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December 28th, 2022
Courtesy of the New York Times, a look at how – in the increasingly dry Southwest – drought and climate change pose a challenge for developers, who need to find creative ways to provide water supply to new communities:
Surrounded by miles of creosote and ocotillo in the Sonoran Desert, state officials and business leaders gathered in October against the backdrop of the ragged peaks of the White Tank Mountains to applaud a plan to turn 37,000 acres of arid land west of Phoenix into the largest planned community ever proposed in Arizona.
The development, Teravalis, is expected to have 100,000 homes and 55 million square feet of commercial space. But to make it happen, the project’s developer, the Howard Hughes Corporation, will need to gain access to enough water for its projected 300,000 residents and 450,000 workers.
Teravalis is seen by local and state leaders as a crowning achievement in a booming real estate market, but it also represents the intensifying challenge in Arizona and other fast-growing Southwestern states: to build huge mixed-use projects in an era of water scarcity.
“You can’t grow and grow on these far-flung lands and put industries anywhere you want,” said Kathleen Ferris, former director of the Arizona Department of Water Resources and a senior research fellow at the Kyl Center for Water Policy at Arizona State University. “You have to be smarter about where and how we grow.”
Persistent dry conditions are driving up the cost of water and prompting more resistance to new development. But the scarcity of water is also pushing developers to innovate with design and install expensive infrastructure to save fresh water and recycle more wastewater.
A deep drought has settled on the Southwest since 2000, exacerbated by climate change. Water flow has dropped precipitously in the Colorado River and other surface water supplies that serve Arizona and its neighboring states. That is putting more pressure to supply homes and businesses from finite water reserves held in aquifers.
The consequences are being felt across the West. A proposal for a new water pipeline to supply St. George, Utah, has become the focus of public opposition. Communities in Colorado and Utah have declared moratoriums on new developments. And water supply is one reason that rural residents are fighting a proposal to increase the density of homes in Washoe County, Nev.
In Arizona, groundwater levels are falling so fast that thousands of residential wells all over the state are going dry. In 2021, the Arizona Department of Water Resources halted new-home construction in Pinal County, south of Phoenix, because groundwater pumping exceeded the supply.
In New Mexico, two proposals for big planned communities outside Albuquerque have languished because of concerns over water. At one project, Campbell Farming Corporation proposed building 4,000 homes, a commercial and retail center and two golf courses on 8,000 acres in the mountains east of the city more than two decades ago, according to planning documents, but it faced objections to groundwater use, which would total about 400 million to 500 million gallons annually. The Office of the State Engineer found that Campbell Ranch would not meet a New Mexico requirement for developers to demonstrate that their projects have a 70-year supply of water.
“It’s fundamental; you’re not doing that development without water,” said Kathy Freas, a co-founder of East Mountain Protection Action Coalition, a citizens’ group that opposed the plan.
Similar concerns are buffeting Santolina, a 13,700-acre planned development proposed in 2014 and still not under construction. Located between Albuquerque and the Rio Grande, Santolina is the focus of active public opposition because it would need 7.3 billion gallons of water a year to serve its projected 90,000 residents.County officials may require Santolina’s developer, Western Albuquerque Land Holdings, to install expensive wastewater treatment and recycling infrastructure to reduce water use and waste. The company has submitted a plan that would convert hundreds of acres from housing to solar energy development, a change that would significantly reduce water consumption but could potentially require it to restart the planning process.
“In the West, water has always been an issue, right? People are just much more alert now,” said Enrico Gradi, deputy county manager for Bernalillo County, who is overseeing the review of the Santolina project.
Water scarcity is also changing the design of Southwest’s planned communities, which no longer feature big lakes, irrigated lawns, golf courses or open drainage canals.
One example is Sterling Ranch near Littleton, Colo., a development with roads and parks that are designed to collect and store storm water for reuse. The 3,400-acre project will have a $350 million closed-loop water supply system that collects, treats and recycles wastewater for more than 12,500 residences, as well as commercial and retail spaces. The developers are also studying how to most efficiently collect and use rainwater from rooftops.
“Until there’s scarcity, most developers aren’t incentivized to conserve water,” said Brock Smethills, president of the site’s developer. “For us, the incentives were aligned on Day 1 to use less water and conserve as much as possible.”
Another example is Verrado, an 8,800-acre planned community in Buckeye, Ariz., that houses 16,000 residents. Along with 30,000 trees for shade and to slow evaporation, Verrado features a water recycling system that collects all of the wastewater from homes and businesses and directs it to a treatment plant capable of recycling 1.5 million gallons a day that is stored and used to irrigate two golf courses.
“Every responsible developer in Arizona knows water is a constraint,” said Dan T. Kelly, chief operating officer and general manager for DMB Associates, the company behind Verrado. “It’s the first question you deal with.”
The intensifying attention to water supply is especially relevant to the Teravalis project. Hughes Corporation paid $600 million to purchase the property from its previous owners, who had proposed to use 3,000 acres for a planned community that would rely on the Hassayampa Basin, an aquifer beneath the project, to supply water. In 2006, the Arizona Department of Water Resources issued two certificates to supply and build 7,000 homes.
Those certificates are still valid, but Hughes Corporation does not have access to supply water to the remaining 34,000 acres — more than 90 percent of its property. The Department of Water Resources has put the Hassayampa Basin off limits to new development while it studies how much water the underground reserve actually holds.
Water supply options for Teravalis include tapping another aquifer and delivering water by pipeline. It could also lease water from one of Arizona’s Native American tribes that have extensive water rights.
Developers also could buy rights to Colorado River water. Queen Creek, a Phoenix suburb, secured state permission and is preparing to spend $27 million to draw from the river nearly 750 million gallons for its 66,000 residents.
The adage in the West that “water runs uphill to money” applies. This year, Arizona lawmakers approved a $1 billion, three-year appropriation, essentially a down payment to secure stable water supplies.
“We’re at the very start of a new era of innovation and investment,” said Greg Vogel, founder and chief executive of Land Advisors Organization, a national brokerage and development consultancy in Scottsdale. “Teravalis will be in the making for 50 years, maybe 70 years, until buildout. They’ll have enough water.”
By no means, though, is that a consensus view.
The City of Buckeye, where Teravalis is, uses nearly 3.5 billion gallons annually for its 115,000 residents. Water consumption by Teravalis’s 300,000 residents could amount to three times as much.
In 1980, Arizona enacted a groundwater conservation law that requires developers in the Phoenix metropolitan region to assure buyers that their homes and businesses have a 100-year water supply. The law also requires developers to replenish aquifers with the same amount of water that they withdraw.
Bruce Babbitt, a former governor of Arizona who signed the 1980 groundwater law while in office, said that Teravalis would not meet either requirement. “My conclusion, based on a lot of analysis, is the project is not viable on the scale they are talking about,” he said.