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Show section 9(d) and 9(e) of the 1939 Reclamation Project Act.36 The 9(d) contracts provide for repayment in not more than 40 years, after an initial development period of not more than 10 years, of the reimbursable construction costs allocated to irrigation. The 9(e) contracts are not strictly repayment contracts, but rather water-service con- tracts. They provide that water users pay an an- nual charge, fixed, by the Secretary of the Interior, generally running for a maximum period of 40 years. There is no requirement that the construction cost connected with water supply works and allocated to irrigation will be fully paid over the period of the contract, although of course such repayment is an objective to be considered in the light of other aspects of the contract. Since 9(e) contracts do not apply to costs of any distribution works, con- tracts for the return of costs to the United States are frequently of a mixed type containing 9(e) con- tract provisions as well as 9(d) contract provisions for repayment of distribution system costs. An example of the mixed type is the contract for the Bostwick unit, Missouri River Basin Project. Still another type of contract may be described as the normal and percentages plan. It provides for variable payments of construction charges re- lated to cyclical changes in agricultural production and income. The base annual construction cost installment, as scheduled by the Secretary of the In- terior, is adjusted each year as the annual gross crop return varies from the normal return, which is the average return of the 10 highest annual figures for the most recent 13-year period. Under this plan the total obligation may or may not be amortized in the 40-year period, depending upon farm production and general economic conditions. Because this repayment plan is difficult of appli- cation, it has not been used in the Missouri Basin. However, contracts in effect at some older reclama- tion projects, such as those with certain districts of the North Platte and Lower Yellowstone Proj- ects, are somewhat similar in that construction charge installments are variable because affected by the productivity of the land. These contracts were negotiated pursuant to the 1924 Fact Finders' Act 37 and provide for annual construction charge payments equal to 5 percent of the gross annual acre income as calculated from a 10-year moving " Act of August 4, 1939, § 9, 53 Stat. 1187, 1193, 43 U. S. G. 485h. aT Act of December 5, 1924, § 4, subsection F, 43 Stat. 672, 702, as amended, 43 U. S. G. 473, 474, repealed by Act of May 25, 1926, § 47, 44 Stat. 636, 650. average. In this type of contract, the total amount for repayment is fixed, but the number of years is indeterminate. One of the difficulties with the plan is that the 10-year moving average is not re- lated to cyclical movements. Another difficulty is the strong tendency to under-report annual gross crop returns. Conclusions Under present procedures one of the most diffi- cult problems in the reclamation program is to draft a contract that correctly anticipates land develop- ment, crop patterns, production methods, and re- turns from irrigation. A contract related to aver- age anticipated economic conditions may be unfair to either the farmer or the Government when prices range widely from the average. Also, even average prices may be much higher or lower than the esti- mated level. The 40-year pay-out period neces- sitates long-term estimates, even though the infor- mation on which such estimates are based is not adequate. Under the 9(d) and 9(e) contracts of the Reclamation Project Act of 1939,38 lack of clear definition as to what constitutes irrigation drain- age, distribution, and water supply works also is a source of difficulty in administration and in just calculation of repayment obligations. The proposal to vary annual payments with farm income has had many proponents. The only for- mula now authorized by law which will vary the annual charge and allow for an extension of time in which the total obligation would be met is the normal and percentages plan. This plan, however, has limitations because it does not provide for adjustments in the base charge in response to long- term changes in ability to pay. As a means of promoting efficient use of irriga- tion water, a national payment policy based upon service charges per acre-foot of water delivered is considered desirable. It would provide an incen- tive to use only the required amount, thus con- serving water and preventing destruction of land by erosion and seepage. Irrigation water users, within their repayment ability, should pay for being supplied with water on a long-term basis. Elements of payment contracts between the irri- gation water users and the Government on this basis would include: (1) A minimum fixed annual demand charge 38 Act of August 4, 1939, § 9, 53 Stat. 1187, 1193, 43 U. S. C. 485h. 249 |