ern California company and a somewhat larger fraction in southern California was secured from assessments, 1 to 5 percent from miscellaneous sources, and the balance from water sales.

Whether or not a given mutual company has authority to levy assessments against its capital stock depends upon the State corporation law, and in some States this power must be reiterated in the articles of incorporation or bylaws and stated on the face of the stock certificates. Obviously, it is important that this authority be specific, otherwise assessments may be invalidated at any time.

The mutual company may time its assessments to the requirements of its own agricultural situation. In actual practice some companies levy from 3 to 5 assessments a year, according to the preference of the stockholders for smaller payments scattered over the season. In other cases where the crop money comes in largely at one time, the practice is to time the single annual assessment to follow closely. Again, spring assessments may be made to raise money for operation and maintenance purposes, and later assessments for other purposes such as payment of interest and power charges.

At least some of the corporation statutes provide in detail the steps which must be taken in levying and collecting an assessment. Unless the statute specifies the entire procedure, the mutual companies may set up their own procedure in harmony with the intent of the law. It is highly important that every step required by statute or by the articles of the company be taken in carrying out an assessment levy and in selling the stock for failure to pay the assessment. If the procedure is not scrupulously followed, a sale for nonpayment is open to attack on the ground of invalidity, and any stockholder who does not surrender his certificate, when it is declared forfeited, may possibly make trouble later.

The toll charge which is made by some mutual companies to supplement the stock assessment is not related directly to the share of stock, hence sale or forfeiture of stock is not a remedy for failure to pay these charges. The usual remedy, and a most effective one, is to refuse further water service until the charge is paid. The procedure is either (1) to require payment in advance of delivery of water, or (2) to deliver the water requested by the user, render bills for service immediately or monthly; and, if the charge is not paid within a given period thereafter, refuse further service until payment is made. The first-mentioned method is used principally in areas in which water deliveries are relatively few throughout the season; where irrigation turns come frequently, as they do in southern California, the second procedure is more satisfactory.

OPERATING EXPENDITURES

Annual outlays other than for making new improvements and reducing indebtedness are termed "operating" expenditures and may be subdivided into those for (1) operation and maintenance; (2) purchase of water; (3) general expenses; (4) interest on indebtedness; and (5) other or miscellaneous purposes.

The study of mutual companies in California and Utah in 1935 showed that for the 5-year period, 1930-34, the "operation and maintenance" expenditures constituted, on the average, about 80 percent of the total annual outlay in northern California, less in Utah, and still less in southern California. Expenditures for "purchase of water" were of considerable importance in the southern California group alone. The "general" expenditures included general management, office, accounting, and other such overhead expenses; these average 11 percent in Utah, 12 percent in northern California, and 14 percent in southern California. The southern California companies have systems more expensive to operate, but they also maintain more elaborate offices and make greater outlays for general management. "Interest" payments constituted about 16 percent of the average per acre expenditures of the southern California companies, 18 percent in Utah, and only 2 percent in northern California. It was noteworthy that the interest payments of several of the southern California group amounted to 30 or 35 percent, but in other instances were only 1 or 2 percent of the total expenditures. The "other or miscellaneous" group was of small proportion in each of the areas.

The operating costs of companies which pumped their water supplies normally were much higher per unit of service than those of companies which obtained water through gravity, because of the cost of power and depreciation on pumping equipment and other relatively high expenditures characteristic of pumping diversions. Likewise, the expenditures of companies serving principally citrus areas were usually found to be well above those serving general farm crops, since returns from citrus have encouraged these companies to go after water supplies at costs far in excess of those incurred by mutual companies serving the lower-income crops. Therefore, during this 5-year period, operating expenditures in case of gravitysupply companies serving crops other than citrus were found to range from less than $1 to $5 or $6 per acre, as contrasted with those of companies pumping water for citrus crops which had operating expenditures ranging from $4 or $5 to as high as $40 or $50 per acre. There were not many outstanding changes in the group percentages from year to year during the 5-year period. The principal change in the Utah figures was a substantial decrease in "operation

and maintenance" and a considerable increase in "interest", but the trend was not maintained consistently. In northern California the rather minor trends in one group tended to offset those in some other group, and in southern California also the group changes can hardly be termed significant.

EXPENDITURES FOR CAPITAL PURPOSES AND REDUCTION

OF INDEBTEDNESS

The companies which made either additions to their capital or net reductions of indebtedness during the period 1930-34, were segregated and were grouped according to their sources of water supply and prevailing crops. In northern California it was found that the portions of the total expenditures of such companies for operating purposes ranged among the several groups from 72 to 84 percent; additions to capital, 1 to 13 percent; and net reduction of debt, 7 to 15 percent.

