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108th Congress                                            Rept. 108-688
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 1
======================================================================
 
  AMEND THE TIJUANA RIVER VALLEY ESTUARY AND BEACH SEWAGE CLEANUP ACT

                                _______
                                

               September 15, 2004.--Ordered to be printed

                                _______
                                

     Mr. Young of Alaska, from the Committee on Transportation and 
                Infrastructure, submitted the following

                              R E P O R T

                        [To accompany H.R. 4794]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Transportation and Infrastructure, to whom 
was referred the bill (H.R. 4794) to amend the Tijuana River 
Valley Estuary and Beach Sewage Cleanup Act of 2000 to extend 
the authorization of appropriations, and for other purposes, 
having considered the same, report favorably thereon without 
amendment and recommend that the bill do pass.

                       Purpose of the Legislation

    The purpose of H.R. 4794 is to amend the Tijuana River 
Valley Estuary and Beach Sewage Cleanup Act of 2000 to 
reauthorize and update the authority to comprehensively address 
the treatment of sewage emanating from the Tijuana, Mexico area 
that flows untreated or partially treated into the United 
States, causing significant adverse public health and 
environmental impacts.

                  Background and Need for Legislation

    Tijuana, Mexico is situated on elevated terrain as compared 
to San Diego, California, and as a result, the Tijuana River 
flows north across the U.S.-Mexico border into the San Diego 
area. The wastewater infrastructure in the Tijuana border area 
is inadequate to protect public health and the environment. 
Because there is insufficient infrastructure to treat all of 
the sewage generated in the Tijuana area, untreated or 
partially treated sewage is released into the Tijuana River and 
flows into the United States, leading to serious public health 
and environmental concerns.
    To protect the city of San Diego and surrounding areas from 
the sewage emanating from Tijuana, Congress authorized, in 
Public Law 100-4, the ``Water Quality Act of 1987,'' the 
construction of a wastewater treatment facility in San Diego to 
provide primary or more advanced treatment of municipal sewage 
and industrial waste from Mexico, including the city of 
Tijuana.
    Then in 1990, the United States and Mexico approved 
International Boundary and Water Commission (IBWC) Treaty 
Minute No. 283 to the Treaty for the ``Utilization of Waters of 
the Colorado and Tijuana Rivers and of the Rio Grande,'' dated 
February 3, 1944. Under this treaty minute, the United States 
and Mexico are to design, construct, operate, and maintain a 
wastewater treatment facility for up to 25 million gallons per 
day (``MGD'') of sewage from Tijuana, Mexico, to be treated to 
a level that meets the United States' secondary treatment 
standards under the Clean Water Act. Secondary treatment is 
defined in Federal regulations as numeric effluent quality 
levels attainable through physical and biological treatment of 
wastewaters, and which require greater removal of certain 
pollutants than primary or advanced primary treatment. To meet 
this obligation, the IBWC constructed the South Bay 
International Wastewater Treatment Plant (``IWTP''). However, 
the IWTP treats sewage only to an advanced primary level of 
treatment, failing to comply with the Clean Water Act and the 
Treaty Minute. The secondary treatment module of the IWTP has 
not been constructed.
    In the 106th Congress, the Committee on Transportation and 
Infrastructure examined the issues surrounding sewage treatment 
in the San Diego, California-Tijuana, Mexico border region, and 
concluded that a comprehensive solution was needed to address 
both the partially treated flows from the existing IWTP and the 
additional capacity needed to address raw sewage from the 
Tijuana area in Mexico that is currentlyuntreated. To achieve 
this goal, Congress enacted Title VIII of Public Law 106-457, the 
``Tijuana River Valley Estuary and Beach Sewage Cleanup Act of 2000'' 
(the ``Act'').
    The Act authorizes the United States, acting through the 
U.S. Section of the IBWC and following conclusion of a new 
treaty minute or an amendment to Treaty Minute No. 283, to 
enter into a fee-for-services contract with the owner of a 
privately financed secondary wastewater treatment facility 
located in Mexico. Such facility would provide secondary 
treatment for a total of not more than 50 MGD of both advanced 
primary effluent pumped from the IWTP and any additional sewage 
from the Tijuana area in Mexico. The purpose of entering into a 
fee-for-services contract for wastewater treatment services 
would be to ensure adequate treatment of wastewater along the 
United States-Mexico border so that untreated or partially 
treated sewage from Tijuana, Mexico no longer flows north into 
the San Diego, California area. Under this approach, the 
upfront construction costs of a treatment facility are to be 
borne by a private entity, and the United States is authorized 
to pay annual contract fees incorporating the costs of 
developing, financing, constructing, operating, and maintaining 
the wastewater treatment facility in Mexico over a period of 20 
years. The Act authorized to be appropriated a total of $156 
million for fiscal years 2001 through 2005 to carry out the 
title.
    On February 20, 2004, the United States and Mexico approved 
IBWC Treaty Minute No. 311, agreeing to go forward with the new 
wastewater treatment facility in Mexico authorized by the Act. 
The new treatment facility is to provide the secondary 
treatment that originally was to be provided by the IWTP under 
Treaty Minute No. 283, and is to provide additional capacity to 
treat raw sewage from the Tijuana area in Mexico. The United 
States is to pay, subject to the availability of annual 
appropriations, annual fees for the contracted wastewater 
treatment services. Treaty Minute No. 311 also specifies 
numerous other contract terms to be included in the wastewater 
treatment services contract. However, before it can enter into 
the contracts necessary to implement Treaty Minute No. 311, the 
U.S. Section of the IBWC needs an updated authorization.

