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or THE
Appointed a Commissioner under the " Public Inquiries Act"
Dealing with the subjects set forth in the terms of the
Commission under Classifications A, B, and C.
Printed by Charles F. Banfield, Printer to the King's Most Excellent Majesty.
1930. To His Honour the Lieutenant-Governor
of the Province of British Columbia.
Sir,—Pursuant to the instructions of the Commission issued to me, appointing me a sole
Commissioner under the " Public Inquiries Act," I have been making inquiry into the question
of production, marketing, handling, and transportation of fruit and vegetables, particularly in
the localities as directed, and I have the honour to submit herewith my report on certain
branches of this inquiry with recommendations.
Victoria, B.C., February 8th, 1930. ROYAL COMMISSION INVESTIGATING THE
" Whereas it is deemed expedient to direct that inquiry be made into the question of production, marketing, handling, and transportation of fruit and vegetables, particularly in that
locality of the Province known territorially as the Okanagan Valley, and also other sections if
considered necessary by the Lieutenant-Governor in Council. AVithout limiting the scope of
such inquiry, the same should especially take cognizance of:—
"(o.) Value and adaptability of lands :
"(!>.)  Irrigation systems and charges thereunder in areas under consideration:
"(c.) AVater-supply available:
"(d.)  Methods of farming and fruit-growing followed or practised in said areas:
"(e.)  The varieties of produce considered most advantageous or profitable to be cultivated in said areas:
"(/.)  Packing and distribution:
"(g.)  Export and domestic markets:
" (/!..) Manufacture of by-products :
"(i.)  Storage:
" (j.)  Transportation :
"(fc.) Relations of producer, shipper, broker, jobber, wholesaler, and retailer.
" And to recommend that AAMlliam Sanford Evans, Economist, of Winnipeg, Province of
Manitoba, be appointed a sole Commissioner for that purpose in accordance with the provisions
of the 'Public Inquiries Act' (R.S.B.C. 1924, chapter 114), and with full powers thereunder.
" That the said Commissioner take such evidence and collect such information and data as
may be necessary to enable him to report upon the above-mentioned headings, and make such
recommendations thereon as in his best judgment seems meet; and that such report and recommendations be made in writing by the said Commissioner."
By Order in Council dated the 31st day of October, a.d. 1929, the area in which the inquiry
was to be held was extended to include the Kettle River and Kootenay Districts of the Province.
As outlined in the Commission under eleven different branches, the question to be inquired
into is one of great scope and complexity. Certain branches could be fully reported upon only
after surveys and estimates by technical experts in soil-analysis, horticulture, general agriculture, and engineering. A report that would completely cover the main features of all branches
could be prepared only after a long period of time had been devoted to the work and a considerable expenditure had been incurred. It was obvious from the beginning of the inquiry, however,
that it was desirable that conclusions on certain aspects should be reached as soon as possible,
so that appropriate action might be taken at an early date. Moreover, it appeared that much
of the technical work was not urgent, although important, and could be carried out by agencies
in the regular governmental service and might be spread over a series of years, without
disadvantage and at much less cost than if undertaken by a staff especially engaged.
To the full extent time has permitted I have made direct inquiry into each branch of the
question and, in relation to the problem as a whole, have examined in detail those matters
which, in my judgment, are fundamental factors or upon which it is most important that early
action should be taken. Pre-eminent among these matters is the irrigation problem, and I
therefore submit forthwith on its completion my report on branches A, B, and C of the question,
the two latter dealing with this problem.
My general conclusion from the inquiry as a whole is that the agricultural industry in the
territory investigated is worth maintaining and developing. Despite a history of plans and
expectations not realized, and despite the many unsatisfactory features of present conditions,
there is, in my opinion, an agricultural proposition in this territory that can be made worth
while from the point of view of Provincial and national policy and reasonably remunerative to
those adapted to the work of irrigation farming. The problems of this particular industry have a special public aspect. The Province has
made loans to the principal irrigation districts, aggregating some $2,300,000; has established
one large irrigation project of its own, at a cost of over $3,000,000; and, for purposes of regulation of marketing, has conferred on a committee constituted at the request of the industry the
right to exercise certain powers which ordinarily are used only by the State itself. AVhether
or not a sound proposition is callable of being developed is therefore a matter of especial concern
to the Province over and above its interest in the welfare of all individual citizens.
AVhile examining details under each branch of the inquiry, the bearing of all facts on the
general question whether an economic proposition exists or can be worked out was considered.
It is not necessary to attempt to summarize all the considerations thus weighed. A few only
of the grounds for the decision need be mentioned:—
(1.) The high quality of the produce of the Okanagan, Kettle River, and Kootenay Districts.
This was established by personal experience of the appearance, flavour, and general quality of
the products and by comparison with similar products in other districts, including certain
districts in Washington State, by examination of the record of awards in national and international exhibitions, and by the evidence of those selling and consuming these products in
British Columbia and the Prairie Provinces.
(2.) The yield per acre now being obtained under favourable conditions of soil, water, and
cultivation. On the average, yields per acre are not as high as they should be in view of the
cost and labour involved in irrigation projects, but the capacity of the better lands has been
amply proved and there is enough good land to make a proposition provided the supply of water
can be made sufficient and the best cultural methods are followed.
(3.) The industry has already assumed important proportions. In the areas defined there
have been established some 2,400 farms and the total volume of production has, with seasonal
fluctuations, rapidly increased. The values directly created by this production, in labour and
in the demand for the products of other districts and for transportation, are already of considerable magnitude. A partial list of these values may be taken from the following estimates
prepared by Mr. John AVhite, manager of the Vernon Fruit Union, covering all territory under
the Interior Committee of Direction, for the crop-year 1928-29, which was the year of maximum
production. The estimates worked out in detail for over twenty kinds of fruits and vegetables
with summarized results as follows:—
Labour in orchard   $2,434,978.42
Cost in packing-house and selling       2,371,062.29
Shooks ex mills        923,038.87
Labour on boxes  60,908.06
Paper and labels         271,571.87
Nails  28,435.19
Spray, tree-fruits only  50,000.00
Fertilizer, tree-fruits and vegetables only -.'  75,000.00
Irrigation-water, excluding Salmon Arm and Coast        321,528.00
Transportation, Middle AArest average rates     2,653,212.20
Total    $9,257,642.20
Although this estimate includes some districts outside the Okanagan, Kettle River, and
Kootenay Valleys, these districts are responsible for a very large proportion of the whole. An
industry creating an annual turnover of labour, supplies, and freights of from $6,000,000 to
$10,000,000 is worth maintaining, provided it can, by any reasonable means, be made economically sound within itself.
(4.) The financial position, while difficult, is not necessarily incapable of betterment.
I have studied a detailed return prepared by direction of the Finance Department of all
encumbrances registered as at July, 1929, against lands in the eight principal districts of the
Okanagan. Of the total acreage reported upon, irrigable and non-irrigable, some 50,000 acres,
60 per cent, was clear of any registered encumbrance, 26 per cent, was encumbered, and 14 per
cent, had reverted to the Crown, the irrigation districts, the municipalities, or the Soldiers'
Settlement Board. Of the total encumbrances registered, 32 per cent, were claims due the
Soldiers' Settlement Board. Any conclusions from these figures should probably be rather of
a negative than of a positive character.    Few agricultural districts in Canada would show so REPORT OF ROYAL COMMISSION INVESTIGATING FRUIT INDUSTRY.        AA 5
large a proportion with clear titles. The correct inference is probably only that mortgage loans
have been hard to obtain in that territory, and small encumbrances may only point to a cramped
financial position.    Still the facts as they stand are of interest.
The help received from money borrowed on the security of land is'moderate. There is no
evidence that large new supplies of private capital have been brought into these districts within
the past few years or that income from sources outside this territory, which may be enjoyed by
residents therein, has increased during this time. AVith other sources of working capital
restricted or not expanding, then the banking position in this territory takes on special
By the courtesy of the principal banks having branches there, I was able to examine some
features of the banking position for the past eight years of the territory taken as a whole.
There, again, any conclusions should probably be of a negative character. The main resource
of these districts is agriculture. The figures I examined would not throw any light on the
question whether the proceeds of the industry were being distributed fairly among the different
classes in the community, but, as a whole, it would appear that the community has been able
to finance its operations during the past eight years, such as they have been, without much
new mortgage-money or much new private capital, but without there developing any critical
banking position. It would seem to be indicated that the bad price years of 1922, 1926, and
1928 caused temporary difficulties, but beyond this there were few unusual features. It may
still be true that the situation is very unsatisfactory for large numbers in the community, and
even as a whole, but if it were so desperate that there was no use seeking modifications or
improvements it would be expected that some clear signs of this would be found in the figures
relating to general finance.
Perhaps the feature that deserves most serious attention is the land reversions. The percentage is already high and a very considerable additional acreage is in arrears and will come
to tax sale within the next year or two. Allowance may be made for a proportion of sub-
marginal lands and of growers not fitted for the work, but there is too much land reverting
that is marginal or better and that has been in the hands of owners who are not incompetent.
