University of California College of Agriculture Agricultural Experiment Station Berkeley, California THE MERCED IRRIGATION DISTRICT AN ECONOMIC SURVEY OF FARM INCOMES, EXPENSES AND TAX -PAYING ABILITIES' M. R. Benedict A Supplementary Memorandum to the Preliminary Report June, 1933 ^ ?r - . UNIVERSITY "OF CALIFORNIA ; ^ COLLEGE OF A^Cai^URE Contribution from the Giannini Foundation of Agricultural Economics Mimeographed Report No. 24 INCOMES AND EXPENSES ON THE LARGER PROPERTIES IN THE MERCED IRRIGATION DISTRICT DURING THE YEARS 1926, 1927, AND 1928 M. R. Benedict s/ A report under the title "The Merced Irrigation District, An Economic Survey of Farm Incomes, Expenses, and Tax-paying Abilities" was issued by the University in preliminary form in February, 1933. This earlier report was a comprehensive study of a large number of farms drawn at random from all types in the District, and covered the incomes and expenses for the years 1929, 1930, and 1931. It sought to give an understanding of the economic conditions in the District during those three years. It is thought that this supplementary memo- randum may aid in affording a better background for interpretation of the con- ditions prior to the period 1929-1931 and a better understanding of the diffi- culties which had become acute in the period covered by the main report. The District began active operation of its irrigation works in 1926. The years 1926, 19 27, and 1928 are thus the only years not already covered, except the year 1932. After the report mentioned above had been issued, a request was made that information be secured concerning conditions in the District during these earlier years when economic conditions in general were better than during 1930 and 1931. To undertake a study of this along the lines of the earlier sur- vey did not appear practical partly because only a short time was available for assembling the information and partly because a great many farmers, especially small farmers, do not keep records such that their business six or eight years back can be shown. It was decided that while a full representation of the situation in those years could not be shown, it might be possible to show the conditions for these years as applying to a particular group of properties and by this means to give some indication of the situation for the District as a whole. For most of the larger properties rather complete books are kept by people who are especially qualified to handle such records. This, of course, is not true of the smaller properties except in incidental cases. The book records of these larger concerns are in most cases available unless special circumstances have arisen. An effort has therefore been made to obtain records from all of the large operators in a certain size group. It was found that in 1926 55 properties were assessed, Dis- trict taxes amounting to $2,500 or more. This group included those for which the most complete and accurate records were available and also constituted a group of about the size that it seemed practical to handle in the limited time avail- able. It was therefore used as the basis for this brief supplemental memorandum. The results shown for these earlier years should not be regarded as fully representative of conditions in the District during those years. They are, how- ever, indicative of a rather general condition which prevailed in the District at that time and of the attitudes and activities of many landowners and invest- ors in those years* The period concerned was one of rapid and speculative devel- opment. Many orchards and vineyards had not yet come into production. Some were Professor of Agricultural Economics, Agricultural Economist in the Ex- periment Station and Agricultural Economist on the