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<br />Penrose Water District
<br />November 13-15, 2006
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<br />Agenda Item 10c
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<br />Monthly Water Bill
<br />average: $30 Enterprise $ 1.20 $10.45
<br />weak: greater than $60 Total $31.75 $41.00
<br /> (average) (average)
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<br />* 2003 Revenue Bond Refunding issue will retired in 2012.
<br />** Current Enterprise budget does include operating expense
<br />*** Does not include the CWCB loan reserve of $461,334, set up at project onset.
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<br />Additional Financial Ratio - The assessed valuation of the District is approximately $21,560,000
<br />(2006). With proposed loan of $8,757,000 the Total Debt/Assessed Value Ratio = 41% (DOLA
<br />criteria: Strong < 25%, Average 25-50%, Weak> 50%).
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<br />Creditworthiness: The District has one existing bond obligation. The balance on the 2003 Water
<br />Revenue Refunding Bond with American National Bank is $1,055,000, with annual payments of
<br />$171,875 ending in 2012. The Enterprise also has two existing loan obligations, a loan with DOLA
<br />with a balance of $104,111 with annual payments of $10,030 ending in 2020, and a loan with
<br />USDA- RD with a balance of $173,900 with annual payments of $11 ,670 ending in 2039. The
<br />Enterprise will retire the DOLA and USDA-RD loans prior to finalization of the CWCB loan. In
<br />addition, the Enterprise has a temporary (interest only) loan of $3,000,517 with the Fremont
<br />National Bank in Canon City, with a balloon payment due in July 2007. The water portion of this
<br />loan ($1,400,000) will be paid off with the CWCB loan in July 2007, and the remaining amount paid
<br />off from the proceeds of the sale of the Goodwin Ranch. In the event the ranch has not been sold
<br />by the time CWCB loan payment commences in 2011, the base water rate increase would need to
<br />be about $12.88, instead of the projected $9.25 per tap, until the ranch is sold.
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<br />Alternative financing sources: The Enterprise will be applying to DOLA in December 2006 for a
<br />$500,000 grant (Energy and Mineral Impact Assistance Program) from mineral lease revenues to
<br />reduce the amount of the project local match from $973,000 to $473,000. A decision on the grant
<br />request is not expected until April 2006, with funds available July 2007. In the event the Enterprise
<br />is not successful in obtaining the DOLA grant, they will use existing reserves to fund the entire local
<br />match.
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<br />Collateral- As security for the loan, the Penrose Water District Water Activity Enterprise will pledge
<br />base water user revenues backed by a rate covenant, revenues from the voter-authorized 3.00 mill
<br />Special Revenue Fund levy, and annual financial reporting. This is in compliance with CWCB Loan
<br />Policy #5 (Collateral). The CWCB will require parity of its lien on the pledged water revenues with
<br />the existing bond for years 2011 and 2012.
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<br />Recommendation
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<br />Staff recommends that the Board approve a loan not to exceed $8,844,570 ($8,757,000 for project
<br />costs and $87,570 for the 1% Loan Service Fee in accordance with the CWCB Loan Policy #16), to
<br />the Penrose Water District, acting by and through the Penrose Water District Water Activity
<br />Enterprise, from the Severance Tax Trust Fund Perpetual Base Account, to purchase water rights
<br />and construct a raw water pipeline from the Arkansas River to the District's service area, enlarge
<br />Brush Hollow Reservoir, and to cover expenses already incurred. The recommended terms of the
<br />loan are 30 years at 3.25% per annum. As security for the loan the Penrose Water District Water
<br />Activity Enterprise, will pledge water user revenues backed by a rate covenant, revenues from the
<br />3.00 mill Special Revenue Fund levy, and annual financial reporting.
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