groundwater replenishment; qualification; subbasins

HB2549 - 572R - I Ver

REFERENCE TITLE:
groundwater replenishment; qualification; subbasins

State of Arizona

House of Representatives

Fifty-seventh Legislature

Second Regular Session

2026

HB 2549

Introduced by

Representative
Mathis

AN
ACT

amending sections 48-3771, 48-3774,
48-3775, 48-3778, 48-3780 and 48-3781, Arizona Revised
Statutes; relating to groundwater replenishment.

(TEXT OF BILL BEGINS ON NEXT PAGE)

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 48-3771, Arizona Revised
Statutes, is amended to read:

START_STATUTE
48-3771.

District replenishment obligations; replenishment location;
source of replenishment; exception

A. For each active management area in which member
lands or member service areas are or may be located, the district shall
replenish groundwater in an amount equal to the groundwater replenishment
obligation for that active management area.� Except as provided in section 48-3781,
subsection G, the district shall complete the replenishment of the groundwater
replenishment obligation of that active management area applicable to a
particular year within three full calendar years after the year that the district
incurs the groundwater replenishment obligation.� Replenishment of the
groundwater replenishment obligation of an active management area applicable to
a particular year is complete when the amount of water added to aquifers
through water storage that has been credited directly to the district's
conservation district account pursuant to title 45, chapter 3.1, plus long-term
storage credits that have been transferred from the district's long-term
storage account to its conservation district account pursuant to title 45,
chapter 3.1, less the groundwater replenishment obligation of member lands and
member service areas located in the active management area and applicable to
previous years, less the contract replenishment obligations relative to
municipal providers in the active management area for previous years and the
year of the calculation, equals or exceeds the groundwater replenishment
obligation of the active management area for that year.

B. With respect to the portion of the groundwater
replenishment obligation attributable to a parcel of member land or a member
service area, the district shall replenish groundwater in the active management
area where the parcel of member land or the member service area is located in
an amount equal to the groundwater replenishment obligation applicable to that
parcel of member land or that member service area.

C. From and after December 31, 2029,
for real property that initially qualifies as member land pursuant to section
48-3774 and for a service area that initially qualifies as a member service
area pursuant to section 48-3780, the district shall replenish groundwater in
the same subbasin from which groundwater is withdrawn to serve the member land
or member service area.

C.

d.
Except
as provided by title 45, chapter 3.1, the district may replenish groundwater
with central Arizona project water or water from any other lawfully available
source except groundwater withdrawn from within an active management area.

D.

e.
Notwithstanding any other provision of this
chapter, if a parcel of member land is included in the service area of a
municipal provider that is not a member service area but that has been
designated as having an assured water supply under section 45-576, the
parcel of member land has no parcel replenishment obligation and the district
has no groundwater replenishment obligation attributable to that parcel of
member land for as long as the designation remains in effect.

E.

f.
Notwithstanding
any other provision of this chapter and except as provided in subsection
F
g
of this section, if a parcel of
member land is included in the service area of a municipal provider that is a
member service area and that has been designated as having an assured water
supply under section 45-576, the parcel of member land has no further
parcel replenishment obligation.

F.

g.
After
September 14, 2024, a municipal provider that submits an application for a new
designation of assured water supply pursuant to rules adopted by the department
of water resources in the Phoenix and Pinal active management areas
and
that relies on a member service area agreement may elect
for all parcels of member land in the municipal service area to retain a
replenishment obligation.� For parcels of member land that retain a
replenishment obligation, the district shall replenish groundwater in an amount
equal to the obligation applicable to that parcel of member land.

G.

h.
If,
pursuant to subsection
F
g
of
this section, a municipal provider's service area contains member lands and the
municipal provider applies to become designated as having an assured water
supply, the municipal provider shall notify the district and the director of
the department of water resources at the time of application

whether it chooses to assume the member lands'
replenishment obligation under the municipal provider's designation of assured
water supply and

member service area
agreement.� This section does not authorize new

member
lands to be enrolled within the municipal provider's service area after the
service area is designated as having an assured water supply.

H.

