Rural Water Projects: Federal Assistance Criteria and Potential Benefits
of the Proposed Lewis and Clark Project (Testimony, 07/29/1999,
GAO/T-RCED-99-252).

Pursuant to a congressional request, GAO discussed the Lewis and Clark
Rural Water Project, focusing on: (1) federal assistance criteria for
rural water projects and; (2) potential benefits of rural water projects
such as Lewis and Clark.

GAO noted that: (1) regarding federal assistance criteria for rural
water projects, GAO's work looked at three programs; (2) these were the
Rural Utilities Service Program of the Department of Agriculture (USDA),
the Drinking Water State Revolving Fund of the Environmental Protection
Agency (EPA), and the Bureau of Reclamation (BOR) of the Department of
the Interior; (3) GAO found that the USDA and EPA programs had specific
criteria that a proposed water project must meet to be considered for
funding and that none of the three projects GAO examined, including the
Lewis and Clark project, had characteristics that met all of the
criteria of any one of the programs; (4) GAO further found that while
BOR did not have a formal program and, thus, did not have formal
criteria, it did have a long-standing policy on reimbursement for its
contributions to projects with which none of the three proposed
projects-again including Lewis and Clark-could comply; (5) regarding
potential benefits of rural water projects, GAO's work, using Lewisand
Clark as the example, found that the local water users, such as
households and business would receive most of the benefits of the
project, which could include higher personal incomes and improved
lifestyles; and (6) while the federal government would realize only
minimal financial benefits, the project would benefit the federal
government to the extent that it will be a means of achieving public
policy objectives.

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

 REPORTNUM:  T-RCED-99-252
     TITLE:  Rural Water Projects: Federal Assistance Criteria and
	     Potential Benefits of the Proposed Lewis and Clark
	     Project
      DATE:  07/29/1999
   SUBJECT:  Water supply management
	     Rural economic development
	     Potable water
	     Regional development programs
	     Water resources development
	     Federal aid programs
	     Economic analysis
	     Cost effectiveness analysis
	     Economically depressed areas
IDENTIFIER:  Lewis and Clark Rural Water Project (IA/MN/SD)
	     Sioux Falls (SD)
	     South Dakota
	     Iowa
	     Minnesota
	     Drinking Water State Revolving Fund

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

Before the Subcommittee on Water and Power, Committee on Resources,
House of Representatives

For Release
on Delivery
Expected at
2:00 p.m.
July 29, 1999

RURAL WATER PROJECTS - FEDERAL
ASSISTANCE CRITERIA AND POTENTIAL
BENEFITS OF THE PROPOSED LEWIS AND
CLARK PROJECT

Susan D.  Kladiva, Associate Director,
Energy, Resources, and Science Issues,
Resources, Community, and Economic
Development Division

GAO/T-RCED-99-252

GAO/RCED-99-252T

(141360)

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

  USDA -
  EPA -
  BOR -

============================================================ Chapter 0

Mr.  Chairman and Members of the Subcommittee: 

It is a pleasure to be here to participate in your oversight hearings
on rural water project funding.  In the past year, we have issued two
reports that address issues involving rural water projects.  One,
issued in May of 1998 to your Senate counterpart, looked at the
characteristics of a number of proposed rural water projects and
compared them with the criteria of a number of existing programs for
funding assistance.\1 One of the projects covered in that report was
the proposed Lewis and Clark project in South Dakota, Iowa, and
Minnesota.  The other report was issued to you in May of this year.\2
It focused on the benefits that could be expected from constructing a
project such as Lewis and Clark. 

Specifically, my statement today will cover (1) federal assistance
criteria for rural water projects and (2) potential benefits of rural
water projects such as Lewis and Clark. 

