The great Central Arizona Project funding switcheroo

  • Central Arizona Project

    US Bureau of Reclamation

Note: This article is a sidebar to this issue's feature story, "The New Water Czars."

Spend enough time in Phoenix, and it’s easy to forget the city sits in a sweltering desert valley that receives less than eight inches of rain a year. Cool misters spray shoppers on the sidewalks of Scottsdale, the ritzy enclave just east of Phoenix, and kayakers paddle a placid lake in front of Sun Devil Stadium on the campus of Arizona State University.

Much of that water is pumped in from the Colorado River, about 160 miles away. And while the waterworks has been operating for two decades, it has yet to be paid for — a fact that is at the center of a long-simmering debate.

In 1968, the state of Arizona and Congress agreed to build the Central Arizona Project, or CAP, a 336-mile system of canals and pumps that lifts water more than 3,000 vertical feet from the Colorado River to Phoenix, and then on to Tucson. The feds picked up much of the cost, but there’s been lots of squabbling about how large Arizona’s share of the tab is — especially as the price of the project dramatically overran original estimates. When CAP was finished in 1993, at a cost of $4.7 billion, the federal government pegged Arizona’s payback at $2.3 billion.

When the Central Arizona Project first started delivering water in 1983, Phoenix and Tucson weren’t using anywhere near their share. In order to use its full allocation, and prevent California from taking the unused water, the state of Arizona essentially gave the water away to farmers at slightly more than cost. Phoenix and Tucson, in turn, underwrote the farmers’ purchases of that water until the cities needed it themselves.

But in 1998 — at about the same time that settlement talks were heating up between the Gila River Indian Community and the federal government — Arizona took the federal government to court over the state’s share of the bill. Arizona agreed to give the federal government the 200,000 acre-feet of CAP water it needed to settle the Gila River community’s demands, plus 67,000 additional acre-feet for future tribal settlements. In return, the federal government reduced the state’s payback cost to $1.65 billion, saving the state $700 million over the 50-year payback period, and also waived farmers’ obligations to repay $73 million borrowed to build distribution systems. Farmers also get a two-thirds discount on leases of excess CAP water through 2030 — water allocated either to tribes that, so far, lack the infrastructure to put it to use, or to cities that don’t yet need it.

The CAP repayment plan, says Gregg Houtz of the Arizona Department of Water Resources, "is really the driving force of the (Gila River Indian Community) settlement." It reduced the state’s payback cost, eliminated debt for farmers who lost their water to the Indians, and created a secure source of funding for the tribes’ water infrastructure projects. In a deal brokered by Arizona Sen. Jon Kyl, R, the money Arizona pays to the federal government for CAP doesn’t even leave the state — it gets redirected to reservations like the Gila River Indian Community for their water projects.

Who picks up the $773 million tab that the federal government has assumed so the water can move to the Indians? Federal taxpayers. And what about Phoenix, which was set to take the water from Arizona farmers? Will it lose out now that 267,000 acre-feet of water is being transferred to Indian tribes? Not exactly: Under the Gila River Indian Community water settlement, Phoenix can lease some of that water back from the Pima and Maricopa Indians — after they mark it up more than 1,000 percent over what cities are currently paying.

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