Giannini Foundation. not yet planted. The coming of water in larger supply was making very extensive changes in farm units, types of production, and forms of investment not only necessary but apparently desirable. Large amounts of outside funds were flow- ing into the District in the form of payments for improvements, funds for main- tenance and operation of properties not yet paying, amounts put in to pay assess- ments and taxes, etc. Some of the properties were, it is true, established and going concerns on a rather intensive basis before the formation of the District. This is true of those properties which were on land that was under irrigation before the District was formed. In interpreting the experience of the individuals and corporations sur- veyed in this memorandum, the reader should recognize that corporation properties often are not able to effect the economies in operation that can be made by small farmers operating their own lands. On the other hand, the larger units have some advantages not only in buying and selling but in operation as well. The advan- tage of the small farmer lies partly in his ability, under stress, to provide the labor of himself and his family .at less than prevailing rates, and partly in the likelihood that labor will be used more effectively in his case than where hired labor must be used extensively. The data presented in this supplemental memorandum apply specifically to a particular class of farming properties. They are believed to indicate accur- ately the general situation so far as properties of that class are concerned. They are not necessarily representative of the earlier years for the farms covered in the previous report though there is much to indicate that conditions on many of the smaller properties were of similar nature though possibly not in the same de- gree as for these larger properties. Many of the small units also were at that time in the early stages of development and were being carried with funds borrow- ed or with savings, presumably until they should be able to operate at a profit. It should be recognized that the period was one in which business optim- ism was at a high pitch in all lines, not alone in these particular areas which were then in a stage of rapid development. Large investments were being made in the expectation of continuing advances in prices and a strong demand for products. In the case of tree and vine crops considerable over-expansion can occur before the additions to product begin to make themselves felt in lower prices. This is apparently true of some of the important crops of the Merced District. These seem to be faced with relatively over-supplied markets for some years to come. Some of the products such as those of the dairy farms, though selling at low prices, flow into a wider market which is less easily glutted by heavy production, and will continue to absorb the products at some price even though it be a very low one. The following summarization covers 26 properties. It includes all on which the 1926 District assessments amounted to more than $2,500 except those which are noted with the reasons for not including them. ^/ Tables I, II, and III give a summary of results from 26 properties for the years 1926, 1927, and 1928. These are divided into two groups. Group IX is a >2/ The records from which these tables are made up are the summaries furnish- ed by the corporations and individuals, usually in the form of signed statements. In a few cases, records were taken from probate records where former owners had died. combined figure for a number of properties where preference was expressed that individual figures not be disclosed. Group I presents individual figures for a number of properties in order that the reader may have