In summary, regarding federal assistance criteria for rural water
projects, our work looked at three programs.  These were the Rural
Utilities Service program of the Department of Agriculture (USDA),
the Drinking Water State Revolving Fund of the Environmental
Protection Agency (EPA), and the Bureau of Reclamation (BOR) of the
Department of the Interior.  We found that the USDA and EPA programs
had specific criteria that a proposed water project must meet to be
considered for funding and that none of the three projects we
examined, including the Lewis and Clark project, had characteristics
that met all of the criteria of any one of the programs.  We further
found that while BOR did not have a formal program and, thus, did not
have formal criteria, it did have a long-standing policy on
reimbursement for its contributions to projects with which none of
the three proposed projects--again including Lewis and Clark--could
comply. 

Regarding potential benefits of rural water projects, our work, using
Lewis and Clark as the example, found that the local water users,
such as households and business would receive most of the benefits of
the project, which could include higher personal incomes and improved
lifestyles.  While the federal government would realize only minimal
financial benefits, the project would benefit the federal government
to the extent that it will be a means of achieving public policy
objectives. 

Since the proposed Lewis and Clark Rural Water Project was a focus of
each of our reviews, I would like to provide some background on that
project before describing our findings in greater detail. 

--------------------
\1 Rural Water Projects:  Federal Assistance Criteria
(GAO/RCED-98-204R, May 29, 1998). 

\2 Rural Water Projects:  Identifying the Benefits of the Proposed
Lewis and Clark Project (GAO/RCED-99-115, May 28, 1999). 

   BACKGROUND
---------------------------------------------------------- Chapter 0:1

The project is to address the dual problems of inadequate quantities
of water and poor quality of water.  The cost of the project is
estimated to be $282.9 million (in 1993 dollars).  The 300,000 people
in 14 counties near the junction of South Dakota, Iowa, and Minnesota
use groundwater as their principal municipal and industrial water
source.  The 100,000 urban residents of Sioux Falls, the largest city
in the area, obtain water from the city's municipal water system,
while rural residents of the area obtain water primarily from smaller
rural water districts.  A number of rural residents obtain their own
water from private wells.  Good-quality water, however, is in short
supply in this area.  Shallow aquifers, a major source of water in
the area, often hold insufficient quantities of water for expanding
populations and economic activities, and quantities can be limited
during times of drought.  Also, the groundwater commonly obtained
from these shallow aquifers is vulnerable to contamination from
nitrates and pesticides from the intense agriculture that is the main
economic activity of the area.  Groundwater is often plentiful in
deeper aquifers, but it is highly mineralized and, thus, requires
expensive treatment. 

Because of the insufficient quality and quantity of water, 22 water
districts in the area advocate the building of a major municipal
water system known as the Lewis and Clark Rural Water Project which
would draw water from the Missouri River.  These districts are
requesting legislation that would authorize a federal grant to cover
the construction of the project.  The proposed legislation provides a
formula for federal and nonfederal sharing of the costs of this
construction.  With the exception of the city of Sioux Falls, the
federal government would fund 80 percent of the costs for the
project's planning and construction, and nonfederal interests would
fund the remaining 20 percent.  For the city of Sioux Falls, the
federal government and nonfederal interests would each provide 50
percent ï¿½of the incremental cost to the city of participation in the
project.ï¿½

ï¿½Incremental costï¿½ is not defined in the proposed legislation, and
there is more than one way to interpret these words.  In our report,
we considered the ï¿½incremental costï¿½ that would be subject to 50/50
federal funding to be Sioux Falls' proportionate share of the
project's capital costs based on its water demand as cited in the
project's feasibility study.  This proportionate share is 42.6
percent of the $282.9 million project's total cost less a small
amount (about $8.5 million), which we interpret the federal
government would pay for environmental enhancements.  Hence, we
estimated the cost shares as follows:  The federal government would
be responsible for $192.9 million, or 68 percent; Sioux Falls'
nonfederal cost share would be $58.5 million, or 21 percent; and the
other than Sioux Falls' nonfederal cost share would be $31.5 million,
or 11 percent. 

