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Position Paper Financing Colorado Water Projects Page...2 other aspect is providing assistance to water users (agriculture, recreation, fish, wildlife) which do not have the ability to fully repay costs. There is also a possibility that short term financial assistance may be needed as well; for instance a project may not be able to sell all of the water it develops for several years or a hydropower plant may not repay costs for the first few years but thereafter it becomes a revenue producer. Financing methods that are flexi- ble enough to service those needs is required. ,We believe that a $1 billion Water Development fund can and should be estabished for use by the Authority. We further believe that plans should be made to estab- lish half of that fund by 1990 and the full fund by the year 2000. The Authority would utilize the fund to: 1) help guarantee revenue bonds to assure the best interest rates, and 2) to provide long or short term assistance to water users. In general, bonds should be utilized to finance projects or portions of projects where the users have the ability to repay the bonds. The fund could also be used for preconstruction studies. The source of the money to establish the fund is, or courSe. the major problem. We believe that, initially, the legislative action will be required to establish the fund; however, the fund could become partially selfsustaining after it becomes fully established. The following list of items describes potential methods for generating revenues with comments on each, all of which require Colorado legis- lative action. Sales Tax - The state presently has a 3% state wide sales tax that generates about $500 million per year. A 1% sales tax for capital improvements, with half going for water pro- jects, might be appropriate. We understand that opinion polls indicate that sales tax is the least objectionable form of new tax revenue. Property Tax - A district covering the entire state could be formed with 'a small mill levy. We understand that opinion polls show that property tax is the least popular form of new tax. Lottery - The state lottery will be generating revenues in the near future. A portion of the revenues could be targeted for water projects, thus providing a long term beneficial investment of lottery revenues. Severance Tax - Many states, Wyoming for instance, have utilized a severance tax as a major revenue generator. The exist- ing Colorado severance tax will generate some funds, possibly accumulating $200 million by 1990. We agree with the concept of eventually adopting a workable increas~ in severance tax but with the mining industry in economic slowdown it may not be practical at present.