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Project on Factual Disclosure Taxpayer Association of Kane County P.O. Box 21 Kanab Utah 84741
THE LAKE POWELL PIPELINE UPDATE
Lake Powell Pipeline Quick-Facts
x� First proposed in 1995 x� Lake Powell Pipeline Development Act passed in 2006 x� Would span 139 miles from Lake Powell to Washington County x� Would pump about 86,000 acre feet of water x� Would serve Washington and Kane Counties x� Costs have increased from $187 million to $1.06—$3.2 billion x� No Federal funding is available for this project x� Would increase water rates, property taxes, and impact fees x� Two economic studies found the project to be unaffordable x� Two legislative attempts to tax all Utahns have failed x� Will only serve two rural counties or 5% of UT population x� Data used to justify this pipeline is unreliable x� Lake Powell is an unreliable water source x� Local water sources make the LPP unnecessary
© Copyright by the Taxpayer Associa on of Kane County. TPAKC encourages quota on and reprin ng of any of the material contained in this newsle er, provided TPAKC is credited.
Here Are the Facts Not Being Shared By Promoters of the Lake Powell Pipeline
The LPP Update provides a wealth of information indicating that this multibillion dollar pipe-line proposal is unaffordable, unreliable, and unnecessary.
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The Project on Factual Disclosure is a nonpartisan watchdog that champions wise government decision-making by distributing facts on projects that impact Utah taxpayers.
In 1995, the idea of a pipeline to carry water from the Colorado River to Washington County in SW Utah sounded good, but a er years of planning, major obstacles plague the project. Despite aggressive promo on by the Utah Division of Water Resources (UDWR) and Washington County Water Conservancy District (WCWCD), key ques ons remain.
The majority of local residents and non-governmental commenters at the July 2013 St. George public mee ng were skep cal and unsuppor ve of the project. Is this costly pipeline worth the expense? Can the Lake Powell Pipeline (LPP) even deliver what is being promised? Will this project “stand the test of me”?
Escala ng Cost Es mates Since 1995, the projected cost of the Lake Powell Pipeline has increased by 570-1710% from the ini al es mate of $187 million to a current es mate of between $1.06 - $3.2 billion, depending on which design features are incorporated . (Ref 1) These es mates do not include financing costs.
The expense of carrying this amount of debt into the Twenty-Second Century increases the overall price tag of the proposed pipeline
tremendously. For instance, Nevada’s proposed Snake Valley Pipeline (twice as long and slightly bigger) started at $1 billion and was recently es mated with interest costs at $15.5 billion! (Ref 2) The per-mile cost comes to around $56,000,000. If that same cost is applied to the proposed 139-mile LPP, the cost with financing could come to $7.7 billion!
Federal Money Won’t Help The proposed LPP project will not receive Federal funding. The result is that a rela vely small number of water users and the State of Utah would have to shoulder the burden of billions of dollars of debt.
The Central Utah Project (CUP) has been built with Federal funding. The cost of the CUP, over its fairly tumultuous history, has increased from an ini al $1.7 billion to approximately $3 billion. (Ref 3) In fact, Governor Herbert recently approached the Federal government asking for more money to pay for the Central Utah Project. (Ref 4) Without Federal funding can Utah afford the LPP?
The LPP Development Act The Lake Powell Pipeline Development Act of 2006 describes how the construc on cost of the proposed pipeline will be paid. The
funding and payback provisions are located at Utah Code Annotated 73-28-401-405. (Ref 5) The Lake Powell Pipeline repayment plan states that water districts may take from fi y to nearly one hundred years to repay pre-construc on and construc on costs, depending on when they contract for and receive water.
Originally it was planned that Washington, Kane, and Iron Coun es would buy into the pipeline, but this is no longer the case. Currently, only the Washington and Kane County Water Conservancy Districts are willing to commit to this costly pipeline project.
According to the LPP Development Act, the coun es must commit to take 70% of the water. They do not have to pay un l they actually take the water. Will the State of Utah have to carry the debt to construct the pipeline for years un l the coun es actually take their share of the water? Will all Utah taxpayers be on the hook for the LPP?
Failed Financing A empts In 2012 and 2013 there were two legisla ve a empts to have all Utah taxpayers cover the cost of the LPP project through the state sales tax. Had this legisla on passed, less money would be available for State government and public services
Lake Powell Pipeline A costly plan that doesn’t add up After years of planning and promotion, can or should this expensive pipeline be built? The LPP Update explores issues critical to the future of Utah.
PROJECT ON FACTUAL DISCLOSURE
Volume I, Number 1: Spring - Summer 2014 Project on Factual Disclosure - The Taxpayer Association of Kane County
THE LPP UPDATE
throughout Utah. Perhaps there would be an increase in sales tax rates for everyone. State legislators have wisely rejected these backdoor a empts to finance the LPP out of the pockets all Utahns.
The Washington County Water Conservancy District has proposed a number of different financing scenarios to keep the project afloat. The latest scenario is to stretch the repayment for the LPP to 90 years. This is a financial prac ce that is seldom if ever used to fund any type of private or public project. The serious risks associated with a 90-year repayment period are discussed in other sec ons of this LPP Update.
An Unaffordable Project Two separate economic studies have concluded that the pipeline will be unaffordable for Washington and Kane Coun es.
The 2012 Washington County economic study, Financial Analysis of Possible Repayment for Proposed Lake Powell Pipeline, was completed by eleven university economic professors and presented to the Utah legislature. (Ref 6) This study confirmed that if payback occurred over a 50-year period, then the yearly obliga on for Washington County would be between $37,660,000 and $70,210,000, depending upon the rate of interest (3-7%). The economists also pointed out that the Washington County Water Conservancy District only earned a net income of $10,275,000 in 2011. Where will all the extra money come from?
The 2013 Kane County study en tled Lake Powell Pipeline Feasibility for Kane County Water District, was sent to Governor Herbert with the signatures of 19 notable Utah economists. It concluded that Kane County's 5.5% share of the pipeline would cost $2.5 million dollars a year
for 50 years. (Ref 7) The cost of the proposed LPP would mean an addi onal annual expense of $344 for every man, woman, and child in Kane County.
If the water users in Washington and Kane Coun es cannot pay for the pipeline, then who would be required to sa sfy the huge debt needed for this proposed pipeline?
Utah Le Holding the Bag The LPP Development Act makes it clear that county water users will be required to pay for the pipeline, yet who is the real holder of this mul -billion dollar debt? In fact, the State of Utah will be required to issue the bonds to build the pipeline. While the
two county water districts may have 90 years to pay their indebtedness, the State will not.
Normally state bonds are issued for periods much shorter than the current 90-year LPP repayment plan. A series of state bonds will have to be issued over many decades to sa sfy this huge debt. The State would act as a long-term creditor to Washington and Kane Coun es, while hoping that enough water users and money will materialize to repay the money owed.
Uncertainty over interest rates and the ability of two largely-rural coun es to pay the ongoing cost of the proposed LPP into the Twenty-Second Century are serious concerns. Will the two coun es go bankrupt, or be forced to reduce funding for other essen al needs? Will they a empt to raise taxes on the large scale necessary to pay for the LPP?
If or when the water users of Washington and Kane Coun es are unable to pay, will the State of Utah need to step in to cover the default in order to rescue our State's credit ra ng? Is the solvency of the State of Utah worth risking for this uncertain
water project?
LPP Unnecessary Is the pipeline needed? This is a huge ques on. Utah has the cheapest water and the highest gallons per capita per day (gpcd) usage of desert ci es. (Ref 8) Large amounts of agricultural water have been converted for local use as popula ons have grown throughout Utah. The 2008 and 2011 Water Needs Assessments by the State included only minimal amounts of converted agricultural water (10,080af and 12,400af) for Washington County. (Ref 9 & 10) It appears that much more water is actually available than is being disclosed.
Annually, approximately 60,000 acre feet of agricultural water are available in Washington County for approximately 13,000 acres of irrigated land. Much of this water can eventually be converted to M&I use (municipal and industrial) as Washington County grows. The 2013 Water-Related Land Use Inventory of the State of Utah presents current data on the balance of agricultural and urban water use. (Ref 11) Converted agricultural water can be used to support the future of Washington County at a much lower cost than the mul -billion dollar LPP.
Water experts o en state that it is significantly less expensive to use local sources of water than to transport it from far away via pumps and a pipeline. The Local Waters Alterna ve to The Lake Powell Pipeline produced by Western Resource Advocates outlines a number of steps that can be taken to provide affordable local water for the future of Washington County. (Ref 8) Water conserva on, water reuse and agricultural water transfers make the LPP unnecessary for many decades – if at all.
A recently published ra ng report states that Washington County has 300,000 acre feet of available water. (Ref 12) This published increase in the local water supply more than compensates for any water that would
Two separate economic studies have concluded that the pipeline will be unaffordable for Washington and Kane Coun es.
2 The LPP Update | Spring - Summer 2014
be supplied by the proposed LPP for future growth. A Financial Drain The planning for the LPP has already cost Utahns approximately $25 million dollars through the imposi on of a sales tax on all taxable goods. (Ref 13) Add to this the ongoing expense of consultants hired by the WCWCD to promote the pipeline at a cost of over $330,000 over the past few years. (Ref 14) Is this level of spending on such an expensive and risky project a wise alloca on of public funds? Why are all the families and businesses of Utah paying a statewide sales tax for a pipeline that will only serve Washington and Kane Coun es?
