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MR. STAPLETON: How do you handle the interest factor? MR. SPARKS: The interest rate is 6 3/8 percent that has been utilized as the method for evaluating these projects. you have to recognize at the outset.that this is purely a phoney figure, because under reclama- tion law for the irrigation portion of any project there is no interest figure. When you use any interest figure to determine benefit cost. I ratio, it simply is an imaginary figure, whatever it is. However, it is cu~tomary.to.use it in det~rmining the hypothet~c~l benefit cost ratio. That 1S all 1t 1S, a hypothet1cal method of determ1n1ng the costs and - benefits. The President directed 6 3/8 percent. The law applying to these proj- ects is quite clear. I will recite that law in my testimony tomorrOw.- The law provides for these three projects; - it states : that the intere'st rate to be applied is the one in effect at the time they were authorized, about 3 1/8, as I recall. The law reads that: "It shall be the rate in effect immediately prior to the effective date of this section," (which was the 1969 law) "and that rate shall continue to be used for such project until construction has been completed, unless the Congress otherwise decides."'. The Congress: has not otherwise_ decided, SO the law is quite plain, but the President wants to change the law as he sees fit. We think it is not within the President's power to repeal the laws of this country. We are citing the exact statutory references for project authorization. For instance, for the Fruitland Mesa project at' the time it was authorized in 1964, the total ratio benefit to cost was computed 2.1 to I, which is a very good benefit. cost ratio. When the definite plan report was completed in 1967, this ratio had decreased to 1.5 to 1. That still is a good benefit cost ratio. However, in the last few years, we have had a great change in the method of computing the benefit cost ratio. The Water Resources Council came forth with a new policy which, in effect, demonstrates how to compute the benefit cost-ratio. This was a lengthy publication adopted into a law which no one understands, except perhaps those.who wrote it. There is a new method now of com- puting benefit cost ratios. The method was designed to destroy water resource development, but didn't quite get it done. Using this new method, the benefit cost ratio on the Fruitland Mesa is .9 to 1. There is no law in existence which states that any particular benefit cost ratio has to be achieved. It is a hypothetical method from an econo- mist's point of how a project should be analyzed. I The problem has been to explain why the benefit cost ratio has deterio- rated since the project was authorized in 1964. The total-benefit has increased by 42 percent, a substantial increase; but the cost has increased by an incredible 226 percent. If there is anyone in the world who can explain the remarkable disparity of the figure juggling, it is a talent that:has not been bestowed on ordinary mortals. One side of the equation is changed drastically, but the other side doesn't change or the changes are very little. This is our big quarrel with the -14-