oversight

Rural Water Projects: Federal Assistance Criteria and Potential Benefits of the Proposed Lewis and Clark Project

Published by the Government Accountability Office on 1999-07-29.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                    United States General Accounting Office

GAO                 Testimony
                    Before the Subcommittee on Water and Power, Committee
                    on Resources, House of Representatives




For Release
on Delivery
Expected at
                    RURAL WATER PROJECTS
2:00 p.m.
July 29, 1999

                    Federal Assistance Criteria
                    and Potential Benefits of the
                    Proposed Lewis and Clark
                    Project
                    Susan D. Kladiva, Associate Director,
                    Energy, Resources, and Science Issues,
                    Resources, Community, and Economic
                    Development Division




GAO/T-RCED-99-252
Mr. Chairman and Members of the Subcommittee:

It is a pleasure to be here to participate in your oversight hearings on rural
water project funding. In the past year, we have issued two reports that
address issues involving rural water projects. One, issued in May of 1998 to
your Senate counterpart, looked at the characteristics of a number of
proposed rural water projects and compared them with the criteria of a
number of existing programs for funding assistance.1 One of the projects
covered in that report was the proposed Lewis and Clark project in South
Dakota, Iowa, and Minnesota. The other report was issued to you in May
of this year.2 It focused on the benefits that could be expected from
constructing a project such as Lewis and Clark.

Specifically, my statement today will cover (1) federal assistance criteria
for rural water projects and (2) potential benefits of rural water projects
such as Lewis and Clark.

In summary, regarding federal assistance criteria for rural water projects,
our work looked at three programs. These were the Rural Utilities Service
program of the Department of Agriculture (USDA), the Drinking Water State
Revolving Fund of the Environmental Protection Agency (EPA), and the
Bureau of Reclamation (BOR) of the Department of the Interior. We found
that the USDA and EPA programs had specific criteria that a proposed water
project must meet to be considered for funding and that none of the three
projects we examined, including the Lewis and Clark project, had
characteristics that met all of the criteria of any one of the programs. We
further found that while BOR did not have a formal program and, thus, did
not have formal criteria, it did have a long-standing policy on
reimbursement for its contributions to projects with which none of the
three proposed projects—again including Lewis and Clark—could comply.

Regarding potential benefits of rural water projects, our work, using Lewis
and Clark as the example, found that the local water users, such as
households and business would receive most of the benefits of the project,
which could include higher personal incomes and improved lifestyles.
While the federal government would realize only minimal financial
benefits, the project would benefit the federal government to the extent
that it will be a means of achieving public policy objectives.


1
 Rural Water Projects: Federal Assistance Criteria (GAO/RCED-98-204R, May 29, 1998).
2
 Rural Water Projects: Identifying the Benefits of the Proposed Lewis and Clark Project
(GAO/RCED-99-115, May 28, 1999).



Page 1                                                                         GAO/T-RCED-99-252
             Since the proposed Lewis and Clark Rural Water Project was a focus of
             each of our reviews, I would like to provide some background on that
             project before describing our findings in greater detail.


             The project is to address the dual problems of inadequate quantities of
Background   water and poor quality of water. The cost of the project is estimated to be
             $282.9 million (in 1993 dollars). The 300,000 people in 14 counties near the
             junction of South Dakota, Iowa, and Minnesota use groundwater as their
             principal municipal and industrial water source. The 100,000 urban
             residents of Sioux Falls, the largest city in the area, obtain water from the
             city’s municipal water system, while rural residents of the area obtain
             water primarily from smaller rural water districts. A number of rural
             residents obtain their own water from private wells. Good-quality water,
             however, is in short supply in this area. Shallow aquifers, a major source
             of water in the area, often hold insufficient quantities of water for
             expanding populations and economic activities, and quantities can be
             limited during times of drought. Also, the groundwater commonly
             obtained from these shallow aquifers is vulnerable to contamination from
             nitrates and pesticides from the intense agriculture that is the main
             economic activity of the area. Groundwater is often plentiful in deeper
             aquifers, but it is highly mineralized and, thus, requires expensive
             treatment.

             Because of the insufficient quality and quantity of water, 22 water districts
             in the area advocate the building of a major municipal water system
             known as the Lewis and Clark Rural Water Project which would draw
             water from the Missouri River. These districts are requesting legislation
             that would authorize a federal grant to cover the construction of the
             project. The proposed legislation provides a formula for federal and
             nonfederal sharing of the costs of this construction. With the exception of
             the city of Sioux Falls, the federal government would fund 80 percent of
             the costs for the project’s planning and construction, and nonfederal
             interests would fund the remaining 20 percent. For the city of Sioux Falls,
             the federal government and nonfederal interests would each provide
             50 percent “of the incremental cost to the city of participation in the
             project.”

