With a court hearing set for Aug. 29, Paradise Canyon LLC who owns Mesquite’s Wolf Creek golf course filed an opposition and counter motion to Virgin Valley Water District’s (VVWD) request to dismiss a complaint Paradise Canyon filed in May.
The documents filed on Aug. 9 refute much of VVWD’s request saying it “was apparently written to arouse local animus – during an election year – and to paint Paradise Canyon in a false light, not to be taken seriously by this Honorable Court.”
Wolf Creek claims that the water district is not acting in “good faith and fair dealing” regarding a lease between the two entities for 155 shares of irrigation water that expires in January 2020 by threatening to increase the price per share from the current $250 to $1,246. The latter price is what the district receives from Southern Nevada Water Authority (SNWA) for leased shares.
The most recent document filed by Wolf Creek says “whether VVWD’s 500% rate increase is a breach of that implied covenant is a question of fact to be decided by a judge/jury at trial, not on a motion to dismiss.”
After the district argued in its motion to dismiss that “Wolf Creek seeks to effectively ‘unseat’ the officials who were duly elected by the Virgin Valley residents” the golf course retorted in its latest filing that “while the Lease grants VVWD discretion [to set the lease rate], it does not grant the political subdivision the right to abuse that discretion.”
Wolf Creek returned to the 2011 origination of the current lease pointing out that “based upon the parties’ course of dealing beginning with their 2007 lease, as well as VVWD’s representations during lease negotiations in 2011, it reasonably expected that any rate increase for irrigation water in 2020 would be based on a market rate. This is also what former board members Carl (sic) Gustaveson and Sandra Ramaker understood when they approved the Lease in 2011.”
Included in the Aug. 9 filing are declarations from (Karl) Gustaveson and Ramaker (who is currently running for Mesquite City Council) with both saying “I understand that the goal in setting the rate was to provide stability to the golf courses for both lending and financing purposes while setting a rate that was comparable to rates paid by other users within the District.”
The statements from Gustaveson and Ramaker go on to say that they understood that the “market rate for irrigation shares was not established by the lease rate charged by the District to SNWA.” And, that “while the Lease provides that Paradise Canyon has the right to continue leasing the Leased Shares on a perpetual basis beyond the Initial Term, the District is permitted to increase the Lease Rate for the Leased Shares after Jan. 1, 2020 in its sole and absolute discretion.”
Wolf Creek’s document adds “The Lease does not grant VVWD the right to refuse to act…Instead, what VVWD bargained for was the ability to exercise discretion, which must be exercised in good faith.”
The documents spell out that Wolf Creek is “unable to return the Leased Shares for two reasons: (1) there existed an operational covenant with its lenders that it maintain the Leased Shares as condition of its financing; and (2) that the surplus, if any, of Lease Shares was necessary to guard against a draught (sic). The bases for the reluctance to amend the Lease were explained to VVWD early and often.”
In 2012, the district signed an estoppel agreement with Paradise Canyon that allowed the golf course owners to receive a loan for $2.125 million from the Nevada State Development Corporation for 20 years based in part on the lease terms of 155 shares at $250 per share.
At issue is the district’s request for the golf course to return 45 of the 155 shares of irrigation water that meter records show isn’t being used. The district wants to lease those shares directly to SNWA at the higher price thus increasing its income.
In fact, Wolf Creek claims that it can sublease the unused shares directly to SNWA itself at the higher price and that it would return to the district the difference between the $250 it pays and the $1,246 it would receive.
Ostensibly, that would allow Paradise Canyon to continue its current financial agreement for the SBA loan.
In previous communications between the two entities, 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” without any escalation over the life of the lease.
The district recently adjusted its lease agreement with Conestoga golf course that increases the per share rate to $650 with a 10 percent annual adjustment up to 90 percent of the going market rate. The Conestoga agreement also returns 50 shares to the district of water it wasn’t using.
The 2011 lease agreement says that “Lessee shall have no right to sublease the irrigation shares to any party. Any attempted assignment or sublease shall be void.”
Wolf Creek’s Aug. 9 filing adds that “The restriction is not reasonable and appropriate to any lawful purpose and is contrary to the role and purpose of enforcing public policy limitations on restraints on alienability of personal property.”