Building Now. . . . . . . . . . . .14

SDS – Water for Generations . . . . . . . . . . . .15


Our Water System: A History of Visionary PlanningLong-term water needs might not have been the first thing on General William Jackson Palmer’s mind when he founded Colorado Springs in 1871. The beauty of Pikes Peak was his inspiration. At the mountain’s base, Palmer found the potential for a thriving resort community. But he also found an arid climate, with no river or large body of water nearby. So began the historic challenge of supplying a safe and reliable water supply to Colorado Springs.

The first water supply for Colorado Springs came from several shallow wells. To expand this supply, an early step under Palmer’s leadership was to dig a 12-mile trench to Fountain Creek called the El Paso Canal. This open ditch provided water for drinking, bathing and other needs, until 1876, when a plague of grasshoppers polluted it. Early citizens realized that a single source of water was ill-advised and began to demand a new water system. Water planning leaders set their eyes on Palmer’s inspiration – Pikes Peak – for another source of water.

As a next step, early citizens voted to create a municipal water system — an indication that voters considered the provision of safe

and reliable water to be a core function of local government. To provide for its citizens, the city constructed a series of dams, reservoirs and pipelines to bring water down from Pikes Peak called the South Slope, North Slope and Northfield Systems. Planning and construction of these early systems spanned more than half a century.

Success in building systems to collect and transport water directly from our closest mountains led to construction of even more elaborate systems to bring water from more distant mountains – across the Continental Divide – known as transmountain water.

First among these innovative projects was the Blue River System in the 1950s, which was instrumental in locating the Air Force Academy in Colorado Springs. Next was the Homestake System in the 1960s, which includes the Homestake pipeline. Today we rely on this pipeline to deliver up to 70 percent of the water used in Colorado Springs.

The addition of the Twin Lakes and Fryingpan Arkansas supplies in the 1970s and the Colorado Canal supply in the 1980s added to our diverse portfolio. Finally, the securing of our Exchange Rights in the 1980s doubled the potential benefit of transmountain water by providing an effective way to reuse those water supplies.

HIGHLIGHTS• Early citizens

discovered Fountain Creek could not provide a reliable water supply and built a series of dams, reservoirs and pipelines to use water from Pikes Peak.

• Our first transmountain delivery system, the Blue River System, was built in the 1950s and was instrumental in locating the Air Force Academy in Colorado Springs.

• Today we rely on the Homestake Pipeline, built in the 1960s, to deliver up to 70 percent of our water.


Key achievements in the development of Colorado Springs’ water system include: • The South Slope System development

started in the 1880s and includes seven reservoirs and related systems.

• The North Slope System development spanned 1900-1960 and includes three reservoirs and related systems.

• The Northfield System development spanned 1903-1970 and includes Rampart Reservoir.

• The Blue River System development spanned 1948-1966 and includes Montgomery and Blue River reservoirs, three tunnels and related collection systems, and a pipeline.

• The Homestake System development began in the 1950s as a partnership between Colorado Springs and Aurora and includes a pipeline, pump station, three reservoirs and related facilities.

• The Fryingpan-Arkansas Project, a federal project that includes Pueblo Reservoir, Twin Lakes Reservoir, Turquoise Reservoir, and a West Slope collection system.

• The Fountain Valley Authority pipeline and treatment plant, an additional Fry-Ark Project facility, was completed in 1985 to deliver water from Pueblo Reservoir to Colorado Springs and other communities in the region.

• Twin Lakes and Colorado Canal, Colorado Springs purchased controlling interest in these companies in the 1970s and 1980s, and includes a west slope collection system and Lower Arkansas Valley agricultural water rights.

• The Exchange Rights, decreed in the 1980s, are the foundation of SDS. The Exchanges allow us to reuse the majority of our water supply efficiently and affordably.

HIGHLIGHTS• Colorado Springs’

location far from a major water source requires visionary planning and innovative water projects.

• Beginning in the 1870s, Colorado Springs has built a complex water system that is now reaching its capacity.

• Our community’s quest to deliver water is chronicled in detail in The History of Colorado Springs’ Water Collection System.

• Building projects to ensure long-term stability of water supply has enabled us to support new businesses and military installations.


Water from Pueblo ReservoirThe Fryingpan-Arkansas Project, which includes Pueblo Reservoir, was authorized by Congress in 1962 to serve the agricultural and municipal needs of Southern Colorado and to provide flood control on the Arkansas River. Transmission of water to Colorado Springs from Pueblo Reservoir became possible when the U.S. Bureau of Reclamation completed the Fountain Valley Authority Pipeline from Pueblo Reservoir in 1985. Also benefiting from that pipeline are Fountain, Security Water District, Stratmoor Hills Water District, and Widefield Water District.