The amount of taxes involved is, of course, only one of the causes of this situation, but the
taxing authorities, rather than mortgagees or banks, are the creditors who are putting an end
to the occupation of the land. This puts the rate and incidence of taxation into the forefront
of the problem, but does not make it insoluble and, indeed, may indicate that the situation is
less complicated than might otherwise appear.
(5.) In these districts more than 20,000 persons are established in homes amidst beautiful
and healthful surroundings, who have invested heavily of their own means in the experimental
stages of the industry. This makes the constructive needs of the situation a matter of direct
concern for pubUc policy.
" Value," I am advised, is here used to mean quality in respect to production and not
saleable price.
I find that no systematic soil-survey of the Okanagan, Kettle River, and Kootenay Districts
has yet been attempted. By personal observation and local inquiries I have learned that many
different types of soil exist in these territories and that changes from one type to another are
frequent even within small areas. The type of subsoil, moreover, is so important that no mere
superficial examination can determine value and adaptability. The question of alkali, also, is
a serious one in certain areas.
Anything practicable that can shorten the road to a working knowledge of how best to use
the lands in these territories should be undertaken. It may take ten years to demonstrate by
experiment that what was supposed to be orchard land is adapted only to field crops, or that
one variety of fruit will succeed much better than another, and the economic loss is even
greater when after many years it is finally realized that certain lands should not be under
cultivation at all because they can never return the high costs of irrigation farming. The
investment of labour and money in such experiments has been exceedingly heavy. Many
growers have learned thereby a good deal about the capabilities of their own lands and the
combined results of these local experiences are undoubtedly of general value. Further, the
local representatives of the Provincial Department of Agriculture are qualified to render good AA 6 BRITISH COLUMBIA.
advisory service and very important work in investigation and demonstration is carried on by
the staff of the Dominion Experimental Farm at Summerland. But more knowledge is necessary with respect to the value and adaptability of lands and there should be a system under
which all that is known would be readily accessible. Representations were made to me by
growers anxious for more accurate information about their own soils. New settlers should have
such information before beginning operations and, indeed, before making purchases, and no
new irrigation projects or extensions of existing systems should be undertaken except upon
the results of a scientific study of the lands to be served.
Only a complete soil and contour survey would supply full information under this heading.
The expert work of chemists, physicists, bacteriologists, land surveyors, and water engineers is
involved. Even if a large staff of experts were employed the work would undoubtedly occupy
more than one season, and a staff especially engaged would call for considerable expenditure.
Even if I had been prepared to advise that the work be done in this way, the above considerations meant that it could not be incorporated as a part of my inquiry but should be separately
decided upon.
In my opinion, however, it is not necessary that this work should be rushed through as
a whole. From the point of view of the practical interests to be served, there is no real need
to have the work proceed far ahead of the desire to make use of the results, or of the occasions
for using them, but provision should exist for dealing with particular cases as they arise, and
the organization required for this purpose could be kept operating at the maximum of efficiency
by work on the general systematic plan of survey.
I have consulted the Provincial Department of Agriculture, which has a full realization of
the importance of this work, with regard to the facilities and agencies that now exist and the
additional organization that might be required. I find that in the Mines Branch there is a
thoroughly qualified analyst and that an understanding has already been reached under which
he will continue, as in the past, to make chemical and physical examinations of soil samples
submitted by officials of the Department of Agriculture. In the Lands Department and the
Water Branch there are the personnel and the facilities for land-surveying and engineering
assistance and for the making of the soil maps which would record the progress of the work,
and a plan of co-operation should be found feasible. Then the Agricultural Department itself
already has experienced District Representatives throughout the territory in question, who
could contribute important information and during portions of the season could give active help.
One qualified agricultural graduate, who would have direct charge of the work and would
collaborate with the officials above referred to, might be the only permanent addition to the
staff of the Civil Service that would be called for, but one or two seasonal assistants would
undoubtedly be found necessary.
I therefore recommend :—
That the Government make the necessary provision, along the lines above indicated,
for a service in the chemical, bacteriological, and physical examination of soils,
and that work on a complete soil and topographical survey of the Okanagan, Kettle
River, and Kootenay Districts be systematically proceeded with.
There are in the Okanagan and Kootenay Districts some thirty-four irrigation systems,
large and small. Of these, fifteen are organized as irrigation districts and thirteen as water-
users' communities under the " AVater Act." Two systems are under municipal administration,
one of which is partly financed from the Conservation Fund and the other is purely a municipal
undertaking.    The remaining four are private enterprises.
AVith respect to the history and condition of these systems a great deal of material exists
in reports of previous investigations and in departmental records. I have studied this material,
have visited all sections of the territory, and have conferred with the boards of all the larger
districts and with large numbers of individual water-users.
AVhat is practicable in irrigation in the Interior of British Columbia has had to be learned
by costly experience. The same seems to be true of irrigation in the United States. At the
beginning, and even until recent years, no one understood how plans would actually work out
in practice. It may truthfully be said that every one miscalculated—promoters, companies,
engineers, Governments, purchasers.    Except, in the cases of some of the smaller systems, where REPORT OF ROYAL COMMISSION INVESTIGATING FRUIT INDUSTRY.        AA 7
a source of water-supply was near at hand and no large expenditure required, all the undertakings have experienced financial difficulties. Most of the original land and water companies
failed and the few that remain have unprofitable investments.
While beginnings of irrigation projects in the Okanagan date back to approximately 1891,
the rapid development occurred between 1905 and 1912. In this period individuals and companies purchased bench and bottom lands which they considered suitable for fruit and vegetable
farming, where such lands seemed capable of being supplied with water. Irrigation systems
were then constructed and the lands offered for sale at high prices.
Certain of the misunderstandings and miscalculations which entered into the planning ana
operating of these projects and created subsequent problems may be indicated:—
In most districts more land was included as irrigable than could be adequately supplied
with water from the sources developed.
Other water rights often existed with respect to the same creek or source of supply and
the ultimate settlement of conflicting claims left less water available than had been calculated
Some inferior lands were included which experience has shown cannot be profitably
Irrigation distribution systems were generally constructed to serve every part of the area
rated as irrigable, and the plant thus installed has remained relatively expensive in those
districts which are not yet under full cultivation or which have a good deal of inferior land.
Systems were not always designed for the most economical and efficient operation and much
of the construction was not of a lasting character, entailing heavy maintenance and renewal
charges and in the meantime being more or less wasteful of water.
Some lots were sold as fruit lands, or were planted to fruit, which are suitable only for
vegetables or fodder-crops. A mistake in the planting of tree-fruits is particularly serious
because of the number of years wasted in the experiment.
The amount of water any particular kind of land and any particular kind of crop would
need was not known, nor does it appear to have been recognized in the making of plans that
larger supplies of water would be required as trees grew older and cover-crop had to be grown
to feed the soil.
The drainage problem that exists in all irrigation projects was not generally taken into
account. It is often necessary not only to put water on, but also to take some of it away, and
that without injury to adjacent lands.
From the point of view of the land companies, there were many miscalculations as to the
amount of money it would take to establish the projects and see them through. Sales were
not made as quickly as expected or not enough land was sold. The water systems cost more
than had been estimated and repairs and renewals began to demand large sums of money.
The charges for water in the original contracts with settlers did not yield enough to maintain
the systems. Financial embarrassments ensued. Various expedients were adopted, such as
organizing new companies to take over the hopeless water interests, in cases where separate
companies had not originally been formed, in the hope of saving the equity in lands even if
the water companies failed.
Most of the purchasers of lots were without previous experience of irrigation farming and
underestimated the amount of private capital, or income from other sources, a man must have
to bear the costs of that kind of farming while waiting for trees to reach maturity. The right
methods of cultivation had to be learned by a series of experiments, and even the best advice
then obtainable as to the most desirable crops or varieties of fruit to plant was often found
after many years to have been mistaken.
This pioneering stage may be considered to have come to an end, but only, perhaps, within
the last few years. The work then done and the investments made, a large proportion of which
must be written off as monetary losses, are entitled to be regarded as having established the
foundations of the industry as it now exists. There is to-day in these territories, in individual
growers and in the agricultural experts of the Provincial and Dominion Governments, a large
body of knowledge of what is practicable and desirable, and there is everywhere evidence of
intelligence, skill, and hard work.    But many of the conditions created by the mistakes and special difficulties of the pioneer stage remain as serious problems, and it is from this point of
view it is Important to have in mind the course of the development.
The Course of Development.
By 1916 many of the larger land and water companies had become financially unable, or
were unwilling, to maintain adequate water services, and the industry in those districts, being
absolutely dependent on water-supply, was threatened with disaster.
Provisions had existed for many years in the " Water Act " and the " Dyking, Drainage,
and Development Act " under which owners of land could organize for the acquisition, construction, and operation of irrigation-works, and by amendments to the " AArater Act" in 1918 and
1920 two forms of organization were finally developed and authorized. Four or more persons
who were owners of lands to which water licences were appurtenant, and who desired to
co-operate in supplying the water service, could form an association and become incorporated
as a water-users' community. The powers granted these communities were limited and did not
include the taxing-powers, but were sufficient for the joint administration of the common
interests of a small number of growers. The other form was that of the irrigation improvement
district, a corporation of wider powers, including the power to tax.
