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<br />. <br /> <br />. <br /> <br />Base Account. The policy provides that the collateral for a loan to a public (government) <br />entity (which includes municipalities, districts, and enterprises) may be a pledge of <br />revenues backed by a rate covenant and annual financial reporting. <br /> <br />During contract negotiations, the District's attorney, Mark Hermundstad, provided the <br />CWCB staff with the attached letter concerning the requirement that the District convey a <br />security interest to the CWCB in the Plateau Creek Pipeline Project. Both Mr. <br />Hermundstad and Tom Peltz, the District's bond counsel are concerned that the District's <br />or its water enterprise's delivery of a deed of trust to the CWCS encumbering property <br />owned by the District or the enterprise would be contrary to Colorado law as further <br />discussed in the letter. The District's attorneys felt that a pledge of water system <br />revenues from a public entity such as the District and its enterprise is standard and <br />should be sufficient security for the loans and bonds of the District/enterprise. <br /> <br />DISCUSSION <br /> <br />The Soard has already determined that a pledge of revenues along with a rate <br />covenant and annual financial reporting is adequate collateral for loans made to public <br />(government) entities, which includes municipalities, districts, and water enterprises. <br />Acceptance of this form of collateral is the standard practice of other state agencies <br />including Department of Local Affairs and the Colorado Water Resources and Power <br />Development Authority, as well as bond issuers. Acceptance of a pledge of revenues <br />as collateral for municipalities and water enterprises enables these entities to enter into <br />loan transactions without violating TABOR prohibitions and other provisions of Colorado <br />law, does not diminish CWCB's security as a lender, and has been approved by the <br />state auditors as part of their recent review of our adherence to the audit <br />recommendations. <br /> <br />STAFF RECOMMENDATION <br /> <br />The staff recommends that the Board approve the Ute Water Conservancy District's <br />request to accept a pledge of revenues backed by a rate covenant and annual financial <br />reporting as adequate security for its $10,600,000 loan from the Construction Fund loan <br />and its $17,000,000 loan from the Severance Tax Trust Fund Perpetual Sase Account. <br /> <br />~ <br />e <br /> <br />e <br /> <br />e <br />