MINUTES OF THE meeting
of the
ASSEMBLY Committee on Government Affairs
Seventy-Second Session
May 12, 2003
The Committee on Government Affairswas called to order at 9:22 a.m., on Monday, May 12, 2003. Chairman Mark Manendo presided in Room 3143 of the Legislative Building, Carson City, Nevada, and via simultaneous videoconference, in Room 4406 of the Grant Sawyer State Office Building, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Mr. Mark Manendo, Chairman
Mr. Wendell P. Williams, Vice Chairman
Mr. Kelvin Atkinson
Mr. Chad Christensen
Mr. Tom Collins
Mr. Pete Goicoechea
Mr. Tom Grady
Mr. Joe Hardy
Mr. Ron Knecht
Mrs. Ellen Koivisto
Mr. Bob McCleary
Ms. Peggy Pierce
Ms. Valerie Weber
COMMITTEE MEMBERS ABSENT:
None
GUEST LEGISLATORS PRESENT:
Ms. Barbara E. Buckley, Assemblywoman, District No. 8
Senator Warren B. Hardy II, Clark County Senatorial District No. 12
Senator Dina Titus, Clark County Senatorial District No. 7
STAFF MEMBERS PRESENT:
Susan Scholley, Committee Policy Analyst
Eileen O'Grady, Committee Counsel
JoAnn Aldrich, Committee Secretary
OTHERS PRESENT:
Frank Siracusa, Chief, Nevada Division of Emergency Management
Jerry Bussell, Special Advisor to the Governor on Homeland Security
Richard Mirgon, Director of Emergency Management, Douglas County
Jim Spinello, Clark County
Jim O’Brien, Manager, Emergency Management, Clark County
Mark Fiorentino, Attorney, representing Vidler Water Company
Tim Perkins, County Commissioner, Lincoln County
Steve D. Hartman, Corporate Counsel and Executive Vice President of Corporate Development, Vidler Water Company, Carson City
Mike L. Baughman, Ph.D., Executive Director, Lincoln County Regional Development Authority
Doug Carriger, County Manager, Lincoln County
Bevan Lister, Concerned Citizen of Lincoln County
Joe Johnson, Toiyabe Chapter, Sierra Club
Kaitlin Backlund, Nevada Conservation League
Randy Robison, Virgin Valley Water District (VVWD)
Dan Musgrove, Director, Office of Clark County Manager
Senate Bill 6: Makes various changes relating to emergency management. (BDR 18-233)
Frank Siracusa, Chief, Nevada Division of Emergency Management, stated that S.B. 6 would move the Division of Emergency Management from the Department of Public Safety to the Office of the Governor. He said that the Division of Emergency Management’s primary responsibility was to support local governments in times of emergency, to assist in planning, training, and exercising, and to coordinate all state assets and state resources in support of local government during any emergency or disaster. The Division also had the responsibility of managing all Homeland Security monies that were allocated to the State of Nevada.
If this bill passed, the Division of Emergency Management would have a direct line of communication to the Governor on a daily basis, as well as improved interface with the Office of Homeland Security, which already reported to the Office of the Governor. He said it made good sense and was critically important that these direct relationships be established to support the decisions and actions the Governor would make in support of local government, and all local governments in the state supported the bill.
Jerry Bussell, Special Advisor to the Governor on Homeland Security, stated that he was in full and complete support of this bill, as was Kenny C. Guinn, the current Governor of Nevada.
Chairman Manendo congratulated Mr. Bussell on his new appointment. He mentioned that the new Homeland Security Chief of the United States, Thomas Ridge, was a friend of the family. He and his family were very proud that Mr. Ridge became the first governor of Pennsylvania from Chairman Manendo’s hometown of Erie, Pennsylvania, where he was born and raised.
Mr. Bussell added, for the record, that it was a tremendous pleasure to serve with Mr. Ridge, who called him on a weekly basis to keep in touch with the Homeland Security Advisors throughout the states. Chairman Manendo added Mr. Ridge had been very good to the people of Pennsylvania.
Assemblyman Goicoechea asked if he could explain how the funding would work and if this bill would affect the funding collected by the Division of Emergency Management.
Mr. Siracusa said that they currently had a Governor’s Committee on Homeland Security, which looked at the needs, risks, and vulnerabilities of the entire state. The Division of Emergency Management was the state administrative agency that received the federal funding on behalf of the Governor. Mr. Siracusa said that they met with each of the counties’ Local Emergency Planning Committees (LEPC), who submitted applications to the Division of Emergency Management officials who evaluated the applications. They were then forwarded to the Grants Subcommittee of the Homeland Security Committee, which evaluated the applications based on need, risk, and vulnerability, and awarded the appropriate amount to the respective local governments. Those monies were allocated at 80 percent to local governments, and the Division of Emergency Management assured that the full 80 percent reached the local governments and local first responders.
Assemblyman Goicoechea said he understood how the local LEPC worked, but he wondered if there were more federal monies coming in to fund Mr. Bussell’s position, or if the funding for his position would go through the Division of Emergency Management.
Mr. Bussell said that was correct, there would be no change in the federal funding that supported his position and his assistant’s position, and neither would there be an expansion in duties beyond the current advisory role.
Mr. Siracusa added that the move authorized by S.B. 6, which would move the Division of Emergency Management from the Department of Public Safety to the Governor’s Office, would be strictly an administrative move. They would remain at the same facility, and everything would remain the same. There was a minimal fiscal note for associated administrative costs, most of which would be payable from federal funds.
Chairman Manendo clarified that S.B. 6 had been concurrently referred to the Committee on Ways and Means.
Assemblyman Christensen asked if Mr. Bussell had oversight of the Office of Emergency Management. Mr. Bussell said he did not. He was strictly an advisor to the Governor, and the two offices were completely separate. The Division of Emergency Management was run by Mr. Siracusa, although they worked very closely on everything regarding Homeland Security.
Richard Mirgon, Director of Emergency Management Communications, Douglas County, Cochairman of the State Emergency Response Commission and Cochairman of the Homeland Security Steering Committee, said that Douglas County had favored this bill for two legislative sessions. During the flood of 1997, he said Douglas County experienced a substantial disconnect between the Division of Emergency Management and the Governor’s Office. He said that, during a local disaster, a great deal of interaction with the Governor was required because of his power to declare disasters and emergencies, mandatory evacuations, and those kinds of decisions.
During the flood of 1997, the Division passed on information through the combined Department of Public Safety and Motor Vehicles, which never made it to the Governor, and sometimes not even to the Department Director. Because these communications were vital to local governments, he said there had to be a direct line from the chief of the emergency department to the Governor of the state. He said this bill would not only streamline communications but would enhance the safety of communities in Nevada.
Jim Spinello, Assistant Director, Administrative Services, Clark County, and Legislative Committee member, Nevada Emergency Preparedness Association, said he wanted to speak in support of S.B. 6 because the Clark County Office of Emergency Management currently reported to him, and his office was the only department that reported directly to the County Manager. They believed that type of structure that was conducive to high-level communications was necessary to support the requirements and functions of the Department and to the mission of the Homeland Security Department. He said this was the right thing to do and exactly how things ought to be organized.
Jim O’Brien, Emergency Management Coordinator, Clark County, reported that the fire chief first hired him into emergency services, when the emergency services crew operated within the Clark County Fire Department. As a first responder agency, it was often difficult to complete necessary tasks because the policies of the fire department often conflicted with other department heads.
In 1990, the Clark County Commission wisely placed emergency management under the Office of the County Manager, which had proven to be a benefit because of the ability to reach out among the multiple departments of Clark County and the surrounding jurisdictions from a position of stature within the organization. It also facilitated activities other than first response-type activities, which included recovery, prevention, and preparation. To accomplish those goals, it was necessary to have a greater reach in order to coordinate among many entities, which was provided by the Office of the County Manager.
There were no questions from the Committee and no further testimony on S.B. 6. Chairman Manendo closed the hearing on S.B. 6 and opened the hearing on S.B. 487.
Senate Bill 487: Authorizes certain smaller counties to enter into certain agreements relating to acquisition, development, and distribution of water resources. (BDR 20-1312)
Mark Fiorentino, attorney, representing Vidler Water Company (Vidler), introduced the officials who would testify in favor of this bill, including the following:
Mike L. Baughman, Ph.D., Executive Director, Lincoln County Regional Development Authority
Tim Perkins, County Commissioner, Lincoln County
Steve D. Hartman, Corporate Counsel and Executive Vice President of Corporate Development, Vidler Water Co., Carson City
Doug Carriger, County Manager, Lincoln County
Mr. Fiorentino thanked the Committee for the opportunity to make a presentation on S.B. 487, which he said was very important to economic development issues in Lincoln County. He said that, although the bill was written using Lincoln County as an example, it would apply to all rural counties in Nevada. He said he would present a brief overview, provide some background, and explain the purpose of the bill. He would then discuss the proposed amendment to S.B. 487 (Exhibit C), which addressed problems encountered in the bill hearing in the Senate Committee on Government Affairs and refined other concerns since the Senate hearing.
Mr. Fiorentino stated that most Committee members were aware of the circumstances in Lincoln County. They had a very limited tax base and revenue stream and a limited potential for additional taxes and revenue because of issues beyond their control. He said that over 98 percent of the land in Lincoln County was federally-owned land, and there was very little private land in Lincoln County, and therefore a minimal property tax base. The total population was about 4,000, and there was no business strip, no gaming, and no public sewer or water system to speak of. So, not only do they have a limited revenue stream, but also they have a very limited bonding capacity because of the restriction on privately owned assets in the county.
Mr. Fiorentino said that it had been very difficult for Commissioner Perkins and his colleagues to provide for citizens of the county, and they were trying to change that by looking at innovative solutions to their problems. They were interested in developing their own solutions in order to reduce the burden to the state. In Lincoln County, there was no water district and no water authority, and the key to economic development in Lincoln County would be the development of water resources.
Mr. Fiorentino said that S.B. 487 would allow Lincoln County to develop their water resources and would allow development of water resources in rural counties in Nevada. If a rural county did not have money, such as was the case in Lincoln County, developing water resources was a very difficult project. Although there was a fair amount of groundwater available, the water was deep in the ground, and the State Engineer had been conservative in issuing permits. It would take a large investment to develop production and monitoring wells. It would be very expensive to develop water in Lincoln County, and much more expensive than Lincoln County had the ability to finance on their own, given their existing revenue and tax base.
Mr. Fiorentino said that no one had objected to the findings on page 1 and the top of page 2 of the bill, regarding the difficulties in developing water resources in rural counties. The heart of the bill began on page 2, line 8, and continued through page 3. There were only two sections to the bill. The first section clarified that a county government could enter into private agreements with private corporations for the development of water resources. The balance of that section would allow the private entity to provide the capital, to take all the risk, to be reimbursed for their advancement of costs, and would allow the division of revenue generated by the existence of the contract.
Mr. Fiorentino stressed that these were not new concepts because public-private partnerships had existed for many years in the state of Nevada, and they covered a whole range of different concepts, including the development of water resources. He said that public-private partnerships also existed to provide, for example, golf courses and recreational centers. He said the list was long. The concept that a public entity could share in revenue streams was not a new concept either. Clark County, for example, received substantial sums from sharing revenue from slot machines, advertising, and billboards at the airport, from golf course contracts, and more.
