Bureau of Reclamation:

Reimbursement of California's Central Valley Project Capital Construction Costs by San Luis Unit Irrigation Water Districts

GAO-08-307R: Published: Dec 18, 2007. Publicly Released: Jan 17, 2008.

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In 1960, Congress authorized the construction of the San Luis Unit of the Central Valley Project (CVP) in California. The CVP is a network of dams, canals, pumps, and other facilities providing water for multiple uses. Located south of the Sacramento-San Joaquin Delta, the San Luis Unit is a component of the CVP and was built jointly by the Department of the Interior's Bureau of Reclamation (Reclamation) and the state of California. The San Luis Unit stores and delivers water that is used for various purposes, including agriculture, municipal and industrial uses, and fish and wildlife needs. Four irrigation water districts in the San Luis Unit currently receive water from the CVP. Westlands is the largest of these districts, covering about three-quarters of the land in the San Luis Unit. The three smaller districts are Pacheco, Panoche, and San Luis. Reclamation has a water service contract with each irrigation water district to deliver CVP water to the district's farmers and other water users at a set rate per acre-foot. Existing water service contracts may be renewed for a period of no more than 25 years. The San Luis Unit includes water storage and delivery facilities, such as dams, canals, and pumps, as well as the San Luis Drain. This drain was designed to return used irrigation water to the delta, but it was never completed. Reclamation is considering two options to provide drainage for the San Luis Unit. The first option, which would be implemented by Reclamation, would include land retirement, evaporation ponds, and treatment methods to remove salt and selenium from the water. The second option would transfer responsibility for providing a drainage solution to the four San Luis Unit irrigation water districts. To assist Congress in evaluating the proposed drainage solutions, Congress asked us to determine how much the federal government has spent to construct the CVP, including the San Luis Unit irrigation and drainage facilities, and what amount is reimbursable by water users, and how much of the reimbursable CVP construction cost has been allocated to San Luis Unit irrigation water districts and how much they have repaid.

Reclamation's total capital cost to construct the CVP as of September 30, 2006, is about $3.4 billion. Construction of the San Luis Unit portion of the CVP, including land, land rights, and buildings, cost $778 million--about $722.5 million for construction of 28 storage, conveyance, and pumping facilities and $55.5 million for the San Luis Drain. Reclamation has determined that about $2.9 billion of the total CVP capital construction cost, or 84 percent, is reimbursable. The reimbursable amount is distributed to various water users, including irrigation water districts, which benefit from one or more of the project's purposes, such as water supply and power generation. Reclamation has determined that, according to the various benefits they receive from the CVP, irrigation water districts are responsible for repaying about $1.6 billion, or 55 percent, of the reimbursable CVP construction costs. Reimbursement of the remaining $1.3 billion is provided by other users, such as municipal and industrial water users. Of the $1.6 billion CVP-wide capital construction costs reimbursable by irrigation water districts, as of September 30, 2005, $523 million had been allocated to five San Luis Unit districts: Broadview, Pacheco, Panoche, San Luis, and Westlands, for repayment based on the terms of their water service contracts.3 As of that date, the San Luis Unit irrigation water districts had paid about $74 million of their portion of CVP-wide capital construction costs, leaving about $449 million to be repaid by 2030. In general, CVP water users are not responsible for reimbursing the capital costs of constructing specific facilities within their unit. Instead, water users are responsible for reimbursing a portion of total CVP costs. Most of the San Luis Unit capital construction costs--with certain exceptions--are pooled for reimbursement with the costs of constructing the rest of the CVP. In addition to their share of the CVP capital costs that are pooled, irrigation water districts reimburse the federal government for certain specific project costs they benefit from. For example, the cost of the San Luis Drain is being reimbursed solely by the Panoche, San Luis, and Westlands irrigation water districts; the costs of specific pumps are also paid solely by the irrigation water districts that benefit from them. In addition, according to Reclamation, Westlands alone is responsible for repaying the cost of the district's water distribution system--about $179 million--under a separate repayment contract. As of September 30, 2006, Westlands had paid $131 million, leaving $48 million to be repaid. Thus, the combined total CVP capital construction costs remaining to be repaid by San Luis Unit irrigation water districts under water service contracts and repayment contracts amount to about $497 million.

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