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Memorandum June 7, 1996 Page Three - It most existing irrigated lands will be dried up. Water in the X- Y and Graham Article II Account will be used exclusively for LA WMA's augmentation program. On the North Ranch, Helton & Williamsen have estimated that revegetation and continuing agricultural operations would require 3,032 acre-feet per year for the first three to five years and 1,475 acre-feet per year thereafter. This estimate is based on ownership by DOW. If the land is not sold to DOW, the revegetation requirements may be different. No X- Y water will be used on the South Ranch. The land is to be sold for dryland purposes. Helton & Williamsen have estimated average historic depletions on the X- Y Ranch lands at 4,880 acre-feet per year for conditions obtaining in the years 1990 to 1994. The 1,475 acre- feet to remain with the North Ranch would have estimated average depletions of 738 acre- feet per year. This would leave 4,142 acre-feet of consumptive use for LA WMA's augmentation program (disregarding water needed temporarily for revegetation). (LA WMA is also intending to purchase an additional 2.5 cfs of X- Y water rights and shares in the Manvel Canal and Irrigation Company. Those purchases are not included in this memo.) SUMMARY OF PROPOSED SALES TRANSACTIONS It is expected that the first sale of X- Y Ranch lands will be the South Ranch to be sold at auction by LA WMA on June 7, 1996. Based on the appraisal of similar lands on the North Ranch, LA WMA expects to receive $75 to $130 per acre at auction. Assuming an average price of $100 per acre, the gross receipts for the approximately 1,300 acr<?s on the South Ranch would amount to $130,000. In addition, LA WMA will convey a conservation easement on the South Ranch to the DOW for an expected $60,000 which will also be deposited to the escrow account. LA WMA has indicated that they are close to an agreement with DOW on the sale of the approximately 3,300 acres on the North Ranch. An appraisal report prepared for DOW by an independent appraiser in January of this year estimated the value of the lands and water rights under consideration for purchase by DOW at $880,000. Mely Whiting, LA WMA's attorney, indicated that this amount may be adjusted upward by as much as $60,000 to a total of $940,000 to reflect the actual number of irrigated acres to be used by DOW. She also indicated that negotiations between LA WMA and DOW on this are still in progress. ASSESSMENT OF COLLATERAL POSITION The total estimated receipts from the sale of the North and South Ranches are summarized in Table 2 at $1,130,000. Subtracting this amount (for purposes of illustration) from the $3,007,640 of principal on LA WMA's Construction Fund loan would leave the Board's exposure on the loan at $1,877,640 as shown in Table 2. Also shown in Table 2. is the net remaining cQnsumptive use of 4,140 acre-feet from the X - Y water rights taking into account the estimated 738 acre-feet of depletions that would remain with the North Ranch.