whatever it is second-feet, that that ought to carry a prior right, that they are really entitled to a prior right, the recognition of a prior right. I know we are awfully jealous in Colorado of preserving our prior rights, and we never whack up with a junior right. When we own it, we own it, and that is all there is to it; and if there is anybody that takes chances it is the newcomer rather than the old settler.

Mr. SUMMERS. It was only that one feature, as to whether it needed to be reserved to them, because of helping the sale of their bonds. I thought in this case that that did not apply.

Mr. TAYLOR. Possibly not. I don't know.

Mr. SWING. Mr. Glass, in his report to the chairman of the committee, criticized the feature of financing provided in the bill and suggests a direct appropriation. I believe from my canvass of the situation that it would be absolutely impossible at this time to put through a proposal to appropriate the cash out of the Treasury for this project. I think that he put this up against the impossible when he said that is the route to travel.

Secondly, if the appropriation was made, in the condition in which the United States Treasury is in now, Mr. Glass would have to do almost identically the thing that is provided in this bill: He would have to sell certificates of indebtedness to get the money to comply with the appropriation. I just noticed in to-night's paper-in the Star-this article:

TREASURY OFFERS NEW CERTIFICATES-SERIES T-8, DATED JULY 15, 1919, ARE PAYABLE MARCH 15, WITH INTEREST-EXEMPT FROM TAXATION.

The Treasury Department announced to-day that "The Secretary of the Treasury, under the authority of the act approved September 24, 1917, as amended, offers for subscription, at par and accrued interest, through the Federal reserve banks, a limited amount of Treasury certificates of indebtedness, series T-8, dated and bearing interest from July 15, 1919, payable March 15, 1920, with interest at the rate of 4 per cent per annum. Applications will be received at the Federal reserve banks. Bearer certificates with one interest coupon attached will be issued in denominations of $500, $1,000, $5,000, $10,000, and $100,000."

The certificates will be exempt, both as to principal and interest, from all taxation now or hereafter imposed by the United States, any State, or any of the possessions of the United States or by any local taxing authority, except estate or inheritance taxes or graduated additional income taxes and excess profits and war profits taxes.

The interest on an amount of bonds and certificates authorized by the act, the principal of which does not exceed $5,000, owned by any individual, partnership, association, or corporation, shall be exempt from surtaxes, excess profits, and war profits taxes.

I think it is well known that on account of the great expenditures during the war and the obligations oustanding that the Treasury is not in a condition where it will have an actual surplus in the near future, and that any appropriation must call for some method of financing by borrowing the money from outside sources. The method followed in this bill is not different particularly from that followed in the $20,000,000 loan from the General Treasury to the reclamation fund. Section 2 of that act provides almost word for word the method that is provided in here:

SEC. 2. That for the purpose of providing the Treasury with funds for such advances to the reclamation fund, the Secretary of the Treasury is authorized

to issue certificates of indebtedness of the United States in such form as he may prescribe and in denominations of $50 or multiples of that sum; said certificates to be redeemable at the option of the United States at any time after three years from the date of their issue and to be payable five years after such date, and to bear interest, payable semiannually, at not exceeding 3 per centum per annum; the principal and interest to be payable in gold coin of the United States. The certificates of indebtedness herein authorized may be disposed of by the Secretary of the Treasury at not less than par under such rules and regulations as he may prescribe, giving all citizens of the United States an equal opportunity to subscribe therefor, but no commission shall be allowed, and the aggregate issue of such certificates shall not exceed the amount of all advances made to said reclamation fund, and in no event shall the same exceed the sum of $20,000,000. The certificates of indebtedness herein authorized shall be exempt from taxes or duties of the United States, as well as from taxation in any form by or under State, municipal, or local authority; and a sum not exceeding one-tenth of 1 per centum of the amount of the certificates of indebtedness issued under this act is hereby appropriated, out of any money in the Treasury not otherwise appropriated, to pay the expense of preparing, advertising, and issuing the same.

Now, back of that $20,000,000, of course, was an intangible lien of the United States upon the property within the projects on which the money was to be expended; back of the advances which the United States makes to us are the bonds of the district, which is a legal lien upon the land, so it gets back not very different from the method which has heretofore been followed in financing the reclamation projects, and it is the method which would have to be followed if a direct appropriation was made, because we would have to go outside the Treasury to get the money. It seems to me that the people on the California side of the river ought to be treated not very differently from the way the people on the Arizona side have been, and we are simply trying to find a way where under the existing conditions of the Government it can be financed, whereby the Government, by declaring its confidence in the people and their project, can encourage private capital to come out and invest its money in the proposition.

