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San Luis Valley Water Conservancy District Agenda Item 16c July 15, 2008 Page 4 of 6 $80,000 of earnest money is required and will be applie d as a credit to the to tal price at closing. The District will pay the earnest money from their cash reserve funds. The resulting loan request is for $720,000. Upon execution of the purchase, th e District will need a place to store the new water rights. Currently, the District leases storage space in three reservoirs: Rio Grande, Santa Maria, and Continental. It is in the process of negotia ting additional storage space for the newly acquired water. Schedule – The water rights acquisition is expected to take place within 45 -100 days of the CWCB July 2008 Board meeting. Appraisal - In accordance with the CWCB Financia l Policy #8 (Purchase of Water Rights), a written appraisal or opinion of value from a quali fied water rights appraiser supporting the purchase price has been submitted. An appraisal of the one-third interest in the Pine River Weminuche Pass Ditch was completed by attorney Kenneth J. Bu rke of Denver in January 2006. Per Mr. Burke, the appraised market value of the one-third intere st in the Ditch was $1,700,000. This appraisal was provided by the owner/selle r of the water rights. The District also had an apprai sal for similar water rights in the Ditch. The second appraisal was completed by Thomas Williamsen, with Helton & Williamsen, P.C., a water resources consulting engineering company in Englewood, Colorado. The appraisal was done in November of 2006 to estimate the value of ½ interest in the Ditch. Mr. Williamsen’s estimate of the value for the ½ interest was $996,800; therefore, appl ying a proportionate value to the one-third interest suggests an estimated value of $664,533. The actual purchase price for th e one-third interest ($800,000) seems reasonable given that it falls between the two price opinions. The District acquired ¼ intere st in the Ditch in 1984 for $353,000 and another ¼ interest in 1994 for $393,000, which equates to approximately $3,000/AF. Based on the expected yield of 141 AF for this additional one-third interest, the total cost comes out to $5,674/AF. Financial Analysis Table 1 shows a summary of the financial aspect s of the loan request. Based on the median household income in the District’s service area, the interest rate will be the municipal low income rate of 3.5% for a 30 year term. Table 1. Financial Summary PROJECT/LOAN Total Project Cost $800,000 Earnest Money paid by District $80,000 CWCB Loan $720,000 CWCB Loan (Including 1% Service Fee) $727,200 CWCB Annual Loan Payment $39,500 CWCB Loan Obligation (including 10% debt reserve funding) $43,500 Annual Project Cost per AF ba sed on 141 AF expected yield $280