I.
If
a municipal provider chooses to allow parcels of member land within its service
area to retain the parcel replenishment obligation pursuant to this section,
the designation of assured water supply and member service area agreement for
the municipal provider shall provide that the parcels of member land retain the
parcel replenishment obligation for the lesser of either of the following:

1. Ten years
from
after
the date of commencement of the first term of the
designation.

2. The first term of the designation.

I.

j.
On
the lesser of the conditions prescribed by subsection
H
i
of this section, the municipal provider shall begin to
assume a percentage of the groundwater delivered to parcels of member land and
any associated parcel replenishment obligation and provide the information to
the district in the annual reports required by section 48-3775.� In the
first year of reporting pursuant to this subsection, the municipal provider may
assume not less than ten percent of the total reported groundwater delivered to
each parcel of member land. In each successive year the municipal
provider shall assume at least an additional ten percent so that within ten
years, all reported groundwater delivered and parcel replenishment obligation
are assumed by the municipal provider and the parcels of member land have no
further parcel replenishment obligation.

J.

k.
After
a municipal provider assumes all groundwater deliveries from all parcels of
member land as prescribed by subsection
I
j
of this section, the municipal provider shall cease
submitting reports to the district for parcels of member land pursuant to
section 48-3775 while the municipal provider's designation of assured
water supply remains valid.

K.

L.
If
a municipal provider assumes the parcel replenishment obligation of member
lands pursuant to a designation of assured water supply that relies on a member
service area agreement, any groundwater allowance or extinguishment credits, as
provided in rules adopted by the department of water resources pursuant to
section 45-576, associated with the member lands assumed by the municipal
provider may be used as follows:

1. If the parcel replenishment obligation and
reported groundwater delivered to the member lands are entirely assumed on the
initial designation of an assured water supply, the remaining extinguishment
credits or groundwater allowance associated with the member lands may be used
by the municipal provider as authorized pursuant to a member service area
agreement.

2. If the parcel replenishment obligation and
reported groundwater delivered to the member lands are assumed in stages as
provided in subsection
I
j
of
this section, the municipal provider may use the groundwater allowance and
extinguishment credits for the member lands in the same manner as authorized in
the applicable agreement and notice of municipal reporting requirements if the
groundwater is being reported as delivered to member
lands. Thereafter, any remaining extinguishment credits or
groundwater allowance may be used by the municipal provider as authorized under
the member service area agreement.
END_STATUTE

Sec. 2. Section 48-3774, Arizona Revised
Statutes, is amended to read:

START_STATUTE
48-3774.

Qualification as member land

A. Real property qualifies as member land only if
all of the following apply:

1. The real property is located in an active
management area in which a part of the central Arizona project aqueduct is
located.

2. The real property is not in a member service area
or in a groundwater replenishment district under chapter 27 of this title.

3. The real property is not a water district member
land or a parcel of water district member land, or in a water district member
service area established under chapter 28 of this title.

4. The conditions stated in section 45-576.01,
subsection B, paragraphs 2 and 3 are satisfied with respect to the district at
the time of the qualification.

5. The owner of the real property, or other person
or entity, such as a property owners' or homeowners' association, if the person
or entity has proper authority, records a declaration that has been approved by
the district against the real property in the official records of the county
where the real property is located that:

(a) Contains the legal description of the real
property.

(b) Declares the intent of the owner that the real
property qualify as member land under this chapter.

(c) Declares that, in order to permit the delivery
of excess groundwater to the real property, each parcel of member land
thereafter established at the real property is subject to a parcel
replenishment obligation and to a replenishment assessment to be determined by
the district.

(d) Declares that qualifying as member land and
subjecting the real property to the parcel replenishment obligation and the
replenishment assessment directly benefits the real property by increasing the
potential of the property to qualify for a certificate of assured water supply
issued by the department of water resources pursuant to title 45, chapter 2,
article 9, thereby allowing the development, use and enjoyment of the real
property.

(e) Contains a covenant that is binding against the
real property and each parcel of member land thereafter established at the real
property to pay to the district a replenishment assessment based on the parcel
replenishment obligation in an amount determined by the district pursuant to
section 48-3772, subsection A.

