‘7

United States Department ofthe

BUREAU OFRECLAMATION

Washington, D.C. 20240

IN REPLYREFER TO:

D-5200 3 1998

WTR-4.OO

MEMORANDUM

To: Regional Director, PN, MP, LC, UC, GP

Attention: PN-bOOO, PN-3300, MP-bOO, MP.

UC-lOO, UC-284, GP-lO0O,

From: Eluid L. Martinez

Commissioner

Subject: Policy for Guidance on Interpretation ofthe.

Of Contracts Under Section 9, Reclamation Project Act of 1939”

The purpose ofthis policy is to provide guidance when renewing water service contracts

pursuant to the Act ofJuly 2, 1956, “Administration ofContracts Under Section 9, Reclamation

Project Act of 1939,” (Act of 1956). This policy also states Reclamation’s requirementfor

National Environmental Policy Act (NEPA) compliance and costs for contract activities.

The Act of 1956 provides for renewal, under certain conditions, ofwater-service type contracts

written pursuant to Section 9(e) and allows for conversion ofsuch contracts to Section 9(d)

repayment contracts under certain mutually agreed-to conditions. A general condition that will

apply to all such contracts is that before they may be renewed or converted, the contracts must

contain language which provides forrenewal or conversion, subject to suchmutually agreeable

terms and conditions. Ifsuch language does not exist, authority is hereby delegated to the

regional directors to amend such contracts solely for this purpose prior to renewal.

The following identifies conditions under which the Bureau ofReclamation, on behalfofthe

Secretary ofthe Interior, will renew a water service contract or convert a water service contract to

a repayment contract.

Conditions for Conversion from a Section 9(e) Water Service Contract to a Section 9(d)

Repayment Contract.

The present ability to pay must be greater than zero, orin lieu thereof, a willingnessto

pay may be considered.

In situations where Reclamation deliversirrigation water from a Corps ofEngineers

project, there must be a completed cost allocation.
I

2

Except where otherwise provided by statute and assuming mutual agreement on terms

and conditions, a Section 9(e) water service contract may be converted to a Section 9(d)

repayment contract ifthe properly assignable remaining construction costs can probably

be repaid to the United States within 40 years. This may be accomplished by entering an

initial 25:year repayment period and a subsequent 15-year repayment period. At the end

ofthe initial 25-year repayment period, the contract will be subject to renegotiation ofall

terms and conditions based on policy and law in effect at that time or a term ofcontract

based on the September 11, 1997, “Policy for Term ofContract,” memorandum may be

negotiated.

Where power assistance is not available, all costs allocated to irrigation must be capable

ofbeing repaid in a term not to exceed 40 years.

Depending upon the contract action, one ofthe following processes shall be followed.

A. Conversion from a Section 9(e) Water Service Contract to a Section 9(d)Repayment

Contract with a Concurrent 9(d) Contract - Many contracts coming up forrenewal have what

is termed as Part AIPart B provisions. Part A provisions are obligations pursuant to a

Section 9(e) water-service contract, and Part B provisions are obligations pursuant to a

Section 9(d), repayment contract. For these types ofcontracts, our policy on conversion is as

follows:

1. Deduct from the total costs allocated to irrigation, credits, payments, and contributions that

have already been made.

2. The remaining amount, i.e., any unpaid portion ofthe costs allocated to irrigation, is the

total remaining obligation.

3. A current ability-to-pay study will be performed to determine the amount available to be

paid by the district during the repayment period ofthe concurrent Section 9(d) contract. At the

end ofthe original Section 9(d) contract, either a new ability-to-pay study will be performed to

determine the obligation for the termofthe contract, orthe amount paid under the concurrent

Section 9(d) contract will be added to the ability-to-pay amount.

4. Ifthe district enters an initial 25-year contract with a subsequent 15-year contract, the

subsequent 15-year contract would be subjectto renegotiation of all terms and conditions based

on policy and law in effect at that time. Or, a termofcontract based on the September 11, 1997,

“Policy for Term ofContract,” memorandum may be negotiated. The amount beyond the

contractual amount will be paid by power assistance.

