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<br />Linda J. Bassi, Esq. <br />September 12, 1997 <br />Page 3 <br /> <br />In terms of security for the loan, the CWCB was explicit in its action approving the loan on <br />January 29, 1997: <br /> <br />2c. Security for the loan to the Horse Creek Water Users Association shall be a <br />collateral interest in the stream of income derived from membership dues and <br />assessments, the water shares or rights purchased, and one annual payment <br />in the form of CD held by the State Treasurer. <br /> <br />Other potential forms of security were discussed, but rejected, during the negotiation ofthe loan, and <br />these were neither recommended by CWCB staff nor imposed by the CWCB when it approved the <br />loan. <br /> <br />You should be aware of one pending development that may affect HCWUA's future revenue <br />stream from assessments, but which would not impair the security of the CWCB. As a result of the <br />settlement negotiations with Rodney Preisser, which now are nearly completed, it is likely that <br />Mr. Preisser will withdraw from HCWUA. Under the proposed settlement, his membership will not <br />be transferrable to another entity, and the scope of the HCWUA Plan will be reduced by the <br />130 acres now irrigated by Mr. Preisser. However, if Mr. Preisser withdraws from HCWUA, he will <br />make a payment to HCWUA of $40,000. The estimated net present value of what Mr. Preisser <br />would pay to HCWUA in assessments over 40 years, ifhe were to remain a member, for debt service <br />on the CWCB loan and for other purposes, is approximately $30,000. Of this, approximately <br />$18,000 represents the net present value of assessments for debt service. HCWUA proposes to <br />invest this amount and to draw upon the funds as needed to supplement assessments paid by its <br />members for debt service. Twelve thousand dollars represents the approximate net present value of <br />assessments for future operating expenses. The remaining $10,000 out of the $40,000 is intended <br />to be compensation by Mr. Preisser for the effects of his proposed well pumping upon existing well <br />users within the Little Horse Creek drainage. HCWUA intends to direct this $10,000 for the benefit <br />of its members within the Little Horse Creek drainage, although HCWUA has not yet determined <br />exactly how it will do this. <br /> <br />The purpose of reciting the history of this matter and of discussing its current status, is to <br />support and explain the detailed comments that follow, particularly those which assert that the draft <br />loan documents ask for security beyond that required by the CWCB and purport to limit the use of <br />the loan funds in a manner that is inconsistent with the arrangement negotiated with CWCB staff and <br />with the State Engineer. <br />