ALP 14

STATE OF COLORADO
Colorado Water Conservation Board
Department of Natural Resources
1313 Sherman Street, Room 721
Denver, Colorado 80203
Phone: [phone]
Fax: [phone]
www.cwcb.state.co.us
Background
The CWCB authorized a $3,323,180 loan to the Dolores Water Conservancy District
(District) at its January 26, 2005 meeting for the construction of two pumping plants and pipeline
facilities to provide water to irrigate approximately 2,200 acres. The project was part of the
District's WETPAK project located in Montezuma County. The District has requested that the
CWCB de- authorize the original loan amount and terminate their loan contract. (see attachment)
Discussion
The District pledged an interest - bearing annuity, established for the purpose of repayment
of and as collateral for the original loan amount under an Investment Agreement with MBIA,
Inc., dated December 5, 2002. The annuity has recently been downgraded by its Insurer from a
AAA rating to an A rating. Due to the downgrade, recent fiscal statutory changes disallowing
this type of collateral, and the unstable economy, the District and the CWCB can no longer rely
on the annuity to secure the loan from the Severance Tax Trust Fund Perpetual Base Account.
The original project consisted of two parts: 1) acquisition of water rights from the
Montezuma Valley Irrigation Company, and 2) the construction of the pumping stations and
pipeline facilities. The water rights were obtained with an initial loan contract that the District
has re -paid in full. The second part of the project has never commenced. The annuity secured
both parts of the project.
When the District was notified that the annuity had been downgraded from a AAA rating
to an A rating, the loan contract in essence had been breached. The District immediately notified
the CWCB staff and an equivalent collateral alternative was investigated. The District's board
Water Supply Protection • Flood Protection • Stream & Lake Protection • Water Supply Planning & Finance
Water Conservation & Drought Planning • Intrastate Water Management & Development
Bill Ritter, Jr.
Governor
TO:
Colorado Water Conservation Board Members
Harris D. Sherman
DNR Executive Director
FROM:
Mike Serlet, P.E., Chief
Water Supply Planning and Finance Section
Jennifer Gimbel
CWCB Director
DATE:
May 11 2009
Dan McAuliffe
Deputy CWCB Director
SUBJECT:
Agenda Item #16 — May 19 -20, 2009, Board Meeting
Water Supply Planning and Finance Section — Revisions to Existing Loans
Dolores Water Conservancy District — WETPAK Project De- Authorization
Background
The CWCB authorized a $3,323,180 loan to the Dolores Water Conservancy District
(District) at its January 26, 2005 meeting for the construction of two pumping plants and pipeline
facilities to provide water to irrigate approximately 2,200 acres. The project was part of the
District's WETPAK project located in Montezuma County. The District has requested that the
CWCB de- authorize the original loan amount and terminate their loan contract. (see attachment)
Discussion
The District pledged an interest - bearing annuity, established for the purpose of repayment
of and as collateral for the original loan amount under an Investment Agreement with MBIA,
Inc., dated December 5, 2002. The annuity has recently been downgraded by its Insurer from a
AAA rating to an A rating. Due to the downgrade, recent fiscal statutory changes disallowing
this type of collateral, and the unstable economy, the District and the CWCB can no longer rely
on the annuity to secure the loan from the Severance Tax Trust Fund Perpetual Base Account.
The original project consisted of two parts: 1) acquisition of water rights from the
Montezuma Valley Irrigation Company, and 2) the construction of the pumping stations and
pipeline facilities. The water rights were obtained with an initial loan contract that the District
has re -paid in full. The second part of the project has never commenced. The annuity secured
both parts of the project.
When the District was notified that the annuity had been downgraded from a AAA rating
to an A rating, the loan contract in essence had been breached. The District immediately notified
the CWCB staff and an equivalent collateral alternative was investigated. The District's board
Water Supply Protection • Flood Protection • Stream & Lake Protection • Water Supply Planning & Finance
Water Conservation & Drought Planning • Intrastate Water Management & Development