Mr. SINNOTT. These bonds that are issued, will they be preferred security over present indebtedness or subordinate to the present indebtedness?

Mr. SWING. Neither. The California law provides that they shall be equal.

The next provision of the Secretary of the Treasury-he objects that the maturities of the United States Government certificates of indebtedness are determined not by the Treasurer according to the exigencies of the case or the money market, but are determined by an organization in California acting under California law. That is, the bill provided in its present form that the United States certificates of indebtedness should follow as to rate of interest and as to time of maturity the bonds offered by the district, the idea being to make the district stand on its own bottom, and that the Government would not be called upon to pay anything until the district was ready to pay its obligations to the Government; but in view of the criticism and to meet it I think that might be amended and leave it entirely to the discretion of the Secretary. He can fix the date to suit himself.

Now, I think that that can be met by an amendment, and I am willing that it should be. Amend section 4 to read:

SEC. 4. That upon the receipt by the Secretary of the Treasury of such district bonds he shall issue certificates of indebtedness

Now, he objects to the name; I never thought that he was obliged to use that name; he can use any name that he wants to, and in order to meet that we put in this

issue certificates of indebtedness, bonds, or notes of the United States in such form as he may prescribe and in amount equal to the face value of such district bonds and bearing interest at a rate

Before it said "at the same rate"; now we have amended it to say— at a rate to be determined by him, not exceeding, however, the rate of interest borne by the district bonds and in denominations of $50 or multiples thereof, the principal and interest thereof to become due on dates to be fixed and determined by him.

If he wants to, he can leave them to fall due at the same time as the district bonds, but if in his wisdom as a financier handling the United States end of it he wants them to fall due sooner, it seems to me it meets his objections to leave it discretionary with him.

Mr. SMITH of Idaho. What are the terms of the bonds you propose to have issued on your district?

Mr. SWING. They begin falling due in installments every year after 20 years. Our State law provides that the outside limit is 40 years. Mr. SMITH of Idaho. But you don't mean to have them all run 40 years?

Mr. SWING. No; it provides that they must begin falling due within 20 years and must all be due by 40 years. There is a graduated scale provided which must be followed, but they can begin by making them payable sooner.

Mr. SMITH of Idaho. They could be made payable two or three or four years.

Mr. SWING. Yes, sir. The law fixes an outside limit.

Mr. SMITH of Idaho. Well, that isn't set out in the bill, and probably if the Secretary was advised in regard to your plan he might look with more favor on the proposition.

Mr. SWING (reading):

Such certificates of indebtedness, bonds, or notes shall run not to exceed the period provided for in the corresponding district bonds.

66

His next objection was as to the name, and the name certificate of indebtedness" is reserved by him under his present practice for short-term securities, and bonds and notes are for long terms, so we have amended that by putting all three names in, and he can take his choice as to what they shall be designated as.

Section 10 of the bill provides that the certificates of indebtedness that the Secretary of the Treasury is ordered to issue shall be exempt from taxes, and he calls attention to the fact that some exception has been made. It is all right if the committee desires to put on the proviso that has been put on these war bonds. The general provision that I find that has been heretofore used is as follows:

Certificates will be exempt, both as to principal and interest, from all taxation now or hereafter imposed by the United States, any State or any of the possessions of the United States, or by any local taxing authority, except State or inheritance taxes, or graduated additional income taxes and excess-profits and war-profits taxes. Interest on an amount of bonds and certificates authorized by the act, the principal of which does not exceed $5,000, owned by any individual, partnership, association, or corporation, shall be exempt from surtaxes, excess-profits and war-profits taxes.

That provision would meet that suggestion of the Secretary.
Then he says:

It is perhaps not improper to observe that, although the whole burden of financing the project is imposed upon the Secretary of the Treasury under the bill, all financial matters with respect to the irrigation-district bonds, which are the sole security of the United States for its investment, are to be determined, not by the Secretary of the Treasury, but by the Secretary of the Interior.

Now, it seems to me that the answer to this criticism is that he ought to have confidence in the Interior Department. They have a department which is familiar with the work, and the law provides that the Secretary of the Interior shall accept the bonds of these districts to an amount sufficient to cover the cost of it when he shall have determined that their irrigation scheme is feasible and that the bonds offered are not disproportionate to the security which will exist when the canal is completed. Now, it is 99 per cent an engineering proposition. If it is feasible any man can estimate the rest of it, and the Interior Department already has the necessary machinery. In order to transfer this work to the Treasury Department, he would have to organize a new agency for the very purpose of making this investigation, making this determination, and it seems to me that as between two coordinate branches of the Government there ought to be some cooperation existing.

