Arizona House Lawsuit Combats 'Unlawful' Groundwater Tax

The Arizona House of Representatives, in partnership with the Home Builders Association of Central Arizona and Arizona State, has filed a lawsuit against the Arizona Department of Water Resources (ADWR), alleging that its newly imposed groundwater regulations constitute an unlawful tax that threatens housing affordability across the state.

Arizona House Speaker Steve Montenegro (R) announced the lawsuit this week.

At the center of the lawsuit is ADWR’s “Alternative Path to Designation of Assured Water Supply” (ADAWS) regulations, which require developers to secure 33.3% more water than necessary to meet their needs. Critics argue that the mandate forces future homebuyers to subsidize the unreplenished groundwater use of others, which drives up the cost of new homes.

“This is government overreach at its worst,” said Speaker Montenegro. “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.”

Speaker Montenegro emphasized that the 33.3% groundwater tax represents “not only a blatant overreach of executive authority, but also a direct attack on hardworking Arizona families who will see the price of new homes increase by thousands.”

Legislative leaders argue that the mandate was imposed without legislative approval and exceeds the authority granted to ADWR. The Arizona House has previously condemned the regulation, including through a formal resolution adopted by the Joint Legislative Ad Hoc Study Committee on Water Security in December and a House Concurrent Resolution passed earlier this session.

“This is a cut-and-dried case,” Speaker Montenegro asserted. “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 lawsuit seeks to block ADWR from enforcing the groundwater tax, restore the Legislature’s authority over water policy, and prevent additional financial burdens from being placed on homebuyers.

“This is exactly why our House Republican Majority Plan focuses on reining in executive overreach, making housing affordable, and lowering taxes for Arizonans,” Speaker Montenegro commented. “Homebuyers should not be forced to foot the bill for illegal taxes or subsidies for other water users.”