For more than two decades, Colorado Springs has benefited from short-term contracts with the Bureau of Reclamation for storing, conveying and exchanging our water using these facilities. Since 1958, El Paso County property owners have invested more than $70 million in property taxes used by the Southeastern Colorado Water Conservancy District to help repay the federal government for construction of the Fryingpan-Arkansas Project facilities and to pay for their operation, maintenance and replacement costs.

Water System Expansion Plans BlockedColorado Springs and Aurora had always planned to partner in the expansion of the Homestake System to meet additional future water needs. However, the Homestake II project met with opposition in Eagle County from environmental concerns.

Between the construction of Homestake I and the planned undertaking of Homestake II, a couple of key events occurred. First, Congress designated the location of the Homestake II diversion facilities as being within a wilderness area, and second, the Colorado Legislature passed House Bill 1041, giving counties land-use jurisdiction over matters of statewide concern, including the development of water resource facilities.

While Colorado Springs and Aurora moved the water rights for the project to originate from a location outside the newly designated wilderness area, Eagle County ultimately denied Colorado Springs a 1041 land-use permit for the Homestake II project, as it was envisioned at the time.

Two other options for Colorado Springs to increase water storage – the Elephant Rock Dam and Mount Princeton Dam – along with a “western delivery system” also met with strong opposition early in the planning phase from recreational interests and homeowners on the Upper Arkansas River. Subsequently, these plans were put on hold while Colorado Springs pursued more viable alternatives.

SDS and the 1996 Water Resource PlanColorado Springs water planners initiated a comprehensive long-term water planning process in the late 1980s focused on the development of solutions, and associated engineering studies and cost estimates, for meeting the water needs of Colorado Springs through the year 2040. Citizens participated in this process through surveys, public meetings and workshops.

In 1996, the Colorado Springs City Council passed a resolution formally adopting the resulting integrated plan, known as the Water Resource Plan. This plan set the direction of water development for years to come. For more than a decade, Colorado Spring Utilities has been implementing the four major components of this plan:

Source: 1996 Water Resource Plan

HIGHLIGHTS• Plans to expand the

Homestake System and a “western delivery system” were blocked by strong opposition and the denial of a 1041 land-use permit.

• In the late 1980s, water planners conducted extensive studies and public outreach to develop a long-term plan to set the direction of water development for years to come.

• For more than a decade, we have been implementing the four major components of the resulting 1996 Water Resource Plan.

• Implementation of the key elements of this plan has enabled us to delay the need to invest in a new delivery system by more than a decade.


The percentages shown represent the proportion of the future (2040) water demand that each component was expected to provide. Each of these major components has been completed or is underway. Successful implementation of the key elements of this plan has enabled us to delay the need to invest in a new delivery system by more than a decade.

ConservationConservation has always been an integral part of our water operations. In the 1940s, the city was fully metered to help customers gauge their water use and conserve, long before it was a standard practice in the industry. In the 1990s, the community opened the award-winning Xeriscape Demonstration Garden and developed extensive customer education programs. In the 2000s, Colorado Springs Utilities began to offer customers rebates for water-efficient appliances and technologies, and introduced conservation rates.

The drought we experienced in 2002 heightened customer awareness of the scarcity of this resource and changed our water use. Today, our per capita residential water use is among the lowest along the Front Range. Colorado Springs Utilities continues to encourage conservation as it is environmentally responsible, helps customers manage water bills, and stretches our existing supplies.

Non-Potable Water DevelopmentNon-potable water (treated wastewater and other untreated supplies) has long been used to irrigate parks, golf courses and other public properties in our community. In fact, Colorado Springs pioneered the recycling of treated wastewater for irrigation in the early 1960s and has the second-largest non-potable water system in Colorado.

In recent years, we have completed many improvements to maximize our use of non-potable water, including the conversion of the Drake Power Plant’s cooling towers to use non-potable water, saving more than 1 billion gallons of drinking water per year. The new J.D. Phillips Water Reclamation facility, completed in 2007, increased our potential non-potable water capacity by 10 million gallons per day.

Existing System ImprovementsIn addition to conservation and use of non-potable water, Colorado Springs undertook several projects to maximize the yield of our existing water system. These improvements include the expansion of the Otero Pump Station and Homestake Pipeline among others, and have added more than 15 million gallons per day (MGD) of water to our system’s firm yield.

Major Delivery SystemOur focus on the expansion of our conservation programs, the use of non-potable water and improvements to our existing water system have been instrumental in allowing us more time to plan, permit and construct the fourth major component of the plan – a new major water delivery system. The plan determined that 55 percent of our future water supply would rely on a new system.

