C150334 Approval Letter

• Contract/PO #: CT2015-044
• Contract/PO #: C150334
• Contractor Name: McDonald Ditch Company
• Contract Type: Loan
• County: Rio Grande
• Loan Projects - Doc Type: Approval Letter

McDonald Ditch Company Agenda Item 28b
September 13, 2013 (Updated September 30, 2013)
Page 3 of 4
Schedule: The final design is nearly complete. Task 2 and 3 construction is expected to begin around
November 2012 and be complete by March 2014.
Borrower - McDonald Ditch Company
The Company is a Mutual Ditch Company formed in 1921 and is in good standing with the Colorado
Secretary of State. The Company is governed by a three - member board of directors responsible for
managing the operation and maintenance responsibilities of the ditch. The Company is made up of 14.4
shares held by 8 shareholders. All shareholders are agricultural owners. Revenues are derived from
annual shareholder assessments. The Company's By -laws require an order from the Board of Directors
to incur debt and provide the Board with the authority to restrict water deliveries on delinquent shares.
Shareholder approval is required for assessment increases.
Financial Analysis
The Company was originally approved for an agricultural interest rate of 2.50% for a 20 -year term
(reduced from a 2.75% agricultural rate for a 30 -year term per CWCB Financial Policy #7). The
Company still qualifies for this rate. Table 2 provides an updated summary of the financial criteria of
the loan request.
TABLE 2: TASK 2 & 3 (LOAN PROJECT) FINANCIAL SUMMARY
The Company will fund their portion of the Project through a CWCB loan (40 %) and a NRCS grant
(60 %). CWCB will disburse loan funds at a rate of no greater than 40% of the Company's Project
obligation, up to the approved limit of $100,000.
Creditworthiness:
The Company has no outstanding debt and a high ratio of cash reserves to current expenses relative to
other irrigation ditch companies. The majority of the current assessments are used to cover diversion
and headgate maintenance and bolster cash reserves in anticipation of this Project. This project is
expected to significantly reduce annual maintenance expenses; thereby, strengthening the Company's
ability to cover the CWCB debt obligation with minimal impact on current assessment rates. Table 2
provides a summary of the financial ratios of the loan request.
Original
New
Approval
Re nest
Total Project Cost
$650,000
$1,085,200
Additional Funding Sources
WSRA Grant (awarded to the RGHRF)'
$160,000
$565,200
EQIP from NRCS (awarded to the McDonald Ditch Company)
$150,000
$150,000
CPP from NRCS (awarded to the RGHRF)
$50,000
$50,000
CCP1 from NRCS (awarded to the RGHRF)
$200,000
$200,000
AVREC (in -kind services for the relocation ofpower lines
$20,000
$20,000
Total
$580,000
$985,200
CWCB Loan Amount
$70,000
$100,000
CWCB Loan Amount (including 1% Service Fee
$70,700
$101,000
CWCB Annual Loan Payment
$4,535
$6,479
CWCB Loan Obligation (including 10% debt reserve funding)
$4,989
$7,127
Number of Shares
14.4
14.4
Current Assessment (per Share
$500
$500
Annual Cost of Project (per Share
$346
$495
The Company will fund their portion of the Project through a CWCB loan (40 %) and a NRCS grant
(60 %). CWCB will disburse loan funds at a rate of no greater than 40% of the Company's Project
obligation, up to the approved limit of $100,000.
Creditworthiness:
The Company has no outstanding debt and a high ratio of cash reserves to current expenses relative to
other irrigation ditch companies. The majority of the current assessments are used to cover diversion
and headgate maintenance and bolster cash reserves in anticipation of this Project. This project is
expected to significantly reduce annual maintenance expenses; thereby, strengthening the Company's
ability to cover the CWCB debt obligation with minimal impact on current assessment rates. Table 2
provides a summary of the financial ratios of the loan request.