Water supplies become a marketplace commodity

The members of the governing board of the Truckee Meadows Water Authority filed into their meeting room, chatting with each other and people in the audience. They’re mostly familiar faces, elected officials from around the valley like Bob Cashell, Geno Martini and Bob Larkin. Sparks Councilmember Mike Carrigan, Reno Councilmember David Aiazzi and two Reno City Council appointees—Tom Young and Michael C. Cate—also sit on the Authority’s board.

The Authority has existed for only a decade. Before that, Sierra Pacific Power Company owned the main local water company, and local distrust of that corporation hampered water policy all up and down the line. No one wanted to trust Sierra Pacific with water meters, for instance. Getting water out from under SPPC and into a public water agency had made life easier all around.

But this meeting had an undercurrent of anxiety. Two members of the audience in particular were nervous.

On this July 16, the board members were considering a very different future for TMWA. A huge investment house was eyeing the public’s water company, and the board was going to vote on whether to sign legal agreements authorizing an exploration of letting TMWA return to private operation.

Goldman Sachs is in the forefront of a business movement to acquire control of the public’s services and infrastructure—water, airports, toll roads, electricity, natural gas, ports.

In 2006, it put together its first infrastructure fund—$6.5 billion. “Goldman Sachs is a leading private equity and real estate investor with a long history of making profitable investments, and GS Infrastructure Partners is a natural extension of that business,” said a company statement. Soon a “Top 10 Goldman Sachs takeover targets” list of water companies was floating around.

Goldman Sachs’ public statements, formal and otherwise, are laced with two themes—how water is underpriced and how water is the new oil.

All over the world, big business is trying to acquire public works and services. Deborah Kaufman and Alan Snitow, producers of the documentary Thirst, wrote, “[S]trings are being pulled by major multinational water companies with a very specific agenda: to make water an economic commodity that is bought and sold on global markets and is managed by transnational companies that claim to be more efficient, flexible and cheaper than public water agencies.”

It’s not a case that is easy to make after what happened in Stockton, Calif. That was the showcase experiment, the prototype that was going to show how it could work. The Stockton City Council, urged on by the mayor, entered into a contract with OMI-Thames for private operation of the water system. After four years of sewage spills, fish kills, underground leakage, undone maintenance and many other problems, Stockton ended the contract. It sent a tremor through the emerging infrastructure industry and local governments, though business lobbyists scarcely missed a beat. They were in Sacramento lobbying changes in water law to make such privatization easier.

Kaufman and Snitow go on, “Arrayed against this corporate-planned water future is a growing citizens’ movement of community groups and nongovernmental organizations. These people believe water is a human right. They want to work toward solving the world’s serious water problems not by empowering corporations but by empowering local people.” (In March, at the behest of the Bush administration, the United Nations Human Rights Council voted that water is not a human right.)

A memo from Reno finance director Andrew Green to the TMWA board members said, “The city of Reno has been approached by Goldman Sachs regarding a long-term asset leasing prospect that could potentially generate significant cash for the three TMWA entities. The program would allow TMWA to lease its assets for 50 years and receive an up-front cash payment.”

Green also wrote, “Given the current difficult economic times that have forced operational cut backs and service reductions within all three owner entities, it is critical that all potentially viable revenue generating prospects be analyzed to determine their true feasibility,” which raised serious legal questions of whether he was looking to divert TMWA assets to Washoe County, Sparks and Reno. (The term “owner entities” is a misnomer—Washoe County, Sparks and Reno don’t own TMWA. It’s an independent government created by the three entities with participation by the Nevada attorney general.)

Among those at the TMWA meeting were Mary Connelly, who runs U.S. Sen. Harry Reid’s Reno office, and Assemblymember Bernie Anderson, both of whom were nervously watching the scene unfold. They were more attuned to water politics than the TMWA board members.

The Truckee agreement
Connelly was already orchestrating for Reid a September ceremony marking the final legislative passage of the Truckee River Operating Agreement, an accomplishment 22 years in the making.

The importance of the river Operating Agreement to Reid could hardly be overstated. On election night—Nov. 4, 1986—when he was first elected to the Senate, Reid in his victory statement promised that he would accomplish a new Truckee River agreement. It wasn’t something he had talked about in the campaign, and it’s not common for a politician to make a promise after the votes are counted, but Reid meant it. Over a period of years, he put together working groups, sponsored negotiations, got legislation passed.

And now, after more than two decades, the capstone of all of the work was ready—and the Truckee Meadows Water Authority was throwing a new player into the works. Connelly and Anderson were circumspect in their statements, but their concern was apparent.

