Colorado Explores New Funding Avenues for Water Infrastructure Amidst Severance Tax Concerns
A new report in Colorado suggests several new funding options for water infrastructure, including data center fees, a special trust, and a sod grass tax, as severance tax revenue from energy production is deemed too unreliable on its own.
Denver, CO, July 31, 2026 —
Denver, CO – A recent report released in Colorado is proposing a variety of new funding mechanisms to address the state’s pressing water infrastructure needs. The recommendations come as the state grapples with the unreliability of severance tax revenue, historically a significant source of funding derived from energy production.
The report highlights several potential new revenue streams that could bolster investments in the state’s water systems. Among the options put forth are fees specifically targeting data centers, the establishment of a dedicated water infrastructure trust fund, and the implementation of a tax on sod grass.
According to the findings, relying solely on severance tax revenue for critical water infrastructure projects is no longer a sustainable or dependable strategy. The fluctuating nature of energy markets and production levels has led to unpredictable funding availability, creating challenges for long-term planning and maintenance of water resources.
The proposed new funding sources aim to provide a more stable and diverse financial base for water infrastructure development and upkeep. Data centers, which consume significant amounts of water, are being considered as a potential source of user fees. A special trust fund could offer a dedicated pool of capital, insulated from the volatility of other revenue streams. Additionally, a sod grass tax could generate revenue from the commercial sale and use of turf, particularly relevant in landscapes where water conservation is a growing concern.
Further details regarding the specific structures, proposed rates, and potential legislative pathways for these new funding options were not immediately available in the report summary. The report’s findings are expected to be a focal point for discussion among state legislators and water management officials as they seek to secure the future of Colorado’s water resources.
Story summarized from the original created by Jerd Smith on coloradosun.com, see more information here.
