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<br />. <br /> <br />. <br /> <br />TIMMS A.FOWlEA <br />MARK R lUFF <br />YfUlINV. WILLETT <br /> <br />YOUNGE & HOCKENSMITH <br />PROFESSIONAL CORPORATION <br />ATI'ORNEYS AT LAW <br />200 GRAND AVE., SUITE 500 <br />p.o.130X 1768 <br />GRAND JUNCTION, COLORADO 81502-1768 <br />303.242.2645 <br /> <br />OF COUNSEL <br />THOMAS K. YOUNGE <br />FRANK M. HOCKENSMITH <br /> <br />DAN G. GRIFFIN <br />KIRK RIDER <br />JAMES S. CASEBOLT <br />RONALD W. GIBBS <br />CATHY P. HOLLlNGSWOfITH <br />EARL G. RHODES <br /> <br />Decemper 7, 1988 <br /> <br />Robert O. Engelke <br />Fruita City Manager <br />101 West McCune <br />Fruita, CO 81521 <br /> <br />Dear Bob: <br /> <br />You have asked our firm to provide an independent legal <br />opinion on the City of Fruita's legal ability to pledge future <br />sales tax revenues to secure obligations held by the Colorado <br />Water Conservation Board ("CWCB"). Set forth below is our <br />understanding of the pertinent facts, followed by our <br />conclusions. <br /> <br />The City of Fruita is obligated to repay to the CWCB <br />about $800,000.00 under contracts that were formed in 1982. <br />This loan is somewhat secured by a pledge of the Fruita Water <br />Treatment and Delivery Facilities. In 1983, Fruita's water <br />system was conveyed to Ute Water Conservancy District, partly in <br />exchange for Ute Water's agreement to make payments to Fruita <br />adequate to retire the CWCB debt. Based upon the <br />representations of the City of Fruita and its counsel, Mark <br />Williams, Esq., but not upon our examination of City records, we <br />have assumed that those agreements and transactions were validly <br />entered into and are currently binding on the parties. <br /> <br />The City of Fruita has negotiated with the CWCB a <br />deferral of the payments due on this debt. Installment payments <br />for the years 1987, 1988 and 1989 will be deferred to the years <br />2007, 2008 and 2009. These deferred payments will accrue <br />interest at the contract rate until paid. ute Water has raised <br />objections to this deferral because they are making the <br />scheduled payments during 1987, 1988 and 1989, for the implied <br />purpose of eventually removing all encumbrances on the Fruita <br />system, so that ute eventually obtains good title to the system <br />assets. The CWCB is willing to accept substitute collateral <br />from Fruita, thereby allowing a current release of the CWCB <br />encumbrance and satisfying the objections of ute Water. <br />