Despite being one of the driest states in the nation, Utah is one of the largest wasters of water in the United States.
Why does this occur?
One cause is the economic incentives created by subsidizing water rates with property taxes. When water users pay a subsidized rate for water, they don’t know or feel the true cost of using that water. There is no direct connection between what a homeowner pays in property taxes and how much water they consume. With the cost so far removed from consumption, Utahns have little economic incentive to conserve water or monitor their use.
With all the buzz surrounding Utah’s population growth and future water needs, the Legislative Auditor General’s performance audit on Utah’s water needs is extremely timely. Frightening statistics projecting Utah’s water needs have been circulating, drumming up a sense of urgency for major, expensive water projects. For example, the Division of Water Resources has claimed that Utahns’ demand for water will outstrip the state’s supply in 25 years, and the cost over the next 50 years of meeting that demand will be $33 billion. As it turns out, major water projects currently proposed may not be so necessary after all, since the performance audit discovered that the data used to generate those predictions are laughably inaccurate. One Utah city’s reported water usage was actually the water used in a city in New York state with the same name. Even the Division of Water Rights, the Division of Water Resources, and the Division of Drinking Water know that the data their projections are based upon is inaccurate.
One of the performance audit’s recommendations moving forward is for the legislature to examine better water pricing models, including removing the current property tax subsidies for water rates. Such a policy would empower “consumers…to make market-based decisions.”
The Utah Taxpayers Association agrees with this recommendation and believes that until property tax subsidies for water are removed and use is reflective of true demand, the state has no accurate way of predicting how much water consumption will be required for future needs. As with other collective resources such as roads, the Utah Taxpayers Association believes that whenever possible, user fees are the best way to fund government projects.
Several western states do not use property taxes to fund water development projects. Instead, water districts in NV, AZ, CO, OR, NM, TX and CA use General Obligation bonds for major water infrastructure projects, where property taxes are pledged, but only levied in rare emergencies. Instead, repayment comes from rates and connection fees. Using this funding model in Utah would allow taxpayers to benefit from the lower interest rates of General Obligation bonds while paying for their direct use of the water.
By removing subsidized water rates in Utah, residents will modify their water consumption behavior and the state will be able to make accurate plans for future water needs. A water pricing structure that motivates Utahns to make choices about their water consumption instead of wasting one of Utah’s most precious resources is one of the most effective ways the state can prepare for future growth in the state.