Correspondence on Bonneville Unit of Central Utah Project

Page 13

Director, water Resources Council March 27, 1972 page 3. receive large subsidies and make large profits from the increase in value of their lands. Meanwhile, our natural resources and recreation and wildlife values on the public lands are being destroyed by the use of the publics funds. These practices must be changed so that the direct beneficiaries of water projects pay a share of the costs which approximates the benefits which they receive. For too long, the small taxpayer has been forced to subsidize the bene­ficiaries of these projects with no opportunity to voice his wishes in the matter. All too often,the large landowners, railroad companies, agricultural corporations, and other special interests have taken advantage of the people in this way. Second, the methods of calculating benefit-cost ratios need to be re­vised. The most important step in this direction would be to utilize a discount rate which realistically represents the true opportunity cost of capital. Today we still have projects which are allowed to use the unrealistic rate of 2 5/8 $• In order to be realistic the discount rate should be set at 10$ which is a good approximation of the average rate of return on capital. Thus, projects financed by federal funds would have to meet the same economic tests as investments made in the private sector. In this way, the public would be assurred that its money is being used in ways which are to some extent economically sound. The 10 % rate should be applied to every project on which construction has not started or is, as yet, uncompleted. However, a realistic discount rate of 10 % would not guarantee the economic desirability of a project. Other factors are also of great importance. All too often the building of a federal reclamation project in the West produces very serious economic repercussions in other parts of the country. Farmers in the West who receive cheap, subsidized water from federal reclamation projects often gain a great economic advantage over farmers in other parts of the country. Thus, the regional economic advantages produced by such developments are often more than offset by economic losses incurred in other regions.