IRRIGATION DISTRICT OPERATION AND FINANCE. 23 
certified issues. While the bond house relies upon its own investi- 
gation of the desirability of taking the issue, as well as upon the 
State report, the fact of certification makes the issue more attractive 
to the average investor and is consequently an important selling 
point. 
During the last few years a tendency has developed toward elim- 
inating the word " irrigation " from the official designations of irriga- 
tion districts and substituting some equivalent term, such as " water 
conservation," " water conservancy/' or " water improvement." 
Some of the recent statutory amendments permit and others require 
the new terms to be used. These changes are designed to afford 
districts an opportunity to prove the merits of their bond issues 
without having to encounter the initial handicap still attaching to 
the term " irrigation " in some places. 
The fact that irrigation district bonds, in common with other 
municipal and quasi-municipal securities, are exempt from Federal 
taxation is thought to have had an important bearing upon the more 
active market in recent years in sections where districts are favor- 
ably known. In some States such bonds are free from State taxation 
as well. 
CHARACTER OF IRRIGATION DISTRICT BONDS. 
Speculative or nonspeculative character. — Bonds of irrigation districts 
may be divided into two general classes on the basis of the character 
of the enterprises issuing them. A district which includes lands valu- 
able enough without irrigation to furnish adequate security for its 
obligations, and which is sufficiently developed to insure revenue for 
making all payments promptly, may issue bonds which are truly an 
income-producing investment. On the other hand, a project which 
has no security to offer beyond that to be created with the proceeds 
of its bonds, whether honestly conceived or otherwise, is essentially 
a speculative undertaking. Bonds issued by districts of these two 
classes have borne approximately the same rates of interest and have 
carried nothing else on the face of the bonds to indicate the extent 
of the security. Furthermore, in the periods of indiscriminate buying 
of irrigation securities, bonds of speculative districts often retailed, 
at prices comparable with those of sound bonds, to purchasers whose 
intent was to invest rather than to speculate. It was the failure to 
discriminate between these types of security that permitted so many 
questionable undertakings to be financed during those periods. 
The theory of State certification of bonds as legal investment for 
bank and trust funds is based upon a recognition of two distinct 
classes of irrigation bonds. The application of this theory, by putting 
the purchaser on his guard, tends to make more difficult the sale of 
speculative bonds from States which have provided for certification. 
In such States, therefore, while feasible projects of the speculative 
class may still organize as districts, the failure of the bonds of such 
districts to bear State certification carries the implication of a possi- 
ble lack of adequate immediate security. 
Financial reorganizations. — While some projects contained so little 
merit as to result in complete abandonment, others unable to meet 
early obligations were sufficiently worthy to give promise of eventual 
success if relieved of part of their burdens. Certain enterprises of 
