Summary: The operational and financial issues involved in the implementation of the Panama Canal Treaty of 1977 were discussed. It is believed that the Panama Canal Commission (PCC) could operate as either an appropriated-fund agency or as a corporate-type organization. Since Congress has historically incorporated Government agencies which function as commercial or business-type entities, and since there would be additional administrative burdens involved in changing the PCC's present corporate form of organization, incorporation of the PCC would be both preferable and consistent with past congressional policy. The principal concern of GAO is that the transfer of property and activities to the Republic of Panama be orderly and that it assure continued efficient operation of the Canal. As of February 1979 the Government of Panama's debts to the U.S. totaled about $9.2 million, of which about $8.7 million was delinquent. These debts should be resolved either as an offset to treaty-specified payments, or preferably, through a lump-sum payment before October 1, 1979 as stipulated in recent legislation. The PCC is required to reimburse the Government of Panama for costs incurred in providing certain Treaty-specified public services. Draft procedures have been developed for relating the payments to the actual costs incurred in order to provide a method for verifying the costs and to provide guidance to joint subcommittees. Neither the extent of which Canal toll rates will have to be increased in order for the PCC to recover costs, nor the total costs that will have to be recovered, will be known until treaty-implementing legislation is enacted. However, it is estimated that a toll rate increase of 21.8 percent would be required to cover projected toll revenue deficiencies in fiscal years 1980, 1981, and 1982. The net amount of other treaty-related costs is estimated at $1,009.7 million, of which $344.7 million would be recovered through tolls, and about $663.7 million would require appropriations.
