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Sanford Canal Company Agenda Item 32b May 9,2014(Updated May 23,2014) Page 2 of 4 Background The Company's service area covers approximately 3,000 irrigated acres. Its diversion is located on the Conejos River just below the confluence with the San Antonio River. The North Branch of the Conejos also converges at this location. This area is known as the Confluence of the Conejos and is located 12 miles upstream from the point where Colorado releases its water to the Rio Grande Compact's downstream states of New Mexico, Texas, and the country of Mexico. Ranching and irrigated farming are the principal income-producing activities in this area, with most ranchers growing winter feed for livestock and raising cattle. Meadow hay and alfalfa are the main crops, with a few raising barley and oats. The Conejos Water Conservancy District(District)plays a critical role in the management of flows on the Conejos River and its tributaries, ensuring that sufficient quantities of water are available to meet agricultural needs within the District and to satisfy Colorado's obligation to the Rio Grande Compact. The District has taken a proactive "whole river" system approach to water management and, over the past few years, has improved the efficiency and stability of many diversions, developed real-time water management data, and studied the effects on return flows from irrigated areas from groundwater withdrawals. The CMP will extend this whole river strategy to the Confluence, specifically to the Sanford Canal, Ephraim Ditch, and East Bend Ditch. CMP funding comes from a variety of sources. Concurrent with this request,the District is seeking approval of a$295,000 Water Supply Reserve Account(WSRA) Grant for the CMP (See Agenda Item 32a). Of this grant, it is anticipated $86,000 will be used towards the Sanford Project. Loan Feasibility Study The District,together with Transforma Research& Design, LLC.,prepared the Loan Feasibility Study titled"Feasibility Study for Rehabilitation of the Sanford Core &Diversion at the Conejos River Confluence," dated November 22, 2013, with support from the Natural Resources Conservation Service (NRCS). The study was prepared in accordance with CWCB guidelines and includes an alternative analysis, preliminary engineering design, cost estimates, and financial statements. Borrower- Sanford Canal Company The Company was incorporated in 1892 as a"Colorado Water Company" and later became a Mutual Ditch Company in 1912. It operates as a nonprofit corporation and is in good standing with the Colorado Secretary of State. The Company has issued 50,054 shares of stock. Revenues are primarily derived from assessments charged on shares of stock owned by the stockholders. Each year the shareholders must approve assessments though the Board has the power to make any such assessment should the shareholders fail to make or authorize such assessment. The Board has the authority to enforce assessments, including suspending water deliveries and the eventual sale of shares for failure to pay assessments. Shareholders approved taking on this debt during a special meeting of the shareholders on Monday, October 7, 2013.