The Washington County Water Conservancy District got a sweet deal from the state in financing its Quail Creek Reservoir - it ended up repaying only about 40 percent of a bond it had originally sold the state for $18 million.
The Legislature's Energy and Natural Resources Committee on Tuesday heard Larry Anderson, director of the Utah Division of Water Resources, explain the financing of the project, which failed New Year's Eve, flooding homes and agricultural land downstream.State Engineer Robert Morgan also told the lawmakers that a special state committee to investigate the failure will meet in secret, with its first session beginning at 5 p.m. Wednesday in St. George.
He noted of the committee's meetings, "We are going to keep them immune from the press."
And the engineer said even legislators may not be able to get certain information concerning the dam break. He said he would refuse to answer certain questions legislators might ask if he believes it would infringe on the independence of the special committee.
Speaking of the committee members, Morgan also stressed that: "It is not their job to determine the blame, and if that needs to be determined, it is my opinion that that be done through a judicial procedure."
Anderson, who explained the financing of the dam project, said that in 1983 the Legislature approved a $50 million bond issue, of which the state's Board of Water Resources would get $20 million for water development.
In September 1983, the board purchased an $18 million bond from the conservancy district as the main financing of the $21 million Quail Creek project.
In 1985, as the reservoir began to fill, "leakage occurred in both the dam and the dike," he said. An additional $1.5 million was needed for grouting and a berm (a heap of earth and other materials) to stop the leakage. This was financed through a revenue bond issued by the district and purchased by the state.
This brought the total cost of the project to $22.3 million, of which the state provided $19,050,000. That was supposed to be repaid at 2.6 percent interest over 50 years, Anderson said.
The first payment was due in 1987. However, in 1986, the Legislature passed a bill allowing state departments to re-market bonds they may have purchased from political entities. The departments were allowed to sell these at a discount on the private market and use this money for other projects.
"It turned out only the Quail Creek bond was marketable," Anderson said.
The state treasurer hired a financial consultant to find out what this bond could be sold for. The consultant came up with a figure based on the private market and began the process to sell it, he said.
At this point, the conservancy district approached the state and said that as long as the bond was being sold, the district would like to purchase it.
On May 31, 1988, the $18 million bond was bought back by the conservancy district for $7,450,000.
"So we no longer have that bond and that interest in that project," Anderson said.
Earlier in Tuesday's meeting, Dee Hansen, director of the Utah Department of Natural Resources, said the department has been studying answers given to questions raised about the dike's safety in the past. At the time, "answers that were given by professionals . . . seemed adequate. I guess that's not true" in hindsight, Hansen said.
Some questions had been raised by Bruce Kaliser, of the state's Geological and Mineral Survey.
Morgan, who is responsible for dam safety, said both the dam and the dike were designed as zoned embankments. With such a design, the interior section is less permeable than the shell. Protection went down below the ground level.
Morgan also said instruments monitoring changes in the pressure exerted by liquids in the earthen dike failed to register a dramatic increase before the breech occurred.