A significant part of the Water Resource Plan was dedicated to identifying and evaluating dozens of different configurations for this project. Among those examined was what would become known as the Southern Delivery System.

HIGHLIGHTS• The 2002 drought

heightened customer awareness of the scarcity of water supply.

• Today our per capita residential water use is among the lowest along the Front Range.

• Colorado Springs has the second-largest non-potable water system in the state and has expanded our use of non-potable water in recent years.

• We have made improvements to increase the efficiency of the existing water system before constructing SDS.

• The 1996 Water Resource Plan identified that 55 percent of Colorado Springs’ future water supply would need to come from a new major delivery system.


What is SDS?SDS is a regional project that will bring water from Pueblo Reservoir to Colorado Springs and our partner communities, Fountain, Security and Pueblo West. The project will be built in phases based on customer demands.

Phase I – now under construction – will transport water from Pueblo Reservoir through approximately 62 miles of underground pipeline. The project includes these core components:

• Connection to the North Outlet Works of Pueblo Dam;

• Pipeline to transport raw water;

• Three raw water pump stations (50 MGD capacity each);

• Treatment plant (50 MGD capacity) to purify the water; and

• Treated water pump station and pipelines to move the water into the existing distribution system for delivery to our customers.

Phase I is estimated to cost $880 million in 2009 dollars (excluding financing). Construction began in 2010 with water delivery expected by 2016.

Phase II will be built in the 2020-2025 timeframe, or as more capacity is needed. This phase of SDS will add two reservoirs expand the raw water delivery capacity, and expand the water treatment plant and pump stations to a be able to meet a peak capacity delivery of of more than 100 million gallons per day (MGD) of treated drinking water. The new reservoirs will have different functions:

Upper Williams Creek Reservoir will serve as terminal storage of raw water closer to our community – providing critical storage during high demands and additional water for emergency situations.

This reservoir and 131-foot-tall dam will hold 30,500 acre feet of water and have a water surface area of 760 acres. It will be the largest body of open water in El Paso County – slightly smaller than Denver’s Cherry Creek Reservoir – with tremendous recreation potential, including boating, fishing, and hiking trails. Colorado Springs Utilities will conduct a public process to help determine

HIGHLIGHTS• SDS will bring water

from Pueblo Reservoir to Colorado Springs, Fountain, Security and Pueblo West.

• The project will be built in phases based on customer demands.

• Phase I construction is under way with water delivery expected by 2016.

• Phase II, anticipated for the 2020-2025 timeframe, will expand the system’s capacity and add two reservoirs.


the recreational uses and will work closely with the City of Colorado Springs, El Paso County and the Colorado Division of Wildlife to make this an amenity that our community can enjoy.

Lower Williams Creek Reservoir will serve a different purpose by helping us maximize the use of our water supplies. When we bring water over the Continental Divide from the Western Slope, we can use this water to “extinction” – getting more than one use out of it. Customers use this water, and then Colorado Springs Utilities treats it and returns it to Fountain Creek. This reservoir will enable us to divert these “return flows” from Fountain Creek and store them until we can exchange, or trade, this water for water that is stored in Pueblo Reservoir. We would then move the exchanged water through the SDS pipeline to Colorado Springs.

The timing of Phase II depends on our customers’ need for additional water. The construction cost of Phase II, not including financing, is anticipated to be between $387 million and $744 million, based on preliminary engineering estimates. We will monitor demand so that this investment can be phased in as it is needed.

The Right SolutionA pipeline from Pueblo Dam is the most cost effective option among the dozens of possible combinations that were considered for delivering the water our customers need for the next several decades. A pipeline from Pueblo Dam is the right solution because it:

• Makes use of water rights we already own on the Arkansas River. In this era of water scarcity, acquiring new water rights to replace those we already own would would be very difficult, if not impossible.

• Is the most cost-effective means for delivering water our communities need for the future.

• Provides significant operational advantages coming from a stable body of water such as Pueblo Reservoir.

• Will increase our overall system reliability in the event that other parts of our system need maintenance or repair.

• Requires lowest energy use, resulting in the lowest greenhouse gas emissions of those studied in the EIS.

• Has fewer environmental impacts and will allow the protection and preservation of historic, cultural, and natural resources.

• Follows through on decades of sound planning and capitalizes on previous investments.

Planning and Permitting – How We Got HereIn the course of more than two decades of planning and permitting, SDS has been thoroughly reviewed by numerous independent government and regulatory agencies at the local, state and federal level.

