[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.]

                                  
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