Water Resources: Flooding on Easement Lands Within the Red Rock, Iowa,
Reservoir (Chapter Report, 12/23/94, GAO/RCED-95-4).

Before the Red Rock Dam and Lake Project near Des Moines, Iowa, began
operating in 1969, the U.S. Army Corps of Engineers purchased easements
from landowners on 29,000 acres within the reservoir's boundary.  The
easements give the Corps the right to occasionally flood the easement
lands when the dam is forced to hold back water upstream in the
reservoir to prevent flooding downstream. Because of
heavier-than-expected rainfall during the 1970s and 1980s, the easement
lands were flooded more often than the Corps had estimated.  In 1985,
Congress authorized a buyout program for easement landowners who were
willing to sell their land to the Corps; however, few owners have been
interested in selling, and their complaints about flooding have
persisted.  This report (1) determines whether the property within the
Red Rock reservoir's boundary has been inundated beyond the levels
permitted by the easements; (2) recommends whether compensation for the
easements should be renegotiated with landowners; and (3) reports on
actions that the Corps has taken to implement the buyout program.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-95-4
     TITLE:  Water Resources: Flooding on Easement Lands Within the Red 
             Rock, Iowa, Reservoir
      DATE:  12/23/94
   SUBJECT:  Water resources development
             Water supply management
             Inland waterways
             Flood control management
             Land use agreements
             Land use law
             Land reclamation
             Expropriation
             Real property acquisition
IDENTIFIER:  Des Moines River (IA)
             Mississippi River
             Lake Red Rock Project (IA)
             Red Rock Reservoir (IA)
             
**************************************************************************
* This file contains an ASCII representation of the text of a GAO        *
* report.  Delineations within the text indicating chapter titles,       *
* headings, and bullets are preserved.  Major divisions and subdivisions *
* of the text, such as Chapters, Sections, and Appendixes, are           *
* identified by double and single lines.  The numbers on the right end   *
* of these lines indicate the position of each of the subsections in the *
* document outline.  These numbers do NOT correspond with the page       *
* numbers of the printed product.                                        *
*                                                                        *
* No attempt has been made to display graphic images, although figure    *
* captions are reproduced. Tables are included, but may not resemble     *
* those in the printed version.                                          *
*                                                                        *
* A printed copy of this report may be obtained from the GAO Document    *
* Distribution Facility by calling (202) 512-6000, by faxing your        *
* request to (301) 258-4066, or by writing to P.O. Box 6015,             *
* Gaithersburg, MD 20884-6015. We are unable to accept electronic orders *
* for printed documents at this time.                                    *
**************************************************************************


Cover
================================================================ COVER


Report to Congressional Committees

December 1994

WATER RESOURCES - FLOODING ON
EASEMENT LANDS WITHIN THE RED
ROCK, IOWA, RESERVOIR

GAO/RCED-95-4

Red Rock Project


Abbreviations
=============================================================== ABBREV

  DOD - Department of Defense
  GAO - General Accounting Office

Letter
=============================================================== LETTER


B-256403

December 23, 1994

The Honorable Max S.  Baucus
Chairman
The Honorable John H.  Chafee
Ranking Minority Member
Committee on Environment
 and Public Works
United States Senate

The Honorable Norman Y.  Mineta
Chairman
The Honorable Bud Shuster
Ranking Minority Member
Committee on Public Works
 and Transportation
House of Representatives

In response to section 343 of the Water Resources Development Act of
1992, this report discusses (1) whether the property within the Red
Rock reservoir's boundary has been inundated beyond the levels
permitted by easements allowing occasional flooding and whether
compensation for the easements should be renegotiated with the
landowners and (2) what actions have been taken to implement section
108(b) of Public Law 99-190, which authorized the U.S.  Army Corps of
Engineers to purchase property with easements from those landowners
who are willing to sell. 

We are sending copies of this report to the appropriate Senate and
House committees; interested Members of Congress; the Secretaries of
Defense and the Army; the Director, Office of Management and Budget;
the Chief, U.S.  Army Corps of Engineers; and other interested
parties.  We will make copies available to others on request. 

This work was performed under the direction of James Duffus III,
Director, Natural Resources Management Issues, who can be reached at
(202) 512-7756.  Major contributors to this report are listed in
appendix III. 

