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71ST CONGRESS 2d Session

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SENATE

REPORT No. 769

TO PROVIDE AID FOR LEVEE AND DRAINAGE DISTRICTS

MAY 29 (calendar day, JUNE 2), 1930.-Ordered to be printed

Mr. McNARY, from the Committee on Agriculture and Forestry, submitted the following

REPORT

[To accompany S. 4123]

The Committee on Agriculture and Forestry, to which was referred the bill (S. 4123) to provide for the aiding of farmers in any State by the making of loans to drainage districts, levee districts, levee and drainage districts, counties, boards of supervisors, and/or other political subdivisions and legal entities, and for other purposes, having considered the same, ordered the same reported favorably with certain amendments.

This act would extend to farmers taxed within districts to construct levees or artificial drainage canals and where the construction thereof is represented by outstanding bonded indebtedness, a loan which would defer the maturity of said obligation for 40 years, and that without interest. If enacted into law it will extend comparable aid to farmers living in drainage and levee districts to that which the Government has extended to reclamation projects.

There are 5,000,000 American farmers affected. They reside in districts which are scattered throughout 34 States.

The construction of levees and drainage districts not only reclaim the lands within the areas of said districts but help to take care of the problems of other districts and other areas by passing on flood waters, and thereby has changed swamps and overflowed lands into cultivated fields. Likewise it has made possible the navigation of streams and protected adjacent lands from overflow without which much of interstate commerce would have been greatly handicapped, if not rendered impossible. Railroads and highways over which the mails are transmitted could not have been constructed or maintained in much of this area without these improvements. Strictly speaking these improvements were in the nature of public works. Under the present depressed condition of agriculture, the tax burden to pay these drainage and levee bonds has become intoler

able to the farmer whose lands are within these districts. In many instances the drainage tax is in excess of all other taxes borne by the people of these localities.

The committee, moved by these considerations, has directed the bill to be reported favorably with the following amendment:

At the end of line 5, page 3, insert:

The Secretary of the Interior is authorized to ascertain the actual value of the outstanding bonded indebtedness of any district making an application for a loan under the provisions of this act, and as a condition precedent to making said loan, to require the holders of said bonds to enter into an agreement to remit the difference between the actual value of said bonds, and their face value, and in determining the actual value of any outstanding bonds, the Secretary is directed to take into consideration the value of said bonds, as of date of March 1, 1930.

This amendment extends to the farmers an additional aid in the effort to confine to the actual landowners all the benefits that may accrue through the passage of this act. It would compel a reduction in the amount of the bonded indebtedness of the face value of the bonds above their actual value. For illustration-if the face value of a bond was $100 while its actual value was but $65, it would require the reduction of the difference-$35-by the holder of said bonds before the districts could receive any benefits under this act.

The provisions of the bill are succinctly set forth in a memorandum accompanying the introduction of the bill by Mr. Glenn, and is made a part of this report, as follows:

EXHIBIT A

WHAT THE PROPOSAL IS AND IS NOT

WOULD NOT BRING NEW LAND INTO CULTIVATION

This bill has nothing to do with reclamation work of any kind. aid in any form to new development. It is not a plan to bring new land into cultivation. It gives no It is not a plan to add in any way to the area of cultivable land. There is no provision in this bill by which there can be any extension of any existing drainage district. No new drainage district can participate in the relief offered under this bill. No run down, dilapidated, or abandoned drainage works can be rehabilitated under this bill. The benefits are restricted to drainage districts now in successful operation.

NOT A GIFT, BUT A LOAN

This bill does not call for a gift of money, but does provide for an extension of credit. The relief proposed under this bill is to be in the form of loans-loans adequately secured by first liens on the benefited farms, the repayment of which is further guaranteed by the fact that each loan is to have behind it the taxing power of the State. distressed drainage districts on a long-term basis. In a word, it is an extension of credit-a plan for refinancing

NOT AID FOR INDIVIDUALS BUT FOR COMMUNITIES

It is not a plan to extend aid directly to individual farmers in their individual capacities, but it is a plan to aid farmers in their collective capacities where they have organized drainage districts to install and maintain public drainage works as outlets for the private drainage works of individual farmers. works, the collective or community works authorized by and operated under It is the public authority of the law that are to be relieved by this bill.

NO OPPORTUNITY FOR SPECULATION

There is no provision in this bill that would afford an opportunity for speculation either in the bonds of any district or in the lands covered by the bonds.

REDUCTION OF FARM TAXES

It is a plar to save highly productive lands that already are under successful cultivation.

It is a plan to prevent the utter ruin of farmers owning and operating drained lands, who are losing their homesteads because of their inability to pay heavy annual taxes levied on their farms for the public drainage works which have been installed by authority of law, by refinancing the public works on a long-term basis and thereby reducing the annual drainage tax levied against the individual farmer.

The extent of relief which each individual farmer can obtain under this bill can be definitely and exactly computed from his tax receipt.

MAKING IT POSSIBLE FOR FARMER TO PAY

In order to readjust and more comfortably distribute the burden of debt, drainage districts, created by authority of State law and having a definite status as political subdivisions, either as counties or special tax districts, may refinance their public works-the public ditches, so to speak, that are supposed to be open and accessible to any farmer in the district who seeks an outlet for his own private ditches.

