Friday, August 12, 2011

Follow The Money

On October 13, 1978, the CBS Evening News aired a segment on their national news broadcast about the La Farge Dam Project. The segment was researched and narrated by Bob Faw, a reporter who worked for the CBS affiliate station in Chicago. Faw had been canoeing on the Kickapoo River earlier in the fall with his family when they paddled past the dam tower north of La Farge. The concrete monolith piqued the veteran newsman’s interest, so when he landed in La Farge, he asked about the tower and talked to some people in town. They told Faw about the long history of the dam project, including the great Kickapoo River flood of the previous July.

Faw thought that he might have a good human-interest piece for his station, so he ran it by his boss when he returned to Chicago. Soon Faw returned to La Farge with a cameraman and started conducting interviews and shooting footage of the Valley. A one-day stay turned into two and more footage was shot for the piece. The CBS national desk heard about the story of the Kickapoo dam at La Farge and it was scheduled for the big show to be broadcast nationwide. Local residents Bernice Schroeder, Lonnie Muller and Ward Rose were featured in the broadcast segment, telling of the turmoil that the project caused to people living in the Kickapoo Valley.

There was another interview that Faw included on that CBS piece that drew my attention when viewing it recently. Colonel Forrest Gay, the head of the Corps of
Engineer’s district office in St. Paul at that time was interviewed for the television story and he answered a question pertaining to the escalating costs of the La Farge project. The costs for the project had been one of the reasons why the dam project had been stopped. In 1975, Senator Bill Proxmire had cited those escalating costs as to why he had withdrawn his support for the dam at La Farge. Without Proxmire’s support in the U.S. Senate, the project was essentially stopped.

When talking to Colonel Gay, Faw wanted to know why the costs for the La Farge Dam Project had gone up so much. Interestingly, the Corps’ Colonel laid the blame on the State of Wisconsin. He cited the insistence of the Wisconsin DOT on “high quality highways and bridges” for the project area as driving up the costs, and the DNR’s demands for enhanced recreational facilities for the La Farge Lake as another contributing factor. Gay said that those kinds of add-ons, mandated by the state, had helped drive up the cost of the project to more than $55-million. The Colonel’s contribution to the CBS piece is another interesting part of the story about the financial costs for the dam project.

Last time, we began to look at the financial reasons that included those escalating costs, for the stopping of the La Farge Dam Project. Financial, environmental and political are the three general categories of reasons to look at when explaining the stoppage of the project. Previously it had been mentioned that the dam project at La Farge had started as a $14.5-million project when first authorized by Congress in 1962, but had grown to a cost of over $51-million in 1975 when Senator Proxmire withdrew his support. Despite what the Colonel said, some better roads and bridges along with nice bathrooms and picnic areas at some lakeside campsites doesn’t quite explain the difference between $15-million and $50+-million. So, what does?

That man in the movie, you remember him hiding in the shadows of the parking garage, said, “Follow the money”. “Deep Throat” might have had good advice for those Washington Post reporters in the Watergate Scandal, but it is not so easy when following the money in this winding tale about the dam on the Kickapoo. Following the money when looking at the escalating costs of the La Farge Dam Project still might not lead one to a final answer. One problem with the trail of following the money is that the books might have been cooked from the get-go.

When the Corps of Engineers plans for a project like the dam project at La Farge, they have to be careful that the costs of the project do not outweigh the benefits. A benefit/cost (b/c) ratio was used when figuring the financial viability of projects such as the one on the Kickapoo River. In the end, for the project to be justified and more importantly to be authorized by Congress, the benefits for the project have to be financially greater than the costs. The Corps knew about how much the dam project would cost, that is a fixed cost that can be readily arrived at using standard projections. It is important to remember that by keeping actual costs low, the Corps can fit projects within a positive benefit/cost ratio more easily.

The price tag on the benefits for a project like the dam at La Farge is somewhat more elusive to figure. The Corps has to figure in the savings from Kickapoo River flood losses, which would be prevented with the dam being in place. Historic flood cost averages on the Kickapoo have to be used to establish these dollar amounts. Figures have to be developed for flood losses in agriculture as well as damages to houses and businesses in the villages along the Kickapoo. Local government costs for bridge and road damage also have to be included. Obviously, the more flood damages and costs that you can list, which then can become benefits of the dam’s flood control, the better it will be for the b/c ratio of the project.

The same is true with recreational benefits. The more money spent by those folks coming to visit Lake La Farge, the greater the dollar amount for the benefits for the project. If the lake increases the economic base of the Valley, those numbers have to be included into the ratio. The problem with the recreation and tourism dollars is that they are not hard and fast numbers. To arrive at a figure for the dollar value of those benefits, some extrapolations have to be made. Extrapolations are like gazing into a crystal ball; what you see may depend on what you want to see. What you see doesn’t necessarily mean that it’s actually there. There’s a certain amount of hocus-pocus in this whole process of developing a favorable b/c ratio for a dam project like the one at La Farge.

