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WSPC01058
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Last modified
1/26/2010 11:09:07 AM
Creation date
10/9/2006 2:32:51 AM
Metadata
Fields
Template:
Water Supply Protection
File Number
8200.400
Description
Colorado River Basin - Basin Briefing Documents-History-Correspondence
State
CO
Basin
Colorado Mainstem
Water Division
5
Date
12/1/1997
Author
DOI-BOR
Title
Benefit-Cost Analysis - Unfunded Mandates Reform Act Analysis for Proposed Rulemaking - Offstream Storage of Colorado River Water - Interstate Redemption of Storage Credits in Lower Division States
Water Supply Pro - Doc Type
Report/Study
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<br />001203 <br /> <br />The discount rates utilized in the analysis were chosen to <br />approximate the opportunity cost of capital for Metropolitan and <br />SNWA (5.75%) and to approximate the real cost of money (8.27%). <br />The difference in the net economic benefits given a change in <br />discount rates reflects the potential range of investment choices <br />facing water entities based upon whether an entity has the <br />ability to borrow funds at tax exempt interest rates or at rates <br />closer to the prime interest rate. Furthermore, Table 1 clearly <br />shows the influence of the water supply model upon the magnitude <br />of economic benefits obtained from interstate transactions under <br />this proposed rule. <br /> <br />The financial analysis also utilizes the cost comparison approach <br />to examine net gains after accounting for CAP capital costs, in <br />addition to the costs accounted for in the economic analysis, <br />that are associated with water that is stored and delivered for <br />interstate transactions. ARS 45-2471, Interstate Water Banking <br />Agreements, requires the AWBA to recover all CAP costs, including <br />capital costs, that are associated with banked water that is <br />distributed on an interstate basis. The economic analysis <br />excludes CAP capital costs since such costs are sunk and are not <br />incurred due to offstream banking and interstate transactions. <br />The CAP capital costs added an additional $22 per acre-foot to <br />the price of the AWBA water. The price range for AWBA water <br />under the financial analysis is from $220 to $260 per acre-foot. <br />The net financial gains are illustrated in Table 2. <br /> <br />TABLE 2 <br />Total Net Financial Gains <br />Regional Level <br />1998 - 2017 <br /> <br />r <br /> <br />Discount Rate (%) <br /> <br />5.75 <br /> <br />8.27 <br /> <br />Water supply <br /> <br />Net Benefits (Million $) <br /> <br />A70 <br />P80 <br /> <br />10.3 <br /> <br />- 41.8 <br /> <br />7.6 <br /> <br />- 32.5 <br /> <br />.440 - 3.1 <br /> <br />.281 - 2.0 <br /> <br />The difference between the net economic benefits and the net <br />financial gains is that the financial gains are calculated after <br />inclusion of CAP capital costs. The results of the financial <br />analysis are very important to the united states because it <br />reflects the incidence of costs in interstate transactions. This <br />analysis shows that the beneficiaries of the interstate <br />transactions pay for all costs related to such transactions <br />including project authorized CAP costs. This signifies that if <br /> <br />~ <br />
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