                       Summary of the Legislation


Section 1. Actions to be taken

    Section 1 amends section 804(a) of the Tijuana River Valley 
Estuary and Beach Sewage Cleanup Act of 2000 to reflect the 
passage of IBWC Treaty Minute No. 311.
    In addition, Section 1 amends section 804(c), in paragraph 
(1), to clarify that it is the payment of a fee under a 
contract that is subject to the availability of appropriations, 
not the negotiation of the contract itself. This section also 
amends section 804(c), in paragraph (2), to change the required 
contract terms to eliminate the requirement that ownership of 
the Mexican facility transfer to the United States in the case 
of default and to clarify that competitive procedures governing 
subcontracts must comply with applicable law, such as 
applicable Mexican law, as well as be consistent with title III 
of the Federal Property and Administrative Services Act of 
1949.

Section 2. Implementation of new Treaty Minute

    Section 2 amends section 805 of the Act to reflect the 
passage of IBWC Treaty Minute No. 311 and to stress the 
importance of expediting action on this issue, in light of the 
continuing threat to the environment and public health and 
safety within the United States.

Section 3. Authorization of appropriations

    Section 3 amends section 806 of the Act to increase the 
total authorization of appropriations from $156 million to $230 
million and to eliminate the expiration of the authorization of 
funding.

            Legislative History and Committee Consideration

    On February 26, 2004, the Water Resources and Environment 
Subcommittee held a hearing on the budget requests and program 
priorities of agencies that fall under the jurisdiction of the 
Subcommittee. At that hearing, the Subcommittee received 
testimony from the United States Commissioner of the 
International Boundary and Water Commission on the status of 
implementation of the Tijuana River Valley Estuary and Beach 
Sewage Cleanup Act of 2000.
    The Water Resources and Environment Subcommittee met on 
July 15, 2004, to consider H.R. 4794 and other legislation. The 
Subcommittee reported the bill without amendment favorably to 
the Committee on Transportation and Infrastructure, by voice 
vote. The Committee on Transportation and Infrastructure met in 
open session on July 21, 2004, and ordered the bill reported, 
without amendment, to the House by voice vote.

                             Rollcall Votes

    Clause 3(b) of rule XIII of the House of Representatives 
requires each committee report to include the total number of 
votes cast for and against on each rollcall vote on a motion to 
report and on any amendment offered to the measure or matter, 
and the names of those members voting for and against. There 
were no recorded votes taken in connection with ordering H.R. 
4794 reported. A motion to order H.R. 4794 reported to the 
House was agreed to by voice vote.

                      Committee Oversight Findings

    With respect to the requirements of clause 3(c)(1) of rule 
XIII of the Rules of the House of Representatives, the 
Committee's oversight findings and recommendations are 
reflected in this report.

                          Cost of Legislation

    Clause 3(d)(2) of rule XIII of the Rules of the House of 
Representatives does not apply where a cost estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974 has been timely submitted prior to the filing of the 
report and is included in the report. Such a cost estimate is 
included in this report.

