Private Water Contractors in CA Owe Taxpayers $500 million

New government audit finds that the bulk of an interest-free loan from the 1960s is still unpaid by irrigation water contractors

January 17, 2008 Press release from Congressman George Miller (D-California, 7th District) Committee on Education and Labor, Committee on Resources

WASHINGTON – Four large irrigation water districts in the Central Valley of California still owe federal taxpayers nearly $500 million for a network of dams and canals constructed for their benefit in the 1960s, according to a new report issued by the non-partisan Government Accountability Office (GAO).  Only 14 percent of capital costs have been repaid.

“This independent audit confirms that taxpayers are still owed an awful lot of money by some of the largest private users of water in the state," said Rep. George Miller (D-CA), the former chairman of the House Natural Resources Committee and author of several key water reform laws.  Miller and two of his colleagues requested the GAO report.

“Taxpayers paid for these water projects decades ago, taxpayers paid for the cleanup of some of the projects’ worst environmental consequences over the years, and now the taxpayers are still waiting to be repaid nearly a half a billion dollars that they are owed,” Miller added.  “The Bush Administration is responsible now to ensure that the new water contracts for these agribusinesses are strengthened not only to end the devastation of California ’s fish and wildlife but to recoup in a timely manner this long-standing debt owed to the taxpayer.”

The Central Valley Project (CVP) is the largest federal irrigation system in the nation, and the beneficiaries of the CVP’s San Luis Unit include some of the most productive and lucrative farms in the world. The irrigation districts that were the subject of the report were assessed $523 million by the Bureau of Reclamation for the construction of the San Luis Unit, which was first authorized in 1960.

But due to the heavily subsidized and forgiving nature of antiquated federal western water policy, the water districts had repaid to the federal treasury only $74 million of that $523 million as of September 30, 2005, according to today’s GAO report.

The approximately 600 agribusinesses that make up the Westlands Water District – the San Luis Unit district that is often cited as the largest irrigation district in the world – were assessed an additional $179 million for the construction of their internal water distribution system. Including the remaining balance on Westlands’ account, the San Luis Unit contractors still owe the federal treasury approximately $497 million.

The report was commissioned by Congressman Nick Rahall (D-WV), Chairman of the House Natural Resources Committee, Congresswoman Grace Napolitano (D-CA), Chairwoman of the Water & Power Subcommittee, and Miller, to help them assess a recent proposal by the San Luis Unit water districts and the U.S. Bureau of Reclamation.

That proposal included a debt-for-cleanup deal, in which the federal government would forgive the water districts’ debt and provide other benefits, and in exchange the water districts would commit to cleaning up the salt- and selenium- infused water that drains from their irrigated agricultural operations. How to manage that toxic drainwater has been the source of substantial controversy over the life of the water project: when the water was allowed to accumulate in the Kesterson National Wildlife Refuge in the 1980s, it caused serious harm to wildlife, including deaths and deformities in waterfowl.

To mitigate and clean up the Kesterson disaster cost the taxpayers $26.6 million, according to the new report, of which about $19.8 million must be repaid by the Westlands Water District. Cleaning up the broader regional drainwater problem, as proposed by the water districts and the Bureau of Reclamation, is projected to be a significantly greater expense.  That problem already has cost taxpayers more than $100 million in costs of studies for possible remedies.

The U.S. Bureau of Reclamation does not require the full repayment of construction costs for water infrastructure such as the San Luis Unit, nor is the assessment adjusted for inflation over the life of the repayment period; the amount owed by the four water contractors amounts to an interest-free loan from the taxpayer that will not be repaid in full until 2030.

The total capital cost to construct the Central Valley Project, the massive federal infrastructure project that moves water for irrigation and urban use throughout state, was about $3.4 billion, according to the GAO report, and the San Luis Unit portion of the project had a total capital cost of $778 million.

The report is online at http://gao.gov/docsearch/abstract.php?rptno=GAO-08-307R

Byron Leydecker

Friends of Trinity River , Chair

California Trout, Inc., Advisor

PO Box 2327

Mill Valley, CA 94942-2327

415 383 4810

415 383 9562 fax

bwl3@comcast.net

bleydecker@stanfordalumni.org (secondary)

http://www.fotr.org

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