It's illegal because apparently water that falls on the ground is supposed to be a municipal ownership item. Having rain barrels stops rain water from flowing into reservoirs and aquifers.
I don't get it though. If I have a rain barrel I'm still going to let the water flow on the ground where the excess that isn't absorbed by plants will flow into the groundwater, I'm just doing it over a longer period. In fact, if you use drip irrigation you'll lose less water to evaporation and more will be flowing into the aquifer.
Yeah, sorry if I wasn't clear. I remember what they were saying the justification was, but it doesn't make any sense to me.
It actually isn't a municipal ownership thing, it is a private ownership thing. There is a farmer way downstream on the eastern plain who has been using X acre-feet of water per year and according to state law, he has a right to the water that has always been flowing in the river next to his farm because he started using it first. Add that up to all the farmers in the state and all of the water in all of the rivers has been accounted for. Water rights in Colorado are decided on a "first in use, first in right" basis so technically according to state law, if you use the water that falls on your land (or your house) you are stealing water from people downstream who own those water rights.
It's silly, but at the same time it discourages people from using more water than necessary. If you can't use a rain barrel and have to water all of your plants with municipal water you pay for, you will probably grow fewer irrigation-requiring plants because the municipal water is expensive.
Currently the only exemption for rain barrels in Colorado is for people who do not have access to municipal water and use a well. They can use a rain barrel because the thinking is that the water will go into the water table anyway. If someone started doing large scale irrigation farming with the water flowing off a large warehouse, the state would probably come down on them even if they technically didn't have municipal water.
Almost all municipal water in Colorado comes from public works projects to store water and divert it from one river to another. About 70% of Denver's city water comes from the west (far) side of the continental divide and is diverted through tunnels in the mountains. Lake Dillon in Summit County is purely a water storage project created to get water into a tunnel that comes out near Bailey, CO. Almost all of the water in Lake Dillon will eventually water lawns in Denver.
I follow water law and usage a lot so if you have questions about how silly Colorado is (note: its silly because there are way more people living here than rainfall can supply), let me know.