Letter to the editor: There’s no such thing as a free lunch – somebody pays
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The Lake Powell Pipeline (LPP) is thrusting itself into prominence again with the issuance of a draft Environmental Impact Statement (DEIS) by the Bureau of Reclamation. The LPP has faded in and out of public notice for a long time, but it has not gone away. Now is the time to assess where we are and where we are going. The financing of the project is faulty and the need is questionable. These problems are compounded by climate change and the present pandemic.
The LPP was initially proposed at just under $1 billion. Estimates are now over $3 billion. How will this be paid for? The true cost can be camouflaged. Economists are fond of saying “there is no such thing as a free lunch”. Financing the LPP requires untenable demands on Washington County residents and subsidies by Utah taxpayers.
The LPP Development Act (2006) mandates the entire project cost be repaid to the State of Utah with interest. In 2015 economists from the University of Utah, Brigham Young University, and Utah State University conducted an analysis of the repayment obligations of the Washington County Water Conservancy District (WCWCD) and residents of Washington County under this law. Some things have changed since that analysis: Kane County dropped out leaving WCWCD as the only participant in the LPP, and power generation from pumped storage has been abandoned as not cost effective. Nonetheless, the conclusions of the analysis documenting the interrelations of the repayment methods and the requisite debt servicing remain valid. The analysis concluded that unless the District substantially increases water rates, impact fees, and/or other revenues, LPP debt will not be repaid at the end of the 50-year loan period.
WCWCD is allowed to defer payment until the water is received. Development costs prior to the receipt of the water are fronted by the state. Any servicing of the debt not paid by Washington County will be paid by Utah taxpayers.
In 2016 the Legislature set up a Water Infrastructure Restricted Account for the “development of the State’s undeveloped share of the Bear and Colorado Rivers”, appropriated $5 million to go into the account, and directed a portion of sales tax revenue to go into that account, which currently has nearly $40 million.
Project need is justified by several unreasonable assumptions.
The 2015 Legislative Audit of the Division of Water Resources found that WCWCD underestimated the availability of alternative water sources in Washington County. Higher than projected local availability of water undermines the claims of water need from other sources.
Some conservation is built into WCWCD’s projections, but much more is possible. Washington County’s per capita water consumption substantially exceeds levels in comparable locations. Consumer response to higher prices and impact fees is ignored.
WCWCD assumes that St. George’s rapid population growth will continue, but the growth rate is declining and may decline further because of the pandemic. Washington County is a local hotspot for the virus, and effects of the pandemic are likely to be long-term. The impact on the real estate market has already been substantial.
The availability of water from Lake Powell is uncertain because of earlier erroneous projections exacerbated by climate change, making the decision to invest in Lake Powell water risky at best. If water is not available in Lake Powell, none can be pumped.
The dubious financing of the LPP and the overstated need for the water, exacerbated by climate change and the pandemic, should all lead Utah tax payers to question it. The DEIS gives us an opportunity.
– Gail Blattenberger
Gail Blattenberger is an Associate Professor Emerita from the Economics Department at the University of Utah. She has been involved in water issues in Utah for a long time.