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SUNDRY CIVIL APPROPRIATION BILL, 1919.

SATURDAY, APRIL 20, 1918. . RECLAMATION SERVICE.

STATEMENT OF MR. ARTHUR P. DAVIS, DIRECTOR.

CONDITION OF RECLAMATION FUND.

(See p. 1216.) The CHAIRMAX. Mr. Davis, before taking up the detailed estimates, suppose you make for the record a statement about the condition of the reclamation fund and generally touching the work of the past year!

Mr. Davis. The reclamation projects are now able to deliver water to about 1,600,000 acres of land, and approximately two-thirds of that was cultivated in 1917. Surplus storage water is furnished to a large additional area under private canals, supplementing their own insufficient supply in varying degrees. There is the prospect that a much larger acreage will be cultivated on the Government projects in 1918, most of the uncultivated land being on farms that are undergoing development.

The funds appropriated for the current fiscal year have been expended just about in proportion to the time elapsed to date; the actual expenditure is a little less and the current liabilities will be a little more than the proportion of the time elapsed.

Since I last appeared before this committee there has been a great increase in the difficulty of getting labor and in the cost of material and equipment. Some of the contractors have failed who had contracts and probably others will fail. For this and other general reasons due to the war, we have confined our operations to those things that are essential, first, in the immediate increase of the food supply, second, in carrying out obligations undertaken by the United States, and third, work for preventing deterioration, such as drainage where the rising water table is threatening to decrease the actual cultivated area. Upon that basis the estimates have been prepared for the coming fiscal year.

The CHAIRMAN. For the fiscal year 1918 you made your estimates on the basis of estimated resources of some $8,283,000 ?

Mr. Davis. Yes, sir.

The CHAIRMAN. In point of fact what will be the resources for this current fiscal year? It is still a matter of some prophecy, of course, but you have had enough experience, presumably, to make your answer more accurate than it was a year ago ?

Mr. Davis. We find that there has been a slight increase over the estimate. The prospects now are that the receipts and resources for the current year will be somewhat greater than estimated.

The C'HAIRMAN. Due to what causes ?

Mr. Davis. The main cause is a larger receipt from the sales of public lands. That, of course, is not proved, but that is the prospect

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at present. We will not know what the receipts are until the end of the year.

The CHAIRMAN. You estimated last year a probable balance from the funds available for 1917 of $2,000,000. In point of fact, what did vou get? That is an ascertained fact, I presume?

Mr. Davis. Yes, sir; it was slightly less; the unexpended and unincumbered fund from the previous year was a trifle less than $2,000,000.

The CHAIRMAN. You estimated that the receipts from the sale of public lands available for use in the fiscal year 1918 would be about $3,000,000. In that there has been an increase ?

Mr. Davis. Yes, sir.
The CHAIRMAN. To what extent?

Mr. Davis. The exact amount we do not know, but it will probably be about 10 or 15 per cent more, maybe 20 per cent more than that.

The CHAIRMAN. Then you estimated receipts from construction repayments for the fiscal year 1918 of $1,252,000? What do you think they will show?

Mr. Davis. They will be less than estimated. That is due to the fact that we did not collect from the Salt River project the amount that we expected to collect at that time, due to a change in the policy of the department.

The CHAIRMAN. You estimated the receipts from operation and maintenance repayments $1,106,000.

Mr. Davis. That was approximately correct.

The CHAIRMAN. Notwithstanding the falling off in the funds available for 1917 you expect your total to be greater than the amount estimated ?

Mr. Davis. Yes; slightly.

The CHAIRMAN. But you did count that in figuring your resources at $8,283,000 ?

Mr. Davis. The reason that was not available was because it was spent before the 1st of July; That was because of the progress of the work, and it did not really make any difference in the resources, except technically.

The CHAIRMAN. What funds do you estimate are available now for the work for the next fiscal year?

Mr. Davis. We estimate that $9,586,000 will be available for the fiscal year 1919. The probable balance of funds available on July 1, 1918, is $2,500,000; the estimated receipts from sales of public lands available for use in the fiscal year 1919 are $3,000,000; the estimated receipts from construction repayments for the fiscal year 1919, $1,220,000; the estimated receipts from operation and maintenance repayments for the fiscal year 1919, $1,323,000; the estimated receipts from rentals of irrigating water for the fiscal year 1919, $354,160; the estimated receipts from power revenues for the fiscal year 1919, $549,000; the estimated receipts from miscellaneous sources for the fiscal year 1919 $210,000, and the estimated refunds on account of reimbursable operations for the fiscal year 1919, $429,810.

The CHAIRMAN. You stated that the estimated receipts for he current year on account of construction repayments had been less than anticipated, due to a change of policy?

Mr. Davis. Yes, sir. It affected the estimated power receipts mostly.

SALT RIVER PROJECT--CHANGE OF POLICY.

(See p. 1225.)

The CHAIRMAN. Suppose you state just what change in policy here has been and in what way it has affected those receipts ?

Mr. Davis. When I appeared before the committee last year the Secretary had issued a public notice applying to the Salt River project, requiring repayments of the construction charges in accordance with the interpretation of the law by which those charges would be paid in full and the receipts from power would be credited upon the last construction payments, not the current ones. That was changed, and a contract was entered into by which the project was turned over to the water users, including all the power plants, and they agreed to make the current payments as required by law but have the power receipts from which to do it. So the fund expected at the time I last appeared before the committee is reduced by the amount of the annual receipts from power.

