FLOOD05130

• County: Statewide
• Community: State of Colorado
• Basin: Statewide
• Title: Water Project Development Financing Needs
• Date: 12/30/1982
• Floodplain - Doc Type: Educational/Technical/Reference Information

The generation of revenues by a water project is primarily a
function of two factors:

(1) the administrative practicability of charging for the
benefits produced by a project, and

(2) the willingness of potential users to pay for the
benefits produced by a project.

The benefits of, or outputs from, water resources projects
are often characterized as being either vendibles or nonven-
'dibles. Vendibles include water supply for municipal,
industrial, and agricultural purposes and the production of
hydroelectric power. These outputs are referred to as vendibles
because they are items over which ownership and control can be
exercised and are therefore items which can be bought and sold.

In contrast, benefits such as flood control protection and
recreational opportunities are not readily marketed outputs.
Although it is not necessarily impossible in either case to
collect fees directly from those who benefit from flood control
protection and recreational opportunities, administrative
problems can make it difficult to require the beneficiaries of
these kinds of project functions to pay for the benefits
received. As a consequence, the full value of flood control and
recreational benefits is often not recovered from those who
receive those benefits.

A.part and separate from the question of the administrative
practicability of collecting revenues is the question of the
willingness of potential users to pay for the full value of
project outputs. Generally speaking, the constuction and
financing costs of municipal and industrial water supply projects
have been and can be borne by project beneficiaries. However, it
has become evident in the last several years that the rapidly
escalating costs of construction, coupled with high interest
rates in private financial markets, are making it increasingly
difficult for Colorado's small rural communities to bear the cost
of new projects.

with respect to irrigation projects, it is clear that the
costs of developing new facilities are significantly greater than
the value of the additional water supplies produced. This has
long been recognized, of course, by the federal reclamation
program. Thus, irrigators are unable to pay the full cost of
developing new projects. Likewise, the cost of rehabilitating
existing systems often exceeds irrigators I financial abilities.
In short1 irrigation projects most often cannot generate enough
revenues to repay the investment involved, especially at today's
interest rates for private capital,

Another potential source of project revenues is "excess
charges" to one class of project users for the benefit of another
class of user. For example, the federal reclamation program has

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