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1.0 INTRODUCTION 1.1. Purpose of the North Fork Water Rights Purchase The Yuma County Water Authority was formed in 2008 to negotiate abasin-wide solution to the surface water-groundwater dispute over the use of waters in the Northern High Plains Designated Ground Water Basin ("NHP-Basin"), which includes the North Fork of the Republican River ("North Fork"). The North Fork Water Rights Purchase is a key element in the settlement of a litigation brought by the owners of certain surface water owners before the Colorado Ground Water Commission (Case No. 05-GW-14) to re-draw the boundaries of the NHP Basin. Upon closing of the Transaction, the YCWA PID will purchase all of the significant senior surface water rights in the North Fork as part of a settlement agreement for the litigation. The terms of the Transaction are prescribed in the purchase and sale agreement between the YCWA PID and the sellers of Water Rights, a copy of which is attached to this study as Attachment 1. This loan sought by YCWA PID and the loan sought by the Republican River Water Conservation District will fund a portion of the purchase price for the North Fork Water Rights Purchase. 1.2. Project Sponsor -Yuma County Water Authority Public Improvement District (YCWA PID) The Yuma County Water Authority (YCWA) was formed to negotiate and fund a settlement with the North Fork surface rights. In order to finance the settlement with property tax revenues, the board of county commissioners (the "Board") of Yuma County, Colorado created the Yuma County Water Authority Public Improvement District ("YCWA PID") pursuant to the County Public Improvement District Act of 1968 (C.R.S. 30-20-501, et seq., hereinafter, the "Act") and to authorize YCWA PID to incur debt in connection with the proposed Transaction. The voters of Yuma County have been asked to ratify the formation of the PID and authorization of general obligation debt at the November 4, 2008 general election. A copy of the form of resolution for formation and debt authorization is attached to this study as Attachment 2. The boundaries of YCWA PID are coterminous with those of Yuma County and all municipalities within said boundaries are required to consent to their inclusion within the YCWA PID as provided for under the Act following the election. Pursuant to the terms of the Act, the board of directors of the YCWA PID shall consist of the members of the Board. The YCWA PID is authorized to borrow money and incur general obligation indebtedness as provided for under the Act. Subject to an affirmative vote on the ballot measures provided for on the attached resolution, YCWA PID shall have the authority to incur debt in an amount sufficient to satisfy its portion of the purchase price as contemplated under the Transaction and to impose ad valorem taxes to service such debt as more specifically described in Section 9.1 of this study. 12368\1 \1204400.5