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11/}8/2003 14:32 71 93362422 LAWMA PAGE 03 Annual Meeting Notice 1111412003 pege ~ As with LAWMA's existing cwes loans, the CWCS will also require LAWMA to obtain commitments from its members that require LAWMA's members to agree to cease pumping if CWCS loan payments are not made in accordance with the loan agreement and requiring members to comply with the State Engineer's rules and regulations governing the measurement and use of groundwater in the Arkansas River Basin. This requirement has been addressed in the past in LAWMA's membership form that all members are required to sign. Any new member will be required to sign the membership form that contains the above-stated commitments. In order to understand the water use and financial implications of LAWMA' s proposed purchase of one-half of the Keesee water rights, the following information should be considered. A recent operational study of the yield of LAWMA' s water rights showed that without one-half of the Keesee water rights LAWMA' s replacement supplies would be adequate for full allocations of replacement water to its members in 37 of 56 years. With one-half of the Keesee water rights LAWMA' s replacement water supplies are improved, especially in dry years, and would justify full allocations of replacement water to its members in four additional years. Also, with the addition of one-half of the Keesee water rights the allocations in the years of less than a full allocation increase by as much as 30% in some years and by 11.2% overall. Of particular importance to individual shareholders, however, is the effect of adding one- half of the Keesee water rights on the average and firm yield of a lAWMA share and on the cost per firm acre.foot of replacement water. Without one-half of the Keesee rights the average yield of a LAWMA share is estimated to be 0.86 acre.feet and the dry-year (or firm) yield is estimated to be 0.33 acre-feet. With one-half of the Keesee water rights the average yield of a LAWMA share is estimated to be 0.90 acre-feet and the firm yield, is estimated to be 0.44 acre-feet. That translates into a firm share yield increase with one-half of the Keesee water rights included in LAWMA' s portfolio of replacement water sources of approximately 30.7% and an average share yield increase of 4.7%. The long term cost to LAWMA's members for a firm acre-foot of replacement water without one- half of the Keesee water rights is estimated to be $67.88 while the cost with one-half of the Keesee water rights is estimated to be $63.71. Therefore, the cost per firm acre-foot of replacement water over the long term will decrease by approximately $4.17 or 6.1 % for LAWMA members if one~half of the Keesee water ri'ghts are acquired. In order to understand the actual fjnancial impact of purchasing one-half of the Keesee water rights LAWMA members should consider the following information. First, the members know that dues and assessments will have to increase considerably in the coming year due to increased loan payments from prior loan deferrals, the interest accruing during project completion on a prior loan, and the need to proceed with moving LAWMA's application for change of water rights and plan for augmentation through Water Court. If LAWMA acquires one-half of the Keesee water rights the Board of Directors recommends that the share assessment in 2004 be set at $,22.30 per share. If one-half of the Keesee water rights are not purchased then the Board of Directors will recommend that share assessments in 2004 be set at $ 35.90 per share to cover LAWMA's current expenses and level of debt. \.)! \1..~yJ- wi' IL<~