AVhile the means were thus provided for the organization of the owners to take over water
systems, they had not within themselves, in most cases, the financial resources required, and it
was doubtful whether as corporations under the Act they would be able to borrow on satisfactory terms in the money markets. Under these conditions application was made to the
Provincial Government for the necessary loans.
The Government met this application by amendments to the " Water Act " in 1918 creating
a special fund in the Treasury to be known as the Conservation Fund. For the purposes of
works for the utilization of water, and subject to the approval of the Lieutenant-Governor in
Council, the Minister of Lands was given authority to expend, either directly or by way of
loan, any moneys from time to time standing to the credit of this fund.
A total of eighteen organizations have borrowed under this provision, consisting of fourteen
irrigation improvement districts, one municipality, one water-users' community, one development
district, and one drainage district.
Where corporations were thus formed to take over the rights and assets of private companies, terms of purchase were negotiated, and in all cases, where the facts have come to my
attention, the sum agreed upon was much less than that expended on the systems by the
companies. Repairs and renewals had to be undertaken on an extensive scale and in certain
instances a policy of extension was entered upon from the beginning. This was the period
when world prices were at the peak of the inflation caused by the war, and all this work was
carried out at relatively high cost. Moreover, miscalculations were again numerous and the
policy of extension was not always economically justifiable. These conditions, in those districts
where they occurred, rapidly modified what at the beginning had been relatively a very favourable position with respect to capital charges, but on the whole the construction costs now standing against these districts are probably below rather than above the reproduction costs of
similarly designed systems. The systems in most cases, however, retained the defects or mistakes
of the original plans.
Partly because of developments such as have just been indicated, and partly because the
universal tendency to miscalculate in irrigation matters had not yet been outgrown, the result
was that the annual levies in the new districts became much heavier than had been estimated,
and much heavier than the rates prevailing under the original contracts with the companies,
which, of course, the companies had found insufficient.
The miscalculations were not confined to the older systems taken over by the district
corporations, but occurred in full measure in the planning of a new project constructed with
money from the Conservation Fund, and are to be found in almost every possible form in the
Government's own undertaking, the South Okanagan Irrigation Project in the Oliver District.
Another problem, the fundamental importance of which was evidently not realized and
which was not grappled with, was that of the distribution of charges within the districts.
Under the laud companies all land sold as irrigable carried the same annual water charge,
but the charge was small. When the projects were taken over, some lands had not yet been
brought under cultivation, some were planted with undesirable varieties or unsuitable kinds of crop, but the proper crops for much of the land had been discovered. This meant that crops
varied from alfalfa and vegetables to the highest-priced tree-fruits and the lands had very
different earning-powers.
The " Water Act" seemed to contemplate that the benefits of the application of water might
not be uniform and that this might be taken into consideration in the basis of assessment in
the new districts, for it was provided in section 174 (2) that: " AVhere the examinations and
reports made by the Comptroller pursuant to the provisions of section 168 have been sufficient
to determine the probable benefits which would accrue to the lands within the territorial limits,
and if it appears that the benefits will be approximately uniform to all the lands, the letters
patent may provide that in the first assessment roll the several parcels of land shall be entered
as deriving a uniform benefit; but if it appears from the said examinations and reports that
all the lands will not derive benefits approximately uniform, but that they can be classified in
grades wherein the lands of each grade will derive benefits approximately uniform, the letters
patent may provide that in the first assessment roll the several parcels of land shall be classified
in grades as shown by the said examination and reports and so entered."
After the first year, the assessment basis of which was fixed in the letters patent, the district
itself, through its trustees, was free to classify the lands in any way it chose. Classification of
a very general kind, chiefly in respect of the physical possibility of applying water beneficially,
was adopted in some cases,. but the earning capacity of the land, the real basis from which to
judge the benefits of the application of water, was nowhere made the basis either in the letters
patent or in subsequent assessments by the districts until within the last two years, when one
district has begun to put that principle into effect.
Any charge on land must be judged relatively. The burden falls very differently according
to the stage of development, the kind of crop, the yield per acre, and the market price of the
products. An annual charge of $12 per acre on an apple-orchard just planted, which will be
eight to ten years in reaching profitable production, is a very different burden from that of the
same charge on a full-bearing orchard. The same is true as between a full-grown orchard and
a field of alfalfa. Again, with a yield of only 150 boxes per acre, the net returns to growers
may not cover orchard costs and the financing of the water charge is a serious problem, whereas
with a yield of 500 boxes per acre the water cost is an almost insignificant item. How different
price-levels affect the situation is obvious. Nothing could be more certain than that the benefits
of water are not uniform.
Under these general conditions the higher annual charges under the new districts were not
only discouraging, but hastened rapidly the tendencies already begun to make unbearable the
burden on all lands except those producing crops of the highest market value. By this time the
capital reserves of the settlers, the need for which had been underestimated at the beginning,
were seriously reduced if not exhausted.
In a majority of the new districts it was realized within two or three years that the charges
as apportioned could not be borne, at least by all the lands affected, and that some kind of
readjustment of the financial scheme must be made, although there was apparently no consensus
of opinion as to the exact form of readjustment best suited to the purpose.
Some of the extreme difficulties of the situation that had to be faced may be illustrated
from conditions as they are to-day. One large pioneer district has to-day 103 miles of irrigation-
works, including primary and secondary laterals. The investment in works has been $854,526.56.
The irrigable area is estimated at 12,854 acres, but water is physically available from the present
system only to 9,967 acres and is actually supplied to only 6,644 acres, the average quantity
supplied being only a fraction over 1 acre-foot, which is far below the requirements for full
production. The debt charges are levied equally over the whole 9,967 acres having nominal
access to the distributing system, although only two-thirds of the acreage is served with any
water, the remaining 3,327 acres for the most part being dry-farmed to grain and feeds. Of the
6,644 acres receiving some water, 3,297 acres is in orchards of varying ages, 1,235 acres in vegetables, and 1,957 acres in alfalfa or other fodder-crops, and the balance in miscellaneous products.
The district's annual costs of operating the water system are, of course, charged only against
the lands using the water. These conditions are originally due to a series of miscalculations
such as have been mentioned.    The resulting position is obviously an impossible one.
One of the newer districts embraces some 2,700 acres, of which about 2,400 acres are locally
considered arable.    There was constructed for this district a water system, fed by pumps, with .
main pipes, primary laterals, and weirs laid out and built to serve the whole area, at a cost of
over $250,000. In 1929 there were served with water only 125 acres in orchards of different
ages, 250 acres in vegetables, and 430 acres in fodder-crops; that is, only one-third of the arable
acreage was using water. About 1,000 acres was dry-farmed, partly because much of it has not
been levelled to make it practicable to put water on. The tax to meet debt charges is levied
against all the arable land, whether served with water or not, but lands not yet levelled pay
less than other lands, and all arable lands pay a minimum water charge of $1.50 per acre toward
operating costs, the lands using water paying in addition according to the quantity used. That
there is no uniformity in benefits in this district is clear and that the district as a whole is not
yet earning enough to carry its debt needs no argument.
These districts illustrate certain of the main difficulties in their most acute form. Many
other districts have simpler conditions or lower costs, or are much more uniform in character.
Applications for Relief.
In 1923 approaches were made to the Government, and by Order in Council, dated January
4th, 1924, temporary relief was granted for two years by deferring the payment of a portion of
the sums due from the districts for the years 1923 and 1924. All interest on total borrowings
was thus deferred, as well as instalments of principal in respect to moneys borrowed for the
acquisition of permanent structures. It was provided, however, that the amount by which
payments were reduced, together with interest thereon, should be amortized and added to the
sums payable during the succeeding thirty years. The nominal ground on which this action was
taken was that prices obtained by the growers during 1923 had not in general been high enough
to fully cover the cost of production.
Looking back with the experience of the last six years, it is clear that the real problem was
not understood in 1923. The situation called for a reconstruction of the whole financial scheme,
and the relief granted, while very substantial so far as money to be raised in those two years
was concerned, could only have the effect of later aggravating the difficulties by adding to the
burden of future years.
The next feature to engage attention was the increasing reversion of lands for unpaid water
and other taxes. Charges for moneys due the Conservation Fund were blanket charges against
the districts. As lands chargeable fell out, the burden became cumulative on the lands that
remained in private ownership. Unless the causes of reversion could be removed, or a new
financial plan devised, the continuation of this process must inevitably, and in most cases
speedily, crush all growers in turn. This situation was met, not by financial reconstruction,
but by the passage in 1925 of an amendment to the " Water Act" giving to the Lieutenant-
Governor in Council power, at his discretion, to relieve a district of payments to an extent equal
to the district's loss of revenue on reverted lands. This would limit the liability of individual
growers, but would also limit repayments to the Conservation Fund, which to that extent would
never be recouped for the advances made. In other words, the Conservation Fund would pay
the taxes on reverted land. No Order in Council putting this plan into effect was ever passed,
but it would appear that in practice the districts have since been deducting the sums represented
by their loss of revenue on lands, the title to which has passed to themselves or to the Province.
