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Written 8-26-71 Series VII, No. 34 Western Resources Wrap-up New Water Developments From: Helene C. Monberg 161B-17th Street NW Washington, D. C. 20009 Area Code 202-462-1929 Washington--Major. vitally important developments are occurring in the water resources and land-related fields here. On orders of the powerful Office of Management and Budget, the Water Resources Council is planning to publish in the Federal Register on Sept. 8 new criteria for evaluating proposed water and land-related projects. WRC tentatively plans to hold public hearings on the pro- posal here on Nov. 15-16. Screams from water men are expected from coast to coast. At this writing the proposed new criteria are: .The discount or interest rate to be used in evaluating proposed water and land-related projects is 7 per cent, to be pegged at that rate for five years. The current rate, 5 3/B per cent, became effect- ive on July 1 at the start of the 1972 fiscal year. Presently the rate is based on the yield rate of the federal cost of money; it is adjusted annually. It was 5 1/8 per cent for fiscal 1971. The Council favors freezing the rate for several years no higher than 6 per cent. But OMB insisted on 7 per cent. The higher 7 per cent discount rate will dramatically affect all water projects in the planning stage by knocking out the most marginal ones and also large projects with long-deferred benefits. The discount rate has been a bone of contention for years between WRC and o~rn. .The benefit-cost ratio will continue to be used only for incre- ments added to water projects. For example, if a hydro plant is added to what is basically a water supply project, its benefits must exceed its costs. A benefit-cost ratio of 1.5-1 means that benefits exceed costs by 50 per cent. .The Council's proposed four-account method of evaluating water and land-related projects is shortened to three. A WRC task force report in June 1969 recommended use of four objectives in evaluating projects: national economic efficiency, regional development, environ- mental and social well-being. Social well-being is out. Regional development will be considered on request. As a practical matter it will be considered. for sponsors and Congressional committees will request inclusion of regional development factors as each project moves into the planning and pre-authorization stage. o~rn and the Council have been deadlocked over the recommendations of the Council on a new method to determine the feasibility of water