Ruling: Tucson's differential water rates ‘unreasonable as a matter of law'

Tucson’s policy of charging customers outside city limits more for water service is not “just and reasonable,” a Maricopa Superior Court judge has ruled.

The city’s differential water rates “are unreasonable as a matter of law because, on the undisputed facts, Tucson did not set them based on cost data,” Judge Randall H. Warner wrote in a Sept. 11 ruling.

Pima County’s Board of Supervisors voted to sue Tucson in November 2021 after the City Council voted in June that year to raise water rates by 10% with a higher-tiered cost based on water usage for customers in unincorporated areas.

“We made the difficult decision to pursue this lawsuit because we needed to safeguard the rights of our constituents and all ratepayers,” District 1 Supervisor Rex Scott said in a news release. “Many of them have been Tucson Water customers for decades and they were forced to pay more for their water solely because of where they live or work. I am proud and grateful that the court has made this just and proper decision.”

The rates took effect on Dec. 1, 2021, and were projected to create $9.9 million for Tucson Water to be used for infrastructure upgrades, climate resilience and expansion of the utility’s low-income program. The city justified the increases as a sustainability measure that’s commensurate with the financial risk Tucson bears.

“Obviously, this decision by the trial court is a great disappointment,” City Attorney Mike Rankin said Friday in an emailed statement. “We are evaluating the implications of the ruling that was filed today, and we will discuss all of our options, including our option to appeal, with the Mayor and Council within the next several weeks.” Although it was issued Monday, Tucson received notice of the ruling on Friday.

Warner’s ruling said the rate hikes should have been justified by a cost analysis proving the city has to spend more to serve unincorporated areas, according to state law. The city obtained a cost-of-service study after it set the rates.

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Warner said the cost of service study’s purpose “was to provide support for already-determined rates.”

Tucson has argued that it can make the rate changes as a policy decision alone without a cost-based justification. It’s also uniquely positioned from other water providers, as nearly a third of Tucson Water customers are outside city limits.

Pima County officials have called the rates “discriminatory” and questioned the true cost of providing water to unincorporated areas.

The City Council adopted another water-rate policy change in March this year that exempts government entities from the differential rates. Tucson argued Pima County didn’t have standing to sue over a policy that no longer applied to them.

Warner said Pima County had standing when it filed the lawsuit, and “Tucson cannot voluntarily deprive it of that standing in the middle of litigation for the same reason it cannot voluntarily moot this case in the middle of litigation.”