C150172 Approval letter

• Contract/PO #: C150172
• Contractor Name: Union Ditch Company, The
• Contract Type: Loan
• Water District: 2
• County: Weld
• Loan Projects - Doc Type: Approval Letter

Union Ditch Company
March 16-17,2004

Agenda Item 25f

for a total investment of $343,000. In addition to the cost of purchasing these shares, the UDC
would also have to file for a change of use of these shares to augmentation purposes. The market
value for Union shares is not unlike the price for most other water that is available for purchase in
the South Platte River basin. Therefore, the cost of developing the recharge project is likely less per
unit of water developed when compared to the cost of acquiring new water sources. It is possible
that UDC can provide excess credits for lease to other entities. Also, it is likely that the recharge
pond will serve as a wetland attracting wildlife to the area, an added community benefit.

Creditworthiness: The UDC has no outstanding debt.

Table 2 shows the Financial Ratios for the UDC, and indicates average ability overall to repay the
$309,500 CWCB loan with the increased assessments.

Table 2. Financial Ratios

Financial Ratio Without With completed
the project project (Future
(Aver. 2002-03) Year-2005+)
Operating Ratio (revenue/expense)
weak: less than 100% 94% (1) 119%
average: 100% - 120% (aver.) (aver.)
strono: oreater than 120%
Debt Service Coverage Ratio
(revenues-expenses)/debt service 116%
weak: less than 100% N/A (aver.)
average: 100% - 125%
strono: oreater than 125%
Cash Reserves to Current Expense
weak: less than 50% 238% 162%
average: 50% - 100% (strong) (strong)
strono: oreater than 100%
Annual Operating Cost per Acre-Ft. (29,000 AF)
weak: greater than $20 $ 2.88 $4.07
average: $10 - $20 (strong) (strong)
strono: less than $10

(1) Share assessment history: $180 (2002); $140 (2003); and $225 (2004). A Colorado
income tax refund of $58,546 received in 2002 was used to lower share assessments,
resulting in an average Operating Ratio of less that 100%.

As security for the loan, the UDC will pledge assessment revenues backed by an assessment
covenant and the Union Ditch diversion headgate structure on the South Platte River. The
diversion structure and headgate was completely re-built and modernized in 2001-02 at a cost of
about $700,000. Staff finds the project to be in compliance with CWCB Loan Policy #5 (Collateral).

Recommendation

Staff recommends a loan not to exceed $312,595 ($309,500 for project costs and $3,095 for the 1%
Loan Service Fee in accordance with CWCB Loan Policy #16), to the Union Ditch Company from
the Severance Tax Trust Fund Perpetual Base Account, to construct groundwater recharge facilities to
develop replacement water to offset out-of-priority depletions from well pumping. The recommended
terms of the loan are 30 years at 2.50% per annum. Security for the loan will be a pledge of
assessment revenues backed by assessment covenant and the Union Ditch diversion structure on the
South Platte River.

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