Irrigation districts  then enter into separate agreements with landholders to provide project  water.geographic area, Reclamation may have only one or two contracts with  irrigation districts for that water project, which provides water to a small  number of landholders. Reclamation’s Data Indicate an Outstanding Repayment Obligation of $1.6 Billion Allocated to Irrigation

Reclamation’s data on water project construction cost repayments  indicate that, of the $6.4 billion in costs allocated to irrigation as of the  end of fiscal year 2012, $1.6 billion remains outstanding. Reclamation Could Better Promote That Information on Water Project Construction Costs and Repayments Is Publicly Available

Reclamation has not publicly reported the information it collects on water  project construction costs and repayment since the 1980s, and we found  that Reclamation does not make it readily known to the public that it  prepares repayment statements annually or that they are available.Reclamation officials said that the purpose of the repayment statements  is generally for internal management use, such as when the agency is  preparing for contract negotiations, or to provide information to certain  power users on the amounts of irrigation assistance power may be  responsible for paying. Some individuals we interviewed  were not aware that Reclamation prepares repayment statements  annually, or that the agency would make them available upon request. Based on  our analysis, early repayment affects the financial return to the federal  government, and it accelerates the elimination of certain restrictions and  requirements for landholders that are in place until their repayment  obligations are fulfilled, among other things. Early Repayment Authority Is Limited to a Small Number of Irrigation Districts

The authority for irrigation districts, or for landholders within those  districts, to repay their allocated water project construction costs early— that is, repay outstanding repayment obligations, either through lump-sum  or accelerated payments, in advance of the date specified in the districts’  contracts—is limited. Of  those 87 irrigation districts, 69 districts exercised their authority and  repaid early, or had some landholders who repaid early, as of December  2013, with early repayments totaling more than $238.9 million, according  to Reclamation data. Specifically, we identified 32 irrigation districts that sought and received  statutory authority for early repayment by the district or landholders.analysis of Reclamation data shows that, of those 32 irrigation districts  with statutory authority, 30 districts repaid early or had some landholders  within the district who repaid early, with their early repayments totaling  $220.2 million, as of December 2013 (see app. Early Repayment Affects the Financial Return to the Federal Government

Early repayment affects the financial return to the federal government,  largely depending on whether a discount may be authorized, such as  calculating the present value of the outstanding repayment obligation to  determine the amount to be repaid early, and the size of that discount. If  no discounts are authorized, any repayments that occur earlier than the  due date specified in the contract would be worth more to the government  because irrigation districts’ repayments do not bear interest. As a result, landholders may be able to receive project water, to the  extent it is available, on additional land or at a subsidized rate once they  have fulfilled their repayment obligations. By further disseminating information to the public that  construction cost and repayment data are available, Reclamation may  increase interested parties’ opportunities to obtain cost and repayment  information, and Reclamation would promote transparency and potentially  increase informed participation by the public. This, in turn, could further  enable Congress, water users, and the public to assess past funding  arrangements and enhance their ability to make informed decisions for  funding potential new work, such as to expand water storage capacity. GAO staff who made major contributions to  this report are listed in appendix V.

Appendix I: Objectives, Scope, and Methodology

This appendix provides information on the scope of our work and the  methodology used for the following objectives: examine (1) the extent to  which Reclamation collects and reports information on water project  construction costs and the status of repayment by irrigation districts and  (2) the extent to which irrigation districts can repay their allocated water  project construction costs early and the implications of early repayment. The repayment statements contain  information on total costs for the water project, including construction  costs incurred as of the end of the fiscal year; estimated future  construction costs, and other costs that Reclamation includes in its  repayment analysis for construction costs, such as capitalized operation  and maintenance costs; the allocation of construction costs among  project purposes, including irrigation; and the status of repayment for  costs allocated to each project purpose, including repayment realized,  anticipated future repayment, and any financial assistance granted to  irrigation districts, such as credits, which relieve water users from a  portion of their allocated repayment obligations. We also  interviewed a nonprobability sample of nine individuals knowledgeable  about Reclamation water projects on the status of repayments, early  repayment authority, or both.
Why GAO Did This Study

Since 1902, Reclamation has financed and built water projects to provide water for irrigation and various other uses in 17 western states. The costs to construct the water projects including irrigation as a project purpose—a combined total of more than $20 billion—were primarily financed by the federal government, but irrigation districts and other water users that receive project water are obligated to repay the government for their allocated share of construction costs. Reclamation typically enters into multiyear contracts with irrigation districts that establish water delivery and repayment of their share of construction costs over time.
GAO was asked to provide information on the status of irrigation repayments. This report examines (1) the extent to which Reclamation collects and reports information on construction costs and the status of repayment and (2) the extent to which irrigation districts can repay early and the implications of early repayment. GAO reviewed laws and policies; fiscal year 2012 construction cost repayment and early repayment data; and interviewed Reclamation officials and nonprobability samples of eight irrigation districts and nine individuals knowledgeable about water projects.

What GAO Found

The Department of the Interior's Bureau of Reclamation collects information on water project construction costs and the status of repayment by irrigation districts—entities that have entered into contracts with the agency to receive project water for irrigation purposes—but has not publicly reported repayment information since the 1980s. Reclamation's data on water project construction cost repayments indicate that, of the $6.4 billion in costs allocated to irrigation as of the end of fiscal year 2012, $1.6 billion remains outstanding. The remaining $4.8 billion has been repaid by irrigation districts or through other revenue sources or will be provided in financial assistance to the districts. Reclamation's policy is to make the statements it prepares annually on repayment available to the public upon request, but the agency does not make it readily known to the public that it prepares these statements or that they are available. GAO interviewed individuals knowledgeable of Reclamation water projects who indicated that this information would be useful for their work, such as in considering funding arrangements for the expansion of water projects; some individuals were not aware that Reclamation prepares repayment statements annually, or that the agency would make them available upon request. By more widely disseminating information to the public that construction cost and repayment data are available, Reclamation may increase interested parties' opportunities to obtain cost and repayment information. This, in turn, could further enable Congress, water users, and the public to assess past funding arrangements and enhance their ability to make informed decisions for funding potential new work, such as to expand water storage capacity.
The authority for irrigation districts—or for landholders who own or lease land for agricultural purposes within those districts—to repay their allocated share of construction costs early is limited to a small number of districts, and its use has various financial and other implications. Early repayment authority allows irrigation districts or landholders to repay their total outstanding repayment obligations in advance of the date specified in the districts' contracts. As of December 2013, 87 irrigation districts—representing about 15 percent of all districts with contracts—had authority for the district or its landholders to repay early. Of those authorized, 69 irrigation districts either repaid early, or had some landholders who repaid early, with those payments totaling more than $238.9 million. GAO found that early repayment's effect on the financial return to the federal government largely depends on whether a discount may be authorized, such as calculating the present value of the outstanding repayment obligation to determine the amount to be repaid early, and the size of that discount. If no discounts are authorized, any early repayments that occur would be worth more to the government because the repayments do not bear interest. In addition, early repayment accelerates the elimination of certain restrictions and requirements for landholders that are in place until their repayment obligation is fulfilled. For example, once landholders have fully repaid their construction cost obligations, they are no longer subject to acreage limits on the amount of land they can own or lease for agricultural purposes and irrigate with project water and may be able to receive project water on additional land.

What GAO Recommends

GAO recommends that Reclamation better promote to the public that information on water projects' construction costs and repayment status is available. The Department of the Interior concurred with the recommendation.