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<br />During contract negotiations, the City of Loveland asked the CWCB staff to reconsider the <br />collateral needed for the $5,000,000 loan. Under Amendment One (also known as <br />TABOR) the City may not convey a security interest in the project without voter approval. <br />The City has informed staff that most of its outstanding loans are secured with a pledge of <br />revenues. <br /> <br />DISCUSSION. <br /> <br />The Soard has already determined that a pledge of revenues along with a rate <br />covenant and annual financial reporting is adequate collateral for loans made to public <br />(government) entities, which includes municipalities and water enterprises. Acceptance <br />of this form of collateral is the standard practice of other state agencies including <br />Department of Local Affairs and the Colorado Water Resources and Power <br />Development Authority, as well as bond issuers. Acceptance of a pledge of revenues <br />as collateral for municipalities and water enterprises enables these entities to enter into <br />loan transactions without violating TABOR prohibitions, does not diminish CWCS's <br />security as a lender, and has been approved by the state auditors as part of their recent <br />review of our adherence to the audit recommendations. <br /> <br />STAFF RECOMMENDATION <br /> <br />The staff recommends that the Board approve the City of Loveland's request to accept a <br />pledge of revenues backed by a rate covenant and annual financial reporting as <br />adequate security for a $5,000,000 Construction Fund loan. <br /> <br />- <br /> <br />e <br /> <br />e. <br />