Corps of Engineers' Benefit-Cost Computation for the Stonewall Jackson Lake Project

GAO made a limited analysis of the benefit-cost computation for the Stonewall Jackson Lake Project, a multipurpose project being built by the Army Corps of Engineers to provide flood protection, water quality control, area development, water supply, and recreation benefits. Although originally estimated to be completed in 1976 at a cost of $34.5 million, completion is currently estimated for 1987 at a cost of $189 million. About $40.5 million has been spent primarily on engineering, design, acquisition and clearing of land, and highway and utility relocations, but the actual construction of the dam has not been started. When the project was authorized, the initial benefit-cost ratio was 1.7 to 1. The fiscal year 1982 total benefit-total cost ratio is computed at 1.07 to 1. However, since fiscal year 1980, the Corps only reports in its annual budget request a remaining benefit-remaining cost ratio which for fiscal year 1982 is estimated to be 1.53 to 1. Recreation benefits account for 15 percent of the average annual benefits. The methodology for computing recreation benefits is an inexact science and, as a result, the estimates are judgmental. The Corps claimed water quality benefits of 47 percent of the average annual benefits. The method which the Corps used in developing this figure was ruled out as a substitute for point source pollution control by the Federal Water Pollution Control Act Amendments, and the water quality benefits are being challenged in a U.S. district court. Flood control benefits account for 29 percent of the average annual benefits. The damage surveys were based on estimated damage using a questionable construction cost index. Benefits attributable to increased water supply were valued at 1 percent of the average annual benefits, but no agreement has been reached for the sale of the water. Area redevelopment accounts for 8 percent of the average annual benefits, but the Corps states that these benefits should be reduced by about $178,000. The interest rate on which the benefit-cost analysis is based is currently under challenge in a U.S. district court. The benefit-cost ratio did not include $26 million in estimated costs and related benefits for highway betterments and relocations.