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~, . . Yes, ,an ad valorem property tax by law can be imposed on the citizens of Durango up to one-half mill prior to the de- livery of water under the project and a maximum of one mill aft~r the delivery of water. Under the present schedule of the Animas-La Plata Project, the one-half mill levy cannot be assessed until 1981 which, of course, would be after the election and vote on the repayment contract. Thus, no citi- zen of Durango would be required to pay any ad valorem pro- perty tax on account of the Animas-La Plata Project until after it has been finally put to a vote of the people on the repayment contract election. The increase from one-half mill to one mill would take effect at the time water was first delivered under the Animas-La Plata Project and the best estimate at the present time is that that will not occur prior to 1988. The state legislature recently amended the water conservancy district law to provide for an increase of mill levey in districts with assessed valuation of more than 50,000,000 to a total of 3 mills. However, this can only be accomplished by a vote of the people in the district and not otherwise. For your information we have attached a representative group of taxpayers in the Durango area which illustrates the amount of tax each would pay at today's assessed valuation on their real property as a result of the one mill levy increase due to the Animas-La Plata Project. The assessed valuation for the entire proposed Animas-La Plata Water Conservancy Dis- trict is approximately $51,000,000.00 at this time, which would mean that the total amount of money raised by a one mill levy tax increase for all of the people in the district, would be $51,000.00 per year. 7. IF THE ANIMAS-LA PLATA PROJECT DOES NOT BECOME A REALITY OR IF DURANGO CHOOSES TO PURSUE OTHER WATER STORAGE OPTIONS, HOW CAN THE CITY ACQUIRE MORE WATER RIGHTS IF NECESSARY? WHAT WILL BE THE EFFECT OF A COLORADO-NEW MEXICO WATER COM- PACT UPON DURANGO'S EXISTING WATER RIGHTS ON THE ANIMAS AND FLORIDA RIVERS? The City of Durango could attempt to purchase additional senior water rights or, perhaps condemn additional senior water rights. Another alternative might be to attempt to change the existing Durango direct flow rights both absolute and conditional from direct flow to storage rights. However, in the process of changing from direct flow to storage, the City of Durango could only store that amount of water which historically the city consumptively has or could possibly use for beneficial purposes. In other words, the measure of the amount of storage that the city could gain by chang- ing the use from direct flow to storage would be strictly limited by the water court. The alternative, of course, of -7-