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. . , Agenda Item 17a. July 13-14, 1998 Page 2 Discussion The purpose of the loan is to conduct a feasibility study to evaluate development of additional water supplies. The District has passed a formal resolution requesting a loan of up to $112,500, which is 75 % of the estimated total cost of the study. The resolution is attached to this memo. The CWCB can approve loans for feasibility studies without separate legislative authority, provided unreserved funds area available in the Construction Fund. The Guidelines for Financial Assistance through the Colorado Water Conservation Board Construction Fund, page 4, specify that "The CWCB may loan a maximum of 50-percent of the cost of a feasibility study for a water project." Apparently this policy is left over from the days when the CWCB policy was to loan a maximum of 50%, regardless of the type of loan. When the Guidelines were revised in 1993 to allow lending of 75% of the project cost, the policy for feasibility study loans was not revised. The CWCB has approved 100% loans for feasibility studies in the past several years (Colorado Water and Protective Association 1993, $60,000 loan; Lower Arkansas Water Management Association, $65,000 loan.) Staff is recommending the Guidelines be revised to allow the CWCB more flexibility in setting the amount of financing for feasibility study loans. The suggested standard would be 75% of the study cost, with the provision that the CWCB could set the actual amount of financing on a case by case basis, considering such factors as financial hardship, loan size, and the degree to which the study promotes achievement of CWCB long range goals. If a loan were approved for this feasibility study, it would be fully collateralized with assets owned by the District. The District has requested that the feasibility study loan be forgiven if a feasible project can not be developed. The Guidelines specify that all feasibility study loans are to be repaid, regardless of whether the project is actually constructed, and that is the Staff recommendation. The District is requesting a grant for the CWCB in amount of $10,000 to pay for a portion of the study cost, and the letter of request is attached to this memo. Over the past year, CWCB feasibility study grants have been made available from the Severance Tax Operational Account, generally in the amount of $5000. A total of only $35,000 is available in fiscal year 1998-1999. These small grants are usually directed at small irrigation companies that do not have the financial resources to complete a feasibility study. For this reason, staff is not recommending a grant for this study. Steve Harris, P.E., has been working with the District for several years, and has taken part in discussions regarding the feasibility of several alternatives. His summary Scope of Work for this proposed study is attached. Steve Harris will be available at the Board meeting to discuss the Scope of Work, and to answer any questions the Board may have,