The State of Arizona adopted strict groundwater conservation policies under the Arizona Groundwater Act of 1980. The Act mandates direct controls on groundwater use and provides incentives to seek alternative water supplies to offset the groundwater overdraft and restrict the expansion of municipal well fields. The City of Tucson, to reduce its groundwater dependency, is contracting for Central Arizona Project (CAP) water. CAP water comes from the Colorado River and carries with it nearly a ton of salts per acre-foot. Conservation programs being investigated by the city include reclaimed wastewater reuse for municipal use and artificial recharge. Salinity, a conservative contaminant, will rise as the water carrying it evaporates away during use. Some saline incidental recharge from wastewater irrigated acreage in the municipal well field is picked-up by groundwater pumpage in what is described as the municipal water-salinity cycle. The rate of salinity pick-up is compounded in the cycle. Those responsible for achieving groundwater conservation under the mandates of the Act do not include the costs generated by salinity damages and suffered by municipal water-consumers into their conservation plans. Salinity damages costs are generated by the direct use of CAP water and the use of degraded groundwater supplies. The study results show that under assumptions of limited groundwater dilution volumes the annual rate of salinity pick-up can range from about 1.4 percent to nearly 2.0 percent. An annual average pick-up rate of 2.0 percent could degrade Tucson's groundwater supplies from the present average salinity of 300 mg/1 to 1000 mg/1 in 61 years. Thirteen scenarios were evaluated and the present value of incremental costs of both salinity damage and expenditures associated with conservation were calculated. While estimates of salinity damage costs are many times lower than the conservation program expenditures, increased salinity in groundwater will lower the future capital value of the resource in the future if ignored.