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Show 2. Allocation of Funds to Local Political Units in Lieu of Taxes The Problem Action needed to compensate political subdivi- sions of upstream States which lose tax sources by the creation of reservoirs which are largely for the benefit of downstream States. The Situation The lower Connecticut Valley in Massachusetts and Connecticut is densely populated, and extensive commercial and industrial areas are subject to flood damage. These areas stand to benefit from both flood control and power development. The dam sites and reservoir storage for this development are located largely in the upstream States of Vermont and New Hampshire. These States are hilly or mountainous, and their economy is largely depen- dent on the agriculture of the valley floors. Reservoir inundation of these lands means not only a loss of agricultural production but may have a temporary adverse effect on the tax base of the local governments. The loss of production and property is taken into account in the purchase price paid by the Federal Government to the farmers for their lands, but under existing law the Federal Gov- ernment does not directly compensate local units for the loss of annual tax revenue from lands and improvements acquired for reservoirs. Accordingly, the upstream States understandably do not look with favor on reservoir development in their areas to benefit downstream States, even though the bene- fits of such development on a regional or national basis may be far in excess of the local losses and the costs of construction. This attitude seems to be even stronger in New England than in most other areas because of traditional local sentiment. It is noteworthy that the tax losses are an ex- tremely small part of reservoir costs, and generally range from $500 to $5,000 per reservoir annually. On the other hand, these taxes constitute a signifi- cant part of the tax base of these rural communities. At present, the losses to towns are offset slightly by income from leasing lands acquired for flood control purposes, of which 75 percent, under ex- isting law, is returned to the States. It is to be expended for the benefit of public schools and pub- lic roads in the counties where the reservoir is situated. This, however, is not sufficient to re- solve the conflict which is impeding an appropriate river basin program. Consideration also must be given to the feeling of the upper States that they have in the past ob- tained little advantage from the low-cost hydroelec- tric power developed at reservoirs flooding their lands. They see the power from such develop- ments transmitted south to energize the industries of other States. A basin plan which would enable these upper States to secure advantages in the way of low-cost power for farms and industries might offer compensation for inundations where these are kept to a minimum. Conclusions The problem of losses in existing taxes occa- sioned by reservoir land acquisition can be resolved in two ways: by making the reservoir projects a distinct local asset; and by compensating for the losses to the local political units. The first; method involves, where feasible, sup- plemental measures to render the reservoir capable of creating new taxable local properties. In this region, reservoir use as a recreational asset imme- diately suggests itself. In view of the necessity for drawing down the pool level of flood control reser- voirs during certain seasons, the possibilities for maintaining constant pool levels in strategically lo- cated arms of the reservoir through small recrea- tional dams should be explored, and the means for accomplishing these possibilities where they exist should be the subject of cooperative action by the Federal Government and local or State interests. There is also the possibility that sound marketing of power from multiple-purpose projects could con- tribute materially to the local agricultural and in- dustrial economy. Beyond this, local governmental units should be compensated for losses of taxable property, to the end of preventing hardship. One solution is sug- gested by a proposed compact among the four Connecticut River Basin States. This compact, ratified by Connecticut and before the Massachu- setts Legislature for action, provides that the bene- fited States (Massachusetts and Connecticut) would reimburse the upper States (New Hampshire and Vermont) for a part of the taxes lost by ac- quisition of lands, rights, or other property acquired by the Federal Government for the purpose of con- structing such reservoirs as may be approved by the signatory States. The principle behind this compact promotes eventual water resources development, as the direct beneficiaries acknowledge an obligation to pay at 911610-51- -33 491 |