Decades of Support from City Leaders Three different mayors and at least eight previous city councils have been involved in the planning of SDS. These leaders have worked hard over the years to establish and maintain relationships with their colleagues in the region which has been key to the project’s success. Important regional relationships made it possible to reach informal and formal agreements that support SDS and other water needs in Southern Colorado.

IGAs Paved the WayTo pave the way for SDS, Colorado Springs Utilities negotiated and signed important formal agreements with other entities that have water interests in our region. These agreements formally outline commitments to our neighbors and established an early foundation of support for the project.

• In 2003, Pueblo, Colorado Springs, several other regional entities, and the Pueblo Chieftain, signed the Arkansas River Water Preservation Principles – a non-binding set of goals that served as a foundation for how the communities will work together to establish more formal agreements regarding water issues of mutual interest.

HIGHLIGHTS• A pipeline from

Pueblo Dam is the most cost-effective, environmentally responsible option and leverages our customers’ previous investments in this federal facility.

• There are significant operational advantages coming from a stable body of water such as Pueblo Reservoir.

• Three different mayors and at least eight previous city councils have been involved in the planning of SDS.


• In March 2004, Colorado Springs Utilities, the city of Pueblo and the Pueblo Board of Water Works entered into a Three-Party Intergovernmental Agreement. This agreement established each party’s participation in the Arkansas River Flow Management Program to maintain more consistent flows on the river through Pueblo. Participants also agreed that participation in the flow program is tied to support of the SDS project connecting to Pueblo Dam.

• In May 2004, Colorado Springs Utilities, the Pueblo Board of Water Works, the Southeastern Colorado Water Conservancy District, and the cities of Pueblo, Aurora, and Fountain entered into a Six-Party Intergovernmental Agreement essentially adding more entities in support of the same principles established in the Three-Party Agreement.

In addition to a commitment to support the Arkansas River Flow Program and SDS originating from Pueblo Dam, the signatories agreed to cooperate in developing downstream storage to manage the exchange of their water rights and the better utilization of Fryingpan-Arkansas Project facilities, including legislation to potentially expand Pueblo Reservoir for additional storage (also known as the Preferred Storage Options Plan or PSOP).

Federal Environmental Review and Approval Since the SDS project requires a major federal action by the U.S. Bureau of Reclamation to issue long-term storage, exchange and conveyance contracts for using Pueblo Reservoir, we were required to develop an Environmental Impact Statement (EIS) under the National Environmental Policy Act (NEPA). The EIS process required the analyis of various alternatives to the project and the studies of the environmental impacts caused by each alternative.

The SDS EIS process was managed by the U.S. Bureau of Reclamation with input from cooperating agencies, including the U.S. Army Corps of Engineers, the U.S. Fish and Wildlife Service, the U.S. Bureau of Land Management and the U.S. Environmental Protection Agency. Hundreds of individual project components were considered before identifying seven alternatives for more intensive analysis, including the SDS pipeline from Pueblo Reservoir.

Rigorous studies and a comprehensive public process were conducted as part of the EIS covering these primary issues, among many others:

1. Surface Water Flow 2. Surface Water Quality 3. Channel Stability and Morphology 4. Sedimentation 5. Water Rights 6. Fish and Other Aquatic Life 7. Wetlands and Other Waters of the U.S. 8. Wildlife 9. Socioeconomic Conditions 10. Recreation Resources

The Final EIS produced hundreds of pages of technical information, and hundreds of public comments were received and addressed during the EIS process. The Bureau of Reclamation maintains a website specifically devoted to documenting the SDS EIS process at www.sdseis.com.

In March 2009, after five and a half years of analysis and public process, the Bureau of Reclamation issued its Record of Decision for the SDS project identifying the pipeline from Pueblo Reservoir as the Preferred Alternative. This alternative was determined to be the most environmentally responsible solution to deliver water to Colorado Springs and our partner communities, and it has the lowest capital investment and the lowest cost for operations and maintenance of the alternatives studied under the EIS.

HIGHLIGHTS• Regional

intergovernmental agreements established a critical foundation of support for SDS from Pueblo Reservoir.

• The Bureau of Reclamation conducted a five-and-a-half-year, rigorous analysis and public process to produce a Final Environmental Impact Statement for the SDS project.

• The pipeline from Pueblo Reservoir was identified as the Preferred Alternative.


Pueblo County 1041 Permit Pueblo County is one of the counties in Colorado that has implemented 1041 land-use regulations. In August 2008, Colorado Springs Utilities filed an application with Pueblo County for a land-use permit for the SDS project.