             “Incremental cost” is not defined in the proposed legislation, and there is
             more than one way to interpret these words. In our report, we considered
             the “incremental cost” that would be subject to 50/50 federal funding to
             be Sioux Falls’ proportionate share of the project’s capital costs based on



             Page 2                                                      GAO/T-RCED-99-252
                     its water demand as cited in the project’s feasibility study. This
                     proportionate share is 42.6 percent of the $282.9 million project’s total cost
                     less a small amount (about $8.5 million), which we interpret the federal
                     government would pay for environmental enhancements. Hence, we
                     estimated the cost shares as follows: The federal government would be
                     responsible for $192.9 million, or 68 percent; Sioux Falls’ nonfederal cost
                     share would be $58.5 million, or 21 percent; and the other than Sioux Falls’
                     nonfederal cost share would be $31.5 million, or 11 percent.

                     The Bureau of Reclamation concurred that our interpretation of
                     incremental costs is reasonable but pointed out that other interpretations
                     may exist. According to the Executive Director of the Lewis and Clark
                     Rural Water System, for example, the project’s sponsors interpret the
                     “incremental cost to the city of participation in the project” as the
                     amount of savings that would be realized if Sioux Falls was dropped from
                     the project. That is, the sponsors equate incremental cost to an estimated
                     savings from downsizing the pipelines, treatment plant, and wells to
                     account for water that no longer would be delivered to Sioux Falls. They
                     believe that this savings would be $55.2 million and that the nonfederal
                     cost share for Sioux Falls would be 50 percent of this amount, or
                     $27.6 million.


                     We identified a number of elements from laws, regulations, and policies
Project              from USDA, EPA, and BOR that constitute the criteria that proposed rural
Characteristics Do   water projects must meet. USDA’s program has direct criteria for
Not Meet Some        participation. EPA—which provides grants to the states that must, in turn,
                     develop their own plans and policies for participation—establishes
Criteria for         minimum requirements for those plans which constitute applicable
Participation in     criteria. BOR, which has no formal program for rural water projects, does
                     have a long-standing policy on full reimbursement for its contributions to
Selected Federal     the local projects it funds. It has concentrated its activities in the 17
Programs             western states that constitute its service area.

                     The characteristics of the Lewis and Clark project meet some but not all of
                     the criteria of the three agencies. The project does not meet some of USDA’s
                     criteria in that it includes a city (Sioux Falls) with a population exceeding
                     the definition of a rural area as a location with fewer than 10,000 people.
                     Thus, only the rural component of the Lewis and Clark project would meet
                     the criterion. The project also does not meet the criterion for economic
                     feasibility for repayment in that it envisions federal funding through grants
                     of 80 percent of the design and construction costs (50 percent for the



                     Page 3                                                      GAO/T-RCED-99-252
                         Sioux Falls component). This amount exceeds the USDA program’s
                         maximum grant limitation of 75 percent of eligible project costs.

                         The project also does not meet some of the criteria of the EPA program.
                         For example, it does not meet the economic feasibility requirement for the
                         state loan program in that it depends on grants to cover 80 percent
                         (50 percent for the Sioux Falls component) rather than a loan. In addition,
                         the inclusion of an entity with more than 10,000 people would call into
                         question the project’s applicability for the portion of the EPA’s state grant
                         moneys that states are to use for projects with populations under 10,000.

                         Similarly, the project’s dependence on grants is inconsistent with BOR’s
                         long-standing policy of having water users repay 100 percent of the costs
                         of projects. In addition, 2 of the 3 states involved in that project–-Iowa and
                         Minnesota-–are not among the 17 western states that constitute BOR’s
                         service area.


                         The benefits associated with a rural municipal and industrial water project
Nature of the Benefits   such as the Lewis and Clark project are a result of increases in both the
of the Lewis and Clark   quantity and quality of water. These benefits can generally be categorized
Rural Water Project      as (1) societal benefits, (2) economic benefits, and (3) fiscal benefits.

