League hears changes to HB501; bill would tie state water funding to local rate hikes but revenue "stays with the local system"

Justin, the League staff lead, told the Legislative Policy Committee that the latest substitute to HB501 keeps the core idea that entities must raise local water or wastewater rates to qualify for state water-development funds but clarifies who keeps that revenue. "The rates stay with the local system," Justin said, adding that the phrase "local contribution" in the bill has been confusing because it could imply funds flow to a state account when, under the substitute, those revenues would remain at the local level.

The briefing stressed two material changes from earlier drafts. First, the previously included universal mandate requiring every system to raise rates beginning Jan. 1, 2031, was removed; under the substitute, a rate increase is only required if a system wants to qualify for the state funding. Second, the substitute narrows prior exemptions: secondary (ag) water had been exempted already; the current change exempts secondary uses from the bill’s requirements and applies the measure primarily to culinary (drinking) water.

League staff flagged remaining policy concerns. The substitute continues to exempt the new fee requirement from a statutory "reasonable basis" test that other local fees typically must meet. "From a policy perspective, that seems like an odd choice," Justin said, noting the League has requested that sponsors add a reasonable-basis requirement. Staff also raised questions about how conservancy districts and interlocal providers will be treated and whether residents served through retailing arrangements could face overlapping assessments; staff said they have asked the sponsor's office to clarify whether providers that set rates through interlocals or districts would need to raise rates in ways that could effectively double-charge end users.

Committee members and attendees asked technical and clarifying questions. One participant asked whether secondary-water charges should be included in the 1.5% affordability metric; League staff responded secondary systems typically remain under separate control and that nothing in the substitute would force a conservancy district to raise its secondary rates if it is a separate provider. Sean Guzman of Saint George asked explicitly about conservancy districts and whether double-assessment could arise; staff said they have asked bill drafters to clarify that point before committee action.

Justin opened a Slido poll to gauge whether the League should continue to oppose the bill given the substitute's changes. Staff underscored that the bill will be heard in committee that afternoon and that members should be ready to respond to possible action alerts once committee language becomes public. The briefing closed with staff urging local officials to be prepared to provide situational examples and to follow up on clarifications about conservancy districts, the source of any state fund dollars, and the League's request to restore a reasonable-basis standard.

Next steps: HB501 was expected in committee the afternoon of the briefing; League staff asked members to monitor action alerts and to provide data or local examples if requested.