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

Lake Powell as seen from space. An economic study predicts that a proposed pipeline from Lake Powell to Washington County will trigger massive water rate increases, Lake Powell, Utah, undated | Photo courtesy of NASA, St. George News

ST. GEORGE  – A study endorsed by 20 economists from three major Utah universities predicts the proposed Lake Powell Pipeline will carry a huge price tag for current and future residents of Washington County.

Map of proposed Lake Powell Pipeline | Image courtesy of Washington County Water Conservancy District, St. George News | Click on image to enlarge
Map of the proposed Lake Powell Pipeline | Image courtesy of Washington County Water Conservancy District, St. George News | Click on image to enlarge

The controversial pipeline would incur debt as high as $781 each year for every man, woman and child in Washington County, the study says, the repayment of which would require extreme increases in water prices, impact fees or both.

The analysis was conducted by Gabriel Lozada and Gail Blattenberger, both professors of economics at the University of Utah, and was endorsed by 19 other economists from the University of Utah, Utah State University and Brigham Young University.

The study was sent to Gov. Gary Herbert, Utah State Senate President Wayne Niederhauser and Utah House of Representatives Speaker Gregory Hughes Oct. 26 and was based on figures from the Lake Powell Pipeline preliminary application documents, the Water District’s financial statements and other public documents.

The proposed 139-mile Lake Powell pipeline would carry up to 86,000 acre-feet of water from Lake Powell to Washington and Kane counties. The pipeline’s cost is estimated at $1.4 billion to $1.8 billion in 2012 dollars – none of the figures have been adjusted for inflation.

The study lays out a scenario in which impact fees would need to be raised by as much as 138 percent to an average of $14,514 per connection in addition to existing impact fees. Water rates could increase as much as 678 percent.

According to the analysis, Washington County Water Conservancy District could raise the funds needed to pay for the pipeline in three ways: raising water rates; raising impact fees; or selling 1,200 acres of property the district owns, which it values at up to $125,000 an acre – a one-time sum of $150 million.

While the idea of using impact fees to put the burden on future residents is an attractive one, higher impact fees actually affect everyone, Lozada said.

What an impact fee actually does is it decreases the value of real estate in St. George,” Lozada said. “So although on the surface it appears as if impact fees are only paid by newcomers, actually the impact fee has the economic effect of depressing the value of real estate everywhere in St. George for all landowners.”

Raising water rates is equally problematic, Lozada said. One thing the district’s analysis didn’t take into account is that higher prices drive down demand. Major water rate increases would reduce the need for additional water, Lozada said.

“Prices would have to go up so much that the demand for water would fall so much, there’d be little or no demand for the water that the pipeline would carry,” he said.

Pay as you go?

The Water District will follow the financing terms specified in the Lake Powell Pipeline Development Act of 2006, district spokeswoman Karry Rathje said in an emailed response.

The district will pay for the water in blocks as it is needed and used. It’s a series of smaller repayments with interest rather than a single loan, Rathje said, and most blocks will have a 50-year repayment.

“For example, if we contract to use block A in 2025, we have until 2075 to repay that block,” she said. “If we contract to use block B in 2030, we have until 2080 to repay that block.”

However, even under the “pay as you go” plan, operation and maintenance costs are not addressed, Lozada said. These costs must be paid annually regardless of when the water is used.

The result would be either ballooning debt for the county due to accumulating interest costs or an almost 50-year interest-free loan from Utah taxpayers, potentially totaling billions of dollars, Lozada said.

“Either Utah taxpayers are about to be ripped off for billions of dollars, or Washington County residents are about to pay through the nose in increased water rates, impact fees and property taxes,” Utah Rivers Council Director Zach Frankel said.

“If the state has a repayment model that explains how to avoid one of those two options, then they need to make it publicly available to all taxpayers,” he added.

The Utah Division of Water Resources was appointed to manage the Lake Powell Pipeline Development by the Utah Legislature in the Lake Powell Pipeline Development Act, Rathje said. It’s a state project, not a district project.

But Lozada said he wonders why the state needs to finance the pipeline in the first place.

“If it really were going to be easy for Washington and Kane counties to pay the cost of the pipeline, why does the district need the state to be involved in the first place?” Lozada said. “If it were really possible to pay it back, then I’m not sure why the district hasn’t just bonded (for the project) all by itself.”

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21 Comments

  • BIG GUY November 12, 2015 at 5:46 am

    I have consistently opposed the pipeline and I’m pleased to see an objective economic analysis support what common sense says is a colossal boondoggle. How can the citizens of southern Utah expect to pay $1.5 billion plus decades of interest on the loan without massive rate increases? Prohibitive impact fees on new building lots will drastically shrink the amount of new home and building construction, leaving today’s water rate payers holding the bag. It’s time to stop this turkey in its tracks.

    • Bender November 12, 2015 at 10:17 am

      If you didn’t vote for Paul Van Dam last fall BIG GUY, then you’re just blathering here. We had the opportunity to elect a mature, experienced and reasonable voice to the county commission. You keep pulling the R lever for county commissioner and you’ll get the pipeline shoved down your throat.

  • Brian November 12, 2015 at 8:03 am

    Everything about the Powell Pipeline stinks on ice. The process has been fraught with deception and misdirection, tone-deafness and bullying. I don’t trust the people pushing it AT ALL. Add to that the likelihood that by the time it gets built Lake Powell will be the size of a puddle and I think the entire thing should be abandoned.

