BOARD01950

• Board Meeting Date: 7/25/2006
• Description: CF Section - Revisions to Existing Loans - Lower Bauer West Lateral - Ditch Rehabilitation Project
• Board Meetings - Doc Type: Memo

Table 1 illustrates the combined Financial Ratios for the Company and indicates an average to
strong ability to repay the $86,050 CWCB loan.

Financial Ratio With Amended
the project project
Operating Ratio (revenue/expense) 100% 100%
weak: less than 100% (average) (average)
average: 100% - 120%
strono: oreater than 120%
Debt Service Coverage Ratio 133% 104%
(revenues-expenses )/debt service (strong) (average)
weak: less than 100%
average: 100% - 125%
stronq: qreater than 125%
Cash Reserves to Current Expense After 151 3-years After 1 St year
weak: less than 50% 200% 110%
average: 50% - 100% (strong) (strong)
strono: areater than 100%
Annual Cost per Ac-Ft diverted (951 ac-ft) $4.80 $5.28
weak: greater than $20 (strong) (strong)
average: $10 - $20
strono: less than $10

Table 1. Financial Ratios

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There are currently sixteen members that hold shares of the stock in the Company. These
members are assessed $140 per share ($40 for operations maintenance and $100 for debt service
on a previous phase oflateral piping upstream of the Project constructed in 1998). The ratios
presented above are based on the Company raising its annual assessment per share from $140 to
$325.

Collateral: As security for this loan the Company will pledge its assessment revenues backed by
an assessment covenant (including a security interest in the Company's Funding Agreement) and
the Project including the pipeline and all associated access easement rights. This security is in
compliance with CWCB Financial Policy #5 (Collateral).

Staff Recommendation

Staff recommends that the Board approve an increase of $35,350 ($35,000 for project costs and
$350 for the 1 % loan origination fee, in accordance with CWCB Financial Policy No. 16) from
the Severance Tax Trust Fund Perpetual Base Account. The additional $35,350 increment of
funding would be for 30-years at the present lending rate of2.50%. The Company's amended
total loan amount will be $86,050 ($83,750 for the total project costs and $2,300 for the 1 % loan
origination fee). Security for the loan will be collateral in compliance with CWCB Financial
Policy No.5.

Staff further recommends that final approval of the 10an be conditioned upon the following:

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1. Company's Funding Agreement shall include a "step-up" provision.
2. All standard contracting provisions of the CWCB Loan Program including a revised Debt
Service Reserve Fund Provision that requires two annua110an payments, one payment set
aside at the time of contract execution and one third of an annual payment set aside at the
time of each of the first three annua110an payments.

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