Sacramento, California, was established at the confluence of the American and Sacramento Rivers shortly after gold was discovered upstream at Sutter’s Mill in 1848. Frequent flooding has been a problem in Sacramento since its founding. To help reduce flooding, over time a complex system of levees, dams, and other related facilities were built. Levees line both sides of the American River from where it meets the Sacramento River upstream for a distance of about 17 miles, and the Natomas Basin is completely surrounded by levees. In addition, the Folsom Dam, completed in 1956 and located upstream from Sacramento on the American River, uses a portion of its storage capacity for flood protection. The Sacramento area flood protection system was designed on the basis of records of rainfall during the first half of the 20th century. However, since 1950, the American River watershed has experienced five floods that were larger than any recorded in the pre-1950 period, although downtown Sacramento was not flooded during any of these events. Nonetheless, the Sacramento area has less protection than the designers of the original flood protection system realized. In fact, much of urbanized Sacramento is located in areas where a flood has a 1 percent chance of occurring every year—known as the 100-year floodplain. Because of this limited level of protection, the Corps estimates that a very large flood—one with a 0.25 percent chance of occurring every year—would flood the 400-year floodplain, resulting in residential, commercial, industrial, and public property damage of about $15.5 billion as well as loss of lives. According to the Corps, about 305,000 people live in more than 100,000 residential properties located within the American River floodplain. A major flood also would cause toxic and hazardous waste contamination; disrupt the city’s downtown business and government areas, including the state capitol; and interfere with the transportation system, including two interstate highways. A major flood in 1986, the largest one ever recorded on the American and Sacramento Rivers, severely strained the levee system protecting Sacramento. Although the levees held and downtown Sacramento was not flooded, the event spurred efforts by federal, state, and local entities to identify measures to increase Sacramento’s level of flood protection. In 1987, the Corps began work on a comprehensive study of flood protection alternatives for Sacramento. In its 1991 report, the Corps’ Sacramento district office considered six flood protection options and recommended building a new dam on the American River at Auburn, California, but Congress did not approve the dam’s construction. Subsequently, in response to the Department of Defense Appropriations Act of 1993, the Corps reevaluated three alternatives for increasing flood protection. In its 1996 report, the Corps examined (1) building a new dam near Auburn, California; (2) modifying the existing Folsom Dam; and (3) increasing the amount of water released from Folsom Dam during a flood, coupled with other flood protection measures. The Corps again recommended building a dam at Auburn, but, again, Congress did not approve its construction. Recognizing the magnitude of the opposition to the proposed Auburn Dam, in June 1996, the Corps recommended the Common Features Project, which included improving sections of the American and Sacramento Rivers’ levees, primarily by constructing cut-off walls, to provide small- scale improvements to flood protection for the Sacramento area while the options for more extensive improvements continued to be considered. The WRDA of 1996 authorized $57 million for the Common Features Project, which included 24 miles of levee improvements on the American River and 12 miles on the Sacramento River along the western border of the Natomas Basin. Subsequently, the Corps concluded that it could provide the same level of flood protection on the American River by modifying only about 21 miles of levees. Figure 2 shows how a cut-off wall, which is composed primarily of a soil, cement, and clay mixture that forms an impermeable barrier when it hardens, can prevent water from seeping under or through a levee. In January 1997, numerous rivers in northern California flooded causing extensive damages, although not in the Natomas Basin or downtown Sacramento. This flood, which was nearly as large as the 1986 flood, highlighted the continuing vulnerabilities of the existing flood protection system. In response, the WRDA of 1999 (1) modified the Common Features Project by adding about 3.8 miles of additional levee modifications along the American River and 10 miles on the Natomas Cross Canal, located on the northern border of the Natomas Basin, and (2) increased the project’s authorization from $57 million to $92 million. When Congress approves a flood protection project, it authorizes a specific amount of money for the project, which provides the basis for the maximum project cost. According to section 902 of the Water Resources Development Act of 1986, as amended, the maximum project cost is the sum of (1) the original authorized amount, with the costs of