varied experience in combating adverse conditions in national emergencies because it was uneconomical to be prepared, Army leaders, of all people, realize most thoroughly the pernicious results of trying to measure national concerns in terms of dime-store economics.

4. Benefits of national scope.—(a) General: In considering the worth of local projects in the past many items of potential national concern have been overlooked but the weakness of the bookkeeping has lain not in the accounting methods themselves, but in the failure to realize national needs and to assign true values to all factors. In this particular project it can be readily shown that, if all benefits are correctly weighted, total benefits from its prosecution would be in excess of its cost. It is the belief of the commission that, if a true conception of the national problems with which our country is faced today governs, most of these benefits can be shown to be of national consequence.

(b) National defense: In computing benefits of the project full attention should be accorded to the great gains which would accrue to national defense because of the responsibilities of the National Government. Of these responsibilities the one most frequently spoken of is that of waging war against a foreign foe and most of the things which accord benefits in peacetime are useful in time of Of specific wartime benefit this project provides for improved continuous production of war necessities of food and lumber, for improved and added transportation facilities, and for improved conditions of health and consequent improved physique and stamina of those who bear the physical strain incidental to international conflict.

war.

(c) Internal peace and welfare: The responsibility of the National Government in promoting the internal peace and welfare of our country would be well served by the project. Two of the main problems facing our country today in this category are unemployment and the cityward movement of rural population. The population in many rural communities embraced in this project is definitely downward. This is partly due to unemployment in the country but also largely to poor opportunities for obtaining a decent standard of living and a reasonable amount of the pleasures of life in rural sections. The effect of the cityward movement at a time when unemployment is already pressing in the cities was well brought out in a recent housing survey made in Memphis, Tenn., by the Memphis Health Department. There it was found that 40 percent of the dwellers in the slums had recently migrated from farms and that in the very worst slum areas the percentage of rural emigres was 60 percent. The average monthly income of the farm-bred slum families was found to be $37.25. It has been found difficult to attract city-bred slum dwellers to the rural districts from time immemorial but surely these recent emigrants, who have found little to enjoy in the dens of physical degeneration which are our slums, could be induced to return if they were assured of a better chance and more healthful and enjoyable conditions than now prevail. The relief of unemployment by leaf-raking and doles is hard to justify when valuable improvements await direction and labor now going to waste. This commission respectfully requests that the real national interest of the National Government in the internal peace and welfare of the country be considered in denominating the benefits from this project which would justify national participation. Economists must be schooled in looking to the needs of the nation for the investigation of projects such as this. Those borrowed from private corporations accustomed to being responsible only in seeing that stockholders get quick dividends are frequently not able to raise their sights.

(d) Rights of posterity: Large portions of the area involved in this project have been subjected to unrestricted exploitation for the last half century with no regard for the requirements of future generations. The preservation and improvement of our heritage of natural wealth for the benefit of our posterity should be one of our main national concerns and are necessary if this Nation is not to perish from the earth. We are extraordinarily bounden to think of posterity at this time as we load it down with debts. If our economic system is to continue we must recognize that we cannot dodge responsibilities and bequeath posterity only debts and a blighted terrain. Many of the features of this project are curative of former abuses and all of them would add to the heritage of our future generations. Our responsibilities to posterity must be kept in mind in the decision as to whether benefits are national or purely local in character.

5. Special subjects.-The true responsibilities of the National Government have been pointed out because of the necessity of keeping them firmly in mind in an investigation such as this one. Some of the features of the project will be further discussed in the light of national significance.

(a) Flood control: Although flood control is the basic feature of the project, it is not practicable to design works nor to assign values to benefits for flood control irrespective of the other features of a balanced program. Severe uncontrolled floods cause a depreciation in property values in the inundated territory because of the slowing up of business activities, due to hesitation of industrial organizations and individuals to locate in the community. Losses occur outside the flooded area through the disruption of electric service, water supplies, communication, transportation, and other utility services. The communities, towns, and cities are losers to the extent that property is damaged and also to the extent that depreciation of property values reduces capacity for the payment of taxes. The Nation is damaged to the extent that those of its citizens within direct effect of the floods are deprived of lives, property, and security, and indirectly to a large extent because of the cessation of production and consumption in a part of its territory. The fitting of the flood-control program into a balanced water-use project appears to be the only logical approach by the Federal Government to fulfillment of its flood-control responsibilities.

