This summer, as many in the Valley of the Sun have dealt with a remarkably hot summer, developers and contractors were left wondering about the state of the local water supply and what it means for the construction industry in the Valley moving forward. The heat, combined with news earlier this summer about new administrative policies regarding development review, led to many reasonable questions.
This article is intended to provide a high-level overview for contractors and developers of the latest news, why it is relevant, and some initial thoughts on what may be next.
At the outset, what has happened this summer? Likely the most important news this summer for the construction industry is the announcement that the Arizona Department of Water Resources will no longer allow groundwater to be used to prove up Assured Water Supplies for new subdivision developments in the Phoenix area. To break this issue down, certain parts of the state are in Active Management Areas, or AMAs. The AMAs are generally aligned with the population centers of the state (e.g., Phoenix and Tucson). Within an AMA, a developer trying to subdivide land, for residential OR commercial use, must establish that there is enough water for 100 years of use and construction cannot begin until the 100-year water supply is secured. This is the “Assured Water Supply Program.”
The Arizona Department of Water Resources determines if there is an assured water supply by considering several factors, including physical availability of the water using technical models.
The news this summer is that, based on its technical models, the Department believes that the groundwater supplies available in the Phoenix AMA are insufficient to support future subdivision developments. In fact, the Department announced that there is not enough groundwater to support approximately 4% of the demands in 100 years that have already been approved. This is based on projections about the depth of groundwater based on predicted uses. This means that the Department will not agree that applications based on groundwater alone can satisfy that there is an assured supply.
This is relevant because groundwater is one way that developers demonstrate an assured supply. It is not the only way and as described below, others remain, but it does present a new challenge for developers. Overall, this policy reflects a conservative approach to preserving a finite resource. Groundwater deposits can be analogized to a savings account. It is difficult to recharge this savings account and when you recognize that your spending may exhaust your savings account, it is reasonable to stop spending from that account alone. Rather, if you want to keep spending, you need to find different sources of money (or water as the case may be).
