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t84:) Projections or Annual Profit and Loss Estimates Table 7.12 shows the annual and cumulative profit or loss status of the water bank over a multi-year period. Beyond the initial year, the occurrence of normal, wet and dry years has been simulated by use of a random number table. Wet years and dry years each have a probability of occurrence of 0.1, and normal years have a probability of 0.8. , , The 2O-year financial projection for the water bank ap~ears positive. Although the water bank incurs substantial losses during the first two years (Initial "\1ear and Year 1), it show a profit during each of the normal years that follow, with a probability df occurring eight years in ten. That profit is interrupted by losses incurred during dry and wet ydrs, each of which would occur one year in ten. The projection above shows the water bank paying off its cumulative deficit as early as Year 6, if it experiences normal water years. Even if it experiences wet and dry years soon after it inception, it should retire its deficit as early as Year 10. The nlost critical factors in this projection are the I assumptions concerning the volume of water rente~ for M & I purposes, and the rental price. However, in a normal water year the water bank coul~ reach profitability if it rents 88 percent of its 5,000 af C.U. to M & I customers at $140/af, and r~ach profitability more quickly. Funding for Water Bank Start-Up The pro forma income and expense statements indicate that the water bank would require $376,019 in initial funding but that it would attain profitability within a few years, depending on hydrologic conditions. I I Where would the initial funding be obtained? A possible source, and the most desirable from the viewpoint ofFt. Lyon shareholders and the water bank's board of directors, would be a grant or loan of funds from the Colorado Water Conservation Board. The water bank would accomplish three purposes: to keep water in the Lower Arkansas Valley; to maintain a viable irrigated agricultural sector; and to promote diversified economic growth through M & I use of some of the water. These I purposes appear to coincide with the goals of the Colorado Water Conservation Board. A grant or loan application for water bank start-up funding aP1x:ars feasible. The water bank could seek a loan until the water bank reaches profitability and establishes necessary reserves. Loans also could also be sought from the ,FLCC, from the counties which would benefit from the water bank's economic development, or frpm commercial banks. The counties might be willing to issue industrial development bonds for ~his purpose, with the water bank remaining responsible for bond repayment. i I I Summary The assumptions made in this financial projection are considered reasonable, but by no means the only assumptions that can be made. For example, *e amount of initial funding for the water bank could be provided by a combination of a grant an~ a loan. A $50,000 grant from the Colorado Water Conservation Board could cover the legal aqd hydrologic costs of preparing the temporary I 7-40