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Town of Gypsum May 12, 2009 (LJPDATED May 22, 2009) Page 2 of 6 Background Agenda Item 17a The Town of Gypsum purchased the LEDE Ditch (Ditch) and Reservoir water rights in 2006. The original appropriators in the Reservoir were Lundgren, Erickson, Doll and Engstrom (LEDE). The original water rights are decreed for irrigation use, and provide storage for up to 947 AF in the reservoir. The Reservoir was built to a capacity of 431 AF. The Town seeks to recover capacity to accommodate continued agricultural irrigation, and for future water supplies to Gypsum Creek and the Town. The reservoir is located at the headwaters of Gypsum Creek and is a good source of augmentation water. Irrigation in the Gypsum valley often depletes Gypsum Creek and the Town relies on the Reservoir to augment its other water rights. The Reservoir will become even more important as the Town's population continues to increase. The Town has a contractual obligation to provide LEDE water for agricultural purposes in the Gypsum Valley. In addition, the reservoir has aging infrastructure that require repairs to comply with state dam safety regulations. The Town wishes to repair and improve the Reservoir to utilize its potential and to protect valuable senior storage rights. The Reservoir is located on the Gypsum Creek drainage in Eagle County approximately 17 miles south of the Town of Gypsum. Water is diverted into the Reservoir via a 2,800 foot long ditch called LEDE Ditch, from a diversion structure on Antones Cabin Creek (aka Lost Creek). It is within the White River National Forest and operates pursuant to an approved special use permit. The available water supply in the Gypsum Creek headwaters is estimated at 1,160 AF annually as determined in a hydrologic yield analysis conducted from 2002 to 2005. Demands on irrigation and increased population were also examined, with a conclusion that expanding capacity in the ditch and reservoir is desired. The Town made a significant investment in the water rights and seeks to preserve the full value of those water rights by ensuring maximum beneficial use.' Loan Feasibility Study The Loan Feasibility Study, titled "Rehabilitation and Capacity Increase LEDE Ditch and Reservoir Loan Feasibility Outline", was prepared by Ramsey Kropf, of Patrick Miller Kropf, PC and Thomas Zancanella of Zancanella & Associates, PC. The study includes feasibility level engineering design and estimates and audited financial information. The study was prepared in accordance with the CWCB guidelines. The Town of Gypsum The Town of Gypsum was formed by a commission duly elected on Apri16, 1982, under the Colorado Constitution, and then approved by special election held on September 14, 1982. The Town's municipal code requires all development to provide water rights or "in-lieu fees" for water rights dedication. The in-lieu fees for annexation and water right dedication, and tap fees are held and managed in the Town's Water Enterprise Fund. The Town also collects monthly service fees for water use which are held in the Water Enterprise Fund.