                         The societal benefits include improvements in the health, safety, and
                         lifestyle of residents served by the project. Health improvements could
                         result from the Lewis and Clark project because of the improved quality of
                         the water. For example, EPA’s research reveals that a reduction in sulfate
                         concentration in a community’s drinking water could result in fewer
                         gastrointestinal illnesses and that reductions in nitrate concentrations in
                         drinking water could result in fewer infants being at risk of serious illness
                         or death. The project could improve safety in the region by making more
                         water available for fighting fires in the smaller communities. Lifestyle
                         improvements could result from a better quality of water being available
                         for drinking, bathing, and washing clothes or more water being available
                         for landscaping. The societal benefits also include contributing to the
                         federal government’s efforts to pursue its goal of furthering economic
                         development in rural America.

                         The economic benefits are increases in the economic value of the national
                         or regional output of the goods and services produced as a result of
                         increases in the quantity or quality of water. The Lewis and Clark project
                         could have an impact on hog and cattle production, milk production, and



                         Page 4                                                       GAO/T-RCED-99-252
                        other agricultural products made from soybeans, corn, and eggs that are
                        processed by local plants. For example, farmers have reported increased
                        weight gains in hogs when rural areas have switched to water having
                        lower sulfates and hardness. Similarly, dairy farmers have attributed
                        increased milk yields to better quality water. Although the water from the
                        Lewis and Clark project will not be used for irrigation, community officials
                        stated that an increased availability of water could provide opportunities
                        for the economic development of industries whose processes require large
                        amounts of water, such as ethanol plants and food processing plants, in
                        the Lewis and Clark service area. In addition, the improved quality of the
                        water would increase the longevity of water heaters, water softeners, and
                        other appliances by reducing mineral deposits and thereby saving
                        residents repair and replacement costs.

                        The fiscal benefits are net increases in government revenues that result
                        from an increase in economic activity. Proposed construction projects
                        such as the Lewis and Clark project would have an impact on fiscal
                        revenues. Should the Lewis and Clark project be built, increased sales tax
                        revenues could result from an increase in economic activity, and increased
                        income tax revenues could result from the higher earnings associated with
                        this economic growth, particularly in the agricultural sector. Increases in
                        the quantity and quality of water could lead to increases in property
                        values, which in turn could increase property tax revenues. However, the
                        net fiscal benefit to the various levels of government would depend also
                        on the impact of the project on various government expenditures,
                        including increases in infrastructure spending or increases in government
                        outlays to meet increased demands for government services.


                        The local water users, such as households and businesses, would receive
Beneficiaries of the    most of the benefits from the Lewis and Clark project. Thus, the project’s
Lewis and Clark Rural   22 member districts would not benefit directly because, as nonprofit water
Water Project           providers, they function as their customers’ agents in obtaining water and
                        deliver water to users at or near cost. The benefits accruing to local water
                        users could include (1) higher personal income resulting from the increase
                        in economic activities; (2) decreased costs for replacing water heaters,
                        maintaining water softeners, and servicing other appliances; and
                        (3) societal benefits, such as improved health and lifestyles.

                        State and local governments would benefit primarily from the increases in
                        tax revenues resulting from an anticipated increase in the production and
                        sales of goods and services. State and local governments could also benefit



                        Page 5                                                     GAO/T-RCED-99-252
                      from increased sales and income taxes generated from the construction
                      activities of the Lewis and Clark project. County governments and school
                      districts could be the beneficiaries of increased property tax revenues.

                      The federal government would realize only minimal financial benefits from
                      the Lewis and Clark project. Increases in federal income tax revenues
                      resulting from increased economic activities attributable to the project
                      would likely be minimal. However, the project would benefit the federal
                      government to the extent that it will be a means of achieving such
                      objectives as meeting federal drinking water standards, improving the
                      quality of rural life, and investing in the infrastructure of rural America.


                      The societal benefits, such as meeting federal drinking water standards,
How Benefits From     improvements in health and lifestyle, and investing in the development of
the Lewis and Clark   the infrastructure of rural America, cannot be measured monetarily with
Rural Water Project   reasonable accuracy. For example, water experts we interviewed stated
                      that improved public health is a major benefit, but the benefit is difficult to
Are Valued            measure. Improvements in health were also cited by district
                      representatives as a major benefit of the Lewis and Clark project.
                      However, neither the reduction in illnesses nor the subsequent reduction
                      in health care costs that might be attributable to better quality water can
                      be valued with precision.

