328 



THE IRRIGATION AGE. 



ment to date from the fifth year after entry. Con- 

 gress did this in full realization that great projects 

 were under way or ought to be under way ; it poured 

 out the baby with the bath, and yet made no other 

 provision to replace the means of finance that is dis- 

 appearing. 



The Reclamation Service employs a force of 

 7,998 persons; it has invested enormous funds in 

 power plants, machinery, implements, and in equip- 

 ment and improvements for carrying on its work. 

 Its expenses run on whether this lies idle or is kept 

 busy, while if it should' do its work by piecemeal 

 the operations of the Service organized as it is for 

 large undertakings will become so costly that the 

 investments of the Government will end in a loss. 



No great enterprise, public or private, except 

 these government irrigation projects, has ever been 

 begun in the United States without at least trying 

 in advance to find the funds needed to carry it to a 

 finish. The troubles that now confront the Recla- 

 mation Service were fore- 

 doomed from the start be- 

 cause of the faulty method 

 of finance by which it was 

 inaugurated because of this 

 trusting upon an uncertain 

 source of funds and revenue 

 for conducting its opera- 

 tions. The correct way (if I 

 may be bold enough to say 

 it) is the simple, ordinary 

 way of issuing debentures. 

 Each project should have 

 been required to stand good 

 for its own debentures, and 

 these debentures should have been issued in repre- 

 sentation of the officially appraised value of the land 

 as improved and been redeemed out of a sinking 

 fund created by the installment payments of the 

 landowners. 



The debentures could have been issued in series 

 against separate units in each project and placed on 

 the market as occasion, arose. In this way funds 

 could have been obtained in advance to the full 

 amount of the estimated cost of any work planned 

 and undertaken. They would have had a ready sale 

 at three per cent. In Europe such debentures have 

 no fixed maturity, but are retired upon contingen- 

 cies specified for the series at the issue 



In the case of railroads and municipalities in 

 the United States, they mature at very distant dates, 

 but are subject to immediate recall by the maker. 

 Either of the two forms would have been satisfac- 

 tory, provided it gave to each project ample time 

 to refund and meet its obligations. The time should 

 have been at least seventy-five years. This would 

 have enabled the Government to grant a correspond- 

 ing long term to landowners to repay their respective 

 shares of the cost of the construction work. Calcu- 

 lated at three per cent for that period, the annuities 

 which the landowners would have been required to 

 pay into the sinking fund would not have been as 

 large as normal interest charges at present. 



Thus, besides creating an adequate supply of 

 capital, this method of finance would have made 

 the investment of the Government profitable and 



A one-man tractor doing work of several horses. 

 International Harvester Co. 



also have lightened the burden of the landowners. 

 The sooner this or some other method is adopted the 

 better it will be. Indeed, a change is absolutely nec- 

 essary, because the Secretary of the Interior warns 

 that a cessation of all work is imminent, while the 

 Director of the Service reports that landowners are 

 falling in arrears and must be granted renewals even 

 after the expiration of the recent twenty-year ex- 

 tension. 



The U. S. Government may possibly worry 

 along under present arrangements but the land- 

 owners cannot. Last year they paid sixteen per 

 cent of the returns of their crops to the Government. 

 In addition, they had to pay water rights and taxes. 

 Unfortunately, too, most of them had to pay six to 

 twelve per cent interest on the mortgages which 

 they gave for the purchase price of their property. 

 Such a burden would be difficult to bear in old, 

 established communities. In these irrigation projects 

 it becomes insupportable, because it leaves prac- 

 tically nothing to the entry- 

 man or assignee for the keep 

 of himself and family, if he 

 does not happen to have in 

 cash at the start the $2,000 

 or $4,000 needed to improve 

 and equip his farm. Five 

 years are required to bring 

 an irrigated farm to full de- 

 velopment, while an orchard 

 is a heavy expense and 

 yields not a cent of profit 

 during all that time. 



It is clean out of the 

 question to expect a settler 



in a new country to pay back or to recover the in- 

 vestment of capital and labor in his homestead 

 faster than he can refund it from his savings from 

 the annual returns of the soil. An attempt to force 

 homesteaders to do so brought on the crash in 1893 

 of the farm-mortgage craze and, I believe, it is the 

 chief cause of the financial difficulties of the farmers 

 on the irrigation projects. 



Short term for loans or for installment pay- 

 ments on construction work should be abolished. 

 The charges against landowners and the financial 

 operations of the Reclamation Service should be 

 converted into long term fifty or seventy-five years 

 through some carefully prepared plan of bond or 

 debenture issues. I offer this suggestion after a 

 more or less lengthy study of the subject in Europe 

 and in the United States. If it be found acceptable, 

 perhaps it would be best to reorganize the Reclama- 

 tion Service so as to restrict its scope to making 

 plans and estimates and doing the construction 

 work, and then to place the financial operations in 

 charge of the Secretary of the Treasury, and intrust 

 the collection of dues from landowners to the Water 

 Users' Associations. 



This arrangement, if carried out to completion, 

 would turn the Water Users' Associations into land- 

 schafts. I called the Government's attention to the 

 feasibility of the landschaft idea in a report that I 

 sent to the State Department from Paris in 1912. 

 Further study has more thoroughly convinced me 

 of the worth of this idea. If the irrigation projects 



Courtesy 



