The City of Tucson is refusing new water connections outside its city limits.

The City of Tucson is also considering raising its water connection fees.

It is about time Tucson started paying attention to the relationship of its water utility and growth in the region.

Since the 1960’s Tucson sought to monopolize water service in eastern Pima County as a water management effort. To that end, Tucson extended its water utility service throughout the Catalina Foothills and into the Northwest. The result was over 100,000 people living in those areas getting water from Tucson, but who refuse to be annexed into the city.

More people live in unincorporated areas of Pima County than live in such areas in Maricopa County, which has 4 times the population of Pima. Tucson’s water policies had a lot to do with that result.

This has a massive negative impact on state revenue sharing for Tucson in that only incorporated cities and towns get the lion’s share of state revenue that is shared. Thus the residents of the unincorporated areas of Pima County cost the region millions of dollars annually because they don’t want to be in a city or town.

Very little area of Maricopa County is outside the city limits of their cities or towns. The primary reason for this is no city or town in Maricopa County would extend its water and sewer system service to new developments outside their incorporated limits without the development signing an annexation petition. Thus virtually all new development in Maricopa County has been in incorporated areas. And Maricopa County has a fraction of the budget liabilities for roads and police protection that Pima County has with Pima having to provide urban services to people outside city limits.

Tucson, on the other hand, extended its water service without the annexation condition, and also turned over its sewer system to Pima County. Pima is the only county in Arizona providing sewer service. Thus, the tools to insure urban residents were inside the incorporated limits were abandoned.

Not surprisingly, we have seen a proliferation of new towns around Tucson, just as new cities and towns proliferated in Maricopa County. Two of the new Pima County towns (Marana and Oro Valley) have stepped up to the plate and are attempting to control water utility service in their jurisdictions. The Town of Sahuarita already has its own sewer system, the only municipality in Pima County that does this.

While Tucson has generally fought the incorporation of new towns, and Pima County seeks to block towns having their own sewer systems, a fundamental change is needed in the region regarding water and sewer service.

The first thing that needs to be done is for Tucson to resolve its fight with the towns over water service, and get out of providing water inside places like Marana. Let Marana go find the renewable water needed for its growth and charge appropriately for new connections. Tucson could then redirect its valuable water resources now being committed to developments in Marana to growth inside Tucson’s city limits.

The second thing is to let Marana have its own sewer system. If Oro Valley wants into the sewer utility business, let them have at it. Tucson really ought to take back its sewer system as well. The cities and towns could hire Pima County to manage their sewer systems, but Pima County absolutely should not be allowed to control growth inside the incorporated limits of cities and towns via sewer system policies.

The basic effect of letting the towns get into the sewer game is they’ll have to establish new sewer connection fees for their growth paid for by the development in their towns. The rest of Pima County would then not have to subsidize growth in Marana and Oro Valley.

The third thing needed is to maximize the urban areas in Pima County that are inside city or town limits. Tucson ought to negotiate “sphere of influence” agreements with surrounding towns delineating which jurisdiction has precedence for annexation. These “spheres of influence should exactly match water and sewer service areas of the cities and towns.

Pima County would be the ultimate beneficiary of getting urban area roads and police protection shifted to urban governments.

Within its own jurisdiction, there are significant steps Tucson can take to redirect its relationship between water service and growth.

The first step is to charge a much higher water connection fee for new developments outside its city limits.

It is now the case that there are areas outside of Tucson’s city limits that are surrounded by Tucson Water service. It is not realistic to deny water service to such areas, since there is no other option. The die has been cast by Tucson already having served outside its city limits. Some of the areas Tucson is now refusing service to were included in Tucson’s designation by the Arizona Department of Water Resources of having an assured water supply. Some of these areas were also in areas claimed to be served by Tucson when it got its Central Arizona Project allocation of water. And in at least one area Tucson is backing off water service, that decision is tainted by efforts to confiscate the property for an open space park. Simply refusing service invites significant litigation and liability to Tucson it doesn’t need right now.

But that doesn’t mean city water customers ought to subsidize growth outside Tucson’s city limits.

The water connection fee outside Tucson’s city limits ought to be at least four times that for a connection inside the city limits.

Why? Consider that every resident served by Tucson Water outside Tucson’s city limits does not generate state revenue share to Tucson. That’s something like $200 per person per year. That lost revenue opportunity needs to be added onto the outside city limit water connection fee. The properties outside Tucson’s city limits also do not generate any property tax revenue to Tucson. That also needs to be factored into the outside city limit connection fees.

Another reason is the market value of an acre foot of renewable water (precedent set by Prescott Valley) is in the range of $20,000 an acre foot. An acre foot of water can serve 3 new homes. Thus each new home takes $6,666 worth of water right to create it. And then there’s the actual cost of the wells and pipes to serve a new home, which state-wide runs around $3,000 a home. It is probably more expensive in Tucson.

Thus, an $10,000 per new home connection fee for new homes outside Tucson’s city limits can be justified, and defended from any attacks by the homebuilders lobby.

Insofar as any new development is close to the existing Tucson city limits, one can bet that given the choice of an $10,000 per home connection fee outside the city limits, versus a $3,000 fee inside the city limits, developers would try real hard to be annexed into Tucson.

If they can’t be annexed for whatever reason, such as homeowners between their development and the city limits that refuse to be annexed, then so be it. Charge $10,000 for the new water connection.

The higher connection fee for new water connections should be limited to areas Tucson could realistically annex. For example, the Tucson Mountain foothills, Catalina Foothills and far east side areas would not likely be annexable by Marana or Oro Valley in a “sphere of influence” context.

That brings up the second issue Tucson should confront.

There is absolutely no justification to charge the same water rates to its customers outside its city limits than inside, except the fear of the storm of protests from residents outside Tucson’s city limits.

Again, those residents outside the city limits served by Tucson Water are not generating state revenue share or property tax money to Tucson. Residents inside Tucson are generating that additional cash flow to pay Tucson’s governmental service costs.

The only limit in state law on a city charging higher rates outside its incorporated limits is a 25% cap on rates inside another city or town. Thus Tucson Water could raise its rates an additional 25% for its water service in Marana and Oro Valley. As noted earlier, Tucson needs to get out of serving water in other towns because there is obviously no annexation potential for Tucson in those areas.

There is no such limit on higher water rates in the unincorporated areas.

Tucson could charge double the rates in those areas, and it should.

Of course residents in areas such as the Catalina Foothills would scream to high heaven if their water rates were twice what people inside the city limits pay.

So what. They don’t vote in Tucson elections….unless they agree to be annexed. And if they were annexed, they could then cut their water bills in half.

And that is exactly the point.