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" , ..''-, . . .; ,,. irrigation. Let me talk about taxes at the state level. You have basically two choices if you use state tax revenues to finance water projects. First, you can pay as you go. lf you do, you have to accumulate enough taxes before you initiate construction to pay for the whole construction job when you do it. That's got some advantages from the point of view of many public policy decision makers in that a state would not go into debt -- which a lot of western states find to be an anathema to their traditional public policy, if not in outright conflict with their constitutions. The disadvantages are that you suffer the ravages of inflation, if inflation continues into the future, and forego the benefits of a project as you wait to accumulate funds. The alternative is to go into debt. It is by definition general obligation indebtedness because the revenues aren't there for the project to pay its own way. The advantages are that you build today, betting that inflation will continue at rates similar to what it has been in the recent past, which means today's construction dollar is cheaper than tomorrow's construction dollar. But as I have already indicated, these are outright constitutional prohibitions at the state level, as Colorado has, or you run into a public policy tradition of not going into debt or of going into debt for only very selected purposes. With respect to hydropower revenues as a means of subsidizing other project purposes, I think there are two observations to be made. First, while the notion of using hydropower revenues to subsidize other project purposes is well established and has historically worked, today's construction costs are so high that the cost per kilowatt hour of new generating capacity is just barely competitive, if at all, in the marketplace, particularly for peaking power. What that means is that the power customer is not willing to pay an extra increment to subsidize other project purposes. Secondly, with respect to federal hydropower revenues specifically, they are not available to the states. They are committed statutorily to paper accounting schemes for repayment purposes. You really don't get any benefits out of the federal power systems unless Congress first appropriates money from the general fund of the U.S. Treasury to pay for a project's construction. Power revenUes subsequently are used for payback. There is no cash kitty for the states to draw upon. So much for setting the stage. Let me turn now to the particulars of what the State of Colorado has done and is in the process of doing. First, about twelve years ago the Colorado General Assembly established a long-term, low interest loan program, called the Colorado Water Conser va tion Board construction fund. The typical terms of loans call for repayment over 1.;0 years at a 5 percent annual interest r<lte. Generally, we loan money for no more than 50 percent of the cost of project construction. Briefly, the criteria to whic:, this. program is subject are that no more than one-third of the funds available can be devoted to projects for the repair and rehabilitation of existing systems, while the other two-thirds is to be devoted to projects which develop new water supplies for the protection of our compact entitlements, The major issue in a long-term, low interest loan program -- and several western states have them - is tr.e poli ,ics of the source of tax money to be used. There are endless debates. In Colorado, most of our funding has come from ad hoc appropriations which are by no means made on a consistent, annual basis. We have had about $110 million, cOlZ:ting interest, accrued over the twelve-year