5. Five-year rate reviews will be based on Reclamation policy.
t

3

B. Conversion from a Section 9(e) Water Service Contract to a Section 9(d) Repayment

Contract - This policy applies when there is no concurrent 9(d) contract.

1. Deduct from the total costs allocated to irrigation, credits, payments, and contributions that

have already been made.

2. The remaining amount, i.e., any unpaid portion ofthe costs allocated to irrigation is the

total remaining obligation.

3. A current ability-to-pay study will be performed to determine the amount remaining to be

repaid under a new Section 9(d) repayment contract.

4. Ifthe district enters an initial 25-year contract with a subsequent 15-year contract, the

subsequent 15-year contract will be subject to renegotiation ofall terms and conditions based on

all laws an&policies in effect at that time. Or, a term ofcontract based on the September 11,

1997, “Policy for Term ofContract,” memorandum may be negotiated. The amount beyond the

contractual amount will be paid by power assistance.

5. Five-year rate reviews will be based on Reclamation policy.

C. Renewal of a Section 9(e) Water Service Contract to a Section 9(e) Water Service

Contract - This section appliesto contracts that will be renewed as a water service contract.

1. Deduct from the total costs allocated to irrigation, credits, payments, and contributions that

have already been made.

2. The remaining amount, i.e., any unpaid portion ofthe costs allocated to irrigation, is the

total remaining obligation.

3. Perform a current ability-to-pay study to establish the district’s annual charges forthe

renewed contract. (Some areas use cost ofservice to determine the district’s annual charges.)

4. Perform 5-year rate reviews based on Reclamation policy.

5. Follow the above processfor subsequent renewal contracts with appropriate credits to the

allocated costs until either the ultimate allocated costs have been realized or conversion from a

Section 9(e) contract to a Section 9(d) contract is effected.

Contractual Requirements

All contract activities, including those under the Act of 1956, will continue to require NEPA and

Endangered Species Act compliance and costs for contract activities will continue to be based on

the September 26, 1997, memorandum, “Policy for Collecting Operation and MaintenanceCosts

Associated with the Administration of Water-Related Contracting Activities.”
4

Please insert this memorandum in Section II ofyour policy book for water service and repayment

contracting.

You may direct any questions to Ms. Sandie Simons at (303) 445-2902.

cc: Manager, Portland OR, Attention: LCA-1000

Manager, Yakima WA, Attention: UCA-1000

Manager, Boise ID, Attention: SRA-1000

Manager, Grand Coulee WA, Attention: GCP-1000

Manager, Folsom CA, Attention: CC-lOG

Manager, Fresno CA, Attention: 5CC-lOG

Manager, Shasta Lake CA, Attention: NC-100

Manager, Klamath Falls OR, Attention: KO-l00

Manager, Carson City NV, Attention: LO-lOG

Manager, Sacramento CA, Attention: CVO-100

Manager, Phoenix AZ, Attention: PxAO-1000

Manager, Yuma AZ, Attention: YAO-1000

Manager, Boulder City NV, Attention: LCD-bOO

Manager, Boulder City NV, Attention: BCOO-b000

Manager, Temecula CA, Attention: SCAO-1000

Manager, Albuquerque NM, Attention: ALB-100

Manager, Grand Junction CO, Attention: WCN-CDeAngelis

Manager, Provo UT, Attention: PRO-lOG

Manager, Farmington NM, Attention: FCO-100

Manager, Salt Lake City UT, Attention: UC-600

Manager, Billings MT, Attention: MT-lOG

Manager, Grand Island NE, Attention: NK-AM

Manager, Loveland CO, Attention: EC-bOG

Manager, Mills WY, Attention: WY-lOG

Manager, Austin TX, Attention: TX-lOG

Manager, Bismarck ND, Attention: DK-100