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<br />D 1:.A~']' <br /> <br />CWCB STAFF DRA <br />11/30/82 <br /> <br /> <br />WATER PROJECT FINANCING NEEDS IN COLORADO <br /> <br />Introduction <br /> <br />In recent decades, the State of Colorado and its political <br />subdivisions, except for municipalities, have historically played <br />a minor role in financing the investigation and construction or <br />rehabilitation of water conservation and flood control projects. <br />The primary reasons for this have been the ability of municipal <br />and private industrial water users to finance their own projects <br />and the reliance on the federal government to finance irrigation <br />and flood control projects and some municipal water supply <br />projects. In the face of rapidly escalating construction costs, <br />significant reductions in the amount 'of federal funds available <br />for water project development, and calls for non-federal <br />participation in the financing of federal projects (i.e., <br />"up-front" cost-sharing) ,it has become necessary to examine' the <br />means by which future water developments in the state can be <br />financed. <br /> <br />The Fundamentals of Project Financing <br /> <br />The financing of water projects involves two main <br />considerations: <br /> <br />(1) What sources of money are available at what cos~ to pay <br />for planning and pre~construction activities? <br /> <br />(2) What means of financing are available to pay for the <br />construction or rehabilitation of a project? <br /> <br />Whatever the subtleties and complexities of the financing package <br />for any given project, these two fundamental questions ultimately <br />govern the ability to construct or rehabilitate water <br />conservation and flood control 'projects in all cases. <br /> <br />planning and pre-construction activities involve substantial <br />sums of money, frequently running into the millions of dollars <br />even on relatively small projects. Furthermore, expenditures for <br />these activities tend to tie 'high"'-risk investments in that one <br />does not know whether a proposed project will be technically and <br />financially feasible, and can obt'ain any necessary regulatory <br />permits, until monies are invested to get the answers to these <br />questions. <br /> <br />As a result, private institutions are frequently reluctant <br />to lend funds for feasibility and environmental studies. When <br />this is the case, money for planning and pre-construction <br />activities must come from the current revenues or cash reserves <br /> <br />185 <br />proj/fin <br /> <br />i, <br />