In April 2009, after months of active negotiations and extensive public process, the Pueblo County Commissioners voted unanimously to approve a Pueblo County 1041 land-use permit for SDS – a historic milestone for the project. The 1041 permit terms and conditions cleared the way for SDS, while requiring the mitigation of SDS construction impacts and operation and providing protection for Fountain Creek, Pueblo Reservoir, landowners and the residents of Pueblo County. In addition to outlining the terms and conditions for SDS construction in Pueblo County, the agreement led to the commitment of a $50 million contribution to Fountain Creek administered through the newly established Fountain Creek Watershed, Flood Control and Greenway District. The contribution will be made in installments begining when the SDS pipeline is delivering water to Colorado Springs.

Valuable Approvals and Permits Water projects in the Western United States are becoming increasingly challenging to permit and construct given the ever-changing regulatory and political climate. Several major water projects in the state still are in the permitting phase and are years away from construction. A number of these water providers started permitting for their projects around the same time as SDS. And, the SDS project is the only one to have cleared these hurdles. The fact that SDS has obtained all of its major permits and approvals puts our community in an enviable position.

The effort to obtain the permits and approvals to construct the SDS project has taken years to complete. It also has required a considerable financial investment by our customers. Each of the permits has a limited “shelf life” and would be very difficult, if not impossible, to replicate or replace. Making the most of these approvals and permits to build SDS now is the most cost-efficient use of our ratepayers’ significant investment to obtain them.

Essential Investment Long-term SolutionEl Paso County is now the most populous county in the state. According to the Colorado Demography Office, our county’s population is expected to grow by more than 70 percent by 2050. Our need for water will increase as our population increases. Half of the expected growth will come from the children and grandchildren of existing residents. Business and military facility expansions also will contribute to increased demand. Colorado Springs Utilities must plan ahead to have an adequate supply of water when we need it.

Balance of Many FactorsScheduling the construction of a large project such as SDS is a challenging tug-of-war balancing multiple factors, risks, and impacts. In determining the timing for SDS, Colorado Springs Utilities has carefully considered the rate effects on customers along with other very important factors, including supply and demand risk, permit constraints and financial/economic considerations.

Based on rigorous analysis of hydrology, our water system, historic and projected water demands, and the state demographer’s population growth projections, Colorado Springs Utilities’ customer demands could exceed supply as early as 2016. Every year that a new water delivery system is delayed past 2016 will increase the risk that our community will not have the amount of water needed.

HIGHLIGHTS• In April 2009, the

Pueblo County Commissioners unanimously approved a 1041 land-use permit for SDS.

• As part of the permit terms and conditions, Colorado Springs will contribute $50 million to the Fountain Creek Watershed, Flood Control and Greenway District once SDS is delivering water to Colorado Springs.

• Water projects are becoming increasingly difficult to permit and construct given regulatory and political challenges.

• The SDS permits have a “shelf-life” and would be very difficult, if not impossible, to replicate or replace.

• SDS is a long-term solution to meet water supply needs over the next several decades.

• Projections show that customer demands could exceed supply as early as 2016.


2003-2009 National Environmental Policy Act ReviewThe U.S. Bureau of Reclamation’s 5½-year review under the National Environmental Policy Act included a Draft Environmental Impact Statement, Supplemental Information Report, Final Environmental Impact Statement and a Record of Decision that outlines requirements for avoiding or mitigating environmental impacts.

• Draft Environmental Impact Statement (February 2008); public comment period starts

• Public comment period ends (June 2008)

• Supplemental Information Report (SIR) (October 2008); public comment period starts

• SIR public comment period ends (November 2008)

• Final Environmental Impact Statement (December 2008)

• Record of Decision issued (March 2009)

APRIL 2009 Pueblo County 1041 PermitThe Pueblo Board of County Commissioner approved an historic 1041 land-use permit that will mitigate the impacts of SDS construction and operation and provide protection to Fountain Creek, Pueblo Reservoir, landowners and the residents of Pueblo County.

JULY 2009 Utilities Board approvalColorado Springs Utilities Board approved moving forward with SDS from Pueblo Reservoir and a 2016 in-service date.

JAN. 2010 Fountain Creek Watershed, Flood Control and Greenway District Approval

The Fountain Creek Watershed, Flood Control and Greenway District voted unanimously to support SDS components that fall within the Fountain Creek Corridor and recommended approval to the El Paso County Planning Commission for SDS facilities in El Paso County outside the Corridor but within the Fountain Creek watershed.

MARCH 2010 El Paso County Location Approvals

The El Paso County Planning Commission passed a series of resolutions for approval of land use for the construction of major SDS project components within unincorporated El Paso County. Individual site development plans are being reviewed and approved by County staff.

APRIL 2010 State Water-Quality 401 Certification

The 404 permit application automatically requires a water-quality review by the Colorado Department of Public Health and Environment (CDPHE). The 401 certification process evaluates water quality impacts and mitigation measures for the project. The CDPHE approved the state water quality certification for SDS.

