For Home Builders, growth makes good water sense

As part of its ongoing examination of Arizona groundwater policy, Chamber Business News is visiting with water experts and policy leaders about their views on groundwater and what they believe are the defining issues for one of the state’s most pressing challenges.

Today CBN visits with Spencer Kamps, vice president of legislative affairs for the Home Builders Association of Central Arizona. 

This interview has been edited for clarity and length. 

Chamber Business News: Tell us what your job is and what the Home Builders Association does.

Spencer Kamps: I’m Spencer Kamps, vice president of legislative affairs for the Home Builders Association of Central Arizona. We are a business trade organization representing residential homebuilders here in central Arizona — Pinal, Maricopa, and Yavapai County. Our board of directors typically consists of the publicly traded companies and the high production builders that engage in that kind of activity in Arizona.

CBN: Give readers a sense of what you have seen over the course of your career as it relates to water policy and homebuilding.

Spencer: I probably worked on water issues for maybe 10 hours a year when I started. Now water issues take up to 60% of my time. It’s a very complicated issue. It’s a big issue in Arizona for reasons like in Pinal County and concerns that there isn’t enough groundwater to grow, and the Colorado River facing cuts.

Arizona is blessed in a lot of ways. We’re a very competitive market. That’s good for the consumers. We’re still a somewhat affordable market compared to some other regions. But all markets change as well.

CBN: You’ve seen your industry evolve in a fast-growing state in a fast-growing region. Have you and your colleagues ever questioned whether Arizona can sustain this level of demand here in an arid desert region?

Spencer: I think it’s always been in the back of everybody’s mind, but not at the front. Arizona is very, very fortunate, which is a story that I don’t think gets told enough. We have had very serious and thoughtful leaders when it comes to water management and water policy in the state of Arizona. We have a very rich history of being at the forefront of managing this very limited resource.

The Groundwater Management Act was adopted in 1980. California adopted theirs something like six years ago. That’s a great example of how far ahead of the curve we’ve been in Arizona. But I think the drought, the Colorado River supplies, have brought this much more in the forefront.

In my industry, I think people always felt water to some degree would work itself out – that the problem would always be solved. We might pay a lot more for water, costs might go up, but water will be attracted to money. But we know from the Pinal County situation that the issue isn’t necessarily solved through money, so it’s much more of an issue today for my members to make sure that they’ve obtained their water supply. Early in the process, it’s required by law that we have water supply, so nobody’s avoiding that requirement, but we try and solve our water problems much sooner rather than later, because it can really hold you up.

CBN: Let’s say that you meet a new legislator who knows that they need to learn more about water, but they don’t really know where to start. From your perspective, where do you like to start with a legislator, whether you’re talking surface water or groundwater?

Spencer: I start with talking about the importance of managing a limited resource in an arid environment. The other thing I tell them is the first bucket of water we had in Arizona was groundwater, and we were depleting that resource, hence the adoption of the Groundwater Management Act.

The second bucket of water we received as a state was the CAP (Central Arizona Project) canal and the Colorado River supplies that are delivered through that canal.

Both those buckets have allowed us to grow immensely to the point where we use the same amount of water we used in 1957. The reason we’re able to grow so much with using the same amount of water in 1957 is because of two reasons, primarily.

Number one is residential growth. We have retired agriculture pumping rights. The ag industry doesn’t have unlimited pumping rights, but close to it. Development falls under the Groundwater Management Act. We do one major thing that doesn’t get talked about a lot, which is we’re able to use groundwater at the location of the development instead of bringing it in, which is a massive infrastructure cost. We’re able to use groundwater and pump it at the location as long as we meet the hundred year assured water supply.

The second thing we do is we replenish it — we put that water back into the ground. So, not only are we retiring ag pumping rights and using less water to serve residential growth, but we’re also replacing the groundwater with reuse to service that growth. It’s a double win for the aquifer. That’s one of the main reasons residential growth is good if it’s done on ag land.

There are also conservation measures. We don’t irrigate residential lots anymore, like we do in old north-central Phoenix. So those first two components are big, and conservation, quite honestly, is the cheapest way to grow because conserving and doing more with what you have is cheaper than going to buy new water supply.

But the most important thing for legislators to understand is we don’t have a third bucket of water. We really don’t. We need a third bucket of water. That’s Colorado River water supplies, which is highly controversial. You have the Harquahala Valley, which is a recognized transfer base, and by state law it’s designed to be transferred into central Arizona, but there’s been challenges there.

And then we have other entities here in central Arizona who have more water than they need, and whether they put that water on the market for the right cost is challenging at best. So, we’re facing growth issues and supply issues here in central Arizona about how we grow as an economy. The Pinal County situation is a prime example of what can happen when we don’t have enough water. 

CBN: You contend that a housing development on what is currently farmland could be less stressful on the water supply than that current farm?

Spencer: It’s just a fact. With residential growth you use significantly less water than an ag operation.

