Interim panel wonders how funding for $1B project would be repaid.
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Financial estimates indicating that paying off the proposed Lake Powell pipeline would require almost a fourfold increase in water district revenue appear to have drained the project's momentum with state lawmakers at least for now.
The Revenue and Taxation Interim Committee again put on hold proposed legislation Wednesday that would provide loans to water districts in Utah based on a 15 percent earmark of future growth in state sales-tax revenues.
The proposed 129-mile Lake Powell pipeline to St. George is only one of 16 projects that have already been identified by water conservancy districts that could use the taxpayer-funded loans, according to the bill's sponsor, Rep. Patrick Painter, R-Nephi.
But the Powell project is massive, with an estimated price tag hovering around $1 billion, and that seems to be the sticking point. Questions about how the Washington County Water Conservancy District could ever repay taxpayers, or banks, for the loan are getting the attention of lawmakers.
"Why can't it be paid 100 percent with user fees?" asked Rep. John Dougall, R-Highland, posing perhaps the toughest question since Painter's proposal sailed through the state Water Development Commission in September. The legislation hit a wall before the Revenue and Taxation Interim Committee the next day, when Sen. Howard Stephenson, R-Draper, asked that research be done to see if the projects can be funded by private parties instead of taxpayers.
As the committee took up the proposal again Wednesday, two experts on bonding sat with Painter in front of the panel but failed to answer questions on the best way to go about funding projects without putting the burden on taxpayers.
There was no motion made and no indication of when the committee would address the legislation again, but Painter offered to make another attempt.
"Would the committee like me to get with my posse and mess with this and bring some ideas back?" he asked. "If that is what we have to do, I'm very happy to regroup and throw some of these ideas into the mix."
Christi Wedig, of Citizens for Dixie's Future, applauded the hold on the legislation, saying her Washington County group has been asking to see a solid business plan on funding for the Lake Powell pipeline for 18 months.
Although they were not in attendance, economics professors from three Utah universities and the retired director of the Property Tax Division of the Utah State Tax Commission sent a letter to the commission before the meeting. It had an impact. Stephenson referenced the letter as bringing up valid concerns.
"Analysis of available information on Washington County Water District finances and of the repayment scenarios presented by the Division of Water Resources leads me to question the viability of the financing of this project," University of Utah economics professor Gail Blattenberger said in a prepared statement.
The concern is based on research that shows the Washington County Water District produces $10 million in annual revenue, while the annual debt payments on a loan approaching $1 billion would be $47 million.
That translates into needing a 370 percent increase in revenues to make payments in the pipeline project alone.
Wedig, who reiterated that recent population projection estimates for Washington County show no need for the water that would flow through the pipeline, wonders how that revenue would be realized.
The most likely scenario, and one supported by committee members Wednesday, is that users of the water foot the bill.
One plan was to increase the impact fee for new homes and put a $20,000 price tag on connecting the residence to the water line.
"The cost of building a new home would increase $20,000 with no added value to the house. That is troublesome," Wedig said. "And that was when the estimated costs of the pipeline were a third of what they are now."
The additional cost could hinder development, which would reduce possible revenue and diminish the need for water.
"It is simple economics: An increase in housing costs decreases the ability for people to move in, and the demand is no longer there," Wedig said. "If that growth doesn't occur, how will Washington County pay its debts?"