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WSP03422
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Last modified
1/26/2010 12:50:21 PM
Creation date
10/11/2006 11:43:28 PM
Metadata
Fields
Template:
Water Supply Protection
File Number
8220.111.O
Description
Central Utah Participating Project
State
UT
Basin
Colorado Mainstem
Date
9/9/1985
Author
US Gen. Accounting
Title
Report to the Honorable Howard M. Metzenbaum US Senate Bureau of Reclamation's Central Utah and Central Valley Projects Repayment Arrangements
Water Supply Pro - Doc Type
Report/Study
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<br />B-217826 <br /> <br />was sufficient to cover the remaining estimated M&I construction <br />costs. Second, the Bureau reassigned tax revenue from property <br />owners within the district's boundaries which was intended for <br />irrigation repayment to M&I repayment. This action increased the <br />ceiling on M&I construction expenditures. In our opinion these <br />actions, as applied to the Bonneville Unit, were legally improper <br />because (1) the Water Supply Act allows the enlargement of a <br />project to meet anticipated future demand, not the deferral of <br />the costs of facilities to provide water already under contract <br />and (2) the existing contract allocates the tax revenues to <br />irrigation payment. As a result, we estimate that the Bureau has <br />spent over $100 million beyond the contractual repayment <br />ceiling. In addition, if the interest-free period provided by <br />the Water Supply Act is applied, we project a potential loss to <br />the Treasury of $8 million to $97 million in interest over 1 to <br />10 years of deferral. <br /> <br />~ I <br />I <br /> <br />Negotiations for a new contract were suspended when the <br />Bureau invoked the Water Supply Act and reassigned the tax <br />revenues. Because obtaining additional repayment obligation is <br />once again necessary, the Bureau began negotiations in July <br />1984. As planned, three contracts are being negotiated, which <br />would increase the M&I repayment obligation by $404 million, <br />making the total repayment obligation $554 million. Based on the <br />Bureau's current estimate of total M&I costs including those <br />deferred, this amount would be sufficient to recover the <br />district's share of the costs. This M&I repayment obligation <br />includes the $38 million previously designated for irrigation <br />repayment. The Bureau expects to execute these contracts by the <br />fall of 1985. <br /> <br />In 1984, the Bureau modified its cost allocation procedure <br />for the Bonneville Unit. The Bureau's Commissioner approved the <br />modified method but has not yet reviewed or approved the actual <br />allocation that resulted. This concerns us because contract <br />negotiations have been based on this cost reallocation. In <br />addition, the Department of Energy Organization Act of 1977 <br />appears to require congressional approval of the reallocation of <br />the costs of multipurpose facilities. <br /> <br />The modified procedure resulted in a substantial increase in <br />the costs allocated to irrigation and a decrease in the power <br />allocation by about the same amount. Since 1964, the costs <br />allocated to irrigation have increased fivefold to $915 million. <br />Nevertheless, the Bureau assumes that the irrigation water users <br />can repay $16 million of these costs, which was outlined in the <br />1965 repayment contract. The Bureau has not reassessed the <br />irrigators' payment capacity since then. This leaves the <br />majority of the remaining irrigation costs to be paid by power <br />revenues from the Colorado River Storage Project. Since, by law <br />irrigation cost repayment is not subject to interest, the value <br />of the eventual repayment will be substantially less than the <br />value of the government's expenditures. <br /> <br />4 <br />
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