H D CsCb UC-NRLF $C ED fiM3 1^ -fl , :i \ 3EP0H!I? Oil yJKIi ^liLLfOIiJ. aOxIDX^IOil OF TH?2 LA SQOIiilDiiJD m ^liilGO Y TKHRiillOS DE LA BAJA GALIIPOMIA, S. A, On IoYem"ber 1, 1906 tiflr. REPORT ON THE PIITMOIAL GOiTDITION OP THE CALIPORUIA DS7SL0Pi^.lTT GOMPAIJY AilD ITS SUBSIDIARY COMPAHY, I.A SOGIEDAD DE RIEGO Y TERREiTOS DE LA BAJA GALIPORIJIA. S. A. On Hovember 1, 1906 By H. T. GORY REPOHT ON TKI? FIKAHCIAL CQNDITICN OF THE CALIFORNIA DEVELOPMafT COMPANY, AND ITS SUBSIDIARY COMPANY LA SOCIH)AD DB RIEGO Y TERREICOS DB LA BAJA CALIFORNIA, S. A. Oil NOV. 1st, 1906 BY H. T. CORY. The following Report has been prepared for the puxpose of showing the present financial condition of the Califomia Develop- ment Company together with its probatle future resources and liabili- tiod. Of the many factors viilch are to be taken into consideration but fevv are definitely detomined, while no small number axe entirely matters of prophesy, so that the explanation as to the bases upon which the results set forth were arrived at should be carefully con- sidered to avoid serious misconception of the true situation. With this explanation the follosving summary is given: 1. Actual Assets #1,275,705.67 2. Actual Liabilities 3,170,078.00 3. Advisable Construction and He-construct ion 1,120,000.00 4. Marketable Securities I!ade Available by AdvisabI .e Extensions 2,750,000.00 5. Probable Yearly Cost of Operation and ::aintenanc€ > of •'"^rapleted System 216,250.00 6. Income 305,200.00 7. Gross Profit Available for Fixed Charges and Dividends on Stock [ 88,950.00 1. ASSETS. A. Buildings and Grounds, 1 6.500.00 ^. Real Estate- 1. Scrip Land 1342.2') acres 13,422. 2. Kan Ion Purchase 1,000. 3. r-7exlcan I.,andB, G0< 000 ac. 80.000. 94,422.00 C. Canals- 1. Concrete Headgate 77,000. 2. Canals in U. S. 15,000. 3, Canals in Mexico 600.000. 692,000.00 D* Equipment and supplies- 1. Dredger Ko. 1 12,000. 2. " '• 2 2,500. 3. " "3 10,000 4. "Delta" 80,000. 5. Steamer "Searchli^t" 8,000. 6. Other r.'achinery 7,000. 7. Corral 2,700. 8. Bnginr. Instrs. & Rods 5,000. 9. Telephone Line 2,700. 10. Camp Equipment 2,500. 11. Furniture 2,000. 12. Tools and Implements 4,500. 13 Llaterials & Supplies 5.18184 -H 22,873 161,773.00 Negotiable Paper - 1. Notes and i!ort gages 2. Interest on same-Nov, let 3. Bills Receivable 4. Int. on sar.e to Hov. 1 5. 2701 shares CDCo 6. 626 shares ILCo. 7. C.D.Co. Bonds, ^^160.00 8. Other Stock 161,693. 7,522. 2,996. 165. ? 31,300. 60. 100. $203,856.00 F. Overdue '''ater Rentals-Nov. 1.- 1. I. '.Co. No. 1 2. .. 4 3. " 6 4. " 7 5. C.I.!. Co. 6. Mexican Colonists 24,300. 1,950. 25,000. 3,000. 1,527. 5.000. 6. Cash H. Personal Accounts 60,777.00 38,377.67. 18.000.00 1,275,705.67 In compiling the assets the figures which stand upon the company's books have not been taken, tut the various items have been determined in various ways and j^^pear in the detail explanations following: A. Buildings and Grounds . These cons 3st of office buildings, warehouses, stables and corrals at Calexico, Kexi- cala and the Cement Heading. At Calexico and : exicali the cutting bac:^ of Hew River has necessitated a line change of the Inter- California Railroad, and the new const ructi en passes through the grounds of the California Development Company's general offices materially reducing their value, rendering the office buildings very much less desirable and necessitating moving the stables and corral to real estate v^ioh must be purchased. The lot on Tuiiich the l!exican buildings in I'exicali stood was washed w^ay and lots must be rurchased on which to place the structures vi^ich were saved. The adobe building at the Qement Heading will be wrecked as the Inter-Califomia Railroad passes directly through the East side of it. The total present value of all buildings and grounds belonging to both companies, therefore, amounts to $6,500.00. ^' Real Estate : The present holdings of Scrip Land is 1,342»25 acres, -which will probably be disposed of within the next two years at an average price of $10.00 per acre. The 320 acres of land at the Cement Heading which was bou^t of Hall Hanlon for $26,000.00, because of it being Impossible to condemn right of way, for irrigating purposes, has little value except for strategic purposes. The roqi^. r^iarry and Clay Pit -2- developed for the work of dosing the break in the Colorado River bank lie outside of this land so that its diief value is in the possibility of a town sito on the International Boundary Line where the latter is crossed by the Inter-California Railway, and is taken at |1,0C0.00. The Mexican Company still 0T;7n8 80,000 acres of land in Mexico which is taken at .fl.COper acre. Of course when water is delivered to these lands for irrigation the price of land with the right to buy water will be from