BOARD01387

• Board Meeting Date: 11/19/2001
• Description: CF Section - Policy Review - Policy #7 - Annual Construction Fund and the Severance Tax Trust Fund Perpetual Base Account Lending Rate Determination
• Board Meetings - Doc Type: Memo

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STATE OF COLORADO

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Colorado Water Conservation Board
Department of Natural Resources
n13 Sherman Street, Room 721
Denver, Colorado 80203
Phone: [phone],3441
fAX: [phone]
www.cwcb.state.co.u5

Bill Owens
Governor
Greg E. Walcher
Executive Director
Rod Kuharich
eWeB Director
Dan McAuliffe
Deputy Director

MEMORANDUM

TO:

Colorado Water Conservation Board Members

Mike Serlet, P.E., Chief IJJ (
Water Supply Planning at~nance Section

FROM:

DATE: November 9, 2001

SUBJECT: Agenda Item 19a - November 19-20,2001, Board Meeting
Water Supply Planning and Finanee - Policy Review
Policy #7 - Annual Construetion Fund and the Severanee Tax Trust Fund
Perpetual Base Account Lending Rate Determination

Introduction
This memorandum outlines suggested revisions to the Board's existing policy on lending
rates, Policy #7. In order to provide 1.) The Board with the ability to more efficiently fulfill its
responsibility of providing low interest water project loans to the State's water users, 2.)
Certainty for borrowers interested in the Board's interest rates when commencing the loan
application process during the year, and 3_) Linkage of agricultural interest rates to other loan
categories.

Proposal/Diseussion
1. Staff is proposing the interest rate calculations be adjusted so as to remain in line with
other providers of water project funding sources. The CWCB rates somewhat compare to
the Water and Power Authority, Rural Development, and Local Affairs, however, the
applicant is required to perform a feasibility study for CWCB loan projects. Sometimes
the feasibility study requirement, together with the time constraint of the legislative
process, is the deciding factor when all applicant pursues funds from the other lending
sources. A more favorable interest rate may provide the incentive necessary for a project
sponsor to borrow from the CWCB rather than from another source.

In order to make the proposed adjustment, the average yield for the 30-year "A" rated
municipal bond would be equal to the Baseline Rate rather than the Municipal High
Income Rate. The rates for the C011Ullercial and Municipal borrowers would then be
calculated relative to the Baseline Rate as 110% for the Commercial rate, 90% for the
Municipal High Income, 80% for the Municipal Middle Income, and 70% for the
Municipal Low Income. The table below shows the comparison between the current
calculation and the proposed calculations.

Flood Protection. Water Project Planning and Financing. Stream and lake Protection
Water Supply Protection. Conservation Planning