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<br />. <br /> <br />. <br /> <br />. <br /> <br />. <br /> <br />Consolidated Mutual Water Company <br />July 17, 2006 (Revised July 27,2006) <br />Page 3 of 4 <br /> <br />Agenda Item 9a <br /> <br /> <br />Discussion <br /> <br />The Soard has the statutory authority under Section 37-60-120 (3), CRS to make loan deferments <br />provided the borrower has encountered significant and unexpected financial difficulties, and that it <br />has been duly diligent in its efforts to comply with the repayment provisions of its contract with the <br />Board. The Soard's Financial Policy #10 (attached) clearly provides guidance in the resolution of <br />this request. <br /> <br />The deferral is based on the Soard's finding that the Company has encountered financial hardships <br />beyond its control, and that it has been duly diligent in its efforts to comply with the repayment <br />provisions of its contracts with the Soard. The restructuring of the Company's loan repayment <br />schedule allows the loan to remain with CWCS and also allows Consolidated. Mutual Water <br />Company relief from its current financial hardship. <br /> <br />Creditworthiness: The Company has five year history of prompt loan repayment to CWCS. The <br />Company is required to maintain a reserve account during the life of the loan." The Company has <br />placed six installments (1/20th of a annual payment or $133,520) in the account. The Company <br />carries a $250,000 unsecured line of credit with a local bank. The Company has recently raised <br />water rates each year about 5% to 6%. This is primarily a result of increases in the cost of water <br />from the Denver Water Soard. As of January 2006, the Company had $9.7 million in cash and cash <br />equivalents. Repayment of the revised loan will be accomplished utilizing the current assessments. <br /> <br />Table 4 shows the Financial Ratios for the Company before, during and after the deferral years. <br /> <br />Table 4. Financial Ratios <br /> <br />Financial Ratio 2006 2007-2011 2012&2013 <br />Operating Ratio (revenues/expenses) 136% 130% 128% <br />I weak: <100% I-I average: 100% -120% I-I strong: >120%' (Strong) (Strong) (Strong) <br />Debt Service Coverage Ratio 161% 128% 82% <br />{revenues-expenses)/debt service <br />I weak: <100% , - I average: 100% - 120% , - I strong: >120%' (Strong) (Strong) (Weak) <br />Debt Service per Tap $134 $153 $247 <br />(20,840 taps) <br />/weak: >$5,000 , - I average: $5,000 - $2,500 1- I strong: <$2,5001 (Strong) (Strong) (Strong) <br />Cash Reserves to Current Expenses 56% 95% 148% <br />I weak: <50% ~ - I average: 50% - 100% 1- I strong: >100%1 (Weak) (Average) (Strong) <br />