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irrigated which is almost equal each year to the total sum of money to be expended, doubling the area of that land will produce more every year than the total cost of these works, so why should anybody be afraid that the farmers will not meet their obligations?
I would like to have Mr. Kibbey take the bill and give us an explanation in his own way of its purposes. He has been here for some months devoting his entire time to this subject and is thoroughly familiar with it. He knows the reason for everything that is in this bill, and you could not get a better authority to explain it.
STATEMENT OF MR. WALTER B. KIBBEY, REPRESENTING THE
IMPERIAL IRRIGATION DISTRICT.
Mr. KIBBEY. Right along the financial question that has been raised here, I wanted to say that as long as that has been discussed, the Imperial irrigation district is willing to put up the money by contract with the Secretary of the Interior which will be necessary in making the estimates which are required under the bill, as you will see as I compare it, in order to carry the expense to the time when the first issue of Imperial irrigation district bonds can be issued. When those bonds can be issued, I will say, as Mr. Hayden has sug. gested, that Mr. Gavin McNab, the attorney for the Anglo-American Bank, of San Francisco, was sent to us, to our committee; he stated that if an appropriation was authorized in the bill that Mr. Fleishhacker, the president of that bank, authorized him to state to us that if we would increase our rate of interest to 51 per cent he would take the bonds as issued at par.
Mr. HAYDEN. Has the Anglo-American Bank purchased any bonds of the Imperial irrigation district heretofore?
Mr. KIBBEY. I don't know. Mr. Fleishhacker personally is the owner of lands in the Imperial Valley. He is president of one of the largest banks on the Pacific coast.
Mr. BARBOUR. What is the capitalization of that bank? Mr. KIBBEY. I don't know. It is a very large bank. Mr. HAYDEN. I am advised by Dr. Mead that this bank has been the largest purchaser of the bonds of the Imperial irrigation district.
Mr. MEAD. These bonds have all been purchased by California banks. As I understand it, they have been underwritten by two banks, and this bank is one of the underwriters and is the principal purchaser of the bonds that have been sold heretofore. There are some $8,000,000 of bonds that have been bought, and those bonds are being sold in California to-day-bought by the general public, just like any other irrigation-district bonds, and at about the same price.
The CHAIRMAN. At what price? Mr. MEAD. Very close to par.
The CHAIRMAN. They will be worth par at once, and they would bring the entire amount of money.
Mr. BARBOUR. Some of the older district 5 per cent bonds are selling at par now, and all of them are very close to par.
Mr. KIBBEY. Now, Mr. Kettner will appear before you again, and he will make the statement that New York representatives came to him and made the same statement with reference to the rate of interest and the salability of the bonds.
The CHAIRMAN. That is, 5% per cent? Mr. KETTNER. Five and a half per cent; yes. Mr. SMITH of Idaho. Of course, Mr. Kibbey, if you expect this committee and Congress to seriously consider this proposition, the bonding companies should put the statements in writing instead of passing them around by word of mouth and expecting Congress to act on them. Mr. KIBBEY. I assume they will not do it. I do not assume that any bonding company will bid for bonds before they are issued, with no certainty of getting them and with a changeable market. We are talking about the market conditions at this time. Under the law the bonds must be sold to the highest bidder when offered for sale, unless all bids are rejected. Mr. SMITH of Idaho. Will they come before the committee and make a statement? Mr. KIBBEY. Mr. Fleishacker lives in San Francisco. Mr. McNab was here and came to our committee, but he had to leave. I did not assume that there would be any question about my statement. I can wire to Mr. McNab. Mr. SMITH of Idaho. You have not only to convince the members of this committee, but we have to convince the Members of the House and the Senate. We do not doubt your assertion that they have made such statements, but it seems to me we should have something more tangible than a mere verbal statement that has been passed around, a mere rumor. Mr. KIBBEY. I thought it was tangible when we were offering on the part of the Imperial Valley to put up the money necessary to carry the expense where the bonds could be issued. A tangible statement, if you desire one, will be that we will assure you that no appropriation will be asked of the present Congress. Mr. SMITH of Idaho. Well, if you are going to modify the bill to that effect, that is a different proposition. Mr. KIBBEY. Now, Mr. McNab said, and so did the others, that we must have an authorization for an appropriation in this bill to give. confidence in the bonds themselves—and that is what is desired, confidence. The only obligation, as I understand it, upon Congress to appropriate money after the passage of this bill is purely a moral obligation; there is no legal obligation upon Congress, as