                    Compliance With House Rule XIII

    1. With respect to the requirement of clause 3(c)(2) of 
rule XIII of the Rules of the House of Representatives, and 
308(a) of the Congressional Budget Act of 1974, the Committee 
references the report of the Congressional Budget Office 
included below.
    2. With respect to the requirement of clause 3(c)(4) of 
rule XIII of the Rules of the House of Representatives, the 
performance goals and objective of this legislation are to 
resolve sanitation and water quality problems in the San Diego, 
California-Tijuana, Mexico border region by providing for 
adequate treatment of raw and partially treated sewage from 
Tijuana, Mexico.
    3. With respect to the requirement of clause 3(c)(3) of 
rule XIII of the Rules of the House of Representatives and 
section 402 of the Congressional Budget Act of 1974, the 
Committee has received the following cost estimate for H.R. 
4794 from the Director of the Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, September 9, 2004.
Hon. Don Young,
Chairman, Committee on Transportation and Infrastructure,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4794, a bill to 
amend the Tijuana River Valley Estuary and Beach Sewage Cleanup 
Act of 2000 to extend the authorization of appropriations, and 
for other purposes.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Susanne S. 
Mehlman (for federal costs) and Gregory Waring (for the state 
and local impact).
            Sincerely,
                                      Elizabeth M. Robinson
                               (For Douglas Holtz-Eakin, Director).
    Enclosure.

H.R. 4794--A bill to amend the Tijuana River Valley Estuary and Beach 
        Sewage Cleanup Act of 2000 to extend the authorization of 
        appropriations, and for other purposes

    Summary: The International Boundary and Water Commission 
(IBWC), composed of a U.S. section and a Mexican section, is 
responsible for applying the boundary and water treaties 
between the United States and Mexico and settling any 
differences that may arise out of such treaties. Enacting H.R. 
4794 would indefinitely extend the authority of the U.S. 
section of the IBWC to enter into a contract to build and 
operate a wastewater treatment facility in Mexico. Under 
current law, such authority is available through 2005 and is 
contingent on the negotiation and conclusion of a new treaty 
between the governments of the United States and Mexico.
    On February 20, 2004, a new treaty between the two 
governments was negotiated, establishing a framework for the 
development of the wastewater treatment facility. Under this 
contract, the plant owner would treat wastewater to certain 
U.S. standards, and the federal government would make annual 
payments over a 20-year period to cover the costs of 
developing, financing, constructing, operating, and maintaining 
the facility. This new facility would be designed to address 
the problem of untreated or partially treated sewage flowing 
over the border from Tijuana, Mexico, to San Diego, California.
    H.R. 4794 would authorize the appropriation of $230 million 
for the wastewater treatment contract. We expect that 
implementing the contract would constitute a federal lease-
purchase of the new treatment facility. CBO estimates, however, 
that implementing this legislation would require appropriations 
of $295 million over the 2005-2009 period. In addition, CBO 
estimates that appropriations of $316 million would be needed 
after 2009 to cover the costs associated with operating and 
maintaining the facility through the remainder of the contract 
period.
    Enacting this bill would not affect direct spending or 
receipts because the IBWC could not enter into a contract to 
build the plant until the full amount necessary to implement 
the contract is provided in advance in an appropriation act.
    H.R. 4794 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments. The bill would benefit California, the City of San 
Diego, and other local and tribal governments in that state by 
reauthorizing and increasing federal support of a wastewater 
treatment project along the U.S.-Mexico border.
    Estimated cost to the Federal Government: For this 
estimate, CBO assumes that the bill will be enacted near the 
start of fiscal year 2005 and that the estimated amounts 
necessary to build and maintain the wastewater treatment plant 
will be appropriated. Estimated outlays are based on historical 
spending patterns for other similar construction projects. The 
estimated budgetary impact of H.R. 4794 is shown in the 
following table. The costs of this legislation fall within 
budget function 150 (international affairs).

------------------------------------------------------------------------
                                By fiscal year, in millions of dollars--
                               -----------------------------------------
                                 2004   2005   2006   2007   2008   2009
------------------------------------------------------------------------
                    SPENDING SUBJECT TO APPROPRIATION
 Spending under current law to
 build and operate wastewater
 treatment facility:
    Authorization level \1\...      0      0      0      0      0      0
    Estimated outlays.........      0      0      0      0      0      0
Proposed changes:
    Estimated authorization         0    263      0      0     16     16
     level....................
    Estimated outlays.........      0     66    118     79     16     16
Spending under H.R. 4794 to
 build and operate wastewater
 treatment facility:
    Estimated authorization         0    263      0      0     16     16
     level....................
    Estimated outlays.........      0     66    118     79     16     16
------------------------------------------------------------------------
\1\ Current law authorizes the appropriation of $156 million over the
  2001-2005 period. To date no funding has been provided.

