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oj Ii "['j;'''1 "'i' \'['1;" I,]' 'I":" "lJI' "(' L I' "\ ..L'\l.) I ..J. 1\ I." \...0 ).; J \ l{l::COt1ME~IDA'l' [()N~ foc WESTPO Govern0rs' Meeting concerning Water Project Cost Sharing o ~(D\~17\<I7~m\ AUG'O lqA~ "0-' 1" ''''ER COLOR" " ..10' CONSE.\'Vi.:i;Oi'\ aOARD ~ 001536 ~. ISSUE: What should be the federal role in water project cost sharing? BACKGROUND: On June 15. Interior Secretary James ~att presented the President with an action memo containing recommended cost sharing guidelines from the Cabinet Council on Natural Resources and Environment. The guidelines include recommended cost sharine percenta~es for various water project purposes. Generally, non-federal financing ~",ould be 100%, with the exception of recreation '(50'7.) and agri- cultural water supply, rural drainage, urban and rural flood control (at least 35%). Operation and maintenance costs would.be the responsibility of the beneficiaries. The memo states that: (1) non-federal cost sharing is necessary due to federal budgetary constraints; (2) upfront contributions are preferrable, with limited exceptions; (3) beneficiaries should pay for the cost of services; (4) above cost pricing should be considered, and (5) agricultural water supply and flood control purposes require more flexible cost sharing. A mvre formal explication of cost sharing . principles is being prepared through the Cabinet Council, but the Administration's final cost sharing policy is not expected to be announced until after the elections. DISCUSSION: The memo to the President recognizes the significant contribution which water development projects have made to the health and welfare of the nation and calls for a tremendous increase in non-federal cost sharing to meet future needs, While western states have previously endorsed the concept of cost sharing and accept the fact that the present federal budgetary constraints may necessitate a reduced federal rele, it appears the present Administration is proposing to withdraw most federal financial participation without a concurrent transfer of federal revenue sources in the face of a clear continuing need. The Administration has made it clear that its primary ob- jective is economic recovery and that cost sharing policy is seen as a tool for reducing federal expenditures. While recognizing the urgent need to balance the federal budget, re- ducing federal app~opriations for water projects will do very little, if anything, to solve our economic problems. In fact, large deficits caused by income transfers and publicly supplied consumer services have driven market interest rates to the point .