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<br />" <br /> <br />Recommendations <br /> <br />Financially, the critical item is probably the spread between the rate of inflation and the <br />return on investment. I think the 3.0 percent I used here (the difference between 6.5 <br />percent and 3. 5 percent) is fairly conservative. As long as the spread is 3.0 percent or <br />more, the $1.25 million should be able to payout an inflation-adjusted amount of about <br />$46,300 per year for 50 years. If the spread decreases, the fund would be depleted in less <br />than 50 years. <br /> <br />Since we don't know what inflation or what the spread will be over the next fifty years, <br />we probably don't want to specify both the amount of the annual payment and the payout <br />period. We can, however, specify one or the other. <br /> <br />My suggestion is that we specify the inflation-adjusted amount of the annual payment from <br />the trust. The adjustment for inflation could be made by using a cost index which reflects <br />the major component(s) of the project's O&M expenditures or some other commonly <br />accepted index such as the Consumer Price Index for the Grand Junction area. <br /> <br />cc: Bill Stanton <br />Linda Bassi, AGO <br />