A bill to overturn a state ban on new subdivisions in parts of the Phoenix area and Pinal County that rely on groundwater is moving through the Legislature.
At the same time, developers and homebuilders are challenging the state groundwater study that led to the Phoenix-area ban.
The bill would require the Arizona Department of Water Resources to approve certificates saying that nearly 90 developments totaling hundreds of thousands of homes in far-flung, suburban Phoenix have an assured water supply lasting 100 years.
It would also open up for development nearly 40 other projects, carrying a smaller but still sizable number of homes, in Pinal County. There, state approvals of new subdivisions on groundwater have been frozen in most areas since 2019.
The certificates for the Phoenix area have been blocked by ADWR’s June 2023 decision halting their issuance because the developments would pump groundwater. Approvals would have to be given despite ADWR officials’ ongoing concerns about inadequate groundwater supplies in these areas — concerns builders and developers say are unwarranted.
Under the state’s 1980 Groundwater Management Act, all new subdivisions in urban areas, including Phoenix and Tucson, must prove they have a 100-year supply to start construction.
Last June, ADWR released a computer model study finding the Phoenix area’s groundwater supply would run about 4% short of anticipated demand over the 100 years.
The agency classifies the shortfall as “unmet demand.” That has halted work on large master-planned communities in cities and towns such as Buckeye and Queen Creek.
The legislation and the developers’ concerns that have pushed it along are also controversial.
Homebuilders and developers say some sort of relief is in order for these projects because their owners have invested millions if not tens of millions of dollars into planning studies, infrastructure and amenities.
The developers say they based the investments on the belief that ADWR’s signoff on their certificates was all but a done deal. That’s because their projects had already received detailed, ADWR analyses of their available supply.
But opponents of the legislation say the developers should have known all along that their projects had water supplies that were uncertain if not inadequate. The analyses they received were not a guarantee they would get a certificate, opponents say.
Developers also say the computer model study that ADWR used to make its decision was inaccurate, by overestimating water demands and underestimating supplies. The model also unfairly envisioned groundwater wells in places where developers would never put them, including mountainsides where groundwater is sparse, they say.
“Investment we are losing”
The system for development of housing in the Phoenix area “has been turned on its head” by ADWR’s model and its decision, testified Spencer Kamps, a vice president and lobbyist for the Home Builders Association of Central Arizona, at a House committee hearing in early April. “There are serious economic impacts because of the sudden and drastic nature of this model. It’s extremely hard to understand how much investment we are losing,” he said.
Opponents say the bill would betray the principles on which the 1980 law’s assured supply requirement was based. That’s because the analyses are preliminary findings, they say. Opponents include environmentalists, as well as many Phoenix-area water utilities and an association representing them.
“The bill would require the department to issue certificates of assured water supply in areas where the department has determined there isn’t any groundwater available. That’s completely contrary to the assured water supply rules and the whole idea of consumer protection,” said Kathleen Ferris, a former ADWR director and an Arizona Municipal Water Users Association attorney.
ADWR itself doesn’t take positions on specific bills, but has criticized certain aspects of this one. Responding to questions from the Arizona Daily Star, the agency also rebutted many criticisms developers and consultants have made of the agency’s groundwater model.
The bill would allow development to move forward despite evidence showing the state law’s requirements for physical availability of water aren’t met, an ADWR official testified at a House hearing last winter.
“In our view, the bill would have the effect of disregarding unmet (groundwater) demands that are present in the Phoenix … area,” said Ben Alteneder, ADWR’s chief legislative liaison.
Chris Barr represents a planned 40,000-home development called Tartesso, whose footprint flanks both sides of the Sun Valley Parkway on Buckeye’s western edge.
The project was stalled by the ADWR decision with fewer than 10% of its homes built. When the project is finished, it should have more than 100,000 residents and millions of square feet of commercial and industrial projects, Barr said.
“My group made a 9-figure investment in infrastructure (in 2016), and we have immediate plans to invest another $100 million, including in a major wastewater plant expansion and a water campus, based on the project having an approved, analysis of an assured water supply in 2022,” Barr said.
“We played by the rules but the rules changed on us in midstream,” he told a joint hearing of two House committees on April 2.
ADWR hasn’t changed the rules, countered Doug MacEachern, an agency spokesman.
“Applicants must demonstrate the physical availability of groundwater pursuant to the assured water supply rules, which have not changed. ADWR periodically updates its models and has informed applicants in advance when model updates are pending,” MacEachern said.
“Every analysis of assured water supply is subject to new evidence regarding physical availability,” he said. “This is stated explicitly in the assured water supply rules.”
Approved by Arizona House
The legislation has cleared committees in both legislative chambers and the full House — all on party-line votes, with Republicans in support and Democrats opposed. A vote by the full Senate isn’t scheduled.
If passed by the GOP-controlled Legislature and signed into law by Democratic Gov. Katie Hobbs, the bill would require ADWR to grant assured water supply certificates to any subdivision that received an analyses of their assured supplies on or before May 31, 2023. That’s the day before ADWR’s ban on new certificates began in the Phoenix area.
