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Agenda Item 17d. November 24, 1997 Page 2 (Updated December 4,1997) DISCUSSION The purpose of the project loan is to acquire ownership of certain water rights that are currently used to serve customers within an existing service area, The Association is currently leasing a portion of the water, and the purchase assures the long-term existence of the supply. A second purpose of the purchase is to protect the wellhead area from pollution. The purchase will cost the Association $1500 per acre-foot acquired, but will include 440 acres of land, and certain well hardware. The service area for the NCW A is primarily rural, and lies generally north of the Town of Wellington, Wellington had a Median Household Income that was less than 80% of the Statewide MHI for 1990. A loan to the NCW A should thus be at the "Low Income" rate for a municipality, to be set by the CWCB on November 24, 1997. The Association has arrived at a purchase price based upon extensive negotiations with the seller, Three Peaks, Inc. A formal appraisal of the value of the water rights (and land) will be conducted as a condition of the CWCB contracting for the loan. COLLATERAL The NCW A receives revenues from its water customers, The CWCB will take a collateral interest in this stream of revenues, and will be in a parity position with all existing debts of the Association. The NCW A can also pledge shares of CBT water. STAFF RECOMMENDATION The staff recommends: 1, That a Construction Fund Authorization in an amount of $900,000, not to exceed 75% of actual cost, be recommended for the Northern Colorado water Association to purchase wells, the water rights for those wells, and the land upon which the wells are located, and 2. That the financing terms for this Construction Fund Authorization shall be at an annual percentage rate equal to the "Low Income" rate for a municipality (as set by the CWCB November 24 1997), for a duration of 30 years, and