a better understanding of what the conditions were in specific cases. The original data in all of the cases, both for Group I and for Group II, are in the same form and were secured in the same way. ^/ The records of expense do not include depreciation. They include interest only if such interest was actually paid out. Interest on own- ed capital is not charged as an expense. The period under consideration, at least so far as these larger proper- ties were concerned, was one of development and large investment. The figures should not be interpreted as a representation either of the basic earning power of the lands at that time or of their probable future earning abilities. It is true, however, that even the older and better established properties do appear to have shown, with few exceptions, an inability to meet from production the heavy expenses which were incurred during these years. In Group I proper- ties A, C, E, G, H, Q, and S were developed and producing in 1926. All of those in Group II were producing. This does not necessarily mean that all of the var- ious properties so listed had reached their highest productivity at that time. In this period expenses of all kinds, including taxes, were at high levels, part- ly because of the general, optimism, and speculative activity. They have unques- tionably been much reduced in later years. It is thought, however, that the picture as here presented may be of some assistance in understanding these con- ditions and in affording some background for interpretation of the difficulties which arose in connection with District assessments in 1931 and the ye a r s s inc e then. n^/ It is probable that the separation of operating expenses from expense for improvements is not wholly accurate in some cases owing to the inclusion of both in one ledger account. Th.se have been separated as we 1 I as possible, however, and are believed to be substantially correct as to major items. -3- \ Table I Income and Expenses: 26 Corporations and Individuals Operating in tho Merced Irrigation District 1926 Business Property Acreage Gross income* Expenses Net income beforo taxes (1) ~ - m — ■ (sT (4) (Col. 2-3) Group I A B C D (1) (2) (3) E F G H I J K I, M I 0 P Q R S J. 1 280 1,106 413 :' v 15,055 74 T 15,585 $ 9,766 596 11,701 $ 5,289 522 3,884 620 1,420 120 646 311 1,202 340 3,440 918 1,515 649 741 621 375 1,236 367 1,025 577 c , out) 416 0 1,810 7,736 1,400 138,678 35,754 9,177 2,728 12 , 643 1,713 36 4,839 1,726 6,174 13, 233 11,251 7,717 0 2,173 140 9,730 13,411 200 107,113 30,997 0 0 47,604 0 1,000 1,051 427 0 6,158 14,052 24,217 r\ U - 1,757 140 - 7,920 - 5,675 1,200 31,565 4,757 9,177 2,728 -34,961 1,713 964 3,788 1,299 6,174 7,075 - 2,801 -16,500 U Total for Group I 20,222 | 287,745 $ 280,336 | 7,409 Total for Group II-* ^27,894 j 614,085 | 68,597 Grand Total 45,816 | 901,830 | 825,824 | 76,006 * Whore the property was rented no expense is shown. In those cases the income given as "gross" is actually net income. \ Rent and other income. ir Certain minor current expenses are not included. Land was not yet producing and there was no income . § This figure is a total for a number of properties whore preference was expressed that Individual figures not be shown. Figures for one of the corporations are an avorago for the three years. Digitized by the Internet Archive in 2014 https://archive.org/details/mercedirrigation24bene Table I (continued) Income and Expenses: 26 Corporations and Individuals Operating in the Merced Irrigation District 1926 Business Prop. Net inc omo Taxes Total Net income Cost of before taxes operating after taxes pcrmanont Irrigation oxnonsn s impr ovement s District "* - — (ej (J) (8) O) (Col. 2 - 3) (Cols. 3 + 5 + 6) (Col. 2-7) Group I A s? 5,289 $ 389 