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<br />Lower Latham Reservoir Company
<br />July 11-12, 2007
<br />
<br />Agenda Item 15b
<br />
<br />Appraisal - In accordance with CWCB Loan Policy #8 (Purchase of Water Rights), a written
<br />appraisal or opinion of value from a qualified water rights appraiser supporting the purchase
<br />price, must be submitted prior to disbursal of CWCB loan funds. An appraisal of the four Lower
<br />Latham Ditch Company shares from the Rothe Farm purchase was completed by Bud Clemons,
<br />Colorado Certified General Appraiser, of Greeley. The appraised market value of the 4 shares
<br />was $1,575,000, or $4,300/AF consumptive use, The range of sales evaluated in the appraisal
<br />was $4200/AF consumptive to $5,300/AF of consumptive use. While the Dejong purchase is
<br />valued at $5,250/AF consumptive use, it is within this range, and is consistent with other
<br />consumptive use values observed in the area,
<br />
<br />Financial Analvsis
<br />
<br />The total estimated cost of the project is $2,194,275. LLRC qualifies for an agricultural interest
<br />rate. Staff is recommending a maximum loan amount of $1 ,974,848 (90% of the estimated
<br />project cost) for 30 years at an interest rate of 2.25%. LLRC will pay the 10% local share
<br />($219,427) of the project cost from existing reserves. Table 1 is a summary of the financial
<br />aspects of the project. A CWCB Loan of $1 ,974,848 would have an annual payment of
<br />$100,360 (including the 10% reserve requirement) at the loan terms of 2.25% for 30 years.
<br />
<br />Table 1. Financial Summary
<br />
<br />Project Cost $ 2,194,275
<br />Number of Well Owners 49
<br />Number of Wells Covered 85
<br />CWCB Loan Amount (30 years) $1,974,848
<br />CWCB Loan Payment (includes a 10% reserve) $100,360
<br />Annual Loan Cost per acre-foot (450.3 AF historic consump. use) $223
<br />
<br />Creditworthiness: LLRC has historically operated without debt, and LLRC has no existing
<br />long-term debt. LLRC obtained an initial loan from the New Frontier Bank in Greeley in March
<br />2007 for the purchase of the Rothe Farm land & water rights in the amount of $2,152,243 (water
<br />value of $1 ,575,000). The maturity date for this loan is September 1, 2007. A second loan in
<br />the amount of $626,570 was also obtained from the New Frontier Bank in May 2007 for the
<br />purchase of the Dejong Farm water rights. The amount of this loan is $626,570 (water value of
<br />$441,525) and the maturity date is November 15, 2007. Both of these short-term loans total
<br />$2,778,813, of which $1,575,000 and $441,525 (total of $2,016,525) will be paid off by the
<br />CWCB loan and LLRC funds, leaving $762,288 to be continued to be financed by New Frontier
<br />Bank, (Assumed to be financed at 8,25% for 10 years,)
<br />
<br />Table 2 shows the Financial Ratios and indicates overall average ability to repay the $1,974,848
<br />CWCB loan, with existing LLRC revenues, and the additional New Frontier Bank loan.
<br />
<br />Table 2. Financial Ratios
<br />
<br />Financial Ratio Without With project
<br /> the project Future Year
<br /> (Aver. 2005-06) 2008+
<br />Operating Ratio (revenue/expense)
<br />weak: less than 100% 169% 169%
<br />average: 100% - 120% (strong) (strong)
<br />strong: greater than 120%
<br /> (70BK/420KJ (70BK/420KJ
<br />
<br />4of5
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