PROJ00130 - Laserfiche WebLink

Home Browse Search

- . David W. Walker July 22, 1991 Page Two The negotiations between Fruita and CWCB resulted in Amendments to each of the two Contracts between Fruita and CWCB. Pursuant to those Amendments, the provisions of the original Contracts which required that Fruita convey its water system to CWCB as collateral for the Contracts (Paragraph A.5.) was modified to instead provide that Fruita shall adopt an irrepealable ordinance which grants as security for repayment of the loans under the CWCB Contracts revenues from future sales taxes. Certain other modifications were also made to the original Contracts. However, there is one provision in each of the original Contracts which was not changed, which provision causes some concern to ute Water. This provision is Paragraph B of each of the Contracts. That paragraph states that "upon default in the payments herein set forth...or in the performance of any covenant or agreement contained herein, the state, at its option, may... (b)...incur and pay reasonable expenses for repair, maintenance, and operation of the [Fruita water system].. . and/or (c) take possession of the system, repair, maintain, and operate or lease it." Accordingly, this provision, read alone, seems to indicate that CWCB still has a security interest in Fruita's water system. However, we think it is very clear that one of the primary purposes of Fruita's recent negotiations with CWCB was to substitute its future sales tax revenues for its water system as security for the CWCB loans. We feel that when the Contracts and Amendments thereto are read as a whole, this intent is clearly evidenced, and that Paragraph B. was also modified by the Contract Amendments, even though it is not specifically mentioned in the Contract Amendments. Our reasoning is set forth in the remainder of this letter. Prior to the execution of the Contract Amendments, Fruita did in fact adopt an irrepealable ordinance pledging as security for the CWCB loans the revenues from future sales taxes. A certified copy of that ordinance was attached to each of the Contract Amendments and was "incorporated.. .by reference" as Attachment C to each of those Amendments. Attachment C is eighteen pages long. The ordinance itself is set forth at Pages 3 through 5 of Attachment C. The "Whereas" paragraphs of that ordinance clearly spell out the intent of Fruita and CWCB in entering into the Contract Amendments. Those paragraphs indicate that: Fruita obtained loans from CWCB in 1982;