PROJ00506 App Letter

• Contract/PO #: C153824
• Contractor Name: Preisser, Rodney J.
• Contract Type: Loan
• Water District: 17
• County: Lincoln
• Bill Number: SPL
• Loan Projects - Doc Type: Approval Letter

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Agenda Item 15a. (Updated July 22, 1997)
July 21, 1997

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into escrow as late as December 1997.

LENDING RATE AND TERMS

Selection ofterms for this loan will involved some discussion. Mr. Preisser has requested a loan
term of 40 years, and an interest rate be 3%. However, CWCB standard 30 year lending rates
for 1996-1997 are as follows:

Agricultural:
Municipal:
Commercial:

3.75% for 30 years
4.75% for 30 years
5.25 % for 30 ~ears

The following issues suggest a LOWER interest rate or a LONGER term for this loan:

The loan will settle the remaining case in the Horse Creek basin.
The loan is for only 41 % of the cost of the water rights, in contrast to the HCWUA
loan, which was for the entire amount.
The loan to the HCWUA was 3% for 40 years.
The loan collateral will be better than the HCWUA loan.
Mr. Preisser will be personally liable for repayment, in contrast to the HCWUA loan.
The hog farm is a form of agricultural use.

The following issues suggest a HIGHER interest rate and/or a SHORTER term for this loan:

Mr. Preisser has a strong financial statement.
The loan is for a relatively small amount ($90K).
Sale of a portion of the property is involved.
The retained portion of the property may be developed for housing.

Staff is suggesting a 30 year loan, at an overall interest rate of 4.1 %. The rate was determined
as follows:

At the time this calculation was made, it was believed that of the 550 acre feet of augmentation
water to be purchased, 400 acre feet (73%) was to be sold immediately for commercial use, and
150 acre feet (27%) was to be retained for agricultural use.

The CWCB standard commercial rate is 5.25%. The CWCB standard agricultural rate is 3. 75%.
A rate reduction of. 75% was applied, because of the benefit to the State in settlement of all
lawsuits in the Horse Creek Basin.

The rate for the commercial part of this loan became: 5.25% - 0.75% = 4.5%.
The rate for the agricultural part of this loan became: 3.75% - 0.75% = 3%.
The final rate is: (0.73)(4.5%) + (0.27)(3%) = 4.1%