    Basis of estimate: This cost estimate is based on 
information from the U.S. section of the IBWC and a firm that 
is interested in constructing the new facility and has 
performed limited design work for such a facility. Because a 
new treaty was agreed to by the governments of Mexico and the 
United States on February 20, 2004, CBO expects that design of 
the wastewater treatment facility would begin in 2005. In 
total, CBO estimates that implementing H.R. 4794 would cost 
$295 million over the next five years and $316 over the 2010-
2025 period. The budgetary treatment of those costs as well as 
the various components are described below.

Budgetary treatment of lease-purchases

    CBO expects that the contract for wastewater treatment 
services authorized by H.R. 4794 would meet the criteria of a 
federal lease-purchase contract, meaning that the government is 
effectively purchasing--not leasing--the wastewater treatment 
plant. CBO bases this conclusion on the fact that the 
wastewater treatment plant would be built for the special 
purpose of the U.S. government, and there would be little or no 
private-sector market for this particular facility. 
Furthermore, the 20-year term of the lease would extend through 
most of the plant's expected economic life, and the lease 
payments over this period would pay for nearly all of the 
facility's cost.
    Despite the fact that the U.S. federal government would 
provide the funding to develop, finance, construct, operate, 
and maintain the facility, the legislation would require the 
facility to be conveyed to ``an appropriate governmental 
entity'' (apparently, a Mexican governmental entity) in the 
event that either the IBWC or the plant operator fails to meet 
its contractual obligations to operate the plant. CBO, however, 
assumes that because the U.S. government would be providing the 
necessary funding to support the facility, the U.S. government 
effectively controls the facility and directs its transfer to a 
Mexican governmental entity at the end of the contract period.
    Funds to execute federal lease-purchase contracts receive a 
special budgetary treatment (see Office of Management and 
Budget Circular A-11). When the government enters into lease-
purchase contracts, the present value of all expected future 
lease payments (excluding annual operating and maintenance 
costs) must be provided in an appropriation act in the first 
year of the contract. Because the cost of a lease-purchase 
contract that involves substantial financial risk for the 
government is accounted for over the project's construction 
period rather than the term of the lease, the outlays 
associated with the appropriation would follow the three-year 
construction schedule assumed for the project.

Construction cost

    CBO estimates that implementing this bill would require an 
appropriation of $263 million in 2005. At this estimated level 
of funding, CBO assumes that the new facility would treat up to 
about 59 million gallons per day of sewage (which is the 
capacity level identified in EPA's Master Plan for the Tijuana 
region), construction of the facility would cost about $159 
million in 2005, that the private builder would seek a 15-
percent rate of return under the lease terms to cover financing 
and other costs, and that the present value of the expected 
future lease payments would be discounted using CBO's 
projection of Treasury's long-term borrowing rate of 5.43 
percent. To the extent that different assumptions are used to 
estimate the net present value associated with the cost of the 
proposed project, the estimates for appropriations to support 
the project could vary.

Operation and maintenance cost

    In addition, after construction is completed, funding for 
operating and maintaining the facility during the remainder of 
the 20-year contract period could be required. While current 
law would allow for such costs to be offset by payments the 
owner of the facility might receive through the sale of treated 
water, there is no guaranty that such an agreement would be 
negotiated, according to the firm interested in designing the 
facility. As a result, CBO estimates that additional 
appropriations of $16 million annually could be necessary 
beginning in fiscal year 2008. Adjusting for anticipated 
inflation, such costs could reach as high as $23 million by 
2025.

Total costs

    CBO estimates that enacting this legislation would require 
a total appropriation of $295 million over the next five years 
and $316 million in subsequent years. This estimated cost would 
exceed the amount specifically authorized by the bill by a 
total of $381 million over the 2005-2025 period. CBO estimates 
that the amount specifically authorized to be appropriated by 
the bill would be insufficient to implement the 20-year lease-
purchase contract authorized by the legislation.
    Intergovernmental and private-sector impact: H.R. 4794 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments. The bill would benefit California, the city 
of San Diego, and other local and tribal governments in the 
state by reauthorizing and increasing federal support of a 
wastewater treatment project along the U.S.-Mexico border.
    Estimate prepared by: Federal Costs: Susanne S. Mehlman; 
Impact on State, Local, and Tribal Governments: Gregory Waring; 
and Impact on the Private Sector: Amina Masood.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                   Constitutional Authority Statement

    Pursuant to clause (3)(d)(1) of rule XIII of the Rules of 
the House of Representatives, committee reports on a bill or 
joint resolution of a public character shall include a 
statement citing the specific powers granted to the Congress in 
the Constitution to enact the measure. The Committee on 
Transportation and Infrastructure finds that Congress has the 
authority to enact this measure pursuant to its powers granted 
under article I, section 8 of the Constitution.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act (Public Law 104-4).