C'lS.OO to (20,00 » but the differ- ence is considered under the headinp of "r.'arketable Securities made Available by Advisable Extensions". C, CanaliS. The (*oncrete Heading at Algodones cost ^77,000.00, and its value is taken at its cost. It is impossible from the books of the company to deter- mine the construction cost of the canals in the United States, as maintenance expenses and other items were charged against them. However, it probably was in the vicinity of $250,000.00. All of those lying East of the Alamo rivor in the Valley are in such state that it is highly advisable to entirely abandon than, and sarce is true of those lying west of the New River. The canal bet'.veen the Alamo river and Kew River is in fair condition, but it has not been taken into account as an asset for the reason that it is practically necessary to turn all of it over to Imperial '"ater Go. Ho. 1 in a general settlonent of their existing contract with the California Development Company for the completion of its irrigat Ion system. Incidentally it should be noted that a considerable bonus must be given to Imperial v;ater Co. Ko. 1 to take over the I'ain canal, so that at present it is really a liability rather than an asset, but this is taken into account in the item "Completion of I. ". Co. Ko. 1 System". The canal from the Concrete Heading to the river cost about |i26,000.00, but could be constructed with a clam-shall dredge for less than $5,000.00. It seems probable at this time that this canal will cut out so satisfactorily that no further work will be required up- on it, leaving a cansil which would cost about (15,000.00 to dig with the clam-shell dredge, and its value has therefora been taken at $15,000.00. The canals in i:oxico consist of a fev; miles of laterals which v/ere not damaged or destroyed during the recent flood, and the Alamo river from the Lower Heading to Sharp's. This later was cut out to a fairly uniform grade by the flood and has been taken to be worth the cost of digging a canal capable of carrying the maximum amount which will ever te needed in the Imperial Valley, less the amount of money it Is advisable to spend upon it to give it that capacity. On this basis it is worth |600,000,0C. D. Etauipment and S uTxplies. The first seven items are taken at their present value. The engineering instruments are worth about ^1,000.00, and the records havo been assigned a value of ^4,000.00. Such records, profiles, maps, etc., of course cost a very much larger sum, but the topography of a great deal of the country has entirely changed making practically all of the data regarding it valueless, and the majority of the records covering the completed work, together with insufficient data about practi- cally everything v*,ich needs to be done makes the real value of the records quite low. The other items are taken at their present value. -3- i. negotiable Paper . All of the items are given at their face value with the exception of shares of the Imperial Land Company stock which are taken at fifty cents on the dollar, and the California Development Company bonds which \7qtq also taken at that figure, ith these exceptions all of the paper is believed to be thoroughly good provided the tenns of the contracts with the various Liutual 'Vater Companies aro carried out. F. Overdue 'ater rentals . All of these are thoroughly good with the exception of the third, the amount due from Imperial "ater Compaiiy Ko. 5, which is probamatical. This Water Company owes about ^'^51,000.00 water rentals, but a law suit is now pending and it is known that several counter-claims will be made by this Company which will reduce the total amount which can be probably collected to the sum given. G» Cash. This item is the Bank balance at the close of business October 31st, 1906. H. Personal Accounts . This item is made up of several entires amounting to ^22,742.68, having a present value of about #18,000.00 80 far as can be ascertained. 2. LIABILITIES. A. Outstanding Bonds — #477,920.00 $286,752.00 B. ♦20,000. 11,565. 900,000. 35,206. Bonds. 22.439 . 989,210.00 C. 106,751. 325,000. 12.500 . 444,251.00 50,000. 1,000,000. 300.000 . 1,350,000.00 E. Unpaid Pay-rolls 10,770.00 F. Personal Accounts 39,095.00 G. Completion Ilo. l*s System 50,000.00 H. Guarantee Bonds of Ro. 8 ? $ 3,170,078.00 A. Outstanding Bonds . The bonds of the company which have been issued are of a face value of #477, 920. 