Counties Could Gain Water License Authority, Impacting Agriculture and Development Start-up Costs

A legislative proposal in Hawaiʻi aims to transfer the authority for issuing water licenses from state agencies to individual counties. This shift could significantly alter how water rights are managed and allocated across the islands, with immediate implications for agricultural producers, real estate developers, and businesses reliant on consistent water access. The bill's proponents argue this move will better align water management with local needs and priorities, particularly in areas like Maui County which seeks to regain control over stream diversions.

The Change

House Bill 1195 (introduced in 2026, with potential enactment in late 2026 or early 2027, depending on legislative progress) proposes to grant counties the primary authority to issue licenses for the diversion and use of water resources. Currently, these licenses are primarily managed by the state Commission on Water Resource Management (CWRM). This proposed legislation seeks to decentralize this power, allowing each county to establish its own licensing framework. Specifics regarding the timeline for implementation are contingent on legislative approval and subsequent county-level adoption of new ordinances and procedures. For example, Maui County has expressed interest in leveraging such a change to take over management of existing private stream diversion systems in East Maui.

Who's Affected

Agriculture & Food Producers

Farmers, ranchers, and aquaculture operators are directly vulnerable to changes in water licensing. Shifting authority to counties could lead to:

• Varied Access and Costs: Each county may develop different licensing criteria, water fees, and allocation limits. This could create an uneven playing field across the state and increase operational costs for those operating in multiple counties or expanding their operations.
• Uncertainty in Water Availability: New licensing processes and potential county-specific restrictions could introduce uncertainty regarding the long-term availability of water for irrigation and livestock, impacting crop yields and production volumes.
• Potential for Delays: A transition period where counties develop their new frameworks could lead to delays in obtaining or renewing water licenses, potentially disrupting planting schedules and operational continuity.

Real Estate Owners

Developers and property owners, especially those planning new construction or expansions, will be significantly impacted. The implications include:

• Increased Development Costs: Securing water rights is a crucial early step in any development project. If county-led licensing processes are more complex, time-consuming, or expensive, it could add 5-15% to upfront development costs and extend project timelines by several months.
• Zoning and Land Use Conflicts: County-level water licensing could become intertwined with zoning and land use approvals. Disagreements or differing priorities between county planning departments and water resource departments could create new hurdles.
• Impact on Affordable Housing Initiatives: Projects aimed at increasing housing supply, particularly affordable housing, may face increased financial and regulatory burdens, potentially slowing down or halting progress.

Tourism Operators

While not as directly impacted as agriculture or development, the tourism sector faces indirect consequences:

• Impact on Infrastructure Development: New hotels, resorts, or major tourist attractions require significant water resources. If county water licensing becomes more restrictive or costly, it could slow the pace of new hospitality development or expansion.
• Operational Costs for Existing Establishments: Hotels and other tourism businesses use substantial amounts of water for amenities (pools, laundry, landscaping). Any increase in water costs due to new licensing fees or allocations could be passed on to consumers or impact profit margins.
• Potential Strain on Water Resources: In water-scarce regions, increased demand from new tourism developments, if not managed effectively through county licensing, could strain local water supplies, potentially affecting residential use and community well-being.

Second-Order Effects

Should counties gain primary control over water licensing, the ripple effects could be substantial in Hawaii's constrained island economy. For instance, increased upfront costs and longer timelines for securing water rights in development projects could slow the pace of new residential and commercial construction. This slowdown in supply, coupled with ongoing demand, could exert upward pressure on housing prices and commercial rents. Simultaneously, if agricultural water allocation becomes more uncertain or costly, it could reduce local food production, leading to higher food prices for consumers and potentially increasing reliance on imported goods, thus widening the state's trade deficit and impacting food security.

What to Do

Act Now: The legislative process for HB 1195 is ongoing, but its potential to redefine water resource management across Hawaiʻi necessitates immediate engagement from affected parties.

Agriculture & Food Producers

• Action: Proactively meet with your respective county's planning department and any existing water resource management offices. Inquire about the potential implications of HB 1195 and understand their current processes for water use permits. Compile detailed records of your current water usage, future needs, and any existing water rights agreements.
• Timeline: Begin these engagements within the next 30-60 days to establish a dialogue before any legislative decisions create tangible policy shifts.
• Guidance: Document all discussions and understand the specific metrics and criteria each county might use for future water allocation. Identify critical crops or operations highly dependent on consistent water flow.

Real Estate Owners

• Action: For any planned or ongoing development projects, conduct an immediate water resource assessment. Engage with county planning and public works departments to understand current water availability, infrastructure capacity, and any anticipated changes under a county-led licensing system. Review existing leases and development agreements for clauses related to water supply and permitting.
• Timeline: Engage immediately, especially if project timelines extend beyond one year, as new licensing processes may cause unforeseen delays.
• Guidance: Build contingency time and budget for potential increases in water access costs and permitting durations. Explore water conservation technologies and potential for on-site water capture or recycling where feasible.

Tourism Operators

• Action: While impacts are more indirect, tourism operators should monitor county-level water management discussions and any potential changes to water rates or regulations. For larger establishments or those planning expansions, assess current water usage against potential future supply constraints or cost increases.
• Timeline: Begin monitoring county planning meeting agendas and public notices related to water resources within the next 90 days.
• Guidance: Advocate through industry associations for clear, predictable, and sustainable water management policies that balance growth with resource conservation. Consider implementing or enhancing water-saving measures within your operations.

This legislative shift underscores the critical nature of water resources in Hawaiʻi. Early engagement with county authorities and proactive planning are essential to navigate potential changes and mitigate risks to your business operations.