Connelly said, referring to all the signatories to the Operating Agreement, “I don’t think you want to cause anything that would cause these folks to back away at the last minute.” Anderson cautioned the board members about “throw[ing] a new player into the mix when the three entities work well together.”

But against these cautions there was all that money at a time when governments in Nevada were struggling through revenue crises. There are these corporations out there waving “hundreds of billions of dollars” around, Green said. When a board member asked him for “some examples out there” of water privatization, Green did not mention Stockton. He said there haven’t been “a lot of water long term leases.”

Green more or less told the board members that they had no choice but to go ahead with the talks with Goldman Sachs: “Again, what we feel as staff, the owner-entities have a fiduciary responsibility to take a look at potential revenue generating processes.” Most members of the board spoke some variant on this point: We can’t not consider it. “To reject it on the face of it is unreasonable,” said Bob Larkin, a Washoe County commissioner.

There was also staff pressure for fast action, which may have originated with Goldman Sachs. (One of the oldest sales techniques is pressure to “act fast before this opportunity gets away!") Green’s memo to the TMWA board members read, “There is, however, a limited window of opportunity to maximize the amount of cash that could be received through this prospect.”

The only vote against negotiating with Goldman Sachs was board chair Mike Carrigan. The Sparks City Councilmember said, “This is a bizarre morning for me because I woke up and read an editorial in the Gazette-Journal and actually agreed with it.”

But the board members soon changed their minds. They started getting calls from residents who apparently feel strongly about a publicly owned water company. TMWA board member Geno Martini, the mayor of Sparks, said his callers “didn’t want us to sell to a private business and was afraid that the rates would go up too much.” There were also reports of pressure from other sources, for different reasons, such as the Operating Agreement. Martini seemed to be sobered when he understood the implications for the Operating Agreement.

But there were still other reports—that the TMWA board had backed off only temporarily and intended to revive the idea after the election. One legislative lobbyist said flatly that she expected it to happen just that way. Martini said, “Well, we killed it, and I haven’t heard anybody has the appetite to do that [revive the measure] because of the public outcry.” But the specter remains over the election campaign.

Importation
In the 1990s, Washoe County was hot on the trail of water. It was called the Honey Lake Water Project, and it generated widespread opposition. It involved importing water from the Honey Lake region on the Nevada/California border north of Reno to Washoe County. Political candidacies rose and fell on candidates’ stands on this one issue. The grass roots were alive with opposition.

It wasn’t the money—it was the importation. County commissioners who expected to be considered the area’s saviors found instead the public didn’t want to import water. Finally the Clinton administration, with a nudge from U.S. Sen. Harry Reid, put an end to the matter.

Except that it wasn’t the end. When the attention of opponents to the project shifted to other issues, the project was retooled and renamed as the “Fish Springs Ranch Water Project.” Vidler Water, water brokerage division of Pico Holdings which some claim is the largest landowner in the state, spent $100 million and went ahead and built the water importation system. It bought land, drilled wells and built the needed trappings. Then, on July 22 this year, it gave the system to Washoe County—easements, infrastructure, 30 miles of pipeline, a 2.5 million gallon tank in Lemmon Valley, five wells, miscellaneous other assets and all. The Washoe County Commission, which had never stopped being bewitched by the notion of importation, accepted it.

Public Citizen, the consumer group founded by Ralph Nader, reports, “Vidler’s strategy is simple: The West is dry, so buy up as much water as possible, sit back, and see just how high the price will go. The more water Vidler sells, the more money it makes, which is to say Vidler’s business plan is in direct contradiction to water-wise development and conservation progress.”

CNETNews.com has reported that in the emerging infrastructure investment world, Vidler is “somewhat unusual. … Vidler acquires water rights and interests … and effectively releases or resells them. Vidler expects it will transfer agricultural water rights to urban centers. … One could argue that Vidler seems to rest on a flimsy, legalistic base. A state government could pass laws that help reallocate water in a more efficient manner. On the other hand, history shows that’s a tough goal to achieve: state governments in the West have fought over water rights for over 100 years.” Vidler is politically well-connected.

In 2007, Vidler had this posted on its website: “The company believes that continued growth in water demand will generate rate adjustments to its water contract prices that meet or exceed the rate of inflation, while the value of its underlying resources may continue to appreciate.”

So, if Vidler gave the water importation system to the county, how does the corporation make money? It still holds the water rights and is expected to sell these rights for in excess of $45,000 an acre foot. Vidler’s Dorothy Timian-Palmer excitedly predicted that the commission’s acceptance of the system would trigger a 10 percent increase in the value of the holdings.

This means the county commission, by accepting the importation system, has made itself beholden to a corporation whose success depends on growth. What are the chances that the commission will support controlled growth policies? Will voter sentiment or Vidler’s needs prevail among commissioners?

