[Congressional Record Volume 142, Number 58 (Wednesday, May 1, 1996)]
[Senate]
[Pages S4517-S4519]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. HUTCHISON:
  S. 1719. A bill to require the Secretary of the Interior to offer to 
sell to certain public agencies the indebtedness representing the 
remaining repayment balance of certain Bureau of Reclamation projects 
in Texas, and for other purposes; to the Committee on Energy and 
Natural Resources.


          the texas reclamation projects indebted purchase act

 Mrs. HUTCHISON. Mr. President, I introduce today a bill on 
behalf of the State of Texas and several major water supply authorities 
in Texas. It would transfer title for Bureau of Reclamation projects to 
local control.
  The purpose of this bill is to give local public agencies the right 
to make decisions regarding their own local water supplies. In doing so 
we will reduce the size of the Federal Government and save taxpayers 
significant amounts of money.
  Mr. President, I mentioned that I am introducing this legislation on 
behalf of the State of Texas. Our goal is to create a process to allow 
the State of Texas or its public agencies to purchase and accept title 
to the Bureau of Reclamation projects in the State.
  I submit this measure with the full support of the State of Texas. 
The State legislature recently passed a resolution, endorsed and signed 
by the Governor, accepting the responsibility for this process of title 
transfer.
  My interest in this effort goes back to the last Congress, when in 
June 1994, I introduced S. 2236 in an effort to correct a longstanding 
problem involving the U.S. Bureau of Reclamation and the city of Corpus 
Christi.
  That legislation directed the Secretary of the Interior to enter into 
and complete negotiations with the city of Corpus Christi concerning 
the Nueces River project, also known as Choke Canyon Reservoir. A 
hearing was held on the legislation, but the Congress ended before the 
Senate could act.
  This year, with title transfers being encouraged by both the 
administration and Congress, it makes sense for the Choke Canyon 
legislation to be included with the broader Bureau of Reclamation 
legislation as developed by the State of Texas.
  In 1976 the city of Corpus Christi and the Nueces River authority 
contracted with the Bureau for construction of Choke Canyon Reservoir 
on the Frio River near Three Rivers, TX. The primary purpose of the 
project was to provide additional water to the city of Corpus Christi 
through the year 2040. Since project completion in 1982, however, 
subsequent studies have determined that the current supply to the city 
from the project is less than contracted for, and that additional water 
supplies likely will be required by the year 2003.
  The local sponsors are proposing that the repayment agreements be 
renegotiated to reflect the diminished water supply derived from the 
project, as well as the unanticipated expenses that the local sponsors 
have incurred to obtain additional water to compensate for the 
projected shortfall in the Choke Canyon-Lake Corpus Christi system.
  I have incorporated the Choke Canyon project into this legislation 
for two reasons:
  First, to pursue the intent of the original contract--because the 
city still is not getting the water it was promised;
  Second and most important, I have introduced this legislation because 
the area is facing a very real water shortage. Due to the lower than 
anticipated yield from the Choke Canyon Reservoir, projections show the 
12-county region it serves will be short of water within 10 years. This 
will affect nearly 400,000 people and numerous major industries.
  The discount and prepayment conditions which the Corpus Christi is 
asking be negotiated are extremely important to the city's ability to 
ensure adequate future water supplies at affordable prices. Congressman 
Solomon Ortiz has introduced similar legislation on the House side.
  Also included in this legislation is a project near Amarillo in the 
congressional district of Congressman Mac Thornberry: the Canadian 
River project. Construction of the Canadian River project by the BOR 
was authorized by Public Law 898 on December 29, 1950, to provide a 
source of municipal and industrial water to member cities of the 
Canadian River Municipal Water Authority in the Texas Panhandle and 
South Plains. The cities served include Amarillo, Borger, Brownfield, 
Lamesa, Levelland, Lubbock, O'Donnell, Pampa, Plainview, Slaton, and 
Tahoka. These currently comprise a combined population of nearly 
500,000 persons.
  The major project facilities include Sanford Dam on the Canadian 
River 35 miles northeast of Amarillo, Lake Meredith which is formed by 
the dam, and a 322-mile aqueduct system that transports water from the 
lake to the member cities. The project was built in the 1960's and has 
supplied water to the cities continuously since 1968. Responsibility 
for operation and maintenance of the entire complex of municipal water 
supply facilities, including Sanford Dam, was transferred to the 
authority on July 1, 1968.
  The project authorization--section 2. (c)(3)--provides that title to 
the aqueduct shall pass to the project sponsor upon payment of all 
obligations arising from the legislation and contract.