The Bureau of Reclamation concurred that our interpretation of
incremental costs is reasonable but pointed out that other
interpretations may exist.  According to the Executive Director of
the Lewis and Clark Rural Water System, for example, the project's
sponsors interpret the ï¿½incremental cost to the city of participation
in the projectï¿½ as the amount of savings that would be realized if
Sioux Falls was dropped from the project.  That is, the sponsors
equate incremental cost to an estimated savings from downsizing the
pipelines, treatment plant, and wells to account for water that no
longer would be delivered to Sioux Falls.  They believe that this
savings would be $55.2 million and that the nonfederal cost share for
Sioux Falls would be 50 percent of this amount, or $27.6 million. 

   PROJECT CHARACTERISTICS DO NOT
   MEET SOME CRITERIA FOR
   PARTICIPATION IN SELECTED
   FEDERAL PROGRAMS
---------------------------------------------------------- Chapter 0:2

We identified a number of elements from laws, regulations, and
policies from USDA, EPA, and BOR that constitute the criteria that
proposed rural water projects must meet.  USDA's program has direct
criteria for participation.  EPA--which provides grants to the states
that must, in turn, develop their own plans and policies for
participation--establishes minimum requirements for those plans which
constitute applicable criteria.  BOR, which has no formal program for
rural water projects, does have a long-standing policy on full
reimbursement for its contributions to the local projects it funds. 
It has concentrated its activities in the 17 western states that
constitute its service area. 

The characteristics of the Lewis and Clark project meet some but not
all of the criteria of the three agencies.  The project does not meet
some of USDA's criteria in that it includes a city (Sioux Falls) with
a population exceeding the definition of a rural area as a location
with fewer than 10,000 people.  Thus, only the rural component of the
Lewis and Clark project would meet the criterion.  The project also
does not meet the criterion for economic feasibility for repayment in
that it envisions federal funding through grants of 80 percent of the
design and construction costs (50 percent for the Sioux Falls
component).  This amount exceeds the USDA program's maximum grant
limitation of 75 percent of eligible project costs. 

The project also does not meet some of the criteria of the EPA
program.  For example, it does not meet the economic feasibility
requirement for the state loan program in that it depends on grants
to cover 80 percent (50 percent for the Sioux Falls component) rather
than a loan.  In addition, the inclusion of an entity with more than
10,000 people would call into question the project's applicability
for the portion of the EPA's state grant moneys that states are to
use for projects with populations under 10,000. 

Similarly, the project's dependence on grants is inconsistent with
BOR's long-standing policy of having water users repay 100 percent of
the costs of projects.  In addition, 2 of the 3 states involved in
that projectï¿½-Iowa and Minnesota-ï¿½are not among the 17 western states
that constitute BOR's service area. 

   NATURE OF THE BENEFITS OF THE
   LEWIS AND CLARK RURAL WATER
   PROJECT
---------------------------------------------------------- Chapter 0:3

The benefits associated with a rural municipal and industrial water
project such as the Lewis and Clark project are a result of increases
in both the quantity and quality of water.  These benefits can
generally be categorized as (1) societal benefits, (2) economic
benefits, and (3) fiscal benefits. 

The societal benefits include improvements in the health, safety, and
lifestyle of residents served by the project.  Health improvements
could result from the Lewis and Clark project because of the improved
quality of the water.  For example, EPA's research reveals that a
reduction in sulfate concentration in a community's drinking water
could result in fewer gastrointestinal illnesses and that reductions
in nitrate concentrations in drinking water could result in fewer
infants being at risk of serious illness or death.  The project could
improve safety in the region by making more water available for
fighting fires in the smaller communities.  Lifestyle improvements
could result from a better quality of water being available for
drinking, bathing, and washing clothes or more water being available
for landscaping.  The societal benefits also include contributing to
the federal government's efforts to pursue its goal of furthering
economic development in rural America. 

