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.
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.”
- 2015 Lake Powell Pipeline Economic Feasibility Analysis
- Lake Powell Pipeline Development Act of 2006
- Utah Rivers Council statement
- Citizens for Dixie’s Future Lake Powell Pipeline Web page
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