Jun 8, 2023 - Business

Economic development leaders look to alleviate concerns over water

Illustration of the state of Arizona mostly filled with water.

Illustration: Maura Losch/Axios

Economic development leaders in Arizona have spent several days pushing back on concerns that the state doesn't have enough water for new housing to sustain its population growth.

Catch up quick: Gov. Katie Hobbs announced last week the Arizona Department of Water Resources (ADWR) will no longer approve new housing subdivisions in the Valley that rely on groundwater.

  • The policy comes in response to a report showing the Phoenix area faces a 4% shortfall in groundwater over the next century.
  • State law requires that new subdivisions in six "active management areas," one of which covers the Valley, show they have a 100-year water supply.
  • Most cities in the Valley have other water supplies and the policy is expected to affect primarily the western and southeastern edges of the metro area.

The big picture: Business and economic development leaders have expressed concerns that news stories could convey a false narrative to out-of-state investors that Arizona doesn't have enough water to sustain its growth.

Why it matters: Arizona competes with other states to attract businesses looking for new locations. Concerns over whether we have enough water for new housing could be a deterrent for companies considering the state.

  • Greater Phoenix Economic Council (GPEC) president and CEO Chris Camacho, who works with businesses that are considering moving to Arizona, said "headline shock" is a worry following the announcement.
  • A lot of economic development activity happens behind the scenes, said Arizona Chamber of Commerce president and CEO Danny Seiden, and states will exploit whatever advantages they have to attract companies away from competitors.
  • He noted that when Texas' power grid failed during a deadly winter storm two years ago, economic development officials in Arizona were quick to tout the reliability of the state's grid.

State of play: Camacho told us Tuesday he'd spoken with probably 200 capital markets site-selection leaders since Hobbs' announcement.

  • "Half of my job now is to clean up what this really is. And so I've spent a lot of my time I was not expecting this week on the phone with investors, on the phone with companies," he said.

1 big vote of confidence: Tom Stringer of the accounting and financial advisory firm BDO USA, who assists companies with site selection, told Axios Phoenix he's not recommending anyone avoid or reconsider Arizona due to the groundwater report.

  • He said his company is still "very comfortable" recommending the Valley to clients, and he believes Arizona has a good story to tell about its water-management policies.
  • "We can't afford to make bad decisions. In our business, we get hired to help companies make and refine their decisions," Stringer said.

Zoom in: Hobbs, Camacho, Seiden and others described the announcement and 100-year water supply requirement behind it as a positive move that shows Arizona is managing its water supply responsibly, a position shared by Sarah Porter, director of the Kyl Center for Water Policy at ASU's Morrison Institute for Public Policy.

  • "This should actually be reassuring because this is part of the program that Arizona has to make sure of long-term water supplies … and to make sure that growth occurs on renewable supplies," she said.

What's next: Camacho said it will take an "ongoing education process" to ensure that businesses and investors remain confident in Arizona's water future.

  • "If we can't solve 4% over the next 100 years through technology advancements and conservation and augmentation, we've got much bigger problems."

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