                      Similarly, it is not possible to accurately assign a monetary value to an
                      improved lifestyle attributed to better quality water. However, the
                      Congress has recognized the long-standing need to improve the quality of
                      water in rural America. For example, the Rural Utility Service, through its
                      water and wastewater loan and grant program, has helped fund almost
                      17,000 water and sewer projects serving more than 12,500 rural
                      communities in the last 30 years. Also, the objective of EPA’s Drinking
                      Water State Revolving Loan Fund program is to ensure that the nation’s
                      drinking water supplies remain safe and affordable.3

                      The economic benefits of water projects such as the Lewis and Clark
                      project are, for the most part, difficult to quantify because of the difficulty
                      in attributing with any precision an increase in economic activity directly


                      3
                       The Safe Drinking Water Act Amendments of 1996 (P.L. 104-182, sec. 130) authorized a Drinking
                      Water State Revolving Loan Fund to help public water systems finance the infrastructure needed to
                      achieve or maintain compliance with the act’s requirements and to promote public health protection
                      objectives. Section 1452 authorizes the Administrator of EPA to make grants to states to capitalize
                      drinking water state revolving loan funds, which in turn can provide low-cost loans and other types of
                      assistance to eligible water systems.



                      Page 6                                                                          GAO/T-RCED-99-252
to an increase in water. Water is rarely the sole factor responsible for
economic change, but water can facilitate economic expansion. For
example, hog farmers are unlikely to decide to raise more hogs based
solely on the availability of better quality water. Instead, they are also
likely to consider the cost of feed, the amount of available space in their
sheds, and the market demand as reflected in the price paid for their
product by slaughterhouses.

Despite the difficulty of measuring the economic benefits, increases in the
value of the output of goods and services resulting from the Lewis and
Clark project can be viewed from either the national or regional
perspective. Although both perspectives are measures of changes in the
value of goods and services produced, the regional benefits could be
significantly different from the national benefits because regional benefits
capture the transfer of economic activities into the project’s service area
from outside the region. Regional transfers will result in no net national
benefits.

At the national level, we believe the increases in the value of goods and
services due to the Lewis and Clark project would be minimal. Increases in
the output of goods and services do not necessarily result in an increase in
their value. For example, hog production, one of the major industries in
the tristate area, was initially expected to increase locally because of
anticipated improvements in the quantity and quality of water. However,
production exceeded the demand of slaughterhouses in 1998, resulting in
plummeting prices. The hog price in December 1998 was $14.70 per 100
pounds, down from an average price of $52.90 in 1997. Similarly, the
December 1998 beef cattle price of $55.80 per 100 pounds was down from
an average price of $63.10 in 1997, resulting in lower incomes.

From the regional perspective, however, the economic benefits of water
projects are greater. The regional benefits reflect not only the increase in
value of the goods and services produced in the region but also the
regional economy’s gain from transfers of industries into the area. For
example, local planners expect that on completion of the Lewis and Clark
project, food processing and ethanol plants may relocate to their region.

Because of the difficulty of identifying and directly attributing changes in
economic activities to the quantity and quality of water, analysts have
developed other methods that, for the most part, can approximate the
value of benefits accruing from a water project. One method, called a
willingness-to-pay study, surveys water users and asks them how much



Page 7                                                      GAO/T-RCED-99-252
they are willing to pay for an increase in the quality and quantity of their
water. BOR analyzed a survey conducted by the Lewis and Clark project’s
sponsors in 1992 and estimated that residents in the project’s service area
were only willing to pay an additional $3.34 million per year to ensure a
safe and reliable future water supply. Over the 40-year life expectancy of
the Lewis and Clark project, this amounts to about $87 million in 1998
dollars.4 As a result, BOR concluded that from a purely economic
standpoint, the Lewis and Clark project does not pay for itself since the
cost of the proposed project is $282.9 million in 1993 dollars. However, if
the project is required to meet future water quality standards or solve
reliability problems that must be dealt with regardless of cost, BOR
concluded that the Lewis and Clark project may be the most cost-effective
way to reach such goals. Moreover, economists that we contacted said
that figures reported by respondents in willingness-to-pay studies may
underestimate total benefits because respondents may fear that their
water bills would be increased by the amounts they report.

Another method used by economists in estimating the value of a water
project’s benefits consists of estimating the cost of reasonable alternatives
that would be avoided if the project is built. In other words, how much the
beneficiaries are willing to pay for an alternative water system provides an
estimate of the value they would place on the benefits they expect to
receive from the increase in the quality and quantity of their water. At the
water district level, this cost represents the value of the project’s benefits
to all water users in the district, including households, farms, and
businesses. This method can approximate the value of benefits if the
alternative will produce the same quantity and quality of water as the
proposed project.