Mr. Fiorentino said they had tried to create a bill that did not in any way change the process anyone would go through before they could appropriate groundwater through the State Engineer, who had the sole responsibility for issuing or not issuing water permits. He said that getting a permit to pump groundwater was a complicated process. In short, the State Engineer had to identify a beneficial use, which did not include making a profit from reselling water, and he had to verify that there would not be any negative impacts to existing water rights in the area.
Mr. Fiorentino said they had worked with a number of interested parties on S.B. 487 and on the amendment, who supported the legislation. Those parties included the Nevada Association of Counties (NACO), representatives of other rural counties, the Southern Nevada Water Authority (SNWA), the Las Vegas Valley Water District (LVVWD), and the State Engineer.
Mr. Fiorentino then walked the Committee through the proposed amendment, (Exhibit C). The amendment would add the following five items to the bill, and there would be no changes to the existing language of the bill. Mr. Fiorentino summarized the five items as follows:
Mr. Fiorentino said they proposed to add this language because some people had expressed concerns that somehow the relationship between the county government and a private company would create a beneficial use, and in effect, force the State Engineer’s hand in making decisions on subsequent applications filed pursuant to one of the subject agreements.
Mr. Fiorentino said this provision was added because concerns in the Senate Committee hearing were expressed that Vidler would appropriate water and sell it for use in California. He said that had never been the intent.
Mr. Fiorentino said this provision was added because there was some concern that the agreement and documents related to these types of agreements would not be open to the public or to public inspection. He said many were familiar with the open meeting law, and that the way it worked was that any item on the County Commissioner agenda, and any document given to a Commissioner in reference to an item on the agenda, with few exceptions, must be made available to the public.
In addition, in examining the Open Meeting Law, there was an exception that allowed a document to remain confidential if it was the subject of a non-disclosure or confidentiality agreement. This meant that Vidler could not use this exception to protect documents relating to these kinds of public-private water development contracts.
Mr. Fiorentino said that the purpose of this item was that there were concerns that Vidler would develop and procure water in Lincoln County, and would sell it at a premium, or at an exorbitant cost, to public entities that might need it. He stated that that was never the intent of the bill.
Chairman Manendo asked if the purpose of the bill was related to the Attorney General’s Opinion No. 02-15, issued on March 21, 2002, (Exhibit D), which stated that contracts between Vidler Water Company, Inc., and Lincoln County did not serve a predominantly public purpose and that the Legislature had not expressly authorized counties engage in such contracts.
Mr. Fiorentino replied that was correct. An Attorney General’s opinion had been issued on that subject, and he would provide some background on that issue.
Mr. Fiorentino said that Lincoln County and Vidler entered into contracts several years ago that would allow Vidler to put up all the capital and take all the risks to help Lincoln County develop water resources for the Toquop Power Plant project and for the Lincoln County Land Act. The Lincoln County Land Act was a federal law that would allow for the release of some public land in Lincoln County for auction and private use.
The contracts were challenged, and the Attorney General’s Opinion No. 02-15 stated that those contracts were not specifically authorized by state law. There was a sentence in that opinion that concluded something like, “We’re not saying the Legislature could not authorize these contracts, we just don’t think they have to date.” Hence, Vidler brought forward S.B. 487, which clearly stated that those kinds of contracts would be permitted under state law.
Mr. Fiorentino said he provided S.B. 487 to the Attorney General and asked him to review the bill to ensure it would address all the concerns listed in his opinion. The Attorney General indicated that the bill had addressed the concerns expressed in his opinion, and that Vidler could testify that it was clearly within the Legislature’s authority to adopt the legislation, which, if it passed, would render Attorney General’s Opinion No. 02-15 moot.
Assemblyman Goicoechea asked why S.B. 487 had only addressed water resources, given the other resources available in rural areas. He thought that those resources should also be included in the bill.
Mr. Fiorentino replied that the reason they did not broaden the bill was because the Attorney General’s Opinion No. 02-15 only addressed water resources, and Vidler believed that the county governments already had the authority to enter into contracts with private entities to develop other resources. In fact, prior to the Attorney General’s opinion, Vidler thought the county governments already had the authority with respect to water resources.
Chairman Manendo asked if it was common for counties to enter into those types of private agreements with water companies and had it happened before.
Mr. Fiorentino said that it was fairly common. For example, the state of Arizona contracted with private entities to develop recharge facilities. The City of Scottsdale had contracted with private entities for the development of water for the city. He offered to produce copies of other contracts for the record, if requested by the Committee. In Nevada, he pointed to Carson City, Douglas County, and Lyon County, who had partnered with private entities to develop water rights and water infrastructure. Mr. Fiorentino said they had focused their research on the western states of Colorado, California and Arizona, and, to the best of his knowledge, all three states would allow the types of agreements proposed by this bill. In fact, Vidler had facilities in those three states. Mr. Hartman could perhaps give more information on that subject.
Chairman Manendo asked how the proceeds were generated for the benefit of the private corporation or entity.
Mr. Fiorentino said that the bill was actually silent on that issue on purpose to give counties the flexibility to do what was best for them, under the circumstances. The existing contract between Lincoln County and Vidler allowed the decision to be made on a project-by-project basis.
The first joint project they had was the Toquop Power Plant, and that agreement was that Vidler would provide the capital investment to develop the water rights for the State Engineer. Vidler had invested about $4 million in the power plant permits. The State Engineer did rule on those applications and did allow the appropriation of water for the power plant. Under that agreement, the power plant would lease the water rights for 42 years under a lease agreement with Vidler. The revenue generated from that lease would first pay back Vidler’s investment, and they would split the rest of the revenue stream equally after Vidler had been reimbursed for its investment. At the end of the 42-year lease, Vidler had no reversionary right to the water. In other words, the water right would be owned entirely by Lincoln County.
Mr. Fiorentino pointed out that S.B. 487 was only authorizing law. It allowed the sharing of revenue, but did not require it. There might be circumstances that would require other arrangements, and the possibilities were unlimited by the bill.
Chairman Manendo asked if, in other states, municipalities shared in the profits.
Mr. Fiorentino said, as far as he knew, yes. One example in Nevada was the state of Nevada selling water rights to Carson City. The revenue was used to pay for maintenance of the water system, and the balance went to the General Fund.
Chairman Manendo asked if Lincoln County owed Vidler any money right now.
Mr. Fiorentino said no. Under the existing contract, they owed zero because no revenue stream had yet been created, and if there was never any revenue generated, Vidler would lose over $4 million.
Chairman Manendo asked Tim Perkins, Lincoln County Commissioner, if all the Lincoln County Commissioners supported the bill, and if the vote they took on the proposed legislation was a unanimous vote.
Mr. Perkins answered that was correct, and it was a unanimous vote. [This testimony was later recanted in a letter to Chairman Mark Manendo and members of the Assembly Committee on Government Affairs, regarding S.B. 487, from Tim Perkins, Lincoln County Commissioner, received on May 13, 2003 (Exhibit E).]
Assemblywoman Pierce said that when Mr. Fiorentino referred to the western states, it seemed that they were not doing much business in California and asked if that was correct.
Mr. Fiorentino referred the question to Steve Hartman, Vidler Water Company.
Steve D. Hartman, Corporate Counsel and Executive Vice President of Corporate Development, Vidler, stated that the company currently had a project in Bakersfield, California, called the Semi-Tropic Project, which was a joint water storage and groundwater recharge facility operated by three public participants and a private water company. Water was stored underground for the local agricultural district to allow farmers to use that water in years that were “dry options.” On the other hand, it allowed the public entities, including Alameda County and the Municipal Water District, one of the principle ones, to move water up and down California’s Central Valley, in terms of the California aqueduct project, to allow them to shift water to various municipalities. That was Vidler’s only project at this time.
Assemblywoman Pierce read the following quotation from Vidler’s Web site:
Vidler has begun to sell down its interest in Semitropic. This was Vidler’s only asset in California, which has proved a difficult state for private water companies to operate in, given the large number of public entities involved in the water industry, each serving a different and sometimes conflicting constituency.
Ms. Pierce asked if that was the only reason Vidler had found California to be…
Mr. Hartman interrupted, stating that California was a very different area anyway, but specifically they did not regulate groundwater at the state level, but at the local level. There was no comprehensive groundwater regulation, as there was in Nevada and in other western states. He said there were places in California where people could pump as much water as they could get from the ground, with no requirements for monitoring or mitigation, in terms of other folks’ water.
The principal reason was that the Metropolitan Water District controlled the entire water infrastructure in California, so it was difficult to move water around the state to areas of need. That problem was changing, however, because of the Imperial Irrigation District’s issues that had caused problems in southern Nevada and Arizona, as well. He said there were peculiarities in California law that made it a less-than-viable place to work. Mr. Hartman said that on the utility side, there are many private utilities, such as American Waterworks in San Diego, throughout the state, but on the resource side, it was very different.
Assemblywoman Pierce said she had a few questions about information on Vidler’s Web page. In terms of what the current market price was for an acre foot (AF) of water, there was mention of an agreement to sell 3,645 AF of water to the City of Scottsdale for $4.7 million, or $1300 per AF. Ms. Pierce gave another example from the Web site that was apparently regarding Lincoln County water for the Toquop Power Plant. The price for an acre foot of water in that situation was $3,300 per AF. She asked Mr. Hartman what was the highest price for which he had ever sold an acre foot of water.
Mr. Hartman said that the reason for the difference was that, in terms of the demand, scarcity, and the ability to move water, every place was different. He said Vidler owned an asset in Scottsdale area, in a valley designated as the future source of water for the Phoenix-Scottsdale Metropolitan Area. Scottsdale had developers come to Vidler because they needed to move a block of water in for their general plan, and they had purchased that water for $1,350 per AF. In the Toquop Power Plant instance, the most recent comparable sale of water came from the acquisition by the SNWA of the Coyote Springs water for around $3,000 per AF of water. Because of the arrangement with Lincoln County, he said they went for an appraisal, which used the public auction of water as the comparable figure. He said Colorado water was very expensive, and would sell for around $50,000 to $60,000 per AF. Annual lease payments were typically $5,000 to 6,000. Every market was different, and every demand was different, but they were typically driven, in the case of Toquop Power Plant, by a market appraisal.
Assemblywoman Pierce asked, “When you say this will be set by the fair market value, do you mean the market as restricted to Lincoln County? It would not include a larger geographical area, would it?”
Mr. Hartman said it would be important to clarify the arrangement with Lincoln County. Developing assets, jobs, and economy in the county had always driven Vidler. The partnership was not driven by a need or a desire to sell water outside of Lincoln County, notwithstanding popular opinion. Frankly, he said, that issue about fair market value was fine with them, because the intent was to work in Lincoln County with water assets to be used by Lincoln County. The most recent agreement with SNWA and Lincoln County did not allow contractually for water to be conveyed. Selling water outside the county was not part of the plan. The arrangement for developing water resources in Lincoln County was to implement the Master Plan.
Assemblywoman Pierce said, “There is nothing in this bill that would restrict Vidler Water Company from selling water outside Lincoln County.”
Mr. Fiorentino replied that the proposed amendment addressed that issue in the last item, number 5, which stated:
A water resource procured pursuant to an agreement entered into pursuant to the Act should not be sold, leased, or otherwise transferred to a public entity for more than its fair market value at the time of the sale, lease or transfer.
