State board discusses financing of Lake Powell Pipeline amid recurring concerns

A meeting of the Utah’s Executive Water Finance Board concerning the financing of Lake Powell Pipeline project at Dixie State University, St. George, Utah, Sept. 17, 2018 | Photo by Mori Kessler, St. George News

ST. GEORGE – Although state funding for the Lake Powell Pipeline is mandated under state law, determining just how the state will go about it hasn’t proven easy. A governor-appointed board is commissioned with figuring this out, while also considering the impacts the cost of the pipeline could have on the people who will be expected to repay state funding.

Washington County residents and civic officials attend a meeting concerning the financing of Lake Powell Pipeline project at Dixie State University, St. George, Utah, Sept. 17, 2018 | Photo by Mori Kessler, St. George News

Issues surrounding state funds that would be used to finance the Lake Powell Pipeline and how that money – taxpayer money – would be paid back were among the topics discussed recently during a meeting of the Executive Water Finance Board at Dixie State University.

The board met in St. George earlier this week on its second visit to the area this year. Tasked with analyzing the funding and financing needs of major water infrastructure projects across the state, the Lake Powell Pipeline was again the focus of its St. George-based meeting.

Like its first visit in March, the board heard arguments for and against the pipeline, as well as reviewed various data points presented by the Washington County Conservancy District.

Read more: Fiscal impacts of Lake Powell Pipeline considered by state board as it hears public concern

The concerns surrounding the pipeline largely remained the same.

Pro-pipeline: Growth and climate change

The Washington County Water Conservancy District touts the need for the pipeline as a way meet the demand of future population growth that is projected to reach over 500,000 over the next 50 years.

According to the water district, water from the Virgin River basin and conservation practices will only be able to supply a little over half of the water needed to sustain a population of that size. The Lake Powell Pipeline, water district officials say, will be able to supply the rest.

As the Virgin River basin is the sole source of water for the county, having the pipeline will also help protect it from the impacts of climate change that can make the Virgin River less reliable, water managers claims.

Composite stock image featuring Lake Powell, Utah | St. George News

The opposition: Conservation, water waste and too costly

Conversation groups that oppose the Lake Powell Pipeline, like Conserve Southwest Utah and the Utah Rivers Council, say the county isn’t pushing water conservation enough and needs to step it up in this regard. Water district officials argue the water-use reductions conservationists demand aren’t realistic.

Washington County has also been seen as the worst water-waster in the nation with pipeline critics pointing to the per-capita water consumption by county residents being as high as 325 gallons per day. This is a large amount when compared to other cities in the Southwest like Albuquerque, which is 127 gallons per capita daily.

According to 2015 recent data quoted by the water district shows better water use, the actual number is closer to 143 gallons per capita per day for Washington County.

Read more: Washington County has decreased water use by over 1 billion gallons, officials say

Graphic courtesy of the Washington County Water Conservancy District, St. George News

In addition to claims of wasting water, opponents of the pipeline say it will cost too much to build and place a heavy financial burden on Washington County residents. They also claim the actually cost of the pipeline project, which is tentatively placed at between $1.3 billion and $1.8 billion, is closer to $3 billion or higher.

A 2015 economic study endorsed by 20 economists from the University of Utah, Utah State University and Brigham Young University predicts the proposed Lake Powell Pipeline will carry a huge price tag for current and future residents of Washington County.

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

The study claims water rates and impact fees in the county will climb as high as 678 percent and 138 percent respectively to cover the cost of the pipeline project.

Financing and repayment ideas

“We need to understand what the actual costs are,” Phil Dean, chair of the Executive Water Finance Board, said to St. George News Thursday as he reflected on points raised in Monday’s meeting.

Ron Thompson, the general manager of the Washington County Water Conservancy District, said Monday that for now, only preliminary estimates can be given until federal regulators issue a “record of decision” and the actual design of the pipeline is drawn up.