(f) Declares that the district may impose a lien on
the real property and each parcel of member land thereafter established at the
real property to secure payment of the replenishment assessment and any
applicable replenishment reserve fee.

(g) Declares that the covenants, conditions and
restrictions contained in the declaration run with the land and bind all
successors and assigns of the owner.

B. The declaration may contain covenants, conditions
and restrictions in addition to those prescribed by this
section. The declaration may be an amendment or supplement to
covenants, conditions and restrictions recorded against developed or
undeveloped land.

C. Notwithstanding subsection A of this section, no
real property qualifies as member land unless the municipal provider that will
provide water to the real property that is subject to the declaration records
in the official records of the county where the real property is located an
agreement between the district and the municipal provider that contains both of
the following:

1. The legal description of the real property and
the tax parcel numbers for the real property.

2. An agreement by the municipal provider to submit
to the district by March 31 of each year after the recordation of the
instrument the information prescribed by section 48-3775, subsection A
and such other information as the district may reasonably request.

D. Real property previously accepted as member land
pursuant to subsection A of this section terminates its member land status only
if all of the following apply:

1. No lot or parcel of subdivided land within the
real property has been sold or leased to a retail purchaser or lessee.

2. The state real estate commissioner has not issued
a public report for the real property.

3. If lot or parcel boundaries were previously
recorded for the real property, the planning agency having planning authority
over the real property has approved a plat vacating the lot or parcel
boundaries that were previously recorded for the real property.

4. The owner or owners of the real property or other
person or entity, such as a property owners' or homeowners' association, if the
person or entity has proper authority, records a declaration that has been
executed by the district and the director of water resources against the real
property in the official records of the county where the real property is
located
and
that:

(a) Contains the legal description of the real
property that is substantially similar to the legal description of the real
property included in the declaration recorded pursuant to subsection A,
paragraph 5 of this section.

(b) Declares that the covenants, conditions and
restrictions previously recorded pursuant to subsection A, paragraph 5 of this
section are revoked.

5. The agreement recorded pursuant to subsection C
of this section has been revoked by mutual agreement of the parties to that
agreement and the municipal provider has recorded notice of the revocation in
the official records of the county where the real property is located.

6. If the department of water resources has issued a
certificate of assured water supply for the real property, the director of
water resources has revoked the certificate pursuant to a written agreement for
revocation entered into between the holder of the certificate and the director.

E. Notwithstanding subsection a of
this section, on the effective date of this amendment to this section, the
district may determine that new real property does not qualify as member land.

E.

f.
For
the purposes of subsection D of this section,
a

"retail purchaser or lessee" means a purchaser or lessee of a lot or
parcel of subdivided lands that is entitled to receive a public report from the
seller or lessor pursuant to section 32-2183, subsection I.
END_STATUTE

Sec. 3. Section 48-3775, Arizona Revised
Statutes, is amended to read:

START_STATUTE
48-3775.

Reports

A. Except as provided in subsection H of this
section, on or before March 31 of each year after the recordation of the
instrument described in section 48-3774, subsection C, each municipal
provider delivering water to member land shall file with the district and with
the director of water resources a report that contains the following
information for the preceding calendar year, which is the reporting year:

1. The amount of groundwater delivered by the
municipal provider to each parcel of member land, identified by the applicable
tax parcel number, and the basis for the calculation of the amount of
groundwater delivered.

2. The amount of groundwater delivered by the
municipal provider to the member land and the basis for the calculation of the
amount of groundwater delivered.

3. The amount of excess groundwater delivered by the
municipal provider to the member land and the basis for the calculation of the
amount of excess groundwater delivered.

4. The parcel replenishment obligation of each
parcel of the member land, identified by the applicable tax parcel number.

