Groundwater rule is 'dangerous policy' contributing to housing shortage, Goldwater Institute says

A couple of weeks ago, The Show spoke with Kathleen Ferris from Arizona State University’s Kyl Center for Water Policy about a recent court ruling that found the state Department of Water Resources illegally changed how it evaluates whether there’s enough groundwater to approve new housing in certain parts of the Valley. Ferris disagreed with the ruling.

"What’s more important? Is a water supply for the home, for the homes that are already here, for the people that are already here, for the investments that have already been made, more important than building new homes? I would say yes," Ferris said.

The lawsuit was brought on behalf of the Home Builders Association of Central Arizona by the Goldwater Institute. The Phoenix Business Journal reports ADWR says the moratorium stopped about 20 applications for certifications of assured water supply — that equates to nearly 13,000 lots in the Phoenix Active Management Area.

Jon Riches is Goldwater’s vice president for litigation; he stopped by the studio earlier to talk about the case and started with why he thinks the judge got it right.

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Full conversation

JON RICHES: So, this case really isn’t principally about water policy; it’s really about who should be making decisions in the state on issues of critical statewide concern, including the stewardship of our natural resources and affordable housing. Should those decisions be made by an unelected bureaucrat at the Department of Water Resources, or should it be made by our elected lawmakers?

And really, more importantly, how should those decisions be made? Should they be made by agency fiat, or should they be made through a lawful process? And what the court got absolutely right is that what the agency did here was unlawful. They did not follow the protocol for how these policies should be made, and they implemented them in a way that is contrary to Arizona law.

MARK BRODIE: The actual policy, though — wasn’t it, it was made by the governor, right, who is elected, you know, getting the data from the Department of Water Resources, who presumably would know better than any legislator or, you know, governor, other elected folks? Like, they are the experts in this field. Is it a problem for them to provide the governor with data and then the governor to make a decision, OK, we're going to do this or we're going to do that?

JON RICHES: Absolutely. I mean, as your listeners know, as we all learned in civics from seventh grade, the legislature makes the law, not the governor. The governor enforces the law. And what the governor did here through an administrative agency was try to create a whole new law out of whole cloth that not only was contrary to state statute, but was in no way specifically authorized by the legislature.

So, this is, you know, ultimately it's a separation of powers issue, and the Department of Water Resources has to follow the law like any other agency in the state.

MARK BRODIE: What did ADWR and the governor do that is not allowed under the Groundwater Management Act, which is what they were talking about using here in terms of requiring an assured 100-year water supply before new buildings are built?

JON RICHES: So, the way assured water supply has always been applied under state law is that if a homebuilder can prove there's sufficient groundwater for 100 years for the proposed use of the development, then a certificate has to be granted.

What the department did is it took this proposed use standard and flipped it on its head and said, "No, we're no longer going to make an assessment based on the proposed use. We're going to impose a new broad standard called 'unmet demand,' where if a hypothetical well drops below a certain level in the East Valley, that means there’s insufficient groundwater for new housing development in the West Valley."

And that’s contrary to law; there’s no authorization for that, and, you know, frankly, that’s not only unlawful but it’s dangerous and bad policy.

MARK BRODIE: Are you concerned about the idea of building new homes without necessarily enough water for them or for the other people who already live here?

JON RICHES: So, that’s just the thing: there is sufficient groundwater for new homes to be built. This case isn’t about a binary choice between existing users and new homes, OK? There’s a couple reasons why that’s the case.

One, the model that the agency was using didn’t actually protect existing users. All it does is place hypothetical wells 96 years down the road and determines what’s going to happen with them. But more importantly, it’s totally arbitrary. Home developers are the only use that are required to replenish their groundwater. So, no amount of water that homebuilders are using is taken away from some existing user because they have to put it back in the ground through their replenishment obligation.

That’s a critical point because it also shows how completely arbitrary this rule was. If a chip manufacturer, for example, wanted to build a new factory and use water at it, they don’t have to get a 100-year water supply; they certainly don’t have to replenish the groundwater the way homebuilders do. So, even if you were to accept the department’s proposition that the Groundwater Management Act was supposed to do something that it wasn’t, they simply didn’t achieve that goal with this rule here.

MARK BRODIE: So, I know you said this suit was mostly about rulemaking and procedural stuff, not necessarily about water, but there’s a lot of data suggesting that we are pumping more groundwater in Arizona now than we have in the past and it’s not being replenished — it takes a long time to be replenished and it’s not happening at the same rate at which we are pumping it.

What are you hearing in terms of, or what do you think about the idea of, maybe it's not a bad idea to sort of pause all the development — maybe not just homes, but chip manufacturers and every kind of development — and really look at what the groundwater situation is and then decide, OK, we should put this here, maybe we shouldn't put that over there?

JON RICHES: Whatever the policy merits are to how groundwater should be allocated in this state, that policy decision should not be made by an unelected bureaucrat within the Department of Water Resources. That policy decision should be made by our elected lawmakers in the legislature through the lawmaking process.

And what you had here was a bureaucrat who imposed a massively consequential statewide rule that affects how our natural resources are allocated, that affects affordable housing in this state, in a way that is not permissible under state law. If they wanna see a change in the policy, they have a remedy, and that's to go to our legislature.

Now, think about exactly what this rule did. We have a housing shortage in this state, and we have an affordable housing problem. And the way to solve that is by to introduce new supply of housing. What the department here said is, nope, we are not gonna allow any new homes in the areas that are most affordable and that are fastest-growing. That's an extraordinary policy. That's a dangerous policy. And if that policy is going to be put in place, it can't be done by the whim of a bureaucrat.

MARK BRODIE: Do you have a sense of how many homes developers were planning to build or are now planning to build, assuming that this ruling stays in effect in the areas of ... Buckeye and Queen Creek?

JON RICHES: I don't have a precise number for you as I sit here today, but it's what the demand is, right? The supply will come on to meet the demand. And what we know is that there is a housing shortage in Arizona. We need new homes. If you're a young family moving to this state and you're looking to get into your first home, you are faced with a very difficult problem in Arizona. And that problem was compounded by the department's decision here. Unfortunately, that decision was undone because it was originally done in an unlawful way.

MARK BRODIE: How would you like policymakers to be thinking about sort of this balance between do we have enough water and do we and can we have enough housing?

JON RICHES: The way every other difficult decision, policy decision is made, and that is through the legislative, thoughtful, deliberative process where all parties have a stake in it, where the public is heard, where lawmakers determine what the trade-offs are. Policy at its worst is policy that's handed down by fiat.

MARK BRODIE: Do you have reason to believe that the houses that will be built there will in fact be affordable?

JON RICHES: Well, this is the fastest-growing and one of the most affordable areas of the Valley; you know, we're not talking about central Phoenix here. This is Queen Creek and Buckeye, where there’s the space to build and where the housing is more affordable.

MARK BRODIE: That is Jon Riches, vice president for litigation at the Goldwater Institute. Jon, thanks a lot. I appreciate it.

JON RICHES: Thanks so much, Mark. Appreciate it.