(b) Navigation: The navigation feature of the project fits well into the remainder of the work, requiring only the installation of navigation locks at dams, provision of drawbridges, and a small amount of dredging. All other facilities employed by navigation are necessary for the completion of the integrated water-use program. It can be shown that providing for navigation will increase the prosperity of the area and consequently of the Nation, but one of the greatest benefits which will accrue from the provision of the navigation facilities is from a standpoint of national defense. In times of war the transportation facilities of our country have proven inadequate to fill the need. It is a well-known fact that the cheapest way of providing ton-mile capacity is by the canalization of rivers. It would appear wise to consider the value to a national-defense program which would result from the relatively small expense by which navigation facilities may be added in the comprehensive project, in addition to the peacetime benefits which alone will justify the inclusion of navigation facilities in the project.

(c) Economic basis for waterways: In proposing navigation facilities, it is intended that without in the least tending to strangulate private enterprise, waterway traffic shall be subject to the degree of regulation necessary to make it an integral unit in the system of transportation facilities of the area. The commission is not unmindful of contentions by railroads that in providing inland water transportation a substantial portion of the business going to the waterways will consist of existing traffic diverted from other means of transportation. When a navigation project is constructed, the railroads claim that they suffer finacially in two ways: First, in the revenue lost because of the diversion of existing business; and, second, because of the consequent reduction of rates on commodities that can be profitably carried by barge lines. No quarrel is raised with the railroads over these issues but the commission takes note that authorities who pass on the feasibility of new waterway projects take care that the financial gains to the public as a whole will be more than sufficient to capitalize the proposed improvements. The capital structure of a railroad may be intimately interlinked with the similar structure of the country as a whole but the true value of a carrier does not lie in the amount of money invested in physical property nor in the sum total of good will, but in value of the service it can render. When a railroad can no longer survive the competition of other methods of properly regulated transportation, the assumption is made that the carrier can no longer justify its existence. Logically the alleged financial losses of rail carriers occasioned by the establishment of barge-line facilities must be balanced against the financial gains to the public and the increase of going-concern value of communities or of whole regions which would result from the addition of a new transportation medium in which, under adequate supervision, the costs of transportation are somewhat lower.

(d) Health benefits: The features of this project which would directly increase health conditions throughout the area are pollution control, mosquito prevention, betterment of municapal water supplies, provisions of recreation facilities, flood control, and drainage. The increase of the health of the inhabitants of the area will add greatly to the ability and therefore the value to the Nation of those who must carry on for national defense and in addition go a long way toward solving the problem of cityward movement. The difficulty of evaluating the benefits of preservation of normal community life by protection of water supplies where the failure of such supplies would be catastropic in its consequences, should not deter an investigator from attempting to do so. As noted in

chapter VII a conservative cash value for an adequate supply of fresh water in lieu of extensive water-treatment works should be $4 per year per inhabitant. On a basis of 1,500,000 citizens this would amount to $6,000,000 annually.

(e) Recreation: In social welfare, recreation is considered a necessity and no greater incentive exists for inducements to participate in recreative sporting activities than nearly bodies of slack water. The annual benefits of the 37 pools and artificial lakes created by this project are assumed at $5 per person for the estimated 1,200,000 citizens of the recreational area or a total of $6,000,000. The benefits to the National Government from the provision of these recreational facilities would be reflected in the improved physique of many of its citizens, in the provision of additional attractions for rural life, and add to the peace and happiness of its people.

