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. . . May 21, 1999 Interest Rate Policy Implications for the CWCB Resulting from Section 3 of the Upper Colorado River and San Juan River Endangered Fish Recovery Program Long-term Funding Legislation Interest Rate Issue The CWCB and representatives from the Salt Lake City Area Integrated Power Contractors (SLCA-IP) have been negotiating the terms of a proposed Memorandum of Understanding (MOD) among the CWCB, the Western Area Power Administration (Western) and the Bureau of Reclamation (Reclamation). The MOU was prepared in accordance with Section 3 of the federal long-term funding legislation (S._ and H.R. --> that provides authorization for Reclamation to construct capital projects under the Upper Colorado and San Juan River Endangered Fish Recover Programs. The capital projects are designed to enhance the recovery of endangered fish, allow water development to continue and reduce the need for recovery activities that would impact the exercise of water rights. The legislation allows Western to pay for capital projects using a loan or loans from the CWCB. The latest negotiations have focused on the interest rate the CWCB would charge for loaning funds to build capital projects. CWCB staff and SLCA-IP have been discussing whether the CWCB should collect interest consistent with CWCB policy and precedent for municipal loans, agricultural loans, or loans with a blended agricultural/municipal interest rate. They have also discussed whether a new rate should be created because the capital projects are environmental mitigation projects and thus, really neither agricultural nor municipal in nature. Legislative Background The long term funding legislation authorizes expenditures of$82 million for Upper Colorado River Recovery Program capital projects through the year 2005; and the expenditure of$18 million for San Juan River Recovery Implementation Program capital projects through the year 2007. Reclamation would pay $46 million toward the cost of completing these projects. The four participating states and power contractors who use hydroelectric power from the Colorado River Storage Project will pay the remaining $54 million. The dates in the legislation correspond with the anticipated completion date of the projects, based on annual appropriations and the ability of the states and other non-federal program participants to provide cost-sharing funds, and are not tied directly to the termination dates in the underlying program agreements. Although not specifically authorized to do so, Reclamation has been funding most of the capital costs associated with the Upper Colorado River program, like building fish ladders, hatcheries, and acquiring habitat where the fish thrive.