00. The amount of money it will take to call in all of the issue depends entirely upon the disposition made of the company itself, but it seems that they could be retired on a basis of sixty cents on the dollar, and they are taken therefor to represent an actual liability of $286,752.00. B. Bills Payable . The first and second items are notes vfhich are now due. The third item consists of fourteen notes aggregating §900,000.00, bearing date and payable as follows: D. Bills Payable - 1. J. M, Smith 2. A. H. Heber 3. S. P. Co. 4. Interest Nov. 1 - 5. Deferred Int. on Accounts Payable - 1. llerchants 2. S. P. Go. 3. Individual Damages- 1. Salt works 2. S. P, CO. 3. All Others Date. Dae Amount July 22- 1905 (1) Map. 1, 1907 $20,000.00 •f (2) Mar. 1, 1908 30,000.00 «t (3) liar. 1, 1909 40,000.00 n (4) Map. 1, 1910 50,000.00 If (5) Mar. 1, 1911 10,000.00 Sept. 22, 1905 March 1, 1911. 50,000.00 Kov. 22, 1905 Demazid 150,000.00 Fel). 12, 1906 75,000,00 I.!ar. 16, 1906 75,000.00 I^ay 11, 1906 50,000.00 J-une 26, 1906 100,000.00 Aug. 7, 1906 100,000.00 Sept, 19, 1906 100,000.00 Oct. 20, 1906 1 ft Total — 100.000.00 $ 900,000.00 The fourth Item is the total a-^-iouiit of interest due on all of the outstanding notes up tc; November 1, 1906. The fifth item is deferred interest on the outstanding "bonds of the company v^^ich it is assumed must he paid although such payment could possihly avoided. c. ACGOUirrs payable . The total amount of money due merchants and ST:5)ply houses is $106,751.00for material furnished or work done. The amount due the Southern Pacific Company is for material famished, for work dene, and for frei^t, chiefly on shipments of rock durfcig the progress of the v/crk at the Lower Heading. The individual accounts include such items as $1,000.00 dae to Sr. Sepulveda, $2,000.00 to the Estate of Senor Velasco, the probable amount of settlement with Attorney Ileserve, etc. ^« Damafres . Suit has been entered by the Salt on Salt Company for $200,000.00, but it is heli^red a settlement can be effected for $50,000.00 and that is the amount taken. The damage to the Southern Pacific Oompary is estimated and may be considerable in error, as I have very little data to use as '\ basis. Other damagen for loss of land and crops undoubtedly a^e great, but nothing but a conjecture can bo made at this time as to the actual amount v^ich wnuld be required to settle them. E, l^-roll Unpaid . This is the amount of unpaid payroll up to Kov ember 1, 1906. F. Personal Accounts . This item consists of moneys payable to various individuals, about forty per cent being payable in excess water arranged in settlement for damages, and about forty-five per cent in unpaid salaries of officers and employees of the company. 0. Completion of Ko. l*s System. The California Development Company is under contract to build a complete distributing system for Imperial v/ater Conipany No. 1, and it is impossible to deteimine how much will still be required to comply with this contract. It will probably be more than $50,000.00, but it is believed an arrangement may be made with Imperial 7.'ator Company llo. 1 to take over the main canal system runninc between the /ilamo and New River and North of the International Boundary Line, and cancel the existing contract for the completion of tlie system for that amount in spot cash, so that it is entered here as a Itimp sum and avoids the necessity of taking note of the main canal as a liability by itself. -5- H. Guaranteed Bonds of No. 8 . The California Development Company guaranteed $109,600.00 worth of bonds issued by Imperial "ater Company No. 9, but I have Just arranged a settlement with the Board of Directors of that company, which will, in effect, relieve the California Development Company of this liability and althou^ the contracts will not be signed for a few days, I feel quite sure there will be no further hitch in the negotiations. 3. ADVISABLE COHSTnuariCK MD RE-COKSTRUCTIOK. A. Completion of '.'ork at Intake 125,000.00 B. Re-Construction and Jiixtraordinary Maintenance of Existing System — 1. Canals in Ilex ice l-EBO.OOO. 2. Canals in U. S. 45.000 . 295,000.00 C. Extensions — 1. In liexlco 435,000. 2. In U. S. 225.000 . 660,000.00 D. Real Estate and Buildings 25,000.00 £• Miscellaneous —Live Stock,Pumiture,etc. 15.000.00 $1,120,000.00 A. Completion of Vork at Lower Heading . On November first, the closing was not entirely made and there were ajproxiraately 400,000 yards of material to put in place and el^t and a half miles of track to lay upon the top of the levees. The completion of all vo rk at present contemplated on the river on the first of Novffnber would cost $125,000.00. B. Re- Construction and Extraordinary !.Iaintenance of Existing System . It will cost about #200,000.00 to improve the Alamo river bed in L'exico between tlie Lower Reading and Sharp's, and about 1-50,000.00 to dig a new canal at the foot of the ?