William T. and Nicole L. Gladden - Page 9




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          Harquahala Valley, Arizona (local water distribution system),                
          that would connect with the CAP Colorado River water distribution            
          system.  HID issued $8.4 million in municipal bonds to raise                 
          funds to reimburse the Interior Department for a portion of                  
          construction costs the Interior Department had advanced for                  
          construction of the local water distribution system.                         
               During 1983 through July of 1992, HID and the Harquahala                
          Valley landowners received annual distributions of Colorado River            
          water under the Subcontract.                                                 
               On July 17, 1992, HID sent a written notice to the                      
          Harquahala Valley landowners of a special election regarding                 
          relinquishment of HID’s water rights under the Subcontract.  The             
          notice explained that HID’s proposed relinquishment of water                 
          rights would occur in exchange for payment by the Federal                    
          Government to HID of HID’s debt and bond obligations to the                  
          Federal Government and for the payment of other funds.  The                  
          notice further explained that funds HID would have available as a            
          result of the payment for relinquishment of its water rights,                
          after expenses and debts, could be distributed to the Harquahala             
          Valley landowners.                                                           
               On August 7, 1992, HID and the Federal Government signed an             
          agreement in principle under which HID agreed to relinquish up to            
          100 percent of its Colorado River water rights, and the value of             
          the water rights to be relinquished was agreed to be $1,050 per              
          acre-foot of water.                                                          




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