Town strikes geothermal water agreement with Springs Resort

Taking another stab at an issue that stymied the Pagosa Springs Town Council for much of the latter part of 2008 — a proposed lease on 400-plus gallons per minute of geothermal water to The Springs Resort — Town Manager David Mitchem found a compromise that satisfied both sides of the issue and quickly put the matter to rest.

With the title of a “Geothermal Water Tap and Economic Development Agreement,” Mitchem’s resolution provides 450 gpm to The Springs Resort (350 gpm of effluent water from the town’s geothermal system, with an additional 100 gpm taken after use in the proposed geothermal greenhouses) with a tap agreement similar to agreements provided to area residents, businesses and local government.

Addressing council, Mitchem said, “The distinction between a lease and a tap is that a tap is perpetual. Rates may change over time but a tap is perpetual. This agreement is beneficial to both parties, the town and The Springs Resort.”

In spelling out the economic benefits for the town that the agreement implied, Mitchem added that The Springs Resort’s new hotel would potentially add 84 new jobs to the community with a $1.7 million total payroll; a $285,511 increase in annual tax revenues; and a $4.8 million “positive economic impact in our community from additional sales.”

However, the agreement differs from other tap agreements in how it is structured, with The Springs Resort locking in a fixed price over the next 14 years with an up-front payment of $15,951 and an additional $116,700 paid in December should the agreement be finalized.

Council had little issue with the agreement. In fact, the only point of contention was with how the December payment would be applied. In the agreement, $100,000 of that payment was to be used to install solar infrastructure for the geothermal control building.

“I’m concerned that it’s not the best way to spend that money,” said council member Shari Pierce. “I think it’s a good idea, but I don’t think we should lock ourselves into it.”

“I think it’s a good idea,” said Geothermal Supervisor Phil Starks. “We could market that it (the geothermal system) is 100-percent green.”

Starks added that the solar system would generate all the power needs for the control building and the system, saving the town around $2,500 in energy costs.

However, council was firm that the money should not be strictly dedicated for a solar array. Council member Darrel Cotton said, “I don’t think we should designate money for anything, at this point. Make that a ‘may’ and not ‘shall’ and I’d be for it.”

Taking Cotton’s stipulation as a condition for a motion to approve, the resolution was passed unanimously by council, finally giving The Springs Resort the water it has been requesting for more than a year.

During 2008, the town and The Springs Resort met several times in an attempt to negotiate a lease — discussions that essentially went nowhere. Hoping to get assurances on the available water, The Springs Resort asked for a 50-year lease from the town. The town could not grant such a long-term lease due to limitations in the town charter that held leases to a 10-year term.

In order to accommodate The Springs Resort, the town would have been required to amend the Town Charter through a special election — with no assurances that the voters would approve the amendment.

In an attempt to sidestep the 10-year lease limit, the town proposed town staff draft an agreement that offered multiple 10-year leases to the Springs Resort as well as stipulations for lease renewals. That agreement was not acceptable to The Springs Resort, as it was looking for longer-term assurances on the water.

With Mitchem’s resolution, both parties were satisfied. The town was able to provide the water without violating its charter while The Springs Resort managed to get the water with, as Mitchem said, a perpetual agreement.

Not all present at the meeting were satisfied. Marsha Preuit, owner of The Spa Motel, speaking when the matter was opened for public comment, said, “I heard Mr. Holt (council member Stan Holt) call it a lease, and I feel that’s exactly what it is. You’ve just given it another name.”

Council meets again on Tuesday, July 7 at 5 p.m. in council chambers at Town Hall.

jim@pagosasun.com