Utah Foundation’s series of water reports explores Utah’s water financing and its current and future impacts.
This report examines the differing viewpoints in the context of conservation. It first outlines how water pricing can encourage conservation. It details the current effects of rates on water use. It then explores conservation in terms of fixed fees and variable rates. Lastly, the report examines incentives for water providers to encourage conservation.
Most water providers embrace the value of conservation efforts and have conservation programs in place. At the same time, conservation could be expanded if water providers were to move beyond property taxes and instead rely solely on water rates and impact fees.
Paying For Water Series
This series contains four parts as outlined below.
• Entire Report: Paying for Water: How Water Finance Impacts Utah
• Executive Summary: Paying for Water: A Brief Summary of the Series
• Part 1 – Background: High and Dry: Water Supply, Management and Funding in Utah
• Part 2 – Conservation: Drop by Drop: Water Costs and Conservation in Utah
• Part 3 – Fairness: Who Gets the Bill? Water Finance and Fairness in Utah
• Part 4 – Practical considerations: Getting Clear on Water: Practical Considerations in the Tax Versus Fee Debate
Utah’s water providers know that conservation is important to both water sustainability and minimizing investments in infrastructure expansions. For water providers that depend heavily upon property taxes, conservation efforts could be bolstered with a shift to greater reliance on water rates.
KEY FINDINGS OF THIS REPORT
- Conservation from an increase in water rates might be limited in the short term, but it would increase over the longer term.
- Comparing Utah’s water providers shows that, on average, providers with 10% higher rates have 6.5% lower water use.
- A greater dependence on use-based water rates would generally tend to raise those rates and encourage conservation; however, there is currently no clear indication that water providers that depend upon a higher share of property tax revenues have customers with higher water use.
- Some water providers encouraging conservation could find themselves in a position where water use drops so much that they cannot continue to cover costs without raising rates.
- Policymakers could decouple revenues from the quantity of water sold, so conservation does not negatively affect water providers’ budgets.
- Generally speaking, conservation is the cheapest way to meet demand for water, followed by agricultural conversion. Building new infrastructure is far more expensive.
But how effectively the shift to water rates promotes conservation depends heavily upon on how water rates are structured. In fact, some of the effects of conservation that would be generated by relying on water rates could be captured without removing the property tax component, assuming that the water rate structure were well-calibrated to encourage conservation. For instance, increases in use-based rates can have a far more significant impact on conservation than increases in base water rates. Those conservation gains could be further leveraged by depending still less on property tax revenues.