Because the bill doesn’t specify geographic limits, it would also clear the way for planned Pinal County subdivisions on hold today because of the older determination by ADWR that they lack enough groundwater.
In return for getting certificates, developers of these projects would agree to cut their water use by 15% from what ADWR assumed when it conducted analyses of the projects up to 20 or more years ago.
Between the Phoenix area and Pinal County, the developments with water analyses that would be able to move forward if this bill passes would use more than 240,000 acre-feet a year of water annually. That’s more than twice the annual drinking water use by Tucson Water customers.
Last year Arizona water officials found that the Phoenix area's groundwater supply would run about 4% short of anticipated demand over the next 100 years. That has halted work on large master-planned communities in areas such as Buckeye and Queen Creek.
A half-dozen huge developments in Phoenix’s West Valley area, most in Buckeye, are among those on hold. They’re led by the planned, 100,000-home Teravalis project lying west of the White Tank Mountains. All received assured water supply analyses back in the 2000s but went on hold for years after the 2008 real estate bust killed the Southwest’s housing markets.
Applicants for an analysis must prove they can meet at least one of the state’s seven requirements for getting the full certificate — that they have enough “physically available” groundwater to last for 100 years. Unlike certificates, which are good for 100 years, an analysis lasts 10 years but can be renewed for an additional 10 years.
Another Buckeye development sidelined by ADWR’s June 2023 decision is Verrado, a massive planned community in the foothills of the White Tank Mountains, north of Interstate 10. Half finished today — its grand opening was 20 years ago — it has 7,000 homes, 16,000 residents and about 100 businesses, its chief operating officer Dan Kelly told a Senate committee in March.
It covers 8,800 acres and is about halfway complete, Kelly testified. It has had $2 billion worth of homes built, Kelly testified.
It got its first assured water supply analysis in 2002, and had it renewed in 2009 and 2015, he said. It has built different sections of the project as it gets additional assured supply certificates.
But last July, the developers received two notices of “deficiency” from ADWR, saying they hadn’t proved an assured 100-year supply for the next phases of their project, he testified.
“This has essentially halted any future development in Verrado, other than certificates we had already received,” Kelly said. “It’s a pause (to some people), but on this side of the podium, it’s game over.”
“Had we not received two certificates early in the year, on June 1st, I would have let all my people go,” he said. “That’s how serious this is. It’s devastating.”
ADWR’s Alterneder, however, testified that an assured supply analysis is only an option available to developers to make a preliminary demonstration of compliance — “prior to applying for a certificate.”
“It can’t be used to obtain (subdivision) plat approval” from a local government, or a public report from state real estate officials saying a subdivision is cleared for construction, he said.
It’s contrary to the state law’s goals of consumer protection to allow plats to be issued and homes to be sold, based on preliminary demonstration of physical availability, when new evidence shows that availability is no longer demonstrated, he said.
Verradio’s Kelly said he believes this project is the kind of development the bill’s drafters had in mind. Bill sponsor Rep. Tim Dunn, a Yuma Republican whose district includes Buckeye, lavished praise on the project, saying he saw Verrado as “Paradise Valley in the West Valley.”
The bill would put into law “what we have believed for the last 20 years, how the rules are written, what they mean, so we can continue to build communities for the growing state of Arizona and a high quality place to live,” Kelly said.
But former ADWR Director Ferris said of the bill, “Bottom line, it’s opening up the process of giving new certificates out when there is still an unmet demand. It’s basically ignoring the findings of the (ADWR groundwater) model and saying, ‘Well, it doesn’t matter, we are just going to keep issuing these things.’ “
Builders propose alternative
The state’s computer model came under sharp criticism in committee hearings in both houses during the first week of April. In the hearings, a parade of developers and their consultants ticked off what they saw as its flaws.
They offered as an alternative a model their consultant has created that showed compliance with ADWR’s rules without halting home development. That was accomplished by changing or adding key assumptions about well locations, water use, conservation, effluent use and replenishment of aquifers with renewable supplies.
Their consultant, Matrix New World Engineering, submitted a version of this model to ADWR in January. On April 2, ADWR responded with a detailed, three-page letter identifying what it said were several deficiencies in that model. New World has since prepared a revised model, but ADWR said it hasn’t received it yet.
ADWR officials weren’t invited to testify at the hearings, before Senate and House Energy, Natural Resources and Water and Commerce committees.
But Robert Anderson, an attorney representing the large developers whose projects have been stalled by ADWR’s June 2023 decisions, spoke at both hearings.
“One of the things that has us motivated on this, it’s very frustrating, is that (the ADWR model) really singles out one sector — owner occupied housing. The for sale, single family residential market, is what’s being stopped by this model,” Anderson testified.
“This is the one sector that is actually required to replenish groundwater,” he said, referring to a state requirement that all new pumping for subdivisions be replenished with renewable supplies such as Central Arizona Project water from the Colorado River. “We don’t feel like we’re contributing to the problem, or what’s perceived as a problem.”