The economic benefits are increases in the economic value of the
national or regional output of the goods and services produced as a
result of increases in the quantity or quality of water.  The Lewis
and Clark project could have an impact on hog and cattle production,
milk production, and other agricultural products made from soybeans,
corn, and eggs that are processed by local plants.  For example,
farmers have reported increased weight gains in hogs when rural areas
have switched to water having lower sulfates and hardness. 
Similarly, dairy farmers have attributed increased milk yields to
better quality water.  Although the water from the Lewis and Clark
project will not be used for irrigation, community officials stated
that an increased availability of water could provide opportunities
for the economic development of industries whose processes require
large amounts of water, such as ethanol plants and food processing
plants, in the Lewis and Clark service area.  In addition, the
improved quality of the water would increase the longevity of water
heaters, water softeners, and other appliances by reducing mineral
deposits and thereby saving residents repair and replacement costs. 

The fiscal benefits are net increases in government revenues that
result from an increase in economic activity.  Proposed construction
projects such as the Lewis and Clark project would have an impact on
fiscal revenues.  Should the Lewis and Clark project be built,
increased sales tax revenues could result from an increase in
economic activity, and increased income tax revenues could result
from the higher earnings associated with this economic growth,
particularly in the agricultural sector.  Increases in the quantity
and quality of water could lead to increases in property values,
which in turn could increase property tax revenues.  However, the net
fiscal benefit to the various levels of government would depend also
on the impact of the project on various government expenditures,
including increases in infrastructure spending or increases in
government outlays to meet increased demands for government services. 

   BENEFICIARIES OF THE LEWIS AND
   CLARK RURAL WATER PROJECT
---------------------------------------------------------- Chapter 0:4

The local water users, such as households and businesses, would
receive most of the benefits from the Lewis and Clark project.  Thus,
the project's 22 member districts would not benefit directly because,
as nonprofit water providers, they function as their customers'
agents in obtaining water and deliver water to users at or near cost. 
The benefits accruing to local water users could include (1) higher
personal income resulting from the increase in economic activities;
(2) decreased costs for replacing water heaters, maintaining water
softeners, and servicing other appliances; and (3) societal benefits,
such as improved health and lifestyles. 

State and local governments would benefit primarily from the
increases in tax revenues resulting from an anticipated increase in
the production and sales of goods and services.  State and local
governments could also benefit from increased sales and income taxes
generated from the construction activities of the Lewis and Clark
project.  County governments and school districts could be the
beneficiaries of increased property tax revenues. 

The federal government would realize only minimal financial benefits
from the Lewis and Clark project.  Increases in federal income tax
revenues resulting from increased economic activities attributable to
the project would likely be minimal.  However, the project would
benefit the federal government to the extent that it will be a means
of achieving such objectives as meeting federal drinking water
standards, improving the quality of rural life, and investing in the
infrastructure of rural America. 

   HOW BENEFITS FROM THE LEWIS AND
   CLARK RURAL WATER PROJECT ARE
   VALUED
---------------------------------------------------------- Chapter 0:5

The societal benefits, such as meeting federal drinking water
standards, improvements in health and lifestyle, and investing in the
development of the infrastructure of rural America, cannot be
measured monetarily with reasonable accuracy.  For example, water
experts we interviewed stated that improved public health is a major
benefit, but the benefit is difficult to measure.  Improvements in
health were also cited by district representatives as a major benefit
of the Lewis and Clark project.  However, neither the reduction in
illnesses nor the subsequent reduction in health care costs that
might be attributable to better quality water can be valued with
precision. 

Similarly, it is not possible to accurately assign a monetary value
to an improved lifestyle attributed to better quality water. 
However, the Congress has recognized the long-standing need to
improve the quality of water in rural America.  For example, the
Rural Utility Service, through its water and wastewater loan and
grant program, has helped fund almost 17,000 water and sewer projects
serving more than 12,500 rural communities in the last 30 years. 
Also, the objective of EPA's Drinking Water State Revolving Loan Fund
program is to ensure that the nation's drinking water supplies remain
safe and affordable.\3

The economic benefits of water projects such as the Lewis and Clark
project are, for the most part, difficult to quantify because of the
difficulty in attributing with any precision an increase in economic
activity directly to an increase in water.  Water is rarely the sole
factor responsible for economic change, but water can facilitate
economic expansion.  For example, hog farmers are unlikely to decide
to raise more hogs based solely on the availability of better quality
water.  Instead, they are also likely to consider the cost of feed,
the amount of available space in their sheds, and the market demand
as reflected in the price paid for their product by slaughterhouses. 

