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future it is expected Tiger Run will eifher join the District or SNMD will service their needs as an out-of-district customer. SNMD facilities are more than sufficient to handle this requirement. More detail on system operation is found in a later section of this �tudy. Loan Request SNMD is requesting a 20 year loan for $150,000 which represents 53% of the $285,000 settlement payment for the acquisition of clear title to the water rights. CWCB Lending Policy No. 8 states in part "the costs of water rights acquisition are eligible for a CWCB loan if the purchase satisfies an existing water need or shortage." The proposed acquisition by SNMD of the water rights which were originally purchased to meet the requirements of the service plan would seem to fall in this definition. This is especially true given the fact that these were the same water rights that BMDC represented to the County would be used for supplying water to the developments in the District. SNMD currently is using the water from these rights but does not have clear title to them. Although SNMD board believes that BMDC was, and remains, legally obligated to convey these water rights to the District, the board decided to negotiate a settlement of the dispute rather than litigate the issue. The Board believes that the settlement is in the best interests of the District. Physical Supply System The Swan's Nest Metropolitan District is a groundwater treatment facility. Water is pumped from two 100 GPM wells that draw water from the Swan River Alluvium to a 240,000 gallon steel storage tank. From the storage tank, water is supplied by gravity to the system. The distribution lines are flushed and valves are exercised every spring. The tank was inspected by Liquid Engineering September 2007 and found to be in great condition. Exhibit D is a copy of the districts Monitoring Plan. Water rights understanding When the lots and units in the District were purchased by the individual owners, none of them were aware of the water rights situation. None of the Title Companies searches discovered the anomaly and the developers of the Villas did not raise any alarm. The County was equally ignorant of the fact that "water service" sign-offs by SNMD President (who was also President of BMDC) did not necessarily mean SNMD had title to the water rights. Once owners began to understand the implications implicit with the lack of clear title to the water rights they looked to their HOAs and SNMD to solve the problem. Significant support exists in the communities for arriving at a solution. The cost of settling the matter in terms of cost per SFE is insignificant in relation to the value af the property, unencumbered by any water rights dispute. 5