C150153 Approval Letter - Laserfiche WebLink

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,- STATE OF COLORADO Colorado Water Conservation Board Water Supply Plann.ing & Finance Section 1580 Logan Street, Suite 750 Denver, Colorado 80203 www.cwcb.state.co.us May 28, 2003 Bill Owens Governor Mr. Steve Arveschoug, General Manager Dolores Water Conservancy District P.O. Box 1150 Cortez, Colorado 81321 Greg E. Walcher Executive Director Rod Kuharich CWCB Director RE: Dove Creek Secondary Water Supply System Dan McAuliffe Deputy Director Dear Steve: As we discussed several weeks ago, the current plan is to take the DWCD loan request for the Dove Creek Secondary Water Supply system to our July CWCB meeting. The dates for this meeting are July 28-29,2003 in Pagosa Springs. The purpose of this letter is to summarize several outstanding items we need to resolve, or get more information on, before our staff can recommend loan approval. 1. Security for the Loan - CWCB loan security must satisfy the requirements of the attached CWCB Policy No.5 - Collateral. Typically, for districts like DWCD, we obtain a "Pledge of revenues backed by rate covenant and annual financial reporting." DWCD originally proposed to pledge revenues from the sale of 307 water taps at $3200, payable to DWCD over 5 years. Our concern is that if only 200 taps are sold, the initial project start-up decision criteria, the project revenues would only be sufficient to pay back the CWCB loan for 6 to 7 years of the 10-year loan payback period. In order for us to recommend loan approval, we need a broader pledge of revenues from DWCD, that will insure that our loan will be repaid in the event that there are ever any project revenue shortfalls. Accordingly, our staff will require the following language regarding collateral: As security for the loan, the DWCD will pledge revenues from its Water Activity Enterprise, which shall include the Dove Creek Secondary Water Supply System tap fees and operations revenues, as well as any other Water Activity Enterprise revenues necessary to assure payment of the annual debt service and debt service reserve deposit. (Please note that this is same lan.guage as in the draft staff recommendation dated 5-8-03, without the reference to DWCD reserve funds.) 2. Economics - It would be helpful for us to have more information on the economic feasibility of the project. I understand that the proposed tap fee of $3200 was a threshold number derived by the work of the Dove Creek Secondary Water Supply Committee. What is the likelihood that Dove Creek residents will sign up at this level? For instance, how many years would it take for a resident to recoup this initial investment with their water savings? What are typical water bills and usage now (domestic and irrigation) and what are they likely to be with this system in place? We did note that based on a 300 acre-foot delivery and 307 taps, the monthly per tap cost of the 10-year CWCB loan (including the 10% reserve requirement) would be $31.31. How does this factor into the project's economics?