Part 1. Determining the Fair Market Value of VVWD Irrigation Water
Michael McGreer and Andrew Davey have both recently written on the implication and allegations of the current lawsuit between the owners of Wolf Creek Golf Club and the Virgin Valley Water District (VVWD). The following two part column details more of the facts and the disturbing history of the VVWD’s continual immoral use of its authority to enrich some local individual families to the detriment of the vast majority of its ratepayers.
The VVWD Service Area. The VVWD was formed as a government entity to provide potable water resources that it owns and/or acquires to people and businesses within its service territory. That VVWD Service Territory is the Virgin Valley, NOT the Las Vegas valley or anywhere else.
The VVWD Water Resources. The VVWD received its initial water rights to Ground Water (wells) and Surface Water (ditch and river water on the surface) when the VVWD was formed. Those rights were primarily BIC (Bunkerville Irrigation Company) and MIC (Mesquite Irrigation Company) water shares and ground water permits. The water that people in the Service Area of the VVWD drink and get for their other residential and business uses is Ground Water which comes from drilled wells that pump water from the underground aquifers. The Surface Water that VVWD owns, much of which was purchased for ridiculously high prices in the last 20 years from insiders (more on that tomorrow), comes from the Virgin River and ditches and is extremely dirty and laden with so much contamination that all studies have shown it to be undrinkable. Those studies also show that the costs to make it potable are astronomical and involve expensive equipment and costly maintenance. Every study has determined that the river/ditch water is not a feasible source of potable water and that if it was, it would be several multiples of the current cost for VVWD Service Area water users. In short, the Surface Water is only practical for irrigation, and it is not even very good for that.
The Role of the SNWA in Manipulating Water Values. The above background sets the stage for the current legal battle between the VVWD and a Virgin Valley business owner. To fully understand the issue we must now go outside of the VVWD Service Area and consider the political lobbying power and machinations of the Las Vegas water supplier SNWA (Southern Nevada Water Authority). SNWA is a huge and politically powerful and savvy organization. SNWA has an unending thirst for more and more water to feed the continued unsustainable growth of the Vegas Valley, and it uses its financial and lobbying resources to push for special treatment and legislation to help in that quest. In simple terms, one such “special deal” allows SNWA to put dirty (any) water into one end of Lake Mead and then take an equivalent amount of much cleaner water out on the other end to run though their processing systems to provide more potable water to its Las Vegas service area.
What is the Market Value of Irrigation Water in the VVWD Service Area? One of the central issues in this dispute revolves around determining what is the fair market value of VVWD owned irrigation water. Ever since the SNWA’s lobbying resulted in the special ability to magically turn unusable water into potable water, VVWD insider directors have been trying to set the price of its irrigation water for VVWD Service Area businesses at the price that the Las Vegas Water Company is willing to pay. Think about that for a minute…….do YOU think it is fair or correct for the VIRGIN VALLEY Water District to charge VIRGIN VALLEY businesses the manipulated price that Las Vegas will pay for it? The charter of this government-chartered organization is to provide its owned water resources within its service area, not to Las Vegas. Should Virgin Valley businesses be made to compete with Las Vegas businesses for VVWD water resources? What would you think if VVWD suddenly said that it was going to charge Virgin Valley residents the same price that Las Vegas residents pay for their water?
A widely understood definition of Market Value is that it is “the most probable price that an asset should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus.” (emphasis added). A SINGLE BUYER and a very limited number of “insider” sellers does not establish the market value of a product or commodity. Those words “not affected by undue stimulus” and “competitive and open market” are key to establishing the fair market value of a product. Those circumstances are NOT present in the valuation of irrigation water being claimed by VVWD. The highly inflated price being paid by the ONE AND ONLY buyer who is willing to pay anywhere near that amount for irrigation water in the Virgin Valley is NOT the market value of that water, it is the Manipulated Value, and no one else in the VVWD Market Area is willing to pay anywhere near that much. Read that again … “The highly inflated price being paid by the ONE AND ONLY buyer who is willing to pay anywhere near that amount for irrigation water in the Virgin Valley is NOT the market value of that water, it is the Manipulated Value, and no one else in the VVWD Market Area is willing to pay anywhere near that much.”
Food for thought. Tomorrow we’ll discuss and disclose the ludicrous prices VVWD paid to Community Insiders to buy more of this dirty filthy river water. Stay Tuned.