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Montezuma Valley Irrigation Company Agenda Item 15c <br /> July 2,2007(Revised July 16,2007) <br /> Page 3 of 4 <br /> Alternative No.1 was considered unacceptable since the Company could not be assured of the <br /> delivery of water to its shareholders. Alternative No. 2 was ruled out because previous repairs <br /> continue to fail. Alternative No. 3 was ruled out because of cost-benefit analysis and it does not <br /> address the issues along the entire canal. Alternative No. 4 was selected, since it is considered <br /> to be the most reliable means of delivery of water to shareholders. <br /> The selected alternative, Alternative No. 4, involves construction of a 5 mile long pipeline. This <br /> pipeline will follow the existing ditch except in a few locations. <br /> Total Project cost estimate is: <br /> Construction $4,730,000 <br /> Contingency (16%) $760,000 <br /> Planning/Engineering $330,000 <br /> Total $5,820,000 <br /> The loan request is based on the total design and construction cost estimate for the Project. <br /> Construction is expected to begin November 2007 and to be completed in two phases during <br /> the fall/winter of 07/08 and 08/09. <br /> Financial Analysis <br /> Table 1 shows a summary of the financial aspects of the Project for the current loan request. A <br /> CWCB Loan of$5,240,000 will have an annual debt service obligation of$266,200 ($242,000 <br /> for annual loan payment and $24,200 for the 10% reserve funding)for the loan terms of 2.25% <br /> for 30 years. Financial Policy#7 requires the interest rate to be blended based on the ownership <br /> of company shares. Since over 99% of the Company's shares are owned by agricultural <br /> producers (City of Cortez owns less than one percent), the blended interest rate remains at the <br /> 30-year agricultural interest rate of 2.25%. <br /> Table 1. Financial Summary <br /> Total Project Cost $5,820,000 <br /> CWCB Loan (90% of Total Project Cost) $5,240,000 <br /> CWCB Annual Loan Payment $242,000 <br /> CWCB Loan Obligation (including 10% debt reserve funding) $266,200 <br /> Before After <br /> Annual Assessments per share (based on 33,284 shares) $14.50 $14.50 * <br /> * Company plans to repay the loan without raising current assessments <br /> Creditworthiness: The Company currently has a contract with the Dolores Water Conservancy <br /> District to pay for a portion of the stored project water in the McPhee Reservoir. The payment is <br /> applied to the District's repayment obligation to the Bureau of Reclamation for construction of <br /> the reservoir. The Company's annual payment to the District of$76,800 lasts through 2038. <br /> The Company has nearly $2.5 million in investments which generates approximately $100,000 <br /> in revenue from interest. This revenue was considered in the Company's financial analysis and <br /> shows a strong ability to repay the CWCB loan. <br />