Carey Act Bonds

Our Government recognized the danger likely to arise from the reckless exploitation of irrigation schemes and, as a measure of protection for the farmer and investor alike, some years ago enacted what is known as the Carey Act. Under this act, authority was conferred upon the state and territorial governments to pass upon the plans prepared by privately organized irrigation projects for the construction of reservoirs, ditches, and laterals, or small canals, by means of which the land was to be fed with water. By the same act, rights to the available water supply were conferred to prevent the overabsorp-tion of the needed supply by too many separate enterprises, but despite these wise precautions, failures have occurred, showing how much judgment can err in an entirely new and untried field.

United States Irrigation Bonds

Our Government, as late as 1910, authorized a large issue of bonds, the proceeds of which are to be used to carry forward, on a much larger scale, the irrigation work planned by the Department of Reclamation. Those bonds are to be redeemed out of the money realized by the Government from the sale of water rights to the settlers.

Municipal District Bonds

Some of our western states, in an effort to reclaim their arid lands, have arranged by legislation that certain districts may organize into municipal districts and issue bonds for irrigation purposes. But their bonds are by no means as safe as the bonds which are authorized by the United States government.

They are in fact, in some instances, inferior to irrigation bonds of privately organized enterprises. These municipal irrigation district bonds depend for their interest and redemption upon the ability of the community to pay the taxes. In a good many instances, the amount of such bond issues is not based on the already existing population, but on a future population that is expected when the district receives the full benefit from the irrigation planned by the issuance of the bonds. If the irrigation project is a failure and the expected water does not materialize, naturally the settlers then have no means to meet their taxes and their lands which remain dry are hardly worth foreclosing upon. That this is possible has already been shown by the default of interest on a number of such municipal irrigation district bonds of some of the Western states during 1910 and 1911.

By way of summary I wish to point out the investment characteristics of irrigation bonds:

1. The character and ability of the men backing the enterprise.

2. The quantity of water available and the regularity of its flow.

3. The legal rights to the quantity of water. A great body of law has developed in our Western states governing priority of rights.

4. The character and fertility of the soil.

5. The character of the crops that can be raised.

6. Transportation facilities and markets for the crops.

Irrigation Bonds. Test Questions

1. What place does irrigation hold in modern agricultural development?

2. What are the four classes of irrigation bonds?

3. How do private corporations promote irrigation enterprises?

4. What pitfalls should one avoid when investing in private irrigation bonds?

5. Describe the Carey Act irrigation bonds. What is their degree of safety as an investment security?

6. How did the United States irrigation bonds come into existence?

7. Explain the investment possibilities in municipal district irrigation bonds.

8. What tests should be applied when contemplating an investment in irrigation bonds?