Three years ago, Arizona lawmakers and then-Gov. Doug Ducey said they were setting aside $1 billion over three years for a water augmentation project. The thinking at that time was that project would be a desalination plant in Mexico’s Sea of Cortez.
But last year, lawmakers and Gov. Katie Hobbs swept more than $300 million from the Water Infrastructure Finance Authority, known as WIFA, the organization that’s responsible for seeking out and funding these kinds of projects. The organization’s director says this year’s spending plan isn’t much better.
Chelsea McGuire says WIFA’s board is in the process of reviewing 17 submitted proposals that are looking to be qualified to move on to phase two of a three phase process. She says by this fall, we should know the basic contours of those water importation proposals and the teams behind them will be asked to do a feasibility analysis.
McGuire joined The Show to talk about the state of WIFA’s finances.
Conversation highlights
MARK BRODIE: Chelsea, let's start with that recently approved state budget. How did your agency do?
CHELSEA MCGUIRE: Not well. This is the third year in a row that we have seen significant cuts to WIFA's long-term water augmentation fund in the state budget. The most recent duration of those cuts totaled about $84 million, which leaves us with about a third of the promised $1 billion that was originally dedicated to that long-term augmentation fund.
BRODIE: And when that money was initially promised, the thinking was that it would lead to, most likely, some kind of water desalination project. The talk was maybe a deal with Mexico and the Sea of Cortez or something like that. Is that project still talked about? Is it still even feasible?
MCGUIRE: So, I'll answer that in two parts and kind of go back to the assumption. I think that was an assumption on the part of a lot of folks. I don't think that was actually the assumption on the part of the policymakers who were designing WA and our long-term water augmentation fund.
Desalination is of course a very obvious solution to augmentation. You're going somewhere, the ocean to use water that we're not currently using. But that doesn't have to be the solution that is funded by the long-term Water augmentation fund, and it's highly likely that it may not be. We don't know yet. We're still agnostic as to what that project looks like.
And then to your point, in December of 2022, really just months after the legislation became effective, WIFA was approached with a proposal for a desalination plant in the Sea of Cortez. At that point, WIFA's board, they looked at that and they said, "That's really interesting. We're really glad to see that there are proposals out there within the industry. We don't have enough information to make a decision right now. And in fact, we don't know what we don't know. So, what we need is not a bunch of proposals just coming in. We need a process for handling those proposals for attracting those proposals."
BRODIE: Did anybody tell you why WIFA was losing the amount of money it was losing?
MCGUIRE: I wouldn't say that we've received definitive reasons as to why WIFA is losing that amount of money. What I will say is that the guiding narrative, or the most common narrative that we've heard, is, "Well, you don't have a project yet, so you don't need the money.
BRODIE: "So you don't need the money."
MCGUIRE: "So you don't need the money. What are you spending it on?" Unfortunately, that's a pretty self-defeating narrative for for a couple of reasons. The first is that the money is there to attract the project. If we as a state are a serious partner at the negotiating table with industry — because even $1 billion was not going to be enough, right? Industry is going to have to come alongside and be a partner with WIFA. That money was there, symbolic of our commitment to long-term water augmentation. So it was never the amount. It was about the commitment. And so saying, "Well, we're not going to commit more money to it until you have a project." It's very hard to attract that project and to be a serious partner if the money is not there.
BRODIE: Have you found it so far to be a hindrance in terms of trying to find a new project, not having the money that you need?
MCGUIRE: I would say yes and no to that. It is a hindrance in that it makes industry kind of look at WIFA and say, "Well, are you serious about this, and what can you bring to the table?" But what I think is important about WIFA, even with the cuts to our budget, even with the uncertainty that we have over sort of the political stability, we still have the ability to go out to industry and say, "We're serious about this. We have a mandate, in fact, from our state to do what we are doing. So keep partnering with us."
And the process that we have developed that going back to what our board asked us to do in 2022 and early 2023 has received extremely positive feedback from industry. We just want to make sure that we can underscore and secure that approach with something tangible to bring to the table.
