Lake Powell Pipeline Update
Independent Legislative Audit Reports District Can Repay the State of Utah for the Lake Powell Pipeline
The Washington County Water Conservancy District (district) can generate sufficient revenue to repay the Lake Powell Pipeline (LPP) costs, according to the Utah Office of the Legislative Auditor General report, “A Performance Audit of the Repayment Feasibility of the Lake Powell Pipeline” (audit) published yesterday. The LPP is an estimated $1.1 to $1.8 billion project that will deliver water to 13 southern Utah communities.

The audit was conducted in response to a legislative request to provide the state with an independent review of the financial viability of the project. Work on the audit started in late 2018.

The auditors considered the district’s anticipated revenue from impact fees, water rates and property taxes based on planned increases as well as the state’s projected growth estimates . Using this information, three hypothetical repayment structures were created and modeled to provide context on the district’s repayment ability:

  • Payment structure 1: a straight-line payment over 50 years (equal payments made over 50 years)
  • Payment structure 2: the district’s and Utah Division of Water Resources’ (DWRe) shared understanding of the financing terms specified in the Lake Powell Pipeline Development Act (act) that allows the district to repay for water gradually as it’s demanded 
  • Payment structure 3: same model as payment structure 2 with capitalized interest

The financing terms specified in the act are not based on straight-line payments nor does the act require the capitalization of interest; therefore, payment structure 2 is the only option that complies with statute.

In all hypothetical repayment structures, the district revenues exceeded the amount required to repay the state. The district’s current financing strategy, if fully executed, generates more than $6 billion in incremental revenue to pay for needed water infrastructure. However, the strategy will only be executed to the extent needed to meet the district’s actual financial obligations. The district will look at engineering and construction efficiencies to minimize borrowing costs and potential financial impacts to taxpayers.

The audit did report that, depending on the financing terms and growth, the first 10-15 years present the most challenge for repayment.

“That’s normal,” according to Utah Senate President J. Stuart Adams . “Infrastructure projects are sized to accommodate current and future residents, which is why the state’s repayment terms are structured to increase as the community grows.”

The district has already initiated several mechanisms to ensure the financial viability of the LPP including, but not limited to:

  • Saving money for a project down payment, which is not required by statute;
  • Enacting a general capital financing strategy that allows for the gradual increase of revenue (impact fees, water rates and property taxes) to generate additional funding;
  • Creating a monthly surcharge on each water connection to offset potential revenue deficiencies from other funding sources; and
  • Completing an independent third-party analysis on the district’s general capital financing strategy and resulting revenue capacity.

Recommendations made in the audit include the preparation of a repayment plan for the LPP once the financing terms and costs are finalized, clarifying the terms for repayment and any expectation of a down payment, determining how repayment costs can be divided among and within repayment contracts, identifying the final repayment timeframe for outstanding reimbursable project costs and considering multiple funding sources. The district agrees with the recommendations, as noted in its response to the audit.

Additional Coverage on LPP Audit Results
Some key recent coverage can be found at:

Wilford W. Clyde
Lake Powell Pipeline will build a better community
An editorial was recently published in the Salt Lake Tribune by Wilford W. Clyde, CEO of Clyde Companies Inc., former chairman of the Utah Manufacturers Association as well as the Salt Lake Chamber and previous president of the Utah Associated General Contractors. Following is an excerpt on his support for the project:

"As a sixth-generation and lifelong Utahn, father, grandfather and businessman, I support the development of the Lake Powell Pipeline.

Utah is filled with distinct and desirable communities, and Washington County is no exception. The culture is educated, caring, industrious and hardworking. Low taxes, top-tier infrastructure and effective local and state governments make it an outstanding place to live and do business. The quality of life for families and individuals of all ages can’t be beat and because of this there are people moving to this area from all parts of the country...

As the former mayor of Springville, I know the challenges that a growing region will face. There are ways to ensure that growth is for the betterment of the community. I’ve been part of such growth — where the community’s history is preserved, where quality of life is improved and resources are ensured for future generations.

In both my professional and personal life, I have strived to continually implement this mission of “building a better community.” I believe that by developing the Lake Powell Pipeline, Washington County can continue to grow and provide a place for people to raise their families and provide opportunities for their children to live and work in this beautiful area of our state."

You can read the editorial on the Salt Lake Tribune.
Copyright © 2019 LPP, All rights reserved.

Lake Powell Pipeline

533 E. Waterworks Dr.
St. George, UT 84770

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