C150150 Approval Letter

• Contract/PO #: C150150
• Contractor Name: Lower Arkansas Water Management Association
• Contract Type: Loan
• Water District: 67
• County: Bent
• Loan Projects - Doc Type: Approval Letter

LAWMA - Water Rights Purchase

Agenda Item 20b

July 28-29, 2003

The cost to a LAWMA member for an acre-foot of firm yield replacement water with one-half of the
Keesee water rights would be approximately $62.66. Given that LAWMA paid between $60 - $65
per acre-foot of consumptive use replacement water during 2002, the figure of $62.66 per acre-foot
of firm yield replacement water with 1/2 of the Keesee water rights is certainly reasonable.

Election - In view of the substantial increases in share assessment levels necessary to put the financial
program into effect, and to assure repayment of the CWCB loans, staff recommends that LAWMA
conduct a special election of the 213 shareholder members on the proposed assessment levels, as a
condition of finalizing the contract for this loan. The election would authorize the LAWMA Board of
Directors to execute the CWCB loan for the Keesee water rights, and approve in concept the financial
program and required share assessment levels presented above. LAWMA's Bylaws require only a
15% quorum and a majority vote for approval. Staff is recommending that for adoption of the financial
program presented above, the 15% quorum requirement be increased to 50%, with approval requiring a
2/3 majority of the outstanding shares of stock represented by shareholders present or by proxy.

Security - As security for the loan, LAWMA will pledge revenues, including membership dues and
assessments on shares of LAWMA stock, as well as the acquired one-half of Keesee water rights.
This is in compliance with CWCB Loan Policy #5 (Collateral).

Arkansas River Augmentation Loan Account - The proposed loan meets the criteria for the use of
this account, as set forth in CRS 37-60-130, in terms of: reliability of the water rights supply, security
and collateral for loan repayment, LAWMA's ability to collect assessments and to repay the loan,
provision of service to a broad user group, and maintaining agricultural viability of the Arkansas River
Valley.

Recommendation

Staff recommends a CWCB loan, not to exceed $2,250,000, to the Lower Arkansas Water
Management Association, from the Arkansas River Augmentation Loan Account, to purchase one-half
of the Keesee water rights for use as a replacement water source to offset depletions from well
pumping. The recommended term of the loan is 30 years and the recommended lending rate is 2.50%
per annum. As security for the loan, LAWMA will pledge revenues, including membership dues and
assessments on shares of LAWMA stock, backed by an assessment covenant, and the acquired
Keesee water rights. This is in compliance with CWCB Loan Policy #5 (Collateral).

Staff further recommends that final approval of the loan be conditioned upon all other standard
contracting provisions of the CWCB, including the 1 % loan origination fee in accordance with CWCB
Policy #16. The maximum loan amount may be increased to $2,272,500 if the borrower elects to
finance the 1 % loan service charge.

Further, staff recommends the following approval conditions:

1. The existing Loan No. C153768 shall be closed out at the current level of disbursal of
$1,875,583.50. The date of substantial completion of this loan will be the date of LAWMA's
closing on the purchase of the Keesee water rights. On the date of closing for the Keesee
water rights, LAWMA shall provide to CWCB payment for the amount of accrued interest, on
Loan No. C153768.

2. Prior to finalizing the contract for this loan, LAWMA shall conduct a special election of the
shareholders, (1) authorizing the Board of Directors to execute the CWCB loan for the Keesee
water rights purchase, and (2) approving in concept the required share assessment levels

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