To that end, we asked the 22 individual water districts to identify and
estimate the cost of reasonable alternatives that would be avoided if the
Lewis and Clark project is built. Reasonable alternatives for the water
districts in the project’s service area include drilling additional wells,
modifying or building treatment plants, and purchasing water from other
water districts. A summary of these alternatives and their individual costs
appears in appendix I.

We estimate that the sum of these alternative costs for Lewis and Clark
members ranges between about $71 million and $81 million in 1998
dollars. However, these figures should be considered minimum values
because many alternatives would not produce the same quality of water as

4
 Discounted at 3 percent.



Page 8                                                      GAO/T-RCED-99-252
                  the Lewis and Clark project and because two districts did not estimate the
                  cost of their alternatives. In addition, only 5 of 16 alternatives that would
                  require large capital investments were based on detailed written cost
                  estimates or engineering studies, so several of the verbal estimates we
                  obtained may lack accuracy.

                  The net fiscal benefits attributable to the Lewis and Clark project would
                  depend largely on changes in the economic activities in the region as well
                  as on changes in the governments’ outlays for services and infrastructure.
                  BOR estimated the tax revenue increases expected from the construction
                  activities of the Lewis and Clark project to be about $16.5 million in 1992
                  dollars. Its estimate included the excise, fuel, sales, and income taxes
                  expected to be collected by South Dakota, Iowa, and Minnesota from the
                  contractors and laborers. However, the estimate did not include increases
                  in tax revenues anticipated from an increase in regional economic
                  activities.

                  Mr. Chairman, this concludes my prepared statement. We will be pleased
                  to respond to questions you or Members of the Subcommittee may have.




                  For further information, please contact Susan D. Kladiva at (202) 512-3481.
Contact and       Individuals making key contributions to this testimony included Arleen
Acknowledgments   Alleman, Ronald M. Belak, Brad Hathaway, Mehrzad Nadji, Rudolfo G.
                  Payan, Doreen Feldman, and Kathleen Gilhooly.




                  Page 9                                                      GAO/T-RCED-99-252
Appendix I

Member Districts’ Alternatives to the Lewis
and Clark Rural Water Project Compared
With the Project’s Commitments

                                                                    Nonfederal
                                 Average         Lewis and        proportionate
                                    daily             Clark      share of Lewis Alternative to     Cost of            Nature of cost
                               water use       commitment             and Clark Lewis and          alternative        estimate for
Member district                 (gallons)     (gallons/day)      (1998 dollars)a Clark             (1998 dollars)     alternative
Lincoln-Pipestone, Minnesota   3,000,000              300,000b        $769,000 None available      Not available      Not applicable
Rock County, Minnesota           583,000              300,000          769,000 Drill more          $2,887,000         Written estimate
                                                                               shallow wells in                       prepared by
                                                                               Rock River                             district manager
                                                                               aquifer
Luverne, Minnesota             1,200,000              500,000         1,282,000 Drill additional   388,000 to         Verbal estimate
                                                                                shallow wells      1,388,000
Worthington, Minnesota         2,720,000             1,730,000        4,436,000 None available     Not available      Not applicable
Sheldon, Iowa                  1,300,000             1,000,000        2,564,000 Drill more wells   6,332,000 to       Written
                                                                                and update         6,832,000          proposal
                                                                                water lines                           prepared by
                                                                                                                      engineering firm
Sibley, Iowa                     400,000              650,000         1,667,000 Purchase         2,556,000            GAO estimate
                                                                                additional water                      based on water
                                                                                from Osceola                          price supplied
                                                                                Water District                        by district
Clay County, Iowa                750,000             1,000,000        2,564,000 Drill more wells   3,102,000          Written estimate
                                                                                and build joint                       based on
                                                                                treatment plant                       studies
                                                                                with Spencer,                         prepared by
                                                                                Iowa                                  engineering firm
Rural Water District 1, Iowa   1,725,000             1,000,000        2,564,000 Drill more deep    Not estimated      Not applicable
                                                                                wells and
                                                                                upgrade
                                                                                treatment plant
Hull, Iowa                       165,000              300,000          769,000 Join nearby         2,447,000          Written cost
                                                                               district in its                        estimate
                                                                               expansion and                          supplied by
                                                                               purchase                               nearby district
                                                                               150,000                                and GAO
                                                                               gallons/day                            estimate of
                                                                                                                      value of water
                                                                                                                      purchase
Sioux Center, Iowa             1,000,000              600,000         1,538,000 Drill wells west   560,000            Verbal estimate
                                                                                of town and                           provided by
                                                                                build water line                      city’s utility
                                                                                                                      department
Boyden, Iowa                      55,000              100,000          256,000 Pump existing       Not estimated      Not applicable
                                                                               wells and
                                                                               eventually add
                                                                               new wells
                                                                                                                           (continued)




