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<br />Stratus Consulting <br /> <br />Existing Funding Sources <br /> <br /> <br />USDA Rural Development is another source of funding for which private nonprofit water <br />systems are eligible. USDA offers direct loans, loan guarantees, and grants. Eligible systems for <br />these programs are governmental systems, private nonprofits, and Indian tribes. Direct loan <br />terms can be for up to 40 years and, depending on the system, the interest rate currently ranges <br />from about 4.5% to 5.5%. Rural Development also offers loan guarantees; however, they have <br />been difficult to execute recently and have not been used often. Rural Development also offers <br />grants to be used with loans. These grants can be used to help keep the monthly payment down <br />for water systems. The percentage of the total project that is eligible for a grant has declined over <br />recent years. At one time, up to 75% of the total project was eligible for a grant, whereas <br />currently the average grant amount is for about 25% of the project. The level of grant funding is <br />determined based on the ability to pay for the system. <br /> <br />Rural Development borrowers must meet federal requirements in their application. This <br />generally includes specific standards for preliminary engineering reports, environmental <br />assessments, and other reviews. These standards must be met for the application to be <br />considered, and sometimes meeting those requirements can take time. The current average time <br />for a loan application and approval process is two to three years. <br /> <br />RCAC is a short-term funding provider. RCAC funds can fill the gap between when USDA <br />Rural Development loans are approved and when the money is made available, which sometimes <br />can be after construction is finished. Short-term loans are available for one year for up to <br />$50,000. Predevelopment loans are available for preconstruction activities, including preliminary <br />engineering reports and environmental assessments. These loans can be for up to $250,000. <br />Construction loans are made for less than three years to bridge a financing gap, and can be for up <br />to $1 million. RCAC has long-term loans available for up to 20 years, but borrowers must meet <br />the requirements of the USDA loan guarantee. Interest rates on these loans are market rate, <br />which currently is approximately 7.5% to 8%. RCAC is a lender oflast resort for this long-term <br />type of loan. <br /> <br />CWCB currently is allowed to make raw water loans to governmental entities and PNPWSs. <br />Eligible projects include reservoir expansions, water rights purchases, and water supply systems, <br />including groundwater pumps or surface water diversions. Interest rates available depend on the <br />type of user (agricultural, municipal, or commercial) and range from 2.25% for agricultural <br />borrowers to 4.75% for commercial borrowers for a 30-year loan term. Loan terms also can be <br />10 years or 20 years. The funding source for this program is severance tax collections by the <br />state. <br /> <br />Funding also is available to both PNPWSs and private for-profit water systems through the <br />WSRA. The WSRA was created by the Colorado legislature as a result of the SWSI, to fund <br />projects that will meet state needs in resolving water supply and demand issues in each of the <br />major river basins in the state. The WSRA provides approximately $42 million in funding over <br /> <br />Page 3-4 <br />SCll199 <br />