C150179 Approval Letter

• Contract/PO #: C150179
• Contractor Name: Henry Bolen Ditch Company
• Contract Type: Loan
• Water District: 34
• County: Montezuma
• Loan Projects - Doc Type: Approval Letter

Henry Bolen Ditch Company
July 9. 2004 (Rev. Aug. 6,2004)
Page 4 of 5

Agenda Item 14d

Creditworthiness: The Company was incorporated in June of 2003 for the purpose of undertaking
the Project and therefore has no financial history. The Company has no existing debt. Repayment
will be accomplished by member assessments according to the Company's Funding Agreement.

Table 3 shows the Financial Ratios for the Water Company and indicates, with the exception of
cash reserves, average to strong ability to repay the $128,750 loan.

Table 3. Financial Ratios

Financial Ratio Without With project
the Droject Future Years
Operating Ratio (revenue/expense) N/A 100%
I weak: <100%' -I average: 100% -120% ~ -I strong: >120o/~ (average)
Debit Service Coverage Ratio
(revenues-expenses )/debt service N/A 100%
I weak: <100% 1- I averaae: 100% - 120% 1- I strona: >120%1 (average)
Cash Reserves to Current Expense N/A 2%
1 weak: <50% 1- I average: 50% - 100% 1- I strong: >100%1 (weak)
Annual Operating Cost per Acre-Ft. (2505 AF)
I weak: >$20 I-I average: $10 - $20 1- t strong: <$101 N/A $0.12
(strong)

C9I1ater-3l: As security for this loan the Company '....ill pledge 1) assessment revenues backed by on
assessment coven~nt; 2) the Project including diversion structure #534 and all aSGociatel:f access
easement rights; 3) a Certificate of Deposit in the amount of halO annual payments ($12,3QO), which
will be held by ONCB for 15 yoars. This security is in compliance with ONCB Loan Policy 115
(Collater31). See changes made to recommendations below.

Recommendation

Staff recommends an initial loan, not to exceed $515,000 for construction costs, to the Henry Bolen
Ditch Company from the Severance Tax Trust Fund Perpetual Base Account, for the Henry Bolen
Ditch Pipeline Project. The staff further recommends a post-construction loan not to exceed $133,900
($128,750 for project costs and $5,150 for the 1% Loan Service Fee) to the Company with terms
based on the current agricultural rate (30 years at 2.50% per annum). Security for the loan will be:

1 a.) A pledge of assessment revenues backed by assessment covenant;

1b.) A debt service revenue covenant equal to two annual loan payments (one payment set
aside at the time of contract execution and one third of an annual payment set aside at the time
of each of the first three annual loan payments);

1 c.) A security interest in the Company's Funding Agreement (Company's Funding Agreement
shall include a Ilstep-up" provision that requires the Funding Agreement signators to make the
entire annual loan payment to the Company in the event member(s) fail to pay their assessed
share amount pursuant to the Funding Agreement);

2.) The Project including diversion structure #534 and all associated access easement rights;