BOARD01902

• Board Meeting Date: 3/26/2001
• Description: CF Section - Changes in Existing Construction Fund Loans - Town of Erie - Loan Defeasance
• Board Meetings - Doc Type: Memo

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STATE OF COLORADC

Colorado Water Conservation Board
Department of Natural Resources
1313 Sherman Street, Room 721
Denver, Colorado 80203
Phone: (303) 866,3441
FAX, [phone]
WWoN,cwcb,state.co.us

Ii

Bill Owens
GOvernor
Greg E. Walcher
Executive Director
Rod Kuharich
eWCB Director
'03.11 McAuliffe
Deputy Director

MEMORANDUM

TO:

Colorado Water Conservation Board Members ~

Bill Green, P,E" Water Supply Planning and Finance Section I I1AJ
Mike Serlet, P,E" Chief, Water Supply Planning and Finance section",

March 16, 2001

FROM:

DATE:

RE:

Agenda Item No, 8 a. - March 26-27, 2001 Board Meeting-Water Snpply
PlannIng and Finance - ChaJlges in Existing Construction Fund Loans -
Town of Erie - Loan Defeasauce

Introduction

The Town of Erie (the Town) is requesting defeasance (tennination under specified conditions) of
one of the Town's two existing Construction Fnnd loans. The Town will establish an annuity
backed by U,S, government securities for full repayment of the defeased loan,

Backl!round

The Town currently has two Construction Fnnd loans, The first loan was made in 1992 for a flood
control project and has an outstanding balance of$455,561. Payments for this loan are made from
the Town's drainage fund, The loan is current and the Town will continue making payments for
this loan from the drainage fund,

The second loan was made in March 1994 to finance the Town's portion of the costs of the
Southern Water Supply Project (SWSP), The Town pledged revenues from water user charges
and fees ofthe Erie Water Department to repay the loan with a security interest to the CWCB in
an allotment contract for a portion of the capacity in the SWSP pipeline, The term of the loan is
40 years at 2,0 percent interest. There are 36 annual payments remaining with a balance of
$1,438,643 and the loan is current. This second loan is the subject of the defeasance request.

At the January 1999 Board meeting (Agenda Item No, lOb" January 27-28,1999), the Town
requested parity on the 1994 loan with waterrevenue bonds that were issued by the Town in
1998, The Town placed $1.55 million in an escrow account pending the resolution of the parity
question,

Staff determined that the Town was not able, at that time, to meet the Board's parity test.
The Board postponed the question of parity status for the 1998 bonds until such time as the Town
could demonstrate that it is capable of meeting the Board's parity lien test, (A copy of Lending
Policy No 6 dealing with requests for parity status is attached,)