    • SteveSGU November 13, 2015 at 9:58 am

      None of us trust them. And Ron Thompson used to live a block away from me. We need to demand that our government listens to us.

  • Chris November 12, 2015 at 8:42 am

    This objective study was conducted by credentialed academics with no axe to grind, other than a desire to seek the greater good for the state. Jeremy Aguayo, who conducted Ron Thompson’s study, was given the explicit task of making the case FOR the pipeline with absolutely no objectivity whatsoever. So, who should we believe? DEATH TO THE PIPELINE!

    • Bender November 12, 2015 at 1:28 pm

      Agreed Chris. Aguero, a law school graduate, is the principal in a Las Vegas consultancy paid, with your tax dollars/water fees, to make the case for the Pipeline by another lawyer, Big Ron Thompson.

      http://www.appliedanalysis.com/our-team.php

  • Chris November 12, 2015 at 8:50 am

    Another point–
    In a state that prides itself on conservative politics, how do our leaders justify backing a massive public works project that will inevitably have massive cost overruns? If the economic realities favor the pipeline, as Ron Thompson and his minions would have us believe, than why should we not leave this to the private sector to fund and to build? It is quite obvious that we, the current residents of this region, will foot the bill for making our population four or five times its current level with all the problems and lessened quality of life that will inevitably result from such growth. DEATH TO THE PIPELINE!

    • Chris November 12, 2015 at 8:58 am

      spelling police–
      “then” not “than”
      sorry

  • tcrider November 12, 2015 at 9:47 am

    What is not covered in this article, is the fact that if Saint George keeps growing at the rate that it is, the current water source will not be able to keep up with it.
    You then start throwing in soccer field development, like sullivan park, in order draw more people into our economy, it is going to snowball, or keep getting bigger.
    The real culprit here, is for the need for more water, in order to fuel growth for the development companies.
    How about having the developers start flipping the bill for future water demand? They are the ones who are benefitting the most.
    The bottom line, in the end I bet it will cost less than 250.00 per person to pipe the water, it sounds like the state is trying to coordinate the project, and if they worked to maybe start selling some of that blm land, it would be a start.
    This news article sounds like a ploy from a anti pipe lobbyist and special interest group.

    • Bender November 12, 2015 at 1:07 pm

      tcrider, We, in Washington County, use three times the amount of water per person as the population of Phoenix does. With current water supplies, conversion of farm land to residential, and untapped local water sources we could grown to 5x our current population — 750,000. At that point we _might_ be able to afford a pipeline to Lake Powell.

      • tcrider November 12, 2015 at 8:26 pm

        Bender its a pleasure to get a response with some stats and even a projected solution, instead of some of the other blabbing as seen in the other mesages.
        I have spoken with other people around here that seem pretty informed of the water situation, but I do not know how many people the water resources could supply for sure, and that really seems like the million dollar question.
        take care, tc

      • SteveSGU November 13, 2015 at 9:55 am

        And we WANT to grow to 750,000 people? That would ruin the Utah’s Dixie life for all of us.

  • Bender November 12, 2015 at 10:13 am

    Attention Washington County Citizens: You’ll take our pipeline and you’ll like it. Issue settled.
    .
    sincerely,
    Washington County Republican Party Leadership, Ron Thompson, Washington County Commissioners.

    • Chris November 12, 2015 at 11:47 am

      I find it amazing that not one elected official in Washington County supports the idea of putting the pipeline to a vote. If we are going to be put on the hook for this ridiculous government intrusion into our economy, then we, the taxpayers, should get a say.

    • Bubbasheepherder November 12, 2015 at 12:40 pm

      You mean like the Democratic lever pull of Obamacare that is failing? Issue settled.

  • wilbur November 12, 2015 at 12:40 pm

    20 independent economists a ploy? Really? Did you read about increased impact fees developers would have to pass on to new property owners? Increased water rate and bond taxes for the rest of us? You sound like a “special interest” group; how’s the view up there in the Taj Mahal anyway?

  • Real Life November 12, 2015 at 2:21 pm

    GREED. The real reason for a pipeline.

  • fun bag November 12, 2015 at 5:19 pm

    the ‘big dogs’ of local and state mormon gov’t have decided to build the pipe, so it will be built, no matter how much whining we do on this message board or anywhere else. Expect property taxes to go up several hundred dollars for the average person. Golf courses will continue to get water nearly free as they always have. there’ll be an impact fee hike and maybe even a sales tax hike. After it’s all said and done they can blame it on obama or the next “liberal” in office, and if you don’t like it you can always leave.

  • beacon November 13, 2015 at 8:44 am

    The real elephant in the room is this. What will these growth-at-any-cost folks do (or rather, what will their children and grandchildren do!) when the area grows to a million people with the pipeline water (entirely conceivable but scary!) and THEN they run out of water? Because, folks, with the make the desert bloom attitude here they will go through that water and again have to face reality, which they are unwilling to face how. They have the chance of taking the bit now and doing what’s needed to conserve, use local resources and preserve this area rather than encouraging rampant growth. Yes,”encourage” – not manage. They encourage it.

  • Scorch November 13, 2015 at 7:41 pm

    From what I’ve seen, the truth is somewhere between the nay sayers and Ron Thompson regarding the pipeline.

  • utahdiablo April 6, 2017 at 8:34 pm

    And you all don’t see the endless home building going on everywhere here in southetn Utah now in 2017? Just wait until the downturn later this year, going to be epic….just be sure to sell before you home gets saddled with the property tax increase for the water / lake powell pipeline

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