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Parkville Water District May 11, 2010 Page 2 of 5 Background Agenda Item 14c The portal of the Canterbury Tunnel is located approximately two miles northeast of Leadville along the East Fork of the Arkansas River. The tunnel was constructed during the late 1920's to provide mine drainage. The tunnel was constructed through glacial till material with timber cribbing wall reinforcements for the first 1,200 feet of its length. The remainder of the tunnel was driven into hard rock that did not require continuous structural support. It is believed that the timber cribbing has begun to fail. The tunnel collected deep-seated water and transported it approximately one mile to the portal where the water discharged into the Arkansas River. In 1961, the Disfict constructed a wet well, pump station, and pipeline from the portal to collect the water and pump it into the existing District's distribution system. The tunnel produced high quality groundwater at a constant rate and a year-round temperature of approximately 50 degrees Fahrenheit. Beginning in the late 1990's, the water discharged from the portal experienced turbidity spikes and the flow rate gradually decreased from about 600 gpm to less than 200 gpm. In 2003, the District stopped using the supply because of its diminished flow rate and unpredictable quality. Without the Canterbury Tunnel water supply the District has struggled to meet current water demands during peak summer use and in winter months when the yield of its surface water rights decline. Loan Feasibility Study Greg Teter, District Manager, has been the primary contact regarding this loan application. The Loan Feasibility Study, titled "Feasibility Study for the Repair of the Canterbury Tunnel Water Supply", dated April, 2010, was prepared by Bret Swigle, PE, of W.W. Wheeler & Associates. The study includes an engineer's cost estimate and annual financial statements prepared by Kenneth L. Olsen, CPA, PC, of Leadville. The study was prepared in accordance with the CWCB guidelines. The Parkville Water District In 1879, the City of Leadville granted a franchise to the Leadville Water Company (Company). The Company acquired water rights and constructed a water supply system which served Leadville for approximately 85 years. The population of Leadville in 1880 was 15,000 and by 1960 it dropped to 4,000. In 1965, the District acquired the Company through condemnation proceedings for $895,130. The District's service area is approximately four square miles and serves 1,964 residential taps and 372 commercial taps (2,336 total customers). The Colorado State Demographers Office has indicated that Leadville may return to a population of 15,000 residents (500% increase) by 2035. The potential reopening of the Climax Mine will have a significant impact on the community. The District is a Title 32 District with five Directors that have the power to set rates, incur debt and enforce water service assessments. Most of the District's revenues come from monthly metered service charges and connection charges. On May 4, 2010, the District voters passed a ballot question approving debt issuance for the Project and to accept the $700,000 in grant funding. Water Rights The District's primary source of water is Evans Gulch. The District has incorporated an additional source of supply from three wells along the East Fork of the Arkansas River. Other sources from