/lesa from the Concrete Heading to a point opposite the Lower Heading. It will be necessaiy to build a canal in the United States from near Holtville about fourteen miles long to Brawley for the purpose of supplying Imperial 'Vater Company No. 4, and providing for the use of the waste water from the Holton Power Company. This canal will ooet about v45,000.00. C. Ertensions . A complete irrigation system for the lands owned by the Mexican Company and a ma 3n canal throu^ Mexico, turning back throu{^ the United f-tates for the purpose of cariying water to the area ^.'est of New River must be completed. This latter canal will be about thirty miles long, but arrangements can doubtless be made with the r'exican c:attle Company — the Times Syndicate — to join in this wo* and the total cost of these canals to the Calif omia Development Company and the ?-:exican Company will be $435,000.00 including the very expensive and elaborate structures which will bo required for the headings of all of the main canals leading into the United States at a point about five miles east of Sharp's. In addition to these improvement It may become advisable for legal reascms to put in a permanent hoadgate in Llexioan terrltoiy Just belav the Cemant Heading. Such a stincture would cost about $150,000.00, but as it does not seom a necessity at this time it has not been taken into consideration. In the United States about thirty miles of main canals must be built for the territory east of the Alamo and eighteen miles for the territory west of New River, costing in all about (i225,000.00. -6- ^« Real Estate and Buildto^s , Calexico is so small a place and climatic ccnditions so disagreeable that it will bo necessary to build several cottages to b ■ rented at a moderate price to officers and employees of the flompany, in order to hold good men of family. These together with satisfactoiy office buildings, corrals, etc. would require $25,000.00. S. I.!iscellaneous . The chief Items imder this heading will be colonization expenses to the I-e:^ican Company especially; and new live stock and buggies for the use of the engineering department in the construction work which will doubtless be begun at once. 4. ilARKETABLI^: SECURITISS i'iADE AVAIL/vBLE BT ADVISABLE E>:TS>:S10KS. A, Land-50,000 acres in Mexico $750,000.00 B. Water Stock- 100,000 acres in U.S. 2,000,000.00 $2,750,000.00 The assets and liabilities given above are those which are practically immediate ones and the Advisable Construction and Re- construction work should la rushed to completion v;ith all possible speed. The Marketable Securities which will "^^ made available can be disposed of relatively soon. The rate of development of the Valley in the past is no criterion to use for that which is to be expected in the future because the extraordinary and vital interruptions which have been experienced. People had Just commenced to come into the Valley in large numbers when a very unfavorable soil report by a Government Expert threv/ a serious damper upon the entire enterprise and by the time that was gotten rid of a water shortage ensued, followed later by an agitation for Government Osmership through tho medium of the Reclamation Service, and a little later c^ime the raenanco due to the break in the Colorado river \7hich soon assumed such proportions as to almost paralyze all advancement. At the present time the Valley is advertised mors widely than ever Lefore in its history and far more favorable. The confidence now existing everywhere as to the Irrige.tion Compary»s ability to satisfy all demands upon it is tut of all proportion to the real facts, and there is now every evidence of a boom which will be almost without a parallel in the history of the country. This in itself would indicate an opportunity for vexy rjipidly disposing of tho additional water stock which will be made availabb by tho extnesions contemplated, but on the other hand a boOTi in itself has many elements of danger by over-reaching. Some of the prices in the Valley v/hich are being asked today are a little less than unreasonable and as some of the ""uixotic belief in the existing management's unlimited altruism is dispelled there will probably be a re-actlon which will very likely result in a disagreeable and unfortunate agitation expecially if steps should bo taken to increase the inccme of the company by means of a raise in water rate, and it may therefore be a few years before all of the additional securitfes can be disposed of without sacrifice. It seems perfectly safe, however, to estimate that this could be done within the next four years, -7- It must be remembered however that not to exceed thirty to thirty-five ^qt cent of the total sun would be in cash v/ithln such a period, but the remainder \«)uld be rex)re8ented by thorou^ly good paper. A, Land , In Mexico the land must be sold with r3ght to buy water included and of the 80,000 acres of land still owned by the iviexioari company only 50,000 acres lie so that it may bo irrigated. The land itself has been talcen into account at $1,00 per acre and by colonization and judicious management the 50,000acre8 of irrigabl'- land could be sold for §20,00 per acre v/ith a cost of about |4.00 per acre for distributing system necessary, leaving $15.00 per acre as the additional values made available by extensions in Mexico. 