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LAWMA -Water Rights Purchase Agenda Item 11 c January 22-23, 2008 To cover the water rights purchase, LAWMA is requesting a $2,470,000 loan from CWCB and the issuance and sale of 400 shares of preferred company stock, at an estimated value of $3,200 per share, for a stock sale revenue of $1,267,000, and a total project revenue of $3,737,000. LAWMA has a tentative closing date of February 29, 2008 to purchase Keesee water rights. The Colorado Division of Wildlife (DOW) has been actively involved with LAWMA towards the purchase of the Keesee water rights. DOW is interested in Keesee water rights as a potential water source to be added to the permanent pool in John Martin Reservoir. The ability to use the Keesee water rights as permanent pool water is contingent upon Arkansas River Compact Administration (ARCA) agreeing to that use, under the resolution that established the permanent pool. Currently, it is not anticipated that ARCA will make a ruling on the issue in the next few months, which does not meet the required purchase deadline by the seller and LAWMA to purchase the remaining 1/2 of the Keesee water rights. If ARCA were to allow the use of the Keesee water rights for permanent pool water in John Martin Reservoir, DOW would at that time be interested in negotiating a separate agreement with LAWMA to purchase a portion of the Keesee water rights. This purchase would be contingent upon LAWMA willingness to sell and the terms and conditions of the purchase agreement. Financial Analysis The total estimated cost of the Keesee Water Rights is $3,650,000. LAWMA is requesting a CWCB loan in the amount of $2,470,000. LAWMA qualifies for a blended interest rate of 2.30%. Staff recommends that the Board consider a maximum loan amount of $2,494,700 ($2,470,000 for water rights purchase and $24,700 for the 1 % loan service fee) for 30 years at an interest rate of 2.30%. Table 2 is a summary of the financial aspects of the project. A CWCB Loan of $2,494,700 would have an annual payment of $127,640 (including the 10% reserve requirement). Table 2. Keesee Loan Financial Summary Project Cost $3,650,000 Number of Shareholders 226 Number of Shares of Common Stock 18,934 CWCB Loan Amount (Includes 1 % service fee) $2,494,700 CWCB Loan Payment (includes 10% reserve) -Begin 2009 $127,640 Current Assessment per share (2007) $22.30 New Assessments per share $27.30 Annual Cost per ac-foot firm yield loan (consumptive 1,760 ac-ft based on 1954 dry year yield) $72.52 Table 3 shows the required annual payments on the existing loans, as well as the proposed Keesee water rights loan, as follows: