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.
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.
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.
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.
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.
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.
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.
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.
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