Iron County Said "No" In March 2012, the Iron County Water Conservancy District voted to end their par cipa on in the LPP project. A Salt Lake Tribune ar cle states, "Iron County conservancy district Chairman Brent Hunter detailed how through conserva on, development of other resources and projects to recharge aquifers, future demands for water can be sa sfied at a frac on of the pipeline's cost." (Ref 15)
So Much for So Few Never in Utah’s history has so much money been asked to benefit so few people. The promoters of the LPP have a empted to ask all the taxpayers of Utah to take on a mul -billion dollar debt that will extend into the Twenty-Second Century for a pipeline that will only serve 2 of our 29 coun es. Does it make sense to invest this much money at the expense of Utah's families and businesses for a water project that will serve only 5.3% of Utah's current popula on… a pipeline that is not even necessary? (Ref 16)
The Test of Time The uncertain es associated with the LPP make it a very risky project. Prolonged drought in the Colorado River watershed may prevent the
pipeline from delivering the water. Quagga mussels, for which there is no current “approved” remedy other than chemical treatment (more treatment costs for LPP water), may clog and disable the pipeline. Inaccurate projec ons of popula on, water availability and water use may mean that the pipeline will never be needed.
The risk of interest rate increases and default by Washington/Kane Coun es presents a financial me bomb for the State of Utah. There is no way of knowing what the true cost of this debt would be. By the me we reach the Twenty-Second Century, Utah will have needed the money allocated to the LPP for more pressing and important projects than a pipeline delivering water to only two coun es.
Planning for the LPP con nues. A revised water needs assessment is underway. Submi al of the licensing applica on for the LPP is planned for Fall of 2015. The preferred pipeline route has been challenged by Na ve American tribal interests requiring more study and more tax money to be spent. At some point, the WCWCD will show the actual numbers suppor ng their latest a empt to finance the project.
There is no reason to assume that Utah can or should take on the tremendous debt of this pipeline project. Given the wide array of uncertain es, there is no reason to believe that the proposed Lake Powell pipeline would survive the test of me into the Twenty-Second Century. ………………………………………….. 1. h p://www.wcwcd.org/downloads/projects/
proposed-projects/lake%20powell%20pipeline/technical%20reports/10%20Dra %20Socioeconomic-WaterResources%20Study%20Report%20031011.pdf
2. h p://www.blm.gov/pgdata/etc/medialib/blm/nv/groundwater_development/snwa/newsle ers0.Par.23340.File.dat/Newsle er%209.pdf
3. h p://le.utah.gov/audit/99_04rpt.pdf and h p://www.cupcao.gov/faq.html
4. h p://www.sltrib.com/sltrib/poli cs/57592500-90/herbert-obama-drought-states.html.csp
5. h p://www.water.utah.gov/lakepowellpipeline/WordDoc's/LPPDevelopementAct.pdf
6. h p://ci zensfordixie.org/wp-content/uploads/2011/11/LPP-economists-le er-repayment.pdf
7. h p://www.riversimulator.org/Resources/Pipelines/LakePowellPipelineEconomicAnalysisOctober2013.pdf
8. h p://www.westernresourceadvocates.org/water/pdf/altlakepowellreport.pdf
9. h p://www.water.utah.gov/LakePowellpipeline/ProjectUpdates/WNA_PhaseIFinalDra _19Aug2008.pdf
10. h p://www.wcwcd.org/downloads/projects/proposed-projects/lake%20powell%20pipeline/technical%20reports/19Dra WaterNeedsAssessmentReport.pdf
11. h p://water.utah.gov/planning/landuse/StatewideSummary2005_2010Final.pdf
12. h p://www.stgeorgeutah.com/news/archive/2014/02/02/washington-county-water-conservancy-district/
13. h p://www.thespectrum.com/ar cle/20140320/NEWS01/303200032/Pipeline-project-studies-con nue?nclick_check=1
14. Data Received from WCWCD by GRAMA Request
15. h p://www.sltrib.com/sltrib/news/53775883-78/county-pipeline-project-conservancy.html.csp
16. h p://quickfacts.census.gov/qfd/states/49000.html
………………………………………….. Future issues of the LPP Update will explore these topics in greater detail, and present the informa on not being addressed by promoters of the pipeline. Please share the LPP Update with your friends and colleagues. Sign up to receive the email version of the LPP Update by emailing [email protected] Contributors to this issue of the LPP Update: Paul Van Dam - Candidate for Washington County Commission; Re red A orney General of Utah [email protected] Lisa Rutherford - Re red 20-year oil company employee; Writer, St. George Spectrum [email protected]
Dr. Sky Chaney - President, Taxpayer Associa on of Kane County [email protected]
www.tpakanecounty.org 3