1 2,510 1 12,665 $ 2,390 § 1,311 B 1,673 8,460 10,729 -10,655 0 C D 3,884 1,732 4,305 17,738 - 2,153 - (1) - 1,757 2,208 3,617 7,998 - 7,582 0 (2) 140 3,347 7,942 11,429 -11,429 2,088 (3) - 7,920 583 488 10,801 f 8,991 0 E - 5,675 902 5,046 19,359 -11,623 4,590 F 1 200 663 4,728 5, 591 - 4,191 — G 31, 565 3,087 15,478 125, 678 13,000 — H 4,757 3,117 3,601 37,715 - 1,961 3,985* I 9, 177 4,106 26,669 30,775 -21,598 31,425* J 2,728 1,508 8,165 9, 673 - 6,945 — K -34,961 5,481 11,878 64,963 -52,320 - L 1,713 827 4,506 5,333 - 3,620 0 M - ' 964 712 5 71 8 7,430 - 7,394 11 3,788 1,801 5,271 8, 123 - 3,284 0 0 1,299 846 3,390 4,663 - 2,937 0 P 6,174 2,472 12,193 14,665 - 8,491 0 Q 7,075 973 2,471 9,602 3, 631 2,691 R - 2,801 1,398 6,021 21,471 -10,220 ™ S -16,500 897 3,210 28,324 -20,607 T t 0 __1,031_ 4,858 _ 5 > 8 S9 - 5,869_ ' 10,922* Total for Group I I 7,409 § 39,753 $150,505 |470,594 f -182,849 Total for § Group 11*68,597 j? 46,905 1157,501 | $749,894 1 -135,809 Grand" Total §76,006 | 86, 658 §308,006 $1,220,488 $ -318,658 * An average for the three years. t Certain minor current expenses aro not included. Land was not yet producing and there v;as no income. 4 s This figure is a total for a number of properties whore preference was expressed that individual figures not be shown. Figures for one of the corporations are an average for the throe years. 2 Statement of tne cost of permanent improvements was not available for one of the properties in Group II. The total for the properties for whicn statements were available was $255,334. Table II Income and Expenses: 26 Corporations and Individuals Operating in the Merced Irrigation District 1927 Business. Property Acreage Gross incomo* Expenses Not income before taxos U) ' (2) " ' ' ' (3) (4) (Col. 2-3) GroUD I A B C D (2) (3) E F G H I J K L M N 0 P Q R S T# 280 1,106 413 $ 2,320 358 1 " 13,163 $ 3,257 973 10,431 fj - 937 615 2,732 620 1,420 120 646 311 1,202 340 3,440 918 1,345 649 741 621 375 1,196 367 1,025 577 2,300 981 0 5,090 20,591 4,200 113,276 31,485 26,907 2,213 68,642 1,626 1,487 6-055 1,846 6,015 10,905 8,719 6,459 0 1,463 0 5,057 24,414 1,200 110,131 35,470 0 0 69,042 0 10,368 765 543 0 8,119 12,370 17,549 0 482 0 33 - 3,823 3,000 3,145 - 3,985 26,907 2,213 400 1,626 - 8,881 5,290 1,303 2,396 2,786 - 3,651 -11,090 0 Total for Group I 20,012 $ 332,338 % 311,152 | 21,186 Total for Group II* 1 27,894 | 293,576 $ 457,353 $-163,777 Grand Total 47,906 $ 625,914 $ 768,505 s£ 142, 591 * Whore the property was rented no expense is shown. In those cases the incomo given as "gross" is actually net incomo. TRcnt and other income. t Property sold June 4, 1927. § Certain minor current expenses aro not included. Land was not yet producing and there was no income, "This figure is a total for a aiumber of properties where preference was expressed that individual figures not be shown. Figures for one of the corporations arc an average for the throe years. Tab 1c II ( c out iiruo d ) Income and Expenses: 26 Corporations and Individuals Operating in the Merced Irrigation District 1927 Businoss Prop. Net income Taxe s Total"* Not income Cost of "before taxes County jvic r c o a. Irrigation District operating oxpons e s after taxes permanent impr ovement s (Col. 2-3) - (5T " Te) - " (Cols. 3 + 5 + 6) ~ '(3) (Col. 2-7) (9) Group I ~ A B C D (D* (2) (3) E F G H I J K L M N 0 P Q R S ?t 937 - 615 2,732 k 589 1,259 1,450 0 2,830 7,049 3,867 $6,676 9,281 15,748 0- 4,356 - 8,923 - 2,585 $ 406 0 - 482 0 33 -3,823 3,000 3,145 -3,985 26,907 2,213 - 400 1, 626 -8,381 5,290 1,303 6,015 2,786 -3,651 -11,090 0 1,104 3,363 643 1,104 843 5,590 1,493 4,422 1,666 5, 536 948 1,361 2,011 1,004 2,396 1,115 1,509 1,101 1,000 1,807 7,477 649 5,064 4,478 14,675 '3,663 26,868 7,777 9,974 4,292 3,726 6, 026 3,351 11,226 2,764 5,632 3,252 4,374 10,840 6,349 30,582 6,521 130,396 40,626 31,290 9,443 84,552 5, 240 15,455 8,802 4,898 13, 622 11,998 19,511 21,902 5,141 - 3,393 -10,840 - 1,259 - 9,991 - 2,321 -17,120 - 9,141 - 4,383 - 7,230 -15,910 - 3,6 14 -13,968 - 2,747 - 3,052 - 7,607 - 1,093 -10,792 -15,443 - 5,141 1,493 0 0 8,031 3,985 r 31,425 Y 0 0 0 0 1,602 10, 9 2 2* Total Gr oup for I 21,186 |41,507 |140,588 0493,247 0-160,909 Total Group Grand Total for II* 5 .