He said that this was not exactly a prohibition against selling water outside of Lincoln County, but, if Vidler did sell water outside Nevada, they could not sell it to a public entity for more than its fair market value.
Assemblywoman Pierce said that this did not give her much comfort. At the height of the “energy crisis” in California, which was driven by a great deal of fraud, fair market value on energy was very high. Therefore, in the post-Enron world, fair market value did not give her much comfort.
In another section of the amendment, regarding confidentiality, Ms. Pierce asked if the prohibition on confidentiality agreements was retroactive to include everything that had been agreed upon heretofore.
Mr. Fiorentino said it was not retroactive, but there was no need because none of the existing contracts in Lincoln County were subject to confidentiality provisions. This amendment would prohibit all future contracts from being kept confidential.
Ms. Pierce asked for clarification that there was nothing confidential at this point. Mr. Fiorentino said that was correct.
Chairman Manendo asked what Vidler stood to gain by partnering with Lincoln County, that they could not do alone.
Mr. Fiorentino said they could do it on their own. What they gained in the relationship was a business opportunity to help Lincoln County develop water for a payment to do it.
Chairman Manendo said, “So, Lincoln County needs Vidler to do this.”
Mr. Fiorentino said that was not true. The power plant could have approached Vidler directly and said, “You develop the water for us, and we’ll pay you. You go to the State Engineer and invest the money to drill the wells and put in the monitoring wells, and, if he issues you the water, we’ll buy it from you at an agreed-upon rate.” He said Vidler did not need Lincoln County for that effort.
Assemblywoman Pierce said she would read a relevant quotation from PICO Chairman Ron Langley, she found on the PICO Web page. PICO was the parent company of Vidler Water Company.
Based on comparable asset valuations, we believe that the potential value of Vidler’s assets is more than twice our book value. The ultimate value realized would depend on prevailing market conditions and the timespan over which assets are monetized. While we do know that water assets have historically appreciated at a rate considerably greater than the rate of inflation, it is not possible to quantify the ultimate value which could be realized in the right circumstances from assets which grow scarcer in supply every day.
Assemblywoman Pierce said that another company that was part of the PICO family was the Nevada Land Resource Company. Ms. Pierce asked if they were still the largest private owner of land in Nevada.
Mr. Fiorentino answered, “Yes.”
Assemblyman Goicoechea commented that entering into an agreement with Lincoln County would facilitate approval of Vidler’s applications for water rights, and he did not think anyone would argue that. On the other side, Lincoln County went into the agreement hoping to bolster economic opportunities in Lincoln County. Only 2 to 3 percent of the total landmass in Lincoln County was private land. He said they needed some help, although they had some resources that would be useful in the future, in terms of renewable energy generation. However those resources were all on federal lands. He could understand why Vidler and Lincoln County would enter into the agreement because it would definitely facilitate the hearing process. He said there were over 3,000 protests in place over SNWA’s applications in three counties. He said it would definitely ease the process if the local government supported the partnership.
Chairman Manendo said there was a handout for the Committee from Bevan Lister, a citizen of Lincoln County (Exhibit F). In the letter, he stated that Vidler needed Lincoln County to grant public status to their water applications, so the State Engineer would have to hold them in place until Lincoln-Vidler was ready to act on them. He asked if there was a different standard for granting permits to public entities versus private entities.
Mr. Fiorentino said they had debated that at length and were still debating that with Senator Hardy this morning. In the case of Lincoln County, there were two projects: the power plant and the Lincoln County Land Act. Neither of those could occur without developing the water resource first, because they were so remote. Under the Lincoln County Land Act, when the federal government released the land, a developer would not bid on it unless there was proof of existing water there. Lincoln County was not the Las Vegas Valley where a developer would know the cost of extending the existing infrastructure. A rural county had to have water in order to attract those kinds of projects.
Mr. Fiorentino said, whether the County passed this law or not, the State Engineer had to make a finding of beneficial use and make a finding that Vidler would not speculate on the water. He said Vidler-Lincoln would have to show him a project. Mr. Fiorentino said that the law was clear today and would be whether this bill passed or not. Whether it was Lincoln County or Vidler, or some combination of the two, the State Engineer had to be convinced that there was an immediate beneficial use and a project. Permits were not granted for speculative purposes. The State Engineer would not appropriate water under those circumstances.
Mr. Collins said he wanted to look just at the state of Nevada. He said neither Elko nor Carlin was digging up gold. Private companies were making the investment to dig up the gold. Since infancy, the City of Las Vegas, or at least the Las Vegas Valley, received water from private investments in the Union Pacific Railroad until 1954. Water was developed for Las Vegas growth when the city was sold at auction in 1905, by the railroad, for people to live there and build a community. The railroad kept the water company until 1954. Water was developed for Blue Diamond Hill about 70 to 80 years ago by a private mining company, not by the LVVWD. The community of Mt. Charleston was private water. Water for the Virginia City gold mining development was constructed by private investors, all the way from Marlette Lake to Virginia City. He said there were many examples of private development of water resources all over the state.
The opportunity in Lincoln County, which was 98 percent federal land, with a very small tax base, would allow economic development in our rural communities. Mr. Collins did not understand why they were not allowing private investment to develop water resource opportunities to assist rural towns such as Panaca, Pioche, Caliente, and Alamo, and surrounding villages. “What’s wrong with someone coming into Nevada to help us do well?” he said.
Chairman Manendo asked if he thought all sources of water supplies within the boundaries of the state of Nevada, whether above ground or below ground, should belong to the public.
Assemblyman Collins said that, by law, the water in the state of Nevada belonged to Nevada citizens. Some citizens in more populated areas had searched outside their basins and secured water in those areas. Those folks intend to develop inside the county and not for export. For example, a power plant in the Tule Desert was much better than having those emissions coming out at Apex over the hill into the Las Vegas community.
Mike L. Baughman, Ph.D., Executive Director, Lincoln County Regional Development Authority, said he would like to follow Assemblyman Collins’ discussion of precedents. In 1999, the Legislature adopted the National Transportation Safety (NTS) Regional Development Act that was a precedent to allowing an outside entity to help develop the Meadow Valley Industrial Park and the Alamo Industrial Parks. Those were success stories. The bid was due to be awarded in the next week for the Meadow Valley Industrial Park, and construction of phase 1 should begin soon. The NTS Development Corporation invested nearly $200,000 in that project for design studies. The agreement stated that when the project goes to lease or to sale, of the first revenues generated, the funds go to the NTS Development Corporation. He said there were many examples of where the Legislature had encouraged counties to work with outside entities to encourage economic development.
Dr. Baughman also noted that, regarding the use of private funds for public projects, the Lincoln County Regional Development Authority had encouraged Lincoln County to form a water district in order to secure bonding for the projects. He suggested that this was no different than private money: bond money was private money, and the bond companies charged interest for using those monies, which was profit. So, regardless of how you looked at it, there was still an equity issue involved, still an expected return, and, in the case of Lincoln County, they did not have the tax base to allow bonding. He felt this was an excellent opportunity for jump-starting the economy.
Assemblyman Grady said that Lincoln County needed help. He said they had heard about the power plant in other testimony, and there was some debate as to whether the tax revenue should stay in Lincoln County. He asked what stage of development the power company had reached, and if it was generating any tax base revenue for Lincoln County.
Dr. Baughman said that the project was in the final permitting stage. The final Environmental Impact Statement and the Notice of Availability on the Toquop Energy Project were published in the Federal Register about 32 days prior. The Bureau of Land Management’s (BLM) wait period expired a few days prior, and BLM could now issue a Record of Decision regarding rights-of-way (ROW) for that project. The project could proceed based on the ROW from the federal government. He said they were still working on the state permits, including air quality emissions permits, and the permit from the Public Utilities Commission, which were still in progress. He said there had been no tax revenue generated from the power plant because it had not yet been built.
Assemblyman Goicoechea said that clearly all the water belonged to the people of Nevada, but it was necessary to discover if there was a vested permit on those waters, and how difficult they were to forfeit, whether groundwater or surface water. Unless a permit was abandoned, it was property.
Assemblywoman Pierce said she appreciated the examples they had discussed, but, personally, she said she felt there was a huge gap between slots, golf courses, and gold – and water. She said she could go many days without playing slots, but only three days without water. Water was a whole other value. One of the things she knew about what happened in California was that power plants that went from a regulated atmosphere to a deregulated atmosphere suddenly required considerably more maintenance than they had under a regulated system. Suddenly, they were off-line a great deal. She said it made her nervous that they were looking at an idea that the citizens of Nevada would have no control over the people who would control the water.
Assemblyman Goicoechea said that the State Engineer would not allow water applications that were speculative in nature. He said they followed the water law, and there must be a beneficial use. Lincoln County has contracted with SNWA to share, split, and totally award subbasins to SNWA. He said that concerned him far more than a public-private partnership.
Assemblywoman Pierce said she was mindful of the fiscal problems in rural Nevada, but neither was she in the Legislature to make sure that Las Vegas could get cheap water forever. She reminded the Committee that she had said many times that she did not think Clark County should be going out into the rural counties to get water just so that Las Vegas could have green lawns. Some people might consider green lawns a beneficial use, but Ms. Pierce did not agree with that. There were other creatures that needed that water. She said that humans did not know enough about aquifers and ecology, and how things interacted, and the interplay between species and surface water and the aquifers. She was not comfortable accepting market value as a human value. She would like people to be more thoughtful and to not be driven by market value.
Mr. Fiorentino said he did not disagree about protecting water resources or about the task facing the State Engineer: He had to be sure he understood how the basins acted before taking action. He suggested that proving that was a very expensive process and inviting private investment into that process was not necessarily a bad idea.
Chairman Manendo asked if Mr. Fiorentino would object to language that allowed the banking of water for purposes of saving endangered lakes, because that was named in the federal farm bill as a beneficial use of water, and water rights could be banked for an extended period of time and not be lost to the water-right owner.
Mr. Fiorentino said they had discussed that issue, but this bill was not the appropriate vehicle because it did not address water law, but addressed the power of the counties to contract with private entities. However, he supported the concept and the idea. He said there was at least one other bill pending that dealt specifically with the State Engineer’s statute and the concept of beneficial use in water law.
Chairman Manendo asked what bill that was, and what was the status.
Mr. Fiorentino answered that it was S.B. 336, which was currently pending before the Natural Resources, Agriculture, and Mining Committee. He said, for the record, that Vidler supported the concept of banking of water for the purpose of saving endangered lakes, and he agreed that language should be added to Chapter 533. However, S.B. 336 was a more appropriate bill because it dealt specifically with Chapter 533.
Tim Perkins, County Commissioner, Lincoln County, stated that S.B. 487 was important to Lincoln County for economic development to put water to use within Lincoln County for the economic benefit of the county. He said that on all their projects, the partnership was 50-50 because the last thing they wanted was to see someone be overcharged for water. They wanted to stay involved in those issues to help regulate them. He said Lincoln County did not have the resources to develop that water, and they needed to find the resources to do it. Big projects were on the horizon but, without access to private funds, the opportunities would likely vanish. He said Vidler could do it alone, if they wanted, but that the county should be involved from the beginning. The goal was to put the water to beneficial use within Lincoln County to expand the tax base.