I understand it, to appropriate money within any definite term. We know of authorizations where years and years have elapsed before money was actually appropriated. That is left entirely with Congress. Mr. SMITH of Idaho. Certainly. Mr. KIBBEY. Now then, if we release you from that moral obligation to appropriate during the present crisis, which we can do by our statements—and, if necessary, I can get the full board of directors of the Imperial irrigation district to come here and make their statements that we will not ask you for one dollar in the present Congress; that the Imperial irrigation district will, by contract with the Secretary of the Interior, finance the proposition up until the time when the bonds can be issued of that district. Now, when the bonds of the Imperial irrigation district are issued, and if they
sell them—which I don't think there is any doubt of, unless a radical change in the market comes—they, together with the Coachella district, taking the proportion for the Imperial irrigation district under the proportion estimated by the board of engineers—which was 60 per cent of the total; assuming that the Coachella Valley will have 15 per cent of the total that would build, as Mr. Harden suggested, an all-American canal up to the point where the other districts could be organized and bonds issued. If any appropriation-assuming that the bonds are sold—is ever needed, it will be possibly $100,000 or $200,000 to carry the work on during the time between when the moneys are spent which have been raised from the Imperial district and the Coachella Valley, and during the time when the bonds of the new districts may sell. The bonds themselves, with the Government behind them, at 51 per cent interest, are a very desirable investment.
Mr. HAYDEX. Are such bonds free from taxation?
Mr. KIBBEY. They are; and that is what makes them so desirable. Now, with reference to the suggestion that the Imperial district cooperate with the Laguna Water Co. and issue bonds and sell those bonds in order to raise a fund in conjunction with the Laguna Water Co., I think I can state that the Imperial irrigation district will never do any such thing under an circumstances. The Imperial irrigation district is not under any circumstances going to raise millions of dollars and turn them over to private interests. They want the Government behind it.
Now, getting back to the bill—and possibly before I go to the bill there is one other statement that I want to make in connection with the statement that I made yesterday.
Mr. W'ELLIYC. Mr. Kibbey, would you mind answering a question for me? How much of these bonds would be sold this year? About $10,000,000 ?
Mr. KIBBEY. That is a question which would have to be determined by the engineers, the amount that would be necessary. I don't assume that the Secretary is going to call for more than enough to carry the work on.
Mr. WELLING. Now suppose there was put on the market $10,000,000 worth of these 5 per cent tax-free bonds; I quite agree with you that they would be eagerly sought after by the men who are now paying, if their incomes are sufficiently large, about 70 per cent or 80 per cent of all their income as supertaxes into the United States Treasury. Your bonds would be sought after if they were considered safe. Do you think the Government of the United States would be doing good sound business if it insisted in the flotation of a bond of that kind which will depress all the other Government securities that are out and now in the hands of the people!
Mr. KIBBEY. I consider the situation this: Now, we would undoubtedly come to Congress asking Congress for a direct appropriation, owing to our condition. I don't think there is any doubt in the world but that we are in the most serious situation of any people in the United States. I don't think there is any doubt in the world but that we are in the most serious position of any people living in
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an irrigated area in the world to-day. I am afraid, gentlemen, that the Imperial Valley is liable to suffer more loss than some of our foreign countries who are refusing to pay the interest upon the obligations which they owe us. Now, we would ask Congress to appropriate that money, except for its financial condition at this time. Instead of doing that we are saying to Congress: “ Get behind us and we will take care of ourselves in that situation,” not by the sale of public lands for the benefit of private interests, but by our own efforts. All we ask is that the Government of the United States lend us the confidence which it has, which will enable us to sell our bonds.
Mr. WELLING. Well, that is very good, and we are all sympathetic with the situation. We all feel that the Imperial Valley is in a very hazardous position, and every member of this committee wants to correct it; but if the Government of the United States gets behind, as you say, the 51 per cent nontaxable bond and permits it to go into the hands of men who will be eager for it because it will relieve them of paying taxes to the United States Government, don't you think that such a situation would depress the price of bonds held by everybody else, bonds which now draw 4 and 31 per cent ? .