While individual liability might be limited, as above, the growers were facing higher charges
in 1925 than they had ever paid before, because the debt to the Conservation Fund had been
increased during the moratorium by the amounts then deferred and these amounts were bearing
interest. No fundamental readjustment had taken place to make it any easier to meet the
charges than it had been in 1923. Urged to further action, the Government on December 22nd,
1925, passed an Order in Council extending the moratorium to cover the years 1925 and 1926.
Grappling with the real problem was again deferred, and under conditions that must make the
difficulties still greater by the further piling-up of debts; Two of the districts, recognizing how
fast their capital liabilities were increasing, accepted this extension of the moratorium for only
one year and voluntarily made larger payments for 1926.
Full rates came nominally into eifect again in the year 1927 and there were serious difficulties
with collections and partial defaults. Again action was urged, and in 1928 another amendment
was made to the " AArater Act " giving the Lieutenant-Governor in Council power, where it
appeared to him to be in the public interest, to remit a portion of the debts due the Conservation
Fund, but not exceeding one-quarter of the sums borrowed prior to December 31st, 1923, together REPORT OF ROYAL COMMISSION INVESTIGATING FRUIT INDUSTRY.        AA 11
with one-quarter of the interest paid or payable on said sums. This was a proposal to cut a
slice off the debt which might in some cases reduce it by approximately the amount of the
moratorium accretions, but it left the original problem untouched. Moreover, there was again
no formal action to bring the plan into effect and there has been no legal sanction for any
deductions since made on this account.
Finally, in the session of 1929, the Legislature again amended the " Water Act" by striking
out the amendment of 1925 with regard to charges on reverted lands, and by deleting certain
words from the amendment of 1928, leaving in the Act the following wide, general provision:
" Where it appears to the Lieutenant-Governor in Council to be in the public interest not to
require payment in full of the moneys payable by any corporation in respect of moneys expended
from the Conservation Fund, he may reduce the amounts payable to such extent as appears to
him just and equitable Upon the making of an Order in Council reducing the amounts payable
by any corporation, the liability of the corporation and the first charge created by subsection (1)
in respect of the moneys expended shall ipso facto be reduced to the same extent."
No Order in Council has yet been passed under this provision.
The history of the past six years is therefore the record of continuous agitation of the
irrigation problem without definite reconstructive action of any kind. When the position of
a considerable number of the growers is taken into account, conditions more disheartening in
their tendency and less favourable to enterprise can hardly be imagined.
The evidence, in my opinion, is conclusive that the present financial plan and system of
levies are unsuited to the conditions, and if persisted in will bear hardly on many individuals,
will drive much land out of occupation, and in the end will have failed to effect more than a
partial repayment of the debt.
Some representations were made before me that only the complete wiping-out by the
Government of the whole debt against the districts would prove an adequate remedy. I have
given careful consideration to this proposal, but am not able to accept it as the proper course
to take.    Among the considerations influencing this decision are the following:—
(1.) Some lands are now making a profitable use of water and can afford to contribute to
its cost.
(2.) More lands can be brought into profitable production and the profitableness of all lands
increased, provided certain things are done which do not seem unfeasible and the ability to
contribute should expand in the future.
(3.) The districts need more money to improve the general position and in many cases even
to maintain the existing standard. Mere remission of the present debt would not alone be a
solution. If the simple expedient of complete debt remission be not adopted, there are the
alternatives of partial remission or of some form of readjustment of the load, or of some
combination of these two methods.
To grant a reduction of debt by any specific amount or percentage would mean that the very
complicated question would have to .be faced of what that amount or percentage should be in
fairness to both borrowers and lenders. The conditions are different in every district. Any
specific reduction would be little more than a guess, which might or might not fit the case.
Moreover, much of the trouble to-day is in the way the charges are collected, and some new
method of assessment would have to be worked out or even an unduly reduced debt might not
be found bearable. A partial debt reduction is subject in a modified form to the same class of
objections as can be offered to total remission. All these objections can be urged against the
reduction of debt contemplated by the amendment of 1928, which has been put into administrative effect, but has not proved the right measure of relief and has left the difficulties of the
situation almost as great as before.
AA'here projects are privately financed the writing-down of debt or capital may be the only
practicable method. The question is whether a better and more effective plan can be adopted
under the special conditions of the present problem.
Many representations were made that the Government should do for all water-users what
it is doing for those in its own Oliver project and supply water at a flat rate of $8 per acre.
It was claimed the Government had created and was managing, at an admitted loss, a district to
compete with the older districts; that it was selling land to competitive growers there at far
below the prices paid by other growers;   and that it was unreasonable not at least to equalize ' '   I
AA 12
the yearly operating costs by making a uniform price for water in all districts. If the competition of the Oliver District was a seriously disturbing factor, which it is not at present and may
not be in the future, this argument might have some economic as distinct from political force.
There are the same objections to an arbitrary fixed rate as to an arbitrary reduction of debt.
The Oliver rate may not be the right rate, and a flat rate means the same rate on every acre,
no matter what the quality of soil or what the stage of development or kind of crop.
The principle on which repayments to the Conservation Fund are now based is that of the
return each year of some regular fraction of the debt according to the number of years over
which the debt has been spread, plus interest on all the debt outstanding. Payments are figured
mathematically from the standpoint of the debt. The alternative principle is payment according to ability to pay. This is a fundamental principle in our systems of taxation and is approved
as sound by economists. AVhen other methods of collection fail it is also the final recourse in
private transactions.
Land cannot pay—that is, cannot continue to pay—except out of earnings. Private capital,
out of which payments in excess of earnings may be made for a time, will at some stage
become exhausted or will refuse longer to maintain an unprofitable investment. On the evidence,
these conditions are being fulfilled in the Okanagan, Kettle River, and Kootenay Districts.
AVhatever may have been the case up to this time, from now on the Government cannot expect
to collect more than the land can afford to pay, and if enterprise is discouraged it may get much
less than the land should be able to pay.
To force payments, which are out of relation to earnings, to the point of taking over
property is not likely to prove good business. Neither the Government nor the district is
organized to satisfactorily administer reverted lands. More than one instance of reverted
orchards being left to die without care of any kind came particularly to my notice. Nor can
such lands be resold and colonized to advantage as long as conditions are such that reversions
continue numerous.
The case for adjusting payments to ability to pay would seem to be clear in principle, but
it must be frankly recognized that the difficulties of working out the details of administration
of that principle are formidable.
There are two phases of the problem. The one is to find a satisfactory measure of the
ability of a district to pay, in order to arrive at the total amount to be charged each year, and
the other is to find in what way this amount can be equitably collected from the individuals
AVith regard to the measure of ability, it must be borne in mind that irrigation-water is an
essential element of production in these districts. AVithout it there would be no orchards and
very little of any other kind of crops. Many other elements, of course, are also necessary, but
water ranks among the necessities and must be accounted as one of the primary costs. AVater's
rightful share in the results is some proportion of what is produced.
In the light of these considerations the gross value of production would seem to be a not
unreasonable rough measure of what is due to water. Gross income as a measure of ability is
very common in tax laws. Net production or net earnings could not be adopted as a basis.
It would be impossible in practice to check the income and expenditure of all farmers and
arrive at any useful result. This certainly could not be done in time for annual assessments.
Further, the proper place of water costs is not after all other expenditures have been made
which a farmer might choose to make, but among the necessities.
AVith regard to the basis of assessment within the district, the question arises whether the
same measure of gross production should be applied to individual farmers. There are reasons
for thinking that certain other considerations should be taken into account in local assessment.
It may be argued that it is not right to leave the personal factor entirely out of the account.
Of two farmers with equally good farms at the same stage of development, one may work harder
or more intelligently than another and produce larger crops, and it may naturally be asked why
he should pay a higher tax than the other who had an equal opportunity. Again, irrigation-
water is necessary for young orchards which are not yet bearing, and it creates values in other
non-producing lands to which it is available and it may not be thought right to throw the entire
cost upon the lands with crops. These matters could all be adjusted in a system of local assessment which would establish an equality in capacity to produce rather than taking note only of
actual production. Experience of the Uniteo States.
Having examined the problem up to this stage, I inquired, as far as time would permit, into
the experience in the United States, and in this connection visited the irrigation districts in the
State of Washington lying between the International Boundary and the City of Yakima.
It is evident from the records that every irrigation problem that has arisen in British
Columbia has had to be dealt with in the United States. The same causes have produced the
same effects in both countries. Financial reconstructions have had to be made in a very large
number of cases, both among privately financed undertakings and among districts under the
Federal Reclamation Service. A bulletin published by the United States Department of Agriculture in 1929 contains a study by AVills A. Hutchins, Associate Irrigation Economist, of debt
settlements, for the most part effected between 1919 and 1928, in thirty-seven districts financed
by the sale of bonds or other securities.
Among the general conclusions of the author is this: that creditors " must start out by
disregarding the actual amount of indebtedness, and conclude by offering settlements based
upon annual payments which the lands can stand, of such character that they will invite acceptance by land-owners. A refinancing plan that ignores this is fatally weak." And again : " The
longer an inevitable settlement is postponed, the harder the task of effecting it properly and the
greater the loss to all parties concerned."