Again, in the AMAs (Active Management Areas) that I represent, we’re required to replenish one hundred percent of that water. Maybe you’ve heard me talk in the past about the Central Arizona Groundwater Replenishment District. That is the entity that my industry created when the ADWR (Arizona Department of Water Resources) proposed that we’re not allowed to grow our industry on groundwater. There was a compromise that we can grow on groundwater, but we have to replenish it all. So, we created the GRD, the CAGRD, to fulfill that obligation. It’s the only entity in the entire state of Arizona whose sole job is to go buy water, find supplies, and put it in the ground.

CBN: When we talk about recharging an aquifer, the CAGRD does that?

Spencer: That’s exactly what it does. It has numerous recharge basins located within Maricopa County and literally buys water and puts it in the ground to meet that replenishment obligation, to buy a hundred-year supply.

CBN: Before your members can go and build a new neighborhood, a new master plan community, a new development, they need to get some sort of certificate that says there is a one hundred-year assured water supply at that project?

Spencer: There are only two ways we can grow in the AMAs. I am referencing, Maricopa, Pinal and Pima. One, a city or private utility can go to the Department of Water Resources and get what’s called a designation. That means they go in and say, “We have X amount of water that falls under the one-hundred-year test and satisfies the Department.” That designation says you can grow X amount under that designation. And then when my builders go into those communities, they draw down that water out of that designation which satisfies the hundred-year test. And then we grow under that scenario.

The second way is in unincorporated areas predominantly or non-designated cities and private utilities. There are many, like Buckeye and Queen Creek. Those communities are non-designated communities. In those cases, we go to the department directly and get a certificate of assured water supply, which is the hundred-year test. And that means that if we drop a well, we can pump it for a hundred years and it will last for a hundred years, but also that we won’t affect surrounding wells in any negative manner. Once we meet that test, we go join the CAGRD and the CAGRD replenishes the water that we’re going to pump to serve that development.

So, those are the two steps to the process outside designated service areas. You have the well test at ADWR, and then the second is to join the CAGRD.

CBN: Can your members get these one-hundred-year assurances in Pinal County right now? 

Spencer: No. Absolutely not. We can only grow in Pinal County in those designated providers that I mentioned earlier, like the EPCOR service area in San Tan, the town of Maricopa, Casa Grande, Eloy, Florence, and I believe Arizona Water has some designated areas. We’re only growing in those areas right now.

CBN: Let me ask you about farmland in Pinal County that is now using less surface water and is relying more on groundwater. Couldn’t a homebuilder come along and say, “If I were to build on this land, I would be putting less stress on the water supply than the existing farm”? If a home puts less stress on the water supply, that provides a water benefit and meets the demand for housing that we see in central Arizona, couldn’t it?

Spencer: Yes, and that’s what we’re saying as it relates to Pinal County. The Groundwater Management Act does, I think, a very good job of managing growth and water supplies in these AMAs. I think it does an exceptional job.

What the Act doesn’t do well is envision what happens in an AMA that has unmet demand, like Pinal County. It doesn’t tell you what happens next. And that’s where we find ourselves in Pinal County.

Agriculture is the predominant industry in Pinal County right now. We made some calculated strategic negotiations during DCP about how we’re going to manage that industry as they lose their access to the Colorado River supplies. And it was to help them with infrastructure needs and drill, and basically mine more groundwater to serve ag. But they’re still going to have to fallow a significant amount of property.

As I mentioned earlier, if you’re in a designated provider, you’re okay, and homebuilding can come in and take down that property and turn it into homes. If you’re not, you’re in a world of hurt.

One big solution for Pinal County is to allow growth to continue. The state doesn’t have the resources to compensate farmers to have them not farm. But development is a natural way for that to happen, and we’ve done it in Maricopa County.

In the Maricopa County AMA, the original rules were originally designed for farmers to get out of farming and sell their property to homebuilders to allow for growth to happen. So, this isn’t a model that hasn’t been tested – it’s been done in Maricopa County.

If we do nothing in Pinal County, agricultural eventually is just going to use as much groundwater as it can. There are limitations to how deep they can go. There are cost issues about how deep they can go, but they’re going to access that groundwater as much as they can, and rightly so because they’re trying to stay afloat. But under our regulations, we’ve not allowed development to retire as much ag land as possible. We need to allow that to happen. The only way to do that is to introduce a new, renewable supply, a new surface water supply to satisfy ADWR’s modeling and we need to do more. I think curtailing development hurts groundwater as much as doing nothing.

CBN: Talk a little more about the unique situation in Pinal County as it relates to the AMA.

Spencer: The Pinal AMA has been uniquely managed through its assured water supply rules. They are in a “planned depletion” AMA, whereas Maricopa and Pima are safe yield. So, we’ve had a different goal in Pinal. I think that’s led to some of the problems.

