By Bob Christie
Capitol Media Services
PHOENIX -- Former Arizona Gov. Doug Ducey's multi-billion dollar plan for a desalination plant or other hugely expensive project to add to the desert state's imperiled water supply is still alive and has the support of his successor despite a budget crunch that will crimp funding needed to get a project built.
But Democratic Gov. Katie Hobbs' budget proposal, released Friday, cuts this year's promised $333 million deposit in the planned $1 billion fund designed to jump-start the plan to just $33 million. And that follows a nearly 50% cut last year, leaving the agency tapped to create the project with only half the money Ducey and lawmakers promised two years ago.
That's despite Hobbs saying at midweek that the obscure state entity that Ducey and the Legislature expanded to help finance the hoped-for water augmentation projects with private firms is "still alive and well.''
The director of the Water Infrastructure Finance Authority, a former Ducey staffer who also worked on water issues for former U.S. Sen. Jeff Flake, told a state House committee last week that a deal to construct the plant -- or some other facility to bring more water to Arizona -- could be finalized by the end of the year.
It has accepted dozens of basic project proposals in addition to the desalination plant backed by an Israeli firm that Ducey championed. And it expects to put out a call for formal project plans by the middle of this year and review them with an eye on its independent board picking one or more by December.
The agency commonly called WIFA was recast in 2022 and charged with identifying and helping fund ways to bring new water to Arizona, along with boosting conservation and its traditional job of helping finance water infrastructure projects.
Ducey championed the desalination plan on the Sea of Cortez in Mexico, with the water being pumped north to Arizona and had hoped to have a deal inked before he left office in January 2023.
But that ran into issues at the WIFA board and some lawmakers who expressed concern about a backroom deal with the Israeli firm and the lack of transparency. In the end, the board agreed to continue talking to IDE Technologies, but not exclusively.
The plant could cost between $5 and $10 billion and be built with private funds, and while still in the running, WIFA’s board opened the process to any project that could boost Arizona's water supply from outside the state.
The state cash could help a private firm secure financing for the project, either directly or by guaranteeing that water it produces would be purchased by Arizona water users. Customers would ultimately up paying for the much higher-priced water through higher rates.
But after the initial $333 million payment was put in the agency’s new "water augmentation” fund in the fiscal year 2023 budget, lawmakers trimmed that amount by $144 million in the current year's budget.
The rest of the money was redirected to other more immediate water infrastructure projects, including drilling new water wells in the metro Phoenix suburbs of Gilbert and Peoria, reconstructing a vital flood-control levee on the Little Colorado River in northeastern Arizona's Navajo County and building a water recharge basin on northwest Arizona's Mohave County.
WIFA Director Chuck Podolak wants that money restored in the next budget, along with the additional $333 million needed to bring the account up to the promised $1 billion. He said cutting future funding will hurt Arizona’s ability to draw private partners who will actually come up with the more than $5 billion needed to build the plant or some other water source.
"A project this size cannot be done solely by the state,'' he told the House committee that focuses on water issues on Tuesday.
"We rely on outside partners,'' Podolak said. "WIFA’s doing everything we can to be a good partner, to show that we’re being serious, to show that when we go out and enter into partnerships to bring us new water that we will make good on that. And we’re hoping that the state stands behind us on that.”
Podolak acknowledged that there's controversy and opposition to plans to bring new water into the state, or "make the pipe bigger'' as he put it. He says he's questioned regularly about why the state doesn't focus on conservation, or reclaiming water from sewage treatment plants or other cheaper ways to boost the state’s supply.
"But when you talk to water providers, the water users, the water utilities, who are responsibility for delivering water every day, every hour for decades and centuries, it is clear we need to find new supplies and bring new supplies to the state,'' he said.
That's especially true given cuts to the state’s Colorado River water supply. Arizona is getting less water from the river because of lower flows and further cuts are likely as climate change impacts snowpack in the river’s headwaters.
Hobbs' budget appears to have ended the effort to bring the cash pot up to the promised $1 billion. Facing a state deficit of more than $1.7 billion in the current and coming budget years, she slashed the deposit along with other items to fill the gap.
Even before her budget plan was released, Hobbs expressed support for WIFA and its plan to boost water supplies, although she hinted that funding was in doubt.
"WIFA is still alive and well,'' she said. "It's still doing what it was made to do.''
But the governor said funding requests have to be considered in light of the state's overall financial situation.
"They haven't spent the money that they were given before, so we're looking at that as we move forward in these more difficult budget times,'' she said. "But the purpose hasn't fallen out of sight and we're still focused on what we can do with that entity to help increase our capacity with infrastructure and potential augmentation projects.''
Christian Slater, Hobbs' spokesman, told reporters after the budget’s release that WIFA has $500 million in the bank and she will continue to evaluate its needs as they develop.
"Obviously, securing our water future is a top priority for the governor,'' he said. "So, that's something that we'll certainly continue to prioritize.''
Rep. David Livingston, a Peoria Republican who chairs the House Appropriations Committee, says the $333 million deposit remains in his chamber's budget package, but it's likely to drop.
"It’s starting there, but I doubt it will end there,'' Livingston said.
He agreed with Hobbs that WIFA is doing good things, including handing out state money for boosting water conservation.
"But finding new water sources? Maybe that was asking for it to do too much,'' Livingston said.
Andy Tobin, a former House speaker who ran Ducey's department of administration and is on the WIFA board, said he opposed asking for the nearly $500 million Podolak and the rest of the board ask for in this year’s budget.
"I said it looks like we’re not paying attention at all to the budget issues that they have at the Legislature and those people are looking to solve problems right now,'' he told Capitol Media Services. "And if we’re not ready to use the funds, I was opposed to them asking for half a billion dollars.''
All that leaves WIFA far short of the billion dollars Ducey and lawmakers planned to give it, but still charged with locating a big new supply of water.
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