In projects under the Federal Reclamation Service, only the moneys actually expended in
construction, without interest, are assessed against the lands benefited. By the " Reclamation
Act " of 1902 the proceeds of the sale of public lands in sixteen States and Territories were
constituted a revolving trust fund for the construction of irrigation-works, and as no interest
has to be paid by the Government on these moneys, no interest is charged. Even under these
very favourable conditions the Federal Reclamation Service has found it necessary at one time
or another to make adjustments of almost every kind and degree.
Of particular interest is the contract in the large Kittitas project in the Ellensburg District,
situated between AArenatchee and Yakima. An irrigation system designed to supply water to
some 72,000 acres is under construction there by the Reclamation Service. For the purposes
of this undertaking a contract was made in 1925, which provided that repayment should be made
to the Government on the following plan:—
" All construction charges shall be made payable in annual instalments based on the productive power of the land as provided in this article. The instalment of the construction charge
per irrigable acre payable each year shall be five per centum (5%) of the average gross annual
acre income for the ten calendar years first preceding, or for all years of record if fewer than
ten years are available, of the area in cultivation in the division or subdivision of the project
in which located as found by the Secretary of the Interior annually. The decision of the
Secretary as to the amount of any such instalment shall be conclusive. These annual payments
shall continue until the total construction charge is paid."
Payments are to begin " when in the opinion of the Secretary the agricultural development
of the lands shall have advanced sufficiently to warrant the commencement of payment."
Statutory authority for such a contract was contained in amendments passed in 1924. These
amendments were based upon the recommendations of a committee of special advisers appointed
by the Secretary of the Interior. This Fact-finding Committee, as it was called, consisted of
six of the best-qualified experts in irrigation problems in the United States. One of the recommendations contained in its report is as follows: " Experience has demonstrated that the
present method for repayment of project-construction costs, based upon time and percentages of
cost, instead of the ability of the several classes of lands to produce, is unscientific and difficult
of fulfilment. Productive power should be the basis for the annual repayments of construction
costs, and for this purpose iiroductive power of the lands should be defined to be the average
gross annual acre income from the irrigated lands of a project or division thereof for the
preceding ten years, or for all years of record, if fewer than ten years are available, and that
the annual acre repayment charge should be 5 per cent, of the productive power of the lands as
hereinabove defined."
Some twenty irrigation districts availed themselves of the opportunity afforded by the above
amendments of converting other styles of contract into this new form or of making new
contracts. AA 14 BRITISH COLUMBIA.
AATithout affecting the validity of contracts made or under negotiation, the subsections of
the Act of 1924 giving authority for this particular form of contract were repealed less than
a year and a half later before there had been time for any results in operation to appear, but
there have been left in the Statutes provisions based on the same principle, but putting its direct
application in the hands of the Secretary of the Interior. One of these provisions reads:
" The irrigable lands of each new project and new division of a project approved, after December
5th, 1924, shall be classified by the Secretary with respect to their power, under a proper agricultural programme, to support a family and pay water charges, and the Secretary is authorized
to fix different construction charges against different classes of land under the same project for
the purpose of equitably apportioning the total construction cost so that all lands may as far as
practicable bear the burden of such cost according to their productive value."
Another provision is that in respect to all projects existing prior to December 5th, 1924,
where it appeai-s to the Secretary that " on account of lack of fertility in the soil, an inadequate
water-supply, or other physical causes, settlers are unable to pay construction costs," he may
undertake a comprehensive and detailed survey and report his recommendations to Congress.
Many Acts abolishing, reducing, or suspending payments in respect to specified acreage have
since been passed. The powers of the Secretary were further enlarged in the Act of 1926, the
declared purpose of which was " the rehabilitation of the several reclamation projects and the
ensuring of their future success by placing them upon a sound operative and business basis,
and the Secretary of the Interior is directed to administer this Act to those ends."
There are thus in the United States two general systems of adjusting payments to ability
to pay, the one adopting the value of the gross production of a district as a measure, and the
other involving the determination by the central authority, after careful survey, of the comparative productive capacities of the different properties, as distinct from what is actually
produced. The latter system has much to recommend it provided the central authority has the
organization necessary and is prepared to extend its administration into minute details." If the
central authority does not think it advisable to assume direct management to this extent, then
a system along the general lines of the Kittitas plan is the obvious alternative.
If the central authority does not itself classify lands in detail and adjust charges accordingly, then this classification must be made by the local district authorities, for even a fair
total charge may bear very unfairly unless it is soundly distributed. It is quite feasible to
devise and administer such a classification and assessment system. That examples in operation
may be hard to find is no reason to the contrary.
In Chelan County, which surrounds the City of AA'enatchee, there is a plan of assessment for
county taxation purposes which illustrates what can be done. It is the most logical attempt
which has come to my attention to establish equality among taxpayers in respect to the earning
possibilities of their respective lands. It is not used for the collection of water charges, but is
designed for other purposes, and as applied would not fit the needs of water taxation, but
adaptations of the method could be made to fit. The land itself is given an assessment value
and there is a different basis for improved and unimproved lands. In valuing land the three
points taken into the calculation are the quality of the soil, the supply of water, and the
topography of the land, as being easy to work or not. The distance from a railway-station is
a factor in fixing the basis. Then improvements are separately assessed. Chelan County is
almost exclusively an orchard district, but the plan could easily be extended to other crops as
well. Fruit-trees are valued under three classifications, as first, second, or third class. In the
first class are placed only Winesap and Delicious apple-trees. First-class trees have twice the
value of second class and four times the value of third class. Under each class the value
increases with the age of the trees up to ten years, the value at that age being ten times the
value at one year. Then deductions from the assessment are made for such things as gulches,
poor location, etc., and also for pumping, where water-supply has to be secured by that means.
To make it possible for a man to bear the cost of pumping he is given a discount on his assessment of from 25 to 60 per cent., according to the height to which he must pump. I was assured
by officials in charge that no difficulty is experienced in administering this system, although the
first assessment took time to work out.
It should again be clearly stated that the form and schedules of this particular plan are
not suggested as suitable for assessing water charges, but are urged upon attention only as
illustrating the possibilities of the assessment system as an instrument for levelling inequalities; REPORT OF ROYAL COMMISSION INVESTIGATING FRUIT INDUSTRY.        AA 15
On this branch of the question I recommend:—
(1.) That the Government accept the principle of payment according to ability to pay
and abandon the present plan of payment by regular fractions of the debt; and
that public announcement to this effect be made as soon as possible.
It is very important to relieve the uncertainty and anxiety that have for so many years
distressed these districts.    It will take time to work out the details.
(2.) That the amount a district is required to pay in any year on account of construction costs should be proportionate to the value of its products.
A simple system of estimating production value could be established. I understand that
the Federal Reclamation Service in the United States requires in all projects in which it is
interested, whether under the special form of contract or not, that irrigation officials on the spot,
who have all lands under observation throughout the year, should before the end of the season
confer with each grower as to the acreage under each kind and variety of crop and the yield
per acre, and report what in their own judgment are the approximately correct figures. Compilations of these details are made for each district as a whole and unit values are applied as
arbitrarily fixed by the Reclamation Service according to general price-levels for the season up
to that date. The values are nominal farm values. Summaries of the " crop-yield reports "
for two contiguous districts for the year 1928 were examined by me, and in one of these the unit
value per pound of apples represented 60 cents per box of 40 lb. and in the other 56 cents,
while in both the value of alfalfa was taken as $10 per ton. It is evident that these are moderate
values. As long as there is consistency in the method from year to year, it does not greatly
matter what standard of values is adopted, but the standard must affect the rate to be charged.
Some equally simple and economical way of gathering promptly this absolutely essential
information as to acreage and crops can easily be devised in Canada. No matter what policy is
followed, this class of facts must be available and I would strongly urge the need for more
complete statistics.
The proportion, or percentage, of gross production demanded should fairly represent the full
reasonable extent to which the industry can make repayments. Because of the absence of
sufficient data, it is not possible at the present time to make the calculations from which the
theoretically right rate for the Okanagan, Kettle River, and Kootenay Districts might be deduced.
The first rate the Government strikes may necessarily have to be more or less experimental and
subject to revision, although changes in rate should not be frequent, and when the right rate is
found it should remain fixed.
In setting the first rate the Government would be justified in having some regard to the
definite finding by the special commission in the United States, that the proper rate for debt
redemption under the conditions in that country was 5 per cent, of the ten-year average production, presumably as regularly estimated by the Reclamation Service. This commission had data
to work upon which are not available here and was composed of men of wide practical experience.
It should be noted, however, that the districts under this special form of contract have to undertake the maintenance and the renewal of the water systems in addition to repaying the cost of
the works. The 5 per cent, is what it is estimated they can pay after meeting these other
charges. It should be noted, also, that 5 per cent, of the average of " the preceding ten years,"
or of all years of record if less than ten, really establishes a range of rates according to the
course of development. For a district which has been rapidly increasing its production, say
10 per cent, per year,: a rate of 5 per cent, on the average would mean only approximately 3%
per cent, on the current year's production. A district standing still would pay a little more or
a little less than 5 per cent., according to whether the current year's crop was above or below
the average, while a declining district would be called upon to pay more than 5 per cent.
