ST. GEORGE – Recommendations in Gov. Herbert’s proposed 2017 budget may signal a shift in the willingness of state officials to fund the Lake Powell Pipeline and other large water projects — at least before major conservation efforts, increased transparency and other measures are put in place.
The 2017 fiscal year budget proposal, unveiled by Herbert Dec. 9, recommends several conditions be met before the state would be willing to consider funding billion-dollar projects like the Lake Powell Pipeline. The pipeline would bring 86,000 acre-feet of water 140 miles from Lake Powell to Washington and Kane counties and, according to a recent study, cost an estimated $1.4 to $1.8 billion.
“The Governor’s recommendations validate our long-held position favoring water conservation and fiscally responsible, locally financed water projects,” Tom Butine, board president of local conservation group Citizens for Dixie’s Future, said.
“He has recognized the elephant in the room. It’s crazy to spend billions of dollars on a water project when we are wasting millions of gallons of water per year.”
The budget and its recommended changes for how large water projects are financed were released a week after state water officials submitted a preliminary licensing proposal to the Federal Energy Regulatory Commission, and a month after a group of economists predicted building the pipeline would result in massive water rate increases for residents of Washington and Kane counties.
Although water use data is imperfect, the Governor said in his budget, U.S. Geological Survey data shows that Utah has the highest per capita municipal and industrial water use in the nation.
Of all the “diverted” water in Utah, 82 percent is used for agriculture, and 18 percent for municipal and industrial use.
Just 3.5 percent of the state total is used for residential indoor use while 6.5 percent is used for residential outdoor use.
Relatively minor increases in agricultural efficiency could provide an amount equal to the current statewide indoor water use.
The budget recommends better tracking of water use and stronger conservation measures:
Utahns have an important choice to make about water use. The need for additional water supply at some point is a given; however, the timing of water system development varies dramatically, depending on changes in water usage.
Increased conservation could delay major development projects for decades while the failure to conserve water will lead to accelerated building schedules and their associated increased costs sooner. …
If Utah’s water were used more efficiently, the need for costly water development projects could be postponed for decades.
Water projects totaling $33 billion, including the Lake Powell Pipeline, have been proposed by a group representing large water conservancy districts, the budget states.
The Lake Powell Pipeline Act of 2006 and the Bear River Development Act of 1991 indicate that the projects are subject to future funding decisions, the budget states. Under the acts, once the projects are built, and repayments to the state begin, repayment of 70 percent of the costs would be made within 50 years after local entities take water that was contracted prior to construction.
However, 30 percent of the repayment remains “completely open-ended,” meaning no set time period is in place for repayment to the state.
“Under the proposal, the State of Utah’s General Fund would never be repaid and the ongoing allocation of tax revenues would create a permanent sizable state taxpayer subsidy for water development,” Herbert said.
Conservancy districts are essentially asking the state to assume the role of financing large water projects — a function formerly filled by the federal government, a move which would be a “massive expansion of the state’s role.” Because the state balances its budget, this would have to affect other state-funded programs such as education, or increase taxes.
Out of respect to the taxpayer, the governor’s budget recommends the state only finance major projects after exhausting all other alternatives.
The Governor recommends that these conditions be met before the state funds water projects:
- Better water data and data reporting before state financing or funding, including universal metering in all areas that would receive state-funded water and three years of data under new state standards to be implemented in 2016
- New and meaningful water conservation targets that strongly emphasize better water conservation
- Independent validation of project costs, including a comprehensive price elasticity and repayment feasibility study
- Local funding effort and increased emphasis on user fees, including water districts paying up front for a “meaningful portion” of any water project and movement away from using property taxes to fund water in favor of user fees
- Transparency and local voter engagement through processes such as public hearings and local votes on proposed projects
- Appropriate financing and repayment terms such as 100 percent repayment of project costs and an interest rate that reflects the state’s actual borrowing costs.
The Governor’s budget recommends spending $6 million to collect and study water data throughout the state and $460,000 to improve water reporting from local and state agencies.
Other proposals would provide funding for water conservation at state facilities, water conservation advertising and rebates, water rights adjudication and funding for safe drinking water.
Water district response
Washington County has already reduced per capita water use by 26 percent from 2000 to 2010, Karry Rathje, spokesperson for the Washington County Water Conservancy District, said. And the district supports continued efforts to reduce use.
The District is considering a down-payment option in its funding scenarios, Rathje said, but that is not a requirement of the financing terms specified in the Lake Powell Pipeline Development Act.
The state and participating districts are acting in accordance to the terms specified in the Lake Powell Pipeline Development Act, Rathje said.
“The Governor’s budget is proposing state financing concepts and requirements for the Lake Powell Pipeline and Bear River Development that are not in the current statutes,” Rathje said.
The District believes transparency and local voter engagement are already established.
“The Lake Powell Pipeline was voted (on) by our publicly elected legislative branch of government with tremendous support in 2006,” Rathje said. “Local elected officials who support the project continue to get the majority public vote.”
In addition, the District has and will continue to host public meetings and provide information, Rathje said.
Unlike transportation and education, water conservancy districts are the only essential public utility that repays state loans with interest, Rathje said, and investments in water infrastructure yield some of the highest state and local economic returns.
For every $1 invested in water infrastructure in Utah, Rathje said, $6.27 is produced in economic output, $5.17 is generated in personal income and $0.41 is collected in state and local taxes.
“The district would not pursue a project if the costs exceeded the economic returns or jeopardized the financial stability of the state or local communities,” she said.
Ed. note: Added clarification of Lake Powell Pipeline Development Act repayment recommendations.
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