Despite the difficulty of measuring the economic benefits, increases
in the value of the output of goods and services resulting from the
Lewis and Clark project can be viewed from either the national or
regional perspective.  Although both perspectives are measures of
changes in the value of goods and services produced, the regional
benefits could be significantly different from the national benefits
because regional benefits capture the transfer of economic activities
into the project's service area from outside the region.  Regional
transfers will result in no net national benefits. 

At the national level, we believe the increases in the value of goods
and services due to the Lewis and Clark project would be minimal. 
Increases in the output of goods and services do not necessarily
result in an increase in their value.  For example, hog production,
one of the major industries in the tristate area, was initially
expected to increase locally because of anticipated improvements in
the quantity and quality of water.  However, production exceeded the
demand of slaughterhouses in 1998, resulting in plummeting prices. 
The hog price in December 1998 was $14.70 per 100 pounds, down from
an average price of $52.90 in 1997.  Similarly, the December 1998
beef cattle price of $55.80 per 100 pounds was down from an average
price of $63.10 in 1997, resulting in lower incomes. 

From the regional perspective, however, the economic benefits of
water projects are greater.  The regional benefits reflect not only
the increase in value of the goods and services produced in the
region but also the regional economy's gain from transfers of
industries into the area.  For example, local planners expect that on
completion of the Lewis and Clark project, food processing and
ethanol plants may relocate to their region. 

Because of the difficulty of identifying and directly attributing
changes in economic activities to the quantity and quality of water,
analysts have developed other methods that, for the most part, can
approximate the value of benefits accruing from a water project.  One
method, called a willingness-to-pay study, surveys water users and
asks them how much they are willing to pay for an increase in the
quality and quantity of their water.  BOR analyzed a survey conducted
by the Lewis and Clark project's sponsors in 1992 and estimated that
residents in the project's service area were only willing to pay an
additional $3.34 million per year to ensure a safe and reliable
future water supply.  Over the 40-year life expectancy of the Lewis
and Clark project, this amounts to about $87 million in 1998
dollars.\4 As a result, BOR concluded that from a purely economic
standpoint, the Lewis and Clark project does not pay for itself since
the cost of the proposed project is $282.9 million in 1993 dollars. 
However, if the project is required to meet future water quality
standards or solve reliability problems that must be dealt with
regardless of cost, BOR concluded that the Lewis and Clark project
may be the most cost-effective way to reach such goals.  Moreover,
economists that we contacted said that figures reported by
respondents in willingness-to-pay studies may underestimate total
benefits because respondents may fear that their water bills would be
increased by the amounts they report. 

Another method used by economists in estimating the value of a water
project's benefits consists of estimating the cost of reasonable
alternatives that would be avoided if the project is built.  In other
words, how much the beneficiaries are willing to pay for an
alternative water system provides an estimate of the value they would
place on the benefits they expect to receive from the increase in the
quality and quantity of their water.  At the water district level,
this cost represents the value of the project's benefits to all water
users in the district, including households, farms, and businesses. 
This method can approximate the value of benefits if the alternative
will produce the same quantity and quality of water as the proposed
project. 

To that end, we asked the 22 individual water districts to identify
and estimate the cost of reasonable alternatives that would be
avoided if the Lewis and Clark project is built.  Reasonable
alternatives for the water districts in the project's service area
include drilling additional wells, modifying or building treatment
plants, and purchasing water from other water districts.  A summary
of these alternatives and their individual costs appears in appendix
I. 

We estimate that the sum of these alternative costs for Lewis and
Clark members ranges between about $71 million and $81 million in
1998 dollars.  However, these figures should be considered minimum
values because many alternatives would not produce the same quality
of water as the Lewis and Clark project and because two districts did
not estimate the cost of their alternatives.  In addition, only 5 of
16 alternatives that would require large capital investments were
based on detailed written cost estimates or engineering studies, so
several of the verbal estimates we obtained may lack accuracy. 