Under this plan drainage districts which are unable to meet either the interest or the principal of their outstanding bonds, may refinance their undertakings by the issuance of noninterest-bearing refunding bonds; such refunding bonds to be accepted by the United States Government as security for loans sufficient to retire as they mature outstanding bonds and the accumulated interest thereon.

ADVANTAGES TO FARMER EXPLAINED

The advantages of this plan become evident when it is considered that the residents of these drainage districts are pioneers who in response to the call of the Government in the first years of the World War undertook to do in a short period of time what heretofore had required a hundred years to accomplish. In a word, they issued drainage bonds to run 20 years to pay for permanent improvements, the benefits of which were to be enjoyed by all succeeding generations, when in the very nature of the case the expense of constructing these public drainage works should have been spread over at least 50 or 75 years. The refunding of the drainage debts will constitute an extension of time and will thereby reduce the annual tax for drainage works to an amount so small as to be surely within the farmer's ability to pay.

PUBLIC DRAINAGE TAXES CONSTITUTE BIG BURden

At present the drainage tax in many districts is more than half of all the taxes the farmer has to pay, more than school district, road and bridge, county, and State taxes combined. In a considerable number of districts the drainage tax constitutes two-thirds of all taxes levied, and runs in many instances to an amount per acre equal to more than half the gross per acre earning of the land. From this it becomes apparent that the refunding of drainage debts by means of long-term noninterest bearing bonds will provide substantial and immediate relief to deserving farmers who are suffering sorely but through no fault of their

own.

FARM DRAINAGE COSTS IN ADDITION TO TAXES

This form of relief becomes the more appropriate when it is borne in mind that the expense of providing public ditches or drainage works is only a part of the burden which the individual farmer must bear, but that in addition to this there is the cost of providing and maintaining tile and surface drainage on his own farm to enable him to make use of the public works.

There is ample precedent for affording this form of relief to be found in the reclamation act of 1902 and in each of its several subsequent amendments.

THIRTY-FIVE STATES TO BE BENEFITED

The benefits of this bill, if it becomes a law, would extend to the residents of 35 States having, as shown by the 1920 census, an aggregate of 65,634,743 acres in drainage districts now operating, and in the drainage enterprises of which districts there was invested at the time the 1920 census was taken a total of $380,040,043. Since that census both the acreage and the capital invested have been increased possibly by as much as 10 per cent.

FIVE MILLION FARMERS AFFECTED

The demand for this legislation is from 5,000,000 of farm population, which, according to the 1920 census, live within these drainage districts.

These 5,000,000 are for the most part small farmers, each having his all invested in his farm, which is also his home, each struggling under a load of debt and taxes, fighting for life, health, and home.

Thousands of farmers already have lost everything because of their inability to meet the drainage taxes.

PRACTICAL RELIEF FOR UNEMPLOYMENT

When a farmer loses title to his land, one of two courses is left open to him. He can go to work as a hired hand for some other farmer if he can find one who will employ him; or he can go to the city to look for a job. In this connection Secretary Hyde, of the United States Department of Agriculture, writing in the Saturday Evening Post of April 12 of this year, has supplied some official figures concerning the drift of population from the farms to the city. He gives the Government estimates on the net loss in farming population, through the drift to the cities, as follows: For the year 1922, 1,120,000 persons; for 1924, 679,000; for 1925, 901,000; for 1926, 1,020,000; for 1927, 604,000; for 1928, 598,000. No estimate was made for 1923. Thus we see that for a period of six years the average drift from the farms to the city has exceeded 800,000 a year or a total of 4,912,000. Statistics, collected and compiled from official sources within the present year, show that several thousands of farmers have been sold out for drainage taxes while other thousands are facing the same fate. Dispossessed, these farmers are and will be forced into the ranks of the unemployed. To enact this bill into law not only would be to give much needed and substantial relief to worthy farmers engaged in the fundamental industry of agriculture, but also would be to prevent in a considerable measure further increase in the number of unemployed.

GOVERNMENT PROVIDES REVOLVING FUND

In the bill now pending provision is made for a revolving fund of $95,000,000 from which the Government may make loans to drainage districts, provided that not more than $19,000,000 of said amount shall be available in any one year.

WHO MAY BORROW

None but districts created by and organized under State law are permitted to borrow from this revolving fund. The relief provided under this bill can be extended to any district having a definite status as a political subdivision of any State, whether as county, drainage district, drainage and levee district, or levee district.

SECURITY FOR LOANS

All loans made from this revolving fund are to be secured by refunding bonds issued by the drainage districts; bonds to be serial, payable to the United States in the amount of the loan, and each bond to carry on its face that it is a first lien on the lands within the applying district on which the original obligations were issued. The Secretary of the Interior shall fix the dates for the maturity of said bonds; provided no bonds shall run for longer than 40 years.

SAFEGUARDS FOR GOVERNMENT

The revolving fund, under this bill, is to be administered by the Secretary of the Interior, who before granting any application for a loan shall by examination satisfy himself of the reasonably successful operation of the engineering works of the district applying, and shall make such examination of economic conditions as he may deem necessary to satisfy himself that the security for the loan is adequate.

SINKING FUND AND MAINTENANCE TO BE REQUIRED

The bill provides for a sinking fund sufficient to retire the refunding bonds at maturity and also provides for the maintenance of the drainage works in a reason. able working condition.

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