MP-3400 

FIN-3.00 

To: Central Valley Project Water Contractors 

Subject: Application of Contractor Revenues to the American Recovery and Reinvestment 

Act (ARRA) Funded Costs 

Dear Water Contractor: 

The purpose of this correspondence is to clarify how the Bureau of Reclamation applies 

contractor revenues to operation and maintenance (O&M) expenditures funded by the ARRA. 

The priority in which Reclamation applies revenues is consistent with existing authority, 

Reclamation's Irrigation Ratesetting Policy, Reclamation's Municipal and Industrial (M&I) 

Interim Ratesetting Policy, and in accordance with the provision of the ARRA, as approved by 

the Reclamation Commissioner. 

The sequence of application of revenues in the Irrigation Ratesetting Policy is as follows: 

• Current Year (CY) O&M expenses (including the one-tenth of the CY ARRA) 

• Interest expenses 

• Interest-bearing O&M deficits 

• Non-interest bearing O&M deficits 

• Capital repayment 

The sequence of application of revenues in the M&I Interim Ratesetting Policy are as follow: 

• CY O&M expenses (including the one-tenth CY ARRA) 

• Interest expenses 

• Capital repayment 

• Interest bearing O&M deficits 

• Non-interest bearing O&M deficits 

A letter from the Commissioner to Mid-Pacific Region, dated November 8, 2010, stipulated a 

10-year repayment period for O&M expenditures that were funded by the ARRA. Reclamation's 

practice is to include one-tenth of the ARRA funded costs with the CY O&M expenditures for 

the Central Valley Project (CVP). Contractors have the option to make a voluntary payment for 

the remaining nine-tenths of the CY ARRA funded costs to satisfy their repayment responsibility 

over a shorter period of time and to avoid interest charges. 
Subject: Application of Contractor Revenues to American Recovery and Reinvestment 2 

Act CARRA) Funded Costs 

Reclamation's decision to include only one-tenth of the ARRA funded costs with contractor 

O&M obligations for the CVP is based upon ~~ following legislation and policies: 

• January 2009, Division A, Title IV of the ARRA of 2009 

• Reclamation Commissioner Letter, November 8, 2010 

(Internal Document - Not to Release) 

• Reclamation Irrigation Ratesetting Policy of 1988 

www.usbr.gov/mp/cvpwaterrates/docs/indiv_ctr_deCI988 

• Reclamation Mid Pacific Region Letter, December 29,2010 (enclosed) 

www.usbr.gov/mp/cvpwaterratesldocs/mi_water..,;::interim_1993.html 

The Commissioner's direction for the repayment of the ARRA funded costs over a 10-year 

period is supported by Division A, Title IV of the ARRA of 2009 which prescribed: 

" ... that the costs of extraordinary maintenance and replacement activities 

. carried out with funds provided in this Act shall be repaid pursuant to 

existing ~uthority, except the length of repayment period shall be as 

determined by the Commissioner, but in no case shall the repayment period 

exceed 50 years and the repayment shall include interest, at a rate determined 

by the Secretary of the Treasury as of th~ beginning of the fiscal year in 

which the work is commenced; .. " 

If you have any questions regarding the application of water revenues, please contact 

Ms. ~tumn Wolfe at 916-978-5391 or awolfe@usbr.gov. 

Sincerely, 

Brenda Bryant 

Regional Financial Manager 
. ." ... --. 

". 

I" REf'IX 

RUFER TO: 

MP-440 

WTR·4.00 

United States Department of the Interior 

BUREAU OF RECLAMATION 

Mid-Pacific RcgioCUlI Office 

2800 Couagc \Yay 

Sacrolmenlo. California 9582S-1898 

DEC 2 9 2610 

To: Central Valley Project Water Contractors 

Subject: Notification That Costs of Extraordinary Maintenance and Replacement (RAX) 

Activities Costs Funded by the American Recovery and Reinvestment Act of 2009 (ARRA) 

Carried Out in the Central Valley Project (CVP) Will be Included in CVP Irrigation, 

Municipal and Industrial (M&I). and Hydropower Rates 

Dear Water Contractor; 

This letter serves as official notification of matters conveyed herein. 

The ARRA appropriated funds to be used to complete six RAX projects in the CVP. The 

Commissioner of the Bureau of Reclamation has approved the repayment to Reclamation of the 

cost of these RAX projects pursuant to the existing CVP Irrigation Ratesetting Policy approved 

in J 988 and either the Interim CVP M&I Ratesetting Policy approved in 1995 or a final CVP 

MAl Ratesetting Policy, ifadopted and in effect at the time of repayment. 

In accordance with Reclamation law, these RAX projects are considered to be operation and 

maintenance (O&M) costs and are therefore reimbursable. O&M costs are nonnelly payable in 

advance of being incurred. However, the ARRA provided for the repayment of certain operation 

and maintenance costs over an extended time period. with interest. Reclamation has determined 

that a 10-year repayment period is appropriate. Repayment will be allocated among project 

purposes (i.e., irrigation, M&I, and hydropower) in accordance with the CVP cost allocation. 

Those contractors who benefit from these reimbursable project purposes are responsible for 

repaying the reimbursable casCS of O&M. Under the CVP ratesetling policies cited above, this 

includes vinually all CVP contractors. 

The total ~ of the six RAX projects is currently estimated to be SI7,640.000 of which 

approximately SI5,717.765 will be reimbursable. For as long as the current interim CVP 

allocation procedures are in effect, the reimbursable costs will be allocated approximately as 

follows: 56,105,630 to inigation, 5905,626 to M&I, and 58,706,509 to hydropower. However, 

when the projects are complete, the actual costs will be allocated according to an updated cost 

allocation in accordance with Public Law 99·546. 

These figures are estimates, calculated for planning purposes. The final total cost, and therefore 

the final reimbursable cost, may be higher or lower upon the project's completion. Your water 

rates will begin to reflect these costs in the year after each RAX project is substantially complete -

" ... I •• 
2 

Subject: Notification That RAX Costs Will be Included in CVP Rates 

and placed in service. When construction is complete and aU costs known, Reclamation will 

furnish you with a full accounting of the LOtal cost and the amollnt of the reimbursable portion to 

be allocated to each reimbursable projcct purpose. 

lfyou have any questions regarding this notification. please contact Mr. Rick Woodley, Regional 

Resources Manager. at 916-978-5200, or e-mail rwoodlcy@usbr.gov. 

Sincerely. 

('. 

o~ J2. o-r-:-

Donald R. Glaser 

Regional Director