Gunnison moves forward with Tarr Canyon water project funding

GUNNISON — The Gunnison City Council voted Feb. 18 to move forward with a financing strategy for the Tarr Canyon water project while also discussing state legislation that could require water rate increases for cities across Utah.

City Administrator Dennis Marker told the council that recent guidance from federal officials clarified the city does not need to take out a federal loan in order to move forward with a $5 million Community Project Funding grant for the project.

“We had a mandatory training meeting from the USDA Washington office,” Marker said. “What we’re talking about is the $5 million community project funding grant that we were awarded. Yes, the money is ours, but we still have to go through an application process and the environmental process.”

Earlier discussions had raised the possibility the city might need to take out a USDA loan to ensure the federal government processed the project quickly. Marker said the training meeting clarified that projects funded through the congressional Community Project Funding program already receive expedited review.

“The indication was that even without a loan from USDA, there was already a streamlined process that they were going to have to put our application through,” Marker said. “They wouldn’t be able to just put our application at the bottom of the stack.”

Because of that clarification, staff recommended returning to the city’s earlier financing plan, which relies on the city’s existing Community Impact Board loan rather than adding additional federal debt.

Under the plan approved by the council, the city will designate $125,000 from the existing CIB loan as the 25 percent non-federal match required for the federal funding. The city will then complete the federal application and environmental review process and proceed with construction.

Mayor Mike Wanner said the proposal appeared to be the most responsible approach.

“For the city and for the citizens, it’s the wisest choice,” Wanner said during the discussion.

The Tarr Canyon project is intended to increase Gunnison’s culinary water supply. The project could eventually affect utility bills depending on how much of the $2.7 million CIB loan needs to use. Marker said the city is hoping the full loan amount will not be necessary.

He said the increase would be about $12 per household if the city used the full loan. “My hope is that we don’t,” Marker said.

Early work on the project has already produced some positive financial news. Marker said drilling costs have come in below initial estimates, which could reduce the amount of borrowing required.

“My hope is that as we go along here everything else comes under (cost) in the same way,” he said.

While discussing the project’s potential effect on water rates, council members also raised concerns about legislation being considered at Utah Legislature.

House Bill 501 would require municipal water rates to meet a threshold based on a community’s median household income if the city intends to receive state funding for water infrastructure projects.

Council members said the proposal could require cities across the state to raise water rates regardless of whether local projects require additional funding.

Councilman Kim Pickett said the bill relies on a national comparison of water rates that may not accurately reflect the overall tax burden residents already face.

“Zions Bank looked across the country at water rates by mean household income for the communities,” Pickett said. “They determined that Utah’s rates are lower than the national average.”

Pickett said the analysis focused narrowly on water rates while ignoring other taxes Utah residents pay.

“My concern with that study is that they looked at water rates alone,” Pickett said. “They didn’t look at the other taxes we pay in Utah, like income, property, sales, vehicles. All those other taxes combined are really our tax rate, not necessarily one piece of it.”

Council members said the bill is being supported by legislative leadership and could have significant consequences for local governments.

“It’s being pushed by leadership,” Pickett said. “I don’t see that it will not pass.”

The council discussed the possibility that Gunnison residents could see increases tied both to local infrastructure projects and to state mandates.

“I think we should look at the timing of House Bill 501,” Pickett said, noting that aligning rate the two types of adjustments could prevent residents from seeing multiple increases in a short period of time.

Council members said it will also be important to clearly explain the source of any future rate increases.

“We need to message that to our community,” Pickett said. “That this is driven by the state, not by anything we’re doing.”

City officials said they will continue monitoring the legislation as the session progresses while moving forward with the Tarr Canyon project and its federal funding process.