A state task force is trying mightily to avoid the simplest way to pay for the Central Utah Project - a property tax increase.
It postponed Thursday's meeting, when a final decision was expected, so a task force subcommittee can have more time to hash out a funding formula.Without offering details on what the final outcome would entail, the governor's legal counsel and legislative liaison Robin Riggs told lawmakers this week they would be "happy with it."
Sources familiar with the Central Utah Project Funding Task Force said the most recent proposal involves a combination of bonding, water development loans and appropriations from the Legislature.
In passing the 1992 Central Utah Project Completion Act, Congress saddled the state with covering up to $350 million of the costs of proposed studies and construction to finish the massive water project.
Gov. Mike Leavitt appointed the task force this year in response to an attempt by the Central Utah Water Conservancy District to raise its property tax levy. Property owners in 12 counties pay a certain percentage of their property tax to the district to cover costs of the project.
With the district pleading poverty, it appeared a property tax increase was inevitable in order to market and finance a bond issue. But a task force subcommittee, following Leavitt's lead in opposing any kind of tax hike, is determined to avoid raising taxes.
To date, discussions have focused on separating CUP contributions into two funding schemes - short term and long term, Riggs said.
In the short term, the district would issue revenue bonds backed by its current tax levy and borrow from the state's revolving water loan funds to cover some $30 million in ongoing construction and mandatory environmental studies of future construction projects, sources said.
Another short-term obligation is an annual $3 million contribution into a conservation and mitigation fund that will be matched by $10 million in federal donations for eight years. Interest from the $13.7 million fund will be spent by a commission overseeing environmental water projects in Utah's upper and lower Colorado River basin.
When the commission dissolves after 20 years, the money will be turned over to the state's Division of Wildlife Resources. Because the state would get the money back, the $3 million annual contribution will most likely come from a legislative appropriation of general fund money, Riggs said.
Short-term financing is all the task force will tackle for now, sources said. How to pay the state's share of the big-ticket construction projects will come a few years later, after mandatory environmental studies indicate which projects are feasible. If some of the CUP components are dropped, the state's cost-share also falls.
The district has reserved comment on the funding proposals until a final decision is made early next month. But it had previously pleaded with the task force that it needed to raise its tax levy to market and finance any future bond. It noted that its most recent foray into the bond market had to be guaranteed by a $130,000 insurance policy.
But task force member Kent Michie, a public finance expert and state financial adviser, said district debt would be cheaper and easier to sell without a tax increase if the district's financing statute were changed to allow it to issue unlimited general obligation bonds.
The so-called "G.O. bonds" are guaranteed by property taxes but can be financed with water rates and increases in other user fees, he said.