Paradise Canyon, LLC, which owns the Wolf Creek golf course in Mesquite, sued the Virgin Valley Water District in May 2018 in civil court over a 2011 lease agreement that provides the golf course with irrigation water. Wolf Creek leases its shares of non-potable irrigation water at $250 a piece for a total annual payment of $38,750. The lease comes up for renewal this year.
VVWD currently leases water shares to Southern Nevada Water Authority (SNWA) for $1,246 a share. The VVWD Board of Directors recently set its water share price at $1,115 a piece.
As part of Mesquite Local News’ mission to educate and inform the public, this series of articles will examine the genesis of a lawsuit Paradise Canyon, LLC, owner of Wolf Creek golf course, filed against the Virgin Valley Water District (VVWD) in May 2018.
Part 1 of this series examined the origins and ownership of Wolf Creek golf course by Cory Clemetson and his brother Chad. It is available online at www.MesquiteLocalNews.com.
This part will discuss issues about the lease agreement between VVWD and Wolf Creek for 155 shares of irrigation water which is the heart of the lawsuit.
Origin of the lease
The current lease agreement between Wolf Creek golf course and VVWD was signed in June 2011. It was an update of a prior lease signed in 2007.
At the heart of the lawsuit is a sentence that says “…the rent amount for the irrigation shares after January 1, 2020 shall be determined in the sole and absolute discretion of VVWD.” The lease also calls for a one-time Right of First Refusal Fee of $25,575 that Wolf Creek paid in 2011.
Cory Clemetson signed the lease as Managing Member of Paradise Canyon LLC doing business as Wolf Creek Golf Club.
In his deposition, Bingham asked Clemetson “So is it safe to say that the general manager at Wolf Creek is authorized by you and Chad [his brother and 50 percent owner] to oversee the day-to-day operations, but you as the managing partner get involved in the significant decisions impacting Wolf Creek?”
Clemetson answered, “Managing member, yes. That would-that would be fair to say.
“Do you typically read the contracts before you sign them?” Bingham asked.
“Yes,” Clemetson said.
Bingham turned to the 2011 lease and asked, “Is that your signature on the last page of that lease?”
“Yes, that’s my signature,” Clemetson replied.
“You mentioned that you typically read contracts carefully before you sign them. Is that also true for this 2011 lease?” Bingham asked.
“Yes. I mean, I would assume so. But we also had counsel review that – this as well,” Clemetson said.
Clemetson explained that attorney George Benesch was his private counsel at the time he signed the lease. Benesch served as the VVWD legal counsel for more than 10 years and was replaced by Bingham in 2010 and 2011.
“You agree that Wolf Creek had the opportunity to negotiate the terms of the lease, correct, before signing,” Bingham asked.
Clemetson said, “Yes.”
Terms of the lease
Bingham asked, “In Section 2A, it says, ‘Under no circumstances shall lessee have the right to lease the irrigation shares on the same terms as set forth in this lease after January 1, 2020. You knew that the lease was for eight years from June 1, 2011 to June 1, 2019; correct?”
“What we knew was we had a lease in perpetuity, and then we had a rate lock for these eight years. And then for the same 155 shares, we could go each year as long as we claimed that in perpetuity. And, you know-and there would be a market rate that would be set. The local market rate. That’s what we knew.”
“And how did you know that there would be a local market rate?” Bingham asked.
“Because in the negotiations, Karl Gustaveson [former VVWD board member] who was-obviously we were coming off the recession, and that was-the first thing was being able to get financing for-you know, financing for golf courses was not very easy at the time. And still isn’t,” Clemetson said.
“So there’s nothing other than Karl’s statement prior to the meeting that you’re relying on or did rely on that there would be a local market rate,” Bingham said.
Clemetson said, “I think that’s what-the understanding from the people that we had met with from the Water District, from Ken Rock [former VVWD general manager] to Sandra Ramaker [former VVWD board member]. But the primary person that we ended up dealing with was Karl Gustaveson, who was the president of the water board at the time.”
“You knew the rate would end-this $250 rate, you knew that that would end after eight years; right?” Bingham said.
“The rate lock period would end, correct. We didn’t know exactly-yes,” Clemetson said.
Bingham asked, “And you knew that the District would have the right to change the rate in its sole and absolute discretion; correct?”
“Correct. But within the market rate. It was-yeah, within the marketplace itself. Meaning the Virgin Valley and Mesquite area. Yes,” Clemetson responded.
“What language in this agreement refers to the local market rate?” Bingham asked.
“I mean, the document speaks for itself,” Clemetson said.
“You can’t-as you sit here today, you don’t know of anything specific in this agreement that states that the District would be limited to setting the rate, at the expiration of the rate lock, based on any local market rate?” Bingham asked.
“Do you want to give me time to review the agreement?” Clemetson asked.
“No,” Bingham said. “I just-I just want to know-I mean, you’ve sued the Water District, right, based on this particular lease? And you’ve made the claim that the Water District’s ability to set the rate should be limited to a local market rate. I want to know specifically what are you basing that on, if anything, within the document itself.”
Clemetson replied, “I don’t know within the specific of the document because, again, it’s been a long time since I signed it. I can only give you what was known by all of the parties at the time of the agreement, what we were trying to achieve.”
After some back and forth defining the terms “sole” and “absolute” Bingham asked “So you understood the District did have the sole and absolute right to set the rate, meaning the District would be the one to determine what that rate would be and that the District would be unlimited in setting that rate?”
“Within the Mesquite marketplace, yes. Within the Valley, yes. That was the intent of all of the board members that voted that night. That was the intent of Ken Rock. You know, that’s what we understood the intent was, and those were all the discussions, there were two separate marketplaces,” Clemetson replied.
Bingham asked, “Do you recall ever asking that the future rate be determined based on the local rate?”
“I just assumed that’s what we were going to do,” Clemetson said.
Note: The 2011 irrigation water lease between Wolf Creek and VVWD does not contain language referencing a “local market rate.”
Part 2 will discuss issues about the lease agreement between VVWD and Wolf Creek for 155 shares of irrigation water which is the heart of the lawsuit.
Part 3 will discuss Clemetson’s efforts to monitor the amount of water the golf course uses and to reach agreements with VVWD prior to the lawsuit.
Part 4 will cover information about Clemetson’s $2.125 million loan for which VVWD issued an estoppel agreement in 2012.
Part 5 will review Clemetson’s deposition in relation to setting the price of irrigation shares.
Part 6 will provide information about people Clemetson has hired like former VVWD Hydrologist Michael ‘Boomer’ Johnson after he left prison, former VVWD attorney George Benesch while he was serving as VVWD counsel, former water board members Sandra Ramaker and Robert ‘Bubba’ Smith and local blogger Mike McGreer.
This series is based on the transcribed deposition of Cory Clemetson, part owner of Wolf Creek, that was taken on May 21 by attorney Bo Bingham who represents VVWD. Clemetson’s attorney, Jeffrey Sylvester was present during the seven-hour deposition.
Because the lawsuit involves a public entity that is funded by ratepayers in the Virgin Valley, all court filings are a matter of public record. All previous MLN articles have relied upon court documents filed by both sides. The reporter in this series purchased the transcript from Manning, Hall & Salisbury, Certified Court Reporters and was not given the deposition by either side.