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<br />Lower Bauer West Lateral, Inc. <br />September 7, 2004 <br />Page 4 of 4 <br /> <br />Agenda Item 4b <br /> <br />Table 3. Financial Ratios <br /> <br />Financial Ratio Without Project With Project <br />Previous Years* Future Years <br />Operating Ratio (revenue/expense) N/A 100% <br />I weak: <100% ~ -I average: 100% -120% 1-lstrong:>120%' (average) <br />Debt Service Coverage Ratio 133% <br />(revenues-expenses )/debt service N/A <br />I weak: <100% 1- I averaQe: 100% - 120% 1- I strong: >120%1 (strong) <br />Cash Reserves to Current Expense N/A After first :3 years <br />I weak: <50% I-I average: 50% - 100% I-I strong: >100%' 200% <br /> (strong) <br />Annual Operating Cost per Acre-Ft. (951 AF) N/A $3.59 <br />I weak: >$20 I-I average: $10 - $201- I strong: <$1Dt (strong) <br /> <br />* Values are not applicable (N/A) since the Company is new and financial records do not exist. <br /> <br />The sixteen members of the Company also hold shares of the stock in the BLWC. The members are <br />assessed $140 per share ($40 for operations maintenance and $100 for debt service on a previous <br />phase of lateral piping upstream of the Project constructed in 1998). <br /> <br />Collateral: As security for this loan the Company will pledge it's assessment revenues backed by an <br />assessment covenant (including a security interest in the Company's Funding Agreement) and the <br />Project including the pipeline and all associated access easement rights. This security is in compliance <br />with CWCB Loan Policy #5 (Collateral). <br /> <br />Staff Recommendation <br /> <br />Staff recommends an initial loan, not to exceed $195,000 for construction costs, to the Lower Bauer <br />West Lateral, Inc. from the Severance Tax Trust Fund Perpetual Base Account, for the Lower Bauer <br />Reservoir Outlet Pipeline Extensions Project. The staff further recommends a post-construction loan not to <br />exceed $50,700 ($48,750 for project costs and $1,950 for the 1% Loan Service Fee) to the Company with <br />terms based on the current agricultural rate (30 years at 2.50% per annum). Security for the loan will be <br />collateral in compliance with CWCB Loan Policy No.5. <br /> <br />Staff further recommends that final approval of the loan be conditioned upon the following: <br /> <br />1. Executed USDA Conservation Program Contract. <br />2. Company's Funding Agreement shall include a "step-up" provision. <br />3. All standard contracting provisions of the CWCB Loan Program including a revised Debt Service <br />Reserve Fund Provision that requires two annual loan payments, one payment set aside at the <br />time of contract execution and one third of an annual payment set aside at the time of each of <br />the first three annual loan payments. <br /> <br />Action Taken bv the CWCB on September 14. 2004 <br /> <br />The CWCB approved the staff recommendation with the additional condition that the parties to <br />the Funding Agreement conditionally assign to the CWCB the right to enforce the step up <br />provision in the event of a default. <br /> <br />Email copy: <br /> <br />Glen Humiston, Vice President, Lower Bauer West Lateral, Inc. <br />Raymond Keith, Mancos Conservation District <br />Tim Ouellette, Engineering and Technical Support, NRCS Cortez Service Center <br />Amy Stengel, AGO <br /> <br />Attachment: Project Data Sheet <br />