MAY 2010 404 Permit | U.S. Clean Water Act

The Army Corps of Engineers approved a 404 Permit, which is required under the U.S. Clean Water Act because the project will have permanent and temporary impacts on jurisdictional wetlands.

MAY 2010 Fish and Wildlife Mitigation Plan

The Colorado Water Conservation Board and Colorado Wildlife Commission approved a Fish and Wildlife Mitigation Plan developed in partnership with the Colorado Division of Wildlife. The plan outlines projected impacts to fish and wildlife as a result of SDS operations and provides a blueprint to address those impacts.

MAY 2010 City Council approval of water rate adjustments for 2011 and 2012

Colorado Springs City Council approved phased-in water rate adjustments needed to fund initial construction of the SDS project and costs for operating and maintaining the existing water system.

Southern Delivery System Permits/Approvals Timeline


Reliable Water for All CustomersThe 76-mile-long Homestake pipeline, our primary water delivery system, crosses rugged mountain terrain and is nearly 50 years old. Man-made water systems require ongoing repairs and maintenance. The Homestake System alone has experienced seven outages in the last 10 years. Colorado Springs relies heavily on this delivery system – as it nears its full capacity – and a prolonged outage could have severe consequences for water availability and reliability for all of our customers. SDS will provide an essential backup to mitigate that risk and enable Colorado Springs Utilities to take this pipe line and other parts of the system out of service for extended repairs as needed. SDS will provide an additional means to access our water using Pueblo Reservoir.

Protection from Supply Uncertainties A new water delivery system will become increasingly important as climate variability and other future uncertainties impact our existing water supply. An essential benefit of SDS is preparedness for water shortages through diversification of our water supply sources, giving us access to supplies that may not be otherwise available to us.

DroughtColorado Springs’ semi-arid climate is prone to periodic drought. From 1999-2005, the snowpack from mountain watersheds that we rely on to replenish our reservoirs was drastically lower than normal. As a result, Colorado Springs Utilities was forced to severely limit our customers’ outdoor watering in 2002. Even with stringent water restrictions, the levels of local reservoirs dropped significantly and took years to return to normal.

SDS will help protect our community from the effects of inevitable drought cycles by having

another way to deliver our water from Pueblo Reservoir, and the Phase II Upper Williams Creek Reservoir will provide a “water savings account” closer to home.

Colorado River ShortagesUp to 70 percent of our water comes from the Colorado River and its tributaries. The Colorado River Basin is currently experiencing a prolonged drought. Storage levels in the major reservoirs on the Colorado River – Lake Powell and Lake Mead – are causing great concern that our supply of water from the Colorado River could be reduced as water demand in Colorado and the Southwest outstrips the river’s supply. This could occur if conditions trigger a curtailment under the Colorado River Compact – the set of laws and agreements that govern the allocation of the water in the Colorado River. SDS protects us from this situation by giving us the ability to diversify our water supply so we are not overly dependent on the Colorado River.

Water for EmergenciesAnother major risk related to supply diversification is the threat of a catastrophic wildfire event in our mountain watersheds. Wildfires in our watersheds can damage water quality, physical structures and potentially cripple our water system operations. SDS provides us with additional water supply located generally outside the wildfire threat area. This would be extremely valuable in an event like the “Hayman Fire.”

HIGHLIGHTS• The Homestake System

has experienced seven outages in the last decade.

• SDS will ensure we can continue reliably delivering water to all our customers even when existing pipelines are out of service for extended repairs.

• SDS will protect Colorado Springs from water supply uncertainties related to climate variability, drought and shortages on the Colorado River.


Improvements to Fountain Creek Fountain Creek plays an important role in our water operations. Since we use the creek to convey our return flows back to the Arkansas River for subsequent use, it serves essentially as a component of our infrastructure – one that we have a responsibility to help maintain.

The 1041 land-use permit approved by Pueblo County for SDS includes a number of requirements for avoiding or mitigating impacts to Fountain Creek. The Environmental Impact Statement and Record of Decision by the U.S. Bureau of Reclamation also contain a number of requirements for avoiding or mitigating impacts to Fountain Creek. In many cases, the mitigation planned as part of SDS will actually make the health of the creek better than current conditions.

The monetary mitigation from SDS can also be used to leverage additional state and local funding for more projects to improve and protect this important waterway and create a regional amenity for many communities to enjoy.

Funding Major Water ProjectsCombination of Rates and BondsRate increases are a necessary component of investing in large capital projects. While the majority of SDS will be funded by issuing 40-year bonds, rate increases are needed to help fund debt service payments. Colorado Springs Utilities, and other utility service providers, typically use bonds (or debt) to pay for large infrastructure projects, which lessens the immediate impact on rates.

