As the governor and state lawmakers finalized their state budget earlier this month … they had to make big cuts — enough to cover a $1.8 million dollar budget deficit over the next two years. And perhaps the biggest cuts came to water.
The budget swept a $333 million allocation to the Water Infrastructure Finance Authority, or WIFA — one-third of a billion dollar promise made by the Legislature under former Gov. Doug Ducey a few years ago. And, while lawmakers noted that the budget left $450 million in WIFA’s Long-Term Augmentation Fund, the cuts are dramatic.
Now, WIFA’s board is meeting to consider suing. State law says sweeps to its budget have to be approved by three-fourths of lawmakers, which didn't happen.
WIFA Director Chuck Podolak joined The Show to talk more about what they decided.
Full conversation
CHUCK PODOLAK: Well, I hate to ruin it but I’m not allowed to talk about what the board talks about in open session. But I will say, I think there may be a lot of imagination or a lot of people using their imaginations on what they think happened.
I would say WIFA is a public body. WIFA’s board has to meet in these open meetings. And the only way that they can ask questions to their lawyers is something in executive session. And so while others may be able to just turn to their lawyer and say, hey, what should I do? What are my options? WIFA has to do it through this executive session.
And so I wouldn't read too much into that. I would read, here's a, here's a group of people who are asking their lawyer, what does the law say? What are our options?
LAUREN GILGER: OK. So more to come on that. But it does have to do with what the law says and how state law says you can or cannot sweep funds from an agency like yours.
PODOLAK: Yeah. And I think, I mean, the law is very clear two years ago, the Legislature set a higher threshold for themselves. They were very, very clear, it says we cannot sweep the, the money unless it reaches this vote threshold. I think it's very clear fact they didn't reach that threshold.
So then the question comes of what can be done and what should be done. And those are the things that the, my, my bosses at the WIFA board are, are we talking about,.
GILGER: OK. Let's talk about how the budget and what finally came out of it could affect what your agency is doing. What are your major concerns?
PODOLAK: Major concerns are the trend. We can't do this alone. We have to do this in partnership with cities and water utilities here who want to partner with us for water we bring into the state and we have to work with the private sector. The cost of building an importation project really requires that there's contributions from outside.
There's private money comes in. There's private companies that would come in and build these. And they all want to know, are we in this for the long haul? Was this a one off? And then the state is stepping back for it or can we count on you as a long term partner?
We want to make sure they're a good partner and we're going through this solid solicitation process to look for good long term partners. But they're looking at us, too, and they want to know, OK, WIFA, are you serious? And then is a state serious? Does the state have your back as you guys are entering into these long term agreements?
GILGER: So, it's almost more about the reliability of the funding than it is about how much?
PODOLAK: Absolutely. I think there's, there's a lot of comments about, we don't need the money today. And in many ways, that's true that we are taking a, a deliberate process to make sure that before we invest anything, we know exactly that it's viable, that it's feasible that it's needed. It's less about how much money you need in the bank today. And it's more about the reliability that the state will have our back when it comes time.
And I think that's, that's really what we're talking about. It's not, it's not the balance, it's what does this say. And people are looking at us and they're asking, did the money get taken away because you're backing away from this project or, or this concept, or did the money get taken away because we don't need it right now. But we're going to be there in the future. And we're trying to figure out we are trying to figure out and others are trying to figure out is it, is it one or two? Which world are we in?
GILGER: And you don't even have the answer to that at this point?
PODOLAK: We have private conversations with elected leaders from the state that, that make us think that it's just the not right now. We have your back. But no one wants to hear that from me. They want to hear that from the leaders themselves. They want to hear that from the governor's office. They want to hear that from our legislative leadership.
GILGER: Yeah. And you had been sounding the alarm for quite a while heading up to the budget negotiations. Do you feel like that fell on deaf ears a little bit?
PODOLAK: Yeah, I, you know, we'd, we'd worked certainly with the governor's office after they put out their budget proposal and we've been working with legislative leaders and, and others throughout the budget negotiations, trying to make the case that if you end up not giving us all our money or worst case, if you take away money you've already given us, then that really should be paired, that we're advocating what we want.
What outsiders want to see is that paired with a statement of we're in it just not right now. And so far we haven't seen that.
GILGER: OK. So let's back up and spend a minute or two talking about what it is that WIFA does. You've referenced projects, partnerships, things like that. You're basically charged with looking for new sources of water, for the state. So these are kind of long term solutions right to a water problem we know we have, but we maybe don't have in an urgent way, at least in urban areas in the state quite yet. This all got a lot of attention a few years ago when former Governor Doug Ducey put a billion dollars or said he would put a billion dollars toward WIFA to fund a desalination project. But I understand that your efforts are broader than desalination. What's, what's on the table?
PODOLAK: Yeah. So it's a little bit of everything. So what I say, WIFA, we're a state agency that uses public money to help Arizona communities secure their water future. And we do that through low cost loans to, to small utilities and large utilities to upgrade their infrastructure. We do that to, in giving grants to communities to do water saving projects, water conservation projects. And we do what you referenced, of looking for new supplies, looking for an augmentation project or projects to eventually bring new water in the state of Arizona. So it's a little bit of everything.
GILGER: So there's small things and big things. What are some of the big things?
PODOLAK: Well, probably the biggest thing is, how do we find a new source of water for the state? And you referenced a desalination project. And I think when I got started about a year and a half ago, a lot of the focus was on one project, one proposal. And what we've tried to do over the last year and a half is to say we're not about one project, we're about a, a responsible process to make sure we do it right. It's not just do a desal plant at this one location or, or nothing, but it's about, what are all the opportunities? Are there water recycling opportunities outside of the state? Are there desalination opportunities and somewhere other than Puerto Penasco, are there other water supplies throughout the Western us that could play a role in, in that?
And that's, that's the process we're going through now. It's like, OK, let's everything's on the table. Let's figure out the best way to do it.
GILGER: Are there good options on those fronts in your mind? Like is the state's water future looking promising from your point of view.
PODOLAK: Yeah, I, I frequently get asked that question. I'm optimistic. It's hard and it's expensive. There's a reason why there's not an importation project yet, but I think we can do it. The state has been moving this direction for years. We've done big strategic studies. We've looked at different augmentation options. We've talked about different funding options and what WIFA is, is we're the next current step in that.
GILGER: So what kind of water commitment would you like to see? Not just your agency, but maybe in an even broader sense from legislators from the governor going forward if it's not this year but next, I mean, it sounds like what you're saying is we've got to get serious about this at some point if we want to make it happen.
PODOLAK: Yeah. So we go out, we talk to industry a lot and we talk to potential customers a lot. We've gone and talked to potential investors. We've gone and talked to potential project developers. The public can see that we did a, a request for information. We went out and talked to industry and we, we have all the responses published on our website.
And what they're asking us is, you, Chuck, you WIFA board, you sound serious, but what you have in the bank right now isn't enough to finish it. So how confident are we that you could do that? And so that's what we're asking for, right.
We're asking for legislative leadership in the governor's office to help to say something publicly, to say something that we can point to that when we're sitting in these meetings, we say, yeah, you're not just talking to WIFA but the state is behind this, not just not this one agency.
There's also, we, we had kicked around some ideas with legislators about additional powers, additional tools that that could go into WIFA's toolbox to allow us to bring those project to fruition. And so I think those are the kind of things we're looking at.
We, we realize this budget was a bunch of hard choices. State revenue is just really not in a good position right now. And so every agency was going to feel pain. We understand that what we're asking to is in that reality that there's not enough money to go around. Let's look for those tangible ways to express support. So the world knows that we're all in this.
