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Flawed Water Planning Endangers Economy

Mike McGreer is a candidate for the Mesquite seat on the Virgin Valley Water Board.

Mesquite, NV. The Virgin Valley Water Board (VVWB) continues to advance water development and cost projections so fatally flawed they endanger the future economy of the community they allegedly serve.

This flawed process highlights a failure to recognize that “water,” as former city councilman Joe Bowler said in 1996, “will eventually stop growth in the city.” [[i]]

At the same 1996 meeting, Mike Winters, then the manager of the Virgin Valley Water District (VVWD), warned the council that the water district currently had 12,000 Acre Feet Annually (AFA) (permits and certifications) [[ii]] of water. “If the city continues to grow as it has been over the next 6 or 7 years, it will be out of water”, he said.

The current water board planners wrongly assume that water follows population growth. They convert those population projections into Equivalent Development Units (EDU’s) to rationalize the difference between business and household users. According to those planners, the EDU’s (Demand) grow from 16,068 in 2019 to 72,900 in 2080. Therefore, they assume, water availability follows those demands.

However, as shown in the chart, the supply of water to meet EDU demand exceeds the states available permits and certifications during peak periods. And the amount will exceed the permits and certifications on an annual basis by 2030.

The other key metric is the Perennial Yield [[iii]], which the State Water Engineer set at 3,600 AFA.  Former Nevada Water Engineer Jason King says that “It is the general policy of the State Engineer is to limit groundwater withdrawals from a basin to the average annual recharge to the groundwater basin or its perennial yield.” [[iv]],[[v]] On paper the District already and plans to continue exceeding those limits

On July 25, 2017, Timber Weiss, a water resource specialist for the Nevada Department Division of Conservation and Natural Resources, Division of Water Resources, warned the Water Board that the perennial yield from local Basin 222 is only 3,600 Acre Feet Annually (AFA).

And the District’s well production rate total is 15,584.80 AFA. That exceeds the 12,271 permits and certificate authorized duty. Even individually, some wells produce AFA over their permitted or certified level. At the same time, others remain below their permit or certificate levels.

Joe Bowler and other early city officials recognized that the supply of water limits growth. The current VVWB, including Bowlers’ son, Richard, plan as if the water supply is available to meet their growth projection demands over the next 40-years. [[vi]]

Board Member Ben Davis verified that assumption when in a July 7 Water Board meeting, he said: “The fastest way to stifle growth is to allow ourselves to get to the point where we don’t have any water.” 

On paper, at least, the official Nevada Water Engineer data does suggest that we do not have the water to support either current or future economic growth.   And until an objective all  source scientific study is performed to determine water availability, those state-sanctioned paper limits serve as planning guidelines.

Cost projections

Given questions about available water, any future cost projects remain seriously flawed.

Nonetheless, it is essential to begin future planning with a baseline of costs, expenses, and some analysis of public benefits.

It is also necessary to have some pricing guidelines. Water is a ‘human right.’ It is not a marketable good. Pricing water within a market structure requires an exclusive property right, which allows it, or access to it, to transfer from one person to another.  Water in Nevada, while it can be transferred, does not have clearly defined property rights. [[vii]]

Further, by statute, water is a public good. “The water of all sources of water supply within the boundaries of the State, whether above or beneath the surface of the ground, belongs to the public.” [viii]

Since all water in Nevada belongs to the public [[ix]], it requires wholesale pricing. Wholesale pricing of public goods and services avoids profiteering, price-fixing and the inflation of water values, which result in overpricing to the public. Wholesale prices enable the public to:

  1. Recover the wholesale costs of securing water,
  2. Recover Operating, maintaining, and repairing costs of their systems, and, 
  3. Generate capital replacement and reserve accounts. [[x]]

In 2019 the VVWD spent $7,247,501 to deliver water to 16,068 EDU’s for which they earned $13,103,684 in revenue for an annual profit of $5,855,779. [[xi]] That puts the cost per EDU at $364.44.

It appears from their 2020 Master Plan that 7,379 AFA came from underground resources. However, the District also passed through 2,764.30 AFA of Virgin River water used for irrigation to golf courses and a farm. The costs to deliver irrigation water is primarily born by the Irrigation Companies with little expenses attributed to the water board.

The water district leases Virgin River water to the Southern Nevada Water Authority (SNWA under the Intentionally Created Surplus (ICS) program. According to SNWA accounting records, the VVWD did not receive any funds for river water leased to them in 2019.

Depending on how much water (AFA) is delivered the cost per AFA is either $794 if only underground water is included. However, it is $577.31 if Virgin River irrigation water is added to the equation. Since irrigation water delivery is primarily a pass-through there is little cost to the water board.  Regardless, the cost per EDU remains essentially the same. 

The Water District reports capital assets of $73,376,141. These assets include $20,007,924 for water shares, which are actually stocks. And many, if not all of those stock shares are in the Mesquite Irrigation Company (MIC) and the Bunkerville Irrigation Company (BIC).

Purchasing those water stock shares created a substantial debt which the VVWB passed on to culinary water users. Thus, accountants may list them as assets but the positive value of actual assets is more likely $53,368,947.

Further, the amount of river water in a stock share likely reduced over the years. When acquired, a stock share probably had 9.06 AFA of river water in a stock share. Today a stock share has only 7.18 AFA of river water. [[xii]] Less water in a stock share means lower dollar values then projected.

It was Wesley Smith, the Chief Financial Officer (CFO), who put the debt at $20 million. [[xiii]] And Smith said the debt caused an increase in culinary water expenses of 35 % in 2010 and a 94 % [[xiv]], in 2015 for the approximately 10,000 culinary (underground) water customers served by the Virgin Valley Water Board (VVWB).

