Utah ranks among both the nation’s driest and fastest growing states. Water governance approaches that ensure sufficiency of affordable, quality water into the future is a major concern. Utah Foundation’s series of water reports seeks to fully explore the issue of how we pay for that water.
Issues of water fairness primarily revolve around the fact that revenues generated from property taxes and revenues generated from water rates rely on two different groups. One group includes all those who pay property taxes, and the other includes all those who use water from the public community system.
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
Property taxes as a source of revenue would be fairer in the following terms:
- Water is an essential component of civilization and community growth, from which all property owners derive benefit – whether they use water or not.
- Property taxes provide a means by which those in the community with more resources can aid those in the community with fewer resources to meet one of life’s most basic needs.
- When water providers offer services that benefit not just water users, but the entire community, (recreation, flood management, fire flows, etc.) it is fair that the entire community helps to pay for those services.
However, relying solely on water rates is fairer in the following terms:
- Those who use the most water must pay the most to support water systems.
- All households and entities will pay closer to the full cost of the water they use, rather than having high-property-tax-liability entities subsidize low-property-tax-liability and tax-exempt entities.
KEY FINDINGS OF THIS REPORT
• Depending on their water providers’ reliance on property taxes, nonprofit institutions and other exempt and partially exempt property owners may pay less than their share for the water they use.
• A shift away from property taxes could result in steep rate increases for some users – including school districts and universities. In some cases, those costs may end up being passed on to the public in other ways.
• Based on who uses the most water, a move to greater reliance on water rates would generally provide for a fairer distribution of the cost.
• Using property taxes ensures that a broader base of those who benefit from water systems share in the cost.
• There are ways to address certain fairness issues without changing the revenue mix, such as by charging differential rates based upon user type.
• To the extent that property taxes lower water rates, they can make water more affordable to lower income Utahns. However, there are ways to adjust water rates to address basic affordability without using property taxes.
• From a broad perspective, a mix of property taxes and water rates allows water providers a means of counterbalancing core fairness characteristics attributable to each funding source.
Regardless of the revenue mix, actions can be taken to make things fairer. If relying on property taxes, differential rates can be charged to those who pay different amounts in property taxes or based on use. If relying solely on rates, tiered rates (standard among most water providers) or water budgeting can allow high-water users to partially cover the costs among low-water users, ensuring that a basic level of water is affordable to all income levels.
In short, when it comes to property taxes versus water rates, fairness is often a matter of perspective – and the devil is in the details.
