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Show INTRODUCTION BACKGROUND In response to rapidly increasing public interest in the quality of our environment during recent years, government legislation and programs have undergone significant changes in scope and emphasis. In the area of water resources development and management, federal funding for large scale storage projects has been diminishing at the same time that funding for water pollution control programs has grown tremendously. The emphasis in federal investment in water development has shifted in the process from direct appropriations to the construction agencies for specific projects to a multitude of grant and loan programs administered by Environmental Protection Agency ( EPA), Housing and Urban Development ( HUD), and others. The effect upon the states has been twofold. First, the diminishing availability of federal funds for more traditional development projects is causing states- some with new statewide water plans- interested in water development to look elsewhere for funds. Although past water development has taken many choice reservoir sites, it would be questionable to say that little further development will be required. Projections of capital investment costs based on extrapolation of " needs" in framework studies of the U. S. Water Resources Council indicated that the total costs for water development ( exclusive of water quality costs) for the period 1970- 1980 will amount to $ 126.2 billion. Of this amount, $ 74 billion is non- federal ( National Water Commission, 1973 p. 507) A second effect of the recent trends in federal policy is that the cost sharing provisions of federal grant programs for pollution control make substantial demands on state financial resources. These demands are likely to become more acute in the future as pressure is exerted to pass more costs on to state and local governments. One estimate placed the costs of constructing municipal sewage treatment systems between 1973 and 1980 at $ 33.8 billion, $ 12.9 billion of which is to be provided by state and local governments ( Administrator of the Environmental Protection Agency, 1974). The major sources of capital financing available to state and local governments are bond proceeds, tax revenues, and federal financial aid ( state aid is also a major source of local government financing). Long- term debt ( bonds) has financed the largest share of state and local capital outlays; however, many states have not utilized this source for water development. Legal debt limitations and interest rate ceilings loom ominously in several states. Furthermore, voters in some states hold to a " pay- as- you- go" attitude and are reluctant to incur long- term debt to pay for water projects. Although some states could make more effective use of debt capital, the unprecedented high level of taxation, particularly property taxation, makes this avenue to capital financing difficult. With costs of education and other urgent state and local programs spiraling, funds for even the most attractive water development projects will be difficult to obtain. Even if all of the currently used sources of funds are used more effectively, they probably will not be sufficient to meet total water development needs. Because of great public concern for pollution control, large amounts of state and local government funds have been contributed in support of this activity. If, as the National Water Commission ( 1973) suggests, the federal grant program does eventually terminate, state and local governments will have to fill the financial gap in improving and operating pollution control systems. States may have to consider new and innovative approaches to raising capital to finance water projects. One approach which appears to have merit is the collection of state water- user fees. Municipal, industrial, and agricultural supply uses; fishing, boating, hunting, and other recreational uses; and flow uses including hydroelectric power production, water transportation, and waste dilution all might be charged. In_ a_ broad sense, a user fee might be considered aTany form of a charge imposed upon a ^ iser for the use of a resource. Sales taxes, severance taxes, excise taxes, tolls, entrance fees, licenses, water rates, and so forth could all be considered as a form of user fee under this broad definition. In the case of water uses, fees may be charged on amounts of water actually used or on rights to use water irrespective of amounts used. They may be set to cover the costs incurred in developing and supplying |