2» ^*^'ater ftock « There aro now outstanding water stock for 217,000 acres of land in the United States aiii the proposed extensions would enable an additional 120,000 acres to bo put under canals. Roughly epeaking the distributing systems for sucih lands which are not ind uded in the estimate for the extensions of main canals will cost t5.00 per acre. Some of the 120,000 acres of land will bo rou^ and expensive to reclaim but the water stock would be sold so that the receipts therefrom would be equivalent to |25.00 per share or per acre for 100,000 acres. Deducting $5.00 per acrcsas the cost of distribut- ing 8;yBtGms there leaves a n'et amount of 100,000 acres at ^20.00 per share or #2,000,000.00. 5. OPERATION AND llAI MBH ANCE CP COMPLETED SYSTEM. A. Levees and River Protection $100,000.00 B. Canal s- 1. In I»:exico 2. In U. S. 100,000.00 C. Buildings 1,250.00 D. Legal t-iepense 9,000.00 E. Insurance, Taxes, etc. 6.000.00 I 216,250.00 A. Levees and River T^teotlon . Like all Delta rivers the Colorado is now upon the highest line of a ridge vAilch slopes both ways from the banks. Prior to last June sono overflow water reached the ?alton Sea, but in no large quantities because of the tendency to deposit silt vexy soon after leavin/r the river proper, thus build- ing the banks higher in proporticn ar the river bottom was raised. For that reason it was a matttir of little importance whero the river channel might be changed by accidental means, and levees would be of no real value except to keep the lard relatively caose to the rivor from being ovorflov/ed, and this was undesirable because the overffiow irrigated after a fashion a veiy large tract of land particularly the Southern portion of that belongirig to the l'ie::ican Cattle Company. On account of the large channel which the break has cut extending practically from within three-fourths of a mile of the river banks proper to tho Salton Sea, this has entirely changed the situation, and if the river at the Lower Heading should begin cutting "estward, it might within a few hours eat away a oonsMerahle portion of the diversion work, and the overflow water reach this canon resulting in another break equally as difficult to handle as the one just closed. Only a few miles East of the Colorado Rivor extending from Yuma Southward and rou£^ly speaking paralleling it is the I.Jesa line whereas on the 'Vest beginning at the Lower Heading and extending entirely to the Grult is a broad plain sloping rapidly from the river. These conditions, as is well kno'wi to Geologists, mean that the river will ccnstantly tend to shift to the eot going farther and farther from the Eastern abeyraent. The in^rovenent work on both Bides of the river consists of levees close to the bank proper and will, if maintained effectually prevent the shifting of the bed from its present location* I am of the opinion that the le^reo system cannot long be maintained satisfactorily except by an elaborate and expensive plan of rivor protection using the methods successfully employed on the :'issourl rivor consisting, generally speaking in short spur dams. If scmething of this kind is not done it is inevitable that the existing levees must be changed fraT. time to time and a chance taken of an occasional break which will prove expensive to close. To decide upon the best method of handling the situation and estimate its cost would require the obtaining of a great deal of data, careful consideration, and probably trying several experi- ments before the most satisfactory method of procedure could be detemined, therefore only a rough estimate, little better than a guess, could be made by anyone at this time. The situation is not grave enough to warrant the heroic measures which would un- doubtedly prove efficacious, but which would cost between $1,500,000 and .f 2,000,000.00 — especially immediately. At the saT.e time some- thing must be done and within the next ten years the average annual expenditure which will be required to insure against disaster or to repair the damage if another break should occur may be taken at tlOO,OCO a year during that period. In considering the matter it must be borne in m.lnd that unless the present levee is extended down the bank of the Colorado River about twenty miles to the hi^ land below the source of the Pescadores rivor, or a levee is built from the end of the present system along the river bank in a '"esterly direction about twenty m.iles to the