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l/':l C\J C\1 As owner of the storage space created by the reservoir enlargement, the San Miguel District would effectively serve as the financing agent for the proposed project and would assume the responsibility to market the water yield therefrom and retire the indebtednesses incurred. Water would have to be sold in the same manner as shares in a ditch company are, with the annual payment per share being due regardless of water availability or use. The district does not propose to use its mill levy as a substantial source of funding for the proposed reservoir enlargement. While the financial aspects of the proposed project appear promising, it has not yet been established that the local irrigators are in fact willing to pay $43.75 per acre-foot. Furthermore, the district is currently in default on a loan from the Farmers Horne Administration for a rural, domestic water supply system which the district obligated itself to finance on behalf of the Wrights Mesa Water Company. While the district looks to the company to raise the revenues to payoff the FHA loan, it is the district which is legally obligated to FHA. Despite these unknowns, the staff believes that the proposed reservoir enlargement is sufficiently promising to merit authori~ation at this time so that final cost estimates can be prepared and details for financing the project arranged. As with all authori~ed projects, the Board need not, and indeed by statute must not, proceed to construction unless satisfied that the Board's investment will in fact be repaid. Recommendation It is recommended that this propsoed project be recommended to the General Assembly for authori~ation in the amount of $2,025,000 subject to the terms of the proposed financing specified above. /bvm , s F""H,A 10a.~v1 'Lj-SW,DOO l:U(~ '6l~ ~ ~s: \ V' \\A ~ ~ , ~\}.HJ, l' S-'--,OOO + ~CLy~+- .1.1, 000 ~ --,q, 000 t -3-