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Loan Feasibility Study for Raw Water Acquisition and Utilization Page 14 Goodwin's interest in the Pleasant Valley Ditch will be completed when the water is changed in Water Court. At an annual yield of 339 of consumptive use, the Goodwin ownership in the Pleasant Valley Ditch satisfies approximately 86 percent of the current base demand for water and will satisfy approximately 35 percent of the base demand at build -out. Use of Goodwin's ownership in the Pleasant Valley Ditch will require the District to change the type of use and place of use of the water rights in Water Court and to lease water to replace winter return flow obligations. We have estimated the engineering costs to change the Goodwin ownership in the Pleasant Valley Ditch to be approximately $200,000. LRE has estimated the winter return flow obligations associated with the 10 /12th ownership in the Pleasant Valley Ditch to be approximately 240 af/year. Assuming the winter return flow obligation is paid back to the Arkansas River by leasing replacement water from Pueblo Water Works at a rate of $150 per af, the annual leased water cost is $36,000. The present worth cost of leasing 240 of of winter return flow obligation water, assuming a 30 -year lease and a three percent interest rate is about $706,000. The present value cost of purchasing the Pleasant Valley Ditch water rights owned by Mr. Goodwin would be approximately $2,606,000. Table 3 presents the break down of the purchase price for these water rights. Table 3 Cost of Purchasing 10 /12ths of Pleasant Valley Ditch Present Value Purchase of 10 /12th of Pleasant Valley Ditch $1,400,000 Leased Winter Return Flow Water $706,000 Broker Fees $150,000 Engineering Fees for Change of Use $200,000 Legal Fees for Change of Use $150,000 TOTAL $2,606,000 6.2.2 Analysis of Alternatives for Water Utilization Projects Three water utilization projects were retained in the preliminary alternative screening for consideration herein. These projects include (1) the no action alternative; (2) diversion to a new storage facility along the Arkansas River and construction of a raw water conveyance pipeline to the WTP; and (3) diversion from the Arkansas River, conveyance to an enlarged Brush Hollow Reservoir, and utilization of the existing municipal treatment and supply system. These alternatives are described in more detail below. Alternative 1 Leonard Rice Engineers, Inc. August 2006 — 1018PEN05 GMS, Inc.