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<br />r <br /> <br />Lower Latham Reservoir Company <br />March II, 2008 (Updated March 20, 2008) <br />Page 3 of 4 <br /> <br />Agenda Item 18b <br /> <br />The Company shares have been determined to be an excellent replacement source because they have a senior <br />right that sustains a high yield during both average and drought years. In addition, implementation of the <br />shares into the Company's plan of augmentation is easily achieved from an operational standpoint. Delivery <br />diversion locations are ideal for the augmentation plan. With the two shares purchased, the Company will <br />have a total of 24.5 Ditch Company shares to use in the plan for augmentation. <br /> <br />The Total Project cost il> estimated to be: <br /> <br />1. Engineering! Appraisal <br />2. Water Rights Purchase - Schmidt <br />3. Bridge Loan FeeslInterest <br />Total <br /> <br />$10,000 <br />712,000 <br />16.000 <br />$738,000 <br /> <br />Schedule - The water rights acquisition occurred in January 2008, using short-term bridge fmancing. <br /> <br />Appraisal- In accordance with CWCB Financial Policy #8 (Purchase of Water Rights), a written appraisal <br />or opinion of value from a qualified water rights appraiser supporting the purchase price must be submitted <br />prior to disbursal of CWCB loan funds. An appraisal of the Ditch Company shares from the Rothe Farm <br />purchase was completed by Bud Clemons, Colorado Certified General Appraiser, of Greeley in April 2007 <br />in conjunction with the previously approved CWCB loan. The appraisal was considered current enough to <br />use with this loan request. The appraised market value of the historic consumptive use of the two shares <br />contemplated in this loan request is $393,750/share and the Company is paying $355,910/share for the <br />Schmidt Farm shares. <br /> <br />Financial Analysis <br /> <br />Table 1 shows a summary of the financial aspects of the loan request. The Company qualifies for an <br />agriculture interest rate of 2.25% for a 30-year term. The Company will use their line of credit and cash <br />reserves as its contribution to the remaining 10% portion of the Project. <br /> <br />Table 1. Financial Summary <br /> <br />PROJECT/LOAN <br />Total Project Cost $738,000 <br />CWCB Loan $664,000 <br />CWCB Loan (Including 1 % Service Fee) $670,640 <br />eWCB Annual Loan Payment $31,000 <br />CWCB Loan ObliJ1;ation (including 10% debt reserve funding) $34,100 <br />Total Project Cost per Acre-Foot (based on 106 AF Consumptive Use) $6,960/ AF <br />. Assessments Before After* <br />Assessments per irrigated acre (500,000 acres) $O.OO/acre $O.OO/acre <br /> <br />* Company revenues are generated from oil and gas royalties from wells located on Company owned property <br /> <br />Creditworthiness: The Company has historically operated without long-term debt until the contracted <br />CWCB loan in 2007. The final loan amount was $1,994,485 with an annual payment of $92,149. The <br />Company obtained a bridge loan from the Union Colony Bank of $996,000 in January 2008. The actual <br />amount borrowed is $775,000 for the purchase of the Schmidt Farm Water Rights. The Company intends to <br />pay down the balance of the bridge loan as soon as possible with available Company funds. The Company <br />will maintain the line of credit account with the Union Colony Bank for use in future water rights purchases. <br />The line of credit has a variable interest rate currently at 6.5% and is secured by CBT shares. <br />