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<br />Abbott Ranch <br />March 21-22, 2006 <br /> <br />Agenda Item 17b <br /> <br />farm improvement loans, and provide direction to the staff on a possible policy guideline, if <br />appropriate. <br /> <br />e <br /> <br />Some of issues the Board may want to consider for this type of loan are: <br /> <br />1. Local Bank Lenders - In the past, Staff has felt that "on-farm" loans might put CWCB In <br />competition with local banks, who are typically not interested in the type of loans we make. <br />Also, financial review of an individual agricultural borrower's situation is less problematic for <br />a bank that makes annual operating loans, as they typically track financial performance on a <br />multi-year basis, and are able to act more as a financial advisor to the borrower. A check <br />with several local banks indicate that they will make loans for on-farm improvements, such <br />as replacing sprinklers, converting from flood to sprinkler irrigation, well repairs, drilling new <br />wells, etc. Loans would likely be short-term, 7 years maximum, and current interest rates <br />would be in the 7 - 8% range. <br /> <br />2. Other Resources - The Natural Resources Conservation Service (NRCS), indicates that <br />they do not have any programs that provide costcsharing for drilling of wells. They do have <br />the EQIP program (Environmental Quality Incentives Program) that promotes agricultural <br />production and environmental quality, from which they can cost -share on projects that <br />provide irrigation managements efficiencies. The project must have a strong environmental <br />component, and producers must agree to certain management practices. This could be an <br />option for some "on-farm" projects, like well pump repairs, installation of new sprinkler <br />equipment and piping, however, competition for funds is high. <br /> <br />3. Minimum Loan Amount - In the past, our informal minimum loan amount has been $50,000. <br />The rationale for this has been our requirement for a Loan Feasibility Study, and the <br />requirements and associated timeframe of going through the State contracting process - <br />including required attorney input and review, liability insurance, and reserve account <br />requirements. These sometimes make a loan less than $50,000 not cost effective. <br /> <br />e <br /> <br />4. Other Issues - If the Board feels that making these types of individual loans is appropriate, it <br />may want to consider limiting the loans to the water supply component of an individual's <br />project, i.e. only the well itself, and not the appurtenant field piping or equipment necessary <br />to distribute the water. <br /> <br />Financial Analvsis <br /> <br />If the Board wishes to further consider the Abbott Ranch loan req uest, following the above <br />discussion, Staff recommends Alternative 3, a scaled-back project from the one requested. Since <br />the applicant is just now filing for the "Alternate Point of Diversion" well permit, as described above, <br />Staff does not recommend including the costs for the new well and pipeline in the requested loan. <br />Given the level of review and timeframe required by the SEa, and pending further policy <br />discussions on "on-farm" improvements, Staff recommends the Board consider only the costs <br />associated with the currently "permitted" replacement well, at this time. <br /> <br />Accordingly, the revised Total Project cost would be: <br /> <br />1. Replacement Well/Appurtenances <br />2. Prior Costs for Existing Well <br />3, Contingency (15%) <br />TOTAL <br /> <br />$ 36,270 <br />12,678 <br />5.440 <br />$ 54,388 <br /> <br />-- <br /> <br />Page 4 of 6 <br />