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North Poudre Irrigation Company Agenda Item 13b July 20-21, 2016 Board Meeting(Updated July 22, 2016) Page 2 of 5 Background The Company's service area encompasses approximately 300 square miles, including additional service areas covering 14 communities and municipal water providers that own NPIC shares. The Livermore Tunnel provides water via the North Poudre Canal to serve 160 square miles of service area, with 36 square miles of irrigated acreage. The Company operates 21 storage reservoirs, 5 flood control dams, and approximately 200 miles of ditches. Irrigated acreage within the service area supports production of corn, sugar beets, soybeans, hay, and feed crops. The Livermore Tunnel carries water diverted from the North Poudre Canal headgate, located on the north side of the North Fork Cache la Poudre River, for approximately 4,900 feet before it discharges into an earth-lined open canal and flows on toward the Buckeye Lateral, Park Creek Reservoir, and the Company's downstream delivery infrastructure. The Livermore Tunnel consists of two tunnels connected by a short section of open channel. The tunnels are approximately 8.5 feet high and 8 feet wide with a concrete invert along the entire tunnel length. The tunnels are considered generally stable with the exception of six collapse zones, meaning rock fall events have occurred and large piles of rock and debris have accumulated in the base of the tunnel, ponding up to three feet of water and restricting the overall flow capacity of the tunnels. Three of the six collapse zones are considered active, where the rock fall events are frequent. Occasional rock fall is occurring in the remaining three collapse zones. In addition, ten shear/void areas are proposed to be proactively repaired to avoid future deterioration. The geometry of the collapse zones varies; however, the disrupted zones were estimated visually to be as large as 45 feet high and 35 feet wide. Potential roof or partial collapse in the tunnel is an ongoing concern, and would impact system users with a prolonged system outage. A major collapse event could result in severe disruption of water service for 14 communities and over 200 farms. Loan Feasibility Study Dave Rau of Paragon Consulting Group, Inc. and John Sikora, P.E. of AECOM Technical Services prepared the Loan Feasibility Study titled "Feasibility of the Livermore Irrigation Tunnel Rehabilitation Project", dated June 6, 2016. The study includes an analysis of alternatives, preliminary engineering design, and cost estimates. The study was prepared in accordance with CWCB guidelines. Borrower - North Poudre Irrigation Company The Company is a Mutual Ditch Company established in 1901. The Company's office is located in Wellington. It operates as a nonprofit corporation and is in good standing with the Colorado Secretary of State. The Company has issued 10,000 shares of stock and currently has 570 shareholders. Company revenues derive primarily from assessments charged on shares of stock owned by the stockholders. The Company also receives revenues from recreational leases, and annual payments from the City of Fort Collins for the sale of Halligan Reservoir. The Company's by-laws empower the Board of Directors to take on debt for the uses, needs, and demands of the Company, and to set assessments accordingly. The Board has the authority to enforce assessments, including suspending water deliveries and sale or forfeiture of shares for failure to pay assessments. Water Rights There are 197 water rights and exchanges, 27 of which are owned by the Company, that rely on the North Poudre Canal and the Livermore Tunnel. The Company continually executes a series of complex exchanges and trades within the Cache la Poudre Basin. There are exchanges and trades for water from Joe Wright Reservoir, Halligan Reservoir, Fossil Creek Reservoir, and Worster Reservoir to the Company's diversion structures. These exchanges create a flexible water supply for agricultural producers and municipal water providers. The Company also owns and operates 22 reservoirs, with a combined 220,000 acre-feet of storage, which are used for a variety of trades and exchanges to efficiently deliver water within the Company service area.