| OCR Text |
Show the water or to charge the users for the privilege of utilizing a public resource, unrelated to development costs. For some uses, the charge may be made directly on the quantity of water consumed or diverted; for others the charges may have to be imposed indirectly on products or services related to the water resource. The type of user fee examined in this study is similar to an excise tax. It is a basic charge or surcharge, as the case may be, for the use of a resource itself. In effect, it might be considered as rent collected by the state for the use of a publicly owned resource. User- fee financing has some desirable features not found in other methods of capital financing. People pay in proportion to amounts of resources and services they receive. The fees would tend to allocate water resources in an economically efficient manner and to reduce waste. The revenues received would provide financing for a state to implement its development plans and facilitate cost- sharing arrangements with other government entities. On the other hand, a state imposed water- user fee system constitutes a drastic break with tradition. User fees generally have not imposed at the state level except for certain recreation uses. A number of difficult questions should be answered if a broader utilization of such fees is to be considered: How can fee structures be designed for each of the major water uses? What amounts of funds can be expected from different levels of fees applied to different uses? What economic effects will result? What legal and institutional problems will be encountered and how will these be solved? How will user fees be accepted by various water users and other citizens? What administrative mechanisms will be required to collect fees and administer funds? RESEARCH OBJECTIVES AND METHOD The purpose of this research project was to seek answers to two of the aforementioned questions, those pertaining to the design of user fee alternatives and estimates of fund generating potential. The answers were intended to develop information that might be used by state officials in assessing the feasibility of water user fees for water development funding and provide a basis for subsequent studies. Subobjectives designed to achieve this result were as follows: 1. Examine the experience of government agencies, particularly state agencies, with the application of water user fees. 2. Review user fee theory and devise state water- user fee alternatives for the major water uses. 3. Determine fund generating potential of selected water- user fee alternatives. 4. Identify problem areas and future research needs related to this subject. Since user fees have been applied successfully to some water uses- for example, effluent charges have been utilized in European countries to control waste discharges to lakes and streams- a logical starting point for this project was an examination of water user fee experience. A literature review was supplemented by information from agency officials with experience in administering user fees obtained through questionnaires and interviews. An advisory panel was organized to examine the findings of the literature review and make recommendations concerning the direction and emphasis of the remaining research. The panel provided expertise in economics, engineering, state finance, and state water planning. Two members of the panel came from Utah state government- one from the executive side and one from the legislative side. The panel provided a coordinating link between state government officials, the potential users of the research results, and the researchers. With respect to the scope of the project, the panel recommended that fund generating potential should be estimated for only four major water uses- irrigation, municipal, industrial, and recreational. The scope of the study was adjusted in accordance with this recommendation, although other major uses are included in the review of pricing policies presented in Chapter III. In order to devise fee structures for these major water uses, appropriate economic theory was reviewed. Criteria based upon political and economic equity, economic efficiency, allocational effectiveness, administrative simplicity, and revenue generation potential were identified and subsequently used for evaluating fee structures. A case study approach was used to analyze water- user fee alternatives in Utah. The case studies estimated the funds that might be raised by the various alternatives under different fee levels. Although conditions vary, many of the problems and effects of applying water- user fees in Utah could be expected in other states. A formula was developed for estimating the fund generating potential of user fees ( see Chapter V) in other states. 2 |
