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The River District receives $3MM annually from Denver for water Denver. leases in Wolford Mountain Reservoir. These revenues have been used and pledged, in part, to meet debt service obligations to the CWCB Construction Fund, through which the project was financed. The River District is currently in the process of refunding this debt and financing the principal balance through the Colorado Water and Power Resources Development Authority. It is expected that the debt service for the refinanced debt will be $1,58.5,000 annually for 10 years. Current estimates of debt service for the Elkhead Project are less than $700,000 per year, meaning there is a sufficient balance from the $3MM annual revenue stream to pledge for the project. Denver's lease payments end in 2020. Assuming a 20-year CWCB loan for Elkhead, there will be several years of revenue stream at the end of the loan that are not pledged. If this is problematic, we propose an escrow, an amount the future value of which would be adequate to cover debt service to the end of the loan repayment, most likely in 2024. The Recovery Program share of the project, less the $2MM which will be funded through the State as discussed above, will be cash funded through their annual appropriations. The River District is asking for a substantial up-front payment of the Program's obligation with forfeiture of monies received and any right to storage water if the Program fails to appropriate and fund the remainder of their share. ENGINEERING In 2001, Ayres and Associates, the River District's NEPA consultant for the enlargement, prepared an engineering feasibility report for the project. In August 2002, the River District retained URS Consultants of Denver, Colorado to perform the engineering design of the expansion. In April of this year, URS completed the preliminary design and an updated construction cost estimate. The preliminary design report is included as Attachment F and the construction cost estimate is included in Attachment G. PERMITTING We have prepared a draft U.S. Army Corps of Engineers 404 permit application with all required supporting information and expect to have this submitted in final form within the next 30 days. The Corps will be lead agency under NEPA. Corps representatives have informed us they expect an Environmental Assessment will be adequate for 404 permit purposes. Elkhead Reservoir is situated in both Routt and Moffat Counties. No local land use authorization is required from either entity. Page -6-