Laserfiche WebLink
<br />~, <br /> <br />DISCUSSION <br /> <br />Loans for participation in the SWSP have been made by CWCB to the following <br />municipalities: <br /> <br />ERIE - $1,544,000, <br /> <br />HUDSON - $1,273,000 <br /> <br />FORT LUPTON - $4,233,000 <br /> <br />All three involved contracting with a municipality and water enterprise, and all three used <br />for security a pledge of revenues (1st position) and the borrower's interest in the <br />Allotment Contract. <br /> <br />Morgan County Quality Water District {MCQWD> has also been approved by the Board and <br />the Legislature to receive a loan in the amount of $4,260,000 to participate in the SWSP. <br />This approval was not contingent upon any additional security requirements. It will be <br />contracted using a pledge of revenues and its interest in its Allotment Contract as security. <br /> <br />An additional issue is that Fort Morgan's pledge of revenues would be in second position <br />to a previous pledge of revenues made to secure the Water Enterprise's 1994 Water <br />Revenue Refunding & Improvement Bond. This loan contract in the amount of $2,500,000 <br />is with the Colorado Water Resources and Power Development Authority and will be paid <br />off in 20 years. Of course, this is only an issue if Fort Morgan would default. Say Fort <br />Morgan goes into bankruptcy, then CWCB would have to buyout this 1st position loan to <br />protect our chance of getting our loan fully repaid. <br /> <br />Another scenario arising from being in second position could be the 1st position lender <br />could refuse to allow the water rates to be raised to a level adequate to repay both 1st & <br />2nd position loans with the argument that doing so would cause fewer people to buy the <br />water and tl1ereby causing a possible default on the 1st position loan. <br /> <br />t <br /> <br />The Northern Colorado Water c.ons,ervancy District {NCWCD>, the entity that is organizing <br />and overseeing the construction,of the SWSP, requires Fort Morgan's payment of $5.5M on <br />August 11,1995. If Fort Morgan doesn't have the funds by this time, it will be considered <br />in default. NCWCD has several options, one of which is to sell off Fort Morgan's pipeline <br />allocation to other organizations that have indicated interest in the project, such as <br />Wiggins, Brush, or Sterling. <br /> <br />OPTIONS <br /> <br />option 1 - Treat all SWSP borrowers the same. For security, contract requirements would <br />be a pledge of revenues and the borrower's interest in the Allotment Contract. According <br />to a 1993 survey conducted by the City, water users indicated their willingness to pay more <br />for improved water quality. It has been determined in the economic analysis that in order <br />to have adequate revenues for all water projects that Fort Morgan currently has on-line, <br />the water rates for Fort Morgan will ultimately increase from $17 to approximately $37 per <br />month in the next several years. As of August, 1995, the rate was increase by 42%. This <br />increase is to cover the payback of CWCB's $5.5M loan. so, while this rate increase is <br />substantial, it is not unreasonable for the water users of Fort Morgan. Additionally, Fort <br />Morgan has already spent $2.4M for its share of the pipeline from carter Lake to the Fort <br />Lupton Terminus. Added to the $5.5M that will be used to construct more of the project, <br />that makes a total cash value of almost saM. This could be considered as the equity value <br />of Fort Morgan's portion of the SWSP represented by the Allotment Contract. <br />