                                           Page 10                                                                 GAO/T-RCED-99-252
                                            Appendix I
                                            Member Districts’ Alternatives to the Lewis
                                            and Clark Rural Water Project Compared
                                            With the Project’s Commitments




                                                                     Nonfederal
                                 Average           Lewis and       proportionate
                                    daily               Clark     share of Lewis Alternative to     Cost of             Nature of cost
                               water use         commitment            and Clark Lewis and          alternative         estimate for
Member district                 (gallons)       (gallons/day)     (1998 dollars)a Clark             (1998 dollars)      alternative
Beresford, South Dakota          280,000               250,000          641,000 Replace             2,000,000           GAO estimate
                                                                                treatment plant                         based on data
                                                                                                                        provided by
                                                                                                                        water
                                                                                                                        department
Centerville, South Dakota        200,000               220,000          564,000 Hook up to          4,412,000 to        Verbal estimate
                                                                                nearby rural        5,012,000           provided by city
                                                                                water systems                           official
Harrisburg, South Dakota          70,000               250,000          641,000 Drill more wells, 2,153,000             Verbal estimate
                                                                                construct new                           supplied by
                                                                                treatment and                           utility
                                                                                softening plants                        department
Lennox, South Dakota             200,000               400,000         1,026,000 Drill more wells   1,021,000           Verbal estimate
                                                                                                                        provided by
                                                                                                                        water
                                                                                                                        department
Madison, South Dakota            800,000              1,000,000        2,564,000 Build a new        0 to 8,040,000      Detailed study
                                                                                 treatment plant                        prepared by
                                                                                                                        engineering firm
Parker, South Dakota             150,000               490,000         1,256,000 Drill              278,000             Verbal estimate
                                                                                 high-volume                            supplied by
                                                                                 well and build                         water
                                                                                 water tower                            department
Sioux Falls, South Dakota      15,678,000         10,000,000          64,101,000 Develop Wall       30,000,000          Informal
                                                                                 Lake aquifer                           estimate by city
Tea, South Dakota                150,000               330,000          846,000 Purchase         2,331,000              GAO estimate
                                                                                balance                                 based on data
                                                                                (180,000                                supplied by city
                                                                                gallons per day)
                                                                                from Lincoln Co.
Lincoln County, South Dakota     533,000               900,000         2,308,000 Purchase           2,762,000           GAO estimate
                                                                                 shortfall (up to a                     based on data
                                                                                 maximum of                             supplied by
                                                                                 800,000 gallons                        water district
                                                                                 per day) from
                                                                                 Sioux Falls
Minnehaha, South Dakota         1,600,000             2,000,000        5,128,000 Implement          Not applicable      Not applicable
                                                                                 stringent water
                                                                                 conservation
                                                                                                                             (continued)




                                            Page 11                                                                  GAO/T-RCED-99-252
                                           Appendix I
                                           Member Districts’ Alternatives to the Lewis
                                           and Clark Rural Water Project Compared
                                           With the Project’s Commitments




                                                                   Nonfederal
                                Average           Lewis and      proportionate
                                   daily               Clark    share of Lewis Alternative to           Cost of             Nature of cost
                              water use         commitment           and Clark Lewis and                alternative         estimate for
Member district                (gallons)       (gallons/day)    (1998 dollars)a Clark                   (1998 dollars)      alternative
South Lincoln, South Dakota     600,000              150,000             385,000 Drill three wells; 7,650,000               Informal
                                                                                 build booster                              estimate
                                                                                 station, lines                             supplied by
                                                                                 and softening                              water district
                                                                                 plant
Total                         33,159,000         23,470,000         $98,638,000      —                  $70,879,000 to       —
                                                                                                        $81,019,000

                                       a
                                        These proportionate shares in 1998 dollars are not equal to proportionate shares discussed in
                                       the report’s text, which are in 1993 dollars.
                                           b
                                           Lincoln-Pipestone has plans to increase their commitment to 1 million gallons per day.




(141360)                                   Page 12                                                                      GAO/T-RCED-99-252
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