Soaring water rates inevitable if Lake Powell pipeline is built, economists say

Stock composite image, St. George News

ST. GEORGE – University of Utah economists have harsh criticism for a Lake Powell Pipeline repayment plan and are standing by their prediction of massive increases in water prices and impact fees for Washington County residents if the pipeline is built.

Stock image | St. George News
Stock image | St. George News

“The university economists analyzed the District’s repayment plan and found the agency intends to repay just 28 percent of the pipeline costs paid by Utah taxpayers,” Zach Frankel, executive director of the Utah Rivers Council, said in a press statement.

Frankel said the Washington County Water Conservancy District knowingly hid massive water rate increases from the public to fund the pipeline, calling it an “outrage.”

“This means the District lobbied for pipeline funding by claiming they could repay Utah taxpayers while secretly intending to force Utah taxpayers to pay 72 percent of the pipeline’s cost, a violation of Utah law,” Frankel said.

In November 2015, a study endorsed by 20 economists from three major Utah universities predicted the controversial pipeline would incur debt as high as $781 each year for every man, woman and child in Washington County. Paying for the pipeline would require extreme increases in water prices, impact fees or both. Water rates could increase as much as 678 percent, the study’s authors state.

Read more: Study predicts Lake Powell Pipeline will trigger massive water rate, impact fee increases

The economists’ analysis comes in the wake of the release of Water District documents opponents say contain a repayment plan for the pipeline which was prompted by a Utah State Records Committee ruling in May.

The ruling was made in response to a Government Records Access and Management Act, or GRAMA, request from the Utah Rivers Council for “all documentation of the WCWCD repayment plan for the proposed Lake Powell Pipeline, and schedule of payments referenced widely by the Division of Water Resources and WCWCD.”

Read more: Records Committee rules Lake Powell Pipeline repayment plan must be made public

However, water district officials say the documents that were released are only interactive survey results or focus group exercise worksheets, not a repayment plan, district spokeswoman Karry Rathje said. Calling the documents “repayment plans” is inaccurate and misleading, she said.

A repayment plan cannot be formulated until 2018 or later because the needed information is not yet available, she said.

A definitive repayment plan cannot be formulated until route and design features determining the final cost of the pipeline are set, Rathje said in a previous interview.

That will not be determined until after the completion of a National Environmental Policy Act review along with an approved final design, cost estimates based on that design and financing terms approved by the state and accepted by the districts, Rathje said.

Read more: Water district releases contested pipeline documents, refutes label of ‘repayment plan’

Water district officials have not had time to fully review the recent analysis and comparison issued by the University of Utah economists, Rathje said Tuesday.

“I can tell you the district will fully repay the project according to the terms of the Lake Powell Pipeline Development Act,” she said. “The Utah Rivers Council’s claim that we’re only planning to repay a percentage (of the pipeline cost) is inaccurate.”

Economists’ analysis

The analysis by University of Utah economics professors Gabriel A. Lozada and Gail Blattenberger states that the Water District’s repayment model is seriously flawed in several ways.

The Water District’s model includes no interest payments to the state on bonds issued by the state, despite language in the Utah Code 73-28-402 (4), part of the Lake Powell Pipeline Development Act, which states:

“The board shall establish and charge a reasonable interest rate for the unpaid balance of reimbursable preconstruction and construction costs.”

The district’s model also underestimates the total cost of the pipeline, which would seriously impact repayment projections.

“The WCWCD (water district) model takes the default cost of the pipeline to be $969 million, whereas the 2012 FERC low-cost and high-cost estimates were $1.328 billion and $1.751 billion, respectively,”  a letter that accompanies the analysis and is signed by 17 University of Utah economics professors states.

The  water district’s model also leaves out pipeline operations and maintenance costs which would be $23 million to $63 million annually, according to documents prepared by the state.

Perhaps most seriously, the district model fails to take into account market economics and the law of demand, the authors state. Consumers typically buy more of a product if its price falls; and the higher a product’s price, the lower its total consumption.

“The fact that this inconsistency has not been corrected by anyone working for the Division of Water Resources or for the WCWCD raises the possibility that these institutions may currently lack the ability to handle even the most elementary principles of economic analysis,” the study states.

“Alternatively, these institutions may understand this concept yet choose to ignore it because the required increases in water rates and reduction of water use could negate the need for the LPP (Lake Powell Pipeline).”

“Given the flaws of the WCWCD model, we stand by the model in our 2015 analysis, warning of significant water rate and impact fee increases,” the analysis states.

“However, that model should only be a starting point for a comprehensive analysis of southwest Utah’s water needs, including not only more sophisticated economic analysis but also geographical study of changing land use patterns, demographic modeling and its implications for real estate development, close study of future water use in agriculture, and reconsideration of using property taxes to partially fund water districts.”

Editors note: Clarified to more strongly reflect the water district’s position that the released documents are not a repayment plan.

 

Email: japplegate@stgnews.com

Twitter: @STGnews

Copyright St. George News, SaintGeorgeUtah.com LLC, 2016, all rights reserved.

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18 Comments

  • Chris September 21, 2016 at 7:21 pm

    Time and again, we are seeing that the pipeline planning process has been fatally flawed, and possibly dishonest, from the beginning. The Las Vegas consultancy that the district hired amounts to little more than a shill for a project that is only justified by greed. We, the current residents of southwestern Utah, have nothing to gain from the pipeline, save those developers and speculators who stand to make a killing from the growth that will inevitably ruin the quality of life in this community. Death to the pipeline!

  • .... September 21, 2016 at 8:21 pm

    Yeah baby bring on the pipeline. wooooohooooooo it’s on the way !

