To judge by some recent headlines, you might think Arizona – and developers in the state – are in the midst of a ruinous water crisis. “Arizona Faces an Existential Dilemma: Import Water or End its Housing Boom,” said Time magazine. “New Arizona development projects paused due to dwindling water supply,” said another from Fox10. For the record, Arizona is not out of water. A construction moratorium has not been issued by Gov. Hobbs. The real headline would not grab the attention desired by many major outlets, but Arizona has a long tradition of effective water management and conservation, and the governor’s latest policy move is much more limited in scope and effect. Still, there are significant implications, and many open questions. Here’s what business leaders in the state and those elsewhere looking to do business in Arizona need to know. What Gov. Hobbs’ policy entails On June 1, Gov. Hobbs directed the Arizona Department of Water Resources to “pause approvals of new assured water supply determinations that rely on pumping groundwater” in the Phoenix active management area, or AMA. This was largely in response to projections showing a 4% deficit in the region’s groundwater supply over the next 100 years.The practical effect is that developers will need to identify an alternative water source to groundwater (municipal or utility assured water supplies, CAP water, or an alternative source) to obtain a new certificate of assured water supply for a new subdivision in the Phoenix AMA.Again, this limited action was taken over a 4% deficit projected over the next century. Whether the action is excessive or justified is a policy question, but many agree that the message was widely misunderstood, creating risk for Arizona’s economy. For that reason, it is important to clear up the following common misconceptions:This pause will only impact proposed developments within the Phoenix AMA – not the rest of the state. Further narrowing the policy’s applicability, large portions of the land within the Phoenix AMA are served by a supplier with a designation of assured water supply, and many new subdivisions …
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