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.
“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.
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.”
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.
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.”
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.
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