Keith O.  Fultz
Assistant Comptroller General


EXECUTIVE SUMMARY
============================================================ Chapter 0


   PURPOSE
---------------------------------------------------------- Chapter 0:1

Before the Red Rock Dam and Lake Project near Des Moines, Iowa, began
operating in 1969, the U.S.  Army Corps of Engineers purchased
easements from landowners on 29,000 acres within the reservoir's
boundary.  The easements give the Corps the right to occasionally
flood the easement lands during periods of high water when the dam is
operated to control flooding downstream by holding back water
upstream in the reservoir.  Because heavier-than-expected rainfall
occurred during the 1970s and early 1980s, the easement lands flooded
more frequently than the Corps had estimated.  In response to the
landowners' complaints that flooding has occurred more frequently
than what the owners were paid for, the Congress in 1985 authorized a
buyout program for easement landowners who were willing to sell their
lands to the Corps.  However, few owners have been interested in
selling, and the landowners' complaints have persisted. 

Concerned about this situation, the Congress in the Water Resources
Development Act of 1992 directed GAO to

determine whether the property within the Red Rock reservoir's
boundary has been inundated beyond the levels permitted by the
easements;

recommend whether compensation for the easements should be
renegotiated with landowners; and

report on the actions the Corps has taken to implement the buyout
program. 


   BACKGROUND
---------------------------------------------------------- Chapter 0:2

The Red Rock Dam and Lake Project was constructed in the 1960s at a
federal cost of nearly $89 million.  To reduce flood damage
downstream on the Des Moines and Mississippi rivers, the project
retains water in the reservoir during periods of high rainfall to
reduce the downstream water levels.  The Corps purchased lands within
the reservoir's boundary that were going to be frequently or
permanently flooded as a result of the project and also purchased
easements on lands expected to be occasionally flooded. 

The land and easement acquisitions took place between 1959 and 1967. 
The acres below the elevation of 760 feet were bought outright by the
Corps because they were expected to be flooded permanently or more
frequently than once every 5 years.  For the lands between 760 and
783 feet, the Corps paid the landowners for what is called an
"occasional" easement, giving the Corps the right to overflow these
lands. 

The 1985 buyout program required the Corps to purchase easement lands
from willing sellers at Red Rock.  In November 1988, the Corps began
to develop plans to make offers on the 29,000 acres of land.  It has
acquired some acreage and is in the process of appraising or
negotiating with landowners to buy other acreage. 


   RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:3

The Red Rock easement documents did not specify a permitted flooding
frequency, level, duration, or timing--only that the flooding would
be occasional.  Since the project began operating in 1969, flooding
has occurred on easement lands, depending on elevation, about 2 to 4
times more frequently than the Corps estimated.  Corps officials told
GAO that, over the long term, the flood-frequency estimates will
prove to be correct, because more rain fell during the first 25 years
of Red Rock's operation than normal.  Landowners disagree, stating
that the flooding has exceeded what they were paid for and that more
compensation is due. 

The easement documents do not provide for renegotiating easement
compensation if the flooding is greater than what was expected. 
Whether additional compensation should be provided to the landowners
is a policy decision for the Congress.  Arguments for compensation
relate to the farm losses already incurred by the landowners in
excess of their easement payments.  GAO estimated that for the
flooding that has already occurred, the present value of crop and
other losses the landowners have suffered may have exceeded the
easement payments they received.  GAO estimated that the gross crop
losses exceeded the easement payments by up to $2.3 million but could
not estimate the amount of net losses because of the many variables
that can reduce the amount of gross revenues.  In addition, GAO's
analysis raises the possibility that the Corps' long-term flooding
estimates are too low.  On the other hand, a court held in 1987 that
owners of lands subject to occasional flooding easements in another
Corps project were not entitled to additional compensation because of
several years of high precipitation.  In addition, the Corps has
stated that too few years have passed since the beginning of Red
Rock's operation to judge the validity of the flood-frequency
estimates. 

Starting in 1988, the Corps' Rock Island District developed and began
implementing plans to acquire the easement lands.  Few landowners--7
percent--have sold their lands after the Corps surveyed, mapped, and
appraised them to estimate their current fair market value.  The
landowners generally believe that the Corps' offered purchase prices
are too low to allow them to buy comparable farmland nearby and
continue to farm.  In addition, the landowners have cited access
difficulties to the rest of their property if they sell only the
easement segments of their farms.  The Assistant Secretary of the
Army for Civil Works has said that a landowners association's
proposal that the Corps lease the lands back to those owners who are
willing to sell should be considered. 


   PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:4


      FLOODING HAS BEEN HIGHER
      THAN EXPECTED
-------------------------------------------------------- Chapter 0:4.1

On the basis of 45 years of streamflow and other data, the Corps
projected that, over the long term, land at 760 feet above sea level
would be flooded on average once every 5 years, while land at 783
feet above sea level would be flooded on average once every 45 years. 
The Corps paid the landowners about $5.5 million for the occasional
easements on the 29,000 acres within the reservoir's boundary that
are located at elevations of 760 feet and higher.  This compensation
was based on estimated average flooding frequencies and such factors
as crop losses, fence damage, soil erosion, and expenses for cleaning
up debris. 

Flooding has occurred on part of the easement lands in 9 of the last
25 years through 1993.  The Corps' records show that the average
annual precipitation was 12 percent higher than normal during this
period.  The frequency of flooding that has occurred at four of the
five elevations GAO studied seems to be unusually high, given the
Corps' estimates.  It is possible, however, that over a longer period
of time, the actual flood rates may move closer to the Corps'
estimates. 


      COMPENSATION ISSUE IS
      DIFFICULT TO RESOLVE
-------------------------------------------------------- Chapter 0:4.2

The landowners' representatives believe that the price the Corps
originally paid for the easements was unfair because the frequency of
flooding has exceeded the Corps' estimates, causing the landowners to
suffer much higher losses than they expected.  The landowners
understood the Corps' estimates to mean that flooding would occur no
more often than once every 5 years at 760 feet and less frequently at
higher elevations.  The easement documents that the landowners signed
do not provide for renegotiating easement compensation.  According to
a Corps district official, the landowners were told that the flooding
estimates were based on historical streamflow data and were not
guarantees of future flooding frequencies. 

On the basis of its analysis of Iowa crop production and pricing data
for the nine floods that occurred between 1969 and 1993, GAO
estimated that the gross revenue losses in crop production for the
easement landowners were likely to be about $7.8 million when
discounted to their 1963 present value, or up to $2.3 million higher
than the $5.5 million paid for the easements.  The net crop losses
were probably lower, however.  GAO cannot compute the net crop losses
because the amounts would vary depending on the timing of the
flooding and the costs and revenues of individual easement owners. 
In some years, farmers lost their planting costs as the result of
flooding on easement lands and did not incur harvesting costs.  In
other years, they may have avoided both planting and harvesting
costs.  It is possible that in some years farmers may have been able
to plant and harvest a second crop to partially offset their losses. 
In addition, in flood years farmers incurred additional, but not
readily estimated, losses as the result of the floods' effects on the
lands--fence damage, soil erosion and depletion, drainage damage,
debris requiring cleanup, sand and salt deposition, and other
factors. 

The issue of additional compensation because of increased flooding of
occasional easement lands was addressed in a 1987 court decision
relating to a Corps flood control project in Missouri.  The court
ruled that because the flooding was caused primarily by high
precipitation and not the Corps' operation of the dam, the landowners
should be refused additional compensation. 

The easement landowners' association in Red Rock wants the Corps to
either renegotiate additional compensation with each landowner, on
the basis of the actual incidence of flooding since 1969, or purchase
the lands using a formula that may increase the fair market price
being offered under the buyout program.  The Corps does not agree
with these proposals. 


      STATUS OF THE BUYOUT PROGRAM
-------------------------------------------------------- Chapter 0:4.3

Starting in 1988, the Corps developed and implemented plans to
acquire the easement lands from owners willing to sell.  However, the
Corps did not meet a congressionally imposed deadline set in 1992 to
make offers by October 31, 1993.  The Corps advised GAO that there
was not enough time or funding to meet the deadline. 

As of March 1994, the landowners of 7 percent of the 29,000 acres had
sold their lands to the Corps.  The landowners of another 4 percent
were negotiating with the Corps.  The landowners of another 36
percent had indicated an interest in an offer by the Corps, and the
Corps was mapping and appraising their lands before beginning
negotiations. 

As for the owners of the other 53 percent of the easement lands, 10
percent told the Corps that they were not willing to sell, 10 percent
rejected the Corps' formal offer for their lands, and 33 percent had
not responded to the Corps' letter informing them of their
opportunity to sell. 

