The first sentence of the Virgin Valley Water District’s response to a lawsuit filed against it by Paradise Canyon, LLC, summed up and set the tone for the next 25 pages of legalese. “This is a case of a golf course that doesn’t want to pay the going-rate for irrigation shares.”
Paradise Canyon, which owns the Wolf Creek golf course, filed a lawsuit against the district on May 16 in civil court over a 2011 lease agreement that provides the golf course with irrigation water. Because the lease can’t be changed until it comes up for renewal in 2019, the lawsuit appears to be a pre-emptory and specious move on the part of Wolf Creek.
The district’s response, filed with the Clark County District Court on July 9, requests an immediate dismissal of the lawsuit, saying “The complaint represents the latest in a series of efforts by Wolf Creek to force the District into charging the rate Wolf Creek wants to pay. Unfortunately for Wolf Creek, the Lease gives the District discretion to determine the Lease rate beginning in 2020.”
In its lawsuit, Paradise Canyon alleged it has the right to lease the irrigation shares in perpetuity, that the district is not acting in good faith and fair dealing, and that Wolf Creek had no restraint on subleasing shares it doesn’t use to Southern Nevada Water Authority. The Mesquite golf course also asked for declaratory relief from proving beneficial use of the water and from the requirement to use city effluent water before using the district’s irrigation water.
Perhaps the most striking portion of the response was the district’s charge of political, legislative and judicial manipulation of the whole issue on the part of Wolf Creek’s owners. In addition to the lack of jurisdiction by a public utility commission, the Nevada legislature gave the district “complete control over the rates it charges for its water resources” due in large part because the board of directors “are elected by the Virgin Valley residents and are answerable to those voters for the decision they make regarding rates and everything else.”
The response goes on to ask the judge, “Is there really any way for a court to decide the policy question of whether a commercial golf course should continue to be subsidized by the residents of the Virgin Valley?”
“Wolf Creek seeks to effectively ‘unseat’ the officials who were duly elected by the Virgin Valley residents,” the response continues. The district also alleges that in the past Wolf Creek was influential in stacking the board of directors with members sympathetic to its cause. “However, when Wolf Creek no longer enjoyed the support of a majority of the District’s board members, Wolf Creek went to the  Nevada legislature in an unsuccessful attempt to get legislation passed at the state level which would have prevented the District from adjusting its lease rates.”
Continuing that, the district alleges in its response that residents “have borne the brunt of the previous policy decision and have felt the financial effects of such subsidy over the past several years.” The document describes the significant rate increases imposed on all other ratepayers in the district’s service area, approximately 40 percent in 2010, 38 percent in 2015, and a $10 per month surcharge in 2015, while the golf course kept the same $250 lease rate for nine years.
“The District’s current directors understand how unfair and unjust it is for every resident, including the large retiree population in the valley living on fixed incomes, many of whom could never afford the [$180] greens fees for a single round at Wolf Creek, to shoulder the necessary rate increases while Wolf Creek, a world-renowned golf course with revenues in the millions of dollars gets a huge discount on [irrigation] shares into the indefinite future,” the document says.
In asking for the lawsuit to be dismissed, the district said “the answers to such questions lie squarely in the political arena, not the court room. These decisions rest exclusively with the officials who were duly elected to make such important judgment calls.”
In the district’s response, it addressed the lack of good faith and fair dealing allegation by saying “as Wolf Creek admits in its complaint, the Lease contains explicit, unambiguous language granting the District sole and absolute discretion to set the lease rate for its [water] shares commencing in 2020.”
The district also pointed out to the court that “Wolf Creek was -unsurprisingly-not able to negotiate a permanently low rate back in 2011 and it cannot now, seven years later, force the District to abide by terms the District never agreed to. The implied covenant is not a loophole allowing a ‘re-do’ of a contract on terms you were unable to negotiate in the beginning.”
The 2011 lease agreement gave Wolf Creek the right to lease 155 shares of irrigation water from the district at $250 a share until the lease renewal date of Jan. 1, 2020. Actual meter readings over the years have shown that the golf course only uses approximately 110 shares for irrigation. The remaining water flows downstream to Lake Mead without compensation to anyone.
Wolf Creek offered to return the unused 55 shares “but only if the District agreed to a 20-year lease of the remaining shares at $450 per share,” said the motion to dismiss document. The district also refutes Wolf Creek’s allegation that it’s free to sublease its unused water by pointing to the lease restriction against such idea.
“Wolf Creek claims the District shouldn’t be able to lease shares to SNWA for the going rate of $1,246 but that Wolf Creek should be allowed to sublease those same shares to SNWA for $1,246,” claims the district’s response. “The District never agreed to such terms. But, Wolf Creek did agree both to the District’s discretion to set the rate in 2020 and that Wolf Creek would have no right to sublease the shares.”
The district leases some irrigation water shares to SNWA for $1,246 apiece. It recently signed a lease amendment with Conestoga golf course that raised its irrigation share price from $250 to $650 beginning in 2020 and incrementally raises the price 10 percent every year until it reaches 90 percent of the market rate. The Conestoga agreement also returns 50 shares to the district of water it wasn’t using. Subsequently the district leased those shares to SNWA for the going rate of $1,246.
In addressing the perpetuity issue, the district responded that “Wolf Creek holds a right of first refusal to continue leasing [irrigation] shares after 2020 if Wolf Creek pays the rate set by the District at that time.” Further, it says that if the board of directors decides that the lease rate should be $1,246, “the District need only give Wolf Creek notice and an opportunity to match that rate. Wolf Creek can either pay that rate or find another source of water.”
The district summed up the “Factual Background” portion of its response by saying “Wolf Creek’s complaint makes clear that Wolf Creek is doing just fine, financially and otherwise. Wolf Creek is regularly featured as one of the premier golf courses in the country on television, in video games, and elsewhere. Managing member Cory Clemetson has stated that ‘We are a bucket list golf course…People come from all over the world. They plan their vacation a year in advance, sometimes years in advance.’
“Regarding the course’s financial performance, Wolf Creek admits in its complaint it hosts 30,000 rounds of golf every year. At the rate of $180 per round, this means greens fees alone amount to at least $5,400,000, not counting cart rental fees, restaurant and pro shop revenues, and the other income producing activities of the course.”