Information on Repayment of the Bureau of Reclamation's Central Valley Project

In response to a congressional request, GAO provided information on: (1) the current contractual obligations regarding repayment of capital costs and operating and maintenance expenses of three water districts of the Bureau of Reclamation's Central Valley Project (CVP) in California; (2) the districts' ability to pay for project water; (3) the districts' actual repayments; (4) the additional costs borne by the government when irrigation costs remain unpaid or are deferred; and (5) the Bureau's policy on the recovery of unpaid or deferred irrigation costs.

Over the life cycle of the CVP, the Bureau has established water service contract rates under several different marketing strategies. Each of the three water districts selected for study has a long-term, fixed-rate contract. The financial obligations of irrigation beneficiaries can be limited to their ability to pay for the water. GAO found that the ability to pay for irrigation water was greater than the cost of providing for water service in all three irrigation districts reviewed. There has been no redetermination of the districts' ability to pay, because their contracts are not subject to adjustment until the mid-1990's. The Bureau pools its water service contract revenues from individual districts to pay for the CVP as a whole, paying operating and maintenance expenses first and then repaying capital. In fiscal years 1982 and 1983, the CVP had operating deficits which were expected to continue in the foreseeable future. Even though the CVP has covered all operating and maintenance expenses, some individual water districts have not contributed their proportional share. Since the CVP is still considered to be under construction, there has been no formal allocation of the CVP construction costs to individual water districts to establish a repayment obligation. GAO found that the long-term, fixed-rate contracts preclude the recovery of capital, operating, and maintenance costs within 50 years as planned because current rates cannot be charged to existing water user entities until their water service contracts expire or can be adjusted.