B-125647, OCT. 7, 1955

B-125647, OCT. 7, 1955

TO THE HONORABLE SECRETARY OF THE INTERIOR:

THERE HAS BEEN RECEIVED HERE A LETTER DATED SEPTEMBER 27, 1955, FROM SENATOR FRANCIS CASE, REQUESTING TO BE ADVISED WHETHER THE DEPARTMENT OF THE INTERIOR MAY REVISE A CERTAIN UNIDENTIFIED CONTRACT WITH AN UNNAMED CITY PROVIDING FOR THE PURCHASE OF WATER FOR MUNICIPAL PURPOSES FROM A GOVERNMENT CONSTRUCTED DAM.

IT IS STATED THAT IN ORDER TO UTILIZE THE WATER THE CITY FINDS THAT IT MUST EXTEND AND REPLACE CERTAIN WATER MAINS AND THAT TO FINANCE THIS OPERATION WILL REQUIRE THE SALE OF REVENUE BONDS. IT IS STATED, ALSO, THAT THE PROSPECTIVE BOND PURCHASERS WILL NOT BUY THE BONDS UNLESS THEY HAVE PRIORITY ON THE WATER REVENUES--- WHICH REVENUES ARE ALREADY OBLIGATED OR PLEDGED TO MAKE THE PAYMENTS TO THE GOVERNMENT FOR THE WATER USED. IN THE CIRCUMSTANCES, THE SENATOR REQUESTS TO BE ADVISED WHETHER THE DEPARTMENT MAY REVISE ITS CONTRACT WITH THE CITY IN ORDER TO PERMIT THE OBLIGATION TO THE BOND PURCHASERS TO HAVE PRIORITY AND TO MAKE THE OBLIGATION OF THE CITY TO THE GOVERNMENT JUNIOR IN ITS STANDING.

AS JUSTIFICATION OF THE PROPOSED MODIFICATION OF THE CONTRACT IT IS STATED AS FOLLOWS:

"THE CITY, HOWEVER, WILL NOT BE IN A POSITION TO USE VERY MUCH OF THE WATER UNLESS IT CAN MAKE THESE EXTENSIONS. HENCE, I AM PERSUADED THAT IT IS TO THE INTEREST OF THE GOVERNMENT TO PERMIT THE PRIMARY OBLIGATION OF THE REVENUES TO BE IN FAVOR OF THE BOND PURCHASERS, SO THAT THE IMPROVEMENTS CAN BE MADE SO THAT MORE WATER CAN BE SOLD AND THE TOTAL WATER REVENUES OF THE CITY BE SUBSTANTIALLY INCREASED.

"IN FACT, IT APPEARS TO ME THAT THE SECURITY FOR THE PAYMENT OF THE OBLIGATION TO THE GOVERNMENT AS WELL AS TO THE BOND HOLDERS WOULD BE GREATLY ENHANCED BY THE EXPANSION AND IMPROVEMENT OF THE WATER DELIVERY SYSTEM. EXISTING MAINS ARE TOO SMALL IN CERTAIN AREAS TO MEET THE HOUSING DEVELOPMENT THAT HAS TAKEN PLACE IN VARIOUS QUARTERS OF THE CITY.

"OBVIOUSLY, IT WOULD GREATLY FACILITATE THE IMPROVEMENT AND THE RE PAYMENT ABILITY OF THE CITY IF THE MATTER COULD BE EXPEDITED BY ADMINISTRATIVE REVISION OF THE CONTRACT.'

IT IS UNDERSTOOD FROM INFORMAL INFORMATION RECEIVED FROM YOUR DEPARTMENT THAT MATTERS REFERRED TO IN THE SENATOR'S LETTER PERTAIN TO TWO CONTRACTS ENTERED INTO WITH RAPID CITY, SOUTH DAKOTA.

PLEASE FURNISH AT THE EARLIEST PRACTICAL DATE A COMPLETE REPORT OF THE FACTS--- INCLUDING THE PERTINENT PROVISION OF THE CONTRACTS AND CITATIONS TO THE APPLICABLE LAWS AND REGULATIONS UNDER WHICH THE CONTRACTS WERE MADE --- IN ORDER THAT AN APPROPRIATE REPLY BE MADE TO THE INQUIRY.