In the late 1950’s, when the Corps was putting the numbers together on the La Farge project, they were having a hard time getting a favorable benefit/cost ratio. For every dollar spent on the project, the Corps had to show a benefit return greater than that dollar cost. If your cost is $1, your benefit must be greater than $1. A b/c ratio of $1.30 to $1 is an excellent one for the project to move ahead, but a ratio of $.80 to $1 will stop it in its tracks. Remember that the benefit return in dollars has to be higher than your cost of construction. In the early planning stages of the dam at La Farge, the Corps was having trouble with getting a favorable b/c ratio for the project.

Part of the problem was the economic reality of the Kickapoo Valley. The region has traditionally been a poor, economically undeveloped area of Wisconsin. We’re not talking Beverly Hills when we look at La Farge and Viola will never be mistaken for Bel Air. There had not been any mansions washed away with the Kickapoo floods, which is too bad. Mansions washed away in Kickapoo floodwaters would have meant higher figures when calculating damage costs. The more property that was lost or damaged in Kickapoo floods meant better numbers for that b/c ratio because those flood costs turn into benefits when the dam prevents the damage from happening. But the Kickapoo Valley was a relatively poor region, so the flood damage numbers didn’t add up as well as other flooded places might. It’s easier to build dams for richer areas and communities than the Kickapoo Valley.

Remember that the Corp’s Kickapoo Valley project, with a dam at La Farge and levees at Soldiers Grove and Gays Mills, was strictly a flood-control project at its inception. The levees for those two down-river villages were added to the project by the Corps to enhance the flood damage numbers. By adding the levees, the flood damage benefit numbers for the two villages could be added to the total to enhance the b/c ratio.

So if the dollar benefits for the flood prevention of the dam and levees did not exceed the costs for building those structures, the Corps had a problem on its hands. To get a better b/c ratio, the Corp’s planners had to bring in some more benefits to exceed the cost of the construction of the dam and levees. The benefits to be added to the ratio came in the form of recreation and tourism.

Recreation was an easy addition to such a project as the dam at La Farge. Besides providing flood protection, dams back up water that can be used by people for recreational purposes. Fishing and boating is a natural set of recreational activities in such a water reservoir. With a little work along the shores of the reservoir, swimming, picnicking and camping can be added as well. You need people to come to the water, so the Corps calculated usage from local people in the area of western Wisconsin. That number of people would be your base group because they would have little distance to travel. By expanding the distance traveled to places like Minneapolis, Dubuque, Rockford, Madison and Chicago, the Corps could add more dollars to the recreational benefits and make the La Farge project more feasible. The more people that could be projected to come to La Farge to recreate in the waters behind the dam and spend some money locally in the process, the better for the Corps’ plans. By adding these recreational benefits to the dam project at La Farge, the b/c ratio changed to a greater amount of benefits received than the money spent on construction of the dam. The ratio was tight, but by 1960, the Corps was ready to go to Congress for money to build.

The 1960 Census threw a monkey wrench in the dam work plans. When the census was released, it showed that most of western Wisconsin had decreased in population from the previous census. The village of La Farge as an example had lost seventy-two people from the 1950 census, while the Town of Stark, where the dam and reservoir would be located had lost 197 in the ten-year period. The numbers were the same for most of the rest of the Kickapoo Valley, Vernon and Crawford Counties and most of the surrounding area. Less people in that area meant less people to recreate on the waters above the La Farge dam. That base group for potential recreation dollars spent on the reservoir at La Farge had shrunk with the new population numbers. Due to the shrinking local population and its potential recreational dollars, the benefit/cost ratio of the dam project was off kilter again, with the costs greater than the benefits. (The decrease in the population in the Kickapoo Valley also affected the flood protection benefits. Less people in the Valley meant less potential loss from floods, which adversely affected the ratio.) The Corps had to come up with some new numbers to make the project go.

With new calculations for the lower populations numbers so greatly affecting the b/c ratio, the Corps’ planners looked to cut on the costs side. Previously, the development of the four recreation areas that were to be around the lake was a cost figured for the federal government to pay. Another part of the costs originally to be assumed by the federal government of the 1962 project was expenses incurred to relocate roads and utilities around the reservoir. The section of Highway 131, which ran along the Kickapoo River from La Farge to Rockton, would have to be relocated to the east of the reservoir. Vernon County Highway P and roads in the Town of Stark would also need to be moved with the expense picked up by the federal government. As the 1961 deadline for submitting the project for authorization by Congress approached, that all changed. A positive b/c ratio had to be found and that could be accomplished if the Corps dropped the federal costs of recreational development and road and utility relocation from the formula. When the project was announced in late 1961 and then authorized a year later, a positive b/c ratio of $1.2 to $1 had been achieved for the La Farge Dam Project. However, those costs did not go away. Somebody had to pay for those aspects of the project and that burden would fall upon the state and local governments. Which was a problem for the State of Wisconsin DOT, Vernon County, the Town of Stark and the Village of La Farge. Suddenly this long-awaited federal flood control project was not coming cheap.