BOARD00786

• Board Meeting Date: 1/22/2003
• Description: CF Section - New Loans - Town of Paonia - Purchase of Water Rights/Water Taps
• Board Meetings - Doc Type: Memo

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Town of Paonia - Water Rights Purchase
January 22-23. 2003

Agenda Item 19ft

. Financial Analvsis

The total estimated cost of the project is $1,900,000, with project funding as shown in Table 1.

. Table 1: Project Funding Sources

.

.

Fundin Source
CWCB Loan
Bond or Alternate Fundin
Town of Paonia
Total

Amount
$1,000,000
$710,000
$190,000
$1,900,000

The Town qualifies for the Municipal Low Income loan interest rate, and staff is recommending a
maximum loan amount of $1,000,000 (84% of the assumed water tap value of $1,188,750) for 30
years at an interest rate of 3.75%. The Town has budgeted $190,000, for its portion of the project,
and the money is in place in Water Fund reserves for that purpose. In addition the Town is
proposing a bond issue for the remaining $710,000 for the project, while at the same time pursuing
potential private purchasers for the land. The current water rates, discussed herein, will be
increased to support the loan and bond payments.

Table 1 is a summary of the financial aspects of the project. A CWCB Construction Fund Loan of
$1,000,000 would have an annual payment of $61,697 (including the 10% reserve requirement) at
the loan terms of 3.75% for 30 years. A bond issue for $710,000 would have an annual payment of
$46,187 at bond terms of 5.00% for 30 years. If a bond is issued, CWCB will require that our loan
have parity of pledged water revenues.

Table 2. Financial Summary

Pro'ect Cost
Number of Residents 1497 In-town/800 Out-of-town
Number of Water Ta s 839 In-town/548 Out-of-town
CWCB Loan Amount 30 ears
CWCB Loan Pa ment includes 10% reserve
Bond Amount
Bond Annual Pa ment
Current Monthl Water Rate Avera e-ln Town
Future Monthl Water Rate
Monthl er ta cost of the CWCB loan and Bond Pa ment

$1,900,000
2,297
1387
$1,000,000
$61,697
$710,000
$46,187
$10.50
$16.50
$6.48

Water Rates -The Town is planning to pay the CWCB loan and bond payment with Water Fund
Revenue from increased water rates and a portion of its fees (conservatively assumed to be 2 taps
per year at $8,500 each.) In order to stabilize revenues, the proposed water rate increases are
planned to be increased gradually over a 4-year period, increasing $1.50 per month for each year
from 2004-2007. This would represent a total increase of 57% over the 4-year period. A summary
of the proposed increases and the anticipated incremental annual revenue is as follows:

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