DRAFT Executive Water Finance Board

DRAFT Executive Water Finance Board

2017 Annual Report

OVERVIEW

Governor Herbert issued an Executive Order in June 2017 creating the Executive Water Finance Board (“Board”) to study various financial and economic aspects of water use in the state. The seven Board members each bring a unique perspective, including expertise in economics, finance, bonding, budgeting, planning, and water management.

After convening in July 2017, the Board met seven timesbetween July and November 2017 to begin its study of the economic and financial impacts of water issues facing the State of Utah, including a significant early focus on demand-side management. Various stakeholders engaged in discussions, providing meaningful dialogue regarding research and innovative practices relating to water data, water metering, water demand, water pricing, and efficient use of water.

The Board anticipates that more detailed recommendations will follow as it continues its work. However, in its initial review, the Board finds the following:

(1)Utah’s population is expected to continue growing rapidly over coming decades. This population growth will require new approaches to water.

(2)To optimize the use of Utah’s scarce water resources and make good decisions about water use, all Utahns (ranging fromhouseholds and firms to governments andnon-profit entities) would benefit frominvestment in better water data and actionable information gleaned from that data. Accurate, accessible, real-time,and comprehensive water data is key to understanding and planning for Utah’s water future. If used, technological advancements in recent decades will allow for a much deeper level of understanding of water to inform decision-making.

(3)Due both to policy decisions and to Utah’stopography, Utah has historically had low water prices, creating what one researcher calls a weak and muddledprice signal for water in Utah. As Utah contemplates its water future, the appropriate pricing of water should be a key component of those discussions.

PROJECTIONS OF POPULATION GROWTH

The Kem C. Gardner Policy Institute at the University of Utah prepares long-term population projections for the state. In July 2017, the Policy Institute released long-term population projections, which estimate that the State of Utah’s population will grow from 3 million people in 2015 to 5.8 million people in 2065.

A full report on thelong-term population projections, including additional county-level detail, is available on the Board’s website at

WATER DATA AND ACTIONABLE INFORMATION

Accurate and accessible water data is vital to making good decisions about Utah’s water future. While some good data about water clearly exists, it is also clear that additional data is needed. In addition, for raw data to be useful, it must be translated into actionable information.

The following are some examples of potential improvements to water data and actionable information from that water data:

• Water metering. The Board received testimony that a sizable portion of Utah’s water use is not metered and significant reductions in water use are reported when unmetered water use is metered and reported to consumers. In addition, technological advancements in recent decades allow modern advanced meters to provide timely detail not provided by traditional meters.
• Billing practices. The Board received testimony about customer-levelwater use reporting and billing practices that can more clearly provide useful and actionable information to water users compared to historical billing approaches providing minimal information.
• Watering practices. Many water consumers do not know or pay attention to how much water they use. For example, the Board received testimony from Utah State University water researchers indicatingthat study area water users overwatered by 50% relative to the actual water needs of the existing landscaping. Various technologies, such as advanced meters and irrigation controllers integrated with smartphone apps, weather forecasts, and even soil moisture gauges, can help Utahns better understand water use.
• Disaggregated water use data. Summary water data disaggregated by type of water user could help inform targeted strategies for different types of water users.
• Summary water data reporting to the State of Utah. As highlighted in a recent legislative audit, summary water use data reported to the State of Utah has been in need of improvement. The Department of Natural Resources indicates that actions have been undertaken to improve this data reporting.
• Comparisons with other states. The Board received testimony from the U.S. Geological Survey about their various roles in water, including a national water use report. Questions have been raised about the comparability of water data among states. Improved, comparable data could provide insights that could benefit Utah as it benchmarks and learns from what others do.

WATER FUNDING AND PRICING

Water funding currently comes from a variety of sources, including water rates, impact fees, and taxes.

In terms of funding from water rates, Utah has some of the lowest water rates in the country, due both to policy decisions to use tax revenues and due to favorable topographic conditions in which an annually-renewed clean snowpack melts and is fed largely by gravity to population centers.

A Utah State University researcher called the current pricing signal for water in Utah“weak and muddled.” Combined with better information, a strongand clear price signal for water would provide an economic incentive for increased efficiency in water use.

An increasing block rate water pricing structure is now required in Utah, but the tier structures are not always meaningful. The Board anticipates further studying this issue and making recommendations on meaningful tiers, including consideration of very basic water needs compared to more discretionary water use.

FUTURE ACTIONS

During 2018, the Board anticipates continued discussions on demand-side management, as well as discussions related to supply-side management, including beginning a detailed examination of proposed water projects and reliability of supply.

The Board also anticipates working closely with the State Treasurer and the State of Utah’s municipal advisor as they review various financing alternatives for proposed water projects, along with the associated financial impacts.