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<br />140 <br /> <br />Staff has reviewed financial information recently provided by the Town for the years 1999 and <br />2000 and, in conjunction with the Town staff, determiped that the Erie Water Department would 4 <br />still be unable to meet the Board's adopted parity polipy, <br /> <br />Discussion <br /> <br />The Town is therefore proposing to defease the 1994joan by establishing a 30-year annuity <br />comprised ofU,S, government securities. Principal an,d interest from the annuity would be used <br />to make annual payments equal to the existing loan payments of $56,442 for 29 years with a final <br />payment equal to the balance of the loan at 30 years, The loan contract would be amended to <br />reflect the new payment arrangements and to substitu~ the annuity as collateral for the loan. <br /> <br />, <br />The investment banking firm ofHanifen, Imhoffwould structure the annuity, and an irrevocable <br />trust in favor of the Colorado Water Conservation Board would be established with the Bank of <br />Cherry Creek, The cost of the annuity to the Town will be established at the time the securities <br />are purchased and is likely to be about $900,000. . <br /> <br />The net effect of defeasance for the CWCB would be fully guaranteed loan repayment with the <br />payoff five or six years ahead of the schedule in the Iqan contract. (The next annual payment is <br />due on June I" of this year and the Town may chooseito establish the annuity after June I" in <br />which case repayment would be five years ahead of s9hedule,) Defeasance would allow the Town <br />to utilize the $1.55 million in the escrow account and ~o issue bonds secured by water department <br />revenues in the future without a parity request to the Board. <br /> <br />Recommendation <br /> <br />Staff recommends that the Town of Erie and the Erie iWater Department be allowed to defease the <br />Town's Construction Fund loan under Contract No. ql53668 dated March 3, 1994 by <br />establishing an annuity comprised ofU,S. govemme~t securities as described in this <br />memorandum. The Town will substitute the annuity ~s collateral for the loan and the Board will <br />release its security interest in the pledged revenues and the allotment contract for capacity ili the <br />Southem Water Supply Project. <br /> <br />As a condition of approval, the Town of Erie will pro~jde CWCB staff with all requested <br />documentation regarding the proposed annuity includ,ing a certificate from a certified public <br />accountant verifYing that adequate funds will be available from the annuity for loan repayment in <br />each year of debt retirement. I <br /> <br />! <br /> <br />Attachment <br /> <br />Cc: Mike Smith, Town of Erie <br />Linda Bassi, AGO <br /> <br />') <br /> <br />J <br />