BOARD01133

• Board Meeting Date: 3/10/1998
• Description: Summary Minutes and Record of Decisions - March 10-11, 1998
• Board Meetings - Doc Type: Memo

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Agenda Item 22.
March 10, 1998

Page 2

(Updated April 14, 1998)

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The project will cost approximately $1.7 million to build. The cost per acre-foot of storage would
be $772, based on the 2200 acre-foot size of the reservoir.

LOAN TERMS

GASP has requested a 4O-year loan at 1 %. These terms are more favorable than any recent
financing provided by the CWCB, with the exception of grants for projects that resolve issues of
State concern. (For example, $2M for the fish hatchery in the San Luis Valley, and $1.25M for
the GVIC to improve flows in the IS-mile reach.) GASP is not requesting a grant.

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In November 1997, the CWCB set standard CWCB terms for agricultural loans at 4% for 30
years. If the entire project ($1.7 million) were financed at these terms (4% for 30 years), the
annual loan payment would be $97,546, or $44.34 per acre-foot, per year. Operation and
maintenance costs would add between $7 and $16 per year, so that the final cost per acre-foot per
year would range between $51 and $61. (A similar analysis with loan terms of 4% for 40 vears
yields a cost of $46 to $55 per acre-foot per year. See attached Feasibility Study, page 18.) The
financial feasibility of the project is in question at these costs.

GASP provides augmentation water for junior wells in the South Platte River basin, in much the
same way that LA WMA provides augmentation water for junior wells in the Arkansas basin. The .
CWCB bas made loans to LAWMA at 3% for 40 years, primarily because litigation concerning
the Arkansas River Compact bas made well augmentation in the Arkansas Valley a matter of
State interest. Part of the solution was to provide financing at a rate below the standard
Agricultural rate. In addition, the loan to LAWMA allows a lower payment during the first 10
years of the contract (roughly equivalent to the payment for a 4O-year, 1.5% loan), with the net
total return to the Board remaining equivalent to a 3 %, 4O-year loan. If these terms were applied
to this project, the cost per acre-foot, per year would be about $32.59 for the ftrSt 10 years, and
between $49 and $59 thereafter.

The following added issues should be considered when setting terms for this loan:

. GASP bas been in existence for about 25 years. During that time it bas spent approximately
$8 million of its own funds to augment junior wells in the South Platte basin. GASP bas
never before requested or received a low interest loan from the CWCB.

. GASP bas an ongoing program of acquisition of water rights. As of October 31, 1997 GASP
held $1. 3 million in water rights (valued at cost.) Total assets amount to $1. 86 million, while
liabilities were less than $30K. As a result, GASP can offer excellent collateral for a CWCB
loan; collateral valued in excess of the loan amount. This loan will be less risky for the
CWCB. possibly justifying a lower interest rate.

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