At its Nov. 6 meeting, the San Juan Water Conservancy District (SJWCD) Board of Directors voted to enter into a settlement agreement proposed by the Pagosa Area Water and Sanitation District (PAWSD), marking a key step in resolving the litigation between the districts.
The litigation concerned PAWSD’s attempts to sell the Running Iron Ranch, where the SJWCD is working to build a reservoir, over the objections of the SJWCD.
The litigation was initiated by PAWSD when it began an effort to establish that the terms of a three-way agreement between the SJWCD, PAWSD and the Colorado Water Conservation Board (CWCB) on the management of the property and the reservoir project allowed PAWSD to sell the ranch without the SJWCD’s consent.
Following various filings and summary judgment by Archuleta District Court Judge Justin Fay on parts of the case, the districts initiated mediation and negotiations over a settlement in March.
The SJWCD board unanimously approved entering into and releasing the settlement agreement.
The board also unanimously voted to approve releasing a brief public statement proposed by SJWCD board member Candace Jones.
The statement reads, “Today, the San Juan Water Conservancy District voted to enter into a settlement agreement with the Pagosa Area Water [and] Sanitation District. Finishing the settlement agreement is an important step toward a final resolution of litigation PAWSD started in December 2024.
“Getting from terms outlined by the Districts in March to today’s vote has been a long process. The Conservancy District accepted a revision of the settlement agreement PAWSD proposed yesterday. We look forward to the PAWSD board acting at its November 16 meeting to formally approve the settlement agreement.
“Failure to complete the settlement agreement would likely return the Districts to active litigation. That outcome is not in the best interest of either District or the community.”
The PAWSD board discussed the litigation in an executive session at a special meeting on Nov. 5, but did not take any public votes or make any public statements on the issue.
The settlement agreement approved by the SJWCD includes a number of terms that will make significant impacts on the management and structure of the ranch and the ongoing reservoir project.
It states that the SJWCD will retain a real estate broker and sell off a portion of the Running Iron Ranch not needed for the reservoir project that can be sold off at a price that will fully pay off Loan A, the loan from the CWCB to purchase the ranch that PAWSD is currently making payments on.
The sale must also pay off PAWSD’s $219,104.95 principal portion of the 2026 Loan A payment and any annual payments PAWSD makes between the approval of the settlement and the sale.
The purchase of the ranch was initially supported by a $9,219,363 loan to PAWSD and a $1 million grant to the SJWCD.
A 2015 three-way agreement between PAWSD, the SJWCD and the CWCB divided the loan into a $4,290,930.32 Loan A to be repaid over 20 years ending in 2036 and a $4,565,000 Loan B to be repaid over 20 years beginning in 2036. Both of these loan values do not include interest, which is 1.75 percent for Loan A and 3.50 percent for Loan B.
The settlement agreement also indicates that the SJWCD will be responsible for negotiating a new or amended loan agreement for Loan B with the CWCB, which will now be repaid by the SJWCD.
The SJWCD will be responsible for negotiating the conveyance of PAWSD’s remaining interests in the ranch and its associated Park Ditch Company water shares to the SJWCD and for negotiating the CWCB releasing PAWSD from its obligations to the CWCB related to the reservoir project.
The agreement indicates that, if the SJWCD does not enter into a contract to sell a portion of the ranch and reach an agreement to release PAWSD from its CWCB obligations prior to Dec. 31, 2027, PAWSD will have the right to terminate the settlement agreement.
The settlement states that the districts will both file to dismiss the lawsuit between them with prejudice and with each party paying its own attorney’s fees and costs following the completion of the transactions outlined in the agreement.
“The Districts’ only remaining claims against each other shall be the potential claims stemming from the Districts’ performance (or lack of performance) of the obligations set forth in this Agreement,” the settlement states.
The settlement also requires PAWSD to cooperate with the SJWCD’s ongoing community water supply study work and its planning for the reservoir, with the bounds of Colorado open records laws and its nondisclosure agreements.
The settlement adds that PAWSD will provide “reasonable non-financial support” for the SJWCD planning efforts for the reservoir and will acknowledge the reservoir as a potential water supply option in its own water demand growth planning.
It adds that PAWSD also agrees to reasonably cooperate and provide assurances of support in future water court filings concerning conditional water rights associated with the reservoir project.
These terms will expire if these conditional water rights are canceled, if the SJWCD sells the ranch, if it formally abandons the reservoir project or by Dec. 31, 2029.
josh@pagosasun.com
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