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<br />George K. Baum & Company <br />INVESThIENT BANKERS <br /> <br />MEMBER <br />NEW YORK STOCK EXCHANGE. INC. <br />CHICAGO STOCK EXCHANGE, INC. <br /> <br />117 seVENTEENTH STREET <br />SUITE 2500 <br />DENVER, COLORADO 80202 <br />TELEPHONE (303) 292.1600 <br /> <br />. <br /> <br />September 10, 1999 <br /> <br />Mr. William E. Green, PE <br />Manager of Planning <br />Project Planning and Construction <br />Colorado Water Conservation Board <br />1313 Sherman Street <br />Denver, Colorado 80203 <br /> <br />RECEIVED <br />SEP 1 3 1999 <br /> <br />Colorado Waler <br />Conservation Board <br /> <br />Dear ML Green: <br /> <br />Thank you for the opportunity to comment on the materials regarding the review of loans by the Colorado <br />Water Conservation Board (CWCB.J The CWCR is in a unique position in its review ofloan applications. <br />The often contradictory statutory requirements that the borrowers have both financial need as well as the <br />ability to repay the loan creates difficulty is designing a simple objective review process. As you know, I <br />took the lead in designing the credit review system for the Colorado Water Resources and Power <br />Development Authority loan programs. That review process has evolved over a ten year period to include <br />both quantitative data and qualitative description of the project I believe that the CWCB review process <br />should include both types of information as well, <br /> <br />. <br /> <br />I have read "Policy Number 4" and found it to be a verv good method of reviewing loan applications. <br />Because many of the applicants will have unique financial situations, it is worth repeating that a narrative <br />description of the project should be included in the written review. This description should focus on how <br />that project fits into the overall water supply system and whether the cost seems reasonable, <br /> <br />Two financial ratios that must be carefully analyzed are Operating Ratio and the Debt Service Coverage <br />Ratio shown in the table on page 2. These ratios need to be reviewed in an historical context to see how the <br />applicant has performed in the past In addition, the CWCB needs to examine any projections to see how <br />the additional debt service and operating expenses will be covered. Allow the applicants tlexibility as to the <br />method and timirrg of raising rever:ue~ bl!t ~emain skeptical of optimistic growth ::cenario5. <br /> <br />I wish you continued success in your loan program. I have brought several governmental borrowers in front <br />of the CWCB and appreciate the importance of having low-cost loan programs available for water projects. <br />The new expanded review process can only make the program better and I look forward to working with you <br />in the future. <br /> <br />Sincerely, <br /> <br />GEORGE K. BAUM & COMPANY <br /> <br />r14"771~ I) - <br />Alan T, Matlosz .~ I <br />Vice President <br /> <br />. <br /> <br />ATM/dn <br />