BOARD01132

• Board Meeting Date: 1/12/1998
• Description: CF Section - Proposed Revision to Policy for Parity Debt Provision and Parity Lien Test
• Board Meetings - Doc Type: Memo

..

Colorado Water Conservation Board

Department of Natural Resources
721 Centennial Building
1 31 3 Sherman Street
Denver, Colorado 80203
Phone: [phone]
FAX: [phone]

STATE OF COLORADO
~
~

MEMORANDUM

Roy Romer
Governor

J<lmes S. Lochhead
Executive Director, DNR

DilriesC. Lile, P.E.
Direaor, (WeB

To:

Colorado Water Conservation Board Members

From:

Date:

January 21, 1998

Subject:

Agenda Item 10, January 28-29,1998, Board Meeting
Water Project Construction Loan Program
Proposed Revision to Policy for Parity Debt Provision and Parity Lien Test

INTRODUCTION

At its November 1996 meeting, the Board adopted a parity debt policy, which included
guidelines, as applicable, for parity status and a parity lien test. Based on its experience in
implementing the policy, the staff proposes amending the guidelines to remove the
requirements that the borrower be a governmental entity and that the subsequent loan be from
a governmental lender, and to revise the parity lien test to exclude connection and tap fees
from the Borrower's net revenues in its financial analysis.

BACKGROUND

The guidelines set out the conditions under which a Borrower may incur additional debt on a
parity with the CWCB's lien on the Borrower's revenues pledged to repay the loan. Two of
these conditions were that the borrower must be a governmental entity, and that the
subsequent loan must be from a governmental lender.

In the past year of operating under this policy, we have received requests for the Board's
consent to parity debt from borrowers that are not governmental entities (e.g., Aristocrat
Ranchette Water Project, Inc.) and for subsequent loans or bond issues that were not from
governmental lenders (City of Fort Morgan, Colorado Water Works and Distribution Enterprise
bonds issued by private bank). Because the borrowers in those cases met the remaining
guidelines, the staff presented their requests to the Board and the Board approved them.

DISCUSSION

. The revised guidelines for parity status and parity lien test would read as follows:

GUIDELINES. The CWCB will consent to additional parity debt when a Borrower meets the

.