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Highland Ditch Company November 8,2005 (Revised November 17,2005) Page 3 of 4 Agenda Item 23a ALTERNATIVE 3 - Upstream Clay Liner $971,565 This alternative includes placing a ten foot thick clay liner on the upstream face of the dam to cut off seepage. This will require the removal and replacement of the riprap on the upstream face of the dam. This option will reduce the seepage and has the advantage of cutting off water from the dam crest to the toe. However, it will not have any impact on the existing layers in dam that are comprised of uncompacted shale. The overall stability of the dam will be increased. AL TERNA TIVE 4 - Do Nothing Alternative $0 This alternative is not considered viable since additional storage restriction is possible if the dam deteriorates due to internal seepage. The total delivery of water from this reservoir that would be lost without improvements would approach 3,000 ac-ft. The Company selected Alternative No.1, primarily due to cost. A breakdown of the construction costs, engineering.fees, legal fees, and contingencies are shown in the following table. Total Project cost estimate is: Construction Contingency Planning/Permitting/Engi neering Total $468,760 46,870 84.370 $600,000 The project is currently under construction utilizing a bridge loan and is expected to be complete in May 2006. Financial Analvsis Table 1. shows a summary of the financial aspects of the Project for the loan request. A CWCS Loan of $540,000 will have an annual debt service obligation of $37,210 ($33,830 for annual loan payment and $3,380 for the 10% reserve funding) for the loan terms of 2.25% for 20-years. The interest rate is based on the standard agricultural interest rate of 2.5% for a 30-year loan. The rate is reduced by 0.25% for a 20-year loan. The Company will use cash available for the remaining 10% of the Project costs that are not financed by CWCS. The total debt service obligation for this Project represents an annual cost of $1.14/ac-ft of water delivered to Company shareholders. Table 1. Financial Summary of Project Total Proiect Cost $600,000 CWCS Loan (90% of Total Project Cost) $540,000 CWCS Annual Loan Pavment $33,830 CWCS Loan Obliqation (includinq 10% debt reserve fundina) $37,210 Annual Assessment for Project Only (based on 725.5 shares) $51.30/share Annual Project Cost per Acre-Foot delivered (based on 32,550 ac-ft) $1.14/ac-ft Creditworthiness: The Company received a CWCS Loan in the amount of $1,040,000 in 1998 for Reservoir repair work. The Company paid off the loan in the second year of the 30 year loan term. The Company currently has a bridge loan with the Centennial Sank of the West which was needed to initiate the Project prior to approval of this CWCS loan. The Company has no other outstanding debt. Repayment of the loan will be accomplished by increasing share assessments as necessary.