Phoenix, AZ

Arizona Faces Massive Water and Growth Issues With New Stage 1 Alerts

Mark Hake

The cities of Phoenix and Tempe, AZ declared a Stage 1 water alert and instituted drought management plans on June 1. They join Scottsdale, AZ, which had already declared a Stage 1 alert on January 11, and Mesa, AZ which did so on May 18.

Scottsdale asked its residents to start using 5% less water, including all residents, businesses, and visitors. Scottsdale said the state is now officially in Tier One of a Colorado River supply shortage. 

In August 2021, the U.S. Secretary of the Interior declared the first-ever Tier 1 shortage for Colorado River operations. The shortage was to start in 2022 and involved a substantial cut to Arizona’s share of the Colorado River. So far residents have not felt the effect, as it impacts central Arizona agricultural users.

But now major cities in Arizona are moving to a Stage 1 alert and implementing drought management plans. For example, not too many people know that 70 percent of residential water is used outside. That means that implementing a reduction in water usage involves simple measures like:

  • adjusting water irrigation timers
  • convert to Arizona landscape from grass
  • use WaterSmart portals (Scottsdale) and amwua.org (Phoenix)

Stages two and three of the water plan could include stricter measures like restrictions on when residents can wash cars or water lawns. Tier 2 restrictions could potentially go into effect in August, according to 12News.com.

Stage four could trigger restrictions on residential swimming pools. 

Water Holding Up Commercial Developments

Recently, water issues have started affecting commercial developments in the Phoenix area. A major project south of Apache Junction, AZ called Superstition Vistas has been recently held by AZ authorities.

This was to be a development that is larger than the city of Tuscon. It would house 900,000 people in thousands of homes in a series of master-planned communities.

But apparently, there isn't enough water for all those people. According to 12News sources, the state of Arizona has refused to let any project go forward that relies solely on groundwater and Superstition Vistas has no dedicated water source.

Moreover, according to Kathleen Ferris, a senior water research fellow at Arizona State University, over 1 million people are projected to move to over 2 dozen master-planned communities like the one being developed in Buckeye called Douglas Ranch. This community is being developed by the Howard Hughes Corporation (NYSE:HHC). The community says it will have enough water.

But Ms. Ferris was quoted by CNBC as saying, "there isn’t the water to sustain that growth. Not with groundwater.”

The massive growth in Arizona and the Phoenix area could end up being stunted if the supply of water issue is not addressed. But others disagree. Governor Doug Ducey says that Arizona now uses less water than it did in 1957. He and other factions believe that proper management and prudent planning of water resources will allow water to be available for the state's continuing growth.

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Mark R. Hake, CFA writes articles at InvestorPlace.com, Barchart.com, Medium.com, and Newsbreak.com as well as a Beehiiv free newsletter on stocks and cryptos.

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Mark Hake is a financial analyst, investor, and Chartered Financial Analyst (CFA). He writes about US and foreign stocks as well as cryptos, hedge funds, and private equity. He previously ran his own hedge fund, investment research firm, and acted as CFO for a fintech startup. He focuses on finding value, arbitrage, and hidden asset opportunities.

Phoenix, AZ
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