6. Costs. It is firmly believed that the entire development should be considered as a whole in evaluating its worth to the National Government. For the purpose of running through a brief analysis of its justification the items of soil conservation and reforestation are justified by their benefits to the land and are at present being prosecuted by various agencies. Costs of that work were not estimated by this commission. Neither has the cost of Blakely Mountain Reservoir above Hot Springs, Ark., been estimated as this item is supposedly self-liquidating. The performance of all other work involved including Denison Dam and other authorized projects that can be tied in with this project is estimated to be $280,000,000. The inclusion of existing unfinished flood-control works is desirable because contrary to opinions in a prior report Denison Reservoir is complemental to the proposed project, the value of each being augmented by the combination. The same may be said of other flood- and stream-control projects of the area. Assuming that the money necessary for the work would be obtained by the sale of bonds, the annual cost of interest and amortization in the light of conditions of existing money markets would be about 4 percent or $11,200,000. Allowing $800,000 per annum for maintenance and operation, the total annual charge would be $12,000,000.

7. Benefits. When a decision as to the disposition of a project is to be based on benefits measured in dollars, some attempt must be made to include a value for all beneficial factors. This has been done in the list of benefits included below:

Pollution control and water supplies: 1,500,000 people, at $4 each__ 6,000,000 Mosquito prevention___

Total_

250,000

26, 680, 000

8. Conclusions. In order to improve the general welfare of the area comprised in the Red River system which nominally includes the Ouchita River and tributaries, and also the Deltaic Plain of south Louisiana, it is proposed to combine improvements including existing flood control and power projects of all individual streams in the area into one project. The magnitude of the work can be realized when it is considered that the Red River is probably the largest system in the United States not yet subject to a unified program of improvement. Because prior reports show that no one item of the project, when considered by itself, is economically justifiable, all benefits and costs are pooled with the result that values of each individual project are greatly augmented. Also new values based on modern conceptions of mass welfare provide a basis for arriving at benefits to the Nation heretofore considered irrelevant to a water-use program. It is recommended that, in addition to a comprehensive program of work herein outlined, a flood control and irrigation program be completed in the upper areas of the watersheds of both the Red and Ouachita Rivers. It is concluded that, in addition to substantial local benefits that will

H. Doc. 541 (74th Cong., 3d sess.), Denison Reservoir, Tex.

accrue to communities, towns, and cities throughout the area, benefits will also accrue to the Nation as a whole that will greatly outweigh annual charges.

9. Offers of local cooperation.-(a) Rights-of-way: Within the State of Louisiana, State agencies already with an active status have the authority to secure the necessary rights-of-way and spoil disposal easements and present them to the Federal Government without fear of delays due to application of technicalities of a legal nature. Assurance can be given that such will be done. All easements secured will be within an economic distance of any dredging operations.

(b) Other cooperation: The Louisiana Flood Control and Water Conservation Commission is not in position to obligate itself or agencies of other States for material contributions other than listed above; nevertheless, information is at hand to indicate the probability that by negotiations conducted through this body, substantial additional help will be rendered by local interests. Moreover, this commission, through its authorized representatives, will hold itself open for consultation with the United States Engineers and to render further assistance as occasion arises.

Yours very truly,

WADE O. MARTIN, Chairman.
FRED VOORHIES, Secretary.

STATEMENT OF NEWT R. GRAHAM, CHAIRMAN OF THE BOARD OF DIRECTORS OF THE SOUTHWEST VALLEYS ASSOCIATION, TULSA, OKLA.

(Submitted by Congressman Disney, of Oklahoma)

I am Newt R. Graham. I live at Tulsa, Okla. I am president of the Tulsa Clearinghouse Association and am chairman of the board of directors of the South-West Valleys Association and am a member of the board of directors of the Mississippi Valleys Association and of the Tulsa, Okla., Chamber of Commerce. I have taken an active interest in flood control on the Arkansas River for some 30 years.

Intimation was made to your committee that I represent or am working for utilities. I have never owned a share of any utility stock nor have I ever received a cent of money from any utility for my personal benefit.

I am among the first proponents of the Pensacola Dam and my only present interest in the controversy lays in my conviction that promises made for flood control in this project at the time it was approved for construction from Federal funds have not been kept.

I desire, therefore, to present the following statement on this subject: Press dispatches of the hearing of the Flood Control Committee of the House of Representatives quote Mr. Leland Olds, Chairman of the Federal Power Commission, as saying that no flood control was promised to the people of Oklahoma and Arkansas when the Pensacola Dam was authorized for construction by the Grand River Dam Authority, an instrumentality of the State of Oklahoma, from 100 percent Federal funds by way of a 45 percent grant and 55 percent loan. As this statement has been further explained by Mr. Victor F. Barnett, an editorial writer for the Tulsa Tribune, it is important that the record of your committee contain the facts.