Doug Carriger, County Manager, Lincoln County, said that he wanted to add to Assemblywoman Pierce’s comments about water. He said she was concerned with the overuse of water. He said the Lincoln County Commission had passed a planned unit development ordinance that required xeriscape, and the goal was about one-third of an AF per dwelling per year, much less than any other area in southern Nevada. That ordinance was in effect and would apply to any developers in the area. They are conscious of the value of the water and have planned ahead to conserve it.
Assemblyman Hardy asked how many families an acre foot of water serviced.
Mr. Carriger said that the rough estimate was that one acre foot (AF) of water would serve one family for a year. In recent years, the improvements in plumbing and other water savings had reduced that figure. Because much of that water was used for landscaping, if there were restrictions on landscaping to the type that did not use a great deal of water, the usage could be reduced to about half an acre foot (AF) per family per year, and folks could still live well. This would be in addition to using wastewater for some irrigation purposes, which would extend the life of the water resource. Lincoln County Commissioners had added that to their planned unit ordinance, looking to the future, and using the water wisely.
Chairman Manendo called for a short recess, and reconvened the meeting at 10:58 a.m.
Senator Warren B. Hardy II, Clark County Senate District No. 12, stated that he came before the Committee because of the larger public policy issue that the bill addressed.
Senator Hardy said he was disappointed because the proponents of the bill knew what his concerns had been all along. He said there were questions from the Committee today that directly addressed the issues he had concerns about, and those questions were misdirected by the proponents of the bill. He said that could only be intentional, based on prior discussions with them.
Senator Hardy said that it was indicated by proponents of the bill that “the bill would not do what some people were saying,” and he assumed that they meant him, since he had been the most vocal opponent of S.B. 487. It had been said, “some people were saying that it changed the appropriation process.” Senator Hardy said he had never said that, this bill did not change the appropriation process. However, the bill did have a significant impact on the way water was appropriated in the state of Nevada.
The comment was made numerous times that “this was not a new concept,” and that “local governments often and continually entered into agreements with the private sector for slot machines, and for concessions at airports.” Senator Hardy said that was not the issue. It was true that those kinds of agreements had existed forever, but it was not those kinds of agreements he opposed. Someone had testified “these types of agreements existed, even in Nevada, and throughout the western United States.” He said that that was said in this Committee, in the Senate, and in the halls of the Legislature.
Once the Committee understood his objections to this bill, as the proponents did, he challenged them to bring forth an agreement anywhere in the western United States similar to this agreement, with regard to the objections he would describe. Senator Hardy said that his objections to the bill had nothing to do with the fact that it was a public-private partnership. Those happened all the time. Senator Hardy said that from a public policy perspective, this bill “changed significantly the way we do business with water in this state.”
Senator Hardy said the focus had been on Lincoln County, but
If this was only about developing water resources in Lincoln County, I would not be before the Committee today. If the amendment I offered in the Senate had been adopted, and not opposed by the proponents of the bill, I would not be here today. And the amendment I offered in the Senate specifically outlined that Vidler can do whatever they want with water resources in Lincoln County, but, if they sell it outside of Lincoln County, then they will be subject to the same rules that apply to other public sector water companies.
To bring forward an amendment such as number 5, is an attempt—and I don’t have a problem with the amendment—but it doesn’t do anything, except provide an opportunity for them to misdirect one of my concerns. They know full well that my concern is not that they could sell water to a public entity for more than fair market value. They can’t do that now. A public water company cannot purchase water for more than fair market value.
Senator Hardy reemphasized that the proponents of the bill knew that.
They knew it because, in arguing against S.B. 487 in the Senate, Senator Hardy had suggested that if Vidler sold water to a private sector company, it should be subject to fair market value because water rates in Nevada were based on the current fair market value in the private sector. Fair market value was not set by public water companies because they could not purchase water for more than fair market value.
In conclusion, he said if this law passed, the Lincoln County-Vidler partnership could sell water to a private sector company outside of Lincoln County – in Mesquite, for example – for any price they wanted. The net effect would be to drive up the fair market value of water in Mesquite for residents who in no way benefited from the Vidler-Lincoln County agreement.
Senator Hardy said that even this issue was not his main problem with the bill. He said the proponents of the bill had done a good job describing the criteria the State Engineer considered when he approved water appropriations. Senator Hardy said that the State Engineer applied those criteria differently to the public sector than he would to the private sector. Agreement after agreement, decision after decision, illustrated that fact. For example, the Virgin Valley Water District (VVWD) was using about 4,000 AF of water from Basin 222, but the State Engineer had permitted 12,000 AF of water for their use. He did that because he knew that Mesquite was one of the fastest-growing communities in America. Eventually, they would have need of 12,000 AF.
Senator Hardy emphasized that, had it been a private sector entity that applied for those water rights in Mesquite, the State Engineer would not have permitted 12,000 AF of water, but he would have permitted exactly what the private sector needed for that particular project. By partnering with Lincoln County, Vidler had circumvented the limitations traditionally applied to private water companies’ permit applications. In terms of the purposes of the State Engineer, from now on Vidler Water Company would be considered a public water company. That was where Senator Hardy’s concern was focused.
Senator Hardy said his fears had already been verbalized by the State Engineer, who said in a couple of rulings, once specifically, that he had rejected similar water applications as speculative but, because Vidler was now partnered with Lincoln County, he would approve the permit applications.
Senator Hardy repeated Chairman Manendo’s question: Why does Lincoln County need Vidler? He said Lincoln County did not need Vidler, but Vidler needed Lincoln County in order to benefit from future water appropriations.
Senator Hardy said he appreciated the amendments the proponents of the bill had brought forward, and in many cases, those items would help. Certainly, item number 1 would help. The proponents had testified to the Committee and in the Senate that their intent was to help Lincoln County develop water resources within Lincoln County. If the following language, or something similar, were to be added to items in the proposed amendment, subject to legal review, Senator Hardy would be satisfied:
If the State Engineer has reason to believe that water applications are speculative, he should reject them.
He said that language would reduce his concerns from having a “100 percent problem to about a 30 percent problem.” Senator Hardy said he still felt it was bad public water policy, but if modifications were made, or he was allowed to confer with legislative counsel to determine if this language would work, then compromise might be reached. He reiterated, to be clear, that if language could be added to the bill that essentially stated, “If the water being applied for would be used for purposes of speculation, the state engineer must reject those applications,” Senator Hardy would drop his opposition to the bill.
Prior to this meeting, Senator Hardy said that the proponents had told him that their intent with item 1 in the amendment was to require the State Engineer to reject speculative water applications. However, the actual language of item 1 of the proposed amendment was to add a new Section 3 to read as follows:
The existence of any agreement entered into pursuant to this Act does not constitute a beneficial use for the purposes of NRS Chapters 533 and 534.
Senator Hardy believed that the intent was to say that the State Engineer could reject applications if they were for purposes of speculation. He clarified that if the proposed language applied only to Vidler Water Company, not in partnership with Lincoln County, he would not be here today. He would have no problem with that because the State Engineer would judge those water applications for exactly what they were: a private sector application.
The language of Senator Hardy’s proposed amendment would have the net effect of tying the water appropriation to a project. He said, if Lincoln-Vidler applied to the State Engineer for water for a power plant project, and that stated construction would start in six months or a year, the State Engineer could and should appropriate the water. However, if Vidler-Lincoln County said they wanted 12,000 AF because they would grow over the next 20 years, he would be concerned that the guidelines to water appropriation would be changed. He clarified that in Lincoln County, the State Engineer could appropriately approve that, but that the Committee should not lose track of what the bill would do.
The Vidler-Lincoln County agreement specifically said that they could:
· Split profits
· Agree to pay for the acquisition of water resources
· Pay for and coordinate the planning and development of water
· Coordinate the distribution of water resources
The Senator pointed out that Vidler’s stated intent, according to their business plan, was to acquire water in rural areas and sell it to urban areas.
Senator Hardy’s problem was that this bill would make water an instrument of commerce. He said that this bill would “fly in the face” of Nevada’s 150-year-old water law which said that the water belonged to the people of Nevada. By passing S.B. 487 as is, it would change the status and ownership of the water under Lincoln County, which would suddenly belong to Lincoln County and could be sold by Lincoln County for profit in lieu of a tax base.
The 150-year-old Nevada water law held that the water belonged to the people of Nevada. It had never been an instrument of commerce.
The other problem with this bill, said Senator Hardy, was that it would specifically bind future county commissioners to the agreement. To his knowledge this had never been done in Nevada, was a new precedent, and in terms of statutory construction, would have significant impact in future decisions by boards. This, also, was a peripheral concern.
Senator Hardy’s concern was that this bill turned over 150 years of water law that said, “Just because the water exists within your geographic boundaries, does not mean the water is yours.” He said, in order to grasp the larger significance, people should set aside the Lincoln County issue. That was only one example, and Lincoln County also had an agreement with SNWA that would alleviate many of his concerns. To his knowledge, Vidler was the largest private holder of water rights in Nevada. The Senator asked, “How would this bill affect Churchill County, and other areas of the state where they hold water rights?” They would be able to sell the water rights outside of the geographic area.
Senator Hardy apologized for venting, but he said he was disturbed by the proponents’ testimony that misrepresented his concerns and attempted to distort and to deflect the debate. However, if his proposed language was adopted and added to item 1 in the proposed amendment, he hoped to go quietly into the night and never have to say, “I told you so.”
Assemblyman Christensen asked Senator Hardy if his position was that he would be comfortable with language that would mandate that this law would apply to a specific project. He thought he heard Mr. Fiorentino testify that that would be the case, that the State Engineer did not offer or grant water rights for speculative ventures but only for specific projects.
Senator Hardy said that was correct. The State Engineer had very specific criteria, which he had to consider in appropriating water. The State Engineer applied strict criteria to private holders of water rights. However, he would allow much more leeway to public water companies, to public sector companies. The reason for that was that the public sector water companies were not in the business of making a profit on the people’s water. They were in the business of providing water resources to the people of Nevada, not at a profit, but as a public utility that provided a natural resource that, without it, we could not live more than three days. In theory, the statute was the same for public and private sectors, but, in reality, the State Engineer allowed much more flexibility to the private sector. Hence, the VVWD could have permitted rights of 12,000 AF, while currently they were only using about one-third of that amount. He would never allow a private sector water company to hold water rights that the company did not plan to develop for as long as 25 years.
Senator Hardy wanted some clear direction to the State Engineer that said, unless there was a specific project for a beneficial use in front of him, he would have to view the application as speculative, and to treat agreements such as the Lincoln County-Vidler agreement as private water rights and not water rights held by the public sector.
Assemblyman Christensen asked if the concern was that this bill granted too much latitude to the counties to sell water to whomever they wanted, perhaps to increase their county revenues.
Senator Hardy said that was correct.
Assemblyman Christensen said Senator Hardy had mentioned that Lincoln County did not need Vidler but that Vidler needed Lincoln County.
Senator Hardy said he could not think of any reason Vidler would need Lincoln County except to take advantage of the situation he had just described, that the State Engineer would be much more lenient in granting applications and in permitting water. He said that was the only benefit he could think of as to why Vidler would be interested in a partnership with Lincoln County, and there was no reason that Lincoln County needed Vidler.
