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46There has also been great conflict over the method of financing the problem. The cost of this development has been estimated by engineers of the Department of the Interior as $41,500,000 for the dam, $31,000,000 for the ail-American canal, $31,600,000 for electrical generator equipment at the dam, interest during the construction period, $21,000,000.It is obvious that the National Government could not be called to take on enormous expense of this character and that the burden should be borne by the beneficiaries, although the Nation as a whole would receive great benefits from added wealth and taxation. The people of the Southwest have at all times been willing to assume the burden, but there are most vivid conflicts as to how it might be accomplished. In an endeavor to compose this conflict Secretary Work, Doctor Mead, head of the Reclamation Service, and myself proposed a short and I believe a simple plan by which the Federal Government should lend its credit to the issuance of bonds that no construction work or the use of this credit should be undertaken until valid contracts had been entered upon for the sale of power, the sale of domestic water, the sale of irrigation water in an amount that would cover amortization and interest on the bond issue necessary to carry out the project. There would, therefore, be no charge upon the taxpayer in the country as a whole. I am glad to say that this proposal seems to have met almost universal approval and has further composed a great line of conflicting interest.I am not at all in favor of the Federal Government undertaking the construction of public works of this character, but we have to bear in mind that this is primarily a water storage, irrigation, domestic water supply, and flood-control project, all of which functions are governmental functions, and power is primarily a by-product.By these three proposals--that is, the six-State ratification of the compact as a condition before any work is undertaken by the requirement that contracts for the sale of water and power shall amount to a safe amortization and pay interest on any bond issue, and by the settlement of the initial rate--it would seem to me that we would have three compromises on the question of conflict that would settle probably 90 per cent of the differences of opinion that have existed in respect to the method of development.The remaining outstanding difficulty in the situation is that of the State of Arizona refusing to accept the compact except under conditions, and, as I understand it, most of those conditions have to do with the desire for a prior agreement with the States of Colorado and Nevada. The compact, as you are aware, provides that a division of the water shall take place between the upper and lower basins, as far as the compact is concerned, and also provides that supplemental compacts shall be entered into or may be entered into by the States in the lower and upper basins as to the division of their proportion of the water. I have hoped that the compact would be entered into by the three lower States that would settle this question and remove it from the problem, but it does not look very promising. It seems to me the situation is so urgent that, until Arizona can find a method of settlement, we should not delay. The necessity is very great to those who are concerned in the project. I believe

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