It would be fairer, where possible, to take the current year's crop as the basis for whatever
rate was found just. Payment then would be more nearly according to that year's ability to
pay. AVith the organization in the Canadian districts it should not be impracticable to have all
necessary calculations made by the beginning of December, which would allow time for levies to
be made to meet payments to the Government by February 15th.
In so far as the finding in the United States may be taken as a guide, it therefore suggests
for consideration a rate between 3% per cent, and something over 5 per cent, on the current AA 16
year's production for repayment of construction costs, exclusive of all that may be classed as
If the principle of the above recommendations is accepted, the Government must then decide
whether it will directly fix different charges for different individual holdings, or whether it will
continue the district as assessing and collecting bodies. I would recommend the latter course.
If that is decided upon, then my third recommendation is:—
(3.) That the Government lay it down as a condition of applying the new policy that a
system of assessing and collecting the water-tax satisfactory to the Government
and consistent with the new policy be put into effect in each district.
This cannot be left optional with the districts, and, unless made compulsory, action could
probably not be taken in many districts because of differences of interest among the different
classes of producers. It is notable, indeed, that even one district should have radically amended
its assessment basis within the past few years.
Upon the clear understanding that a system to effect the proper distribution of water
charges in accordance with the new principle is demanded, each district, through its board,
might be required to consider and report to the Government the classifications and schedules
that in its opinion would best meet the special conditions in its case. In the Government
service are officers thoroughly experienced in both the theory and the practice of assessment,
and a committee of such officers might be asked to study the reports thus submitted and, without
being limited in any way by them, recommend to the Government a uniform system for all
districts.    Modifications can be made from time to time as experience suggests.
(4.) That a change be made in the general system of administration and that an administrative officer be appointed with headquarters at some convenient point within
this territory, who will directly represent the Minister.
Control over the affairs of the districts that have borrowed from the Conservation Fund
has been retained by the Government. Excepting in certain routine matters, these districts can
act only by by-law, and no by-law can become operative unless and until it receives administrative approval at Victoria and is registered there. Because it can prevent any proposed action
and must approve of whatever is done, the Government must bear the ultimate responsibility
for the management. There are seventeen districts in this position, each having to submit
by-laws, make representations, or send delegations to Victoria.
Now. the undertakings thus managed are going concerns, worth maintaining and developing.
Big public as well as private interests are involved, for the Province has $2,300,000 already
invested and must make further advances. The districts are of the class of public utility
corporations, businesses, concerned with the construction, maintenance, and operation of
engineering-works and with charges and collections. The decisions to be made are on practical
details and business policies. It is not enough that they be kept out of certain troubles, they
must be made operating successes, or their purpose will not have been attained and the Government will not get its money back.
For convenience and for efficiency the working contract of the Government with these
undertakings should be more direct and less formal than at present, and I am therefore recommending that one man be assigned to these special interests who will study on the spot all
needs as they arise and be in a position to advise the Government whenever executive action is
required, and who also can see to the carrying-out of all policies decided upon. This man could
work over with the local boards the problems as they develop, and there would be referred to
the Government only well-considered propositions in order of importance. The arrangement
should be much more satisfactory to the Government, and I am satisfied that nothing could
have more effect in improving the whole outlook and feeling within the territory.
In addition to his other functions, I recommend that this officer should take over the
administration of the irrigation-works of the districts financed by the Conservation Fund in
such part and to such extent as may be found desirable in the interests of efficiency and economy.
AVithin a comparatively small section of the Province there are now some thirty-four local
boards or committees, of which fourteen are in the class now being considered, all trying to
deal with engineering problems of the same character. With one or two exceptions, no one of
these boards is in a position to engage more than occasional professional advice. Again, with
one or two possible exceptions, no district has independent power of financing and can know
what it can do, beyond a little patching, without perhaps prolonged communication with Victoria. REPORT OF ROYAL COMMISSION INVESTIGATING FRUIT INDUSTRY.        AA 17
Under the conditions of the past six years, with no clear-cut constructive policy in existence,
the whole position has been most unsatisfactory. In any case, there is altogether too much
man-power being devoted to planning and directing some elementary engineering in a limited
area, the greater part of which is within an hour or two's motor drive from a central point.
The simplification of organization of all kinds and the reduction of overhead costs is one
of the most promising of the possible improvements in conditions in this territory, and in no
department of activity is overequipment more obvious than in the control of irrigation-works.
I am not proposing that the Government should take over the ownership of these works,
but that it should control the administration while public money is invested in them. A saving
in cost should be effected or, what is the same thing, better results would be attained, permitting larger production, at relatively less expenditure.
The present system is costly. An analysis of the expenditures for the year 1928 of ten
districts, large and small, which have borrowed from the fund, shows a total in salaries of
$58,001.53, of which $22,297 was paid to executives and trustees, $22,331.43 to water bailiffs, or
regular patrol and distributing employees, and $13,375.10 to other labourers. This salary total
works out at approximately $3 per acre of the acreage served with water. There was spent on
repairs by these districts in that year $44,804.42, and, including incidentals, the grand total of
all expenditures was $110,534.42, or a little over $5.50 per acre served, chargeable in the form of
tolls, as distinct from the tax to repay debt. No question is here raised of lack of economy on
the part of the trustees, whose own remuneration is purely nominal. It may be that under the
present system the work could not be done for less money, but it is reasonable to assume that a
centralized administration of all the main works, particularly where districts lie side by side,
could effect a saving in per-acre cost.
In this connection the Government might consider whether the staff of district officers it
now keeps in this territory could not be co-ordinated with the new system in some way. The
AVater Branch has district engineers and the Treasury Department has agents, assessors, and
collectors. The number of agencies, governmental, municipal, and district, performing similar
functions and in many instances covering the same ground is an outstanding feature of the
Saving is not the main point, however. Considerations other than of sound engineering
practice inevitably face local boards under the present arrangement. I have seen leaky systems
in districts short of water this year which did not believe they could meet heavy current repair
bills for a year or two, or add to their yearly debt charges by borrowing for renewals, even if
the money could be obtained. Water is the life-blood of this industry. The supply is limited
and must be conserved to the last drop and must be made as regular as possible. This is a
problem for sound engineering and sound economics, and these cannot be applied by those
bound by the temporary exigencies of local situations.
Subject to the approval of the Lieutenant-Governor in Council, the Minister has authority
in the " Water Act " to expend money for " maintenance and operation " of water systems as
well as for their " construction, reconstruction, repair, or extension," and very wide general-
powers exist. There is provision for the appointment of a superintendent where money is
directly expended by the Minister and of a receiver in eases of default, but the arrangement
recommended above was not contemplated in either of these provisions. The Water Board and
the Comptroller of Water Rights have semi-judicial functions and a wide range of general
duties. What is needed is an operating officer who will establish direct contact between the
irrigation districts and the Government.
I would recommend that, the " AVater Act" be amended by adding a new section, somewhat
to this effect:—
" The Lieutenant-Governor in Council may appoint a Chief Irrigation Commissioner for the
Province and Irrigation Commissioners for any one or more districts, who, under the Minister,
shall perform such duties as may from time to time be directed."
If in the opinion of the law officers additional specific powers are required, they should also
be included in the amendment.
(5.) I recommend that only that portion of the expenditures of a district which can be
properly accounted as costs of conveying water, or only a nominal rental for the
use of the plant, be charged to water-users as such and collected as tolls. All
expenditures on plant maintenance can more equitably be levied by a rate on the
general assessment basis.
The charges discussed under recommendations 1, 2, and 3 are for repayments to the Conservation Fund. Annual expenditures for operation and maintenance are additional costs that
must be met.
The districts are authorized to raise revenue for both these classes of expenditures by
imposing taxes, but the expenditures for other purposes than payment of interest and instalments in respect of debt are ordinarily raised by " tolls," which are generally levied uniformly
on all water-users as a charge per acre-foot of water used, under threat of cutting off the water-
supply. Exceptions to this practice are not uncommon, however. When anything at all can
be paid by a water-user, it goes first to the tolls and only the balance remains for the tax.
When the sudden-death penalty of shutting off the water was put into the hands of the districts
by the Statute, the Province virtually agreed to take second place for its claims. The result is
that the amount and incidence of the tolls must be taken into account as affecting the ability
to repay the Government.
From replies to a questionnaire submitted by me asking particulars of expenditures by the
principal districts for the years 1926, 1927, and 1928 under various headings, it is shown that
for the ten districts giving complete replies the total of such expenditures in 1928, outside of
debt charges, would, if distributed over the acreage reported as actually served with water,
require charges per acre as follows, in order of amount: $1.24, $3.44, $3.58, $5.05, $5.16, $5.80,
$7.35, $7.92, $12.02, $14.28.
