water from the western side of the Continental Divide, and a reservoir at Two Forks (southeast of Denver) on the South Platte River to impound such water together with the hydroelectric plant at Two Forks to use Blue River water and South Platte water to generate electricity for use in the Denver area.

The provisions with respect to the construction loan may be summarized as follows:

(a) Over a maximum period of 15 years, the United States will advance funds just ahead of their need for construction.

(b) Moneys advanced for each unit will be interest free until the unit itself is completed. On completion of each unit the loan, with respect to the unit in question, becomes immediately repayable, or, at Denver's option, may be repaid in 50 equal annual installments plus interest at the going rate for long-term Federal money. Net revenues of the water plant and taxes levied on all taxable property in Denver are to be made available to discharge Denver's obligations.

Next following is a flow chart to show the probable chronological schedule of construction and a rate of investment table based on the flow chart.

·City and county of Denver, anticipated rate of advances, Blue River project

The factual justification for the loan may be summarized as follows: 1. Diversion of a maximum of 177,000 acre-feet of water into the Denver water system will result in return flow to the South Platte River through Denver sewers of 140,000 acre-feet of water per year. If reservoirs are built to catch and hold this return flow for release during the irrigating season, more than 50,000 acres of what is now dry, unproductive land northeast of Denver can be irrigated, and the annual benefits thereby derived, computed in the same manner as those reported for H. R. 236 (Fryingpan-Arkansas project), are as follows:

If no reservoirs are built, only the return flow to the river during the irrigating season could be used beneficially. Under these circumstances, only 21,000 additional acres could be irrigated and the annual benefits would be:

Direct benefits each year__

Indirect benefits each year_.

Total

Total benefits over 50-year repayment period__.

$558, 600 964, 300

1, 522, 900 76, 145, 000

The

2. Denver is known as the second capital of the United States. population of metropolitan Denver, 650,000 includes 19,500 nonmilitary Federal employees and 16,500 military personnel and approximately 70,000 dependents of such employees and personnel. This group of more than 100,000 people represents a very substantial segment of Denver population for which Denver performs all municipal services without benefit of a corresponding industrial tax base, the most prolific source of revenue to meet the costs of government. The new West Point of the Air may increase these figures.

3. The Denver Water Board supplies water, not only to the area within the political limits of Denver, but also to almost the entire metropolitan area around Denver. Within the political limits of Denver there is located $36,902,000 of tax-exempt federally owned property. Had this property been taxed at the 1953 mill levy for

city purposes of 39.55 mills, the Federal Government would have paid Denver $145,947.41 in taxes.

4. Denver has a split water rate, one rate applying to Denver citizens who have invested almost $70 million in their water plant, and the other, a higher rate, applying to users outside the city who have not made such investment. However, the city grants to Federal Government installations outside the city cheaper, inside rates in almost all The next following table shows for the year 1953 the water revenue from Federal Government installations located outside the city and losses of revenue ($82,433.19) to the city by reason of the favorable rates:

cases.

City and county of Denver loss of revenue from Government installations outside of Denver, 1953

Denver is requesting a construction loan of $75 million for a necessary, worthwhile, and justifiable project with repayments to be made on a sound business basis. Denver's only request, which might be called a subsidy, is that the money be interest free during the construction period until the various units of the project go into operation. Generally, money advanced by the Federal Government for projects of this type, is interest free during the construction period. During this 15-year construction period, the Federal Government will receive from Denver:

Tax free use of land and improvements.
Bargain water rates____

Total---

Based on present water rates and the present tax structure,
year payout period, the United States will receive from Denver:
Tax free use of land and improvements__
Bargain water rates___

Total.

$2, 190, 000

1, 237, 000

3, 427,000

during the 50

$7,300,000 4, 125, 000

11, 425, 000

In addition, there will accrue to irrigation users in the South Platte Valley, without building any storage, during such 50-year period, values of $76 million which in part will return to the Treasury in the form of income and other tax collections. Reservoir construction of a modest nature can increase this figure to $180 million.

PRECEDENTS

The legislation which the city and county of Denver now seeks has ample precedent in similar laws enacted by Congress from time to time in the past to assist municipalities in the development of their waterworks, especially in situations where it is necessary for the municipality to go a long distance to obtain an adequate water supply for the expanding population and industry. Such assistance by Congress has been amply justified to aid in the development of commerce and trade within the country, for the public welfare, to permit the construction of defense projects at selected strategic locations, and to assist in the settlement of public lands in the surrounding area. The nature of this assistance has been in the form of loans and also in the form of grants and subsidies which meet a part of the cost of a project by recognizing secondary and incidental benefits of the project to the public in general, such as flood control and preservation of fish and wildlife.

