That article is somewhat wrong. 10 million gallons of water is not enough for 300k households. It's maybe enough for 300k people. 10 million divided by 300k is 33 gallons. The average use per person even in urban areas is around 40 gallons per day - so that's generally ignoring outdoor irrigation. It's more like enough water for 200k-250k people.

So 2% of that is maybe around enough water for 5k people. Arizona has 7 million people. And residential doesn't even use most of Arizona's water.

It's fine.