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The PRBDC will cover any costs that exceed the estimated project cost. The PRBDC is requesting a 30-year loan from the CWCB. The standard agricultural lending rate would be 2.75%, resulting in annual payments of $9,877. To this would be added $988 per year for the first 10 years to fund the emergency reserve account, for a total annual cost of $10,865. Table 3 is a summary of the financial aspects of the project. Annual assessments will increase from $7.25 per share, up to $12.80 per share with a loan of $200,000. This represents an annual assessment increase of $5.55, or $1.22 per acre-foot, based on average annual diversions 8,866 acre-feet. Table 3. Financial Summa 1 0% loan reserve $267,000 $200,000 $10,865 51 1952 $7.25 $12.80 $1.22 Since all other funding for the project is in the form of grants, the Company would have no other debt service on this project. Operation and maintenance costs are expected to decrease with the new diversion structure, and can be accommodated by the Company's existing budget. Credit worthiness: PRBDC has no existing debt. Appendix E includes PRBDC's financial information (Balance Sheet and Profit/Loss Statement) for years 2002 and 2001. With the new assessment in place PRBDC will be able to repay the CWCB loan. Shareholders voted unanimously to increase annual assessments to finance repayment of a project loan at the annual meeting February 10, 2003. Minutes from the annual meeting are included in Appendix F. Alternative financing considerations: The PRBDC has investigated alternative financing sources. They have obtained an in-kind grant from the NRCS for engineering design and construction inspection. The PRBDC attempted to obtain other grants, but found the current economic situation had either eliminated or severely decreased available grant funding. Collateral: As security for the CWCB loan, the PRBDC can pledge assessment income, the project structures, and a certificate of deposit equivalent to one annual payment. Economic Analysis The economic benefit of the project is considerable. The NRCS estimates the value of property affected to be $5.5 million, within the 2596-acre service area. The short-term value of potential damage to this property in the event the PRB Siphon is not repaired is estimated as $2.9 million. Using an estimated total project cost of $267,000 (to cover design, construction of the siphon and all appurtenances, construction supervision, and up to $44,096 in contingency, the project benefits clearly outweigh the cost. PRB Ditch Company Siphon Replacement Feasibility Study June 2003 Page 11 of15