A similar segregation in southern California showed the following averages for various groups: Operating expenses, 63 to 94 percent of the total annual expenditures; additions to capital, 0 to 23 percent; and net reductions of indebtedness, minus 2 percent to 18 percent.

In Utah the operating expenditures of these segregated groups ranged from 71 to 80 percent of the total annual outlay; additions to capital, 2 to 16 percent; and net reduction of indebtedness, 13 to 19 percent.

Generally speaking, within the larger groups of companies, expenditures for new improvements which added to the value of the irrigation systems were made in substantial amounts in each of the 5 years. In the southern California group deriving its water supplies for citrus production entirely or almost entirely by pumping from underground, the capital additions constituted 23 percent over the 5-year period, being heaviest in 1930. This is important in view of the high per acre expenditures of these companies.

ACTUAL COST TO THE STOCKHOLDERS

The cost of water to the irrigator on a unit basis is greater than the expenditures of the company which serves him, computed on the same basis. It is important to bear this in mind in considering how much a farmer can afford to pay for irrigation water, as well as in making comparisons of the cost of water under irrigation organizations of various types.

In the first place, many companies convey the water only part way to the land on which it is to be used (see p. 37), and consequently incur only part of the total cost of water distribution. The

cost of delivering such water at the land is the stockholder's prorata share of the company expenditures, plus his share of whatever additional outlay is required to convey the water from the company's canal system to the irrigated land—an added cost which may be relatively very small or very large, depending upon the location of his land with reference to the main canal system. The operating expenditures of southern California companies which pump water for citrus crops represent in most cases the entire cost of distribution to individual stockholders, since the underground pipe systems of these companies usually have outlets in practically every citrus grove (fig. 14).

In the second place, in case of a mutual company, the real cost of water to the irrigator includes not only the amount which he pays to the company which serves him-his pro-rata share of its expenditures-plus any additional expense of conveying the water to his land, but also interest on his investment in mutual company stock. This is often an item of considerable importance. The market values of stock of several southern California companies were quoted at $300 to $600 per acre in 1929; the cost of water to persons who purchased stock in those companies in that year should include interest which, if computed at 6 percent per annum, would amount in some cases to as much as $36 per acre.

The cost of water to the irrigator under a public-utility irrigation company, which delivers the water at his land, is the rate which he pays the company, inasmuch as such rate is designed to give the utility a return on its investment and to cover the costs of replacements and interest on borrowed money. A comparable cost to the irrigator in an irrigation district is the amount of the district assessment against his land, plus interest on redeemed bonds of the district, inasmuch as they represent a capital investment.

ESSENTIALS OF SATISFACTORY OPERATION

OFFICIALS of some companies interviewed in 1935 indicated

that they had no problems other than those of a routine or minor nature. Others were attempting to solve very real problems. Those matters found to be giving most concern dealt with phases of the corporate structure and relationship of the company to other units; litigation, principally over water rights; physical problems, such as maintenance of the water supply at a point which would give the stockholders enough water to produce their crops; financial problems, such as securing the money with which to acquire supplementary water supplies after locating them, and with which to make needed betterments, and securing more favorable terms of financing; and operation problems.

While some companies in 1935 were functioning in a manner apparently satisfactory to both management and members, officials of others indicated that the most difficult operation problem they had had to face in recent years was the accomplishment of efficient operation in the face of reduced capacity of stockholders, due to the depression, to pay the necessary costs.

There are great differences in the character of the mutual companies, particularly in the soundness of their physical and financial organizations. Some have been successful from the start; others were foredoomed to failure even without the impetus of a great financial depression. Generally speaking, the success of an irrigation project depends upon several groups of factors:

First, the fundamental requirements which govern the selection of a site for the project; namely, (1) productivity of soil, (2) sufficiency and stability of the water supply, and (3) availability and capacity of markets for the farm products to which the area is adapted.

Second, the development factors, particularly (1) soundness of construction and adequacy of service of irrigation and drainage works, and (2) settlement of the land by farmers of character, ability, and means.

Third, the financial factors, namely, (1) reasonableness of capital and operating charges, and (2) allowance for a wide margin of safety, or permissible cost, above the charge determined upon as reasonable, which the lands must be able to bear if the project is to be considered feasible.

The third group depends directly upon the two preceding groups and becomes the measure of economic feasibility of the project; that is, its ability to render adequate service to the irrigators and to discharge its obligations without loss to creditors. This applies to irrigation enterprises of various types; the mutual company is no exception. Those companies which have incurred obligations necessitating annual charges beyond their ability to carry in times of low farm income have failed financially, with heavy losses to creditors and stockholders alike. Some have suffered principally because of serious depletions in their sources of water supply. Others have come through the depression without impairment of credit, and various ones have been able to secure access to other sources of water supply, to make up deficiencies, at costs which the officers felt justified in incurring.