That a problem exists in connection with these expenditures is obvious. The very highest
and the very lowest are exceptional cases, but more than one-third of the combined acreage
served with water would have been chargeable with a rate of over $7 per acre if collection
was made by tolls. The by-laws passed for levying tolls do not appear to have been for these
specific rates, and what part of the money was raised by taxes and what was otherwise financed
or left unpaid within the year was not disclosed in the details furnished; but the immediate
point is that these expenditures, outside of debt obligations, create a serious problem, not only
because of their magnitude, but because repairs, when they become unavoidable, may make very
irregular demands. One district had a bill for $4,569.98 in 1927 and for $16,104.47 in 1928, and
a small district for $580.07 in one year and for $3,337.95 in the next year, the latter representing $8 per acre, without counting salaries and incidentals or the tax due on the debt.
These expenditures are made up of three main elements: (1) Costs of maintenance or
betterment of the irrigation-works; (2) costs of conveying and distributing water; (3) costs
of assessing and collecting the taxes and tolls. It is repairs and the overhead chargeable to
maintenance and betterments that bring the totals to such large figures and cause the wide
fluctuations from year to year in the same district. The aggregate cost of " repairs," without
overhead, in the above ten districts was $29,355.80 in 1926, $32,142.74 in 1927, and $44,804.42 in
1928, thus showing a marked upward trend. The cost of conveying and distributing water is
moderate and fairly stable.
One of the most confused questions in finance is involved in this problem, that of depreciation or replacement reserves in relation to sinking funds or debt repayments. The object of the
former is to distribute evenly the yearly payments out of revenue for all the substantial work
to be done on the plant to maintain it in full efficiency, so that at the beginning of a new period
it may be as good as at the beginning of the first period. The object of the latter is to pay off
the original cost of the works by evenly distributed instalments. If both reserves are set aside,
then at the end of the period the utility finds itself with a good plant free of debt. This means,
however, paying out of revenue within the period twice the cost of the plant, the original cost
plus the cost of rebuilding. Few utilities attempt quite so much, although all aim to do more
than merely maintain the value of the asset.
In the " Water Act " it is provided that loans to the districts " shall not be extended beyond
the estimated useful life of the works for the acquisition or construction of which the moneys
are expended." The loans actually made to the districts have been for terms varying from as
low as two or five years, on portions of works considered of a temporary character, to ten
years on certain new, or practically new, wooden structures, and on up to thirty years for
heavy concrete structures. The instalments of principal repayable each year were figured
from the terms of the loan. An extension of the term on certain of the more permanent
structures was afterwards granted as a measure of relief. REPORT OF ROYAL COMMISSION INVESTIGATING FRUIT INDUSTRY.        AA 19
If these repayments to the Conservation Fund were not originally intended, in considerable
part at least, to be in effect a depreciation and replacement reserve for the districts, to be used
for important expenditures in maintaining the plant, then the districts have no such reserves,
but must meet plant costs irregularly as necessity arises, and must raise twice the cost of the
works within the term of their useful life.
Neither from the Act itself nor from the practice under it is it clear what is intended. In
urgent cases loans have been made for important repairs, but not on any regular principle, and
one of the serious difficulties of the districts is the financing of the irregular demands of repair
and reconstruction work.
This irregularity must be remedied in some way and yearly costs more nearly equalized.
Experience has demonstrated that this industry, at its present stage of development, cannot
afford to fully pay off debt and rebuild plant at the same time. This position should be definitely
recognized. Either an entirely new reserve fund should be instituted for the service of the
plant, or the repayments to the Conservation Fund should be available as depreciation or
replacement reserves, the balance above these requirements going toward the redemption of
debt.    This latter would seem to be the only practicable course.
The amount the districts are called upon to contribute yearly to this common reserve fund
should be the maximum amount they are reasonably able to pay. The rate of 5 per cent, on
gross production fixed in certain districts in the United States was, as has been pointed out,
solely for the repayment of debt, and the maintenance and operation of the irrigation systems
was undertaken by the districts in addition. A considerably higher rate in the United States
would undoubtedly have been set if a dual-purpose fund had been contemplated.
It would seem logical and right that all moneys required to maintain the plant should be
collected on the basis of the assessment fixed as discussed in recommendation 3, and not by
charges direct on water-users as such; that is, by tax and not by toll. The cost of conveying
water, or perhaps something in the nature of a nominal rental for the use of the plant, should
properly be charged direct to users. It would seem to me desirable that the water tolls be
moderate in amount and fairly stable.
(6.)  That a substantial appropriation on capital account be made by the Legislature
at the present session to provide additional money for the Conservation Fund.
As at December 31st, 1929, there was in the Conservation Fund a balance in hand of only
$15,079.87. Appropriations made in the past have exceeded the sums actually borrowed and
turned over to the fund by $79,128, and this amount can be made available by administrative
action. Against these combined resources of some $95,000 there are, however, already full
commitments, and the fund is therefore impotent for the important functions it must perform.
There is authorization in the "Water Act" to appropriate not to exceed $3,000,000 for the
purposes of this fund. By Loan Acts passed in 1919. 1920, 1921, and 1922 a total of $2,300,000
has been appropriated, leaving a balance authorized of $700,000. Even if there were no balance
on the original authorization, the Legislature, of course, could at any time amend its limitations
on itself. I am not in a position to estimate how much work of a productive or necessary
character should be undertaken during the current year, but recommend that a substantial round
sum be appropriated. The money can be borrowed and the. debt created only as, and to the
extent, required.
Up to this point the Conservation Fund has been considered from the standpoint of the
districts rather than of the Province or the general taxpayers.
This fund has been created by Provincial capital appropriations as follows:—
"Loan Act, 1919"      $500,000.00
"Loan Act, 1920"         700,000.00
"Loan Act, 1921"      1,000,000.00
"Loan Act, 1922"         100,000.00
Total appropriations  $2,300,000.00
Borrowings under these appropriations have totalled $2,220,872. To start the fund in 1918
there was appropriated from Consolidated Revenue $50,000, which was shortly afterward repaid.
Up to December 31st, 1929, repayments of principal by the districts have totalled $482,248.99.
These repayments have been retained in the fund and have been used for new loans. At the
above date the net outstanding advances to the districts totalled $2,205,792.13, leaving the small AA 20 BRITISH COLUMBIA.
balance in the fund of $15,079.87. The further debt charged against the districts, represented
by arrears of interest, was regarded as owing to Consolidated Revenue.
The interest rate payable by the Province is not the same with each loan, but averages at
present a very small fraction over 5 per cent. In addition to paying interest, the Province has
been providing out of Consolidated Revenue a sinking fund, calculated according to the term
of each loan. As at December 31st, 1929, the total thus set aside amounted to $205,365.32.
Deducting this amount, the net debt of the Province on this account was $2,015,506.68. To carry
the gross debt will call for interest appropriations from Consolidated Revenue of about $110,000
per year. As some of the loans are for comparatively short terms, the sinking fund requirements are relatively high and are something over $40,000 per year. For interest and sinking
fund Consolidated Revenue must now provide approximately $155,000 per year.
If the Treasury thought it wise to refund these loans as occasion offered by the sale of
longer-termed securities, and if favourable markets occurred, the annual charges on this debt,
might in time be considerably reduced. On fifty-year securities the charges would probably
not exceed $125,000 per year.
What has been paid by the districts as interest has been transferred to Consolidated Revenue
toward meeting the above interest obligations, but no arrangement has been made in respect to
sinking fund instalments, which are charged to Consolidated Revenue in accordance with the
general policy of the Province to make provision for the repayment of debt.
Now, as against these obligations of the Province, the total demanded from the districts for
1927, the year after the expiry of the moratorium, was $240,544.68, which, of course, included
claims on account of the amortized interest deferred during the moratorium. Of the total
demanded there was paid in $178,104. In 1928 allowance was made for the reduction of debt
contemplated by the amendment in that year and the demand was for $186,467.07, on which
$110,144.62 was paid. Two districts, one of which at the present stage offers the extreme
illustration of a disproportionate and misadjusted load, defaulted altogether, and certain other
districts did not pay in full. When it is recalled that ten of the principal districts, as previously
pointed out, had expenditures in that year of over $110,000 in addition to their payments to the
fund, it will be seen that the districts have been raising considerable sums of money. Defaults
have been increasing in the last three years, but up to 1926 practically all payments demanded
were met in full and this is worthy of note. The demands during the moratorium were comparatively light, but prior to 1923 there were no concessions.
With the possibilities of betterment that lie before this industry if the proper constructive
attitude is adopted, it does not seem too much to expect, it will not be many years before at
least the minimum required for the service of the Province's debt could be contributed by the
To provide further money for the Conservation Fund means increased borrowings by the
Province and corresponding increase in annual charges, but. in the first place, there is in my
judgment no alternative for the Province if the whole investment is not to be endangered, and,
in the second place, the new money if soundly invested should not only much more than earn
its own charges, but help to make the old money profitable.
The method of accounting under the general plan outlined in these recommendations, and
the regularization by Orders in Council of the debt chargeable against each district, will require
the consideration of the proper departments.
A full report on the water-supply available could be made only after a thorough engineering
survey of all the watersheds tributary to these districts as well as of the works now installed.