No single generation could afford to pay for an entire water system. People who live in Colorado Springs today are benefiting from the investments that their parents and grandparents, and other residents have made in our existing water system. By using bond funding, the costs for SDS are being spread over 40 years so that future beneficiaries will share in the investment.

Phased-in Approach to Rate IncreasesColorado Springs Utilities has developed a phased-in rate plan that amounts to water rate increases of 12 percent each year beginning in 2011 and ending in 2016. These increases are shared by residential customers, as well as commercial and industrial customers.

The development industry also is sharing the cost to build SDS. Development (tap) fees have increased by 138 percent since 2002. For each new home that is built, builders and developers pay an average of $9,000 or more for a new water tap. That means that new residents — either our children staying to raise their families or people who move into our community, have been and will continue to pay their share for SDS.

The planned water rate increases are not all related to SDS. About two-thirds of the rate increases will fund SDS; the other third will be necessary to fund maintenance and operation of the existing water system, not including SDS.

Concern for customer impacts was a key factor in the construction schedule approved by City Council in July 2009. Stretching construction over a longer period, with an in-service date of 2016, is allowing for rate increases to be phased in over time to ease the effect on customers.

HIGHLIGHTS• In many cases, the

mitigation planned as part of SDS will make the health of Fountain Creek better than current conditions.

• The majority of SDS will be funded by issuing bonds that will help spread the cost of the project over 40 years so that future beneficiaries will share in the investment.

• Stretching construction over a longer period, with an in-service date of 2016, is allowing for rate increases to be phased in slowly, over time to ease the effect on customers.

• About two-thirds of the water rate increases will fund SDS, with the remaining funding used to operate and maintain the existing water system.


SDS Compared to Previous InvestmentsResidents of Colorado Springs have made similar investments in the water projects that we rely on today.

From a historical perspective, the cost of building SDS (as measured by bonds issued for financing) for existing water customers is significantly less per capita than other major water projects built throughout the history of Colorado Springs. Additionally, the water rate increases necessary to build SDS are less than or similar to rate increases necessary to build previous parts of the water system, as measured per capita and adjusted for inflation.

While water rates are expected to double from 2009 to 2016 as we construct SDS, this is not unprecedented. Customer water rates also doubled as we constructed the Homestake pipeline project in the 1960s. Following this period of investment, rates leveled off and customers benefited from decades of stable water rates.

At today’s rates, 1 gallon of water costs our customers approximately one-half cent. By 2016, water is expected to cost approximately 1 cent per gallon, which includes miles of transport, treatment and reliable delivery to customer homes and businesses.

Economic Impact of SDS The Southern Delivery System is an essential investment in the community’s water delivery system, and it will have a very important economic impact, helping to drive the local and regional economy over many years by contributing to the creation of thousands of jobs and billions of dollars in earnings for the population.

Job increase 2011-2015: Up to 786 construction-related jobs gained in the region. New jobs: Estimated impact of more than 13,000 new jobs by 2020 and the potential for 36 percent greater job growth by 2050 generated by a growing economy certain of its water supply. Return on investment: Virtually the entire construction cost of SDS Phase I will come back to the community each year after 2020 in increased individual earnings due to employment gains.

Source: Economic Impacts of the Southern Delivery System on the Regional Economy of Pueblo, Colorado Springs and Surrounding Areas, commissioned by the Chamber of Commerce Center for Regional Advancement and conducted by Summit Economics LLC. Colorado Springs Utilities helped fund the study.

HIGHLIGHTS• The investment in

SDS for existing water customers is substantially less per capita than other major water projects built throughout the history of Colorado Springs.

• Customer water rates also doubled as we constructed the Homestake pipeline project in the 1960s, followed by a long period of rate stability.

• By 2016, water is expected to cost approximately 1 cent per gallon, which includes miles of transport, treatment and reliable delivery to customers.

• According to a recent economic study, nearly the entire construction cost of SDS Phase I will come back to the community each year after 2020 in increased individual earnings due to employment gains.

Comparison of Major Water Projects in Colorado Springs' HistorySouth Pikes Peak Homestake SDS

Decade of Construction 1880s 1890s 1960s 2010sBonds Issued/Capita Adj. for Inflation /a

$ 2,440 $ 2,417 $ 4,348 $ 1,610

Population 4,226 11,140 70,194 416,427 Bonds Issued in period (in 000's)

$ 312 $ 634 $ 42,100 $ 670,400

Bonds Issued/Capita /b $ 74 $ 57 $ 600 $ 1,610 /a The inflation adjustment converts the value of the bonds per capita into 2010 dollars (adjusted for inflation) so a direct comparison is possible. /b Bonds issued stated in nominal dollars (not inflation adjusted) in the decade supported by the population at the beginning of the decade bonds were issued

Source: CSU, Time Capsule, Summit Economics


A Future Without SDSAs a utility, we have a responsibility to plan ahead to ensure our customers will have water when they need it. SDS is critical to meet our community’s water needs for the next several decades.

