AZ vs. CA:16 California Exhibits, Vol. XVI; Nos. 2600-2644

page 56

56 BUDGET BUREAU CIRCULAR A-4 7 AND POWER PARTNERSHIP the report of the Secretary of Agriculture on the economic aspects of the reclamation phases of a program or project is not available within 90 days after the completion of the main program or project report, the head of the agency proposing the program or project may submit the report thereon to the Bureau of the Budget without an accompanying report from the Secretary of Agriculture. (6) Repayment of irrigation costs. Consistent with the standards of this circular relating to repayment, irrigation project reports submitted for authorization by Congress may propose repayment of irrigation construction costs within 50 years, with allowance for an additional development period of not to exceed 10 years. Note.-Where irrigation projects are authorized administratively by the Secretary of the Interior under present law, repayment of the construction cost is based on the ability of the water users to pay over a period of 40 years, with allowance for an additional development period of not to exceed 10 years, except that a longer period may be used where the costs are to be returned under contracts entered into pursuant to section 9 (e) of the Reclamation Project Act of 1939. Projects in which the returnable allocations, together with nonreturnable allocations permitted by existing law, do not equal construction costs may be authorized only by act of Congress. Pending the enactment of general legislation dealing with the use of the interest component to show assistance in the retirement of construction costs allocated to irrigation, proposed irrigation project reports will be reviewed in accordance with the following criteria: (1) Irrigation aspects of proposed projects shall meet a test of economic justification made in accordance with the principles, standards, and procedures set forth in this circular. (2) Net revenues from other purposes associated with the project may be proposed for use in helping to repay costs allocated to irrigation. (3) Where the cost allocated to irrigation is in excess of the sum of the anticipated repayments by the water users and other identifiable irrigation beneficiaries, and any net revenues of any separable purposes of the project, the project renort shall identify these excess costs and may propose that they be borne by the Federal Government as a subsidy to irrigation. Where a Federal subsidy is proposed, either by use of the interest component or otherwise, the project report shall clearly show the amount and composition of such subsidy, and the letter of trane-nvttal to the Congress shall contain proposed authorizing language stating the maximum amount of such subsidy to irrigation which would be borne by the Federal Government. As soon as feasible, arrangements will be made to show any such subsidy in the annual budget presentation to the Congress. Note.-In determining financial feasibility of irrigation projects, the Department of the Interior has construed Federal reclamation laws to permit the use of interest payments on the construction cost allocated to power or water supply to show assistance in the retirement of construction costs allocated to irrigation that are in excess of the ability of the water users to repay. There has been no general legislation specifically dealing with this policy. The Bureau of the Budget, in clearance of project reports, has never specifically approved or disapproved the policy of applying the interest component to assist in the retirement of costs allocated to irrigation. The use of the interest component for this purpose raises several important policy problems: (a) the interest component represents an indefinite type of subsidy, (6) the interest component may be used to make a project appear to be financially feasible which is not economically sound, and (c) the size of the interest component necessarily varies with the size of the power or water-supply investment, and, therefore, the use of the interest component discriminates against irrigation projects which are not directly associated with power or water-supply projects or in which such investments are small in relation to the size of the total project. 19. Additional standards relating to recreation Proposals for recreational aspects of Federal water-resources development programs and projects will be reviewed in accordance with the following standards: (a) Recreation potentialities shall be given full consideration in the preparation and evaluation of proposed water resources programs and projects. The financial costs of those aspects of surveys, investigations, and planning required to provide a full and complete understanding of the recreation potentialities of these programs and projects shall be treated as a nonreimbursable Federal expense. (6) Recreation costs and benefits shall be dealt with on an incremental basis; i. e., costs specifically incurred for and benefits directly creditable to recreation