BOARD01870

• Board Meeting Date: 5/23/2005
• Description: CF Section - New Project Loans Sheek Ditch Company - Pipeline Construction Project
• Board Meetings - Doc Type: Memo

Sheek Ditch Company Agenda Item 15b
May 16. 2005
Page4of4

Table 3 shows the Financial Ratios for the Company. The Company proposes to assess the members .
$1 ,200/share to cover the CWCS Loan and maintenance costs. The Company has 9.3 shares, which is
based on the amount of decreed flow in the ditch. (1 cis = 1 share)

Table 3. Financial Ratios

Financial Ratio Without Project With Project
Previous Years" Future Years
Operating Ratio (revenue/expense) N/A 100%
I weak: <100%1- taverage: 100%-120%1- ~strong: >120%' (average)
Debt Service Coverage Ratio 133%
(revenues-expenses)/debt service N/A
I weak: <100% I" I averaae: 100%" 120% I" I strana: >120%1 (strong)
Cash Reserves to Current Expense N/A After first 3 years
I weak: <50% I-I average: 50% -100% I" I strang: >100%~ 200%
(strong)
Annual Operating Cost per Acre-Ft. (1,781 AF) N/A $6.29
I weak: >$20 I" I average: $10 "$20 ~" I strang: <$101 ' (strong)

" Values are not applicable (N/A) since the Company is new and financial records do not exist.

Collateral: As security for this lo~tn, the Company will pledge its assessment revenues backed by an a
assessment covenant, which indudes a security interest that assigns the Company's right to enforce .
the "step-up" provision in the Funding Agreement to CWCS in the event of default, and the Project
including pipeline, diversion structure #565 and all associated aCcess easement rights. This security is
in compliance with CWCS Loan Policy #5 (Collateral).

Staff Recommendation

Staff recommends an initial loan, not to exceed $427,200 for engineering and construction costs, to the
Sheek Ditch Company from the Severance Tax Trust Fund Perpetual Sase Account, for the Sheek Ditch
Pipeline Project. The staff further recommends a post-construction loan not to exceed $164,472 ($160,200
for project costs and $4,272 for the 1 % Loan Service Fee) to the Company with terms based on the
current agricultural rate (30 years at 2.50% per annum). Security for the loan will be collateral in
compliance with CWCS Loan Policy NO.5.

Staff further recommends that final approval of the loan be conditioned upon the following:

1. An executed USDA Conservation Program Contract shall be provided.
2. The Company's Funding Agreement shall include a "step-up" provision.
3. All standard contracting provisions of the cwes Loan Program including a revised Debt Service
Reserve Fund Provision that requires two annual loan payments (one payment set aside at the
time of first draw of funds and one third of an annual payment set aside at the time of each of
the first three annual loan payments).

Email copy:

Tam Weaver, President, Sheek Ditch Company
Raymond Keith, Mancos Conservation District
Tim Ouellette, Engineering and Technical Support, NRCS Cortez Service Center
Amy Stengel, AGO

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Attachment: Project Data Sheet