The net fiscal benefits attributable to the Lewis and Clark project
would depend largely on changes in the economic activities in the
region as well as on changes in the governments' outlays for services
and infrastructure.  BOR estimated the tax revenue increases expected
from the construction activities of the Lewis and Clark project to be
about $16.5 million in 1992 dollars.  Its estimate included the
excise, fuel, sales, and income taxes expected to be collected by
South Dakota, Iowa, and Minnesota from the contractors and laborers. 
However, the estimate did not include increases in tax revenues
anticipated from an increase in regional economic activities. 

Mr.  Chairman, this concludes my prepared statement.  We will be
pleased to respond to questions you or Members of the Subcommittee
may have. 

--------------------
\3 The Safe Drinking Water Act Amendments of 1996 (P.L.  104-182,
sec.  130) authorized a Drinking Water State Revolving Loan Fund to
help public water systems finance the infrastructure needed to
achieve or maintain compliance with the act's requirements and to
promote public health protection objectives.  Section 1452 authorizes
the Administrator of EPA to make grants to states to capitalize
drinking water state revolving loan funds, which in turn can provide
low-cost loans and other types of assistance to eligible water
systems. 

\4 Discounted at 3 percent. 

-------------------------------------------------------- Chapter 0:5.1

   CONTACT AND ACKNOWLEDGMENTS
---------------------------------------------------------- Chapter 0:6

For further information, please contact Susan D.  Kladiva at (202)
512-3481.  Individuals making key contributions to this testimony
included Arleen Alleman, Ronald M.  Belak, Brad Hathaway, Mehrzad
Nadji, Rudolfo G.  Payan, Doreen Feldman, and Kathleen Gilhooly. 

MEMBER DISTRICTS' ALTERNATIVES TO
THE LEWIS AND CLARK RURAL WATER
PROJECT COMPARED WITH THE
PROJECT'S COMMITMENTS
=========================================================== Appendix I

                                           Nonfederal
                      Average              proportion                          Nature of
                        daily   Lewis and   ate share                          cost
                        water       Clark    of Lewis              Cost of     estimate
                          use  commitment   and Clark  Alternativ  alternativ  for
                     (gallons   (gallons/       (1998  e to Lewis  e (1998     alternativ
Member district             )        day)  dollars)\a  and Clark   dollars)    e
-------------------  --------  ----------  ----------  ----------  ----------  ----------
Lincoln-Pipestone,   3,000,00   300,000\b    $769,000  None        Not         Not
Minnesota                   0                          available   available   applicable

Rock County,          583,000     300,000     769,000  Drill more  $2,887,000  Written
Minnesota                                              shallow                 estimate
                                                       wells in                prepared
                                                       Rock River              by
                                                       aquifer                 district
                                                                               manager

Luverne, Minnesota   1,200,00     500,000   1,282,000  Drill       388,000 to  Verbal
                            0                          additional  1,388,000   estimate
                                                       shallow
                                                       wells

Worthington,         2,720,00   1,730,000   4,436,000  None        Not         Not
Minnesota                   0                          available   available   applicable

Sheldon, Iowa        1,300,00   1,000,000   2,564,000  Drill more  6,332,000   Written
                            0                          wells and   to          proposal
                                                       update      6,832,000   prepared
                                                       water                   by
                                                       lines                   engineerin
                                                                               g firm

Sibley, Iowa          400,000     650,000   1,667,000  Purchase    2,556,000   GAO
                                                       additional              estimate
                                                       water from              based on
                                                       Osceola                 water
                                                       Water                   price
                                                       District                supplied
                                                                               by
                                                                               district

Clay County, Iowa     750,000   1,000,000   2,564,000  Drill more  3,102,000   Written
                                                       wells and               estimate
                                                       build                   based on
                                                       joint                   studies
                                                       treatment               prepared
                                                       plant with              by
                                                       Spencer,                engineerin
                                                       Iowa                    g firm

Rural Water          1,725,00   1,000,000   2,564,000  Drill more  Not         Not
District 1, Iowa            0                          deep wells  estimated   applicable
                                                       and
                                                       upgrade
                                                       treatment
                                                       plant