Without additional water, higher rates would be needed to manage a limited supply. Outdoor watering restrictions could be necessary again, and possibly, become permanent. In addition, as existing pipelines age, the risk for long-term outages increases.

While we own the rights to more water, we need a new delivery system to increase our existing system’s capacity to transport the additional water. Colorado Springs could attempt to implement smaller projects over time, but that approach was carefully considered and found to cost our community more without ensuring the long-term stability of supply and added reliability that SDS provides. Additionally, those smaller projects would require significant lead time and additional costs for planning, designing and permitting.

SDS is critical to maintain the water rights we already own and to pursue additional rights in the future. Also important is our ability to store additional water in Pueblo Reservoir under long-term agreements for SDS with the U.S. Bureau of Reclamation. SDS will provide us the flexibility to further diversify our water supply.

Our community has already made a major investment in SDS ($125 million through February 2011) on permitting, engineering/design, program management, land acquisition, NEPA analysis, and construction. We have already acquired more than half of the 300 parcels of land – mostly easements – required to build SDS.

If the project were stopped before completion, it would mean our customers wouldn’t receive the additional water for the investment we’ve already made. Costs already incurred for SDS – and those required to postpone or cancel the project – would still mean rate increases, however ratepayers would receive no benefit from their investment.

Failure to proceed with SDS would result in financial consequences that could lead to downgrades in Colorado Springs Utilities’ bond rating, which is similar to a credit rating for an individual. That could mean much higher costs to fund any utility projects that are needed. Higher borrowing costs mean customers pay more.

A future without SDS could jeopardize our ability to meet future water demand, the reliability of our water system, our valuable permits and approvals, and our community’s economic stability.

Advantages of Building NowNow is an opportune time to build SDS. Contractors and vendors are eager for the opportunities made available by SDS construction. Bids on some of the initial work for the project have come in well below the original estimates. With the economic downturn, prices now are lower for construction materials and labor. Regional contractors and suppliers have already benefitted from early SDS construction contracts.

Now is an optimal time to borrow money for construction while interest rates are low. For the $180 million in bonds that were issued in September 2010, we received a historically low interest rate of 3.62 percent, which will save customers millions over the 40-year repayment period.

The availability of water is critical to retaining and attracting businesses to the region. SDS puts us in the position to welcome new businesses – and support military expansion plans – with the assurance we can provide for their long-term needs. Water is the backbone that supports future economic vitality, and our community’s prosperity relies on the availability of water. If we fail to ensure a reliable future water supply, businesses will choose to locate in other communities that have a more stable water outlook.

HIGHLIGHTS• Through February 2011,

our community has invested $125 million in the SDS project.

• If the project were stopped before completion, customers would still experience rate increases to pay for the investment already incurred, without the long-term benefits that SDS provides.

• Without additional water, higher rates would be needed to manage a limited supply and we would eventually be forced to implement outdoor water restrictions.

• Now is an opportune time to build the project and take advantage of lower costs for materials, services and interest rates on borrowing.

• SDS will provide a stable long-term water supply to attract and retain new businesses.


SDS: Water for GenerationsColorado Springs Utilities has a history of visionary and responsible planning to serve its citizens. We have now reached another chapter in that legacy of providing reliable water service to our community. Envisioned in the 1980s, planned in the 1990s, and initiated in the 21st Century, Colorado Springs Utilities has made a significant investment in the planning, permitting, and financing for the next major delivery system for our community – the Southern Delivery System. SDS is one of the few water projects in the state of Colorado that has obtained the necessary permits and is now under construction. SDS will ensure our community has a stable supply of water for the next several decades. SDS is a major part of the legacy our generation will leave for the next.

SDS PHASE I• Pueblo Dam connection

• 62 miles of underground pipeline

• 1 water treatment plant

• 3 water pump stations

COMMUNITIES SERVED• Colorado Springs

• Fountain

• Security

• Pueblo West

CONTACT INFORMATIONSouthern Delivery System

Colorado Springs Utilities

P.O. Box 1103, MC 930

Colorado Springs, CO

Phone: 719-668-7582

Toll Free: 866-719-4737

E-Mail: [email protected]

Website:

www.SDSwater.org

sds whitepaper

Documents