BOARD00940

• Board Meeting Date: 3/29/1999
• Description: CF Section - Long-Term Financial Projection
• Board Meetings - Doc Type: Memo

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Long-Term Financial Projection
for the
Colorado Water Conservation Board Construction Fund
and the
Severance Tax Trust Fund

Introduction

This Long-Term Financial Projection is intended to be a tool for the Board to plan future
expenditures from the CWCB Construction Fund and the Perpetual Base Account of the Severance
Tax Trust Fund against their respective projected revenue streams.

The Colorado Water Conservation Board Construction Fund is a semi-revolving cash fund. It
has become a reliable, annual source oflow interest loan financing for construction of water resource
projects in Colorado. The fund is also used for direct funding of water resource studies,
investigations, and design of information management systems to improve the planning and
management of water resources (see S37-60-I 19 and S37-60-I22, CRS).

The money in the Perpetual Base Account of the Severance Tax Trust Fund is available
exclusively for loans for construction of state water projects pursuant to the same criteria used to
administer the CWCB Construction Fund (see S39-29-109 (1)(a)(I),CRS).

Financial Objectives

In recent years, the ratio of cash to equity of the Construction Fund has been as high as 62-
percent (FY 1993), There has been concern that these cash funds would be better invested in the
water community than in the State Treasury. A financial goal has been to reduce cash in the fund
to a reasonable level through wise investments in the local economy, and to achieve a balance
between income and expenditures. Over the last five years, this strategy has been somewhat
successful as the outstanding loans receivable have increased 104-percent from $52.2 million in FY
1993 to $106.4 million in FY 1998. Furthermore, the FY 1998 cash to equity ratio has decreased
to 48-percent, even after a sizable General Fund cash transfer in FY 1995.

The I998 Performance Audit of the Construction Fund concluded that the average cash balance
of the Construction Fund be "maintained so that it is high enough to absorb fluctuating receipts and
disbursements but low enough to minimize the possibility of idle funds." Based on several
assumptions, the auditors determined that an average balance of about $38.8 million is "needed to
pay for any anticipated disbursements on a day-to-day basis, "

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