unconstructed project features adjusted for inflation; (2) the costs of modifications that do not materially alter the scope of the project, up to 20 percent of the original authorized amount (without adjustment for inflation); and (3) the cost of additional studies, modifications, and actions authorized by the 1986 Act or any later law. As a result of these provisions, the $92 million that Congress authorized for the Common Features Project in 1999 translates to an allowable maximum project cost of about $120 million in 2003. When Congress authorized the Common Features Project in 1996, federal law required that nonfederal partners pay 25 percent of the cost of flood protection projects. For the Common Features Project, these partners are the State of California Reclamation Board and the Sacramento Area Flood Control Agency. In this report, when we refer to project costs, including the maximum allowable project cost, we are referring to the combined federal and nonfederal expenditures. Estimated costs for the Common Features Project grew from $57 million in 1996, when the project was first authorized, to between $270 million and $370 million in 2002, primarily because the Corps changed the design of the levee improvements. For the American River levee improvements authorized in 1996, estimated costs more than tripled, due largely to changes in the design of the cut-off walls. New work authorized in 1999 added another $15 million to the cost increase. The Corps has completed much of the American River work authorized in 1996, but it has not begun construction on the work authorized in 1999. Regarding the Natomas Basin component, estimated costs increased from $13 million to between $112 million and $212 million. Costs rose primarily because the Corps changed the design of the levee improvements and proposed adding other improvements to this component. The Natomas Basin work is in the early planning stages, and the Corps has not begun construction. As of July 2003, the Corps had spent or made plans to spend nearly all of the money authorized for the Common Features Project. It therefore will not be able to finish constructing the American River work authorized in 1996, begin constructing the American River work authorized in 1999, or complete planning for the Natomas Basin work unless Congress increases the project’s authorized funding. The Corps’ cost estimate for the American River levee improvements authorized in 1996 has more than tripled, from $44 million in 1996 to about $143 million in July 2002, as shown in table 1. As table 1 shows, costs rose primarily because of the increased costs of the cut-off walls. The Corps’ original design called for building cut-off walls to a depth of between 20 and 30 feet to prevent water from seeping through the levees and for allowing gaps in the cut-off walls at bridge and utility crossings. However, after the 1997 flood, the Corps realized it also needed to address the problem of water seeping under levees. It therefore increased the depth of the cut-off walls to between 60 and 80 feet and closed the gaps in the cut-off walls at bridge and utility crossings. For some sections of the levees, the Corps could not close the gaps using its standard approach for cut-off walls because of problems accessing the sites. As a result, the Corps employed a new and more expensive approach—known as jet grouting—to build cut-off walls by drilling and injecting concrete material into areas that were difficult to access. Closing the gaps in the cut- off walls by jet grouting raised estimated costs by $52 million and increasing their depth raised costs by $24 million, according to the Corps’ July 2002 cost estimate. However, in September 2002, the Corps determined that fewer gaps needed to be closed using jet grouting, which should reduce costs to some extent. As of June 2003, however, the Corps had not incorporated these potential cost reductions into an official project cost update. As table 1 also shows, the Corps’ response to accidents that occurred during construction of the 1996 authorized work added $11 million to project costs. On three occasions, liquid material from the cut-off walls accidentally leaked into either the American River or the backyards of homes that are built against the levees. As a result, the Corps incurred costs cleaning up these spills and responding to new work requirements mandated by the Environmental Protection Agency to help prevent future leaks. Lastly, in addition to the cost increases related to the 1996 authorized work, new flood protection measures authorized in 1999 added about $15 million in costs to the American River component of the project. These measures include raising levee banks at two locations, installing gates and pumps at an existing drain, and installing cut-off walls in two additional levee segments. Of the American River work authorized in 1996, the Corps has completed about 90 percent and must still close gaps in the cut-off walls at some remaining bridge and utility crossings to complete this work. For the levee improvements authorized in 1999, the Corps has done some planning but has not begun any construction.