Water Resources:

Bureau of Reclamation's Bonneville Unit: Future Repayment Arrangements

RCED-86-103: Published: Mar 7, 1986. Publicly Released: Mar 7, 1986.

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Pursuant to a congressional request, GAO reviewed the repayment arrangements for various reclamation projects, and asked the Department of the Interior's Assistant Secretary for Water and Science to respond to several issues regarding the Central Utah Project's Bonneville Unit.

The Assistant Secretary stated that: (1) the 1965 supplemental repayment contract with the water district allowed for the use of the Water Supply Act of 1958 and provided that it would be applicable to the repayment of allocated costs of municipal and industrial (M&I) water when there is an anticipated demand; (2) the Bureau intended to allow a 10-year deferment of repayment costs for facilities already completed; (3) the Bureau decided to use ad valorem tax revenues from the district's property owners for M&I payments; and (4) a 1984 change in the cost allocation was not final and did not require formal congressional approval. GAO continues to believe that: (1) the Bureau's use of the act to defer portions of M&I costs was illegal and could result in the federal government losing millions of dollars in interest revenues; (2) the Bureau's use of ad valorem tax revenues from property owners to increase the Bonneville Unit's M&I repayment obligation under the 1965 contract was improper since that money was already dedicated to irrigation repayment; and (3) the Department of Energy Organization Act of 1977 requires congressional approval of the modified cost allocation, because it would reduce the interest collected on repayment since the cost allocated to electric power is repaid with interest and the cost allocated to irrigation is repaid without interest.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: P.L. 99-591, signed by the President on October 30, 1986, contains a provision that the District shall pay principal and interest on those features of the Central Utah Project, which develop municipal and water supply without benefit of the deferral under the Water Supply Act of 1958.

    Recommendation: The Secretary of the Interior should direct the Commissioner, Bureau of Reclamation, to: (1) work with the Central Utah Water Conservancy District to revise the supplemental repayment contract between the Bureau and the district to eliminate any inappropriate deferment of the repayment of construction costs and interest; and (2) not use the funds made available for the Bonneville Unit by the Energy and Water Development Appropriation Act, 1986 until the supplemental repayment contract has been appropriately revised.

    Agency Affected: Department of the Interior

  2. Status: Closed - Implemented

    Comments: Interior does not intend to implement this recommendation because it disagreed with the findings and conclusions. Interior did admit, however, that it could do a better job on highlighting the normal year-to-year fluctuations in cost alloctions, and that it will make every effort to ensure that any changes, which do not require formal congressional approval, are clearly presented.

    Recommendation: To inform Congress more fully, the Secretary of the Interior should direct the Commissioner, Bureau of Reclamation, to immediately provide Congress with an explanation of why the modified procedure was developed, how it was developed, and what effect it will have on allocated costs and repayment. Further, to comply with the requirements of the Department of Energy Reorganization Act of 1977, the Secretary should seek congressional approval for this modification.

    Agency Affected: Department of the Interior

 

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