BOARD00757

• Board Meeting Date: 1/22/2003
• Description: CF Section - Policy Revisions Policy #5 - Collateral for Construction Fund and Severance Tax TrustFund Perpetual Base Account Project Loans
• Board Meetings - Doc Type: Memo

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attached Information for Colorado Real Estate Appraiser Applicants. The four levels of appraisers .
vary in their educational requirements, work experience, and type of appraisals typically completed. '

Parity:
The bold sentence in the second to the last parllgraph on page two of the attached Policy #5
has been an unwritten policy of the Board for the past several years. Since 1996, staffhas included
this requirement for all loan applications, especially those applications of sponsors with existing
debt.

Discussion

Appraisals:
Given the descriptions of the education and experience requirements of the four different
appraiser classifications, staff feels that the Certified General Appraiser (CGA) category is the type
of appraiser best suited to perform the land valuations required in determining the adequacy of real
property collateral used in the CWCB loan programs. The CGA must have at least 1,500 hours of
non-residential appraisal experience and the educational emphasis for this category of appraiser is on
the "appraisal of non-residential properties". The Division of Wildlife requires this level of
appraiser certification for all appraisals of land acquired by the Division.

Certified appraisers are bound by state law to use valuation methodologies identified in the
Uniform Appraisal Standards for Federal Land Acquisitions. Staff does not therefore recommend .
further policy requirements regarding appraisal methodology, but to leave that decision to the
professional judgment of the appraiser.

Parity:
The definition of parity is "the state or condition of being the same in value". The definition
of a lien is "the claim on the property of another as security against the payment of a just debt". A
. parity lien is therefore an equal claim by lenders to shnilar collateral used by a borrower to secure
more than one loan. In the case of our CWCB loans, a parity lien gives the CWCB an equal claim to
a project sponsor's collateral held by other lenders in the event of bankruptcy or insolvency of the
project sponsor.

Requiring a parity lien or a first lien on revenues pledged as loan collateral has been an
unwritten requirement of the Construction Fund loan program for the past seven years. It helps
achieve the Colorado Revised Statute requirement, that the Board assure the repayment of
Construction Fund and Severance Tax loans, as the existing policy states. The additional statement
to the policy simply documents the practice.

Recommendation

Staff recommends the Board adopt the revisions to Policy #5 as discussed above and shown
in bold on the attached policy statement.

Flood Protection. Water Project Planning and Financing. Stream and Lake Protection
Water Supply Protection. Conservation Planning

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