BOARD01816

• Board Meeting Date: 11/19/2001
• Description: CF Section - Proposed Statute Revisions Construction Fund and Severance Tax Trust Fund Perpetual Base Account
• Board Meetings - Doc Type: Memo

Amendments to Allow Borrowers to Proceed with Pre-construction Activities Prior to
Contract Execution

37-60-120(2) and (3) Colorado Revised Statutes, is amended to read:

(1) The state of Colorado shall have the ownership and control of such portions of said projects,
or shall take a sufficient security interest in property or take such bonds, notes, or other
securities evidencing an obligation, as will assure repayment of funds made available by
section 37-60-119, Any security interest in property taken under this subsection (1) maybe
perfected and enforced in the same manner as security interests under article 9 oftitle 4,
C,R.s, The board is empowered to enter into contracts that are, in its opinion, necessary for
the maintenance and continued operation of such proj ects,

(2) The sponsor oia project may not initiate or inct~r costs for final designs and specifications
for a pra;ject, nor award a contract for, proceed with,: or in any manner incur costs for
construction of a project, t:ntil such sponsor has oomplied with all procodures and
requirements of the board, If a sponsor fails to comply with the board's procedures and
requirements, the board may, at its discretion, withhold or terminate all or a portion of the
board's financial contribution to or loan for a proj ect, notwithstanding the authorization of
the same by the general assembly, or the board may require such assurances from the project
sponsor as the board deems necessary in order to adequately protect the board's investment in
a proj ect.

(3) The board may adjust the authorized interest rate, extend the authorized repayment period for
any project, ancllor defer one or more annual payments if, in the board's opinion, the entity
requesting such adjustment, extension, ,and deferment demonstrates that it has encountered
significant and unexpected financial difficulties and that it has been dMy diligent in its efforts
to comply with the repayment provisions of its contract with the board,

Discussion

Paragraph (2) of 37-60-120 prevents a borrower from doing any work before he has
complied with all the requirements of the Board, This language prevents a borrower from
proceeding with any pre-construction activities literally until a loan contract is executed, Many
times a borrower will proceed with design, right-of-way acquisition, and other pre-construction
work using its project cost share money in order to expedite the project schedule, The CWCB
staff realizes that time is of the essence with most proj~cts and allows this activity to occur as if a
loan contract were in place, Allowing the pre-construction activity to proceed in parallel with the
contracting process prevents undue project delays and increased costs, The Board's interests in
the project are secure based on the wording in the second sentence following the deleted first
sentence.

The addition of"ancllor" in paragraph (3) is a ~ammatical clarification,

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