BOARD00654

• Board Meeting Date: 1/14/1976
• Description: Agenda or Table of Contents, Minutes, Resolution
• Board Meetings - Doc Type: Meeting

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time basis. Otherwise we get into continuing arguments, perhaps, with
the local people about the priorities. It seemed to us the only fair
thing to do was take projects previously recommended by this board
carried forward as a number one priority in the ensuing years until
they are funded. The Gunnison project was priority number three last
year. The other two projects have been funded.

The other projects were evaluated based upon a rather complex formula
that we devised. Need is one of the big factors. The economy of the
area is another. What the project would do to improve the economy or
welfare of the people in the area, their ability to repay the project
cost, environmental impact, whether or not there is any adverse environ-
mental impact and' their wllli:'.3ness .to go ahead with the project are the
primary factors.

You will notice that in almost every case, we proposed to furnish only
about a third of the actual cost. This means that the local people
have to secure the remaining financing. However, in each case, we will
work directly with the sponsors to assist them in getting financing
from sources in addition to what this board might authorize.

MR. STAPLETON: Now, what is the interest factor and the carrying
charge?

MR. SPARKS: We do not charge interest per se. The board is not
permitted to loan money. We construct a portion of these projects and
take title to that portion that we construct. Then we lease it back to
the local people for a period of years and assess them an annual service
charge for the use of those facilities. In arriving at that service
charge, we do amortize the payment based upon some interest factor. We
use an interest factor that remains within the ability. of the local
people to repay the cost. That will generally vary from zero percent
to four percent in most cases. We determine how much the local people
will have to pay on a monthly basis for water. In most cases that will
be in addition to the present water rates. The city of Gunnison, for
instance, will have to raise its rates if this project goes through.

As an example, consider the Greetville area. We believe the maximum the
people down there can afford to pay for water is twelve dollars per
month. Most of the people in the area, which is south of Trinidad, live
on fixed incomes. The average per capita income down there is very
low. There are some retired miners who are drawing some benefits from
United Mine Workers, some are on welfare payments, or Social Security.
We considered that twelve dollars a month was the maximum that people
down there could pay.

When we considered a service charge in the nature of an interest rate,
it brought the water rates to over twelve dollars. As a result, we do
not propose any service charge greater than actually needed to retire
the capital investment.

For Gunnison we propose a service charge amounting to four percent. The
people in Gunnison are more able to pay than the people in Greetville.

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