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A city water policy that had been described as "trick-or-treat" for new developers has been replaced by a tougher stance in which City Hall has denied service to four projects in unincorporated areas.

The new policy denies water to developments outside existing city service areas. It triggered a recent legal claim for $46.25 million by the developer of a saguaro-rich property in the Tucson Mountain foothills.

The developer of the 260-home Painted Hills project said the city is wrong and that this project would lie inside the service area.

The city has frustrated other developers by turning down a 3,500-home project on the far Southwest Side, and two industrial parcels on the South Side.

Some outside experts question whether it makes sense for the city to deny service to developers in unincorporated areas who can then form service areas and drill their own wells to serve themselves. Such new wells would go against efforts by local and state governments to push the use of Central Arizona Project water from a more renewable supply — the Colorado River.

"I don't see that it accomplishes anything unless it's sort of a blackmail technique," said Priscilla Robinson, a retired Tucson Water consultant and environmental activist. "Limiting water to control growth is not very practical. All water law in this state has been written so it can't be used to control growth."

City officials say they're sticking to this policy until they and Pima County can reach consensus on how to meet water needs in growing areas. A city-county advisory committee has been meeting for six months to seek that consensus. It is scheduled to finish by September.

While the water policy isn't intended to control growth, it is aimed at stimulating discussion about how far out the city should serve new development and how far the metro area should grow, City Manager Mike Hein said.

"This is a good policy because there is no real regional cooperation on water and wastewater as of yet," said Sean Sullivan, a city planning commissioner and an environmentalist serving on the advisory committee. "There's a finite amount of water currently here, a certain amount that can be served without negatively impacting the environment. Until the city and county get on board with land-use decisions determining what that threshold is, Tucson Water needs to take stock and hold back."

The city's policy shifted abruptly last December. Hein announced at a City Council meeting that the city would no longer serve new developments lying outside city limits and the existing water-service area.

Until then, the city routinely served water to any developer requesting it — a policy Hein described as "trick-or-treat." It is clear the city government has to serve all new development inside city limits. The city's obligation is less clear for areas outside the city. Currently, the only unincorporated places served by Tucson Water are areas such as the Catalina Foothills, Marana's Dove Mountain and Continental Ranch, where the city long ago cut legal agreements with developers.

"We asked our staff, 'When are we legally obligated to provide service?'" Hein said at the council meeting. "It is a question not answered in any policy documents."

Of the four projects at stake, Painted Hills is the most controversial. It was originally targeted by Pima County voters for purchase of its 285 acres as open space because of its lush, rolling hills and its thick stands of saguaro cacti. But in 2006, a Dallas police and firefighters' pension fund paid $27 million to buy it for housing.

In its legal claim filed Oct. 8 at City Hall, Painted Hills developer TDB Tucson Group said city officials ignored three requests for comment on water service when Pima County officials were reviewing the developer's application for approval of its subdivision layout. Only this fall has the developer received a Tucson Water comment, saying it would not review the application, said John Iurino, an attorney for the project.

Tucson Water lines already exist along West Speedway and Anklam roads next to the Painted Hills property, and Tucson Water already serves properties on three sides of this parcel, Iurino wrote. The letter quoted a 2007 memo from Assistant City Attorney Chris Avery saying the city cannot arbitrarily refuse to provide water to "infill" development within an existing service area.

"We're not really protesting anything. All we're doing is saying this is one of those situations where city has a clear obligation to serve," said Keri Silvyn, another attorney for the developer.

Avery, now an interim Tucson Water deputy director, declined to comment on this claim's merits. Under the law, the city must deny or otherwise respond to such a claim in 60 days. Then, the developer can file a lawsuit.

The city's stance was welcomed by neighbors who have fought the Painted Hills project.

"I think that the City Council and mayor understand the value of the natural environment, that it is an irreplaceable asset to the character of life and quality of life and are supporting (a) clear mandate voters made by approving bonds to buy that land," said Lissa Gibbs, a neighboring resident.

On Wednesday, a City Council subcommittee is to discuss a councilwoman's request to have the city deny water service to Painted Hills and to any future developers of Tumamoc Hill. The latter is a natural area west of Downtown that hosts a century-old research laboratory but is state-owned land that someday could be sold for development.

"All of us know we have a beautiful Sonoran Desert city. How do we keep the values that we have?" said Ward 1 Councilwoman Regina Romero. "It's not about Painted Hills — it's about the future and planning of all our development."

The industrial parcels, owned by Diamond Ventures, are part of a new program aimed at making vacant, job-generating parcels "shovel-ready" for new development. The idea is to get water and sewer lines and other infrastructure taken care of ahead of time. Then, a project would be ready to go when a developer arrives. The program's sponsor is Tucson Regional Economic Opportunities Inc..

In a letter to Tucson Water this month, Diamond Ventures President David Goldstein said he took great exception to the department's denial of water because Tucson Water letters in 2007 and 1999 had assured water service to the property.

"As a supporting member of TREO, I know that both Pima County and the City of Tucson have both endorsed the concept of shovel ready sites as a way to advance and promote economic development," Goldstein wrote.

Montecito developer David Larson criticized the city's decision because a Tucson Water transmission line runs underneath his 837-acre parcel. The city's position is that this line can be used only to ship water from one place to another and lacks sufficient pressure to serve development.

He said he can hook up to a private water company in the area or to the suburban Metro Water district if necessary. The Painted Hills developer may not be so lucky. "A lot of question marks" exist for Painted Hills because only a few wells lie near there and no good information is available on their water levels or productivity, said Jeff Tannler, director of the state Department of Water Resources's Tucson office.

Diamond Ventures didn't return calls seeking additional comment on the city's decision.