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<br />-- <br /> <br />Whatever the source of analysis, long range estimates of water <br />project investment needs over the next twenty to thirty years <br />invariably amount to $2-4 billion. The Five Year Capital <br />Investment Plan identified nearly $400 million of needed state <br />investments for the immediate future alone. <br /> <br />In short, the need seems not to be in dispute. <br />is one of how to obtain the necessary capital to pay <br />costs of project construction--that is, how is water <br />development in Colorado to be financed? <br /> <br />The question <br />for the <br />project <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 cost 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 take 2-3 years on <br />even relatively small projects and as long as 5-10 years on major <br />projects. These activities require substantial sums of money, <br />frequently running into the millions of dollars even on <br />relatively small projects. Furthermore, expenditures for these <br />activities tend to be high-risk investments in that one does not <br />know whether a proposed project will be technically and <br />financially feasible, and can obtain 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 corne from the current revenues or cash reserves <br />of project proponents. However, these activities are so <br />expensive as to frequently exceed the capacity of local entities <br />(such as water conservancy districts, irrigation companies and <br />districts, and small municipalities) to pay for them. <br /> <br />With respect to the financing of construction or <br />rehabilitation, there are essentially three means by which this <br />can be accomplished: <br /> <br />-2- <br />