The landowners' representatives told GAO that the Corps' proposed
prices are too low to allow them to buy comparable farmland nearby
and have proposed increasing the prices offered.  In addition, they
said that selling easement lands can create difficulties with the
access to lands surrounding them.  So that the landowners can
continue to farm the easement lands and access surrounding lands, the
representatives have also proposed that the Corps allow willing
sellers to lease the lands sold back from the Corps at a fair market
rent.  The Assistant Secretary of the Army for Civil Works has stated
that this proposal deserves consideration if it is based on fair
market value. 


   AGENCY AND LANDOWNERS'
   ASSOCIATION COMMENTS
---------------------------------------------------------- Chapter 0:5

GAO requested and received written comments on a draft of this report
from the Department of Defense and from representatives of the
easement landowners.  While they generally concurred with the report,
each raised comments about particular data or analyses in the report. 
The Department of Defense stated it does not agree with what it said
was an implication that the Corps' determination of flooding
frequency is not accurate.  The report does not say that the
frequency determination is inaccurate.  Rather, it points out that
the probability that the Corps' long-term flooding estimates will be
correct is low, given the flooding that has already occurred, but
states that the possibility exists that the Corps' estimates may be
accurate over a longer period.  The Department also stated it does
not fully agree with the methodology GAO used to determine the value
of agricultural losses and the implication that landowners were not
adequately compensated for existing easements.  GAO revised the
report to more clearly recognize the crop losses that may have been
incurred.  The easement landowners' representatives made various
suggestions to clarify the report.  In particular, the
representatives questioned the average amount originally paid for
easements and the average remaining value of easement lands.  GAO
revised the report to address the suggestions. 


INTRODUCTION
============================================================ Chapter 1

In reaction to a series of disastrous floods affecting wide areas,
the Congress established as a nationwide policy in the Flood Control
Act of 1936 that flood control is in the interest of the general
public welfare and that the federal government would participate with
the states and local entities to carry out flood control activities. 
The purpose of flood control is to reduce the susceptibility of
property to flood damage and to relieve human and financial losses. 
During the past 59 years, the U.S.  Army Corps of Engineers has
invested over $23 billion nationwide in flood control projects.  More
than 600 projects are now operated by the Corps, which has built
reservoirs and thousands of miles of levees, floodwalls, and channel
improvements.  Flood control reservoirs often serve multiple uses,
such as municipal and industrial water supply, navigation,
irrigation, hydroelectric power, conservation of fish and wildlife,
and recreation. 


   THE RED ROCK PROJECT
---------------------------------------------------------- Chapter 1:1

First authorized by the Flood Control Act of 1938 (Public Law
75-761), the Red Rock Dam and Lake project is an integral unit of the
comprehensive plan for reducing flood damage in the Upper Mississippi
River Basin.  It was conceived to reduce flooding downstream
(southeast) of the project.  The dam is located on the Des Moines
River in south-central Iowa, about 143 miles above the confluence of
the Des Moines and Mississippi Rivers and about 60 miles downstream
from the city of Des Moines.  The other major flood control project
on the Des Moines River--the Saylorville Dam and Reservoir--was
authorized and funded later.  The locations of the Red Rock and
Saylorville reservoirs are shown in figure 1.1.  Figure 1.2 depicts
the Red Rock reservoir's surface area at the maximum flood control
pool. 

   Figure 1.1:  Des Moines River
   Reservoirs

   (See figure in printed
   edition.)

Figure 1.2:  Map of Red Rock Lake's Surface Area
at the Maximum Flood Pool

The Red Rock Dam and Lake project provides flood protection to 36,000
acres of agricultural lands in the Des Moines River Basin and to the
cities and towns of Ottumwa, Eldon, Eddyville, Keosauqua, and
Farmington.  Downstream from the mouth of the Des Moines River, levee
districts and cities along the Mississippi River also benefit.  These
cities include Quincy, Illinois, and Canton, La Grange, and Hannibal,
Missouri. 

Land acquisitions at Red Rock took place between 1959 and 1967 under
the Joint Army-Interior Land Acquisition Policy--also called the
"Eisenhower policy"--which was established in 1953.  Under the
Eisenhower policy, the Department of the Army acquired lands up to
the 5-year flood-frequency line, which at Red Rock is at an elevation
of 760 feet.  For lands between the 5-year flood-frequency line to
the maximum reservoir flood control pool line plus freeboard (783
feet),\1 easements were acquired. 