Phil Dean (left), chair of the Executive Water Finance Board, speaks to attendees at a meeting concerning the financing of Lake Powell Pipeline project at Dixie State University, St. George, Utah, Sept. 17, 2018 | Photo by Mori Kessler, St. George News

Until then, as with everyone else, the board is working off the $1.3 billion-$1.8 billion estimate.

A fund the Utah Legislature set aside to finance major water projects will only yield around $40 million by 2022 to cover the cost of a bond for the pipeline. Based on the available numbers, the state needs between $80 million and $120 million annually to cover a $1 billion-plus bond.

Options on filling the gap include increasing state sales tax, transferring money from education and transportation funds, increasing federal participation in the project and increasing local participation.

Within the water district, water rates, property taxes and impacts fees are slated to rise as a means of paying back the state. Impact fees for new residential construction, for example, are anticipated to increase from around $8,000 to $15,000 or more in coming years.

Under the funding plan proposed by the Lake Powell Pipeline Act – which was passed by the Utah Legislature in 2006 – before breaking ground on the project, the water districts involved must commit to taking 70 percent of the water they are slated to receive. They will then repay the state according to a schedule of water-block purchases, on terms to be negotiated, including interest.

A map shows the proposed route of the Lake Powell Pipeline though Southern Utah and Northern Arizona | Map courtesy of Washington County Water Conservancy District, St. George News

Over the pursuing decades, through the water-block purchases, the state is anticipated to fully recoup funds it advanced.

The act dictates that “a reasonable interest rate” be attached to the repayment plan.

A financing plan proposed by the water district would create a potential subsidy in the range of $1 billion, Dean said. This is due to future repayment of a loan from the state being done with “deflated money,” he said

As Dean explained it, the value of future dollars applied to repayment would be valued at today’s rates and not rise with inflation.

“To me, there’s clearly a subsidy taking place,” he said.

There is the possibility of applying for federal funds from the Water Infrastructure Finance and Innovation Act, Dean said. However, the pipeline project must be much further along on the federal side before that becomes a viable option.

The water finance board is expected to make its financing recommendations to Governor Gary Herbert’s office concerning the Lake Powell Pipeline and other water projects in its annual report which is expected to be submitted in a month’s time.

The proposed 140-mile long, 70-inch diameter pipeline is designed to take water from Lake Powell to Sand Hollow reservoir in Washington County. The pipeline is anticipated to bring 77 million gallons of water daily to 13 communities in Washington and Kane counties.

Email: mkessler@stgnews.com

Twitter: @MoriKessler

Copyright St. George News, SaintGeorgeUtah.com LLC, 2018, all rights reserved.

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3 Comments

  • Not_So_Much September 21, 2018 at 1:20 pm

    Odds are that with interest (funny how they want to leave that out of the numbers) the people served by the water district will pay for the 3 BILLION dollar project regardless of the number of people living here in 50 or 60 years. You, your children and their children will be paying the bill so that the current powers that be can keep boasting of the fastest growth rate in the nation. If that’s what you want then remain silent and do nothing.
    Consider the options of slower growth and better conservation with more money in your pocket then act.

  • tazzman September 21, 2018 at 2:35 pm

    We need visionaries in this county so we never hit the 500k population level. That number is thrown out as a given. We need people in office who will preserve our quality of life. The current group is dominated by developers, politicians, and business interests who see nothing more than $ signs.

  • dodgers September 22, 2018 at 8:04 am

    The pipeline seems like a terrible idea on so many fronts. And it’s kicking the can down the road, for somebody else to solve a much bigger issue. The developers see the potential $$ for their pockets by trying to create an oasis in the desert, a mini-Las Vegas. The state leadership wants the tax revenues. Left out of the equation are the residents who want to maintain the beautiful environment and way of life. And what will be the impact of the significant draining of Lake Powell, how it impacts others already relying on the source? Its the typical myopic approach by government and big business, don’t resolve the real issue; instead, make it worse and kick the can down the road. Not good for southern Utah.

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