[Senate Report 110-117]
[From the U.S. Government Publishing Office]
Calendar No. 250
110th Congress Report
SENATE
1st Session 110-117
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RENEGOTIATION OF PAYMENT SCHEDULE
_______
June 28, 2007.--Ordered to be printed
_______
Mr. Bingaman, from the Committee on Energy and Natural Resources,
submitted the following
R E P O R T
[To accompany H.R. 235]
The Committee on Energy and Natural Resources, to which was
referred the Act (H.R. 235) to allow for the renegotiation of
the payment schedule of contracts between the Secretary of the
Interior and the Redwood Valley County Water District, and for
other purposes, having considered the same, reports favorably
thereon without amendment and recommends that the Act do pass.
Purpose of the Measure
The purpose of H.R. 235 is to allow for the renegotiation
of the payment schedule of contracts between the Secretary of
the Interior and the Redwood Valley County Water District, and
for other purposes.
Background and Need
In 1964, the Redwood Valley County Water District
(District) in California was formed to provide a reliable water
supply to 1,100 residents and farmers of Redwood Valley. A
small water project was built at a cost of $8.5 million, $7.3
million of which came from two Small Reclamation Projects Act
(SRPA) loans (P.L. 84-984). The District's rate schedules for
the water system were subsequently inadequate to generate
revenues to repay the loans. At the core of the problem was the
District's inability to secure a reliable water supply. In
October 1988, Congress passed P.L. 100-516 suspending the
District's loan repayment obligation until a renegotiated
payment schedule is in place. It also eliminated any accrued
penalty interest. No such payment schedule has been negotiated.
The District is now actively seeking to secure private
financing to acquire a stable water supply and expand its water
system to new customers. To do that, the District needs to be
able to commit future revenues to pay for the projects without
objection from Reclamation.
Legislative History
H.R. 235 was introduced on January 4, 2007 by
Representative Mike Thompson and referred to the House
Committee on Natural Resources. Under suspension of the rules,
H.R. 235 passed the House of Representatives on February 6,
2007. The bill was received in the Senate and referred to the
Committee on Energy and Natural Resources. An identical
measure, S. 1112, was introduced by Senator Feinstein for
herself and Senator Boxer on April 16, 2007, and referred to
the Committee on Energy and Natural Resources. The Subcommittee
on Water and Power held a hearing on S. 1116 and H.R. 235 on
April 25, 2007. At its business meeting on May 23, 2007, the
Committee ordered H.R. 235 to be favorably reported.
Committee Recommendation
The Committee on Energy and Natural Resources, in open
business session on May 23, 2007, by voice vote of a quorum
present, recommends that the Senate pass H.R. 235.
Section-by-Section Analysis
Section 1 amends Public Law 100-516 to authorize the
Redwood Valley County Water District to finance through non-
Federal entities, the procurement of water rights and water
system improvements to address the District's water needs, and,
as set forth, to reschedule payments due from the District to
the United States to satisfy existing outstanding financial
obligations.
Cost and Budgetary Considerations
The following estimate of costs of this measure has been
provided by the Congressional Budget Office:
June 6, 2007.
Hon. Jeff Bingaman,
Chairman, Committee on Energy and Natural Resources,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 235, an act to
allow for the renegotiation of the payment schedule of
contracts between the Secretary of the Interior and the Redwood
Valley County Water District, and for other purposes.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Tyler
Kruzich.
Sincerely,
Peter R. Orszag.
H.R. 235--An act to allow for the renegotiation of the payment schedule
of contracts between the Secretary of the Interior and the
Redwood Valley County Water District, and for other purposes
H.R. 235 would require the Secretary of the Interior to
reschedule payments owed by the Redwood Valley County Water
District to the government on loans made to the district by the
Bureau of Reclamation under the Small Reclamation Projects Act.
Based on information from the bureau, CBO estimates that
enacting H.R. 235 would have no significant impact on direct
spending or revenues over the next 10 years.
The Bureau of Reclamation executed two loans over 25 years
ago to help the district construct a dual distribution water
supply system. The loans totaled $7.3 million. After making the
first payment in 1983 on a 35-year repayment plan on the two
loans, the district determined that water sales from the
project would not be sufficient to repay the loans. After years
of inability to repay the loans, the Mni Wiconi Project Act of
1988 was enacted. That act required the Secretary to
renegotiate the repayments schedules of the district's loans,
and suspended repayments until such renegotiation was complete.
To date, the water district has made no additional
repayments, and under current law the Bureau of Reclamation
does not expect to collect any significant repayments on those
loans over the next 10 years. Further, the agency holds no
collateral for those loans and does not plan to foreclose on
them. Hence, CBO estimates that enacting H.R. 235 would not
affect direct spending because we expect the agency is unlikely
to receive any significant repayments either under current law
or under the bill over the next 10 years.
H.R. 235 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act. The
bill might benefit the Redwood Valley County Water District by
requiring the Secretary of the Interior to revise the
district's repayment contracts for construction and water
projects.
The CBO staff contact for this estimate is Tyler Kruzich.
This estimate was approved by Peter H. Fontaine, Deputy
Assistant Director for Budget Analysis.
Regulatory Impact Evaluation
In compliance with paragraph 11(b) of rule XXVI of the
Standing Rules of the Senate, the Committee makes the following
evaluation of the regulatory impact which would be incurred in
carrying out H.R. 235. The bill is not a regulatory measure in
the sense of imposing Government-established standards or
significant economic responsibilities on private individuals
and businesses.
