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<br />, <br /> <br />. <br /> <br />STATE ~coLdRADo <br />~ <br />~ <br /> <br />-, <br /> <br />Colorado Water Conservation Board <br />Department of Natural Resources <br />721 Centennial Building <br />1 31 3 Sherman Street <br />Denver, Colorado 80203 <br />Phone: (303) 866.3441 <br />FAX, 13031 866.4474 <br /> <br />Roy Kampf <br />GovernQI <br /> <br />]<lmes S. Lochheild <br />Executive Director, ONR <br />OilripsC. Lilf', PE <br />Dirpclor,CWCB <br /> <br />October 24, 1996 <br /> <br />Town of Lyons <br />Attn: Glenn Klepel, Mayor <br />P. O. Box 49 <br />Lyons, CO 80540 <br /> <br />SLJBJECT: Contract #C153721 <br /> <br />Dear Mr. Klepel: <br /> <br />It has come to our attention that the Town of Lyons ("Town") is in the process <br />of closing on a loan .contract with the Colorado Water Resource and Power <br />Development Authority ("Authority") to finance improvements to the Town's water <br />system. The Town plans to repay the loan from the Authority with water system <br />revenues that have also been pledged to repay the Town's loan from the Colorado <br />Water Conservation Board ("CWCB"). The Town's bond counsel, Tom Peltz, has <br />expressed concerns that closing on this loan could constitute a breach of the Town's <br />loan contract with the CWCB. <br /> <br />In the Town's October 4, 1996 loan contract with the CWCB ("Contract"), the <br />Town pledged revenues derived from water charges and fees to repay the loan. In <br />paragraph A.11 of the Contract, the Town warrants that those revenues will not be <br />used for any purpose other than for repayment of the loans listed in that paragraph. <br />Further, Paragraph 13 of the same contract prohibits the Town from pledging its <br />water system revenues without the CWCB's prior written consent. <br /> <br />In its parity lien tests submitted to the CWCB staff in connection with the <br />CWCB loan, the Town included debt service on the upcoming loan from the Authority <br />and showed a favorable net revenue/debt service ratio. Because the CWCB staff <br />believed that the upcoming loan would be paid from a separate Sanitation Fund, it did <br />not include that loan in Paragraph A. 11 of the loan contract. Based on the parity lien <br />tests submitted to the CWCB by the Town, the CWCB hereby consents to the Town' <br />pledging its water system revenues to repay the upcoming loan from the Authority. <br />