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Upper Surface Creek Domestic Water Users Association March 16-17, 2004 Agenda Item 25h public water supply, it is reasonable to assume that property values would decrease significantly. At a cost of $1.32 million, the project returns an enormous benefit. Creditworthiness: USCDWUA has an existing debt of approximately $53,400 with the First State Bank of Hotchkiss, for the land purchase for the water treatment plant. This loan will be paid off and included in the new private bank loan. Alternative financing sources: USCDWUA has investigated alternative financing sources. A grant has been applied for from the Colorado River Conservation District in the amount of $15,000. Most sources of funding for drinking water projects are not available to USCDWUA because of its private, non-profit status instead of municipal or special taxing district. Table 2 shows the Financial Ratios for USCDWUA and indicates average ability to repay the $162,180 CWCB loan, with the increased water rates. Ratios do not include any tap fee revenues, which have averaged $136,000 per year from 2001-2003. Table 3. Financial Ratios Financial Ratio Without With project the project Future Years (Aver. 2001-02) (2005+) Operating Ratio (revenue/expense) weak: less than 100% 119% 130% average: 100% - 120% (aver.) (strong) strong: greater than 120% Debt Service Coverage Ratio {revenues-expenses )/debt service 100% weak: less than 100% N/A (aver.) average: 100% - 125% strono: oreater than 125% Cash Reserves to Current Expense weak: less than 50% 57% 15% average: 50% - 100% (aver.) (weak) strono: oreater than 100% Debt per Tap (857 taps) weak: greater than $5000 N/A $999 average: $2500 - $5000 (strong) strono: less than $2500 Monthly Water Bill average: $30 $26 $30 weak: greater than $60 (aver.) (aver.) Security for the loan will be a first lien on the pledge of water charge and assessment revenues backed by a rate covenant and the project itself (diversion structure and raw water pipeline.) This is in compliance with CWCB Loan Policy #5 (Collateral). Recommendation Staff recommends a loan not to exceed $163,802 ($162, 180 for project costs and $1,622 for the 1 % Loan Service Fee in accordance with CWCB Loan Policy #16), to the Upper Surface Creek Domestic Water Users Association from the Severance Tax Trust Fund Perpetual Base Account, to construct a new raw water diversion structure and raw water pipeline, and to pay project expenses already incurred. The recommended terms of the loan are 20 years at 3.25% per annum. Security for Page 5 of 7