Assemblyman Christensen said he understood that finding the water, drilling, and developing wells, creating the infrastructure, would entail a significant capital outlay. He asked, since Lincoln County might not be in a position to make that kind of investment, if that might be one reason they would need Vidler.
Senator Hardy replied that Mr. Christensen needed to ask himself how other counties had been doing it through the years. He said that a county did not need infrastructure until there was growth. For example, the City of Mesquite had been the fastest-growing community in America for several years. Developers came to them and said they wanted to build 50 homes, the city council said fine: Build the homes and build the infrastructure. The county required and approved exactions to fund the infrastructure. There was no reason Lincoln County could not develop in the same way.
Senator Hardy said that Lincoln County was currently operating under the assumption that, if Vidler built the infrastructure, more people would come. Other counties operated under the assumption that when a developer was ready to build, and made a commitment to build, the county would help them build through exactions and impact fees, oversizing agreements, refund agreements, and other means. He said, for example, that when a developer wanted to put in a development in a remote location, the local government would require them to build the infrastructure. The county would often require the developer to put in oversize lines, and the developer would recover costs as other people hooked up to the system. Senator Hardy said that Lincoln County wanted to build it in hopes that people would come. That was the difference.
Senator Hardy said that was Lincoln County’s business. If it turned out to be a bad idea, then the commissioners would answer to the voters. He said that was not his issue. His issue was how this legislation would impact neighboring communities, and how this bill would change how water was appropriated in Nevada because it would change the ownership. Instead of the people of Nevada owning the water under Lincoln County, Lincoln County, or any county, would be able to act as if they owned the water, and could do with it what they wanted, for a profit.
For example, if Lincoln County were permitted 12,000 AF of water, when they only needed 2,000 AF of water, and then Virgin Valley needed additional water from Basin 221 in Lincoln County, Virgin Valley could no longer apply for permits for that water because the water from Basin 221 was already permitted to Lincoln County-Vidler, a private sector company. That had never been done before in Nevada.
Senator Hardy said that his issue was not related to public-private partnerships or to the appropriation process. He said the proponents of this bill knew that because they had had many discussions on those issues. He was upset that the proponents of this bill had misrepresented his objections to the Committee today. He said the Committee should decide the issue based on facts, but what they had tried to do in proposing item 5 of the amendment was to deflect the real issue. He said they stated that the fair market value was fine with them, so why not add the amendment he proposed in the Senate, which would apply fair market value prices to the private sector as well. Senator Hardy said they opposed that amendment in the Senate.
Assemblyman Christensen asked for a copy of that, and Senator Hardy said he would provide it. Senator Hardy said that the amendment proposed in the Senate was that, if water was sold outside of Lincoln County, whether to a private sector company or public sector company, it could not be sold for more than fair market value.
Assemblyman Christensen asked if there was an index. Senator Hardy said that fair market value in water was determined very much like real estate, on comparables, which meant that selling water would have the impact of driving up costs.
If we now say Lincoln County can sell water for profit, their water, because it was under their county, they could sell it outside of Lincoln County for profit, and perhaps for a significant profit. The people of Lincoln County would benefit from that. We’ve now done something for Lincoln County. But at what cost? At the cost of driving up the fair market value of water for the people of Mesquite, who did not, in any way, benefit from the agreement that impacted their water rates. That’s not fair. And that significantly impacts the way water is done in this state.
Assemblywoman Pierce said she was reminded of the energy crisis in California where energy companies sold energy in a circle, and sold it back and forth a couple of times in order to drive up the market value of energy. The truth of the matter was that if the Committee passed this bill, and the Governor signed it, they could wake up the next morning and discover that Ken Lay was now the Chairman of the Board of PICO, and there would be nothing that could be done because it was not the business of the Legislature. Ken Lay would be bringing to Vidler his dearth of ethics, and his extraordinary abilities at shell games. He was not in jail. He was looking for work. The people of Nevada would lose any ability to impact water down the road.
Assemblywoman Pierce reminded Senator Hardy that he said that the Lincoln County-Vidler agreement would bind future county commissioners. By extension, Ms. Pierce said she thought the agreement would also bind the Legislature. She asked Senator Hardy if that was true.
Senator Hardy said he did not know if this particular agreement would, but what it would do to statutory construction would be to set up a precedent, which would then beg the question. If that language was in one section of statute, it would need to be in every section of statute, and the ramifications of that were significant. It would also set a precedent that one county commission could bind another county commission, which had never been the case in Nevada. For purposes of this statute, however, he said the bill would specifically bind county commissions to those types of agreements, and would not further bind county commissioners. It was the precedent that concerned Senator Hardy, but he said that it was mainly a public policy concern and would not have the impact that the rest of the bill would have.
Assemblywoman Pierce said that, because of the Ken Lay example she just gave, adding the “private entity” clause to the last amendment would not give her much comfort with the amendment.
Assemblyman Grady said he was concerned with Senator Hardy’s comments that the bill would not only affect Lincoln County, but would also set a new precedent for water law that he did not think rural residents could live with. He asked if the issues Mr. Hardy had discussed today were what caused the “interesting” vote in the Senate, or if those were different issues.
Senator Hardy replied that his Floor speech had addressed the same issues he spoke of today. He said the bill passed the Senate Government Affairs Committee with a 6-1 vote, and he was the only person voting in opposition. He said other water districts that also had concerns had contacted him. Specifically, the SNWA, under their agreement with Lincoln County, was contractually prohibited from engaging on this issue. He said he seemed to be the only person sounding the alarm, for a while. He did not lobby this bill to his colleagues, but simply expressed his concerns on the Floor of the Senate. Five of his colleagues voted with him to oppose the bill. The main issue was the change in water law, which was later misrepresented as if he meant that it would change the statutory scheme for determining it. He said that was not the case, and that was not what he spoke about. Senator Hardy said that this legislation would have the net effect of changing Nevada water law by saying that water belonged to a person because it was located geographically under a person’s land. It was those issues that he addressed in his speech on the Senate Floor.
Assemblyman Goicoechea stated that it was his understanding that the State Engineer had the ability to deny any application if it were speculative or was not in the public’s best interest. He was not aware that there was any exemption for public, private, or anyone else from those criteria. He believed that if a public entity formed an alliance with the private sector and submitted numerous applications on behalf of both parties, he thought that Hugh Ricci, P.E., State Water Engineer, would deny those applications. Mr. Goicoechea said he did not see the change in state water law Senator Hardy had described. He said that the last thing he wanted to do was to change Nevada water law, right of prior appropriation, and beneficial use.
Senator Hardy said Assemblyman Goicoechea probably knew more about Nevada water law than he ever would. Senator Hardy referred Mr. Goicoechea to the State Engineer’s decision where the VVWD protested the application of water for the power plant in Lincoln County based on the fact that it was a water-cooled power plant, not an air-cooled power plant. He said, while a water-cooled plant was more efficient, obviously the proponents wanted to sell the water. In that agreement, the State Engineer gave examples of applications he had denied as speculative, that came specifically from the private sector. In this case, however, he acknowledged that the Lincoln County-Vidler agreement was a new “animal.” The State Engineer specifically stated, almost verbatim, by entering into agreement with Lincoln County, Vidler had avoided the appearance of speculation, and, therefore, he had approved the applications. This was his main concern, and he asked Mr. Goicoechea to review that decision. Senator Hardy said that the State Engineer, at minimum, had found this to be problematic in his deliberations.
What Senator Hardy wanted was for the bill to clearly direct the State Engineer to deny applications that he thought were speculative. Senator Hardy said that language would satisfy most of his concerns with this bill.
Assemblyman Goicoechea said that no one would deny that Vidler was definitely looking for advantages in the partnership with Lincoln County. On the other hand, he looked at Lincoln County and did not feel they had a choice but to accept a “helping hand.” He said that the rural counties needed help because they would be losing some of their water resources, and they did not have the ability to capture those resources today. This was an economic opportunity that could be lost to the rural counties.
Senator Hardy said he regretted that Lincoln County was in the middle of that issue. He said he did not know anyone who had done more, from a private sector perspective, to try to do something for Lincoln County. He said that, as a consultant, he suggested that the VVWD extend their service boundaries to be able to serve the area contemplated for the Lincoln County Land Act. As a representative of the City of Mesquite, he went to the VVWD and asked them to enter into negotiations with Lincoln County to provide other services such as fire, school, and police. He said his objective was not to damage, but to help, Lincoln County.
If what was on record was true, and all they were talking about doing was to develop water resources in Lincoln County, that was fine. “But why didn’t they accept my amendment, Mr. Goicoechea?” asked Senator Hardy. He added that the germane question regarding Lincoln County was whether Vidler intended to operate under the same restrictions in other areas of the state where they held water rights. “If they do,” Senator Hardy asked, “Why would they oppose my amendment?” Senator Hardy said his amendment would have allowed them to do anything they wanted to within the county where the agreement existed. However, he said, it was not his intent to be combative.
The proponents indicated that their intent with respect to item 1 of the amendment was to simply say that anything deemed speculative would be rejected by the state engineer. If that was, in fact, their intent, he said, if it was spelled out in the amendment, he would move on.
Assemblyman Goicoechea countered by saying that was the law already.
Senator Hardy said he was not disputing that, but he asked Mr. Goicoechea to acknowledge that the State Engineer applied that statute much more liberally to the appropriation of water to public sector water companies, than to private sector companies.
Assemblyman Goicoechea said that was within the authority of the State Water Engineer to dispense that law as he saw fit. However, the ”public’s best interest” had never been defined.
Senator Hardy said to Mr. Collins that the statute was in NRS 533.710.
Assemblyman Collins said that some of Senator Hardy’s argument regarding binding future county commissions or future legislators was unfounded because future county commissions could, for example, repeal sales taxes in order to switch to other sources of revenue. Mr. Collins said that he saw parallels with the county commission in 1997 that passed the sales tax and the Sierra Nevada Water Appropriation for the development of Clark County water. Regarding oversizing of waterlines, Mr. Collins thought that practice could also be considered speculation: a developer needed a 16-inch water line and an 18-inch water line was put in. It was speculation because no plan had yet been approved, except perhaps in a master plan. Until an actual population increase was fact, everything was speculation. Assemblyman Collins argued that binding future commissions was not at risk with this legislation, because they could break or change or renegotiate or terminate contracts.
Senator Hardy said, “With all due respect, not this contract.”
Assemblyman Collins said that any contract could be changed. It might cost them some money, but it was the same as the SNWA and their 20-year and 40‑year contracts. Las Vegas Paving would make more money building water lines in Southern Nevada for people who might move there, than Vidler would ever spend in Lincoln County, for example.
Assemblyman Collins said he questioned some of Senator Hardy’s motives, although Mr. Collins also recognized that Senator Hardy had disclosed to the Committee that he worked for the City of Mesquite for 8-10 years, and for the Virgin Valley Water District (VVWD).
Assemblyman Collins compared it to testimony on legislation in another committee where someone testified that he lost a bid on renewable energy and wanted to change the law so he could win the bid next time. That was about wind turbine versus geothermal energy. Mr. Collins said he did not want it to sound like Senator Hardy was a bad sport, but the five folks that voted with him against S.B. 487 were Clark County Democrats who probably liked the SNWA aspect better. Mr. Collins admitted that he had no idea why those people voted against the bill, but only that Senator Hardy was in the minority. Mr. Collins said that, in his mind, the bill was “all about economic development.”
