Utah Panel: Don't Use Property Tax to Fund Water Projects

November 19, 2002

The Utah state Tax Review Commission recommended that the use of property taxes for financing water projects should be reduced or eliminated. The commission, which advises the governor and lawmakers on tax policy, voted to recommend that the state eliminate the authority of larger cities and water districts to levy property taxes.

"There is a consensus that we want to move away from property taxes as a vehicle [to pay for water]," said commission member Larry Barusch.

Environmentalists, who have been working for several years to end tax subsidies for water, applauded the move.

Some of the state's most prominent economists, along with Utah Gov. Mike Leavitt, have argued that property taxes are an inequitable way to pay for water development and delivery. The taxes also keep the price of water artificially low, discouraging users from cutting back.

The Utah Rivers Council released a study showing that while all of Utah's major water districts rely on property tax, only 22 percent of other western urban water suppliers levy taxes.

If property taxes were removed, water rates likely would rise to compensate for the loss of tax revenue. As a result, water usage would decrease, as would the need to build more dams, pipelines and water treatment plants, Frankel said.

Water district officials could not be reached for comment Friday afternoon but they have generally resisted efforts to remove property taxes. They say taxes provide a steady income stream and improve their bond ratings, thereby lowering interest rates.

As the Tax Review Commission recommended against taxes, a state task force charged with finding alternative ways to finance water projects decided to recommend the state should stick with taxes. The task force, which was supposed to find alternatives to a one-sixteenth percent sales tax levy for water projects, recommended that the tax remain in place. It also recommended against removing property taxes as a funding source.

"The bottom line is, the system is working pretty darn good for water funding," said Sen. Leonard Blackham, R-Moroni, who co-chairs the task force.

When they meet in January, lawmakers may decide to shift the one-sixteenth sales tax to education or other pressing issues expected for a tight budget year. During a special legislative session in July, Leavitt tried to do just that but was rebuffed.

If the governor succeeds in shifting the tax in January, the task force recommends that water projects be funded by a variety of sources. Among them:

* Surcharges on metered water sales, watercraft licenses, waterfowl hunting and fishing licenses, admissions at state parks on reservoirs and on golfing fees.

* Surcharges on excessive use of water during the summer months.

Frankel criticized the task force -- comprising legislators and members of Utah Gov. Mike Leavitt's administration -- for not recommending an end to taxation for water development but said he was not surprised because the subcommittee on alternatives is made up mostly of officials from large water districts that levy taxes.

"Asking water suppliers collecting taxes if we should remove these taxes is like asking Chicken Little whether the sky is falling," Frankel said.

Despite the task force's continued support of taxation, some lawmakers on the panel finally appear to be talking seriously about the need to save water.

In an unexpected departure from its original mission, the task force voted Friday to draft a conservation bill for the next Legislature.

To date, there is no legislative mandate for water conservation.

Although it is too early to predict what form the conservation bill will take, Blackham said it would likely involve "gentle encouragement" to promote public education about conservation, tiered water rates to discourage water waste and water-wise landscaping ordinances.

The bill will be drafted with the help of Ron Thompson, manager of the Washington County Water Conservancy District.

Discussion on a water conservation bill comes about a month after David Ovard, general manager of the Jordan Valley Water Conservancy District, criticized the Legislature's lack of leadership on water conservation.

"There is a potential to save $1 billion by getting people to use less water," Ovard. "That is certainly in the interest of the whole state."

Frankel, however, was skeptical of the task force's resolve on meaningful conservation legislation, given that it failed to recommend any changes to the current system of financing water projects.

The task force is expected to consider a water conservation bill in its next meeting in early January.

Source:

Salt Lake Tribune

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