LOS ANGELES - California and U.S. officials are in the final stages of revising an agreement in principle that provides a general framework for giving the state control of one of the nation's largest federal water projects by 1995.

Gov. Pete Wilson last spring formed a task force to negotiate possible terms with the U.S. Interior Department for transferring control of the Central Valley Project to the state. Officials hope to reach agreement by Sept. 30.

According to a Sept. 10 draft version the memorandum of agreement, the officials have studied various options for transferring control and have concluded that "transfer of title [to the project] best meets the goals of California and the U.S."

The eventual outcome of the negotiations is important to many in the municipal market because local issuers such as urban and agricultural water districts have a huge stake in federal and state water policies.

Many people assumed at the outset of the discussions that a full title transfer would be impossible, " especially since the state said it was not in a position to spend huge sums of money for a takeover, noted Andrew H. McLeod, assistant secretary of communications for the California Resources Agency. Douglas P. Wheeler, secretary of the agency, is the governor's point man for overseeing the state negotiations.

But other transfer options, like giving the state operating control of the project but letting the federal government retain ownership, posed "legally difficult" challenges, Mr. McLeod said.

For example, it made little sense from a federal standpoint to own the project and retain liability but have no control, he explained.

A title transfer also seemed more feasible when rough estimates of asset valuation for the project produced numbers that might be workable from the state's viewpoint, Mr. McLeod said.

Gov. Wilson is seeking control of the federal project in the belief that the transfer will improve efficiency by combining management of the federal system and the State Water Project. He also argues that California's economic health depends on controlling planning and allocation of the Central Valley Project to meet long-term urban, agricultural, and environmental water needs.

California initially conceived the Central Valley Project, but the United States undertook construction in the 1930s because of state economic problems stemming from the Great Depression.

The vast system of dams. reservoirs, and other facilities now provides single largest block of developed water in California, much of which benefits agriculture.

Major water negotiations in California usually trigger contentious discussion, and six years of drought have heightened sensitivity to how the resource is allocated.

Published reports this week about the draft agreement generated intense response. Among other things, critics of the process say it distracts attention from pending federal legislation that would revamp policies for the Central Valley Project, including those that currently restrict water sales by farmers.

Others said the draft agreement avoids addressing crucial issues pertaining to the transfer, such as the project's price and anticipated water policies.

Mr. McLeod acknowledged that "the issues to be settled are mammoth," but also observed that an agreement in principle at least paves the way to move forward.

The reason the transfer may take until 1995 to finalize is that achieving compliance with environmental reporting processes is a lengthy procedure, he added. The draft memorandum notes that specific contract terms and conditions will be developed under the National Environmental Policy Act and the California Environmental Quality Act. This lengthy and complex process means it will take about three years to reach a final decision.

Last week, the federal Bureau of Reclamation also released draft figures of so-called baseline data to help determine a rough estimate of asset valuation for the Central Valley Project.

The figures, prepared with the assistance of First National Bank of Chicago as an outside financial adviser, note that the federal government has invested $3 billion in the project.

Of that amount, almost $2 billion remains to be repaid by agricultural, urban, industrial, and power water users. Most of those payments will be received by fiscal 2030 under current repayment policies.

The present value of that revenue stream. using a 7.84% discount rate, is $870 million, according to the figures.

Beside the value of those financial contracts, the reclamation bureau provided estimates on the value of the project's physical assets. The book value, $3 billion, is reduced to $1.9 billion if the original cost of each facility is depreciated using a straightforward accounting approach known as straight-line depreciation.

By contrast, the estimated replacement cost of the project is pegged at $7.1 billion.

It remains uncertain how such information might be combined to arrive at a total valuation for purposes of a transfer.

In addition, possible changes in future water rates and reallocation of water supplies could affect revenues collected by the operator of the project, the financial analysis notes.

Standard & Poor's Corp. observed in a report last April that changes in policies, including those embedded in the pending federal legislation, also could affect the financial flexibility of local water districts.

Bond professionals also will be interested in how California finances any assumption of the Central Valley Project. Whether some sort of revenue bond issuance might play a role in raising up-front money is uncertain, and Mr. McLeod noted that the subject has not been raised "at all" by state officials. Such details will likely remain on a back burner.

For now, federal and state officials are trying to reach a final accord on the memorandum of agreement. They hope by November to develop general terms and conditions for a transfer if an agreement in principle is reached this month.

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