Cocopa I'ountains, which foTm the western abeyment of the rivor. Just south of Calexico, the overflow water will each year get into the Salton Sea to a more or less extent. S» Canals . The Maintenance and Operation of the ccmploted system exclusive of Rivor and Levee Protection work, but Including Administration will bo about 1100,000.00. This figure is based upon good construction of the main system which must be maintained by the California Development Company and the I^exioan Company, and contemplates reinforced concrete and steel gates throughout, and further contemplates no expenses of management other than the routine ones which would be required for a satisfactory system v/ith all existing tangles and difficulties straightened out. ' ^* Buildings . The maintenance of the buildings v/hlch must be erected at Calexico and :.:exicali and at various points on the completed systen for employees and officers is estimated on the basis of 5% per annum and should not amount to more than $1,250. E. Legal Expenses . Extraordinaiy legal expenses are certain for the next year or two because of veiy important suits which have already been filed, particularly those against Chaffee, et al, and against Imperial '"ater Company Ko. 5. At all times claims must be expected and difficulties encountered with the various mutual -9- water companieB, bocause their management cannot be expected to te business -like. Furthermore a decisive legal controversy with the United Ttates Heclnmation Service to definitely settle the rlg^t to take enough water to Irrigate the 500,000 acres of land referred to, eeeiTB inevitable sooner or later. Under these conditions a; "expense of at least $9,000.0^ a year should be expected. F. Insurance. Taxes, etc . This item Is problematical depending largely upon the appraisement which is to be expected — probably $6,000.00 per year is a fair figure for the next five years. 6. INCOME. A. Rents B. Pov/er Rentals C. Water Rentals 11,200.00 4,000.00 300.000.00 $305,200.00 ^' Rents . The rents on the Company's houses built to accommodate company officers and employees will average vl»200.00 per annum. B. Power Rentals . There Is a possibility of considerable power rental in the Valley i.rovidlng the injunction restraining the Company from allowing any water to reach the Salt on Sea can bo removed. Doubtless the best v/ay to do this Is to obtain control of the Salton Basin, which veiy likely can be done as a part of the settlemsnt of danage claims with the Salton Salt "orks. The pester required in the Valley will be quite considerable and there is a possiUlity that water rentals for power purposes might reach ^15,000.00 within the next five years. At the present time it araraounts to v,2,000.C0 and for the ensueft ing five years it will probably average (-4,000.00. C. ':.'ater Rentals . Water rentals for the six months ending June 30th, 1906 were at the rate of f 120, COO. 00 per annum.. The acBrage in cultivation is approximately 100,000. Within five years 300,000 acres should bo under cultivation in the United States and probably 150,000 acres -possibly 200,000 in Kexico. The use of water will probably increase in direct ratio with the area under cultivation, although this Is very doubtful. The rate at which the water rentals will increase from the present time until the entire 450,000 or 500,000 acres will be under cultivation is problematlcal- probably within the next year the rate of increase will be much larger than later on -but it depends upon a great many factors and it would seem wise not to assume the average annual income from water rentals for the next five years to be greater than |!300,000. per year. J'any figures have been made on the basis of four acre feet of waterpor year for each and eve y acre under the canals and assuming that ultimately 500, COO acres will be irrigated in the Valley the water rentals would amount to ^1,000,000.00 per yeaur. In the light of experiaace here it would seem that two and a half acre feet per year for all land undercanals is about the proper figure, and the price per acre foot is not fifty cents, but it is fifty cents less ten, or more, per cent allov/ance for seepage and evaporation, amaking the real price of water per acre foot less than forty-five cents. Hence it would seem that when the entire Vallq^ is fully developed the water rentals whould amoiant to frcm -10- $550,000.00 to $600,000.00 per annum, providing the eompany can supply the demand for water and that the present water rates contjnue . It has been tacitly assumed that the Colorado river carries enough water to irrigate 2,000,000. acrep of land; but investigation shows this is a serious overestimate due very largely to the fact that the total annual discharges of the river at Yuma have always been