The Defense Public Works Act (42 U. S. C. A. 1531 ff.), provides in part:

SEC. 1531. Declaration of policy; definition of “public work."-It is declared to be the policy of this subchapter to provide means by which public works may be acquired, maintained, and operated in the areas described in section 1532 of this title. As used in this subchapter, the term "public work" means any facility necessary for carrying on community life substantially expanded by the national-defense program, but the activities authorized under this subchapter shall be devoted primarily to schools, waterworks, sewers, sewage, garbage and refuse disposal facilities, public sanitary facilities, works for the treatment and purification of water, hospitals and other places for the care of the sick, recreational facilities and streets and access roads.

Sec. 1532. (c) To make loans or grants, or both, to public and private agencies for public works and equipment therefor, and to make contributions to public or private agencies for the maintenance and operation of public works, upon such terms and in such amounts as the Administrator may consider to be in the public interest. * * *

Sec. 1533. (3) Public works shall be maintained and operated by officers and employees of the United States only if and to the extent that local public and private agencies are, in the opinion of the Administrator, unable or unwilling to maintain or operate such public works adequately with their own personnel and under loans or grants authorized by this subchapter.

The provisions above quoted terminated 6 months after the end of the national emergency.

Let us consider the water problem of the city of San Diego. In 1947 a conduit from the aqueduct of the Los Angeles Metropolitan Water District was completed to supply the city with a flow of 85 cubic feet per second. This unit was planned by the Bureau of Reclamation and built by the Navy with the city to repay the cost, approximately $15 million, over a 40-year period. However, the needs of the city expanded so rapidly that the 82d Congress, 1st session, authorized (Public Law 171) the Secretary of the Navy to build a second conduit. The assistance was justified, House Report 907 of the 82d Congress, on the grounds that San Diego had grown in population, had a large aircraft industry, a large naval establishment, and a limited water supply. The cost of this second conduit is to be repaid by the city over a 40-year period.

Denver likewise has grown rapidly in population, has a large military establishment and important national defense industry including one installation of the Atomic Energy Commission.

Another group of analogous laws is found in the statutes on public lands which created the Bureau of Reclamation. The Bureau is authorized to furnish water to municipalities (43 U. S. C. 485h (c)), providing:

The Secretary is authorized to enter into contracts to furnish water for municipal water supply or miscellaneous purposes: Provided, That any such contract either (1) shall require repayment to the United States, over a period of not to exceed 40 years from the year in which water is first delivered for the use of the contracting party, with interest not exceeding the rate of 31⁄2 percent per annum if the Secretary determines an interest charge to be proper, [Emphasis supplied.]

Denver's request that it not be charged interest until the development period has expired, finds ample precedent in section 485h (₫) where it is stated:

(3) That the general repayment obligation of the organization shall be spread in annual installments, of the number and amounts fixed by the Secretary over a period not exceeding forty years, exclusive of any development period fixed under subsection (d) (1) of this section, for any project contract unit, or for any irrigation block, if the project contract unit be divided into two or more irrigation blocks.

(4) That the first annual installment for any project contract unit, or for any irrigation block, as the case may be, shall accrue, on the date fixed by the Secretary, in the year after the last year of the development period or, if there be no development period, in the calendar year after the Secretary announces that the construction contemplated in the repayment contract is substantially completed or is advanced to a point where delivery of water can be made to substantially all of the lands in said unit or block to be irrigated; and if there be no development period fixed, that prior to and including the year in which the Secretary makes said announcement water shall be delivered only on the toll charge basis hereinbefore provided for development periods.

To aid commerce and trade, the Reconstruction Finance Corporation was created. Under such a law, Denver would be eligible for the loan. That law (15 U. S. C. A. 604 (3)) provided:

In order to aid in financing projects authorized under Federal, State, or municipal law, to purchase the securities and obligations of, or to make loans to, (A) States, municipalities, and political subdivisions of States, (b) public agencies and instrumentalities of one or more States, municipalities, and political subdivisions of States, and (C) public corporations, boards and commissions: Provided, That no such purchase or loan shall be made for payment of ordinary governmental or nonproject operating expenses as distinguished from purchases and loans to aid in financing specific public projects.

Restrictions were placed upon such loans. The obligations purchased were required to be of sound value and secured, and not exceed $200 million. Interest rates were determined by the Secretary of the Treasury (15 U. S. C. A. 606). If the RFC were still active, Denver would qualify for the loan from such agency.

In hearings before the Subcommittee on Irrigation and Reclamation of the Committee on Interior and Insular Affairs, House of Representatives, 82d Congress, held May 18, 21, and 22, 1951, Mr. D'Ewart pointed out at page 32 that the State of Montana has a water board which issues bonds and builds irrigation projects, financing such bonds through RFC or through the various agencies for that purpose. He also pointed out that this board had irrigated more acres in the State of Montana, through such projects, than through Bureau of Reclamation projects.

A number of projects supplying municipal water in part have been built under this law. For example, the Canadian River project in