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Fort Lyon Canal Company Agenda Item 23a September 15-17,2015 Board Meeting(Updated September 18, 2015) Page 2 of 7 Background The Company serves approximately 93,000 irrigated acres along more than 113 miles of the Fort Lyon Canal in Otero, Bent, and Prowers Counties north of the Arkansas River from La Junta to Lamar. The Horse Creek Flume has been in operation since 1938. Despite ongoing repairs over the years, the flume has reached the end of its service life and the Company seeks to replace it. The flume is a 400- foot-long, 10-foot-diameter, elevated steel pipe located on the Fort Lyon Canal where it crosses Horse Creek, approximately 10 miles northeast of La Junta and about 8 miles west of Las Animas, in Bent County, Colorado. Three different Professional Engineers have assessed the flume and all found it to be in extremely poor condition and in need of immediate replacement. Failure of the flume, designed to convey 1,800 cfs, could result in the loss of more than $50 million in crop revenue and loss of supply to more than 14,000 acres of wildlife habitat in the downstream Queens and Thurston State Wildlife Areas. Loan Feasibility Study Steve Jamieson, P.E. of W.W. Wheeler Et Associates, Inc. prepared the Loan Feasibility Study titled "Feasibility Study for the Replacement of the Horse Creek Flume", dated July 8, 2015. The study includes an analysis of alternatives, a preliminary engineering design, and cost estimates, in accordance with CWCB guidelines. Borrower - Fort Lyon Canal Company The Company is a Colorado mutual ditch company and a non-profit corporation, incorporated in 1897, in good standing with the Colorado Secretary of State. The Company's office is located in Las Animas. The Company has 275 shareholders and has issued 93,989 shares of stock. The Company's revenues are primarily derived from assessments charged on shares of stock owned by stockholders. Additional revenue comes from an agreement with the Amity Mutual Irrigation Company to transport water through the canal, and from Colorado Parks and Wildlife for easement access to several of the Company's reservoirs. The Company has a five-member board of directors. The Company's by-laws authorize the Board of Directors to borrow money and to provide for the payment of the same by assessment of its members. The board appoints a committee to set preliminary assessments. The preliminary assessment is then voted on by the shareholders at the annual December meeting. The Board has the authority to take measures to enforce assessments, including the suspension of water deliveries and the eventual sale or forfeiture of shares for failure to pay assessments. Water Rights The Company owns a diversion dam, headgate, and over 100 miles of irrigation canal and appurtenant structures. The Company also owns Adobe Creek Dam, Horse Creek Dam, Thurston Dam and the Fort Lyon Control Basin. The Company has the following decreed water rights: TABLE 1: WATER RIGHTS Name Amount Appropriation Adjudication Date Date Fort Lyon Canal 164.64 cfs 4/15/1884 4/8/1905 Fort Lyon Canal 597.16 cfs 3/1/1887 4/8/1905 Fort Lyon Canal 171.20 cfs 8/31/1893 4/8/1905 Adobe Creek Reservoir 5,483 AF 8/1/1896 2/3/1927 Adobe Creek Reservoir 6,1575 AF 1/25/1906 11/8/1928