  • mesaman September 21, 2016 at 8:28 pm

    I fear that the Lake Powell Pipe Dream is too far along for the citizenry to prevent it. If it were to go to a referendum vote at least we would have been heard. I think we have an obligation to ride our elected officials to include it in the November election.

  • beacon September 21, 2016 at 9:55 pm

    What important things in this state and community will go wanting for money while money is thrown at an unnecessary water project? Those who support this project – not just leaders but all citizens – would do well to consider that. There is more than enough water in this county to support growth for a long time. Having studied the project for many years and the details behind it, that is clear. People who allow themselves to be pulled along on a leash by pipeline proponents, many of whom have their egos involved or stand to make much money themselves, would do well to think seriously about this. Washington County is 5th from the bottom of the list when it come to incomes compared to other counties. Even during the growth heydays incomes did not compare favorably. Do folks really think that this pipeline and any of the few and temporary jobs provided will solve that problem? People who are concerned and want a different plan for our future should make that known by participating in public commenting on the state water plan at http://envisionutah.org/projects/utah-water-strategy.

  • Not_So_Much September 22, 2016 at 7:42 am

    Why not enter into a fair, 50 year lease of Utah’s water rights with Nevada and California? Limit the term of this lease so, if in 50 years, there is an absolute need for the pipeline the lease ends and the line is built. A little common sense will serve everyone well. Oh, and have the funds placed into a trust restricted in use to this project, at least for the next 50 or 75 years. This along with reasonable increases in impact fees and use charges (all of which should go into the trust) should address any future needs.

  • tcrider September 22, 2016 at 8:20 am

    I think there would of been enough water if the area was not growing as fast as it is, but when we have
    greedy developers and ambitious city planners who think soccer fields and golf courses are needed to
    attract more growth, then we do not have enough water and we end up in the situation we are in now,
    just think if they build the pipeline and the housing market goes belly up again, the locals will be priced
    out of their homes.

    • BIG GUY September 22, 2016 at 10:58 am

      All Washington County golf courses (and probably most soccer fields and parks) are irrigated with non-potable secondary (reuse) water, some of which comes from the sewage treatment plant. None use potable water.

  • outsider_100@hotmail.com September 22, 2016 at 10:37 am

    While I sincerely appreciate the forward planning associated with this project, and assessment of water resource requirements under different scenarios of growth, I have to wonder about the competency of our WCWRD leadership team who are supposed to be supervising the consultant. This project is certainly in the public eye, and as soon as they provide a huge obvious error in their calculation of future costs, folks who may have been moderately supportive are now sceptical. And those folks have every right to question the financial analysis, and underlying assumptions.
    Agricultural water consumption in WC is likely to continue to taper off, as fields are converted into subdivisions, and hay cannot be sold at high enough prices to justify the irrigation water.
    As a transplant, who has seen other areas of the SW deal with limited water resources, I believe we have opportunities for conservation….

  • Ron September 22, 2016 at 11:00 am

    The Lake Powell Pipeline is and has been a sham from the get go. Always for the speculators and the “good ‘ol boys” to benefit from it the most. There is a reason the district has not and would not provide full information as to the costs of this pipeline scheme. They don’t want the public to know. Plain and simple. If they had made the costs and who would be responsible for paying for it public, do you think it would have the support it has? Of course not! The district (Ron Thompson) continues to manipulate the information going out to the public. He does not want to give up his cushy position and the potential of unlimited riches coming his way, all at the expense of the paying public.
    It is time for Ron Thompson and his cronies at the district to resign NOW!, and stop fleecing the public of their hard earned dollars.
    It is time for a complete new leadership team at the district who will have the citizens best interest at the forefront of their decisions for the future use of water and the communities of Washington county.

    RON THOMPSON RESIGN NOW!!!

    • Brian September 22, 2016 at 2:03 pm

      I agree completely. I resent every penny I have to pay to the WCWCD, I resent the massive building on the hill, and I resent the state of Utah telling me that rain that falls on my property belongs to them. Ron Thompson is kingdom building, plain and simple. County commissioners that don’t support accountability at the WCWCD need to be voted out (good luck with that).

      • RealMcCoy September 23, 2016 at 11:22 am

        I took a poll, and all the raindrops that land here identify as “undocumented snowflakes”.

        Rain that falls on my property belongs to ME, and if the state tries to say otherwise they will get a lawsuit for any and all damages THEIR water has done to my property.

        • .... September 23, 2016 at 12:53 pm

          Make sure you photograph and register every raindrop with it’s DNA and point of origin and make sure the raindrops are legally documented and you have documented proof of ownership and make sure you have a copy of your paperwork in English and Spanish and make sure the raindrops are not abused while in your custody. .

          • RealMcCoy September 23, 2016 at 2:00 pm

            Not only are they registered, but they VOTE! Multiple times!
            They seem to want to vote against the pipeline though. They say their brothers and sisters are being forced to migrate from Lake Powell (which we now know is a Lake of Mass Killings).

            As for my paperwork, documents, and registration…. they were all emailed and safely stored on Hillary’s private server.

  • Real Life September 22, 2016 at 2:38 pm

    Driving through St George last night in the pouring rain, I lost count of how many sprinklers going full blast that I saw. Schools, churches, apartments, and houses. Why is conservation a dirty word here in Utah? Is it a “God will provide” attitude? I don’t know, but people need to pull their heads out of the ground.

    • Ron September 23, 2016 at 10:08 am

      Real Life, it is NOT the ground people need to pull their heads out of. You know where their heads are stuck up in.

    • .... September 23, 2016 at 12:42 pm

      Wow. That’s funny we drove through St George during the rain storm and didn’t see any sprinklers on. just sayin.

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