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<br />. <br /> <br />. <br /> <br />. <br /> <br />, <br /> <br />Dolores Water Conservancy District - Dove Creek Secondary Water Supply System <br />July 28-29, 2003 <br /> <br />Agenda Item 211 <br /> <br />as well as any other Water Activity Enterprise revenues necessary to assure payment of the annual <br />debt service and debt service reserve deposit. <br /> <br />Creditworthiness: The DWCD Water Activity Enterprise has one existing loan with the CWCS for <br />the WETPACK project. This loan was authorized by CWCS in November 2000, and has a <br />remaining amount of $5,461,200 with an annual payment of $296,933. A fully funded annuity has <br />been set up to totally pay this loan, and as such this obligation does not figure into the Dove Creek <br />loan repayment. <br /> <br />Alternative financing sources: In March 2003, DWCD applied to the Department of Local Affairs <br />(DOLA) for a $300,000 grant (Energy and Mineral Impact Assistance Program) to reduce the <br />required tap fee for the project from $3200 to approximately $2600, or reduce the obligation for the <br />additional 107 taps. Grant funding from DOLA through the federal mineral lease program would <br />be applied toward the total construction project cost and thereby reduce tap fees. A decision on <br />the grant request is not expected until August 2003. Staff recommends that any DOLA grant funds <br />that might be obtained be used to reduce the amount of the CWCS loan principal, and that the loan <br />re-amortized to reduce the annual loan repayment. This would result in a corresponding reduction <br />in tap fees required of the residents, enhancing the affordability of the project. <br /> <br />Recommendation <br /> <br />Staff recommends a CWCS Small Project Loan from the Construction Fund, not to exceed 90% of <br />the project cost up to $883,304, to the Dolores Water Conservancy District, acting by and through <br />Dolores Water Conservancy District Water Activity Enterprise, to finance the construction of a (dual) <br />secondary water supply system for the Town of Dove Creek. The project would be constructed, <br />owned and operated by DWCD through a franchise agreement with the Town. The recommended <br />term of the loan is 10 years and the recommended lending rate is 3.00 % per annum. Security for <br />the loan will be a pledge of DWCD revenues from its Water Activity Enterprise, which shall include <br />the Dove Creek Secondary Water Supply System tap fees and operations revenues, as well as any <br />other Water Activity Enterprise revenues necessary to assure payment of the annual debt service <br />and debt service reserve deposit, backed by a rate covenant and annual financial reporting. <br /> <br />Staff further recommends that final approval of the loan be conditioned upon all other standard <br />contracting provisions of the CWCS, including the 1 % loan origination fee in accordance with <br />CWCS Policy #16. The maximum loan amount may be increased to $892,137 if the borrower <br />elects to finance the 1 % loan service charge. <br /> <br />Staff further recommends the following approval conditions: <br /> <br />1. No CWCS loan funds shall be disbursed until DWCD has provided documentation that <br />200 tap commitments have been secured for the project. <br /> <br />2. In the event that State grant funds are obtained through the Department of Local Affairs, <br />with the intent of reducing the impact of tap fees required of Dove Creek residents, said <br />grant funds .shall be used to reduce the principal amount of the CWCS loan. <br /> <br />cc: <br /> <br />Steve Arveschoug, General Manager, Dolores Water Conservancy District <br />Linda Bassi, AGO <br /> <br />Attachment <br /> <br />Page 5 of 6 <br />