Using Water Shortages to Curtail New Development

Description of Technique
In some regions, existing or potential future shortages of water threaten to limit future growth and development. Groups interested in curtailing future growth and development sometimes use this threat to block specific proposed development projects, claiming that there is not enough water to accommodate them and also to serve existing requirements.

Background Analysis
A key issue concerning water shortages is the prices that are charged water users by public authorities responsible for supplying water. If those authorities charge users prices that are far below the actual marginal cost (the cost of the last gallon produced) of supplying that water, users will not be motivated to conserve water. This can lead to inefficient wasting of water that would be conserved if users had sufficient incentives to conserve it.

Authorities often charge average costs of water, rather than marginal costs, thereby reducing user incentives to conserve water. For example, in one area, water from wells costs $100 per acre-foot, while water procured from the federal government from large rivers costs $40 per acre-foot. If the authorities mix water from these two sources and charge users only the average cost—say $60 per acre foot—then users will use a lot more water than they would if they were charged the full marginal cost of $100. In 1995, the total amount of fresh water withdrawal for all purposes in the entire U.S. was 341.0 billion gallons per day. But only 3.39 billion gallons were used for all domestic purposes—including all residential uses. Another 2.89 billion gallons were used for commercial purposes.

Thus, only 1.8 percent of all fresh water used daily is consumed by residential and commercial properties combined. Industry—both urban and rural—used another 20.7 billion gallons. The biggest users of fresh water are agricultural irrigation (39.3 percent), thermoelectric power generation cooling (38.7 percent) and industry (6.1 percent). Together, these users consume 84.1 percent of all fresh water used each day—or 47 times as much as all residential and commercial properties combined. It is clear that even small changes in water usage by these three sources could have immensely more effect in saving water than huge changes in residential and commercial property usage.

In only four states and the Virgin Islands does the combined usage for domestic and commercial purposes exceed 8 percent of total fresh water usage. Those four states are Alaska, Maine, New Hampshire and Oregon. All but Oregon have small populations and little agriculture; and all four have large-scale timber operations that use water. In other words, urban uses are not the main causes of any water shortages that arise. Restricting such uses to save water will not be nearly as effective as adopting other conservation measures concerning other types of uses.

California, Arizona and Colorado are three states in which potential fresh water shortages are sometimes cited as obstacles to further urban growth. In these three states, a 100 percent reduction of all 1995 domestic and commercial uses would equal only 1.7 percent, 1.06 percent and 0.28 percent reductions in their irrigation uses of water, respectively. Clearly, domestic and commercial uses of water are nowhere near as great possible obstacles to future growth as the irrigation uses of water. It would be almost silly to restrict future increases in domestic and commercial uses to combat possible water shortages when irrigation uses so much more water.

Potential Benefits of Technique From General Public Point of View
It is socially desirable to prevent future shortages of water from arising by prohibiting additional developments that are likely to create future imbalances of water supply and demand. This technique can be far less costly in the long run than trying to expand future water supplies through developing new sources or channels, especially if the water would have to be moved long distances to existing localities. However, the amount of water used by urban development activities is so small in most areas that changing it greatly would not affect total water usage significantly.

Potential Drawbacks of Technique from General Public Point of View
It is not efficient to restrict growth and economic development to save water when the new developments associated with growth consume such small percentages of total water used in each area. Other types of conservation aimed at agriculture, power plant cooling and industrial uses would be far more effective at saving fresh water, since they use so much higher percentages of all such water consumed.

Practical Lessons from Application of Technique
In practice, restrictions on future urban growth to conserve water have almost no impact upon actual total consumption of water in the regions concerned, for reasons clearly explained above. Therefore, use of this technique can be considered almost purely an anti-growth measure, rather than a serious attempt to combat an existing or potential shortage of water.

Strategic Considerations for NAIOP Members Faced with Technique
NAIOP should point out what a small proportion of total water consumption arises from all urban uses, and that an even tinier oportion of such consumption would be generated by additional development in the region. Therefore, other measures of water conservation are sure to be more effective than restricting new urban development, without imposing the other costs to the community that such restrictions entail.

Advantages from NAIOP’S Perspective
None.

Disadvantages from NAIOP’S Perspective
This technique restricts development supposedly to save water, when development uses very little of the total water consumed in each region. Other forms of water conservation would be far more effective at saving water without imposing the economic costs of restricting new development.