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➢ Recognizing that market forces now drive water reallocation from agricultural to municipal uses, structure such transfers, where possible, to maintain agriculture, but in all cases, mitigate the adverse impacts to rural communities from these transfers; ➢ Involve affected publics and fully address the inevitable environmental and socioeconomic impacts of increasing water supplies; and ➢ Recognize the fundamental political and economic inequities and the adverse environmental consequences of new transbasin diversions and emphasize the most efficient utilization of existing supplies to avoid new transbasin projects. Hydrological Impacts of the Drought The current drought, which began in 2000 and has continued to the present, has been the most severe on record by several measures. Streamflows in Colorado in 2002 have generally been the lowest in over 100 years and the tree ring data suggest that flows are probably the lowest in 300 to 500 years. In terms of multiple year streamflow deficits, the current drought is worse than the historic droughts of the 1950s and 1970s. While this drought has not lasted as long as the drought of the 1930s, it is not yet over and it has been more severe than any three -year period of the 1930s. Economic Impacts of the Drought The total economic impact of the drought of 2002 is probably in excess of $1 billion dollars, or roughly 0.7% of the state's income, although no one can yet know the precise losses. Losses occurred in several economic sectors, but mostly in agriculture, and water - dependent recreation and tourism. Federal programs and insurance mitigated some losses. Municipal use, including landscaping, is the only sector where more water supply development and/or measures to increase efficiency could have prevented a large fraction of the losses incurred. As a result, the preventable economic losses were about $250 million overall, or 17% of the total loss. Given that even these "avoidable" losses will recur only with another major drought, probably not more than once every half century, programs to prevent these losses should not cost more than $250 million and probably not even half that. Managers' Responses to the Drought Water managers' responses, though late in many cases, did have an effect on customer behavior and did achieve some reduction in customer demand. Initial efforts consisted of educational programs to encourage efficiency and voluntary conservation programs, followed by mandatory restrictions on outdoor water usage. Very few water providers adopted pricing surcharges or placed any restrictions on the issuance of new taps. Many providers invoked restrictions as a precautionary response in recognition that the current drought might not be over. Water savings achieved by municipal providers' drought response measures varied; but, preliminary results suggest that, on average, municipal water users will have reduced their normal demand by about 10% between May 1, 2002 and April 30, 2003. In most communities the public response to efforts to reduce water use was positive. iv