Colorado Task Force Floats Data Center Fees, Sod Tax to Fund $20B Water Plan
Colorado could turn to new fees on data centers and renewable energy companies, a tax on sod, or a dedicated trust fund to raise the $20 billion the state needs over the next 30 years for water infrastructure, The Colorado Sun reports, citing a new task force report.
Market Impact
The report, produced by the Colorado Water Center at Colorado State University for a task force created by state lawmakers last year, found that severance tax revenue from oil, gas, mining, and coal production is too volatile to serve as the state’s primary water funding source. Revenue swings year to year and lawmakers frequently divert it to cover budget shortfalls, according to the report.
State Sen. Dylan Roberts, a Democrat from Frisco who co-sponsored the task force legislation, said the findings confirm Colorado needs a long-term funding strategy independent of severance tax swings. The report pointed to the 2019 sports betting initiative, which voters approved and which now generates millions of dollars annually for water projects, as a model for dedicated, stable revenue streams. It also cited New Mexico and Wyoming programs that place severance tax revenue into protected trust funds that lawmakers cannot redirect.
Jim Yahn, a Logan County commissioner and task force member appointed by Gov. Jared Polis, said even preserving current funding levels would be a meaningful start. He pointed to the Colorado Water Conservation Board’s revolving loan fund, which financed spillway and diversion structure work for North Sterling and Prewitt reservoirs, as an example of a program undermined when lawmakers sweep the money for other uses. Roberts said he expects new legislation addressing long-term funding solutions in the next legislative session.
What It Means for Subcontractors
- Civil and heavy-civil contractors working on dams, spillways, and diversion structures should track whether the 2027 legislative session advances a dedicated trust fund, since a protected funding source (modeled on New Mexico and Wyoming programs) would reduce project delays tied to severance tax volatility.
- Firms bidding on Colorado Water Conservation Board revolving loan fund projects, including reservoir and pipeline rehabilitation, should watch for legislative action that would stop lawmakers from sweeping loan repayments, which Yahn said currently limits the pool available for new contracts.
- Contractors serving data center and renewable energy clients in Colorado should monitor proposed fee structures on those industries, since new fees could translate into dedicated water infrastructure contract packages if lawmakers adopt the funding mechanism next session.
- Agricultural and landscaping-adjacent subcontractors should note the sod tax proposal specifically, as it signals lawmakers are willing to target water-intensive industries directly for infrastructure funding, a precedent that could expand to other high-water-use sectors.
- Firms should watch for Sen. Dylan Roberts’ promised 2027 legislation, since the task force report itself carries no funding authority and requires action by lawmakers and, in some cases, voters before any contract opportunities materialize.