On the basis of the project plan that the Corps developed and that
the Congress authorized, the Corps acquired the following interests
in lands for the Red Rock Dam and Lake project:  47,600 acres in fee
title, 100 acres in permanent easements, and 29,000 acres in
occasional easements.  Construction of the project, with its
mile-long earthen dam, began in May 1960, and the project became
operational for flood control in January 1969.  Originally authorized
principally for flood protection, the project is now also used for
recreation, for fish and wildlife management purposes, and for
augmenting the river's flow during drought. 

With a standard elevation of 742 feet above sea level, Red Rock Lake
is Iowa's largest lake, with 19,100 surface acres of water.  But when
heavy rains occur on the lake's 12,300-square- mile watershed, the
lake can triple in size.  In 1984, for example, flooding pushed the
lake to a height of nearly 780 feet above sea level and expanded the
lake's surface area to 65,400 acres. 

Rises in the conservation pool\2 were anticipated in the original
project design to maintain a constant water storage level as
sedimentation occurred.  The Red Rock conservation pool, which was
725 feet above sea level in 1969, was raised to 728 feet in 1976, 734
feet in 1988, and 742 feet in 1992.  In addition, the maximum
releases from the Saylorville project upstream from Red Rock were
increased in 1979.  With each rise of the conservation pool or other
change, the Corps changed the dam's water release rates or the dates
of release in order to mitigate flooding from the reservoir.  The
Corps has stated that none of these changes have increased the flood
frequencies projected for any of the easement lands.  Figure 1.3
represents a cross-sectional view of the Red Rock reservoir. 

   Figure 1.3:  Cross-Sectional
   View of Red Rock Reservoir

   (See figure in printed
   edition.)

Source:  GAO's drawing based on Corps of Engineers' data. 


--------------------
\1 Freeboard is the elevation between the top of flood storage and
the top elevation acquired--usually 3 to 5 feet--that protects
against wave wash, saturation, and the like. 

\2 The conservation pool is that reservoir storage, other than flood
control storage, that stores water for future use such as water
supply, recreation, navigation, and minimum releases to maintain
in-stream flows. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
---------------------------------------------------------- Chapter 1:2

Section 343 of the Water Resources Development Act of 1992 directed
us to (1) determine whether the property within the Red Rock
reservoir's boundary has been inundated beyond the levels permitted
by the easements, (2) recommend whether compensation for the
easements should be renegotiated with the landowners, and (3) review
the actions taken to implement section 108(b) of Public Law 99-190,
which authorized the Corps to purchase lands with easements from
those landowners who are willing to sell. 

We conducted our work primarily at the Corps' Washington, D.C.,
headquarters; at the Corps' district office in Rock Island, Illinois;
and in the area surrounding the Red Rock Dam and Lake project near
Des Moines, Iowa.  At these locations, we interviewed Corps
officials; representatives of the Red Rock Easement Landowners'
Association and the association's consultant; a representative from
the Iowa Farm Bureau Federation in Des Moines, Iowa; and others
knowledgeable about the flooding of easement lands at Red Rock. 

To determine whether the landowners' properties have been inundated
beyond the levels permitted by the easements, we collected and
analyzed the Corps' and landowners' documents on the estimated and
actual flooding frequencies, the original land acquisition processes
and practices, and the Red Rock project's design and operations.  To
provide a perspective on whether the number of floods occurring over
the past 25 years was consistent with the Corps' estimated long-term
flood rates, we used the binominal probability distribution.\3 We
researched the relevant federal policies in effect both during and
after the easement acquisitions, and we reviewed examples of the
easements signed by the landowners.  We discussed flood damage with
the representatives of the landowners' association, a representative
from the Iowa Farm Bureau Federation, and a professor of economics at
Iowa State University.  We calculated the approximate gross revenue
loss in crop production for the easement lands within the Red Rock
reservoir and converted these amounts into their present value at the
time of acquisition, tested the sensitivity of our results to the
choice of an interest rate, and considered other variables.  We also
observed and photographed easement lands from the air and the ground,
both during and after the 1993 flooding. 

To determine whether compensation for easements should be
renegotiated with the landowners, we interviewed the representatives
of the landowners' association, the Iowa Farm Bureau Federation's
representative, and Corps officials in the Rock Island District
Office and in the Washington, D.C., headquarters office.  We also
reviewed relevant law and court decisions. 

