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

long been premised upon sales of hydropower at rates in excess of
that needed to repay the construction costs allocable to a
project's power features. These excess charges have then been
used to repay that portion of the construction costs allocable to
a project's irrigation features which are beyond the irrigator's
ability to repay. The upper Colorado River Basin Fund and the
repayment provisions of the pick-Sloan Missouri River Basin
program are the devices with which we in Colorado are most
famil iar.

To some extent, future non-federal water project development
in Colorado can use this same approach. It can be implemented
either on an ad hoc project-by-project basis or through a
centralized funo. It is doubtful, however, that hydropower
developments, given current construction costs, will be able to
assist with anything more than a small portion of the costs of
the non-power features of most multiple-purpose projects. In
other words, hydropower revenUes may be largely consumed in just
paving for the cost of hydropower features themselves.

It has been suggested from time to time that "excess" power
revenues accruing to the Upper Colorado River Basin Fund ought to
be accessible to Colorado for its direct use as it sees fit.
Under the existing law, this is not possible. It would take both
amendments to existing law and a very substantial increase in
federal power rates before Colorado could realize a direct source
of revenues large enough to be of any consequence. The
preference customers of Colorado River Storage Project power and
other Upper Basin states have voiced strong opposition to any
such suggestions.

Another problem with revenue financing is that it may fail
to achieve the optimum development of a reservoir site. For
example, a municipality may desire to construct a dam at a site
capable of storing 30,000 acre-feet. But from the municipality's
point of view, a project in excess of 10,000 acre-feet may not be
financially feasible if project revenues are the only source of
repayment for the indebtedness incurred in raising capital to pay
for constru,ction costs. In such a case, Colorado might lose the
opportunity to achieve the optimum development of its water
resources.

In summary, a significant portion of Colorado's potential
future water developments--small, rural municipal water supply
prolects; irrigation projects; rehahilitation of existing
irrigation systems, and flood control projects--cannot, at least
in large part, he financed through revenue financing. It is
increasingly difficult to find water projects whose outputs are
so highly valued that those outputs can generate the revenue
necessary to repay a project's cost. Thus, it appears that
revenue financing will be a significant source of capital only in
the case of large municipal and industrial water supply projects
and, to some extent, in the case of projects which have a
hydropower component. '

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