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LAWMA -Water Rights Purchase Agenda Item 11 c January 22-23, 2008 LAWMA Cash Flow Surplus Less 10% $138,502 $17,584 $26,738 $15,498 $27,101 $135,676 $424,157 Reserve Payment Required Share Assessment (Exist. _ $20.44 $26.43 $25.98 $26.50 $25.96 $20.58 $6.30 $27.30) The cost to a LAWMA member for an acre-foot of firm yield replacement water for the remaining '/ of the Keesee water rights would be approximately $72.52. Given that LAWMA paid $67.86 per acre-foot of firm yield replacement water in 2002, the figure of $72.52 per acre-foot of firm yield replacement water for the remaining '/ of the Keesee water rights is reasonable. The appraised value of the water rights and long term benefit to LAWMA's water portfolio and also makes it a good investment for LAWMA. Election -LAWMA obtained shareholder approval of the remaining '/ Keesee water rights purchase and financial plan at its annual meeting held on December 13, 2007. At the annual meeting, 13,364 of the 19,912 votes (approximately 67%) entitled to cast a vote on the proposed purchase and finance plan were present in person or in proxy. 13,210 out of the 13,364 voted in favor of the proposed water rights purchase and financing plan, leaving only 61 votes against. Also included at the meeting was the approval of increasing the share assessment from $22.30 to $27.30 and the approval of future share assessment increases as needed to cover payment over the life of the existing and proposed loans. Collateral - As security for the loan, LAWMA will pledge assessment revenues, including membership dues and assessments on shares of LAWMA stock, as well as a portion of the remaining acquired '/ of Keesee water rights. The pledge shall be backed by a rate covenant. The amount of water rights to be held by CWCB for collateral will be of a value equal to or greater than the loan amount. This is in compliance with CWCB Financial Policy #5 (Collateral). Recommendation Staff recommends a CWCB loan, not to exceed $2,494,700 ($2,470,000 for water rights purchase and $24,700 for the 1 % loan service fee) to the Lower Arkansas Water Management Association, from the CWCB Construction Fund, to purchase the remaining '/ of the Keesee water rights for use as a replacement water source to offset depletions from well pumping. The recommended term of the loan is 30 years with a recommended blended lending rate of 2.30% per annum. Security for the loan shall be in compliance with CWCB Financial Policy #5. Staff further recommends that final approval of the loan be conditional upon all other standard contracting provisions of the CWCB. In addition, the following Supplemental Loan Contract Conditions shall apply: 1) If any water rights purchased with CWCB loan funds is sold in part (or whole) the proceeds generated from that sale in excess of the expenses of that sale shall be applied to the remaining balance of the CWCB loan within 6 months of the date of sale. Annual payments shall remain unchanged unless the loan contract is amended as described in the contract documents.