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A group of home builders is suing the Arizona Department of Water Resources for imposing what they claim are unlawful assured water supply restrictions that have halted some new home construction and caused them financial hardship.
The conservative Goldwater Institute on Jan. 22 filed a lawsuit in Maricopa County Superior Court against ADWR and its Director Thomas Buschatze and on behalf of the Home Builders Association of Central Arizona. The lawsuit asks the court to permanently block two water supply rules that the Home Builders Association says were illegally adopted without public input and don’t align with state law.
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Home Builders Association CEO Jackson Moll blamed Democratic Gov. Katie Hobbs, whose office oversees ADWR, for what he called “a deeply inaccurate and flawed claim that Arizona is running out of groundwater.”
In a statement, Moll said that Hobbs’ statements, coupled with ADWR’s water rules, had “devastating effects” on housing affordability in Arizona.
“Today’s lawsuit strives to uphold the basic democratic and separation of powers principles found in the state constitution, protect our state’s ability to conserve its precious natural resources, and grow economically for the future,” Moll said.
All residential home builders within Arizona’s designated groundwater Active Management Areas, or AMA, must obtain a certificate of 100-year assured water supply, or a commitment from a water provider that already has a certificate of assured water supply to provide water to their subdivision before they can build. Developers must meet several criteria to obtain a certificate, such as ensuring the water will be of good quality and that it will be physically, legally and continuously available.
The assured water supply rule dates back to the 1980 Arizona Groundwater Code, which created the AMAs with the intent of managing the state’s groundwater supply from which it had been overdrawing for decades.
In June 2023, Hobbs released an updated hydrological model for the Phoenix AMA — which covers most of the metro area — showing a projected 4% shortfall in its 100-year water supply. The announcement halted some new home building plans in Queen Creek, Goodyear and Buckeye that relied only on groundwater, even as the region faced a severe housing shortage.
These areas are not served by any water providers, so developers’ only option is to apply for their own assured water supply certificate.
The department released an updated version of the model in November in which it doubled down on its decision not to issue more assured water supply certificates.
In the lawsuit, Goldwater Institute attorney Jonathan Riches specifically targets two new rules regarding AMA-wide “unmet demand” and water depth.
Riches says that both rules are illegal because the department failed to follow proper procedures when creating them — including soliciting input from the public — and that they are inconsistent with state law.
“Decisions on vital statewide concerns like the availability of affordable housing and the responsible stewardship of our natural resources should be made through a transparent, democratic process — not imposed by executive fiat,” Riches said.
Christian Slater, a spokesman for Hobbs, told the Arizona Mirror in a written statement that he found the Goldwater Institute’s claims in the lawsuit to be disingenuous.
“This is nothing but a shameless and partisan attack by bad actor developers to get a short-term profit while they pump the water out from under Arizona families and farmers,” Slater wrote.
He added that, if the Goldwater Institute was sincere about its belief that the concept of unmet demand was illegal, it would have had the same reaction when unmet demand was found in the Pinal County AMA, when Doug Ducey — a Republican and Goldwater board member — was governor.
“They didn’t, because they are nothing more than partisan operatives working for the bad actor developers on their board,” Slater wrote.
The unmet demand and water depth rules, Riches wrote in the lawsuit, differ from how the department has historically determined the availability of an assured water supply in that they take into account the water conditions across the entire Active Management Area instead of at the site of the proposed development.
In the lawsuit, the developers argue that the department invented the term “unmet demand,” and that the phrase isn’t found in state statute.
The department used the unmet demand and water depth rules which the Goldwater Institute claims are illegal to determine that the “2024 model update does not support the issuance of Assured Water Supply determinations based on groundwater.”
These rules have left the assured water supply applications of the subdivision developers that the Goldwater Institute represents on indefinite hold.
Instead of following state law, Riches wrote, ADWR illegally changed its assessment of water availability from being site-specific and based on the water demand for the project in question to a “modeling exercise” that denies assured water supply certificates in Buckeye “based on unrelated groundwater conditions modeled to occur decades into the future on the opposite end of the greater Phoenix metropolitan area.”
The department’s refusal to issue assured water supply certificates will cause “enormous harm” to members of the Home Builders Association, Riches wrote, adding that it has a legal obligation to issue certificates to developers who prove 100 years of physical availability.
The builders accuse ADWR of preventing residential developers from starting new projects, and continuing ongoing projects for which they had “incurred significant expense in reliance on their legal entitlement to Certificates of Assured Water Supply.”
In a written statement, Buschatzke, the head of ADWR, said that the department stands behind its process for making Assured Water Supply application determinations.
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