THE IRRIGATION AGE. 



165 



Irrigation Bonds Under Carey Act 



By^Mark Bennitt 



Bonds issued on account of irrigation projects under- 

 taken by authority of the Carey act are among the best 

 known of securities of this class. The Carey act has 

 afforded a plan for irrigation development with private 

 capital, whose success is without parallel. 



The great work of the Government under the reclama- 

 tion law calls for no assistance from bond houses or pri- 

 vate interests of any sort. Such public lands as may lie 

 within the area to be irrigated by a Government project 

 is at all times available for entry under the homestead act, 

 and the patented lands come under an arrangement where- 

 by no person shall have more than the farm unit decided 

 upon under the project. 



On the other hand, the Carey act furnishes a splendid 

 means for private enterprise and investment. The pro- 

 cedure under the Carey act is in the main as follows: 

 The initiative is taken by a private individual or company. 

 The first step is to make a filing upon the waters avail- 

 able for irrigation and then to secure the segregation of 

 the lands which may be irrigated from the stream or 

 proposed reservoir. 



In all this work the private parties must have the co- 

 operation and assistance of the State Land Board. It is 

 the duty of the board, on approving the project, to apply 

 to the Federal Government for the segregation of the land. 

 The application must be accompanied by a full statement 

 of water supply and all necessary data to justify the 

 segregation. Then follows a Government investigation 

 of the project. The price of the perpetual water right is 

 fixed in the beginning by agreement between the irrigating 

 company and the state. This having been done, the com- 

 pany is allowed to go ahead with construction. An open- 

 ing day for the sale of the land and water rights is an- 

 nounced. On this occasion the State Land Board and the 

 private company work together, the state selling the 

 land at 50 cents an acre, the price named in the Federal 

 statute, and the water right being sold at the fixed price, 

 which cannot be increased. The law requires that each 

 applicant for land must sign a contract for a water right 

 before he may enter the land. It is this provision that is 

 so advantageous in the protection of the invested capital, 

 the ordinary homesteader being excluded. 



The success of the sale of lands under the Carey act 

 depends more or less upon the reputation of the private 

 organization which is undertaking the project. During 

 the first year that the law was enforced there were 

 numerous failures by reason of miscalculation as to cost 

 and by unsuccessful advertising, and other causes. The 

 state exacts a sufficient bond from the private organiza- 

 tion to insure the performance of the contract. This also 

 protects the settler. During the last two or three years 

 the demand for irrigated land has become such that it 

 frequently happens that large tracts are sold out immedi- 

 ately on the opening day or soon thereafter. 



The price of the perpetual water right is based upon 

 the cost of construction. All the details of construction 

 must be approved by the State Land Board. A small 

 down payment is made on the water right by the entry- 

 man, and the contract is signed for the full right. These 



contracts under the law constitute a first lien on the land 

 and are the equivalent of a first mortgage. It has been 

 the practice of bond houses to deposit these contracts 

 with the trustee as collateral for the bonds at the rate of 

 $1.25 for each dollar of bond issued. Sometimes these 

 securities are in the form of serial payment bonds, the 

 payments extending through a period of ten to fifteen years; 

 in other cases term bonds are issued to run two, three, 

 four or more years up to the full period of payments on 

 the water rights. As the water rights are all paid for seri- 

 ally, the short-term issues are promptly retired. In this 

 case, as in the case of district bonds, the standing of the 

 trustee and the bond houses have an important bearing 

 on the salability of the securities. 



Where the state exercises strict supervision of con- 

 struction and where the bond issue is ample to cover all 

 contingencies, the safety of the investment is well assured. 

 Ultra-conservative investors are now seen buying these 

 securities. 



Water rights under the Carey act are now selling at 

 from $45 to $65 and even up to $125 an acre. Conserva- 

 tive financiers estimate that under general conditions now 

 existing in the irrigating regions a bond issue of $25 per 

 acre is justified. The fact that the value of the lands is 

 immediately increased by occupancy is reassuring to the 

 investor. Occupancy necessitates improvements of a per- 

 manent character. The purchaser of land and a water 

 right under one of these irrigating systems can ill afford 

 to allow his property to remain idle. The generous pro- 

 ductiveness of the land under irrigation is such as to 

 attract the best farmers. The trained farmer, especially 

 the one who has scientific knowledge, is quick to appre- 

 ciate the immense money-making value of the land which 

 has a controllable water supply always available for im- 

 mediate use. 



Irrigated land is generally of very high quality be- 

 cause it is usually river bottom land or bench land where 

 the soil is deep, and it has never been subjected to the 

 copious rains which wash out much of the plant foods 

 in the rainy country. 



Chicago bond houses have become heavily interested 

 in irrigation. Some of these have placed large issues 

 with their customers all over the countrv, and so prompt 

 have payments been, both of interest and maturing bonds, 

 that these securities are rated very h'gh when put out by 

 well known and conservative houses. 



The Twin Falls country of southern Idaho is the 

 source of many of these bonds. The gigantic works which 

 have been constructed for irrigating portions of the Snake 

 River Valley have involved the expenditure of many 

 millions of dollars. Still greater works are in process of 

 construction and others still are contemplated. More than 

 a million acres of land in this region alone will be irri- 

 gated under the Carey act before the completion of proj- 

 ects now in hand. 



A sale of land under the Carey act was recently held 

 at Milner, Idaho, when nearly 30,000 acres were sold at 

 $65 per acre. 



Another sale under the Carey act had taken place a 

 few days before at another point in the great valley, 

 where an equally fine class of people representing many 

 Eastern states were in attendance, and where nearly 50.000 

 acres were sold at $40 per acre. Under good management 

 Carey act land sells out at once, furnishing a strong un- 

 derlying value for the bond issue. 



