A White Paper
By Andrew South (BYU professor), Robert B. Sowby (BYU professor), Brigham Daniels (U of U professor), Bryant Holloway (law student), Kyle Lowe (law student), and Andie Madsen (law student)
Summary
Utah’s cities, like many across the country, face a growing and unavoidable problem: aging water infrastructure and rising costs to replace it. As Provo City grapples with these challenges, a larger debate has emerged about how best to pay for water system improvements and how to fairly allocate costs among water users.
This report argues that the solution being considered by Provo—tiered water pricing—is an economically efficient, fair, and forward-looking approach that promotes conservation and prevents costly future failures. Additionally, Provo’s case offers lessons for cities statewide as they look to comply with recent legislation calling for tiered pricing, as they also plan for long-term water security.
I. Provo’s story
In 2024, the typically boring topic of water infrastructure made national headlines. Lisa McGuire was visiting her husband in the hospital when a neighbor called to tell her that Lisa’s home was on fire. Lisa rushed home to find firefighters already on the scene. When she approached the blaze, she noticed the firefighters had a hose connected to a fire hydrant, but no water was flowing. When water was finally secured from down the street, the fire had finished its work. Lisa watched as her home burned to the ground, killing her two dogs trapped inside.
Her town’s aging and leaking water system failed Lisa. So much water was lost from leaking pipes in the minutes and hours leading up to the fire that there was not enough pressure for firefighters to operate a firehose to save Lisa’s house.
In many parts of Utah, water infrastructure is old and frequently in need of repair. It is hard to believe, but many pipes have been around as far back as World War I. These old, leaky pipes are expensive to repair and replace. Replacing these pipes is not optional, but merely a question of when it gets done and at what cost. Generally speaking, like many things in need of repair, the longer cities wait, the more expensive repair becomes. Not investing now is equivalent to taking out a payday loan, whose interest balloons until payment is made. In addition to wasting public funds, waiting too long can look like a flooded cul-de-sac, a torn-up road, or even a burned-down house. Even without a disastrous end, water can leak from an old pipe for a long period of time, wasting water and rate-payer resources.
Provo City is among the many places in Utah trying to get on top of a water infrastructure that is old and prone to problems. A couple of years ago, Provo recognized that the longer it waited, the higher the price tag would become. Unlike many places, it set out to determine a way to meet the challenge before it got any worse.
At the time, more specifically, Provo determined that not asking the city’s ratepayers to address the inevitable failure of Provo’s 50-, 60-, 70-, or even 100-year-old water pipes would only end up hurting the same people—the city’s ratepayers. Beyond the financial liability the city faced, it may have also worried about secondary economic impacts due to “local flooding, interruption of water delivery, and damage to roads and private property,” as well as negative impacts on hospitals, universities, and other major local institutions’ operations that depend on Provo’s water. A weak water system hampers the city’s ability to carry out its other critical responsibilities, like maintaining public health, sanitation, and fire safety.
Based on the city’s financial outlook, Provo commissioned an expert report to explore the best way forward and how to pay for the needed repairs.
II. Water infrastructure is a matter of state concern
Provo is by no means the only community needing to rethink its water infrastructure and how to pay for it. In fact, it is sobering that the Utah Division of Water Resources estimates $60 billion is required for infrastructure updates by 2060.
In the most recent legislative session, Utah passed a bill (House Bill 274, sponsored by Casey Snider) that requires communities to take conservation into account when setting water prices. Conservation is not only a key component of responsible stewardship of our water resources but also is financially prudent. It avoids the need for the state to develop additional reservoirs, provides our state increased water security, and helps stave off problems related to water scarcity, like the drying of Great Salt Lake.
The new bill means that changes are coming to water rates in many Utah communities. For various reasons, from promoting conservation to rate equity, some water providers already charge the biggest water users more money per gallon after a certain point; at the most basic level, the recent change in the law will now require water providers across the state to follow suit. The changes are set to go into place by July 1, 2027.
As many water providers and residents begin thinking about how this will affect them, the concerns in Provo about paying for water infrastructure are more relevant than ever to communities across the state.