He noted that single-family housing only accounted for about half the total shortfall that the state groundwater study found in available water supplies.
Homebuilders and developers say some sort of relief is in order for stalled projects because their owners have invested millions if not tens of millions of dollars into planning studies, infrastructure and amenities. But opponents of the legislation say the developers should have known all along that their projects had water supplies that were uncertain if not inadequate.
A primary concern is what Anderson and some developers and consultants said was the incorrect well locations in ADWR’s model.
Rather than using locations that developers used when they sought assured supply findings, “they chose some random well locations,” Anderson said.
The wells added by ADWR were near mountains, whereas “the wells we used were located in the most productive parts of the aquifer,” he said.
The developers hired Matrix New World Engineering, to prepare their own groundwater model as an alternative to ADWR’s model.
Nathan Miller, a vice president for Matrix New World Engineering, the company hired by the developers to prepare their own alternative to ADWR’s model, testified.
“If you put a well on the side of a mountain where there isn’t water, the model will predict the well goes dry, at an assigned rate,” Miller said at the House hearing.
The consultant’s model, by contrast, went “on the reasonable assumption that water providers will put the wells where the water is” and where the water need is, he said.
“By doing that, we were able to resolve all the unmet demand,” said Miller, Matrix’s vice president for groundwater modeling services.
In response to the developers’ concerns, ADWR said later that the allegation that its model put wells in mountainous bedrock is inaccurate.
While some wells were put next to mountainsides in the model, they were generally placed in thick, alluvial sediment areas that are typically more productive for groundwater, the agency told the Star.
“If it gets towards the edge of it, getting close to the side of a mountain, it doesn’t mean you are on a mountain, or you’re on bedrock,” said Ryan Mitchell, ADWR’s chief hydrologist.
Areas near mountains are also where developers want homes to go — “They want to have some scenery. They all want to be as close to the mountains as they can get,” Mitchell said.
The ADWR model doesn’t extend to any potential, aquifer-bearing sediment areas thinner than 265 feet, and those are over by the Papago Mountains in east Phoenix, he said. In the Lower Hassayampa Basin in Buckeye where the big developments would be built, the average thickness of potential water-bearing sediments is 754 feet, Mitchell said.
“It’s incredibly misleading to say we’re putting wells on bedrock,” he said.
He also said ADWR has told developers to “give us a well location that’s legal and acceptable and we’ll put your well there” in the groundwater model.
“They haven’t done that. No one has come in and told us where to move our wells,” he said. “That seems disingenuous and misleading.”
Water table decline
Miller, Anderson and others working for the consultant or for developers also faulted ADWR’s model on these grounds:
— Anderson said it assumes a new subdivision would be pumping “from day one” the maximum amount of groundwater it could legally pump over the 100 years covered by an assured supply certificate.
“And that, of course, is not how water use occurs, but it ramps up over time,” he testified at the Senate committee hearing.
— Miller and the developers said the assured water supply analyses of 20 years ago projected the new subdivisions’ water demand based on water use practices that have since become much more efficient. The Matrix New World model, by assuming more conservation-friendly practices, reduced water demand 12%, they said.
— The ADWR model didn’t account for use of treated sewage effluent that is far more common than it was 20 years ago, the developers and their consultant said. Today, it’s very likely that most effluent produced by new subdivisions will be either reused or recharged into the aquifer, they said.
Assuming the intense reuse or recharge of effluent, along with more water conservation, reduces the projected decline of the aquifer by 200 feet, Miller said.
— Finally, the state model failed to account for all the replenishment of the aquifer that will be required by state law for all new subdivisions to be built over the next century, the consultant said. That by law must be done by a three-county agency known as the Central Arizona Groundwater Replenishment District.
Taking that into account, as well, reduced the water table’s decline by a total of 400 feet, Miller said.
ADWR’s Mitchell, however, said assuming the full, 100 years worth of water use from the start of the model period is important for consumer protection, a prime goal of the state assured water supply requirement.
As for effluent, assuming a specific amount of its use over 100 years can run up against a legal problem, he said: “Who owns the effluent, after it’s processed or made? The developers could very easily say in a couple of decades that ‘I’d rather sell my effluent for use at Palo Verde’,” he said, referring to the nuclear plant lying near Buckeye.
Similarly with groundwater replenishment, ADWR can only assume the amount to be replenished by the three-county district’s 10-year operating plan, which expires in 2025, the state agency says.
The agency can’t assume a whole lot more water for future replenishment because that would be speculative, Mitchell said. Part of what the assured supply program does “is take speculation out of it,” he said.
Summing up, a model scenario like ADWR’s is a snapshot of current conditions, he said. Things can change over time, and a lot of things would or could be different if it were rerun in a year or two or more.
“The canary in the coal mine is we’re butting up to the limit as to what the aquifer can provide,” Mitchell said. “What course corrections can we do now? After we make some corrections and see trends change, let’s redo the scenario and see the result.”
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