This would be a long and expensive undertaking and would not in my opinion be justifiable
as a special commission. AVith all the regular agencies available, however, this work should be
pursued as rapidly as possible, for the water-supply is one of the absolutely basic factors in this
industry, and only upon an accurate knowledge of quantities available can policy for the future
be wisely founded. This matter should be one of the chief concerns of the administrative officer
it is recommended should be assigned to direct supervision of the operations in this territory.
The season of 1929 was below average in the quantity of water delivered by the irrigation
systems and in many districts the supply failed before the end of the growing period. I saw
many sections in which in the month of August there was clear evidence of failing vitality in REPORT OF ROYAL COMMISSION INVESTIGATING FRUIT INDUSTRY.        AA 21
the trees and the fruit was not filling out as it should have been, thus entailing lower grades
and a reduced yield. The loss in production and grade for the one season is not the only, or
perhaps the principal, loss that may be caused. Trees entering the winter with low vitality are
very susceptible to damage by frost, from which they may not fully recover for several years.
I can therefore report, from direct evidence, that in 1929 the Okanagan territory, at least, did not
have enough water for the acreage under crop.
From details furnished me by the districts, but disregarding one small district where
conditions were exceptional, the average quantity of water delivered in the three preceding
seasons, 1926, 1927, and 1928, per acre served, ranged from 1.06 to 3.14 acre-feet, according to
districts. This range in itself indicates a problem. Even the highest average is not high by
comparison with conditions elsewhere. The Government's own project at Oliver supplies a full
4 acre-feet and many projects in the United States have a supply as large or larger.
The character of the soil and of the subsoil, and the kind and stage of growth of the crop,
determine the minimum quantity of water necessary. The importance of a complete soil-survey
iu its bearing on this problem is evident. The expression " the duty of water" is commonly
used for the productive results of a certain quantity of water.under given conditions. To raise
the duty of water is to secure the same or better results with less water, and the duty of water
is said to be lowered when more is used than is absolutely required. There may be overirrigation
and there may be waste when water is not properly distributed on the land itself. AA^ith some
soils more frequent irrigations with moderate amounts of water are more effective than much
larger quantities occasionally applied. Then, evaporation can be partly controlled by proper
cultivation. All these factors entered into the differences I observed this year as between one
district and another, and one farm and another in the same district.
But, making all allowances for some wastefulness in methods, the conclusion must be that
the supply of water in the Okanagan is insufficient for the total acreage rated as irrigable and
in some districts for the acreage now being cultivated, while even in the districts relatively best
supplied the quantities available are no more than on the border-line of safety.
It follows that the water-supply must be increased or that the area to be cultivated must be
contracted. Land must be highly productive to bear the costs of intensive irrigation farming
and water enough for such production is indispensable, for no probable improvements in marketing or other general conditions can make a half-crop pay. It is a question of more water or
less land.
Before land contraction on any general plan is undertaken, however, it is a clear duty to
thoroughly canvass the possibilities of increasing the supplies of water. As glacial water is not
available in this territory, it is a matter of catching and conveying the run-off from the adjacent
mountains of the annual precipitation. A sufficiently large run-off area must exist and then the
site of a catchment-basin must be found properly situated and capable of being adapted to use
at an economic cost. This is a combination not easy to hit upon. Undoubtedly the principal
water resources are already developed, but certain supplementary supplies are known to exist
which should be examined as to feasibility, and there is a very general local belief that still
other propositions may be discovered. Indeed, one very likely proposition of that kind was
found this autumn, which, if the preliminary examination is confirmed, might largely solve the
water problem in one area.
Another way of increasing the water-supply is by stopping leaks by replacements or betterments. The wastage of water between the dams and the orchards is serious in some of the
systems.. Then the inefficient use of water should be reduced to a minimum by education and,
if necessary, by regulations.
There remains one other possibility to be carefully investigated, that of pumping back from
lakes or larger streams to portions of districts where the elevation is not too high. To the extent
to which pumped, water can be substituted in some districts for gravity-water there will be more
of the latter for other lands, or to the extent to which insufficient gravity-water can be supplemented by pumping there will be lands with an adequate supply. There are already individual
instances in the Okanagan under each of these headings. Pumping is very extensively resorted
to in the United States, and I conferred there with individual farmers pumping their own supply,
with pump-distributers, and with power companies. I also conferred with pump-manufacturers
and power companies in Canada. AVhat may be practicable would have to be worked out for
each specific case, but I am satisfied that there are possibilities of some relief in this way. AA 22 BRITISH COLUMBIA.
In judging the economic feasibility of any proposition for the increase of the water-supply,
the values likely to be created by the additional water should be the test. AATater that will add
100 boxes of apples or another ton of alfalfa per acre can pay charges on a high capital cost,
while the added increment that will convert unprofitable into profitable agriculture will not
only pay for itself, but may save the whole investment. The same test should be applied in
pumping propositions, most of which may be undertakings for the individual, as is commonly
the case in the sections of the United States I visited, rather than for the districts or the
Conservation Fund. The man who pumps should, of course, be correspondingly relieved of water
taxes and tolls, and it would be good public policy to give him consideration also in respect
to other classes of taxes, as is done in Chelan County, the system of assessment in which has
been referred to above.
AVhen all is done that can be done to provide water within economic limits, the very difficult
problem of reduction of cultivated area must be faced. To continue to spread water so thinly
over an extended area that only a little of the heavier soil here and there is profitable, is
suicidal. This applies to individuals as well as districts. A man with 5 profitable acres will
do well, who with 10 unprofitable acres would be ruined. It cannot be too often insisted upon
that high yield pet acre is absolutely necessary in irrigation propositions. The regulations of
the AArater Branch and of the districts should be such as to place no obstacles in the way of
the man who wants to use all the water to which he has a right on a portion only of his land.
Then, there is the problem of inferior lands. These must drop out in any case, for it is only
a waste of water to keep them in unprofitable cultivation. A thorough soil-survey would prevent
such lands from being taken up in the future, but there is the distressing problem of the sub-
marginal lands taken up in the past in good faith. As one way of easing the situation in which
the owners of such lands find themselves, and at the same time of facilitating the distribution
of water, I am making a recommendation based on the experience of the United States.
On this general branch of the inquiry I make the following recommendations:—
(1.)  That it should be regarded as among the primary duties of the local administrative
officer to promote exploratory surveys for additional water-supply and to promptly
submit to thorough test as to economic feasibility all proposals brought to his
In this connection I would suggest that it would be well worth the money it would cost for
the Government to have a photographic survey of the watersheds made from the air.    Such a
survey, which could be very quickly made, might reveal topographic conditions that would at
once and finally exclude certain areas from further consideration.    In such an event the problem
of getting along with existing supplies could be approached without delay and with every one
in agreement that that is the only course to pursue, which will not be the case as long as popular
belief remains that sites for further catchment-basins exist.    If, on the other hand, the survey
led to the locating of even one or two new sources, the result would be still more important.
(2.)  That, under the heading of " beneficial use," ample powers be taken by the Government to regulate the distribution of water and prevent waste in any form, and
that the administration of sufficient of these powers should be centralized in the
local officer to enable him to control operating conditions in the irrigated areas.
Scattered provisions, apparently giving wide general powers of this kind, now exist in the
"Water Act," but if these are not found adequate, amendments should be made as experience
(3.)  That water, the-right to which is appurtenant to certain lands,  should, under
regulations, be permitted to be used on other lands in the same ownership.
This right to transfer the use of water should exist not only from one part of the same lot
to another, but from one lot to another lot within the  same district.    Where a grower is
culivating only part of a lot he owns the case is simple.    The same right, however, should exist
when the lands owned are not contiguous.
As orchards come to maturity they require more water than the average necessary for a
district as a whole. Some highly productive lands with lighter soil need more water than
equally good, but heavier lands. If the total water-supply for a district is limited, those lands
which can make a profitable use of more water can get that water only by taking it away from
other lands. In every such district it is clearly an economic waste for water to continue to
be used on inferior lands which can never be profitable, when it could be made highly productive
on other lands. Under the regulations in the United States, the owner of good land requiring more water
is permitted to increase his supply up to 30 per cent, by purchasing poorer lands with a water
right and transferring this right. It is understood that the percentage allowed to be transferred
may be increased if found desirable in the future. Every application must be passed upon by
the Government and approved before a transfer can take place.
In this way the contraction of a district to an area of good land having an adequate water-
supply is brought about more simply and effectively than by any arbitrary measures. It has
the great advantage of creating realizable values for the man who purchased inferior land in
good faith and finds not only that he cannot make the land pay, but that he cannot sell it.
The Government and the districts would have an asset in the inferior lands which have reverted
to them, which they do not now possess.
(4.)  That the drainage problem in the various districts, which is a part of the general
irrigation problem, should be carefully studied by the local administrative officer
with a view to recommending the most effective drainage systems and the most
equitable method of distributing the costs and the damage from seepage.
Provision for drainage should properly be made when projects are first designed and the cost
included in general construction costs.    The cost of drainage construction found necessary after
projects are in operation may be inequitably distributed if wholly charged on a small portion
only of the district.
All of which is respectfully submitted.
Printed by Charles F-. Banfield, Printer to the King's Most Excellent Majesty.


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