III. Lessons to be learned from Provo
Provo began seriously rethinking its water infrastructure challenges years before House Bill 274 passed. It commissioned a study based solely on municipal concerns about how to reign in the growing drain of city resources by addressing a failing water infrastructure. Provo also hoped to find ways to address its aging infrastructure, maintain affordable service, and sustain a growing population. The expert study it commissioned contained two major findings:
- The city needed to invest heavily in water infrastructure or its residents would pay much more money in addition to having to deal with an increasingly unreliable water-delivery system
- Increased reliance on tiered water pricing would be more fair for Provo’s residents
We agree with these findings and explain why below.
A. Investing in water infrastructure will save cities money
The first finding of Provo’s expert report is that in order to save money for its residents in the long run, the city should increase investments in infrastructure.
We agree with this finding, and the same point is applicable to water systems across Utah. According to a 2024 report on water infrastructure from Utah State University, the average failure age of water mains is 53 years. According to Provo’s expert, over half—54 percent—of Provo’s water mains are already 35 years or older, and some have been in place for more than 100 years. It is not a question of if these pipes will fail, but when. And waiting for a failure to address the problem is expensive. In fact, the average cost of a water main break in the U.S. and Canada is around $10,000 in direct and indirect costs to repair. Proactively replacing water pipes is the cheapest way forward.
The underinvestment in drinking water infrastructure within the U.S. continues to grow. Currently, there is a combined $300+ billion shortfall for funding drinking water system maintenance and improvement. At the current rate, this gap is expected to more than double in the next 20 years. Cities across the U.S. will continue to find that additional investment is necessary, and cities that proactively embrace the reality and are strategic in planning/funding this future work will spend less money in the long run. They will also have greater control over how such actions would otherwise disrupt their operations and the lives of their citizens.
National studies demonstrate that, unsurprisingly, higher municipal water rates generally reflect higher spending and investment in drinking water systems. Lower rates often signal a lack of investment and maintenance capacity, potentially putting communities at risk of larger unanticipated future infrastructure costs. Population growth, variability in annual water source collection, and new water regulations (such as PFAS standards) may especially affect future infrastructure costs for communities of surface-water dependent systems like Provo. HB 274 creates an opportunity for Provo to examine current and past investments in drinking water infrastructure and consider its trajectory for planning and managing the future. The alternative is a reactionary approach to future disruptions. Prudent funding and preventative actions are fiscally responsible and will best support Provo’s citizens.
B. Tiered rates would increase the fairness of water rates
Provo currently has tiered rates, and the expert report Provo commissioned recommends using more meaningful tiers to make Provo’s rate structure. As it currently stands, the rest of the city subsidizes Provo’s biggest water users. The expert recommends rates much more in line with actual costs water users impose on the system. Our review suggests that the rate structure similar to the one Provo’s expert recommended would be more fair and represent an improvement.
Tiered rates are rates that charge users more along several price steps as their water use increases. Tiered rates are more fair than a flat rate across all water users, because they allow a reasonable amount of water use at an affordable price (i.e., enough water for drinking water and most indoor uses) and align costs of water to those who place the most burden on the system.
Increasing the costs of water use falls into two major categories that economically justify tiered water rates. First, the costs of expanding the system are disproportionate due to the needs of the biggest water users. Like large parking lots around a shopping mall designed to accommodate holiday shopping, water infrastructure design must account for the most intensive users’ demands.
Second, the more intensive the use, the more strain put on the system. Just as the old adage “the straw that broke the camel’s back” suggests, less intensive water use puts less pressure on the water system than more intensive water use does. Because “wear and tear” on the water system is related to increased water use, it makes sense to charge larger users more.
For very similar reasons, tiered rates are not only common in the municipal water context, but counterparts to tiered rates have long been used in other industries. Trucking companies, for example, that operate heavy trucks on public highways must pay certain excise taxes, like the heavy vehicle use tax, to offset the cost of repairing the wear and tear on public highways that all residents use.
Tiered rates, like the rates Provo’s hired water-needs expert consultant proposed, are specifically designed to charge consumers rates that reflect not only the water they use but also the costs that they put on the infrastructure system. The analysis takes into account numerous factors, including the sheer volume of increased infrastructure, the additional size of treatment facilities, the length of transport systems, and equipment demands to maintain pressures to provide for more complex water systems necessary to supply high-volume users.
Comparative example of infrastructure costs and conceptual water use of different housing types in Provo, Utah.
