SB1611 Enables ‘Ag-to-Urban’ Water Transitions for Real Estate Developers in Arizona

By John D. Burnside and L. William Staudenmaier

Arizona Senate Bill 1611 (SB1611), signed into law during the 2025 legislative session, introduces sweeping changes to Arizona’s groundwater and land use framework that could significantly benefit real estate developers operating in the Phoenix and Pinal Active Management Areas (AMAs). Widely characterized in media coverage as an “Ag-to-Urban” water bill, SB1611 is intended to facilitate the conversion of irrigated agricultural lands into urban developments by allowing developers to apply water conservation credits to new subdivision approvals.

This legislation comes in direct response to recent developments discussed in our earlier article, “Breaking News: Phoenix AMA Has an Abundance of Groundwater for the Next 100 Years and Beyond,” which reported on the Arizona Department of Water Resources’ (ADWR) updated groundwater model and the agency’s subsequent moratorium on approving new assured water supply determinations based on the physical availability of groundwater in the Phoenix AMA.

SB1611 directly addresses the regulatory bottleneck created by ADWR’s June 2023 announcement that it would no longer process Assured Water Supply (AWS) applications for subdivisions that propose to rely on groundwater. While the announcement did not mean Arizona is running out of water, it did effectively bar many developers in the Phoenix AMA from accessing groundwater as a legally acceptable source for AWS certifications. SB1611 is designed to help bridge that gap — particularly by facilitating the conversion of agricultural land to urban development.

At the core of SB1611 is a new “groundwater savings credit” program, which allows developers to permanently retire irrigated agricultural land and apply a credit toward the AWS determination for a new subdivision. These credits reflect the reduction in historic groundwater irrigation use that results from taking the land out of agricultural production. The program is aimed squarely at supporting “Ag-to-Urban” transitions, giving developers a mechanism to offset the groundwater use of new urban developments by demonstrating real, quantifiable conservation.

To generate groundwater savings credits, landowners in the Phoenix and Pinal AMAs must permanently relinquish irrigation grandfathered rights (IGFRs). Credits are then calculated based on the number of IGFR acres and historic groundwater use, with caps and multipliers that vary by AMA. Once issued, credits may be pledged to AWS applications and transferred between parties. Importantly, developers using these credits may be exempt from proving physical availability of groundwater. Usage restrictions apply, including a prohibition on credits supporting non-functional turf, decorative water features, and water parks. This is a time-sensitive opportunity: credits must be pledged by December 31, 2030, and the program will sunset entirely after 2035.

For subdivisions that rely on groundwater savings credits, SB1611 offers significant regulatory streamlining. Municipalities may not require applicants to demonstrate physical availability of groundwater and must accept ADWR’s recognition of credits as satisfying AWS criteria. This eliminates a major hurdle for many developers, particularly in hydrologically constrained areas affected by the updated ADWR model.

The law also places new limits on local land-use authority. Municipalities in AMAs may not impose certain landscaping mandates on subdivisions using groundwater savings credits. Specifically, SB1611 prohibits requirements for minimum turf or irrigated ground cover, decorative water features, excessive right-of-way landscaping, and non-drought-tolerant plants. These restrictions are intended to preserve the water savings realized through IGFR relinquishment and ensure that urban development supported by credits remains consistent with the program’s conservation goals.

SB1611 presents substantial strategic value for developers who hold or can acquire land with existing IGFRs, need AWS determinations for subdivisions in the Phoenix or Pinal AMAs, or face resistance from municipalities regarding landscaping and water-intensive design conditions. The credits can reduce reliance on new water sources, accelerate AWS approval timelines, and unlock development opportunities that might otherwise be infeasible under current hydrologic constraints. In particular, the law provides a clear path for converting agricultural properties to urban communities, using the water conservation benefit of retiring irrigation as the foundation for new growth. Successfully navigating the SB1611 credit process requires careful attention to land history, hydrologic modeling, and the applicable rules governing AWS determinations. Developers may wish to evaluate their IGFR holdings, coordinate with qualified experts to quantify available credits, and consider the timing implications of the 2030 and 2035 deadlines.