WSP05088

• File Number: 8221.112.J
• Description: Central Arizona Project
• State: AZ
• Basin: Colorado Mainstem
• Date: 10/1/1993
• Title: Governor's Central Arizona Project Advisory Committee: Final Report and Recommendations
• Water Supply Pro - Doc Type: Report/Study

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GOVERNOR'S CENTRAL ARIZONA PROJECT ADVISORY COMMITTEE

Likely Future Conditions Without Alternative Action -- Draft report dated March 10, 1993,
prepared by ADWR

This report discusses the possible likely future conditions concerning CAP utilization
and water pricing. The Notice of Substantial Completion for the CAP water delivery
system will be issued by the USSR on or about October 1, 1993 triggering the repayment
obligations of the CAP contracts and subcontracts. Due to the depressed agricultural
economy, several CAP irrigation districts may be unable to make the required payments
for the CAP distribution systems. Moreover, if the water is priced at its actual delivery
cost, these irrigation districts will be unlikely to pay CAWCD for their CAP allocations. If
CAP debts cannot be reformulated, it is probable that some irrigation districts will utilize
Chapter 9 bankruptcy to reorganize their debts. Costs of operating and maintaining the
CAP will shift to the remaining customers, primarily large municipalities and some Indian
Tribes, greatly increasing water charges over previous expectations. Use of CAP water
will remain at very low levels in the near term but will increase gradually reflecting growth
induced demand for additional municipal supplies.

CAP Irrigation District Default and Bankruptcy Issues -- Draft report, April 16, 1993,
prepared by ADWR

This report provides an overview of the issues and laws which may come into play
if a CAP irrigation district were to default on contract or bond obligations or seek
bankruptcy reorganization under Chapter 9 of the federal bankruptcy laws. The report
describes the obligations of the irrigation districts relating to CAP, including water delivery
contracts and subcontracts, federal 9(d) contracts associated with the construction of
irrigation distribution systems, and private bonds issued by the irrigation districts to meet
the 20% cost sharing requirements of the federal 9(d) contracts. Relevant state and
federal laws are discussed and analyzed. Issues associated with both non-bankruptcy
remedies and bankruptcy are posed. The report concludes that there will be a high degree
of uncertainty associated with a bankruptcy proceeding. However, it is likely that irrigation
districts could emerge from bankruptcy with a reorganization of their debts at a rate which
would make it economically feasible for them to continue in operation.

FINAL REPORT AND RECOMMENDA TIONS

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