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The Hinckley Journal of Politics

harmful impacts. They claim explicitly these property taxes lead to water waste. “By subsidizing the price of water, people overuse, or ‘waste,’ water” (Reynolds et al., 2012, 2). In 2012, 51% of Washington County Water Conservancy District’s (WCD) revenue was property tax, and residents of St. George used over 900 gallons every single day of July, paying the subsidized rate of $1.11 (Reynolds et al., 2012, 2). They then remind the reader that this contrasts sharply with the higher rates and lower consumption throughout the West (Reynolds et al., 2012, 2). This waste disproportionately affects certain Utah populations in turn. In another fiscally conservative irony, private home and business owners end up paying for public water waste. “The property taxes paid by homeowners and businesses subsidize large lot landowners to use water…which pay no property taxes and therefore pay far less than the full cost of their water use” (Reynolds et al., 2012, 2). These policies force working class Utahns to pay for the water use of wealthy individuals and institutions. “Since roughly 70% of Utah’s urban water use occurs outside the home during summer months…lower income residents use much less water (per capita) than richer residents” because they tend to live in smaller homes in which spending on outdoor water is not a financial priority (Reynolds et al., 2012, 2). Since the property tax rate is the same regardless of water use, this means those with less means subsidize the high water use of the Utah residents and institutions that can afford it (Utah Rivers Council, 2014, 7). Taxpayer money is not used fairly, the most economically, or in the best interest of the people of Utah. This property tax subsidy of water wastes financial resources as well as water. Of particular relevance to this study is the tax’s role in promoting large capital projects and public indebtedness. After reducing the retail price of water and therefore increasing water use, the property tax results in massive water development to continue to fuel it. “This high water use is often the justification for expensive capital projects, such as the proposed Lake Powell Pipeline” (Reynolds et al., 2012,1). The proposal of this pipeline directly implicates St. George’s high water use. “Demand projections that are used to justify capital expenditures are based on this waste” (Utah Rivers Council, 2001, 3). This means that the taxpayer monies being collected for water use are being wasted as well, and leads to the state incurring more debt for Utah residents to pay off. The economists cited above pointed out “Utah is at or near its constitutionally-mandated ceiling of indebtedness” and issuing more debt is distinctly fiscally irresponsible (Reynolds et al., 2012,1). The need for more large water projects, as argued by the state government and water districts, is the result of their tax collecting. It enables even more inefficiency as it provides more water to be wasted rather than distributing the cost directly to the consumer. The property tax also prevents viable alternative sources of water from being developed. Alternative sources aren’t competitive because they cost more than the subsidized price of water will support. Surplus agricultural water, water reuse, secondary water, gray water, reclaimed water, and other water sources are frequently used in communities outside Utah…[but] have not been implemented in the Salt Lake Valley because the price of these sources is greater than subsidized water rates. (Utah Rivers Council, 2001, 4) Dr. Gardner agrees, explaining that a consequence of removing the tax would be “these water consumers will support politically only the construction of projects that are economically feasible—where expected project benefits are at least equal to project costs” (2012, 229). While without the property tax, water demand would be lower and conserva-

2017

tive expansion of the supply could be paid for as needed, the higher demand and lack of funds for expansion gives the districts the tools they need to ask for state spending on large water projects. This begs the question why, when so ineffectual economically and environmentally, is this policy still in place? The recipients of this tax money, the water districts and the developers they work with, are politically entrenched. They actively use a portion of this money to lobby for keeping the property tax in place and to acquire funding for the capital projects it supports. Utah Rivers Council points to “virtually all the opposition to phasing out property taxes for water comes almost entirely from those water agencies who receive” them, and that “it’s not uncommon for revenues to be used for marketing campaigns and lobbying contracts” (2014, 1-2). Gardner agrees once more: The fundamental water problem in Utah (and other Western states) is not that existing supplies will prove to be inadequate to meet increasing future demands. This is a fallacy artificially induced by failing to regard water as an economic good like most other goods. The basic problem is that pricing policy has been infected and distorted by political favors in the form of subsidies and concessions to differ ent interest groups. Using property taxes as a revenue substitute for direct water prices is one such example. So many water “problems” could be solved if this commodity were priced at the level required to cover supply costs and equate supply and demand. (2012, 245) The chief water problem to be interrogated here is the connection to big spending on destructive water projects while more ecologically and economically minded options are ignored. The Lake Powell Pipeline is an important example of the process discussed above. Washington County WCD is one of the chief proponents and would-be recipients of its water, and has some of the highest use in our high-use state. As discussed above, in 2012 over half of their revenue was property taxes while their water prices were exceptionally low and consumption rates were above the state average at 295 gpcd (Blattenberger et al., 4). “The government water supplier proposing the Lake Powell Pipeline project receives as much money collecting water taxes as they do from selling water, according to their audited financial statement” (Utah Rivers Council, 2014, 3). Because of the increased water consumption that results from artificially reduced rates, “phasing out these taxes would delay the need for this project for at least 20 years, but this government agency is adamantly opposed to even studying phasing out the water tax” (Utah Rivers Council, 2014, 3). The government has not seriously considered phasing out the property taxes. Additionally, the Lake Powell Pipeline results in a radical increase of indebtedness. In an October 2015 study, 21 academic economists argued the project would result in anywhere from $1.33 to $1.75 billion in construction costs to be repaid by the recipient water districts (Blattenberger et al., 2015, 6). This doesn’t include interest payments from $52 to $258 million annually at interest rates from 0.03% to 0.07% (Blattenberger et al., 2015, 6). The project would require significant increases in property taxes, water rates, and impact fees in order to repay this debt, which the economists argue will be highly unlikely to accomplish (Blattenberger et al., 2015, 11-12). In facilitating the high consumption rates that are used to justify this project, the property taxes result in the incurring of unsustainable debt that falls on the taxpayer to repay. While the proposed Lake Powell Pipeline has received increased prominence in public discourse, the role of property taxes is strikingly absent from the discussion. An opinion piece by the Salt Lake Tribune

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Hinckley Journal 2017  

The Hinckley Journal of Politics is the only undergraduate-run journal of politics in the nation and strives to publish scholarly papers of...

Hinckley Journal 2017  

The Hinckley Journal of Politics is the only undergraduate-run journal of politics in the nation and strives to publish scholarly papers of...

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