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<br />. <br /> <br />. <br /> <br />. <br /> <br />With annual charges of $229,028, the average annual yield of <br />the reservoir enlargement (estimated at 5370 acre-feet) would have <br />to sell at $42.65 per acre-foot (or $29.77 per acre assuming that <br />all 4880 acres received a prorata share of the water supply) to <br />yield enough revenues to cover the required debt service, O&M, and <br />reserves. By comparison, the consulting engineer estimates that <br />an acre-foot of supplemental water would be worth about $65 per <br />acre-foot. <br /> <br />As owner of the storage space created by the reservoir <br />enlargement, the San Miguel District would effectively serve as <br />the financing agent for the proposed project and would assume the <br />responsibility to market the water yield therefrom and retire the <br />indebtednesses incurred. Water would have to be sold in the same <br />manner as shares in a ditch company are, with the annual payment <br />per share being due regardless of water availability or use. The <br />district does not propose to use its mill levy as a substantial <br />source of funding for the proposed reservoir enlargement. <br />.'t~, 6 S' <br />While the financial aspects of the pro osed project appear <br />promising, it has not yet been established that the local <br />irrigators are in fact willing to pay $ . 5 per acre-foot. <br />Furthermore, the district is currently in~fault on a loan <br />from the Farmers Home Administration for a rural, domestic water <br />supply system which the district obligated itself to finance on <br />behalf of the Wrights Mesa Water Company. While the district <br />looks to the company to raise the revenues to payoff the FHA <br />loan, it is apparently the district which is legally obligated to <br />FHA. <br /> <br />Despite these unknowns, the Board believes that the proposed <br />reservoir enlargement is sufficiently promising to merit <br />authorization at this time so that final cost estimates can be <br />prepared and details for financing the project arranged. As with <br />all authorized projects, the Board need not, and indeed by statute <br />must not, proceed to construction unless satisfied that the <br />Board's investment will in fact be repaid. <br /> <br />Recommenda tion <br /> <br />It is recommended that this project be authorized by the <br />General Assembly in the amount of $1,012,500, the Board's <br />investment to be repaid subject to the terms of the proposed <br />financing specified above. <br /> <br />/bvm <br /> <br />-3- <br />