Four years after the Virgin Valley Water District first asked Conestoga golf course to return irrigation water shares it wasn’t using, the two entities reached an agreement at a special board of directors meeting held Tuesday, April 24, that amends an existing lease of irrigation shares.
The original lease agreement was signed in 2011 with its terms set to expire on Dec. 31, 2019. Under the amendment, Conestoga will immediately return to the district 50 of the 150 shares it currently leases. Golf course representatives have stated that they do not use all 150 shares on the golf course but rather they use between 85 and 100 shares. The golf course has paid an annual $250 fee per share since 2011.
The district leases other shares of irrigation water it owns to the Southern Nevada Water Authority for an annual $1,246 fee per share. The district will now lease the 50 shares to SNWA netting an extra $49,800 in general funds.
The agreement also calls for the lease rate for the remaining 100 shares to stay at the current $250 rate through December 2019. It will increase to $650 per share in January 2020 and further increase 10 percent a year until it reaches 90 percent of the lease rate paid by SNWA through the year 2036.
The increased rate in 2020 will cost the golf course $40,000 more that year or about 75 cents per round of golf for 30,000 rounds. According to its website, Conestoga’s green fee ranges from $70 to $199 per round in prime season.
In December 2017, Conestoga, through its attorney Jeff Sylvester, said it wanted the current lease rate of $250 extended for 30 years without any escalation clauses. The board turned that down and continued negotiating through the winter with Sylvester and Pulte Del Webb/Conestoga representative Quincy Edwards.
That is about the same time the golf course was put up for sale.
At Tuesday’s meeting the board, its attorney Bo Bingham, Edwards and Sylvester discussed the legal term of “Fair Market Value” upon which the amendment will set rates after 2036.
In a lease agreement VVWD signed with SNWA in 2014 the district will receive the $1,246 rate per share until either the year 2036 or the district has received $4 million whichever comes first.
The lease amendment with Conestoga referenced the 2036 date but not the dollar mark. The board agreed to include the referenced $4 million in a revision.
The amendment says that “commencing January 1, 2036, the District shall have right (sic) to set the lease rate at whatever price the District may determine in its sole and absolute discretion and the parties expressly agree that in setting such rate the District shall not be constrained or limited in any manner whatsoever. In the event Conestoga is unwilling to pay the rate set by the District, all lease and other rights and obligations of every kind shall automatically terminate…”
Also included in the amendment is a provision allowing the district to develop alternative water sources that it could make available to the golf course in lieu of the irrigation water it now supplies. VVWD General Manager Kevin Brown said the district is considering developing seasonal water resources it has available in the Half Way Wash located downriver from Mesquite.
The current amendment language says the alternate water will serve “in lieu of the leased shares on the same terms as set forth in the lease and this amendment,” which presumably would be at the same dollar amounts as the irrigation water. However, Brown and board members said they would have the right to price the alternate water at any rate they choose.
Since 2011, the district has leased part of its irrigation water to three golf courses in the local area all at the same $250 per share rate: Conestoga (150 shares), Palms golf course (80 shares), and Paradise Canyon (Wolf Creek) golf course (155 shares). All three leases are set to expire Dec. 31, 2019.
Earlier this year Mesquite Gaming, which owns the Palms golf course located across the Arizona state line, voluntarily agreed to return all 80 shares to the district this summer, almost 18 months before its current lease expires. Even though the then-VVWD board of directors signed the Palms lease in 2011, it was actually illegal to do so since the water was technically not being used in the state of Nevada.
According to documented water meters, Wolf Creek golf course also does not use its full 155 shares for irrigation. However, it has continually refused to return any shares to the district. Public documents between the district and Wolf Creek show that the golf course pays $11,250 per year for 45 shares of water it doesn’t use thereby costing the district $44,842 in lost income it could gain from leasing the shares to SNWA.
In 2012, the district signed an estoppel agreement with Wolf Creek that helped the golf course obtain a bank loan for $2.125 million that was “secured by the Club Property which will have priority to the SBA Loan as permitted by the Authorization and except for the potable water utilized for the golf course greens, the primary source of water for the irrigation, operation and maintenance of the remainder of the Club Property is pursuant to the Lease Agreement.”
In December 2017, Sylvester, who is the representing attorney for both Wolf Creek and Conestoga, notified the district that Wolf Creek also wanted the $250 lease rate to remain fixed for an indefinite number of years. Sylvester wrote that “any proposed amendment would require approval of Paradise Canyon’s secured lender as a condition precedent” and that the estoppel document signed in 2012 “was necessary so that Wolf Creek could obtain a loan.”