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e e e Colorado Water Conservation Board Department of Natural Resources 721 Centennial Building 1313 Sherman Street Denver, Colorado 80203 Phone, (303) 866-3441 FAX, (3031 866-4474 STATE OF COLORI\DO - Roy Romer Governor James S. Lochhead Exeo.J[ive Director, DNR DariesC.lile, P.E. Director, ewes Peter H. Evans Acting Director, ewes November 12, 1998 Mr. Charles Palmer, President Pinon Mesa Ranches Community Association 300 Angus C.R 310 Ignacio, Colorado 81137 Re: PMRCA Diversion Structure and Pipeline Construction Dear Mr. Palmer: Thank you for your October 30, 1998 letter endorsing Ms. Kelley Calder's October 5, 1998 letter and summarizing your recent efforts to settle your dispute with RMI and strengthen the Pinon Mesa Ranches Community Association's (PMRCA) financial position. It is unfortunate that the PMRCA and RMI are involved in a dispute, and we hope that the parties reach a resolution that will facilitate successful completion of the project. It has come to our attention that during settlement discussions of this dispute, allegations have been raised regarding artificially inflating project construction costs. We would be interested in any further information or evidence you could provide to confirm these allegations. With regard to the project completion, while the PMRCA currently is'in compliance with the CWCB loan contract, events over the past year, such as the PMRCA's failure to pay its 25% project cost share to RMI, have raised concerns about the PMRCA's ability to repay that loan. Based on these concerns, the Colorado Water Conservation Board (CWCB) and its staff have attempted to assist the PMRCA in finding a way to work with RMI in not only completing the project but also to develop a revenue stream to pay back the loan. Understanding that the Reverse Osmosis plan involving the three party agreement is unacceptable in the PMRCA's opinion, the CWCB anticipates the PMRCA's new leadership will take steps to address the CWCB's concern and complete the project in a timely marmer. The loan contract will expire on October 9, 1999 at which time Interest During Construction will be due and the loan re-payment period will begin.