Bluffdale agreed to sell water to the National Security Agency at a rate below its own guidelines and the Utah average in order to secure the contract and spur economic development in the town, according to records and interviews.
The deal could mean savings of hundreds of thousands of dollars a year for the NSA and federal taxpayers, but is more of a gamble for Bluffdale, which had to issue a $3.5 million bond to help pay for new water lines. Bluffdale leaders consider that section of the city, now covered with sagebrush, ripe for new businesses.
Without the influx of NSA revenue, it would have been 15 years before Bluffdale could have afforded to bring water to that area, said Bluffdale City Manager Mark Reid.
“It got us a ton of infrastructure, water infrastructure, in places we wouldn’t have it,” Reid said.
Bluffdale residents are not subsidizing the cost of providing water to the Utah Data Center, said Reid, noting the agreement ensures the city receives enough money to cover its costs for water and system maintenance.
But Connor Boyack, president of the libertarian Libertas Institute and who has written an opinion column calling for shutting off the water to the Utah Data Center, said it appears Bluffdale is subsidizing both the water and what he called “the NSA’s extra-constitutional activities.”
“I come from the line of thinking that government officials should be protecting our rights and not be economic developers,” Boyack said.
Details of the agreement between the NSA and Bluffdale are discussed in three years’ worth of emails the city disclosed earlier this month in response to a public-records request. Bluffdale allowed the NSA to redact large portions of the correspondence, but the emails still demonstrate how Bluffdale persuaded the NSA to buy what eventually may be more than 1 million gallons of water a day from the city rather than from four other bidders.
Like many culinary-water suppliers in Utah, Bluffdale has multitiered rates. The first 10,000 gallons used by homes and businesses every month are charged at the lowest rate, but then higher rates begin to apply. The final highest charges begin when a home or business consumes more than 100,000 gallons in a month. Currently, those large consumers in Bluffdale pay $3.25 per 1,000 gallons for water in excess of 100,000 gallons a month.
But when Bluffdale bid to be the Utah Data Center water supplier, it told the NSA it would charge it at the second-tier rate, currently $1.95 per 1,000 gallons, no matter how much water it consumed. That rate is usually reserved for homes and businesses that consume 10,000 to 50,000 gallons per month.
The Utah Data Center also must pay a 10 cents per 1,000 gallon surcharge required of all Bluffdale water users above 4,700 feet elevation, meaning the Utah Data Center is paying $2.05 per 1,000 gallons.
That charge is still less than the average statewide rate. According to a 2011 survey by the Utah Division of Drinking Water, the average rate for culinary water is $2.09 per 1,000 gallons.
To hedge its bets, Bluffdale built two conditions into the NSA deal. The agreement requires the Utah Data Center to pay Bluffdale $12,500 a month in maintenance costs. Also, the NSA must pay a minimum amount in water fees every month, regardless of its water use.
The minimum amount increases every year of the contract as the Utah Data Center is expected to boost operations, Reid said. Bluffdale, at the behest of the NSA, redacted portions of the contract showing the minimum monthly payments.
The provisions ensure Bluffdale has enough money to repay the $3.5 million bond.
The deal was finalized in a 10-year contract that took effect Sept. 30, 2011, records show. The contract specifies that Bluffdale can’t increase the rates on the Utah Data Center without also hiking rates on all Tier 2 water consumers.
It’s unclear how much water the Utah Data Center is currently using. Bluffdale has declined to disclose the center’s water consumption. The NSA previously has said the Utah Data Center would be operational in September or October, but The Wall Street Journal reported in October that electrical problems had delayed the project. The NSA has declined to say whether the data center is operational.
Reid said the cities of Herriman, Lehi and Saratoga Springs as well as the Jordan Valley Water Conservancy District also submitted sealed bids to supply water to the Utah Data Center.
Bluffdale also has an agreement to take used water from the Utah Data Center. The city will tap that supply to water the grass at its parks.
Reid said Bluffdale is receiving only about a quarter of the water used by the center. Reid declined to say how much the NSA is paying, though the arrangement helped the NSA save about $1 million for sewer upgrades around the Utah Data Center.
Details of the water agreement have been disclosed as a coalition of libertarians and anti-war groups calling themselves Nullify NSA are waging a campaign to shut off water to the Utah Data Center.
Most of the literature the coalition has published incorrectly refers to the state supplying water to the Utah Data Center.
Reid said the city’s seen no lobbying and has received only one email asking Bluffdale to shut off the water. It came from a man in the Midwest. The contract prevents such a move, anyway.
“We can turn [the Utah Data Center] water off,” Reid said, “as long as we turn everyone else in Bluffdale’s water off.”
Reid said the city bid to supply water to the Utah Data Center to help build improvements that will aid the city in future growth — not to make money off the NSA. The intent, Reid said, is to benefit Bluffdale residents.
“We accomplished that with the bid,” Reid said.
What water costs in Bluffdale, per month
• Homes pay a flat fee of $12, businesses $30, plus...
• The first 1,000 to 10,000 gallons: $1.55 per 1,000 gallons
• After that, using up to 50,000 gallons costs $1.95 per 1,000 gallons*
• After that, using up to 100,000 gallons will cost $2.60 per 1,000 gallons
• After that, it’s $3.25 per 1,000 gallons
• For users above 4,700 feet, like the Utah Data Center, all the rates increase by 10 cents
* Rate Bluffdale is charging the NSA, plus the 10 cent elevation fee
Source: Bluffdale city government