5. Such other information as the district may
reasonably require.

B. On or before March 31 of each year after the
qualification of a municipal provider's service area as a member service area,
the municipal provider shall file with the district and with the director of
water resources a report that contains the following information for the
preceding calendar year, which is the reporting year:

1. The amount of groundwater delivered by the
municipal provider to all customers within the member service area and the
basis for the calculation of the amount of groundwater delivered and, if the
municipal provider has entered into a member service area agreement pursuant to
section 48-3771, subsections
H
i

and
I
J
, the amount of
groundwater delivered to member lands and the percentage of those groundwater
deliveries assumed by the municipal provider.

2. The amount of excess groundwater delivered by the
municipal provider to all customers within the member service area and the
basis for the calculation of the amount of excess groundwater delivered.

3. Such other information as the district may
require.

C. The district shall confirm the calculation of the
parcel replenishment obligation of each parcel of the member land and the
service area replenishment obligation of each member service area, using the
information provided in subsections A and B of this section.

D. To the extent allowed by the assured water supply
rules adopted by the department of water resources pursuant to section 45-576,
subsection H, in calculating the excess groundwater of a member land or a
member service area, the municipal provider shall reduce the amount of
groundwater that may be used, consistent with such rules, at a member land or
delivered for use within the member service area and that is not derived from
credits on a straight line basis over the applicable period of years prescribed
in such rules. The municipal provider may apply any credits
applicable to the member land or the member service area as allowed under such
rules.

E. The district shall prepare and file with the
director of water resources on or before August 31 of each year for the prior
calendar year, which is the reporting year, an annual report that includes the
following information:

1. The total amount of water that was stored by the
district during the reporting year pursuant to each water storage permit issued
to it under title 45, chapter 3.1.

2. The amount of water stored by the district during
the reporting year to be credited to the district's conservation district
account pursuant to title 45, chapter 3.1.

3. The amount of water stored by the district during
the reporting year to be credited to the district's replenishment reserve
subaccount pursuant to title 45, chapter 3.1.

4. The groundwater replenishment obligations for the
reporting year and for the two calendar years preceding the reporting year, and
the extent to which the district has completed the groundwater replenishment
obligations applicable to each of those years.

5. The information required under section 45-877.01.

6. The amount of water stored by the district during
the reporting year to be credited to the district's long-term storage
account pursuant to title 45, chapter 3.1.

7. The amount of long-term storage credits the
district has transferred and credited to its conservation district account
pursuant to title 45, chapter 3.1 during the reporting year.

F. The district and the municipal providers required
to file reports under this section shall maintain current, accurate records of
the information required to be included in the reports.

G. If a municipal provider fails to file a report as
required by the district, the district may assess a penalty of up to $1,000 per
day that the report is overdue.

H. A municipal provider shall not file the report
required by subsection A of this section for a parcel of member land that is
included in the service area of a municipal provider that is a member service
area that has been designated as having an assured water supply under section
45-576 unless the parcel of member land is subject to a member service
area agreement as prescribed in section 48-3771, subsections
H
i
and
I
J
.
END_STATUTE

Sec. 4. Section 48-3778, Arizona Revised
Statutes, is amended to read:

START_STATUTE
48-3778.

Annual assessment; general revenue law

A. On or before the third Monday of August of each
year after the qualification of any real property as member land, the district
shall charge an annual replenishment assessment against each parcel of member
land that is subject to a parcel replenishment obligation. This
charge becomes a lien on the parcel and shall be collected in the same manner
as an ad valorem tax. The assessments shall be calculated by the
district pursuant to this article and shall be sufficient to produce the amount
of money estimated as needed to pay the costs and expenses to replenish
groundwater established under section 48-3772, subsection A and taking
into account any annual replenishment tax levied against municipal providers
under section 48-3781 and any member service area agreement pursuant to
section 48-3771, subsections
H
i

and
I
J
.

B. The district shall promptly certify the
assessments to the board of supervisors of each county in which member lands
are located, and these boards of supervisors at the time of levying general
county taxes shall take the necessary steps for collection of replenishment
assessments against the parcels of member land within such county.

C. The assessment when collected shall be deposited,
pursuant to sections 35-146 and 35-147, in the special fund
established
under
pursuant to

section 48-3773, subsection A, paragraph 3 to be spent by the district
only for the purposes authorized by this article.