The CHAIRMAN. As to that project? Mr. Davis. Yes, sir. The C'HAIRMAN. And that amounted to practically what? Mr. Davis. Something like $300,000; between $300,000 and $400,000. That is net, after deducting operating costs.

The CHAIRMAX. It makes no change in the long run, because they would have gotten credit for these power receipts eventually?

Mr. Davis. Yes, sir; that is true.

The CHAIRMAN. But it enabled them to get the credit annually instead of on the final payment?

Mr. Davis. Well, it really decreases the amount that they pay the United States in this way: That under the terms of the public notice the project would have paid out in about 14 years and during that period, of course, they would have credit for power receipts for 14 years credited upon the last payments; as it is now that period is spread over 20 years and they receive credit for these receipts for 20 years instead of 14 years. However, when they receive credit for only 14 years that is balanced, to a certain extent, by the fact that they would receive the receipts themselves after that, after the project was paid out, so that what you say is essentially true.

The ChairMAN. Suppose you put into the record, Mr. Davis, a statement as to the estimated difference to the Government by virtue of the present plan as against the old method of crediting these power receipts to the final payment of the debt. That will of necessity be an estimate in so far as it can not be known absolutely what the power receipts will be.

Mr. Davis. We will also have to estimate a rate of interest. Would you say 6 per cent?

The CHAIRMAN. I do not know about that.
Mr. Davis. As you said, it is practically a question of interest.

The CHAIRMAN. The Government borrows its money now at 44 per cent, and at what rate will it it borrow it over this period of time we can not tell. It has borrowed money as low as 3 per cent.

Mr. Davis. The following tabulation shows in column 1 the years and in column 2 the amounts to be paid under the contract that has been made, representing the net cost under the terms of the reclama

tion extension act. The power receipts have increased rapidly, exceeding the cost of production by over $300,000 in the last year of Government operation. For the future a much higher profit might be estimated, but that figure has been assumed as conservative and is given in column 3. In column 4 are given the receipts thus estimated that would have entered the reclamation fund under the original plan. These are the sum of the figures in columns 2 and 3 until these accumulate the net construction cost, when payment would stop.

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Under the old plan (column 4) an amount of about $4,000,000 would enter the reclamation fund at $300,000 a year, 1917 to 1930, which under the existing contract will be received at about $610,000 a year, 1930 to 1936. This is approximately equivalent to the postponement for 10 years of the construction of one of the lesser Government projects.

Under the contract the power profits will go to the water users and will more than provide for their construction repayments for the first six years. I'nder the old plan the power receipts would enter the reclamation fund until the project paid out. Thus, under the contract the waters users must supply a total of about $4,000,000 cash in 20 years, the difference between columns 2 and 3, while under the old plan they would have supplied about $6,000,000 caslı in 14 years, the balance of the net cost in either case being supplied by power profits.

CONDITION OF RECLAMATION FUND,

(See p. 1213.) The CHAIRMAN. You stated that you were having difficulty in connection with the physical work due to the enhanced value of raw materials, and due also to the difficulty of obtaining labor.

Mr. DAVIS. Yes, sir.

The CHAIRMAN. Your estimate for work that is coming has, nevertheless, been predicated upon the available funds for expenditure.

Mr. Davis. Yes, sir.

The CHAIRMAN. Without letting either of those two factors that have just been mentioned determine the estimates ?

Mr. Davis. They have had a strong influence on the estimates,

The CHAIRMAN. They have had a strong influence in that they determined how much work you could do, but what I mean is that you are undertaking to do just as much work as you have funds available for?

Mr. Davis. Yes, sir.

The CHAIRMAN. You are not proposing, therefore, to postpone or in any way to lessen your work because of the added cost and difficulty of getting labor?

Mr. Davis. This principle that you speak of has had a very strong influence in the preparation of these estimates, in causing us to eliminate such work as could be postponed. It happens, however, that the fund that we have to expend is so small that it is very difficult under the increased prices to stretch it over those things that can not be postponed, such as work that is in progress, work for which we have some obligation, and drainage work that threatens to decrease values unless it is carried out.

The CHAIRMAN. So that, as a practical matter, you find yourself faced with a situation whereby, owing to the cost of doing work, you have difficulty in getting the imperative work, so to speak, done within the limits of the available funds!

Mr. Davis. Yes, sir; that is actually true.

The CHAIRMAN. And, if I understand you, in each instance you have undertaken to ask for work which seemed imperative, either because of the deterioration that would take place in the land if the work were not done, which particularly applies to the matter of drainage, or to the stoppage of work that was in such process of completion as would entail a loss that ought not to be borne

Mr. Davis. Yes, sir.

The CHAIRMAN. Or because of an obligation on the part of the Government which in good faith should be kept ?

Vr. Davis. Yes, sir.

The CHAIRMAN. Touching that latter case will you illustrate just what you mean?

RESERVOIR ON TIETON RIVER.

(See p. 1276.) Mr. Davis. One of the most prominent cases, and it is one that I want to bring especially to the attention of the Committee for that reason, is the construction of a reservoir on the Tieton River in southern Washington, a reservoir on which we are beginning construction. The water is needed for lands that are under cultivation or that are about to be put under cultivation, mainly on the Indian reservation below. We are in effect under a statutory order to build that reservoir. Congress passed a law requiring us to furnish water for that reservation, and the construction of this reservoir is carrying out that mandate. That is one operation of that character that I have in mind and it is a question of whether that work should be done now. It is costing a great deal more than it would cost under normal conditions to carry that work out, and I believe that if I were the sole dictator of the policies of the Government in such

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