As to the AFCI issue, I think it might depend on what the basement is going to become.
If it is still just a utility area, I would say no. But if it becomes a bedroom, recreation room, den or laundry area, then per the 2020 code, yes, it would require AFCI. It will also depend on what code cycle your area has adopted, but it looks like Colorado is one of the States already using the 2020 code.
Side note:
The gas water heater needs electrical power? Technology for technology's sake I guess? One thing I've always liked about having a gas water heater is that if the power fails, at least I have hot water. I guess that's now a thing of the past?
Running side joke re: "hot water heater".
Why would one need to heat hot water?