  Total project cost was about $83.8 million, of which about $76.9 
million is reimbursable to the United States by the Authority. Non-
reimbursable components paid for flood control and fish and wildlife 
benefits. Including interest during construction, the original 
reimbursable obligation was $83.7 million, repayable with interest at 
the rate of 2.632 percent over a term of 50 years. Twenty-six annual 
payments have been made.
  Under this bill the outstanding balance would be purchased by the 
project sponsor, the Canadian River Municipal Water Authority. Title to 
the aqueduct would be transferred to the Authority. Title to the dam 
will not be transferred because of its flood-control functions, which 
need to remain under the supervision of the U.S. Corps of Engineers, 
and title to the land around the reservoir to remain with the National 
Park Service because it is designated a National Recreation Area.
  Purchase of the debt would be accomplished by payment of the net 
present value of the cash stream which would be required to repay the 
current indebtedness, discounted at U.S. Treasury rates on the date of 
purchase contract execution, after adjustment to reflect unrealized 
project benefits and outstanding credits.


                    advantages for federal interests

  Recent changes in the mission of the Bureau of Reclamation have 
reduced emphasis on water resource development projects. Now, the BOR's 
activities are regulatory in nature, for the most part, as they relate 
to existing projects. Transfer of Federal ownership would eliminate the 
need for BOR participation in the oversight of operation and 
maintenance, and relieve the Federal Government of liability related to 
operation of transferred facilities.
  The cash payment to the Government would make funds available to 
support new projects that create, jobs or which cannot be funded from 
present budget sources. Currently, BOR is considering the prospect of 
title transfer for selected projects, including the aqueduct system of 
the Canadian River Project. The debt purchase proposal in

[[Page S4518]]

this legislation is similar to the process which would result from 
those activities, without extended negotiations and added 
administrative costs.


                     advantages for local sponsors

  Because of the water supply shortfall the Canadian River Project the 
Authority and its member cities are forced to seek replacement water. 
The savings that would accrue from purchasing the outstanding debt 
would allow the Authority and its member cities to finance needed 
replacement water without undue economic hardship.
  Replacement supplies capable of providing the lost annual supply of 
30,000 acre-feet or more are being sought at a probable cost of $76.5 
million. That additional expenditure will be necessary even if the 
discounted debt purchase is accomplished.

  Also included in the legislation is the Palmetto Bend project 
authorized by Congress in 1968.
  The primary purpose of Palmetto Bend is to provide municipal and 
industrial water to a broad area along the Texas gulf coast. The 
project was completed by the BOR in 1985 and includes, as its main 
feature, Lake Texana.
  Lake Texana is located near the gulf coast midway between Houston and 
Corpus Christi. It is operated by the Lavaca-Navidad River Authority. 
In essence, the reservoir's entire yield has been committed, including 
more than 42,000 acre-feet/year for municipal use in the cities of 
Corpus Christi and Point Comfort, and more than 32,000 acre-feet/year 
for industrial use largely in the regional petro-chemical-plastics 
industry. The city of Corpus Christi provides water service to a 10-
county area. Two of the industries to which Lake Texana supplies water 
provide more than 3,000 jobs to the local region.
  Currently, the authority and the Texas Water Development Board are 
obligated for repayment to the Federal Government of about $70.7 
million, at an interest rate of 3.502 percent over a term of 50 years. 
The board has made 10 annual payments; the authority is scheduled to 
begin payment in 1996.
  Under this bill, the outstanding balance of debt would be prepaid, 
and the project purchased by the authority and board as State project 
sponsors. Purchase would be accomplished by payment of the net present 
value of the cash stream required to repay the current contractual 
debt, discounted at U.S. Treasury rates on the date of purchase, after 
adjustment to reflect unrealized project benefits and outstanding 
credits.
  Title to the Federal portion of the project would be transferred to 
the State sponsors, the authority, and the board.
  Two clear benefits of the transfer of title to the State sponsors are 
avoidance of the cost of Federal oversight of the project and the 
release from liability of the Federal Government. Transfer of this 
obligation should result in a reduction in the size of the Federal 
bureaucracy required to support the projects.
  Quantified advantages include an immediate infusion of approximately 
$34 million to the Federal Treasury, annual savings of $250,000 for 
project operation and upkeep expenses and an annual savings of about 
$12,000 by avoiding payments-in-lieu-of-taxes to Jackson County.
  Annual debt service payments for Lake Texana will be reduced by 
approximately $1 million per year. Currently this cost is borne by the 
water users, so municipal and industrial water costs would be reduced.

  It is estimated also that up to $50,000 in costs due to BOR reporting 
mandates and management assistance would be avoided.
  More importantly, however, state sponsors will be able to manage 
their projects to achieve the maximum benefits without the delay, 
expense and uncertainty which is incurred currently by BOR management 
oversight.
  This proposal is a mutually advantageous proposition that will 
provide economic benefits to both Federal and State interests, while 
reducing duplicative and unnecessary Government programs.
   Mr. President, I urge my colleagues' strong support for this 
legislation. It is responsible. It addresses serious local interests. 
It fulfills the expressed goals of both the 104th Congress and the 
administration, and it makes sense.
   Mr. President, I ask unanimous consent that recent testimony by a 
representative of the Texas Water Development Board before the House 
Subcommittee on Water and Power Resources Subcommittee supporting this 
legislation be entered into the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