No personal information would be collected in administering
the program. Therefore, there would be no impact on personal
privacy.
Little, if any, additional paperwork would result from the
enactment of H.R. 235, as ordered reported.
Executive Communications
The testimony provided by the Bureau of Reclamation at the
Subcommittee hearing on April 25, 2007 on H.R. 235 follows:
Statement of Robert Johnson, Commissioner, Bureau of Reclamation, U.S.
Department of the Interior
Mr. Chairman and members of the Subcommittee, I am Robert
W. Johnson, Commissioner of the Bureau of Reclamation. For the
reasons discussed below, the Department does not support H.R.
235.
Reclamation has worked with the Redwood Valley County Water
District (District) for over 30 years to fund and build a water
distribution system to provide over 1,100 residents and farmers
of Redwood Valley, California with a reliable municipal and
industrial water supply. Although we recognize the need to
develop a workable strategy for ensuring the District is able
to repay its loan obligation to Reclamation, because H.R. 235
could provide the District legislative loan forgiveness,
Reclamation cannot support the bill.
Over 25 years ago, Reclamation executed two 35-year
repayment contracts with the District (contract numbers 14-06-
200-8423A and 14-06-200-8423A Amendatory) for two Small
Reclamation Projects Act (P.L. 94-984) loans totaling $7.3
million. Combining those loans with funding from other sources,
the District built an $8.5 million water system project that is
still in use today. By 1982, the District's water rate for its
customers were above the state average, yet still inadequate to
generate revenues for facilities operation and maintenance and
repayment of a projected debt of $200,000 per year. That same
year the District informed Reclamation of possible repayment
problems.
Beginning in the late 1980s, the District, congressional
representatives, and Reclamation engaged in numerous
discussions over the District's inability to make the scheduled
loan payments. Subsequent legislation resulted in a
postponement of loan interest, but did not produce any positive
outcome on the repayment issue.
Compounding its fiscal problems, the District does not have
a firm and reliable water supply and is currently under a
court-ordered moratorium preventing new service connections.
This moratorium has greatly hampered the District's ability to
repay its two loans.
Reclamation cannot support H.R. 235 because the
legislation's repayment provision does not establish a date
certain for either repayment to begin or to be concluded. The
proposed legislation does not provide any assurance that the
United States will ever receive payment on the two loans, and
essentially could provide loan forgiveness. The renegotiated
payment arrangement could further postpone repayment of money
owed Reclamation.
Reclamation recognizes that a firm and reliable water
supply is likely necessary to resolve the District's current
financial dilemma, which prevents the District from being able
to complete repayment of these two loans. Also, any deferment
legislation should include language to ensure that the District
first uses proceeds from the sales of such a supply to repay
the new obligation used to secure the water supply and second
to satisfy the District's repayment obligations to Reclamation.
Furthermore, such legislation should include a date certain for
repayment of Reclamation loans to begin or to be completed. We
support efforts by the District to recover financially and find
a solution that will enable it to pay its debts. Any such
solution must ensure that the loans made by Reclamation will be
wholly repaid.
While the Department cannot support H.R. 235, we look
forward to working with the District to address the repayment
issue. This concludes my prepared remarks. I am pleased to
answer any questions.
Changes in Existing Law
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, changes in existing law made by
the Act H.R. 235, as ordered reported, are shown as follows
(existing law proposed to be omitted is enclosed in black
brackets, new matter is printed in italic, existing law in
which no change is proposed is shown in roman):
Public Law 100-516, Section 15 (102 Stat. 2573)
SEC. 15. CONTRACTS WITH THE REDWOOD VALLEY COUNTY WATER DISTRICT,
CALIFORNIA.
(a) Renegotiation of Contracts.--(1) Notwithstanding any
other provision of law, the Secretary of the Interior shall
renegotiate the schedules of payment for the loans to the
Redwood Valley County Water District which are numbered 14-06-
200-8423A and 14-06-200-8423A Amendatory.
(2) [Such renegotiated schedules of payment may not take
effect until October 1, 1989.] If, as of January 1, 2006, the
Secretary of the Interior and the Redwood Valley County Water
District have not renegotiated the schedule of payment, the
District may enter into such additional non-Federal obligations
as are necessary to finance procurement of dedicated water
rights and improvements necessary to store and convey those
rights to provide for the District's water needs. The Secretary
shall reschedule the payments due under loans numbered 14-06-
200-8423A and 14-06-200-8423A Amendatory and said payments
shall commence when such additional obligations have been
financially satisfied by the District. The date of the initial
payment owed by the District to the United States shall be
regarded as the start of the District's repayment period and
the time upon which any interest shall first be computed and
assessed under section 5 of the Small Reclamation Projects Act
of 1956 (43 U.S.C. 422a et seq.).
(b) The obligation to repay amounts loaned to the Redwood
Valley County Water District, California, pursuant to the
original negotiated schedule of payment of a loan specified in
subsection (a) is suspended until the renegotiated schedule of
payment for that loan takes effect. Any obligation to repay
amounts under any such loan which is due, but not paid as of
the date of enactment of this Act, is suspended. The
renegotiated schedules of payment, referred to in subsection
(a) shall take into account any obligation suspended by this
subsection.
[(c) No interest may be charged on any payment under either
of the loans specified in subsection (a) which is due but not
paid before the renegotiated schedule of payment for such loan
takes effect.]