He asked if Senator Hardy wanted to correct his testimony in that future commissions would not be bound to honor contracts that extended into the future because they could vote to terminate that contract.
Senator Hardy said he was not an attorney, but wanted to read the language:
The board of county commissioners may enter into any contract . . . but except as otherwise provided in subsection 1 of this Act, contract, lease, franchise, exchanges or other transactions were binding beyond those terms of office only to the extent the money was appropriated . . .
Senator Hardy said that language showed commissioners were bound to honor those contracts. He said testimony was given that the reason the private sector needed that kind of agreement was because of financing. He said that was fine, and he had no problem with that, but it would bind the commission.
Assemblyman Collins said they were bound only to the intent, which was the same as the Clark County Commission that passed a 20- to 30-year bond. They could withdraw from the bond but would have to pay for that decision. He said it was all about money.
Senator Hardy said that it was not his objective to be sidetracked on this issue. In addition, Mr. Collin’s reference to his representing Mesquite and Virgin Valley in the private sector prior to his election to the Senate was not germane to this issue at all. He said, as he had indicated before, the VVWD was not concerned with this because of the agreement Vidler had with the SNWA. They were taken care of, and it was not an issue with them. He was no longer engaged by that organization and hoped there was no suggestion of any impropriety. For Senator Hardy, this was a water policy issue that was larger than one district or county.
Assemblyman Collins added that the Truckee Meadows Water District was owned by Sierra Pacific Power Company for many years in northern Nevada and was only recently acquired by a public entity. Privately developed water provided a great deal of water to Reno.
Senator Hardy wanted to make sure that the Committee understood his main point. He had no problem with the private holding of water rights, but when the private sector held water rights, the State Engineer would look at those applications differently, knowing full well what they were: a privately held water right. The State Water Engineer would make his decision on the appropriation based on that fact, and he would strictly apply the statute in NRS 533 and make sure they met the criteria. He said that this kind of agreement would blur those lines and potentially would allow a private sector water company to take advantage of the opportunities that only public water companies were granted.
Senator Hardy reiterated that, if the Committee adopted item 1 in the amendment, with the clarification that the State Engineer “shall reject applications if viewed as speculative,” he would no longer be concerned. He said that would mean that Lincoln County-Vidler would bring a project to the State Engineer, describe the project, give a start date, and other information, and the State Engineer would approve those applications. Senator Hardy did not have a problem with that.
Assemblyman Collins said he believed that was the testimony, as well as the appropriations, that had been discussed as the Lincoln County Land Act, as well as the Toquop Power Plant, so those were not speculative water rights. Senator Hardy agreed. Mr. Collins said they probably spent an hour arguing over a couple of sentences that had already been addressed. Senator Hardy said then all they needed was clarification on item number 1 of the amendment and he would be 70 percent happy with the bill.
Assemblyman Hardy said he hated to belabor the point, but he was curious just what “speculative” was: Was it the Coyote Springs Ranch, was it the Toquop Power Plant, was it the concept of increasing property tax roles, providing water to Clark County, or what would be speculative that the State Water Engineer would say “that’s speculative and I’m going there.”
Senator Hardy said that none of those items mentioned would be speculative if you have a real project on the drawing board going forward. What would be speculative would be to apply for a permit for 13,000 AF, when the current projections only supported 4,000 AF.
Bevan Lister, representing a “large number” of Lincoln County Citizens, said he was from Lincoln County and would like to explain the speculative aspect. Lincoln County-Vidler, approximately 3 months after they signed the partnership agreement, filed nearly 20 water applications for 150,000 AF for irrigation purposes. Because Lincoln County was a public entity, the State Engineer held those applications in priority until Lincoln County or Vidler came before them and asked for them to be acted on. That was the policy for public use applications. He felt that needed to be made clear when discussing speculation. Because Lincoln County was a public body, the State Engineer viewed those permits, not for beneficial use, but for future planning, and held them without action in a priority position, which prevented anyone else from applying for those water rights.
Assemblyman Collins said that Assemblyman Williams, and perhaps Assemblyman Hardy, were around in 1991 when the SNWA was formed. The SNWA had a huge number of applications for water in Lincoln County, not designed for Lincoln County, as he understood it. To conclude from that example, Vidler and the Lincoln County Commissioners would like to develop water in Lincoln County versus the water being drawn by the SNWA to Clark County, which would turn Lincoln County into another Owens Valley. Mr. Collins wondered if this bill would negate SNWA’s prior applications.
Senator Hardy said he did not believe it would because the State Engineer would look at those applications for exactly what they were: water applications held by a public sector water company.
Assemblyman Goicoechea said they had 114 applications for 187,000 AF in the three rural counties of Lincoln, White Pine, and Nye. Mr. Goicoechea thought that amending the bill would negate those water applications. He said if Senator Hardy wanted to offer that amendment, he was not opposed to it because he would be opening up many water rights in northern Nevada.
Senator Hardy said he intended that the amendment would apply to S.B. 487, specifically with regard to these types of agreements. The antispeculation language would not apply in cases that did not have a public-private partnership, such as contemplated by this legislation.
Assemblyman Goicoechea said he did not understand why what was good for Lincoln County should not be good for White Pine and Nye Counties.
Senator Hardy explained that the problem only existed policy-wise if a public entity was partnered with a private sector company. The distinction was that the entities that filed those applications in other counties were not public-private partnerships. Right now, the State Engineer should be able to hold water rights in abeyance for future growth potential. Therefore, he only wanted the speculative language to apply to this set of circumstances where a public entity was partnered with a private entity.
Assemblyman Goicoechea said they were getting pretty selective and might be looking at litigation if they were much more restrictive.
Assemblyman Grady said that Mr. Lister, in the second paragraph of his letter (Exhibit F) to the Committee, stated that he had reviewed the Lincoln County Commission minutes and that they had never officially hired a lobbyist nor taken an official position on any legislation. Yet, Commissioner Tim Perkins had testified to the Committee that he represented the Lincoln County Commissioners. He asked Mr. Lister if he would go on record saying that that was not accurate.
Mr. Lister said he had reviewed Lincoln County Commission agendas from August 2002 through mid-April 2003, and he had talked to the Lincoln County Clerk three times that morning asking her to review those agendas and minutes. To the best of his knowledge, no official action had been taken in support of this legislation, and no official action was taken to hire a lobbyist.
Randy Robison, Virgin Valley Water District (VVWD), said there were a few remaining concerns about this bill. He had worked with the proponents of the legislation on the amendment, and there were some clarifications he would like to offer for consideration by the Committee.
First, regarding item 3 of the proposed amendment to S.B. 487, he understood how and why they brought that issue forward. Item 3 talked about agreements that were not subject to nondisclosure or confidentiality agreements of that particular section of the Open Meeting Law statute. He said that their concern was to make sure that the Open Meeting Law applied to this particular agreement when there was a public-private partnership. One concern had been that, throughout the process and for the last several years, once Vidler became involved with Lincoln County, Vidler, as a private institution, was able to walk into the VVWD at any time and request any of their documents because they were public records. They could review all plans, specifications, and data. On the other hand, when VVWD requested information from Vidler, they struggled for cooperation because many of those documents were protected. He requested that the Committee state, in processing this bill and amendment, that the Open Meeting Law would apply to all documents and data implicated by those agreements, and that it should be open and available to the public for inspection and review.
Secondly, the VVWD, a public entity that, with the passage of this legislation may become subject to a variety of private corporations approaching the VVWD for potential agreements, asked for clarification, under such agreements, of what effects the agreements would have on the nonprofit status of either the for-profit private entity or the not-for-profit public entity. He said it was simply not the case, as testified earlier, that this bill was “simply about economic development.”
Thirdly, continued Randy Robison, the question was also asked whether this bill was before the Committee because of the Attorney General’s opinion, which the proponents answered that it was, and then quickly dismissed it by saying that the Attorney General also said that the opinion did not prohibit the Legislature from contemplating it. The Attorney General existed to offer opinion on existing law, not on prospective law. He did express concerns about the existing law. If this bill were passed, it would change existing law, so, of course, the Attorney General’s opinion would be moot.
However, the Attorney General’s concern was not that this bill or these agreements were about economic development, but that the agreements did not serve a predominantly public purpose. The problem with the agreements was not that they would not foster economic development, which they certainly would. The Attorney General’s opinion was that the reason that these agreements did not serve a predominantly public purpose was because they were engaged in the partnership for the express purpose of profiteering on behalf of the public entity. The VVWD anticipated that, if S.B. 487 passed, with or without amendments, they would be subject to private corporations soliciting agreements with them after the precedent had been set.
Mr. Robison said that the previous point was fundamental to his final concern, which was the binding of future governing bodies. This legislation would specifically bind future governing bodies for these specific agreements. If the bill was about economic development and was so beneficial, he wondered why one would remove the checks and balances by binding a future governing body. If it were beneficial now, it would be beneficial years from now. The system of checks and balances should be retained, even if those contracts were terminated in the future. One could imagine a point where the parties were invested to the point that termination of those contracts would not be prudent, or where they were so far down the path that they would have no recourse. The VVWD had concerns about that because, if the bill passed, and these agreements would bind future governing bodies pursuant to this subject, a local governing body might not be at liberty not to bind themselves and future governing bodies, if they wanted to enter this type of agreement. The idea of competition would be kind of “turned on its ear.”
Bevan Lister said he had submitted his thoughts in writing and wanted to clarify a few things. Mr. Lister said if Mr. Fiorentino left the Committee with the impression that residents of Lincoln County were still packing water from the spring with a bucket and using the outhouse, he wanted to assure them they were not. Each town, Pioche, Panaca, and Alamo had a public water and public sewer system. The City of Caliente also had an improved water and sewer system to benefit residents. A couple of outlying communities were still on wells and septic systems, but the county was addressing those concerns little by little. He said they were definitely in the Twentieth Century.
Mr. Lister had concerns with the idea that public-private partnerships had long existed. He understood that county commissions had broad-based grounds to contract and make agreements, but he was not certain that they had been in the realm of profit making in those contracts and agreements.
Mr. Lister next read two statements from the second to last paragraph, page 7 of the Attorney General’s Opinion No. 02-15, issued on March 21, 2002:
The public purpose doctrine prohibits use of public property for private purpose.
Revenue generation for the county does not fulfill the public purpose requirement within the ordinary meaning of the term.
As stated in his letter, Mr. Lister said that, yes, this was a water issue, but far more, it was a government issue.
Are we now going to change from a representative type of government to a business representative government? Sell commodities for financing our government purposes?
Examples were given of revenue sharing at the airport; of course that was accomplished under special legislation, which was given to the airport authority. It had the authority to do many things, but most of those were done, not through profit sharing, but through taxation of gross receipts, mainly from concessions. He said that was quite different than meshing a partnership and sharing the profit.
It was necessary to understand that a public body held special status with the State Water Engineer for future planning, and that those permits were not necessarily granted, nor were they based on any kind of beneficial use requirement. Because it was a public body, the State Engineer held those applications in abeyance until the public body was ready for them. The LVVWD applications were filed in 1989. Those applications fell under the public purpose doctrine and were held in abeyance. Only recently, a few of them were permitted. That was why Vidler needed Lincoln County.