To review the actions taken by the Corps to implement the current
buyout program, we interviewed representatives of the landowners'
association; Corps officials in Rock Island and Washington, D.C.; and
the Iowa Farm Bureau Federation's representative.  We also reviewed
documents supplied by the Corps and the landowners' association
pertaining to program authorization, funding, and activities. 

We conducted our review between June 1993 and July 1994, in
accordance with generally accepted government auditing standards.  We
did not determine whether the Corps operated the reservoir in
accordance with its operating plan, since it was beyond the scope of
this assignment. 


--------------------
\3 The binomial probability distribution determines the probability
of observing as many floods as occurred in the past 25 years, given
the Corps' flooding probabilities. 


FLOOD FREQUENCY AND COMPENSATION
ISSUES AT RED ROCK RESERVOIR
============================================================ Chapter 2

Since the Red Rock project began operating in 1969, flooding has
occurred on easement lands, depending on elevation, at about two to
four times the frequency estimated by the Corps.  According to
representatives of the Red Rock Easement Landowners' Association, the
greater-than-expected frequency of flooding has caused crop losses
and damage beyond those on which the easement compensation was based. 
On the other hand, the Corps believes that even though flooding has
occurred more frequently than estimated over the past 25 years, the
original flooding estimates and the original compensation will prove
to be valid over the long term.  Nonetheless, with the flooding that
has already occurred, the present value of crop production and other
losses that easement landowners have suffered may have already
exceeded the easement payments they received.  The easement documents
do not provide for renegotiating easement compensation.  These and
other factors make the question of additional compensation for the
landowners a difficult one to resolve.  There is no clear- cut answer
on whether or not easement landowners should receive additional
compensation. 


   FLOODING HAS OCCURRED MORE
   FREQUENTLY THAN EXPECTED
---------------------------------------------------------- Chapter 2:1

On the basis of 45 years of streamflow data and the plan of operation
for the dam, the Corps estimated in 1961 that over the long term (for
example, over a 100-year period), easement lands would flood, on
average, once every 5 to 45 years, depending on elevation.  That is,
land at 760 feet above sea level would be flooded, on average, once
every 5 years, while land at 780 feet above sea level would be
flooded, on average, once every 45 years.  As shown in figure 2.1,
flooding has occurred on part of the easement lands in 9 of the last
25 years. 

   Figure 2.1:  Frequency of
   Flooding and Maximum Elevation
   Reached by Water at Red Rock
   Dam and Lake Project, 1969-93

   (See figure in printed
   edition.)



   (See figure in printed
   edition.)

Source:  Corps of Engineers. 

The elevation of the easement lands ranges from 760 to 783 feet above
sea level; therefore, the percentage of acreage damaged depends on
the elevation attained by each flood.  Only the flood of 1993 reached
an elevation of almost 783 feet, flooding 100 percent of the easement
lands; three others (in 1973, 1984, and 1991) attained an elevation
of almost 780 feet.  Conversely, four floods (in 1969, 1974, 1979,
and 1990) reached about 765 feet--5 feet above the elevation at which
flooding of easement lands begins. 

Figure 2.2 shows the percentage of easement lands inundated by
flooding during each of the 9 years. 

   Figure 2.2:  Percent of
   Easement Lands Flooded, per
   Flood Year, 1969-93

   (See figure in printed
   edition.)

Source:  Corps of Engineers. 

Depending on elevation, flooding has occurred about two to four times
more frequently than the landowners expected on the basis of the
Corps' estimates.  Figure 2.3 compares the number of flood years
expected by landowners, given the elevation of their easement lands,
to the number of flood years experienced since the completion of the
project in 1969. 

   Figure 2.3:  Number of Flood
   Years Expected by Landowners
   Versus Number of Flood Years
   Experienced, at Various
   Easement Elevations, 1969-93

   (See figure in printed
   edition.)

Source:  Interviews with landowners' association representatives and
Corps of Engineers' data. 

The duration of the flooding for the 9 years varied from year to
year.  However, the overall period during which the flooding occurred
was about the same:  April through August, which is about half of the
planting and growing season.  Figure 2.4 shows the duration and
timing of flooding at the Red Rock Dam and Lake project for the nine
flood events. 

Figure 2.4:  Duration and Timing of the
Flooding in Nine Years at Red Rock Reservoir

Source:  GAO chart based on Corps of Engineers' data. 


