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Joey BunchJoey BunchAugust 22, 201712min522

Steamboat Springs – Could a tax similar to the one on sugary drinks in Boulder become a vehicle for financing the state’s multi-billion dollar needs for water? Probably not, but a similar idea is on a laundry list of solutions floating around the state’s water community.

This week, funding the state water plan is among the topics being hashed at a Steamboat Springs conference of the Colorado Water Congress, a statewide nonprofit that is the “principal voice of Colorado’s water community.”

For the past year, water officials have been mulling over a list of possible options for covering about $3 billion of the plan’s initial $20 billion cost, a list commissioned by the Nature Conservancy.

The water plan, released in November 2015, is intended to deal with a projected water shortage due of 1 million acre-feet largely to a surge in population from the current 5.6 million to around 8 million or more by 2050. (An acre-foot is about 326,000 gallons, or enough water to satisfy two families of four for a year.) About 100,000 people per year are moving to Colorado, at a time when demand for water from most of the state’s eight major rivers already exceeds supply.

The Colorado Water Conservation Board, the state agency responsible for developing and implementing the water plan, has begun looking for a way to finance about $100 million per year for water projects tied to the water plan. Those projects are under the stewardship of eight volunteer groups, known as basin roundtables, with each tied to one of the state’s major rivers. The roundtables are made up of representatives of agriculture, water utilities; industrial, recreational and environmental interests and elected local government officials. A ninth roundtable, which covers metro Denver, teamed up with the South Platte River group on their water projects.

These projects run the gamut, from conservation to reservoirs to environmental and recreational needs. So far, the water plan doesn’t have a priority list or even a full accounting of just how much it would cost to cover all the projects identified by the roundtables.

But just as important as the list of projects to be funded is just where the state will look for the money.

At Tuesday morning’s Water Congress session on funding the state water plan, Dick Brown, an economist who also works with the Pikes Peak Regional Water Authority, presented a list of about eight options that have floated to the surface on just how to come up with the $3 billion the CWCB is hoping for. The list was developed by Summit Economics, led by famed Colorado economist Tucker Hart Adams, at the request of the Nature Conservancy. The first draft included more than 200 ideas on how to finance the water plan, and after a series of conversations that list has been pared down to about eight or 10 options.

Over the past several decades, water projects have largely been funded out of the state’s severance taxes, dollars paid by oil and gas and mineral companies for “severing” the resources from the land. For the past 10 years, the CWCB has been able to count on about $40 million a year from severance taxes to fund loans for water projects. But the volatility of those markets in the past several years has made that funding less certain, which makes it less attractive to the financial markets that could provide bonds to pay for those projects.

The water plan does have some funding tied to it already. Roughly $25 million is going to the water plan through funds approved by the Colorado General Assembly. The CWCB’s Kirk Russell said the agency is currently reviewing requests for $10 million from that appropriation, “all in the name of advancing the water plan.”

The short list of financing options includes:

Hikes in water rates

Alan Motlosz of bond firm George K. Baum says asking customers to pay more for water is not likely to be a popular idea. “We know [that water rates] are affordable,” he said, especially compared to other household expenses like Internet or cable bills, which often run more than $100 per month. But people are not likely to favor a water bill at that level, even though it supplies a resource more essential than cable or the Internet.

Over the past 17 years, water rates per person have increased from about $29.11 per month to $45.80 per month, according to Mike Brod of the Colorado Water Resources and Power Development Authority, which provides low-cost financing to governmental agencies for water and wastewater treatment projects. “This helps us gauge what is affordable for the future as we raise revenue.”

The proposal tied to a hike in water rates suggests about a $2.50 per month increase, which could bring in about $68.25 million per year. That meets one of the goals set by those reviewing the options: that any option had to be able to raise at least $25 million per year in revenue.

Beverage container fee

Brown told Colorado Politics that putting a fee only on soft drinks, such as Boulder voters did in the last election, is expected to drive down consumption, and that’s the whole point of that kind of fee. What he and his colleagues are considering is a more widespread fee that would apply to any kind of beverage container, and it would capture fees from tourists as well as Colorado residents. At a one cent on a dollar purchase, the fee would bring in about $70 million per year.

Other ideas included:

  • A state sales tax on water-related fixtures, appliances and other like items.
  • A surcharge on title insurance policies.
  • A “scarcity” fee on water sales, tied to higher water prices during times of drought.
  • A fee on sales of over-the-counter medications and personal care products.
  • A “tourism” fee levied on accommodations and recreational activities.
  • A $500 boost in water tap fees, the cost of connecting a new home or business to a water provider. Those fees could generate as much as $27.6 million per year.

“We’re getting it boiled down to the top 10 options” or so, according to John Stulp, the special policy advisor on water to Gov. John Hickenlooper.

Stulp has one more idea that hasn’t made the top 10: an increase in the state sales tax that would fund infrastructure of all kinds: water, highways, broadband and higher education buildings. It’s similar to the idea for the transportation bill that failed in the 2017 General Assembly.

Stulp told Colorado Politics the sales tax idea could be either a referred measure from the General Assembly or a ballot initiative, and it’s unlikely to even be past the talking phase for a couple of years.

But Brown is skeptical.

“When you start looking for revenue streams, you start off with the premise that taxation will not be palatable to the community at large,” he said during the morning session. And those who want dollars for education or transportation “don’t care about your water projects and will work very hard to change” how those dollars are allocated.

And the next big question also will be just where will this money be spent. CWCB executive director Becky Mitchell told Colorado Politics that her agency is compiling a master list of identified projects from the basin roundtables, grouped by type, that will be completed within the next couple of weeks. Some have not been as thoroughly vetted as others, and costs are still an unknown for some of the projects. But when that list is completed, it will be prioritized and the CWCB will have the beginnings of a roadmap on just what the state wants to pay for.

It’s a critical component to the conversation about water priorities. Mitchell noted that they don’t want a repeat of 2003, when Colorado was just coming out of one of its worst droughts. You’d think that people would be gung-ho to make sure that didn’t happen again. But the General Assembly wound up with egg on its face after voters, by a better than 2-to-1 margin, rejected Referendum A, which would ask voters to approve about $2 billion in bonds for water projects. The big hangup for voters was that there was never a publicly-identified list of just how the money would be spent.

“It’s premature” to get worked up over one option or another, according to Aaron Citron, natural resources policy director for the Nature Conservancy. Many major questions remain unanswered, such as whether the state has enough money to implement the plan now, with more research on quantifying specific needs and how much each will cost, and then prioritizing those projects. It’s not time to jump to a conclusion and call for a tax or a statewide bond, or even reprioritization of existing money, he said. “Everything is on the table. We just need to figure out what we need that money for and how to prioritize before we dive into where that money comes from.”

These can be done in concert, Citron suggested: looking for the dollars at the same time they’re figuring out where those dollars will go. “But at least let’s get [the financing options] on the table and see if they’re realistic options.”