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<br />Surface Creek Ditch & Reservoir Company - Dam Rehabilitation <br />November 25-26. 2002 <br /> <br />Agenda Item 20c <br /> <br />Creditworthiness: The SCD & RC has an existing construction loan that will be paid off with the <br />CWCB permanent loan. Table 2 shows the Financial Ratios for the SCD & RC and indicates, with <br />the exception of cash reserves, strong ability to repay the $265,000 CWCB loan with the project in <br />place, particularly with the 2002 assessment of $70 per share left in place. <br /> <br />Table 2. Financial Ratios <br /> <br />Financial Ratio Without With project <br /> the project Future Years <br /> fA ver. 2000-01) 2003+ <br />Operating Ratio (revenue/expense) <br />weak: less than 100% 116% 162% <br />average: 100% -120% (Average) (Strong) <br />strona: areater than 120% <br />Debit Service Coverage Ratio <br />(revenues-expenses )/debt service N/A 150% <br />weak: less than 100% (Strong) <br />average: 100% - 125% <br />strona: areater than 125% <br />Cash Reserves to Current Expense <br />weak: less than 50% 5% 20% <br />average: 50% - 100% (Weak) (Weak) <br />strona: areater than 100% <br />Annual Operating Cost per Acre-Ft. (8428 AF) <br />weak: greater than $20 $4.75 $5.55 <br />average: $10 - $20 (Strong) (Strong) <br />stronQ: less than $10 <br /> <br />The SCD & RC will maintain a cash reserve of about $1 0,000 in 2002. By maintaining the current <br />assessment level at $70 the company hopes to build this level to $15,000 to $20,000 in several <br />years. . While this still places the ratio of Cash Reserves to Current Expense in the weak category, <br />it is fairly typical practice for ditch companies not to carry large cash reserves from year to year. <br /> <br />As security for the loan the SCD & RC will pledge assessment revenues backed by an assessment <br />covenant and the project itself. This is in compliance with CWCB Loan Policy #5 (Collateral). <br /> <br />Recommendation <br /> <br />Staff recommends a CWCB Small Project Loan, from the Severance Tax Trust Fund - Perpetual <br />Base Account, not to exceed $265,000 to the Surface Creek Ditch and Reservoir Company from <br />the Construction Fund to rebuild the Hotel Twin dam. The recommended term of the loan is 30 years <br />and the recommended lending rate is 2.80%. Security for the loan will be a pledge of assessment <br />revenues backed by assessment covenant and the project itself. <br /> <br />Staff further recommends tHat final approval of the loan be conditioned upon all other standard <br />contracting provisions of the CWCB, and that the loan be used to payoff the construction loan with <br />the Surface Creek Bank, and other eligible construction costs. <br /> <br />cc: Ellis Fritchman, President, Surface Creek Ditch and Reservoir Company <br />Chuck Richards, Secretary, Surface Creek Ditch and Reservoir Company <br />Linda Bassi, AGO <br /> <br />Attachment <br /> <br />Page 4 of 5 <br />