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and governmental allocation of water, with decisions made in a political setting ) that tend to promote the traditional status quo - and conflict. Increasingly now, new approaches to efficient water allocation are evolving to augment - or even replace traditional approaches, Examples of innovative water transfer and negotiations point to the need for a new type of water manager. Water managers historically trained to manage water supplies are now being required to manage use, users, finances and attitudes- rather than just the water itself. Engineers predominate in water agencies. They are trained to build structures. They must be supplemented with innovative, efficient business people as the New Era of Conservation takes hold. Innovative thinking combined with creative public relations and community education will be in demand. Perceptions are critical. Without an experienced, motivated public relations team; the probability of political embarrassment and failure is high. Engineering will be secondary. Water will become a dynamic business. The future demands excellence and change, not tried routine methods. Change challenges - as it should. This shifts the power to thinking people and creates conflict with those in power - the status quo. This simple but dynamic equation is the basis for democracy. (old & powerful vs young & vital - good vs evil) Truth is a powerful force. Free markets are dynamic and through a variety of signals best represent reality. Thousands of years of experience prove this. IT WOULD APPEAR THAT FUTURE PROSPECTS FOR STRETCHING WATER SUPPLIES WILL REQUIRE LESS TECHN'OLOGY AND MORE IMAGINATION. THE GENERAL CONSENSUS AMONG LEADING EXPERTS AND POLITICANS SUGGESTS THAT VALUE IS THE CONTINUING KEY TO SOUND WATER MANAGEMENT WITH PRICING AND WATER MARKETS EMERGING AS EFFECTIVE TOOLS TO MANAGE FUTURE WATER DEMAND. No longer insulated from the true cost of water projects by federal dollars, states are going to have to begin developing new ways to prioritize and fund such future needs as water delivery systems, wastewater treatment systems and groundwater reclamation and monitoring programs. The high cost of building new water systems will force states to look at alternative, more innovative approaches to water management. Conservation, true-cost water pricing and water markets will offer economical, non-structural options for managing water demand. In moving from an era of supplying water demands to one of managing those demands, however, present social, economic, political and legal institutions will require modification. The public will need to become more supportive of conservation as well as more willing to pay higher prices for water supplies. Agriculture will need to implement more effective conservation practices and, in some arid regions, shift to less water-intense crops. Water development in the United States, particularly in the West, has been driven by vision rather than by regional environmental realities of financial feasibility. Continued development will require a different kind of vision - one based on learning to live with less water, rather than endlessly striving to supply more. THE INCREASING ECONOMIC VALUE OF WATER AND THE EMERGENCE OF WATER MARKETS CAN BECOME EFFECTIVE TOOLS TO ENSURE WISER MANAGEMENT OF WATER DEMAND INTO THE 21ST CENTURY. We anticipate this very serious social challenge will allow American Water Resources, Inc. the opportunity to establish an important position in a new and exciting industry. WATER MARKETING - BANKING. Thomas C. Havens, President fllCf 339o.FB'b