taiken, thus countinf^ the flood waters, all of which, of course, could not be used. It is true that the average annual discharge of the Colorado River at Yuraa is 0,000,000 acre feet, and assuming four feet of v/ater used per acre per year the total discbarge of the river would obvirusly suffice to irrigate 2,000,000 acres. Unfortunately the total annual discharge of the river is not available nor any large fraction thereof, for while it is theoretically possible to conserve the flood waters of the Colorado Hiver and render than available for use during low v^-ater period, the flood discharges so greatly exceed the capacity of any feasible storage system that has ever been omsidered or Is likely to be carried out that it would be little lese than folly to regard as available for irrigation anythinf?; more than the formal flow of the river. The Reclamation Service Engineers told mo that they are considering the construction of a gigantic chain of reservoirs on the water sheds of the Colorado River in Colorado Involving an expenditure of between t'12,000,000.00 and $16,000,000.00 but they find several serious obstacles to ovoreome aside from obtaining the necessary amount of money and it is doubtful whether any of such syster, will be constructed for many years. Reliable gaugings of the Cclorado river discharge at Yuma were not taken before 1902, so that it is impossible to say just what the discharge is during the lowest low water period. It is probable, but by no moans certain that the lowest discharges for a period of six months will not fall below that measured from the first of September 1902 to the first of Inarch, 1903, when the average monthly discharge waB as follows: September, 1902 227,246, acre feet. October " 264,335 f» tt November " 249,144 ft ft December " 332,771 f» ft January 1903 189,939 tf r« February " 187.271 ft H Total 1,450,706 ft ft Average during the period -241, 780 Acre Feet. Assuming that permission could be obtained to draw off every drop of water from the river during this entire period, that there could be delivered to the irrigated lands, seventy-five j>er cent of all waters abstracted (which by the way contenplatos a very high efficiency of canals), and that 1.25 feet of water would suffice during such time, there would be 1,450,700 acre feet divided by 1.25 or 1,160,600 acres as the outside limit of land which could be irrigated by the waters of the Colorado. The Yuraa Project of the United States Reclr.raation Service contemplates irrigatlne 97,000 acres and it has two other projects between Yuraa and the Needles each consisting of 200,000 acres of a grand total of 500,000 acres which It contemplates rasLaiming in Arizona. It would seem evident -therefore that the estimate of 317,000 acres in -11- America and 200,000 acres in Mexico, which have been used f6r the basis of arriving at the probable ultiimte income of the California Development Company is quite as largo as is safe. It should be furthermore pointed out that a great deal remains to be done to securo to the California Development Company unquestioned right to take this amount of water. It will undoubted- ly be necessaiy to arrange a treaty with Mexico before all of the water can bo taken from the Colorado River durinf^ a period of mix months, and so absolutely destroying all navigation on the river. Vlien such a treaty is made it is hi^ly probable that I-'exico will insist on a lar£,er amount of water to 1 e used on 2sion and the securing of a new concession which would be free from all entanglemaits along thete lines, and give a free hand to the adjustment of tlae .tariff in proportion to what the traffic will bear. 7. GROSS PROFIT If the money for all Bettorments and Sxtensions were to be obtained by the sale of such assets ar> arc not necessary to conduct the business of the Compaiy and by the sale of bonds, then the probable annual income during the next five years, less the probable annual cost of Operatinn and I'laintenance would bo the probable annual amount available for fixed charges and dividends on stock. The general reorganization of the Company will probably not be made along thes<3 lines so that the sura so obtained is nothing more or less than Gross Profits. Adopting the figure of $600,000.00 as the ultimate income of the Gompaiiy v-'hon its business is fully developed and assuming the yearly cost of Operation and iTaintenance of the Completed System to average ^216,250.00 the Gross Profits would amount oto $383, 750. OC. Too great stress cannot be laid upon the fact that this figure is arrived at and based upon what is no more and no less than conjecture, Calexico, Califomia, November 2l8t, 1906. -13- ',4 i"A: 1^!= ::^(^:^^^>!a?siiiipllp liii^ UNIVERSITY OF CALIFORNIA LIBRARY <4^':^r<'f'':t^/\io?i:^''^^^^^