Oklahoma Senate bill No. 395 was approved April 26, 1935, by the Oklahoma Legislature. This is the original Grand River Authority Act. In section 2 in which are enumerated the powers and duties of the Authority, under subsection (C) appears these words: "To prevent or aid in the prevention of damage to person or property from waters of the Grand River and its tributaries."

This act was written in the offices of Public Works Administration and its passage was made the basis of the promised loan and grant. This act made the Grand River Dam Authority subject to suit in State courts for any damage caused by its acts or failures. There are dozens of flood damage suits now pending against Grand River Dam Authority and many more promised against whatever equity Grand River Dam Authority may have in the property. Under Federal operation there is some question whether citizens have like recourse to the courts without the permission of Congress. Thus the act of the State of Oklahoma creating the Grand River Dam Authority which was accepted by Public Works Administration as the basis for spending of Federal funds, definitely imposes the duty of preventing floods from Grand River even to the extent of permitting court remedy for failure and resulting damage.

On September 22, 1937, Mr. Clark Foreman, as Director of the Power Division of Public Works Administration, acting for the Administrator, approved the loan and grant to Grand River Dam Authority for Pensacola Dam in the following report written by Mr. Richard B. Hartshorne, 2d, finance examiner, Power Division:

FEDERAL EMERGENCY ADMINISTRATION OF PUBLIC WORKS,

Memorandum Finance Report

POWER DIVISION,
September 22, 1937.

Subject: Docket No. Oklahoma 1097-P, Grand River Dam Authority, Pensacola, Okla., hydroelectric power and flood control.

Loan
Grant

Total.

$11, 563, 000

8, 437, 000 20, 000, 000

The project, as revised, includes all of the flood-control features recommended by the War Department, as well as transmission lines and a power plant with an initial installation of two 20,000 kilowatt units and 50 percent operating factor, which would enable the sale of 155,000 kilowatt-hours at the end of the transmission lines.

A comprehensive study has been made by the Federal Power Commission of the available market for power adjacent to the project. It is the opinion of the Commission that upon completion of the project, the entire energy output could be utilized immediately in replacing fuel-generated energy. The Power Division engineer examiner estimates that gross revenues of $1,240,000 should be realized the first year of operation from the sale of 155,000,000 kilowatt-hours at 8 mills. Operating costs are estimated at $237,000, leaving a balance of approximately $1,000,000 available for debt service requirements. As average annual debt service on the loan under consideration would approximate $620,000 a coverage of better than 160 percent is indicated.

According to the Power Division engineer examiner, municipalities in the area to be served by the project with a probable consumption of $81,000,000 kilowatthours in 1940, offer an outlet for the sale of power in addition to a potential market of 224,000,000 kilowatt-hours due to the natural growth of the markets now served by the private utilities operating in the eastern half of Oklahoma. Electrical energy requirements for electrolytic smelting for two companies and subsidiaries in the area to be served are around 65,000,000 kilowatt-hours per year, so that if the Pensacola project could capture this market, as well as the municipal market, the sale of practically all energy generated by the project would be assured.

Since it appears that power from the proposed project can be generated and sold at prices more favorable than those now in effect in the area adjacent to the project, the conclusion of the Power Division engineer examiner that there will be a ready market to absorb the output of the initial installation of the plan seems justified.

Recommendation: Based upon the available data, it is recommended, subject to the special conditions contained in the memorandum dated August 28, 1937, from the Acting Director, Power Division, to Mr. Burlew, as modified in a memorandum dated August 31, 1937, from the Acting Director, Power Division, to the Associate Director, Projects Division, that the Government purchase up to $11,563,000 revenue bonds of the applicant, payable from the net revenues of the Authority, maturing over a period of 35 years, with interest at 4 percent as follows:

CLARK FOREMAN.

In table 4 of his report, Mr. J. J. Wagner, examiner engineer, estimated the costs of installation and operation and the probable income. It is important in