BOARD01302

• Board Meeting Date: 11/22/1999
• Description: Pine River Canal Company - Request to Contract Without Parity
• Board Meetings - Doc Type: Memo

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Colorado Water Conservation Board

Department of Natural Resources

1313 5herman 5treet M E M 0
Denver. Colorado 80203 RAN DUM
Phone' 13031 866.3441
fAX, (3031866.4474

STATE OF COLOMDO

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TO:

Colorado Water Conservation Board Members

8illOwens
Governor

FROM:

CregE. Walcher
Executive Director, DNR
John Van Sciver ......:JW1I:s. Peter H. '"n,

7tjtorWCB
Mike Serlet, P.E., Chief, Water Supply Planning and Finance Section/I!J
November 18, 1999

DATE:

SUBJECT:

Agenda Item 11 c, November 22-23, 1999 Board Meeting
Pine River Canal CO!'1pany-Request to contract without parity

Introduction
The Pine River Canal Company (PRCC) currently has a $243,700 CWCS loan authorization to
complete the Tunnel Hill Project, located about 8 miles southeast of Ignacio. This project involves
the construction of a new section of canal approximately 150 feet west of the existing tunnel,
laying 6-foot diameter reinforced concrete pipe for a distance of approximately 700 feet, and
bypassing the tunnel entirely. The tunnel is in very poor condition and could fail at any time. The
estimated cost of the project is $325,550. Please see the attached project summary and map.

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The PRCC has an existing debt in amount of $48,247.50 payable to USDA Rural Development
(RD). The annual payment amount is $4,599. The CWCB normally requires parity with, or
subordination of existing debt, as a condition of the loan contract.

The Problem
The Company needs to complete the project before the next irrigation season. However, it will
take more than 6 months to obtain parity with the existing RD debt, because of a requirement
for an environmental assessment of the project. If the tunnel fails during the irrigation season so
water can't be delivered to the shareholders, the loss in crop value could exceed $400,000.

Discussion
The CWCS loan contract could proceed now (and allow the project to be built on schedule) by
either 1) eliminating the CWCS requirement for parity with the RD debt, or by 2) paying off the
RD debt. The RD debt is a small ($48,247.50.) The annual payment of $4,599 represents only
$0.33 per share, and $0.09 per acre-foot diverted. For these reasons staff is recommending the
CWCS contract proceed without the requirement for parity.

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Updated Financial Analvsis
The total estimated cost of the project remains as $325,550. The PRCC has $56,282 in cash
and a grant in amount of $26,550 from the NRCS to make up their 25% cost share of $81,850.
The PRCC will also establish a non-revocable assessment to retire the CWCS loan in $17,147
annual installments (20-year term at 3.5%), and to fund a 10% loan reserVe in amount of
$1,715 per year.