444 



It asserted that: 



Tlie Federal Government has used water resources and power development 

 projects, which should be undertaken exclusively for economic purposes, to accom- 

 plish indirect social and political ends.*^ 



Moreover — 



The Federal Government has paid too niiieh of the costs of water resource 

 and power development and has required too little of the beneficiaries. 



The Federal Gov'ernment has planned, constructed, and paid for water re- 

 source and power development projects which are economically unsound and 

 hence waste the national wealth. 



From the standpoint of financial return to the Federal Government, Federal 

 water resource and power projects which produce, or could produce, revenues 

 are not operated according to sound business principles, and do not produce 

 a return fairly related to their value; nor does the Federal Government uni- 

 formly require adequate contributions, either for the use of its money for capital 

 outlay or for operation and maintenance costs.*^ 



Further support for the position taken by the Second Hoover Com- 

 mission was g'iven by a Presidential Advisory Committee on Water 

 Resources Policy that reported December 22 of the same year.^^ This 

 report, rendered by the Secretaries of Agriculture, Defense, and the 

 Interior, urg-ed decentralization of water projects, with a larger share 

 of their funding provided locally. Specifically, it recommended : 



(a) That, as a general policy, all interests participate in the cost of water 

 resources development projects in accordance with the measure of their bone- 

 fits; that the Federal Government assume the cost of that part of projects where 

 benefits are national and widespread and beneficiaries are not readily identi- 

 fiable; that power and mimicipal and industrial water users pay the full cost 

 of development; that where projects are primarily local, and the beneficiaries 

 are clearly identifiable, the Federal Government's contribution should be limited, 

 with non-Federal interests bearinsr a substantial portion of the construction 

 costs of the project as well as the replacement, maintenance, and operation costs; 

 and that under certain conditions the Federal Government may bear a higher 

 proportion of the costs. 



(?>) That the Federal Government encourage non-Federal assumption of re- 

 sponsibility for construction of water resources projects by such means as the 

 payment of costs which would have been noni'eimbursable had the projects been 

 federally constructed, and the making or guaranteeing of loans to non-Federal 

 interests for certain purposes under proper safeguards. 



Application of the principles advanced in Circular A-47 of the Bu- 

 reau of the Budcret, coupled witli the principles enunciated by the 

 Hoover Counin-sion and tlie Pi-esident's Advisory Conmiittee, came 

 under considerable criticism ]:)ecause of a damping effect on new starts. 

 Criticism centered on : 



(a) The inclusion of tax losses incurred by the construction 

 of a proiect as a cost : 



(h) The arbitrary imposition of a HO-vear amortization ceil- 

 ing on projects presumed to have a longer life ; 

 (r) The emphasis on tangible benefits ; 



(d) The criterion that pi-ojects not incorporate power gener- 

 ation features unless power could be profluced from them more 

 cheaply than by any alternative federally financed source; 



(e) The shift from the incremental method to the separable 



" IMfl., V. 13. 



"Ihid., pp. 14, 17, 22. 



"T^S. Prpsidential Advisory Committee on Water Resourops Policy. Water Rpsonrces 

 Poiicv. A Report hv the * * '* on Water Resources Policy. Dec. 22, 1955. (Washington, 

 U.S. (Government Printing Office, 1955.) 