C. An illustrative example of why tiered pricing makes sense
Consistent with experts around the country, Provo’s consultant found that high-volume residential water consumers impose a disproportionately higher cost per unit for providing and operating water infrastructure systems than small-volume users. Consider a simple example of an apartment community in Provo and an adjacent single-family residential community. The apartment community has a significantly smaller “infrastructure footprint” (and associated costs) than the higher-consuming neighbors. This image shows a predominantly residential area in Provo. The area is bounded by the Provo River (west), University Parkway (east), 3700 North (south), and 4800 North (north). The area in yellow is the new apartment community The Flats at Riverwoods. The area in red is mostly single-family homes.
The Flats at Riverwoods at the north end of the image (yellow) is about eight acres and has approximately 218 units; it is a mix of studio, one-bed, two-bed, and three-bed units. Using average values, this community can house approximately 550 people. The single-family residential area (red) to the south is about 240 acres, and using average values for the city of Provo is accommodating about the same number of individuals. However, the linear lot frontage for water and wastewater supply piping infrastructure at the apartment community is around 900 feet. The equivalent frontage for water and wastewater piping infrastructure in the residential area is greater than 18,000 feet. This is more than 20 times the length of piping, not to mention the additional infrastructure components to support higher residential water users.
To be clear, single-family residences do not necessarily mean high water consumption. However, in recent years, the state of Utah has highlighted that outdoor residential water use is the “largest single category of municipal water use,” at 45% of total municipal water consumption. The proposed rate structure recognizes that a baseline of water use—which would generally cover most indoor water uses—is necessary by all residents.
As far as the second tier, even taking into account outdoor water uses, residents have much control over how much water they use. In addition to taking care not to overwater, Provo residents can rely more on drought-resistant plants (particularly in parts of their yards that are underused) and low-flow irrigation technologies. Experiences across the country show that users need a reason to change from their current behaviors and systems. Tiered water rates offer an opportunity to properly motivate users to find an optimal use pattern that doesn’t put undue financial strain on Provo’s drinking water infrastructure.
The following table is a hypothetical example of tiers on different residential types across two seasonal thresholds.
Table: Example of potential of water tiers’ impact across seasons for different housing types (multi-family and single-family residential units)
| Tier | Winter | Summer |
| T1 | Conservative indoor water consumption: Achievable for all users | Conservative indoor water consumption: Achievable for multi-family users with conservative behavior (assumes limited or no outdoor water consumption); Achievable for single-family users with well-designed outdoor spaces and water systems |
| T2 | Moderate indoor water consumption: Many opportunities to change behavior, and some high-impact fixture changes | Moderate indoor water consumption: Easy for multi-family users; Achievable for single-family users with strategic behaviors and specific water system component improvements |
| T3 | Extreme cases: unusual | High water consumption: Non-discerning water behaviors and unimproved residential water systems |
The consultant’s recommendations rely on an overriding principle in setting rates—fairness. Provo can continue to allow residents the water they need while also assessing costs on users that require more infrastructure and impose heavy wear and tear on the water system. We agree that users who do not impose significant costs on the system should not be forced to subsidize those who do. It is only right for everyone in the community if big water users pitch in more for their higher impact on the pipes.
D. Additional conservation benefits of tiered pricing
In addition to the financial fairness reasons, tiered pricing also has conservation benefits. In fact, House Bill 274 mandates that water providers consider tiered pricing as a mechanism to incentivize conservation. While these reasons are separate from the reasons motivating Provo’s recent changes, tiered rates repeatedly show positive outcomes in Utah’s water conservation efforts, including for landscape irrigation. In complying with House Bill 274, water providers should set tiers with significant rate differences to encourage water conservation (behavior change) and price them appropriately to maintain the revenue necessary for system operation, maintenance, and future replacement costs.
IV. Provo’s choice
Provo was recently named the fifth-best-run city in the entire country. This distinction is well-earned and adds to the city’s many accolades. Part of Provo’s success is rooted in its willingness to invest in what is best for the city. From revitalizing Center Street to constructing the new City Center building to expanding the Provo Airport, Provo’s willingness to invest is only matched by the rate of its growth and the strength of its economy. Provo’s rise will certainly not be stymied by a lack of above-ground investment, but it could be stymied by the lack of investment below ground.
Replacing Provo’s outdated water infrastructure will not only eliminate outdated pipes but will also mitigate water main failures, saving the city and its residents money. Introducing the report’s recommended water rate reform would not only help Provo save its residents money and more fairly distribute costs across the system, it would also serve as a model for other municipalities to follow.