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Headgate 396 Lateral Corporation November 6, 2006 Page 4 of 4 Agenda Item 10f 'v Table 3. Financial Ratios . Financial Ratio Without Project With Project Previous Years* Future Years Operating Ratio (revenue/expense) 440%(Average) I weak: <100% 1- I average: 100% - 120% I-I strong: >120%1 N/A $1100/2500 Debt Service Coverage Ratio 133%(Strong) (revenues-expenses )/debt service N/A I weak: <100% 1- I averaQe: 100% - 120% 1- I stronQ: >120%1 $8500/6400 Cash Reserves to Current Expense 145%(Strong) I weak: <50% I-I average: 50% - 100% 1- I strong: >100%1 N/A After 3 years $12800/8900 Annual Operating Cost per Acre-Ft. (1900 AF) $4.68(Strong) I weak: >$20 I-I average: $10 - $20 1- I strong: <$101 N/A After 3 years $8900/1900AF * Values are not applicable (N/A) since the Corporation is new and financial records do not exist. Collateral: As security for this loan, the Corporation will pledge its assessment revenues backed by an assessment covenant, which includes a security interest that assigns the Corporation's right to enforce the "step-up" provision in the Funding Agreement to CWCB in the event of default, and the Project pipeline and all associated access easement rights. This security is in compliance with CWCB Financial Policy #5 (Collateral). Staff Recommendation . Staff recommends the Board approve an initial loan, not to exceed $232,300 ($230,000 for project costs and $2,300 for the 1 % Loan Service Fee) for engineering and construction costs, to the Headgate 396 Lateral Corporation from the Severance Tax Trust Fund Perpetual Base Account, for the 396 Lateral Piping Project. The staff further recommends a post-construction loan not to exceed $136,300 ($134,000 for project costs and $2,300 for the 1 % Loan Service Fee) to the Corporation with terms based on the current agricultural rate of 30 years at 2.50% per annum. Security for the loan will be collateral in compliance with CWCB Financial Policy No.5. Staff further recommends that final approval of the loan be conditioned upon the following: 1. Executed USDA Conservation Program Contract. 2. Corporation's Funding Agreement shall include a "step-up" provision. 3. All standard contracting provisions of the CWCB Loan Program including a revised Debt Service Reserve Fund Provision that requires two annual loan payments (one payment set aside at the time of first draw of funds and one third of an annual payment set aside at the time of each of the first three annual loan payments). Email copy: Dave McDonald, President, Headgate 396 Lateral Corporation Max Schmidt, Water Solutions of Colorado NRCS Office c/o Lloyd Reed & Louis Hautbauer Amy Stengel, AGO Attachment: Project Data Sheet .