Graywater is wastewater collected from the drains in your home. The Arizona Department of Environmental Quality (ADEQ) controls graywater use throughout the state. ADEQ rules state that graywater use is perfectly legal in rural and urban Arizona if a short list of best practices is followed: see this brochure. No city, town or county may limit the use of gray water if the use is permitted by ADEQ (ARS §49-204) EXCEPT for the Prescott AMA (PrAMA).
In general, graywater may be applied to ornamental landscapes and trees. It may not be sprayed with sprinklers or allowed to pond on the ground, and it cannot be used on edible plants. For complete guidelines, see this brochure.
By using graywater for ornamental landscapes instead of tap water, groundwater use is reduced. However, less wastewater is collected for reuse and recharge.
Graywater rules for PrAMA cities:
Prescott: Graywater use is not permitted.
Prescott Valley: No local restrictions on graywater use, but the town discourages the practice.
Chino Valley: (inquiry in progress)
Yavapai County: No restrictions.