D. All provisions of the general revenue laws for
the collection of taxes on real estate for county purposes apply to the
collection of the replenishment assessment imposed by this article, including
all remedies of the revenue laws for collecting delinquent taxes and provisions
relating to sales of real property for delinquent taxes. The
exemptions applicable to ad valorem taxes do not apply to assessments charged
pursuant to this section.
END_STATUTE

Sec. 5. Section 48-3780, Arizona Revised
Statutes, is amended to read:

START_STATUTE
48-3780.

Qualification as a member service area; termination

A. The service area of a municipal provider
qualifies as a member service area only if all of the following apply:

1. The service area is located in an active
management area in which a part of the central Arizona project aqueduct is
located.

2. The municipal provider is not a member of a
groundwater replenishment district established pursuant to chapter 27 of this
title.

3. The service area of the municipal provider is not
a water district member service area under chapter 28 of this title.

4. If the municipal provider or its predecessor
previously terminated member service area status pursuant to subsection B of
this section, the service area or any portion of the service area has not been
a member service area for at least ten years.� The district may waive this
requirement if the district and the director of water resources determine that
previously unforeseen circumstances necessitate requalification of the service
area.

5. If the municipal provider or its predecessor
previously terminated member service area status pursuant to subsection B of
this section, the municipal provider agrees to pay to the district all charges
that would have otherwise been imposed by the district had the member service
area status remained in effect during the period since termination became
effective.

6. If all or a portion of the service area has
previously qualified as a member service area, the municipal provider agrees to
pay an amount equal to the amount of the replenishment taxes assessed against
its predecessor that were not paid, plus interest calculated in accordance with
section 48-3782, subsection A.

7. The conditions stated in section 45-576.01,
subsection B, paragraphs 2 and 3 are satisfied with respect to the district at
the time of the qualification.

8. The municipal provider publishes a resolution
once each week for two consecutive weeks in a newspaper of general circulation
in the county or counties where the service area is located that:

(a) Has attached to it a current map of the
municipal provider's service area.

(b) Declares the intent of the municipal provider
that the service area qualify as a member service area under this chapter.

(c) Declares that, for the privilege of withdrawing
and delivering excess groundwater within its service area and to ensure the
continued exercise of that privilege, the municipal provider shall pay an
annual replenishment tax to be determined by the district.

(d) Contains a covenant, binding against the
municipal provider, to pay to the district an annual replenishment tax based on
the service area replenishment obligation in an amount determined by the
district as necessary to allow the district to perform the groundwater
replenishment obligations.

(e) Authorizes the municipal provider to enter into
a written commitment with the district in the form and substance satisfactory
to the district regarding payment of the annual replenishment tax.

(f) Declares that the resolution applies to the
service area of the municipal provider as it currently exists and to all
additions to and extensions of the service area.

(g) Declares that the resolution is irrevocable for
as long as the district is obligated to perform the groundwater replenishment
obligations.

(h) If applicable, declares that the municipal
provider has elected to have parcels of member land within the member service
area of the municipal provider retain the replenishment obligations as
authorized pursuant to section 48-3771, subsections
H
i
and
I
j
.

B. A service area previously accepted as a member
service area pursuant to subsection A of this section terminates its member
service area status only if all of the following apply:

1. The municipal provider for the member service
area has submitted an application to the district requesting termination of
member service area status.

2. The municipal provider for the member service
area has submitted an application to the director of water resources requesting
modification of the municipal provider's assured water supply designation under
section 45-576 that eliminates the municipal provider's reliance on
member service area status.

3. The applications provide evidence satisfactory to
the director of water resources that the municipal provider has obtained a
substitute supply of water, other than groundwater, that is determined by the
director of water resources to be consistent with assured water supply
requirements pursuant to section 45-576 and that is sufficient to
eliminate the municipal provider's reliance on member service area status.

4. The director of water resources has approved the
municipal provider's application to modify its assured water supply designation
based on the addition of the substitute water supply.

5. The municipal provider publishes a resolution
once each week for two consecutive weeks in a newspaper of general circulation
in the county or counties where the service area is located that:

(a) Has attached to it a current map of the
municipal provider's service area.