Mr. Lister emphasized that he fully endorsed the practice of private companies developing resources. He said he had financed and developed over 2000 AF of water on an agricultural operation. They drove the wells, put in the pumps, put in the irrigation system, and paid the bills. He had no problem with private companies, or with Vidler Water Company, developing resources. Nevertheless, Mr. Lister said he had a real problem with the meshing of public and private. “Where are we going with this type of government?” he asked.
Mr. Lister said there was a question about the commissions being able to change their contracts.
What if your contract says that, if you back out of this contract or choose to terminate it, you will pay us all of our out-of-pocket expenses?
Suppose Vidler was $4 million or $5 million into the contract, and Lincoln County chose to terminate, with three years to repay $4 million to $5 million; how would Lincoln County repay those funds, he queried. If you were contractually obligated to those terms, Mr. Lister wondered how a future commission might react, and whether termination was a realistic option, given the alternative in a small rural place like Lincoln County, and if Lincoln County would owe Vidler. Mr. Lister said, “Who knows? I don’t have access to Vidler’s books. I don’t know what they’ve paid out.” He wondered what rules would apply when private and public bodies were joined together. The Lincoln County District Attorney had represented the Lincoln County-Vidler partnership in legal matters. The following questions could be asked:
We are opening a door for corruption, according to Mr. Lister.
The Boy Scout Oath says a boy scout is trustworthy, loyal, and honest. If we always had boy scouts as commissioners, we’d probably be okay. But that may not always be the case. Then what happens? And, who would enforce the laws?
Mr. Lister said that the Lincoln County Water Plan specifically stated that the county plans to export water. That’s what this is about. He said, if we think about our main role as a government, it was to provide basic services. One of the county commissioners and Mr. Lister had discussed this extensively.
Was it really the role of a county commission to provide water for each individual citizen? If so, is the county responsible for drilling wells for domestic use for folks who move to outlying areas if they cannot attach to a municipal system?
Mr. Lister did not think so and did not think government would want to move in that direction, even if a private company wanted to do so. He supported that wholeheartedly, but he was certain that mixing the two entities would cause problems. We would become a government by a business, and, as a citizen, I would be governed by Vidler’s business decisions, not by decisions made by Lincoln County.
Mr. Lister said that exporting water was an economic development issue, but that development for Lincoln County meant acquiring a tax base and making land available for that purpose. Selling off water for “a few dollars in the pocket” would not develop the area.
Nevada had some of the strongest water laws in the western United States. One of the reasons was because, to date, Nevada had not tampered with them. If passed, this legislation would significantly change not only how Nevada looked at water, but how Nevada looked at government.
Chairman Manendo asked if Mr. Lister was present at the hearing where the Lincoln County Commissioners voted to support this legislation.
Mr. Lister said he was not, because he had never seen a Lincoln County Commission agenda with this item on it.
Joe Johnson, of Sierra Club’s Toiyabe Chapter, wanted to go on record opposing the bill. In general, they supported the amendments because they made the bill less egregious, but he anticipated that the second amendment would not be found to be constitutional under federal law. He said that the conversation Assemblyman Goicoechea had with Senator Hardy in relation to the first proposed amendment, was quite appropriate. Their principal objection to the bill was related to the special case status that counties had when they planned for water development in the future, and their status before the State Engineer.
Mr. Johnson said he was in the Legislature in 1991 and voted on part of the revised law that was generated then, which, in part, recognized this special case status, but he was not in the Legislature in 1989 when LVVWD [SNWA] made their application. He said that the Chairman’s question about why this bill had been brought forward was germane to the discussion, and he did not think that Vidler Water Company had answered the question. He thought that Vidler representatives needed to address that question directly.
Mr. Johnson also wanted to comment on Mr. Collins’ references to private development. Historically, private development had been encouraged. It was how the water rights had been granted in Nevada. This bill was not about the ability of a private company to file an application for water rights and develop that water with a designated project or beneficial use. Regarding the question of what was speculative: TMWA, now a public water supply company for the City of Reno in Washoe County, operated at well under 100,000 AF per year. For Lincoln County, in conjunction with Vidler, to apply for 150,000 AF of water per year was speculative. There was anticipation that there would not be direct projects involved in an application of that sort. Granted, that application was in response to an even larger application by the LVVWD [SNWA], which again questioned the wisdom of projects for the purpose of exporting water to a metropolitan area, of Lincoln County’s portion of that, and their relation to Vidler, a private company.
For the development of the Lincoln County Land Act properties, the power plant or the residential areas, Vidler could have just applied for water for projects that they subsequently developed, and, barring the existing LVVWD [SNWA] applications, could have developed those projects, which was what Vidler representatives told the Committee this morning. “Indeed the bill was unnecessary for them to have done that as a private company,” said Mr. Johnson. “Which gets back to the question of the Chairman: Why do you need this bill?”
Mr. Johnson suggested that there was no public benefit to this bill. There was existing statutory and case law that adequately developed protection of public interest, and also adequately protected the ability of private companies to invest their money in development of water rights, which were presently unallocated. If the Committee chose to process this bill, he encouraged them to adopt the amendments as proposed by Vidler, with clarification on the first item, to include Assemblyman Goicoechea’s comment that this was just about Lincoln County, since it had not yet been discussed how it might apply to other counties. He suggested that the amendment should restrict the bill to Lincoln County.
Mr. Johnson said that, if the Committee was concerned about the economic viability and the impact of the transfer of water, A.B. 229 which would increase the transfer fee, was a good approach to this issue. He suggested that a portion of S.B. 487 should be amended into A.B. 229. NRS 533.438 would be amended to change all references to “tax” to “fee” and change the fee amount from $6 to $12. Perhaps $60 was a little ambitious. The justification by the prime sponsors for item 1 in the proposed amendment would open NRS Chapters 533 and 534 to action by this Committee.
Assemblyman Collins said the City of Alamo had two water problems, their domestic water was in bad shape in terms of clarity and volume, and so was their irrigation water. He had met with Hugh Ricci, P.E., State Water Engineer, in Alamo, and looked at the problems there. They were working to form a water district, or water board, and had been for years. To have an agreement to develop the water there would be beneficial. It had not yet been done, but this bill could clarify the opportunity, which needed to happen. Their only other option was to rely on the state or federal governments for grant monies. Assemblyman Collins stated that was his opinion.
The whole point was economic development. Lincoln County was trying to stop coming to the Legislature, like they did two years ago, to build an elementary school for their kids. The Legislature gave Lincoln County $1 million to build a school. He said the Legislature also built a high school in Lund with supposedly surplus funds. The Legislature also built an elementary school in Schurz after the previous school was condemned and closed.
The Legislature took state revenue that should have been distributed, proportionate to population, for roads, health, and other needs, and built schools in rural communities because those communities lacked opportunities. If this legislation gives them an opportunity to develop their community, we should pass it. Get them off the welfare. “Give a man a fish, you feed him for a day. Teach a man to fish, and he will feed himself.” Apply that principle.
Mr. Johnson said that the question of ownership needed clarification. Water was a public resource. Whether you think that authorizing $1 million for a school, or authorizing transfer of the public interest in water resources to a county, and then to a private agency, was in the public interest, that was what you were ruling on. Mr. Johnson said he believed that the majority of the environmental community would hold that the issue of the public interest in the waters of the state should not be monetized for the benefit of a private company. There were adequate means to improve water resources and water facilities in small rural communities to meet health and safety standards for the public, such as small bond acts as well as federal appropriations.
Assemblyman Knecht said that he took issue with Mr. Johnson on the second item in the amendment proposed by Vidler. His knowledge of the commerce clause was that it would not prohibit the export of water but would only prohibit it pursuant to agreements under this bill. He thought it would survive the scrutiny of the Committee on Commerce and Labor.
Mr. Johnson said he was a geologist; commerce was outside his area of expertise.
Kaitlin Backlund, Nevada Conservation League, said they were in opposition to this bill. She said she had heard excellent testimony today, certainly that by Senator Warren Hardy, to which they would like to lend their support. Although they do not agree that, if his amendment was adopted, they would just go away. They would suggest that the Committee oppose this legislation. The Nevada Conservation League had an appreciation for the financial difficulties faced by rural counties, and she said it seemed that some felt “If you can’t beat them, join them.” It would be unfortunate to see water sold out from under the rural counties of Nevada, for the benefit of one of the larger counties. She thought it would be best to look for other alternatives on how the counties could better capture revenue. It should not be simply a water grab, and they should have some revenue if the water was to be exported. She suggested that, if the Committee did pass the bill, they should limit this bill to Lincoln County, so it did not apply to all other counties in the state, except Clark County.
Chairman Manendo asked for more testimony or more questions, and there was none. He also asked for written copies of any other proposed amendments as soon as possible.
Chairman Manendo requested a copy of the minutes from the Lincoln County Commissioners’ meeting where they voted to approve S.B. 487, and directed the copies to be distributed to Committee members, to staff, and that a copy be made available to the general public at the earliest convenience.
Mr. Fiorentino thanked the Chairman for the opportunity to speak. He said that nothing was more important than his reputation, regardless of what issues or bills he was working on. He was very distressed at Senator Hardy’s concerns and wanted to clarify those amendments, since he had worked closely with Senator Hardy for months on this issue. He said the amendment was meant to clarify, not to misrepresent, his concerns.
Mr. Fiorentino said he understood that Senator Hardy’s main concern was primarily that the existence of the contract between Lincoln County and Vidler would somehow change water law and would change the State Engineer’s ruling on what was a beneficial use. Mr. Fiorentino read the sentence that Senator Hardy referenced to the Committee in the State Engineer’s ruling on the power plan case. He said the first part of the quote was accurate, but that Senator Hardy had stopped half way through the sentence.
The State Engineer finds that by joining with Lincoln County, Vidler has avoided the appearance of speculation, because Lincoln County is attempting to plan for providing water resources to lands within the county that have begun to go into, or may go into, private hands, or lands that are believed to be exchanged for the location of the power plant.
Mr. Fiorentino said that the State Engineer then went on for pages talking about the Lincoln County Lands Act and the power plant.
What Mr. Fiorentino had tried to demonstrate to the Committee and to Senator Hardy that morning was that, clearly, the intent was to not change state law. The State Engineer made the ruling in that case because Vidler presented specific projects to him. That’s what the current law was, but if the Committee wanted to add a sentence to the first item of the amendment that said the State Water Engineer could not, under any circumstances, grant applications that he deemed to be speculative, Vidler would support that language. Vidler also supported what Mr. Goicoechea said, which was that that ought to apply to everyone equally, regardless of who asked for the water.
Secondly, the second paragraph in S.B. 487 would not require the binding of future county commissioners. It was enabling language, which would allow them to enter into contracts that might extend beyond commissioners’ terms of office. He said it was often necessary in water resource planning and took years to develop water resource applications. There was nothing in the statute that required the commissioners to be bound by prior contracts. Despite what Senator Hardy said, that was not unusual. Mr. Fiorentino said he would provide a specific citation of the statute, if the Committee wished. He said he knew of one example where there was specific statutory authority for that, and it dealt with the county commission’s ability to deal with airport lands, because airport lands were often leased or used for 40 to 50 years, or more, and clearly extending beyond the 4-year term of a county commissioner.