Mr. KIBBEY. I can not imagine that $10,000,000 or even $17,000,000 worth of bonds, or $33,000,000 worth of bonds, would have that effect upon the bond market.
Mr. HUDSPETH. Isn't it a fact, Mr. Kibbey, that every city, municipal, and county bond is nontaxable, and they buy those bonds?
Mr. KIBBEY. Exactly what I was going to say.
Mr. HUDSPETH. That is my understanding. If I am incorrect I would like to be corrected.
The CHAIRMAN. I think there are some slight exceptions, but that is the general rule.
Mr. HUDSPETH. What are the slight exceptions, Judge? I would like to be informed.
The CHAIRMAN. I don't know, but I believe there are some. I ran across recently some few exceptions.
Mr. HUDSPETH. No doubt you are correct about it. I was under the impression that it was universal.
The CHAIRMAN. The general rule is as you have stated. Mr. KIBBEY. Now, in further answer to the question, a result might follow, as has been the result in other cases where bonds were sold without the Government behind them, that if they were sold they would have to be sold at 70 or 75 cents, which would tend to further injure the market than the method which we propose. The bonds would still be exempt from taxation.
Now section 1 of the bill is designed to cover the all-American canal.
Mr. HAYDEN. I will read section 1. We can discuss it better after hearing it read:
That the Secretary of the Interior is hereby authorized and empowered to construct a canal and necessary works, entirely within the United States, connecting the present irrigation system of the Imperial irrigation district with Laguna Dam, substantially in accordance with the plans and specifications of the joint survey made by the United States and the Imperial irrigation district under the contract entered into by them February 16, 1918, and to construct
canals and other necessary works for the reclamation of all lands, public or private, which in his judgment are susceptible of successful reclamation by the diversion of water from the Colorado River by said dam; to construct such storage reservoirs and other works as in his judgment are necessary to provide an adequate supply of water for the successful irrigation of such lands, and on behalf of the United States to enter into such contracts and agreements not inconsistent with the provisions of this act, with the Imperial irrigation district, the Coachella Valley county water district, and other legally organized irrigation districts, water users' associations, and other legal organizations as may be necessary or expedient in carrying out the provisions of this act, insuring compliance therewith and securing the repayment of the total costs of the said canals, reservoirs, and works, and the operation and maintenance thereof.
Mr. HUDSPETH. Is that the bill we have now under consideration?
Mr. HAYDEN. This is the bill which the subcommittee appointed by this committee prepared and which was introduced by Mr. Kettner.
Mr. HUDSPETH. I haven't read that bill. I read the first Kettner bill.
Mr. KIBBEY. Now, of course, the principal object of that section is to provide for the construction of the all-American canal and for storage. I think the committee has heard enough testimony on the question of the necessity of the all-American canal, except that I will add that the necessity is greater now than it ever has been for the purpose of changing the point of diversion. The people of Yuma, as the committee already know, have a temporary injunction, which they have not served. Personally I do not think they will serve it as long as the efforts of the people of the Imperial Valley are honest and sincere in trying to remedy the situation. However, they have served notice that no further extensions will be permitted ; that they will serve that injunction; that we will not be permitted to put in a weir any more. It is almost necessary that that weir be placed in the river and that work be commenced next month, I am informed through a report of the engineer of the district; when I say next month I mean next March.
If this bill goes through, if this committee reports this bill out and it appears that there is a possibility of the bill passing, I think that we can go to the people of Yuma and get a further extension of time, otherwise I am afraid that there will be a real shortage of water in Imperial Valley this summer. Likewise, in connection with that, I received through this morning's mail a copy of the El Centro Progress, dated January 23. I will not take time to read the article, but it is now said that the Government of Mexico below the line is proceeding to reclaim 350,000 acres of land, is actually at work upon that at this time.
Mr. BARBOUR. That is that land down in the neighborhood of that Volcano Lake, isn't it? The land that they were advertising last summer in the New York Sun that they were going to reclaim, 175,000 acres?
Mr. HUDSPETH. About where is that, Mr. Kibbey, on that map? Does that map show it there?
Mr. KIBBEY. The purpose, of course, will be to irrigate by means of the canal which now is diverted from the United States and carried into Mexico.