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San Luis VaHey Water Conservancy District July 15,2008 Page 5 of6 Agenda Item l6c Creditworthiness: The District has no existing debt. Its income currently comes from tax assessments, annual fees, and water sales. CWCB Financial Policy #8 states that costs of water rights acquisitions are eligible for CWCB loans as long as the purchase satisfies an existing water need (not strictly for growth). For this reason, the District's new water sales were not included as income for the financial analysis. Repayment ratios were calculated using only tax assessments and annual fees as income. The District presently has over $900,000 in cash reserves. Prom that, $80,000 will be paid as its 10% match (earnest money) on this acquisition. Upon the execution of the sale of this one-third interest of the Ditch, the District intends to try to acquire the remaining one-sixth (3cfs) of the Ditch. If the District's offer is accepted, it will purchase the remaining interest with cash from its reserves. This was also considered when analyzing the District's future finances. The District increased its fees in 2002 in an effort to rebuild its reserve account (which was being drawn down by ongoing operations of the augmentation program). Based on its current income and expenditures, rates currently do not need to be raised to cover the CWCB debt service. Table 2 shows the Financial Ratios for the District's revenues. Table 2. Financial Ratios . Future Financial Ratio Past 3 Years wi Project Operating Ratio (revenues/expenses) 118% 118% I weak: <100% I-I average: 100% - 120%' -I strong: >120%1 (Average) (Average) $323/273K $323/273K Debt Service Coverage Ratio 115% (revenues-expenses)/debt service (N/A) (Average) I weak: <100%1-1 average: 100% - 120% , -I strong: >120%1 ($323-273K)/ $44K Cash Reserves to Current Expenses 307% 133% I weak: <50% I-I average: 50% - 100% I-I strong: > 1 00%1 (Strong) (Strong) $839/273K $420/317K Annual Operating Cost per Acre-Foot * $748** $626*** !weak: >$20 I-I average: $10 - $20 I-I strong: <$101 $273K/365 $420K/506 *Cost per acre-foot is based on fully consumable water in the augmentation plan. This ratio is usually used for agricultural financial analysis and may apply here. **Past years based on 365 AF - estimated yield from augmentation decrees ***With project based on 365 AF + 141 AF (estimated yields) = 506 AF Collateral- Security for this loan will be a pledge of Water Activity Enterprise revenues backed by a rate covenant and annual financial reporting. This security is in compliance with CWCB Loan Policy #5 (Collateral).