                        Preemption Clarification

    Section 423 of the Congressional Budget Act of 1974 
requires the report of any Committee on a bill or joint 
resolution to include a statement on the extent to which the 
bill or joint resolution is intended to preempt state, local, 
or tribal law. The Committee states that H.R. 4794 does not 
preempt any state, local, or tribal law.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                Applicability to the Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act (Public Law 
104-1).

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

   TIJUANA RIVER VALLEY ESTUARY AND BEACH SEWAGE CLEANUP ACT OF 2000


TITLE VIII--TIJUANA RIVER VALLEY ESTUARY AND BEACH CLEANUP

           *       *       *       *       *       *       *


SEC. 804. ACTIONS TO BE TAKEN BY THE COMMISSION AND THE ADMINISTRATOR.

  (a) Secondary Treatment.--
          (1) In general.--[Subject to the negotiation and 
        conclusion of a new Treaty Minute or the amendment of 
        Treaty Minute 283 under section 1005 of this Act,] 
        Pursuant to Treaty Minute 311 to the Treaty for the 
        Utilization of Waters of the Colorado and Tijuana 
        Rivers and of the Rio Grande, dated February 3, 1944, 
        and notwithstanding section 510(b)(2) of the Water 
        Quality Act of 1987 (101 Stat. 81), the Commission is 
        authorized and directed to provide for the secondary 
        treatment of a total of not more than 50 mgd in 
        Mexico--
                  (A) * * *

           *       *       *       *       *       *       *

  (c) Contract.--
          (1) In general.--[Subject to the availability of 
        appropriations to carry out this subsection and 
        notwithstanding] Notwithstanding any provision of 
        Federal procurement law[, upon conclusion of a new 
        Treaty Minute or the amendment of Treaty Minute 283 
        under section 5,] the Commission may enter into a fee-
        for-services contract with the owner of a Mexican 
        facility in order to carry out the secondary treatment 
        requirements of subsection (a) and make payments under 
        [such contract.] such contract, subject to the 
        availability of appropriations for that purpose.
          (2) Terms.--Any contract under this subsection shall 
        provide, at a minimum, for the following:
                  (A) * * *

           *       *       *       *       *       *       *

                  (J) Provision for the transfer of ownership 
                of the Mexican facility to [the United States] 
                an appropriate governmental entity, and 
                provision for a cancellation fee by the United 
                States to the owner of the Mexican facility, if 
                the Commission fails to perform its obligations 
                under the contract. The cancellation fee shall 
                be in amounts declining over the term of the 
                contract anticipated to be sufficient to repay 
                construction debt and other amounts due to the 
                owner that remain unamortized due to early 
                termination of the contract.
                  (K) Provision for the transfer of ownership 
                of the Mexican facility to [the United States] 
                an appropriate governmental entity, without a 
                cancellation fee, if the owner of the Mexican 
                facility fails to perform the obligations of 
                the owner under the contract.
                  (L) The use of competitive procedures under 
                applicable law, consistent with title III of 
                the Federal Property and Administrative 
                Services Act of 1949 (41 U.S.C. 251 et seq.), 
                by the owner of the Mexican facility in the 
                procurement of property or services for the 
                engineering, construction, and operation and 
                maintenance of the Mexican facility.

           *       *       *       *       *       *       *


SEC. 805. [NEGOTIATION OF] NEW TREATY MINUTE.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Implementation.--In light of the continuing threat to the 
environment and to public health and safety within the United 
States as a result of the river and ocean pollution in the San 
Diego-Tijuana border region, the Commission is requested to 
give the highest priority to the implementation of Treaty 
Minute 311 to the Treaty for the Utilization of Waters of the 
Colorado and Tijuana Rivers and of the Rio Grande, dated 
February 3, 1944, which establishes a framework for the siting 
of a treatment facility in Mexico to provide for the secondary 
treatment of effluent from the IWTP at the Mexican facility, to 
provide for additional capacity for advanced primary and 
secondary treatment of additional sewage emanating from the 
Tijuana River area, Mexico, and to meet the water quality 
standards of Mexico, the United States, and the State of 
California consistent with the provisions of this title, in 
order that the other provisions of this title to address such 
pollution may be implemented as soon as possible.

SEC. 806. AUTHORIZATION OF APPROPRIATIONS.

  There is authorized to be appropriated a total of 
[$156,000,000 for fiscal years 2001 through 2005] $230,000,000 
to carry out this title. Such sums shall remain available until 
expended.

           *       *       *       *       *       *       *