The hundreds of small privately owned water companies in Arizona that have been spawned by development of rural subdivisions are faced with conflicting state conservation requirements and health regulations in addition to the state's public utility regulatory agency, which rules on rate cases. In many instances, developers are unwilling to subsidize the cost of maintaining and operating the water systems necessary for the sale of lots in the subdivision once all the lots are sold. Homeowners are faced with inadequate or unsafe water supplies and depreciated or unsalable properties. The size of the rate increases that would be necessary to rectify the inadequacies of these small systems is politically unpalatable, and noncompliance with health regulations caused by inadequate revenues incurs penalties. Reforms seem to be mandatory, and in the fall of 1986, a sweeping set of proposals worked out by an appointed committee was submitted to the state legislature.