BOARD00002

• Board Meeting Date: 9/24/2001
• Description: CF Section - Changes in Existing Loans Lower Arkansas Water Management Association Loan Payment Deferral Request
• Board Meetings - Doc Type: Memo

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MOSES, WITTEMYER, HARRISON AND WOODRUF"F", P. C.

LAW OFFICES

1002 WALNUT STREET, SUITE: 300

DAVID L, HARRISON
,JAMES R. MONTGOMERY
TlMOTHY..J, BEATON
VERONICA A. SPE:RLIN13

BOULDER, COLORADO 80302

CHARLES N. WOODRUFF
(1941-1996)

TELE:PHONE: [phone];;:
FAX: (30,3) 443-8796

COUNSEL
RAPHAEL J. MOSES
JOHN WITTE:MYER

RICHARO..l, ME:HRE.N
GABRIEL D. CARTE:R

ADORESS CORRESPONOENCe: TO:
P.O.~OXJ440
BOULDER, CO 80306,1440

SPECIAL COUNSEL
HUNTLEY STONE

September 11, 2001

HAND-DELIVERED

Mike Serlet
Colorado Water Conservation Board
Department of Natural Resources
721 State Centennial Building
1313 Shennan Street
Denver, CO 80203

Re: Deferral of Lower Arkansas Water Mana~ement Association' CWCB
Loan Payment

Dear Mike:

This letter is intended to follow up on your voice mail to me regarding Lower
Arkansas Water Management Association's ("LA WMA") request to defer some part of its payments
of its four Colorado Water Conservation Board ("CWCB") loans. As you probably know, the final
trial of the Kansas v. Colorado case is rapidly approaching. In Kansas' latest rounds of expert
reports, distributed in April of this year, Kansas raised many issues specific to the operation of
LA WMA's replacement plan in the Lower Arkansas River basin.

LA WMA has conferred with counsel for the State of Colorado on these issues and
questioned how Colorado intends to respond to Kansas' attacks on LA WMA' s operations. Counsel
for Colorado has told LA WMA that it would be in the best interest of both Colorado and LA WMA
if LA WMA prepared detailed responses to Kansas' allegations against LA WMA for Colorado to
present to the Special Master. Moreover, LA WMA will have to participate directly in the trial of
this case early next year. LA WMA's engineers and attorneys are currently in the process of
preparing detailed reports to be presented to the Special Master. While LA WMA would not seek
to be a fonnal party, it is preparing to participate actively in the trial.

However, given the extraordinary and unanticipated cost of responding to Kansas'
expert reports, LA WMA is quite concerned that it will be unable to make the entirety of its CWCB
loan payments. While some of these work items would have been done in due course as LA WMA
goes through the water court augmentation plan process, many of the tasks will have to be done
twice. All of the tasks will have been accelerated. We have to prepare for a level of intensity even
more than nonnal in water court. Our best estimate of the cash flow impact on LA WMA for the