      CROP LOSSES FROM FLOODING
      WERE GREATER THAN EXPECTED
-------------------------------------------------------- Chapter 2:1.1

To date, flooding has caused the landowners to suffer higher crop
losses than they expected on the basis of the Corps' original
flooding estimates.  Depending on the interest rate used for
discounting, the crop losses likely have been greater than the
compensation the landowners received, even when the losses are
converted to their present value at the time of the acquisition
period.  While the majority of the cost incurred by the landowners
stemmed from crop damage or loss, flooding also caused damage to the
easement lands that is harder to quantify. 

A recent economic analysis of Red Rock, conducted at Iowa State
University, found that a severe flood in even a single year can cause
heavy financial losses.\1 Our analysis of data on Iowa crop
production and pricing showed that the flooding events on easement
lands may have resulted in a gross revenue loss for crop production
of up to $31.4 million, including $7.9 million in 1993 alone.\2 To
develop the gross revenue loss for crop production for each flood
year, we multiplied the portions of the easement land planted in corn
and soybeans by the number of acres flooded in the particular year,
by the yield per acre, and by the price per bushel.  To make these
figures comparable to the $5.5 million paid for the easements at Red
Rock, we converted the loss from each of the nine flood years into
its 1963 present value, which is the middle of the 1959-67
acquisition period.\3 We used the 1963 midpoint because the
year-by-year amounts that were paid for easements were not readily
available. 

To calculate the 1963 present value of each crop loss, we selected
the interest rate on 1-year Treasury securities for each year from
1963 to the year the loss was incurred to discount the nominal loss. 
Because the choice of interest rate is somewhat arbitrary, we tested
the sensitivity of our results to our choice of interest rate by
calculating present value using rates 1 and 2 percentage points
higher.  Using the 1-year rate, we calculated a 1963 present value
for the $31.4 million gross crop loss at about $7.8 million, or up to
$2.3 million higher than the $5.5 million paid for all of the
easements.  With interest rates 1 and 2 percentage points higher, we
calculated 1963 present values of $6.6 and $5.7 million,
respectively.\4 The net losses for each flood year were probably
lower.  The exact amount depends on the timing of the flooding, the
extent to which farmers may have avoided planting and harvesting
costs, and on whether a second crop was successfully planted and
harvested.  A number of factors in addition to crop losses were
considered in determining the original compensation for the
easements, but they are not readily estimated with available data. 
These include the floods' effect on the land:  fence damage, soil
erosion and depletion, drainage damage, debris requiring cleanup,
sand and silt deposition, and other factors. 

The landowners' association representatives said that financial
losses are particularly hard to bear when flooding occurs in
consecutive years, or in 3 out of 4 years, as has happened since
1990.  Figure 2.5 is a photograph of flooding on a portion of
easement land in July 1993.  Figure 2.6 is an aerial photograph of a
farm in the Red Rock reservoir area, which was taken in August 1993
shortly after high water covered all of the easement land. 

Figure 2.5:  Easement Lands Within the Red Rock
Reservoir Boundary Inundated by Flood Waters in July 1993

 Second p.  ref.  now on pp.  10-14. 

 See comment 1. 



(See figure in printed edition.)

 First p.  ref.  now on p.  4.  Second p.  ref.  now on
pp.  17-26.  Third p.  ref.  now on pp.  38-39. 

 See comment 2. 



(See figure in printed edition.)



(See figure in printed edition.)

 First p.  ref.  now on p.4.  Second p.  ref.  now on pp. 
26-28. 

 See comment 3. 



(See figure in printed edition.)



(See figure in printed edition.)

 First p.  ref.  now on pp.  4-5.  Second p.  ref.  now on
pp.  29-33. 

 See comment 4. 

 See comment 5. 



(See figure in printed edition.)

 See comment 6. 



(See figure in printed edition.)

 First p.  ref.  now on pp.  5-6.  Second p.  ref now on
pp.  34-35. 



(See figure in printed edition.)

 First p.  ref.  now on pp.  5-6.  Second p.  ref.  now on
pp.  35-37. 



(See figure in printed edition.)



(See figure in printed edition.)

 First p.  ref.  now on p.  6.  Second p.  ref.  now on pp. 
37-41. 

 See comment 7. 


The following are GAO's comments on the Department of Defense's (DOD)
letter dated October 31, 1994. 