-163,777 -142,501 J?47,108 088,615 _ $149^93^ 0290,523 0654,396 01,147,643 0-36O,82O_ 0-521,729 H * Property sold June 4, 1927. t xiit average for the throe years. ^ Certain minor current expenses arc not included. Land was not yet producing and there was no income. This figure is a total for a number of properties whero preference was expressed that individual figures not be shown. Figuros for one of the corporations are an average for the three years. Statement of the cost of permanent improvements was not available for one of the properties in Group II. The total for the properties for which statements were available was .#191,479. Table III Income and Expenses : 26 Corporations and Individuals Operating in the Merced Irrigation District 1928 Business Property Acreage Gross inc omo * Expenses Not income before taxes (2) (3) (4-7 (Col. 2 - 3) Group I $10,500 $- 729 280 Oil, 029 B 1,106 1,072 ' 177 895 C 413 15,847 8,692 7,155 D 1,420 0 269 269 (2)1 120 2,532 6,159 - 3,627 E 646 32,844 35,757 - 2,913 F 311 4,700 1,600 3,100 G 1,202 89,027 103,867 -14,840 H 340 46,455 42,643 3,812 I 3,440 33,3 64 0 33,364 J 918 1,358 0 1,358 K 1,156 46,800 98,533 -51,733 L 649 5,707 0 5,707 K 741 11,337 10,378 959 I 621 6,057 546 5,511 0 375 2,732 605 2,127 P 1,196 11,135 0 11,135 Q 367 16,028 10,995 5,033 R 1,025 2,341 19, 656 -17,315 S 577 8,232 15,442 - 7,210 2,300 0 0 0 u« 22,414 . ? 7 J??9. . - 5,566 Total for Group I $370/382 $394,328 1-24,046 Total for Group II® 27,894 $488,478 $ 644,719 $ -155, 241 Grand total $858,760 $1,039,047 $-180,287 * Where the property was rented no expense is shown. In the s c cases the income given as "gross" is actually net income. t Rent and other income, f Property sold in May. /.Certain minor current expenses are not included. Land was not yet producing and there was no income. H Records for the year 1928 only were available . ikThis figure is a total for a number of properties where preference was expressed that individual figures not be shown. Figures for one of the corporations are an avoragc for tho three years. -8- Tabic III (continued) Income and Expenses : 26 Corporations and Individuals Operating in the Merced Irrigation District 1928 Business Prop . Net income Ta xes Total Net income Cost of before taxes County ~T5) \ Merced Irrigation District operating expenses after taxes permanent improvements ~ (4) (Col. 2-3) (67 ~ (7) (Cols. 3-t- 5 + 6) (8) J (Col. 2-7) '(9) Group '. B C D (1) (2)* E F G H I J K L iVL I 0 P Q R S Tf U$ v- 729 895 7,155 0 541 2,531 1,433 02,3 59 8,997 3,868 013,929 11,705 13,993 0- 3,629 -10,633 1,854 0 270 0 269 - 3,627 - 2,913 3,100 -14,840 3,812 33,364 1,358 -51,733 5,707 5,511 2,127 11, 135 5,033 -17,315 - 7,210 0 - 5,566 0 743 1,356 769 2,462 1,591 4, 627 1,784 4,078 1,089 1, DO / 2,144 1,061 2,851 1,309 1 R?n ± , o£u 1,233 1,006 4, 108 0 768 4,486 3,670 11,875 3,195 23,574 7,777 8,909 4,292 ■Z COR . O , Do O 5,356 2,979 10,896 2,451 A Q 1 c; 2,160 3,635 8,492 269 7,670 41,599 6,039 118,204 47,429 28,201 9,561 111,520 5,381 1 C ROT 8,046 4,645 13,747 14,755 18,835 4,641 40, 580 269 - 5,138 - 8,755 - 1,339 -29,177 974 5,163 - 8,203 -64,720 326 A 1 PA - 1,989 - 1,913 - 2,612 1,273 — CO , ( UU -10, 603 - 4,641 -18, 166 0 0 612 3,985T 31,4251" 5,300 0 0 21,000 55 10, 922 1" Total for Group