CT2015-165 Collateral Change Approval

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Bull Creek Reservoir, Canal Et Power Company Agenda Item 24a September 15-17, 2015 Board Meeting(Updated September 18, 2015) Page 2 of 4 Background The CWCB and the Company entered into a Loan Contract dated June 18, 2007, amended September 21, 2009, and again amended on December 14, 2010, for a total loan of $1,801,630 to finance 90% of the total Project costs. The numerous amendments were due to cost overruns as a result of an inexperienced design engineer that provided inadequate and multiple design iterations; selection of a low-bid contractor that failed to complete the project; unforeseen weather conditions; and permit complications related to the Reservoir's location on Forest Service Land. The current Loan Contract includes conditions & contract requirements that established the following: 1) Upon resolution of the pending litigation, Borrower shall attempt in good faith to sell Reservoirs #1 and #2 or some other combination of assets to maintain its annual assessments at a maximum of $125 per share. The CWCB shall have the right of first refusal to acquire any such assets in exchange for a reduction of the Company's loan balance. 2) If the two mechanics liens and the contractor's claims cannot be resolved satisfactorily within a four year period, the Company shall sufficiently cover the outstanding claims and CWCB debt service payments through the liquidation of assets or other means with the written consent of the CWCB. 3) The Promissory Note allowed for lower initial repayment amounts. For the first four years, $49,550 and for years 5 through 30, $94,081.68. This allowed the Company to deal with the uncertainty of the Contractors' lien, subcontractor's lien, and the significant increase in annual assessments due to the cost overrun. 4) As security for the Loan, the Company members pledged their individual stock certificates. CWCB originally received over 90% of the shareholders stock. The Company significantly raised its assessments over the last 15 years. In 2000 - $5/share; 2002 - $20/share; 2004 - $30/share; 2006 - $50/share, 2007 - $200/share, 2012(current) - $250/share. The Company has demonstrated success in assessing and receiving the $250/share assessments for four years. The Company made an advance principal payment in 2012. In 2015, the Company made a $94,081.68 payment. The 2015 payment was made at the higher payment amount to demonstrate their financial capacity and ability to make payments and avoid selling assets as contemplated in the Loan Contract. As indicated above, the existing loan contract requires the Company to market the Company's Reservoir#1 and #2, in order to pay down the principal on the CWCB Loan. The reservoirs were not sold; however, the Company has been in compliance with the reporting requirement. The Company has determined that selling the reservoirs is not in the Company's best interest at this time. Therefore, the Company is requesting that this requirement no longer be included in the loan contract. Borrower - Bull Creek Reservoir, Canal & Power Company The Company is a mutual ditch company located in the Town of Mesa, approximately 30 miles east of Grand Junction. The Company was registered in the State of Colorado in 1895 and is a non-profit corporation in good standing. The Company provides irrigation water to approximately 800 acres of agricultural land primarily used for cattle ranching. The Company had 19 shareholders when the Project began and currently has 27 shareholders and a total of 500 shares of stock. The Company has the power to set members' annual assessments, cut off water deliveries to shareholders that fail to pay assessments, and to sell stock to pay back assessments.