The Washington Aqueduct, managed by the U. S. Army Corps of Engineers, provides wholesale water treatment services to WASA and its partners in Northern Virginia, Arlington County and Falls Church. WASA purchases approximately 75 percent of the water produced by the Aqueduct's two treatment facilities, the Dalecarlia and McMillan treatment plants, and thus is responsible for 75 percent of the Aqueduct's operating and capital costs. Under federal legislation and a memorandum of understanding enacted in 1997, WASA and its Northern Virginia partners have a much greater role in oversight of the Aqueduct's operations and its capital improvement program.

The FY 2003 — 2012 proposed disbursements budget for WASA's share of Washington Aqueduct projects totals $119.1 million, or $7.6 million less than last year's 10- year plant of $126.7 million.

Major projects underway in this year's plan include:

• McMillan Water Treatment Plant Improvements — This includes a variety of projects at the McMillan plant, which is adjacent to WASA's Bryant St. pumping station, including elevator and crane replacements and building renovations. Over ten years, projects at this facility will total approximately $16.1 million (WASA share.)
• Transmission & Storage Facility Improvements — This includes a variety of projects including renovation of the booster pumping station, replacement of sluice gates, improvements to the Georgetown Reservoir, transmission main rehabilitation, and improvements to the Little Falls pumping station. WASA's share of costs over ten years totals approximately $16.4 million.
• Dalecarlia Water Treatment Plant Improvements — This includes a variety of projects at the Dalecarlia plan, including building, roadway and security improvements and clearwell cleaning and disinfection. Over ten years, projects at this facility will total approximately $15.6 million (WASA share.)

Near-term projects include Georgetown Reservoir improvements, including rehabilitation of the dividing wall and sluice gates, and renovation of the laboratory and chemical buildings which will renovate the four existing, forty-year old labs.

In addition to these projects, the Aqueduct has identified a project that could occur depending on the outcome of permit negotiations and other regulatory changes that are being considered by the EPA. Currently, solids that settle out from water in the Dalecarlia and Georgetown Reservoirs are periodically discharged into the Potomac River during high river flow conditions. The draft NPDES permit received by the Aqueduct requires development of a plan to remove 85 percent of incoming sediments and not return them to the Potomac River. The Aqueduct, WASA and the other wholesale customers are working with the EPA to better understand this requirement and to identify the technological alternatives available to meet this requirement. The Aqueduct has tentatively identified projects to address this requirement, with costs totaling approximately $51 million (WASA share only).

Currently, WASA finances its Washington Aqueduct projects in two ways: 1) taxable U. S. Treasury notes; and 2) pay- as- you- go financing. Most of the projects financed with U. S. Treasury notes are nearing completion, leaving virtually all of the out- year projects to be financed with WASA pay- as- you- go financing. For the pay- as- you- go projects, the U. S. Corps of Engineers currently requires WASA to remit cash in an amount equal to the total project cost in advance of advertising contracts, and these funds are transferred immediately to a Corps / U. S. Treasury account at zero return to WASA. In the past, this has not been a significant issue to WASA as the level of projects to be undertaken was relatively small. However, these projects are beginning to increase in size and scope, becoming an unreasonable cost for WASA's customers to bear. We have made good progress over the last six months on this issue, including discussions with senior management at the Corps, the Aqueduct, Congressional staff, and the U. S. Office of Management and Budget. In addition, we are pursuing options to transfer dollars on a phased basis or to provide the Corps with a bank line of credit, both of which would allow us to keep our cash and related interest earnings until the funds are actually needed by the Corps.

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