I 0-24, 04 6 ^39,793 0128,240 0562,361 0-192,079 Total for Group II 11 -156,241 049,618 0150,694 0845,031 0-356,553 Grand Total 0-180,287 089,411 0278,934 01,407,392 0 548,632 * Property sold in May. T /ill average for the three years. f Certain minor current expenses are not included. Land was not yet producing and there was no income. £> Records for the year 1928 only wore available. II This figure is a total for a number of properties whore preference was expressed that individual figures not be shown. Figures for one of the corporations aro an average for the three years, ff Statement of the cost of permanent improvements was not available for one of the properties in Group II. The total for the properties for which statements were available was $181,015. Table IV Income and Expenses: 26 Corporations and Individuals Operating in the Merced Irrigation District Total 1926, 1927, and 1928 Business Property Acreage Gross income* Expenses 'Not income before taxes ro W w (Col. 2-3) Group I 280 027,675 024,052 v 3 , 623 B 1,106 -r 1,504' 1,746 242 C 413 44,595 30,824 13,771 D (Df 620 1,397 3,636 - 2,239 , (2)f 1,420 0 409 409 (3) 120 9,432 20,946 -11,514 E 646 61,171 73,582 -12,411 F 311 10,300 3,000 7,300 G 1,202 340,981 321,111 19,870 H 340 113,694 109,110 4,584 I 3,440 69,448 0 69,448 J 918 6,299 0 6,299 K 1,339 128,085 215,179 -87,094 L 649 9,046 0 9,046 M 741 12,860 21,74-6 - 8,886 I 621 16,951 2,362 14,589 0 375 6,304 1, 575 4,729 P 1,236 23,324 0 23,324 Q 267 40,166 25,272 14,894 R 1,205 22,311 46,078 -23,767 S 577 22,408 57,208 -34,800 T B 2,300 0 0 0 22,414- - 5,566 Total for Group I 0990,3 65 0985,816 1 4,549 Total for Group II** 27,894 01,396,139 Ql, 647, 560 0-251,421 Gr and Total 02,386,504 02,633,376 0-246,872 * Whore the property was rented no expense is shown. In these cases the income as "gross" is actually net income , T Rent and other income, ^ Property sold June 4, 1927 . £ Property sold May, 1928 „ II Certain minor expenses are not included. Land v/as not yet producing and there was no income. ^fl Records wore available for the year 1928 only. ** This figure is a total for a number of properties whore preference was expressed that individual figures not bo shown. Figures for one of the corporations arc an average for the throe years. -10- Tablo IV (continuod) Income and Expenses: 26 Corporations and Individuals Operating in the Merced Irrigation District Total 1926, 1927, and 1928 Business Prop. Net income Taxc s ""Total Net income Cost of "before taxes (Col. 2-3) County "TO Merced Irrigation District operating expenses ™rn (Cols. 3-1- 5 -4- 6) after taxes Ts) (Col. 2-7) permanent improvements — in Group '. J.L B C D (D* (2)t (3) E F G E I J K L 1.1 N 0 P Q R S Tf 03,623 242 13,771 01,519 5,463 4,615 07,699 24,506 12,040 033,270 31,715 47,479 0- 5,595 -30,211 - 2,884 0 1,987 0 - 2,239 409 -11,514 -12,411 7,300 19,870 4,584 69,448 6,299 -87,094 9,046 - O j OOD 14,589 4,729 23,324 14,894 -23,767 -34,800 0 - 5,566 3,312 6,710 1,969 3,362 2,275 11, 139 6,201 13,155 4,958 15,095 2,864 3,630 5,956 2,911 7,719 3,397 4,427 3,231 3,037 4,108 5 1 'x 24 15,419 1,905 14,596 12,876 42,028 10,459 77,111 23,719 30,761 13,090 13,030 16,653 9,720 34,315 7,686 16,568 8,622 12,614 8,492 12,372 22,538 24,820 91,540 18,151 374,278 125,770 90,266 28,677 261,035 15,954 R AAA 24,971 14,206 42,034 36,355 on r\r?rz o/,U(0 69,061 15,651 _ 40,580 -10,975 -22,538 -15,388 -30,369 - 7,851 -33,297 -12,076 -20,818 -22,378 -132,950 - 6,908 - £ D , D'-c D - 8,020 - 7,902 -18,710 3,811 A A 1 P.0 -46,653 -15,651 -18,166 _ 1,493 2,088 0 13,233 11,955 94,275 5,300 0 0 21,000 4,348 32,766 Total for Group I § 4,549 0121,053 0419,333 $1,526,202 0-535,837 Total for Group II 11 -251,421 0143 JL 6JH^ 0458, 130 0,2,249,321 | 0-855,182