Testimony by Tom Brown, Deputy Executive Administrator Water Resources 
               Development, Texas Water Development Board

       Mr. Chairman and Members of the Committee, thank you for 
     the opportunity to present the views of the Texas Water 
     Development Board on the issue of transfer of Federal 
     Reclamation facilities to local project beneficiaries. The 
     Legislature of the State of Texas has passed Senate 
     Concurrent Resolution 80 and the Governor has signed this 
     resolution, supporting the transfer of Bureau of Reclamation 
     projects in Texas to either the local sponsors or the State. 
     Included in SCR 80 was the direction of the legislature to 
     the Texas Water Development Board to work with local 
     interests to purchase Bureau projects in Texas and to 
     encourage Congress to adopt legislation to facilitate this 
     acquisition. Under this legislation there are three projects 
     being proposed to be purchased, the Canadian River Project, 
     Palmetto Bend Project and the Nueces River Reclamation 
     Project.
       There are strong incentives for the Federal Government to 
     sell these projects to local sponsors. These include: First, 
     receiving lump sum cash payments totaling in excess of $100 
     million. Since the bill provides for the purchase of the 
     facilities using a net present value of the outstanding debt, 
     these payments will provide a direct cash infusion into the 
     federal treasury while defeasing outstanding obligations of 
     the Federal Government.
       Second, the Federal Government would be able to transfer 
     the liabilities associated with the projects to the 
     purchaser.
       Third, the Federal Government would not have to continually 
     appropriate funds to pay for a portion of operations and 
     maintenance of the transferred facilities.
       Fourth, it would eliminate Federal overhead on these 
     projects since oversight would not be required.
       There are also significant local incentives for the 
     purchase of these facilities. These incentives include:
       1. Reducing annual debt service payments for local 
     ratepayers.
       2. Since local sponsors are currently operating and 
     maintaining the facilities the purchase would eliminate 
     duplication of management by both the Bureau and the 
     local sponsor.
       3. Allow for consistency in operating plans for the 
     facilities. Since the State of Texas regulates the operation 
     of these facilities, local or State ownership would 
     streamline operations of the facilities through elimination 
     of duplicative or contradictory operating plans'.
       4. Eliminating the time and oversight required by the 
     Bureau of Reclamation.
       5. Eliminating additional cost associated with federal 
     involvement. For example, The Texas Water Development Board 
     has been working with local governments in developing water 
     conservation plans to address local issues since 1985. In 
     fact, under state law any applicant that borrows over 
     $500,000 from the Board must have an approved water 
     conservation plan. Given the recent push by the Bureau of 
     Reclamation for the development of water conservation plans 
     it will approve there are additional costs that should not 
     have to be borne by local governments.
       In addition, the State of Texas owns the surface water 
     within its boundaries with rights to these surface waters 
     being conveyed by the State to individuals and entities for 
     beneficial uses. While the Federal Government has assisted 
     local and State sponsors in constructing these projects to 
     store and divert surface waters, the water rights for the 
     projects have remained with local sponsors, not the Federal 
     Government.
       What is being proposed in this legislation, and what the 
     Texas Water Development Board supports, is the ability of 
     local sponsors to purchase the Federal interests in these 
     facilities at a present value of the outstanding debt 
     associated with the municipal and industrial uses in the 
     projects, a transfer of all operations and maintenance and 
     the transfer of title to the state or local sponsor. 
     Furthermore, this legislation meets the Bureau of 
     Reclamation's criteria for projects that could be transferred 
     as single purpose projects: (1) A fair return to the 
     taxpayers for Federal assets. (2) Compliance with all 
     applicable Federal Laws. (3) That interstate compacts and 
     interests are protected. (4) Native American assets are not 
     affected. (5) No international treaties are affected. (6) The 
     recipients shall maintain the public safety aspects of the 
     project.
       It is recognized that the non-reimbursable aspects of the 
     projects such as recreational opportunities and fish and 
     wildlife benefits are a significant public benefit. However, 
     in the case of the projects referenced in this legislation 
     both the Palmetto Bend and Nueces River projects, local 
     sponsors and or the State of Texas operate all recreation and 
     wildlife areas and the Bureau of Reclamation is not directly 
     involved in the provision of these benefits, nor do they 
     provide any specific or regular management function relative 
     to these activities. The Canadian River

[[Page S4519]]

     Project transfer will not involve transfer of any facilities 
     associated with the non-reimbursable aspects of the projects.
       Through this legislation the Congress would affirm its 
     support to the principle that the State have the primary 
     responsibility for management and use of its water. This 
     legislation also recognizes that it is the States 
     responsibility to ensure that these transfers will relieve 
     the Federal Government of the financial liabilities 
     associated with these projects and help Texas control its 
     water destiny and meet the needs of its citizens.
       Thank you for allowing me to issue this statement and 
     support what we believe is needed legislation.

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