Mr. SINNOTT. According to his theory, the Secretary of the Treasury should supervise all the other departments of the Government. Mr. HAYDEN. The Secretary of the Treasury has a very efficient agency right at hand in the Federal Farm Loan Board. [Laughter.] Mr. SWING. I can not entirely agree with you. Then he proceeds: It is also worthy of note that section 8 of the bill provides that the surplus proceeds of sale of the certificates are to be applied to the payment of the interest on the irrigation-district bonds; that is to say, the proceeds of sale of obligations of the United States are to be used in part to pay the indebtedness of the irrigation district.

Now, he didn't quite catch the drift of that, because although section 8 provides that any surplus shall be applied by the Secretary upon the payment of district bonds held by him, section 3 provides that the money received by the Treasurer from the districts, or on account of their bonds, shall immediately be applied by him upon the payment of the United States Government certificates. What we are trying to do is when the project is completed to simply trim down the outstanding indebtedness, both of the Government, and also ours, which is the foundation for it. But I am willing, and I take the suggestion to pull the cart up on the horse, instead of backing the horse into the cart. They get to the same place in the end. I propose this amend

ment:

Such surplus shall be credited as payment on the principal and interest of the certificates of indebtedness, bonds, and notes of the United States issued hereunder, and a similar credit applied on the district's bonds held by the Secretary of the Treasury on account of such project.

You arrive at the same point, but if it is preferable to have it worded the other way, I see no reason why it should not be done.

Now, in his last objection he says he sees that there is no limit whatever to the amount of irrigation-district bonds which the Secretary of the Interior is directed to accept. Now, there is this limit: It is but one project; a survey has been made, and as near as engineers can

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make estimates, they have made the estimates; the districts have no uncontrolled authority to vote an unlimited amount of bonds; the Secretary of the Interior will accept only those bonds which he finds are backed by security and by a feasible project, and which when taken together will equal the cost of the canal. It seems to me that there is a limit, because it is limited to the one project.

Mr. HAYDEN. Why not fix a limit of $30,000,000 or $35,000,000 and be done with it?

Mr. SWING. I have no objection if that will answer his argument. Make it $35,000,000.

Mr. ROSE. Make it "not to exceed."

Mr. SWING. Not to exceed $35,000,000. I think that the Secretary of the Treasury-the principal thing that I fear from his report is the fact that he has made an adverse report. The reasons he gives, I think, are reasons that can be met by amending the bill, but I think that hurts its prospects, because somebody will say, "Secretary Glass reported against your bill," but if they will consider the report and if these amendments are made, I think to a very large extent the objections are met.

Now, I want to refer to the amendments suggested by Secretary Lane. I have read them over very carefully and compared them with our bill and the purpose we intended to carry out, and I find each and every one of them very helpful and beneficial, and our entire committee concur in each and every one of them and join in the request that they be made. I think they strengthen the bill and make it a better bill, and we concur heartily with each and every one of them.

I have received this resolution of the board of directors of the Imperial irrigation district indorsing this bill and I will ask that it be made a part of my statement:

Resolved, That we, the board of directors of the Imperial irrigation district, indorse and approve H. R. 6044, introduced in the House of Representatives June 17, 1919, by the Hon. William Kettner, and hereby request and urge the committee now in Washington, D. C., to use every honorable means to secure the passage of the said bill: Be it further

Resolved, That the secretary be instructed to forward a copy of the above resolution to each member of the committee now in Washington, D. C.

As secretary of the board of directors of Imperial irrigation district, I hereby certify that the foregoing is a full, true, and correct copy of a resolution adopted by said board and appearing on the minutes of July 8, 1919. [SEAL.] F. H. McIVER, Secretary.

Mr. HUDSPETH. You state you are going to issue not to exceed $35,000,000 of bonds. What would be the cash value of your lands upon which those bonds would be issued?

Mr. SWING. I believe I am warranted in saying that the present cash value of the irrigation lands alone, which are only 400,000

acres

Mr. HUDSPETH (interposing). I mean irrigated to-day; not what you propose to irrigate.

Mr. SWING. No; what is there now-is conservatively worth $100,000,000. I think that value itself would be increased when the canal is completed.

Mr. SMITH of Idaho. Your total production last year was $40.000,000?