Finally, he did not mean to misdirect or avoid the question that Chairman Manendo asked about the Attorney General’s Opinion 02-15. He explained that Lincoln County and Vidler entered into those contracts. Pursuant to the contracts, they filed applications to provide water to the power plant and for the Lincoln County Lands Act. Immediately the contracts were challenged by the VVWD and by representatives of the SNWA. They attacked them legally by going to the Attorney General and asking that those contracts be declared illegal. He said the Committee could judge the motivation, but Mr. Fiorentino suspected it was because they were filing applications for the same water, and if they eliminated Lincoln County’s ability to develop water resources in partnership, because they could not afford to do it alone, Lincoln County would be out of the running for water rights in that area.
Mr. Fiorentino said that Vidler disagreed with the Attorney General’s opinion the moment it was issued because there were contracts where people share revenue. They did not think that invalidating those contracts was a valid statement of the law. Although the Attorney General’s opinion was not law, Vidler was fearful that, even though they had an agreement with SNWA, the VVWD or someone else would continue to attack those contracts between Lincoln County and Vidler using the Attorney General’s opinion as a tool. So, the prudent thing would be to address it directly in front of the Legislature. He said they brought forward the bill specifically because of concerns addressed in the Attorney General’s opinion. Since then, Mr. Fiorentino said that their fears had been realized: The VVWD had protested every Lincoln County-Vidler application in Lincoln County and had asked the State Engineer to dismiss them by using the Attorney General’s opinion as a basis for dismissing the applications.
Finally, Mr. Fiorentino said it was unfortunate that Lincoln County and Vidler, for purposes of the discussion generated, had decided to enter into an innovate type of contract, one which said they would split the revenue, if any, and that would be how Lincoln County would pay back Vidler for their investment. Despite what was said today, Mr. Fiorentino did not feel this was an unusual business practice. He said that there were cases where Clark County actually received revenue, in addition to the tax on gross receipts. That was an innovative way to finance the projects. Lincoln County could have gone to Vidler today and asked for an engineer to help develop their water resources for the Lincoln County Land Act. The County might have asked, “How much do you want to be our project engineer?” Vidler could have responded that they wanted $50 million, $5 million per year for the next ten years. What made this contract unique was that they took the risk out of it for Lincoln County, and for the citizens of Lincoln County, by saying they did not have to pay Vidler unless they actually developed usable water for projects in Lincoln County.
Mr. Fiorentino thanked the Committee and said he would be glad to answer questions.
Chairman Manendo closed the hearing on S.B. 487 and directed the Committee to turn to S.B. 358.
Senate Bill 358 (1st Reprint): Provides for certain protections relating to certain lands adjacent to Red Rock Canyon National Conservation Area. (BDR 22‑645)
ASSEMBLYWOMAN PIERCE MOVED TO DO PASS S.B. 358.
ASSEMBLYWOMAN KOIVISTO SECONDED THE MOTION.
Assemblyman Grady said his question from the hearing on Saturday was regarding bonding. His impression was that almost everyone agreed that there was no way the bond put up for the reclamation of that project would even begin to remediate the problem. He asked if this would come back to the state eventually, and, if so, if they should be concerned with a fiscal note for those costs. Or, would that be considered an unrelated potential cost, he wondered.
Chairman Manendo said that this bill would just codify current zoning that the Clark County Commissioners supported in a resolution that passed in a 6-0 vote.
Assemblyman Grady said they did not see the resolution since they attended Saturday’s hearing by videoconference from Carson City. He said that Myrna Williams stated that the resolution addressed this particular bill, but he heard later that it did not, and that it addressed the federal language. He wanted to know if anyone had seen the resolution.
Chairman Manendo said he had not seen the resolution.
Dan Musgrove said that his understanding was that the resolution that was passed last Tuesday was in regards to prompting the federal delegation to put together the deal to attempt to buy the land through use of the funds in the public lands account.
Assemblyman Goicoechea asked Dan Musgrove to clarify another point. He had heard Commissioner Williams say that it was a 6-0 vote that supported this legislation. He wanted Mr. Musgrove to clarify, if the Clark County Board of Commissioners had requested that this Committee pass the legislation, they would not have any problem. He asked if Mr. Musgrove knew if that was the intent of the Clark County Commissioners.
Mr. Musgrove said that was the position of Clark County. They were in support of S.B. 358, and it would put into state law exactly what they had passed in the Red Rock Overlay. He said they believed it was necessary because of the importance of Red Rock, that the Red Rock Overlay district, which was a local zoning matter, should be put into state statute to ensure that the future of the area was protected. Once it was codified in state statute, any changes would have to be made through the Legislature, rather than through a county commission that might change several years down the road.
Assemblyman Knecht said he would be voting no but would reserve the right to change his mind on the Floor of the Assembly. He said that a good case could not be made for elevating a land use matter to the state Legislature even at the request of the local county. Home rule meant that local bodies should be accountable to their voters and not hide behind the state Legislature. However, in view of the complexity of this case and the subtle issues, he was still considering it, but he had not yet been persuaded.
Assemblywoman Pierce said to Mr. Knecht that she would suggest that, in the same way the state had an opinion on what happened at Lake Tahoe, the state had an opinion on what happened at Red Rock. It was a comparable national and statewide treasure, which was why it was elevated to the state level.
Assemblyman Knecht said he agreed it was a national treasure, but he felt that the state’s participation in the Tahoe Regional Planning Agency (TRPA) had become a real problem for those who lived in the area and were familiar with the details. While he understood her concerns, suggesting that the Committee ought to pass this bill because it was somehow similar to TRPA was not helping her case, because he thought TRPA had made complete hash out of its charge and needed to be changed. He said that would not prevent giving the issue serious consideration prior to voting on the Floor.
Assemblywoman Koivisto said to Mr. Knecht that, for whatever reasons, too many of the Clark County Commissioners had “conflicted-out” and were unable to vote on S.B. 358. Therefore, their constituents were not represented. In order for those folks to have representation on this issue, it had to be dealt with through the Legislature.
Chairman Manendo said there had been some discussion of their role as elected officials and where they had an opportunity to represent their local constituents, even on local issues such as this one.
Assemblyman Christensen said that he had not been too vocal on this issue to date, but he wanted to forward what he had heard from his constituents, since Red Rock was entirely within his district. He had received more e-mail on this issue than on any other issue. Putting his own feelings aside, it was very clear that his constituents wanted this area completely protected. From listening to both sides during the hearing, he had to say that the arguments for the bill were quite compelling. His concern about whether it was the legislators’ job to be involved in this matter, which was a local zoning issue, became a firm “Yes. It is a state matter, as much as a local matter.” His personal memories of riding his bike in that area as a teenager evoked the hope that his boys would be able to do the same. The whole area could be developed so fast, given the current pace, that, although it may seem extreme, he felt they needed to draw the line and act to protect the phenomenal Red Rock area. He said he was representing his constituents and also his own feelings in fully supporting the bill.
Assemblyman Grady said that Mrs. Koivisto made the most eloquent argument for voting for this bill. We were being asked to do something that could not be done locally. That was the reason he supported the bill, in addition to the resolution, and hoped his colleagues would support of this bill.
Mr. Musgrove said he appreciated Mr. Knecht’s comments. He felt it was very significant that Commissioner Myrna Williams stepped forward and sat next to Senator Dina Titus at the witness table during the hearing on this bill in Las Vegas. Anyone who had seen Commissioner Williams would know what a vigilant supporter she was for Home Rule and for empowering counties to make decisions on their own. Mr. Musgrove said they were also very fortunate in having Senator Titus come to them and ask how she could help them protect Red Rock. He said that was the decision that was made by the Clark County Commissioners; it was to put aside the quest for Home Rule, that absolute want for complete authority over individual zoning matters, and to approach the state for help in protecting that natural resource.
Assemblyman Hardy said he did not want to hear any more testimony on this. He said the bond of $600,000 would be going up to around $1.4 million for remediation of the site. Having seen that mountain, Mr. Hardy said that would not even come close to remediating the site. He did have a concern about that and wanted to discuss what state and/or federal dollars would be involved in the remediation.
Mr. Hardy said that his understanding was that the Clark County Commission did not actually vote on S.B. 358, or people would have abstained. His question was what would be discussed on May 21, 2003, since this bill was on the county commission agenda, if the Legislature took action. Would their action pre-empt that discussion, or were they even allowed to have it on their agenda. He was unable to reach his county commissioner for an answer on that. He told a reporter that if the local county commission would transfer authority on a local zoning ordinance, the Legislature would take it. He had qualms about doing something quickly, rather than going through the normal county zoning process, and he had a question about property tax roles. Because, as he voted, he would still have questions and remain open-minded, he asked for the prerogative to change his vote on the Floor of the Assembly.
Chairman Manendo said that 11,000 names of petitioners were not read into the record, and that members had received e-mail over the weekend about folks that were turned away. He said the Committee apologized with all their hearts, because it was such a heated and important issue to southern Nevada, which was why they held hearings in Las Vegas. The Chairman said they would still accept letters and e-mail for the record, and the record would remain open for comments in writing.
However, he regretted that people were turned away by a private company that was hired by Mr. Rhodes. People who did not have blue shirts on were told the room was full, and they were not allowed to enter the state building. Chairman Manendo said that, considering that, there were only two capital police on hand trying to do crowd control in rooms on the fourth floor, it was still not acceptable, and should not be acceptable to this body or to citizens, because no one should be turned away by anyone. He was personally very offended by that because folks wanted to be heard and were turned away. He thought, in the future, they needed to have more staff on hand for that type of hearing. Chairman Manendo reiterated that people should never be turned away because of their stance on a piece of legislation. That was bad public policy and was a disservice to the people the Committee members represented.
Assemblyman Collins wanted to disclose that he was an electrical contractor on a qualified list with utilities, making a disclosure under advice by legal counsel. He said he did not bid on roadwork, but his company had done work on road projects and may currently be doing work on road projects. His company was not in a bid process, however those jobs were awarded because of contracting qualifications. This bill would not affect him in any way.
Assemblywoman Weber said she had conflicting feelings on this issue, partly because her father’s favorite place was Red Rock. Although her family was in construction, even her father wanted to save Red Rock. She viewed this as a citizen issue, a grass roots issue, and that participating in that was a great honor. She was very moved by the issue, and the bill had her complete support.
Assemblyman Collins said, in Section 9, subsection 2, in supporting the federal acquisition, he did not strongly support that but did not want to amend it out. Because of the southern Nevada Public Lands Act, he would rather see that money spent this way, rather than in rural Nevada, where there was such a limited amount of private property. He believed it was a statewide concern, not just a Clark County issue, so it was appropriate for that language to remain in the bill.
Chairman said it was good that members had a chance to see Red Rock. Not everyone came to Nevada to gamble. No other discussion ensued. Chairman repeated the motion and the second and then called for the question.
THE MOTION CARRIED WITH MR. KNECHT VOTING NO.
Chairman Manendo assigned the bill to Assemblyman Christensen to handle on the Floor with Assemblywoman Pierce as backup.
Chairman Manendo adjourned the meeting at 12:59 p.m.
RESPECTFULLY SUBMITTED:
JoAnn Aldrich
Committee Secretary
APPROVED BY:
Assemblyman Mark Manendo, Chairman
DATE: