CAP freezes municipal capital charges at $52/AF through 2036 to buffer Colorado River volatility

CAP freezes municipal capital charges at $52/AF through 2036 to buffer Colorado River volatilityThe Central Arizona Water Conservation District has approved a long-term rate stabilization measure, using previously collected Non-Indian Agriculture funds to lock in municipal capital charges and shield local utilities from fluctuating delivery costs.

The board voted to fix the municipal and industrial (M&I) capital charge at $52 per acre-foot from 2027 through 2036.

The stabilization is funded by approximately $40 million in back capital charges collected during a 2021 reallocation of Non-Indian Agriculture (NIA) water rights.

CAP also established its first-ever groundwater recovery rate, setting a blended rate of $400 per acre-foot for 2027 to facilitate upcoming recovery operations.

Property tax levies were maintained at their statutory maximums to build CAP's Extraordinary Cost Reserve to a new $707 million target for future water acquisitions.

The Central Arizona Water Conservation District (CAWCD) board has approved a long-term rate stabilization plan, locking in the capital charge for municipal and industrial (M&I) customers at $52 per acre-foot from 2027 through 2036. Approved during the board's June 4 meeting, the fixed rate is intended to provide financial predictability to local water utilities navigating impending Colorado River shortages. The stabilization will be funded using approximately $40 million in back capital charges collected during a 2021 reallocation of Non-Indian Agriculture (NIA) water rights. Assistant General Manager for Finance and Administration Chris Hall described the capital charge as the only rate element completely within the district's control. "This is the only lever we have to pull to provide rate certainty for our customers right now," Hall said, noting that other delivery costs will remain highly volatile due to fluctuating river volumes. Warren Tenney, representing the Arizona Municipal Water Users Association, praised the decision, stating that financial certainty is crucial as municipalities prepare to invest heavily in alternative supplies, such as advanced water purification and groundwater recovery, to offset river reductions. While the capital charge is locked, overall water delivery rates will still increase. The board approved a firm 2027 water delivery rate of $326 per acre-foot, rising to a provisional $340 per acre-foot in 2028, driven by aging infrastructure, contract labor, and material costs. To prepare for imminent shortage impacts, the board also established its first-ever groundwater recovery rate schedule, setting a blended rate of $400 per acre-foot for 2027. Finance and Accounting Manager Doug Dunlap indicated the rate will initially fund credit exchange agreements, serving as "seed money" before the district transitions to more expensive direct recovery infrastructure, such as new extraction wells and treatment facilities. To fund future water acquisitions and legal expenses, the board voted to maintain its general ad valorem tax at the statutory maximum of 10 cents per $100 of assessed valuation, alongside a 4-cent water storage tax. The levies will funnel into the district's Extraordinary Cost Reserve, which recently saw its funding target increased from $444 million to $707 million. A substitute motion by a board member to reduce the general tax rate to 3.5 cents to ease the burden on taxpayers failed in a roll call vote.