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. . Agenda Item 17j. November 24, 1997 Page 2 (Updated December 1, 1997) e DISCUSSION The purpose of the project loan is to acquire water rights for raw water for a new domestic water system. The water will be treated by Denver, and delivered to the District through a master meter and a new pipeline from Denver conduit #10. The District has located water rights that it is considering purchasing. These rights are currently being reviewed by Denver Water, to determine whether they will be a sufficient supply for the District. Denver has agreed to supply treated water ONLY to the existing residents and owners of platted lots, and thus has set conditions that limit the number of taps. A tap will be allowed only for each existing house, and for each existing lot that could currently be built upon. Lots range in size from less than an acre, up to 35 acres. An owner of an existing 35-acre tract in the service area would not be allowed to buy taps for a new subdivision of small lots. Based on 150 taps, the project has a per tap capital cost of approximately $13,000, which is substantially less than the $20,000 cost of a new well. e The District will obtain financing for construction of the pipeline and distribution system from other sources. They have contacted the Colorado Water Resources and Power Development Authority, as well as USDA office of Rural Development. However, if conventional financing is all that is available, they could be looking at an average weighted interest rate for the entire project of 7 % . The annual financing cost of the entire project ($1.95 million) at an average rate of 7% over a 20-year period, is $184,000 per year. This amounts to about $1200 per year per tap (about $100 per month per tap.) Monthly water service charges of about $40 would be added to this amount, to arrive at a total monthly bill of approximately $140. A low interest loan from the CWCB is important to holding down the cost of the project. The District will purchase water rights in amount of about 100 acre feet, at a price of approximately $650,000, or $6,500 per acre foot. The value of the water right will be determined by an appraisal. The service area for the District includes several small older subdivisions in a primarily rural setting that does not compare well with surrounding communities like Littleton and Castle Rock. Because of the problems with water supply, homes have been selling at or below the median price for the Denver Metropolitan area. For this reason, and because the monthly cost of water under the new system will be in the range of $140, staff is recommending that the loan to the District be at the "Standard" rate for a municipality, to be set by the CWCB on November 24, 1997. e