(b) Declares the intent of the municipal provider to
terminate the service area�s member service area status.

(c) Declares that the district is no longer
obligated to perform the groundwater replenishment obligations on behalf of the
service area.

(d) Revokes the resolution for the member service
area provided for in subsection A, paragraph 7 of this section.

6. All amounts owed by the water provider on behalf
of the member service area to the district have been paid.

7. The municipal provider has paid or made
arrangements suitable to the district for repayment of any capital costs
incurred by the district specifically on behalf of the member service area.

C. Notwithstanding
subsection a of this section, on the effective date of this amendment to this
section, the district may determine that an ADDITIONAL service area of a
municipal provider does not qualify as a member
service
area
.

END_STATUTE

Sec. 6. Section 48-3781, Arizona Revised
Statutes, is amended to read:

START_STATUTE
48-3781.

Annual replenishment tax; contract replenishment tax

A. On or before the third Monday of August of each
year after the qualification of the member service area of any municipal
provider, the district shall levy a replenishment tax against each municipal
provider having a qualified member service area for the privilege of
withdrawing and delivering excess groundwater within the member service
area. The replenishment tax shall be calculated by the district in
accordance with this article and shall be sufficient to produce the amount of
money estimated as needed to pay the costs and expenses to replenish
groundwater established under section 48-3772, subsection A, and taking
into account any annual replenishment assessment levied under section 48-3778
and any member service area agreements entered pursuant to section 48-3771,
subsections
H
i
and
I
J
.

B. The district shall promptly transmit a statement
to each municipal provider having a member service area stating the amount of
the annual replenishment tax and any replenishment reserve fee due under
section 48-3780.01.

C. On or before the third Monday of August of each
year after the district enters into any contract to replenish water pursuant to
section 48-3772, subsection B, paragraph 9, the district shall levy a tax
against each municipal provider that is a party to a contract to replenish
groundwater at the assessment rate provided in the applicable contract.� The
district shall promptly transmit a statement to each municipal provider that is
a party to a contract to replenish groundwater stating the amount of the replenishment
tax due under the contract.

D. On or before October 15 of each year, each
municipal provider that has a member service area shall pay to the district an
amount equal to the annual replenishment tax levied by the district and any
replenishment reserve fee due under section 48-3780.01.

E. On or before October 15 of each year, each
municipal provider that is a party to a contract to replenish groundwater under
section 48-3772, subsection B, paragraph 9 shall pay to the district the
contract replenishment tax levied by the district pursuant to the contract.

F. Annual replenishment taxes and contract
replenishment taxes collected by the district shall be deposited, pursuant to
sections 35-146 and 35-147, in the special fund established
pursuant to section 48-3773, subsection A, paragraph 3 and shall be
expended by the district only for the purposes authorized by this article.

G. If a municipal provider is delinquent for more
than ninety days in the payment of its replenishment tax, the district shall
promptly notify the director of water resources of the delinquency.� Except as
provided in subsection H of this section, for any municipal provider that is
delinquent for more than ninety days in the payment of its replenishment tax,
the district shall complete the replenishment of the service area replenishment
obligation.� The district shall complete that obligation within three full
calendar years after the year that the district is paid an amount equal to the
delinquent replenishment tax, plus interest calculated in accordance with
section 48-3782, subsection A, or within ten full calendar years after
the year that the district incurs the service area replenishment obligation,
whichever is sooner.

H. The district is not required to complete the replenishment
of the service area obligation of a municipal provider that is delinquent for
more than ninety days in the payment of its replenishment tax if both of the
following apply:

1. The district is not paid an amount equal to the
delinquent replenishment tax, plus interest calculated in accordance with
section 48-3782, subsection A, within ten full calendar years after the
year that the district incurs the service area replenishment obligation.

2. The municipal provider or its successor has
violated section 45-492, subsection D or section 45-493, subsection
D and the director of water resources has not commenced an enforcement action
against the municipal provider or its successor for the violation within ten
full calendar years after the year that the district incurs the service area
replenishment obligation.
END_STATUTE