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Utah Foundation releases Getting Clear on Water: Practical Considerations in the Tax Versus Fee Debate.

In this fourth installment of Utah Foundation’s new Paying for Water Series, Utah Foundation addresses property taxes and water rates in the context of fiscal impacts, focusing on cost, price for consumers and revenue stability for water providers. It also addresses differences in local needs, transparency and representation. Previous reports provided an overview of water management in Utah and examined conservation and fairness issues.

Key findings of the newest report include:

  • While water rate revenues are not as stable as property taxes, they are among the most stable relative to other possible revenue streams commonly used to support revenue bonds.
  • Rainy day funds and decoupling of water rates from sales volume can help address budget volatility.
  • While it stands to reason that property tax revenues might help push credit ratings higher and thereby make the overall cost of water cheaper, it is only likely to be the case to a marginal degree.
  • Market distortions created by using property taxes for wholesale water may increase the overall cost of water.
  • A mix of revenue sources allows for more local flexibility by allowing water providers to use the property tax as needed and to counterbalance drawbacks in water rates.
  • A full reliance on water rates tends to provide stronger cost transparency because consumers can turn to a single source of information for their use and cost: monthly water bills.

Utah Foundation President Peter Reichard said that property taxes offer greater revenue stability than water rates, but that the difference should be kept in context. “Water rates remain a relatively stable revenue source – much more stable than other commonly used government revenue sources, such as sales tax,” Reichard said. “Overall, the cost picture depends on multiple factors.”

The report Getting Clear on Water: Practical Considerations in the Tax Versus Fee Debate is available on the Utah Foundation website at www.utahfoundation.org, with the first three parts of the series. Thanks to the George S. and Dolores Doré Eccles Foundation for providing grant support for the Paying for Water Series.