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<br />July 1 7, 2006 <br />Page 2 <br /> <br />Ifwe can have a bid opening on August ll, and the bids allow Bijou to proceed, we will begin <br />public notice for the election on August l4, and hold the election on September 5. <br /> <br />Because the District cannot sign the CWCB loan contract until after the election approves it, we <br />will need to plan to have everything for completion of the loan contract ready to go promptly <br />after September 5. We note4 that the loan contract is not finished until after it has been approved <br />by the State Controller. Please advise us about how much lead time to expect between the time <br />CWCB staff signs the contract and when the State Controller approves it. Timing here will be <br />very important, because we hope to begin construction around September l5. We probably have <br />some flexibility with that date, but not too much. <br /> <br />Our office has reviewed the loan contract and its appendices. We have identified a few language <br />issues that we hope can be resolved without CWCB approval. Attached to this letter are hand <br />marked redlines on those pages where we think changes should be made. Several of the changes <br />just involve changing the dates from the draft contract provided last year. The others will be <br />easier for you to review with some explanation. Therefore, the following paragraphs explain <br />why we think the indicated changes are needed. <br /> <br />On page 1 of the Loan Contract, the language describing the loan service fee is both ambiguous <br />and contradictory. In one place, it refers to a one percent service fee based on the ''project <br />amount." However, the project amount is shown on that page as $740,000. In fact, the service <br />fee is one percent of $666,000, which is the amount of funds loaned. So, this requested change <br />just resolves the ambiguity and makes this language consistent and accurate. <br /> <br />On page 2 of Appendix 1, the draft used the term "tax levy" to refer to revenues that will provide <br />the collateral. That terminology is inconsistent with loan contract paragraph 8.c. that uses the <br />term "revenue assessments" to describe the District's collateral. Indeed, the term "assessment" <br />is the correct term to use for an irrigation district. The Supreme Court has held that these <br />irrigation districts are exempt from TABOR because they do not levy taxes, but do levy special <br />assessments. Therefore, this terminology should be consistent throughout the contract. You will <br />note an identical change proposed on page 1 of Appendix 4 (Security Agreement). <br /> <br />There are several small revisions proposed in the Board Resolution to approve the loan contract. <br />I believe that these are all clerical. Let me know if you have questions about them. <br /> <br />On page 1 of Appendix 4 (Security Agreement) we think there is an inappropriate ambiguity in <br />the description of the collateral. Here, it purports to establish collateral in "all revenues" of the <br />district. That needs to be revised so that it applies only to the $2.00 per acre assessment that <br />would be levied for this contract. This change would make this document consistent with both <br />loan contract paragraph 8 (Pledge of Property) and the other documents. This change is critical <br />because Bijou cannot pledge "all revenues" to repay this loan. Additionally, the revenues to <br />repay this loan must be segregated in a separate account from the other district revenue. Ifthe <br /> <br />s:\clicnt\bijou IilCli\bijouempirelrocwilliam Itr of7.14.06.doc <br />