Arizona House of Representatives Sues Water Agency Over Groundwater Tax that Threatens Housing Affordability

In a move to protect homebuyers and restore legislative authority, the Arizona House of Representatives, in partnership with the Home Builders Association of Central Arizona (HBACA) and the Arizona Senate, has filed a lawsuit against the Arizona Department of Water Resources (ADWR). The legal action comes in response to the department’s recent adoption of an unlawful groundwater tax that threatens to significantly raise housing costs across the state.

The lawsuit targets ADWR’s controversial “Alternative Path to Designation of Assured Water Supply” (ADAWS) regulations, which impose a 33.3% groundwater tax. This mandate requires developers to secure more water than necessary to meet their own needs, effectively forcing future homebuyers to subsidize the unreplenished groundwater pumping of other users. Arizona House Speaker Steve Montenegro is leading the charge, arguing that the new tax represents an illegal overreach by the executive branch, one that directly impacts Arizona families and makes homeownership even less affordable.

Speaker Montenegro expressed his frustration with the rule, stating, “This is government overreach at its worst. The people of Arizona elected us to defend their interests, not allow unelected bureaucrats to impose illegal taxes that make the American Dream of homeownership even more out of reach. This 33.3% groundwater tax is a blatant overreach of executive authority and a direct attack on hardworking Arizona families who will see the price of new homes increase by thousands.”

The lawsuit asserts that the ADWR has exceeded its legal authority by implementing this mandate without legislative approval. The Arizona Legislature has repeatedly stated that this groundwater tax is unlawful, with a formal resolution issued by the Joint Legislative Ad Hoc Study Committee on Water Security in December and further resolutions advanced this legislative session.

“This is a cut-and-dried case,” Montenegro added. “The department has gone rogue, acting as if it is above the law and unaccountable to the people of Arizona. It ignored direct warnings from the Legislature, bypassed stakeholder input, and rushed through a rulemaking process that will drive up home prices for thousands of Arizonans.”

The Arizona Legislature is taking action to rein in the ADWR’s overreach and restore accountability, seeking to defend the authority of the legislative branch and prevent unnecessary costs from being passed on to homebuyers. The lawsuit aims to prevent the implementation of this groundwater tax and ensure that policies affecting housing affordability are enacted through proper legislative processes.

This lawsuit is part of the Arizona House Republican Majority’s ongoing efforts to protect the affordability of housing, combat executive overreach, and ensure that the state’s laws work for all Arizonans.