Thus, any funds received from SNWA for river water would go to offset the large debt with little if any “profit.”  

When asked during a legal deposition [[xv]], if the VVWB would continue to raise culinary rates over the next ten years, Smith said: “I’m sure we will.”

In 2019, The Water District brought in $5,855,779 more than needed to deliver primarily underground water to its customers. Nonetheless, on April 21, 2020, the water board approved a bank loan of up to $10 million.

Board Member Ben Davis during their July 7 meeting, argued that they were another $25 million short in funding future growth projects over the next ten years. These including new wells, treatment plans, storage tanks, and other infrastructure costs. To collect revenue, The Board proposes to raise System Development Costs (SDC) from $2,730 to $6,629.78 per EDU and pass them on to developers.

That is only the start. According to their 2020 “Master Plan,” the Water Board needs $40,566,000.00 in capital investment between now and 2029. And another $53,080,000 between 2030 and 2039 and another $41,747,000 between 2040 and 2060. It totals to $125,393,000 for an additional 36,225 AFA by 2060 to serve an estimated 65,814 people (not EDU’s). If that 36,225 is cumulative to the current 7,379, then the total water 46,604 AFA. That is 12 times the perennial yield and four times the number of permits and certificates currently available. Be clear, capital costs do not include operating expenses and personnel costs. Therefore the actual costs to the customers could easily double the capital expenses in any given year. 

Joe Bowler and Mike Winters were right in 1996, and their comments remain right today. Richard Bowler, Ben Davis, and the rest of the water board: Travis Anderson, Nephi Julien, and John Burrows are wrong to project water supplies more than Nevada Water Engineer planning data. And they are wrong to say, without evidence, that water is available to meet population demands over the next 40 years.

Determining, with scientific accuracy, not artificially developed numbers, is the essence of public water planning. And it seems that most public officials except the VVWB know that.

On June 9, 2017, Nevada Governor Brian Sandoval, R, signed into law Senate Bill 47 (NRS 533.024). That legislation required the State Water Engineer to prepare a “water budget” for groundwater and manage that water source “conjunctively” with surface water. According to Jason King, Nevada’s chief water engineer for Nevada’s Division of Water Resources, conjunctively also includes effluent.

(MAR) to enhance reliability of water supplies in response to droughts and floods. Bridget R Scanlon, Robert C Reedy, Claudia C Faunt, Donald Pool and Kristine Uhlman Published 8 March 2016 • © 2016 IOP Publishing Ltd RT: http://iopscience.iop.org/article/10.1088/1748-9326/11/3/035013

In 2019, Governor Steve Sisolak, D,  signed into law, SB150 requiring a county or city government to develop a water resource plan that contains an analysis of existing water demand in the community. Under SB150, water demand projects require a look at projected growth. Water board planners used straight line percentage growths in their projects. If correctly done, projected growth statistics take into account birth and death rates and factor in economic impacts such as recessions along with seasonal declines (snowbirds) of residents. 

Further, SB150 requires these branches of government to identify “all known sources of surface water, groundwater, and effluent that are physically and legally available for use in the community.”

SB150 does allow a local water district to conduct the planning for the community. Still, any future water plan requires at least an attempt at understanding actual water availability. And at a minimum must be limited, at least for planning purposes, by state sanctioned water data and correctly done population projections.

Without better planning and a thorough analysis of water availability the future of Mesquite-Bunkerville is that of a squatter’s paradise.

Endnote:

[i] Mesquite City Council meeting, Feb. 27, 1996 at: https://mesquitenv.granicus.com/DocumentViewer.php?file=mesquitenv_65b5a4d3c68085a2f2d46fbd4a215c2d..pdf&view=1

[ii] The actual number of permits and certificates is 12,271.

[iii] The maximum amount of water that can be salvaged each year over the long-term without depleting the groundwater reservoir. If perennial yield is continually exceeded, groundwater levels will decline.

[iv] Former Nevada State Water Engineer Jason King, then Nevada’s State Water Engineer, told Nevada’s legislative Committee on Natural Resources, Agriculture, and Mining on March 14, 2017)

[v] Nevada State Law does not mandate how perennial yield is calculated or used for water rights administration. Tim Wilson, Nevada State Water Engineer, in email to Michael M. McGreer June 28,2020.

[vi] 2020 Virgin Valley Water District Plan.

[vii] Those goods for which property rights do not exist are known as public resources.

[viii] Nevada Revised Statutes (NRS) 533.025

[ix] All sources of water within the boundaries of the state, above and below ground, belong to the public (NRS 533.025 and 534.020).

[x] See Agriculture water pricing: United States, Organisation for Economic Co-Operation and Development, 2010, at: https://www.oecd.org/unitedstates/45016437.pdf

[xi] Up from $4,032,168 in 2018.

[xii] This is due to a Nevada Water Engineer reduction in irrigatable land which reduced the amount of irrigation water needed.

[xiii] Deposition of Wes Smith in Paradise Canyon vs. the Virgin Valley Water District, Dec. 5, 2019.

[xiv] Deposition of Wesley Smith, Paradise Canyon LLC vs. State of Nevada, Virgin Valley Water District, Case no. A-18-774539-B, December 5, 2019 pgs. 82-83.

[xv] Ibid.

 

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About Author

Michael McGreer Mesquite, Nevada
Dr. Michael Manford McGreer is managing editor of Nevada-today.com and writes on issues that impact public policy.

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