   GAO COMMENTS
---------------------------------------------------------- Chapter 3:5

1. We have incorporated DOD's suggested wording changes as
appropriate, for the purpose of clarity. 

2. The 45-year period referred to on page 17 is the period used by
the Corps district to calculate the flood-frequency projection for
the original acquisition of real estate for the Red Rock project. 
This frequency projection is very significant because the Corps used
it to determine where fee title, permanent easements, or occasional
easements would be acquired.  In addition, the 45-year projections of
the extent of future flooding were used in appraisals and
negotiations with the landowners for purchase of the easements.  The
75-year record that the Corps refers to is apparently the data that
it used in the 1992 re-analysis of the flood-frequency projections
for the Assistant Secretary of the Army for Civil Works.  This is
discussed in chapter 2. 

3. The essence of the suggested paragraph was added to the discussion
in chapter 2 to further explain the appraisal process. 

4. The report reflects the technical distinction in terminology
between a taking of property and payment for losses as a result of
government actions. 

5. We have revised the report to reflect that we have calculated only
the gross revenue loss for crop production.  We have clarified the
appropriate sections of the report to reflect the factors that would
adjust the gross revenue loss for a net crop loss figure.  Because
detailed data to determine net income were not readily available, we
list only factors that would reduce or increase the gross loss. 

6. The Corps has no written definition of "occasional easements."
During our review, Corps headquarters officials told us their
definition of occasional easements was "anything other than
permanent." The report has been revised to reflect the Corps'
explanation of occasional easements referring to court
interpretations of the term. 

7. We have incorporated DOD's suggested wording changes as
appropriate, for purposes of clarity. 




(See figure in printed edition.)Appendix II
COMMENTS FROM LANDOWNERS'
ASSOCIATION
============================================================ Chapter 3

 Now on p.  3. 

 See comment 1. 

 See comment 2. 

 Now on pp.  4 and 23. 



(See figure in printed edition.)

 See comment 3. 

 Now on p.  41. 

 See comment 4. 

 See comment 5. 

 Now on p.  29. 

 See comment 6. 

 Now on p.  29. 

 See comment 7. 



(See figure in printed edition.)


The following are GAO's comments on the easement landowners
representatives' letter dated October 19, 1994. 


   GAO COMMENTS
---------------------------------------------------------- Chapter 3:6

1. We requested but were not supplied with the easement contracts
that provide for renegotiating easement compensation.  None of the
easement contracts we reviewed contained specific language providing
for redress if project operations change.  The landowners provided
copies of court decisions on condemnations that occurred during the
acquisition of the Red Rock easements.  We have identified a court
decision on another project that makes a point similar to the
condemnation decisions.  The Hendricks case discussed in chapter 2
stated that a claim for additional compensation could be made if a
change in operations caused additional flooding.  The Corps states
that operational changes that have occurred at Red Rock have been
adequately mitigated and contends that operations have not increased
the frequency of flooding on easement lands. 

2. We have further explained the concept of present value of dollars
and the need to convert crop losses incurred over many years. 

3. The report does not say that the number of landowners selling will
increase.  Rather, it states that the number may increase
significantly after the Corps makes offers to the 40 percent of
landowners who have indicated an interest in selling their lands to
the Corps. 

4. We have reflected these views in the text of chapter 2. 

5. The extent of information we obtained from the Corps about the
flood frequencies discussed with the landowners during negotiations
is the frequency projection table the Corps developed in 1961, using
45 years of record. 

6. The Corps told us that part of the $5.5 million was for
structures.  We have added this factor to the list of appraisal
factors in chapter 2.  The Corps has no readily available estimate of
the portion of the $5.5 million that was paid for buildings and other
structures.  To show how the landowners' proposed formula would work,
we used an actual appraisal that identified the value of the
buildings and other structures. 

7. The wording we used reflects the fact that many of the numbers are
estimates based on assumptions. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix III


   RESOURCES, COMMUNITY, AND
   ECONOMIC DEVELOPMENT DIVISION
   WASHINGTON, D.C. 
------------------------------------------------------- Appendix III:1

John H.  Anderson, Jr.
Leo E.  Ganster
John P.  Scott


   DENVER, COLORADO
------------------------------------------------------- Appendix III:2

Arthur D.  Trapp
Pamela K.  Tumler
Frank B.  Waterous


   OFFICE OF THE GENERAL COUNSEL
------------------------------------------------------- Appendix III:3

Stanley G.  Feinstein
