The study attempted to estimate predictors of the impact of major water resource construction projects on expenditures and on tax bases of local governments. Step-wise regression of five year changes (1957-62) in expenditures for various functions in 56 Montana counties obtained from Census of Government data on variables which a priori economic reasoning would suggest as predictors yielded mostly statistically significant results. The equations did not provide reliable estimates of changes which occurred over the subsequent five years. Interviews with local officials indicated the projects had not caused extraordinary financial problems. An apparent reason for lack of expenditure response to construction activity is severe statutory limitations on local government finances. Cross-section regression of various expenditures on population for Montana counties provided significant estimates of long run adjustment of local expenditures to population differences. (Author)