Pinal County for all intents and purposes is one of the last affordable housing markets. It’s one of the reasons San Tan is one of the hottest housing markets in the country. It’s because that entry level product’s so easy to build out there and it’s in high demand. So, something needs to change down there. And this has been a problem for going on eight years. We haven’t had a certificate (of assured water supply) issued since 2015. We had some 30,000 to 40,000 lots that were put into production in 2008 in the heyday that had been sitting there. We’ve grown through those, and we have massive lot supply problems. Land prices are going up because there’s limited areas you can grow. We need to solve this problem. My industry’s very frustrated by it. It’s very, very difficult. If this issue is not solved soon, you will see the lack of housing activity in Pinal start to impact Arizona’s economy in a negative way. 

CBN: But isn’t agriculture an essential Arizona industry?

Spencer: Oh, yes, and we’ve never denied that. We’ve never tried to get in the way of the ag industry accessing the water. We partnered with them on many occasions. And we will continue to partner with them. We’ve had some conceptual discussions with securing water supplies with the ag industry and letting them use it until we get there. There are challenges with doing that, but they can be overcome and hopefully, we’ll get there soon.

CBN: For homebuilders who cannot get a one-hundred-year assured water supply today, will they be able to tomorrow, or in five years, 10 years? Will this issue ever change?

Spencer: That is the million-dollar question. If you had asked me that six years ago, I would’ve told you that we would have this problem solved by now. So, from the perspective as someone who has been involved in the homebuilding industry, I’m very frustrated. The solution is not limited to introducing new surface water supplies to Pinal County. It is a complicated mix of reforms within the system and introducing new water supply.

CBN: What do we do about water supply? You’ve talked about the CAGRD as way of replenishing aquifers, but is there something more we need to be doing to address the supply side other than praying for rain?

Spencer: I think Speaker Bowers did a big first step last session when he allocated $140 million for the drought committee. That is a good first step that’s focused on out-of-state supplies, but I think we also need to focus on in-state supplies, both desalinization, which is a long-term play, and also looking at bringing in the Harquahala water, which is a designated transfer base, and it can go a long way to solving a lot of problems.

There are a lot of entities that have water, more water than they would ever use. And those individuals need to put it on the market either to sell it or lease it. If you bought a house next to ASU when your child was 10 years old for a good investment, you wouldn’t let it sit there until they went to college – you would rent it out. Leasing water is a very good option for people to put water out on the market that they’re not using today.

We need to have a massive discussion about whether we’re going to bring in water from the farthest areas of the state to central Arizona. The ultimate decision could be that we don’t do that, but we wouldn’t grow as a state. Those are the consequences.

We need to figure this out because Maricopa, Pinal and Pima, all the taxpayers of those areas pay for the CAP canal. And the supplies delivered by the CAP canal were given out decades ago and not everybody got a piece of the pie. The CAGRD is the one way to balance that equation because no matter where you are in Pima, Pinal or Maricopa County, if you meet that a hundred-year assured water supply test, you can access the CAGRD and develop and any landowner can join, and any farmer can join if they wanted to put their property into development, and any city can join, and any private utility can join. It’s fair and equitable for everybody to get a benefit of the CAP canal. If we don’t do that, the only people who benefit are the ones who got water out of the CAP canal.

So, we need to figure out how to get the CAGRD more water in my opinion, and to get more renewable supplies down in Maricopa, Pinal and Pima, with Pinal being the priority, and the state needs to make a critical decision about whether we want to invest in these new supplies or not. We need to have those conversations to figure out how to solve this.

CBN: Pinal County’s a very hot area for job growth right now. Not just homes, but people going to work there in good-paying, attractive jobs. Where are they supposed to live?

Spencer: We’d love to solve that puzzle. We’d obviously love to be the provider of all those homes. We don’t want to be like California. We don’t want high, high housing costs where the middle class can’t engage in the economy by making one of the biggest investments that anybody ever makes, which is buying their own home and creating value and assets in their lives. We don’t want to get to that spot, but we’re fearful that we will.

CBN: Would growth rely on a mix of water sources?

Spencer: I don’t see how as a state we grow without groundwater. As it relates specifically to homebuilding, there’s no reason we should be prohibited from using groundwater because we replenish it all. We’re a positive asset to the groundwater tables when we grow. The cost of not growing on groundwater is so expensive that it would destroy housing affordability. We would have to somehow put a big pipe from the CAP canal and direct deliver that to the development. Those costs are astronomical.

CBN: You mentioned the 1980 Groundwater Act, and we did the Drought Contingency Plan a couple of years ago. Do you think it’s time to do another sweeping groundwater bill that is reflective of the here and now?Spencer: I don’t think so. I think the Groundwater Management Act is a good foundation. It can always be improved upon, but I think it’s an excellent foundation. The AMA model is a great one. I think what the state needs to focus on is conservation, reducing use of groundwater without replenishment, and introducing new supplies.