The Pagosa Area Water and Sanitation District (PAWSD) Board of Directors approved a response to a letter from Archuleta County Assessor Johanna Tully-Elliott concerning the impact of PAWSD’s drought restrictions on agricultural water users at its July 30 meeting.
Tully-Elliott’s letter, dated July 10, states that she is writing to the PAWSD board regarding concerns from members of the county’s agricultural community about how the district’s rate structure is applied to agricultural operations in the district.
She indicates that, in her understanding, these operations may not be currently recognized as businesses and thus may have to pay higher water rates when their usage exceeds 4,000 gallons due to the district’s current drought restrictions.
PAWSD is currently in stage two drought, and all residential water use above 4,000 gallons per month is billed at double the normal water rate.
“My purpose in writing is not to advocate for any particular rate schedule, but rather to provide clarification regarding the legal nature of agricultural classification under Colorado law and the rigorous standards agricultural producers must satisfy to qualify for that classification,” Tully-Elliott’s letter states.
She explains that Colorado law defines a farm or ranch as a property operated primarily for the purpose of obtaining a monetary profit.
She indicates that the assessor’s office frequently and thoroughly reviews properties that hold an agricultural classification to determine that they meet this classification and to distinguish them from rural residential properties or hobby farms.
“Here in Archuleta County, our agricultural producers preserve thousands of acres of open space, support local food production, sustain livestock operations, maintain working landscapes, and contribute meaningfully to our local economy. Water is not merely a residential utility for these operations - it is an essential business input without which agricultural production cannot occur,” she states.
She clarifies that she does not believe that all properties with agricultural activities or livestock should be classified as businesses, only those that are classified as agricultural land and operate as a business by the county assessor.
“While I fully recognize that the Pagosa Area Water and Sanitation District has independent authority to establish its own rate structure, I respectfully encourage the Board to consider whether Colorado’s statutory recognition of farms and ranches as profit-driven agricultural businesses should be reflected when evaluating water rate policies. Recognizing bona fide agricultural operations as business enterprises for purposes of water rates would acknowledge the legal framework established by the State of Colorado and the essential role agriculture continues to play within our community,” Tully-Elliott states.
PAWSD Programs Manager Renee Lewis opened discussion of the issue at the PAWSD board meeting, explaining that staff prepared a proposed response to Tully-Elliott’s letter.
“I honestly don’t have any ownership in this,” Lewis said. “I just wanted to provide you with something that reflected what their request might look like in our current structures.”
She explained that the substantive portion of the response deals with the impacts of changing from a residential to commercial account.
According to Lewis, this would likely result in an increase in equivalent units (EUs), which would involve paying more capital investment fees, as well as likely leading to a higher monthly rate for some users.
“I think, in general, moving a residential account that uses a bit of treated water for irrigation purposes or other outside uses … might actually cost more in the long run than just paying the drought tier multiplier while we’re in stages one and two,” she said. “That was what ended up being my conclusion and what I tried to convey in the letter.”
PAWSD board member Glenn Walsh commented that the district’s response should emphasize that customers are free to present proposed breakdowns of residential and commercial uses to PAWSD.
However, he added that the district has a “fairly generous” residential water use policy for large homes and that, although this classification might cost somewhat more in drought years, establishing a commercial account could cost $10,000 or more.
“You could be costing yourself a whole lot of money,” Walsh said, by pursuing a commercial account instead of taking advantage of PAWSD’s “very generous” residential EU policy.
The district is open to people making that reclassification if they wish to do so though, he added.
PAWSD board chairman Gene Tautges commented that he knows people who use PAWSD water and have large gardens or horses, although he stated that some of these people also have water rights in irrigation ditches and use this water for their livestock or garden.
“Like the letter says, feeding horses potable water or irrigating farmland with potable water is just not a good idea,” Tautges said. “It’s a waste of a real valuable resource, so I think all of these connection forms are gonna say residential on them and if they want it to be something else, it needs to follow the rules of the district.”
Walsh commented that there are thousands of homes in the community that now operate as businesses, but “they insist on being taxed at a residential rate. So, I’m not open to them coming over and saying that ‘We’re businesses, but we should be exempt from the residential surcharge or the 4,000 gallon limits that residents get’ unless you want to go and asked to be assessed with a commercial rate of taxation. … I think we should treat them equally with every other business but not, maybe they don’t appreciate how difficult other businesses have it, you know, with taxes and fees. … I think we should always be open to folks who want their setup to be judged and divided between residents and commercial, but could be a very rare setup where that’s worthwhile.”
Walsh commented that there are also a large number of “hoops” to obtaining a commercial classification.
“If we start designating commercial as exempt, we’re going to get more and more excuses for commercial,” said PAWSD board member Alex Boehmer. “And we have a small amount of the water in the county that actually flows through the county, and I think we need to focus that on the ratepayers that we have that are existing based on how the residences were set up and keep it residential. And, if they wanna have horses, that’s a choice — and I love horses, I’ve spent a lot of time riding horses, it’s awesome — but having horses and cows and using domestic water for that, you gotta understand the costs and the risks, and it’s now up to the rest of our ratepayers to kind of eat it over that.”
Walsh commented that the cost differential for water in drought stage two is likely to not be significant compared to the cost of purchasing an additional EU for a commercial operation.
Boehmer commented that the county contains large areas of rural farmland where cattle operations could be more successful than trying to water livestock with treated water within the PAWSD boundaries.
“I appreciate what these people are trying to do, but I think it’s dangerous for us to start accepting agricultural as commercial and then allowing them to get exemptions,” he said. “I think it’s a bad idea and we have to look out for our ratepayers, and the majority of our ratepayers are going to be negatively affected by this.”
Tautges asked Lewis if the board needed to make a decision on this item.
Lewis replied that she would like a decision if the board wanted to respond and what content would be included in the response.
Walsh commented that he would like an additional emphasis in the letter that PAWSD’s offices are open for customers who want a business evaluation of the costs of residential versus commercial classification.
Lewis proposed that this could be added to the end of the letter, with Walsh expressing approval.
Walsh also complemented the professionalism of Tully-Elliott’s letter compared to his expectation that she would “dump” complaints she is receiving on PAWSD.
He then moved to send Lewis’ letter to Tully-Elliott with the addition of the verbiage he suggested.
The board then unanimously voted to send the letter in accordance with Walsh’s motion.
josh@pagosasun.com
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