By Staff Reporter |
Gov. Katie Hobbs’ overruled housing moratorium could leave taxpayers on the hook for more than $1 billion in compensation to builders.
The housing moratorium was a result of the Arizona Department of Water Resources’ (ADWR) indefinite suspension of developer certificates throughout the Valley based on new groundwater regulations imposed under Hobbs in 2024.
For decades, state law required developers to prove 100 years of assured water supply for their developments. Once Hobbs took office, ADWR imposed new regulations that expanded developers’ duty to prove assured water supply beyond their development into the surrounding water management area.
The Home Builders Association of Central Arizona (HBACA) sued ADWR over the regulations last January, represented by the Goldwater Institute. Last month, the Maricopa County Superior Court sided with HBACA and struck down the moratorium. Judge Scott Blaney found that ADWR violated Arizona law on the extent of its powers and on agency rulemaking.
ADWR plans to appeal the ruling.
A former ADWR director and one of the leading policymakers behind the legacy rule on assured water supply (the 1980 Groundwater Management Act) spoke out against the superior court ruling.
Kathleen Ferris, now an Arizona State University (ASU) senior research fellow with the Kyl Center for Water Policy, told KJZZ last month that ADWR was justified in its rulemaking because it had discovered that Phoenix-area groundwater was more interconnected than understood previously.
Whether that court ruling will stand on appeal or no, taxpayers will likely be on the hook for hundreds of millions — perhaps over a billion — in builder compensation claims filed under the Private Property Rights Protection Act, enacted under Proposition 207.
Prop 207 entitles property owners to just compensation for any land use laws’ impact on the use, division, sale, or possession of their property that reduces its fair market value.
One such Prop 207 claim is already underway.
Last September, developers Buckeye Tartesso and Buckeye Tartesso II filed a claim demanding over $320 million in compensation for lost value due to the ADWR rule. That figure, however, reflected only a low estimate which the developers felt they could accept as a settlement.
“[This figure] incorporates a number of conservative assumptions, and the [developers] expect that actual, proven damages would be significantly higher,” read the demand letter. “This demand is an offer of settlement, in the nature of a compromise, and the [developers] reserve the right to seek additional or different damages if litigation is necessary.”
ADWR prevented the developers from obtaining a certificate of assured water source for the Tartesso development in the city of Buckeye, which spanned over 12,800 acres. As a consequence, they were prohibited from subdividing or selling lots on that property.
The Goldwater Institute filed the claim on behalf of the developers.
Should all builders file similar claims, taxpayers could be on the hook for over $1 billion in compensation payments at a time when the state is already struggling with budget woes.
Gov. Hobbs inherited a budget surplus of over $2.5 billion from her predecessor, Republican governor Doug Ducey. After two years in office, the budget plunged to a $1.4 billion deficit: a near-180 on the state’s fiscal health.
The latest figures reflect a slightly better status, though still nowhere near in the black: a deficit of over $300 million, according to Rep. David Schweikert (R-AZ-06).
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