Mesquite, NV May 24, 2018
Tuesday evening the Virgin Valley Water Board (VVWB), finalized an agreement to lease irrigation water at 6 times the average lease rate for irrigation water [i] to the Conestoga Golf Club, LLC
Between 1992 and 2010, the VVWB gave away $12 million (plus) for 550 Virgin River share (3,000 AFA) permits held by shareholders in the Mesquite Irrigation Company (MIC) and the Bunkerville Irrigation Company (BIC).
In addition to earning $12 (plus) million in cash, MIC and BIC shareholders also earn money by annually leasing their shares to the Southern Nevada Water Authority (SNWA). For example, in 2011 MIC shareholders earned $1,160,459.46 in lease revenue from SNWA. About the same time, BIC shareholders earned $706,424 in lease revenue from SNWA.
The Conestoga agreement requires VVWB to lease 100 shares (718 Acre Feet Annually AFA) of the MIC permits they hold at the current rate of $34.82 per AFA until January 1, 2020. On New Year’s Day, the lease rate rises to $90.53 per AFA ($650 per share). The rate increases gradually to $109.84 per AFA by 2036.
Three golf courses rely on VVWB leased water. The Conestoga, Wolf Creek, and the Palms owned by Mesquite Gaming. The agreement with the Palms was improper since that golf course resides in Arizona. Therefore, Mesquite Gaming “voluntarily” agreed to return all its 80 shares from the Palms Golf Course to the VVWB this summer. The Oasis Golf Course, also owned by Mesquite Gaming, relies on MIC leased water not controlled by the VVWB. The Falcon Golf Course relies on reclaimed water obtained from the City of Mesquite.
The Conestoga golf course is up for sale. Thus, they have an incentive to cut a deal as soon as possible. That leaves Wolf Creek, arguably the best golf course in the community to deal with the VVWB.
“Fair” Market Rates?
The VVWB claims that the drastic increase in share prices levied on golf courses is a “Fair Market Rate” since the SNWA is willing to pay a high price for Virgin River water. It is not that simple.
It appears that sometime in 1992 holders of MIC and BIC water-shares got together with SNWA Board of Directors to build an inflated market for Virgin River water.
At that time, the SNWA had permission under the Federally established Tributary Conservation Intentionally Creates Surplus (ICS) doctrine to acquire water from shareholders of water in the Muddy and Virgin Rivers, with pre 1929 priority dates. [ii]
About that time, Virgin River shareholders lobbied Nevada legislators to establish the VVWD. On July 12, 1993, the Nevada Legislature created the District.
On June 9, 1993, the first VVWD board members and shareholder’s John Lee, Cresent Hardy, J.L. Bowler, Todd Leavitt, and Sam Reber, voted to purchase shareholder water. Reber set a share at $3,000 (about $331 per AFA).
Between 1997 and 1999 the VVWB paid shareholders $662.25 per AFA. They paid shareholders $2,517.22 per AFA between 2005 and 2008. Prices paid topped out at t $7,883.30 per AFA between 2008 and 2010. The total averaged $2,067.59 per AFA.
There is no doubt that making millions from water originally gifted by the tapayers to MIC and BIC pioneers benefits their descendants. Equally, SNWA adminsitrators benefit by achieving polluted river water, which they clean and return to Lake Mead. In return, they get credits for more underground water to serve their expanding communities.
Noone knows now much water actually exists to serve both the rural community of Mesquite and metropolitan Las Vegas. Inattention to underground supplies, climate change and demands that exceed supply combined with regulatory and statutory restraints are all variables that must be considered when setting water markets.
None of the members of the VVWB have even the faintest understanding of water issues. One is a realtor, another is a bug exterminator. Two are low levels employees of the City of Mesquite. The fifth member works for a taxi-cap dispatching firm in St. George.
However, they all have some things in common. They all have historical and cultural affinities to MIC and BIC shareholders.
[i] Calculations: Agreement sets lease rate at $650 per share. That equal ($90.53 per Acre Foot Annually (AFA) at 7.18 AFA per share. 2013 off farm irrigation rate of $13.50.
[ii] The SNWA cleans that water and returns it to Lake Mead. In return, the SNWA receives “Return-Flow Credits” to take ground water in equal amounts they deposit to Lake Meade.