Central Arizona Project

Costs and Benefits of Acquiring the Harquahala Water Entitlement Gao ID: RCED-95-102 June 5, 1995

The Fort McDowell Indian Community Water Rights Settlement Act of 1990 requires the Interior Department to acquire nearly 14,000 acre-feet of water to complete the settlement of the Fort McDowell Indian Community's water rights claim against Arizona parties and the federal government. The Interior Department acquired the water from the Harquahala Valley Irrigation District, one of 10 irrigation districts that contracted for non-Indian agricultural water from Interior's Central Arizona Project. This report provides information on how Harquahala became a source of water for the settlement, the federal government's costs to acquire the water, and the benefits accrued to the parties involved in the acquisition. The report also discusses the status of Agriculture Department loans made to Harquahala landowners.

GAO found that: (1) economic conditions in the late 1980s led Harquahala landowners to sell their land and associated water rights, while the Central Arizona Water Conservation District and the federal government were seeking water to settle long-standing water rights claims; (2) the Harquahala water acquisition will cost the federal government $87.6 million to $124 million in foregone receipts over the project's 55-year repayment period, which includes the elimination of the Harquahala District's debt for its water distribution system and project construction costs; (3) the federal government settled the Community's Indian water claims, the Indian community obtained a firm water supply, the irrigation district reduced its repayments for project construction, and the Harquahala landowners received cash and debt relief from the sale of their water rights as a result of the water acquisition; (4) the Department of the Interior failed to adequately protect the federal government's interest with respect to federal farm loans held by Harquahala landowners; and (5) although seven Harquahala borrowers were eligible to receive $4.5 million from the water rights sale, these borrowers had delinquencies of $3.9 million in outstanding loans.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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