Hull, Iowa            165,000     300,000     769,000  Join        2,447,000   Written
                                                       nearby                  cost
                                                       district                estimate
                                                       in its                  supplied
                                                       expansion               by nearby
                                                       and                     district
                                                       purchase                and GAO
                                                       150,000                 estimate
                                                       gallons/                of value
                                                       day                     of water
                                                                               purchase

Sioux Center, Iowa   1,000,00     600,000   1,538,000  Drill       560,000     Verbal
                            0                          wells west              estimate
                                                       of town                 provided
                                                       and build               by city's
                                                       water line              utility
                                                                               department

Boyden, Iowa           55,000     100,000     256,000  Pump        Not         Not
                                                       existing    estimated   applicable
                                                       wells and
                                                       eventually
                                                       add new
                                                       wells

Beresford, South      280,000     250,000     641,000  Replace     2,000,000   GAO
Dakota                                                 treatment               estimate
                                                       plant                   based on
                                                                               data
                                                                               provided
                                                                               by water
                                                                               department

Centerville, South    200,000     220,000     564,000  Hook up to  4,412,000   Verbal
Dakota                                                 nearby      to          estimate
                                                       rural       5,012,000   provided
                                                       water                   by city
                                                       systems                 official

Harrisburg, South      70,000     250,000     641,000  Drill more  2,153,000   Verbal
Dakota                                                 wells,                  estimate
                                                       construct               supplied
                                                       new                     by utility
                                                       treatment               department
                                                       and
                                                       softening
                                                       plants

Lennox, South         200,000     400,000   1,026,000  Drill more  1,021,000   Verbal
Dakota                                                 wells                   estimate
                                                                               provided
                                                                               by water
                                                                               department

Madison, South        800,000   1,000,000   2,564,000  Build a     0 to        Detailed
Dakota                                                 new         8,040,000   study
                                                       treatment               prepared
                                                       plant                   by
                                                                               engineerin
                                                                               g firm

Parker, South         150,000     490,000   1,256,000  Drill       278,000     Verbal
Dakota                                                 high-                   estimate
                                                       volume                  supplied
                                                       well and                by water
                                                       build                   department
                                                       water
                                                       tower

Sioux Falls, South   15,678,0  10,000,000  64,101,000  Develop     30,000,000  Informal
Dakota                     00                          Wall Lake               estimate
                                                       aquifer                 by city

Tea, South Dakota     150,000     330,000     846,000  Purchase    2,331,000   GAO
                                                       balance                 estimate
                                                       (180,000                based on
                                                       gallons                 data
                                                       per day)                supplied
                                                       from                    by city
                                                       Lincoln
                                                       Co.

Lincoln County,       533,000     900,000   2,308,000  Purchase    2,762,000   GAO
South Dakota                                           shortfall               estimate
                                                       (up to a                based on
                                                       maximum of              data
                                                       800,000                 supplied
                                                       gallons                 by water
                                                       per day)                district
                                                       from Sioux
                                                       Falls

Minnehaha, South     1,600,00   2,000,000   5,128,000  Implement   Not         Not
Dakota                      0                          stringent   applicable  applicable
                                                       water
                                                       conservati
                                                       on

South Lincoln,        600,000     150,000     385,000  Drill       7,650,000   Informal
South Dakota                                           three                   estimate
                                                       wells;                  supplied
                                                       build                   by water
                                                       booster                 district
                                                       station,
                                                       lines and
                                                       softening
                                                       plant

=========================================================================================
Total                33,159,0  23,470,000  $98,638,00  ----        $70,879,00  ----
                           00                       0              0 to
                                                                   $81,019,00
                                                                   0
-----------------------------------------------------------------------------------------
\a These proportionate shares in 1998 dollars are not equal to
proportionate shares discussed in the report's text, which are in
1993 dollars. 

\b Lincoln-Pipestone has plans to increase their commitment to 1
million gallons per day. 

*** End of document. ***