Those kinds of questions trouble some residents who are not one bit happy that the county is importing water and are even less happy with the pro-sprawl policies of local governing bodies. They argue that public documents show Reno, Sparks and Washoe County are planning for more growth than the water supply can support, to say nothing of what sprawl does to the climate and the quality of life.

Within the system
In 2006, Susan Lynn and Doug Smith asked the Washoe County Commission to put a couple of advisory ballot measures on the ballot to take the public’s temperature on water and growth and guide the commissioners.

Instead, the commissioners set up a task force to study the issues over an 18-month period. The final report was—excuse the expression—watered down by local governments. There were also accusations that planning commissioners who advocated more compact development were sent packing, along with at least one planner who was fired for reaching the wrong conclusions.

They tried again. This year, they returned to the county commission and asked that advisory questions on leapfrog development (development that sprawls far beyond a community’s borders) and water be placed on the ballot.

The commission refused. Commissioners Robert Larkin, Bonnie Weber and David Humke voted against putting the measures on the ballot. Commissioners Kitty Jung and Jim Galloway supported doing so.

Humke, a former veteran state legislator, said there were a number of reasons for his vote against the advisory questions. One big one to him was that because of the verbiage used, he didn’t know who would be advised.

“I didn’t quite know what to do with it if it did result in an advisory question. It wasn’t highly defined. … Who would be directed? Would the county be directed? Would the cities, would Regional Planning? There were a lot of unanswered questions.

“In their own testimony, I believe the proponents blurred the lines between the two questions,” Humke said. “You know, someone would come up to testify on one and would wind up testifying on the other. So there was a lot of confusion as to that.”

He was also concerned about “a crowded ballot.” There were already a couple of ballot measures in the pipeline and another expected, and not all ballot measures are created equal. Some are more “valid” than others, Humke said. Non-binding questions have lower legitimacy than, say, school bonds and initiative petitions in his mind, he said. “I try to take care in my voting so that we don’t have a ridiculously crowded ballot with ballot questions because it’s a turn-off to voters. There’s a lot of research to do.”

The commission rejected ballot measures that were purely advisory—and Nevada governments are experienced and skilled in ignoring non-binding ballot measures—and instead got a ballot measure that will create new law. The citizens group Voices for a Sustainable Washoe County turned to an initiative petition, a means to put legislation directly on the ballot for voters to pass if enough voter signatures are gathered. And enough were gathered.

The measure, called WC3, will appear on the ballot with this language: “Shall The Truckee Meadows Regional Plan be amended to reflect and to include a policy or policies requiring that local government land use plans be based upon and in balance with identified and sustainable water resources available within Washoe County?” Along the way, the advocates of the measures dropped the leapfrog development issue to focus solely on water.

Humke is not bothered by WC3 being on the ballot. He specifically names it as having greater ballot legitimacy than the earlier advisory questions.

Going around officialdom
Why go around public officials to legislate directly? Many of those involved in the water initiative are critical of the kind of initiative government that is all too common. But they point out that they twice pursued change through normal governing channels and were rebuffed.

The initiative petition developed during the Progressive era as a remedy to a deeply corrupt system in which change was stymied by money and power. It was a product of distrust as reforms from the popular election of U.S. senators to limits on child labor were defeated in formal governing channels.

This is a period of similar corporate excesses and public distrust, and water politics have generated a substantial amount of suspicion. In June, a report by Emily Green of the Las Vegas Sun shot through the ranks of water activists around the state. She reported that hydrogeologist Timothy Durbin, hired by the Southern Nevada Water Authority (SNWA) to run a model of its plans to take water from eastern Nevada for Clark County, had reached findings that were not favorable to SNWA. The southern officials had been telling eastern Nevadans that they could pump water while leaving ranching intact, without disturbing the flora and fauna and without harming the water table. But when Durbin ran his model, it showed exactly the opposite—that ranching, the ecology, and the water table would be seriously damaged. The state water engineer, who would decide whether to grant permits to SNWA, would hear his testimony.

Durbin was paid by the public but was reluctant to undercut his agency. Green reported, “As Durbin took the stand before the state engineer on Sept. 14, 2006, he had decided that if anyone asked flat out whether he had run his model and what the results were, he would give the answer. If not, he wouldn’t.” In an hour of testimony, Durbin avoided testifying directly on the findings for which the public had paid hundreds of thousands of dollars just in his fees. He used technical jargon designed not to set off alarm bells.

As a result, state water engineer Tracy Taylor granted the permit. And after Green’s story reporting Durbin’s admission, Taylor did not revoke the permit and rehear the case.

With such behavior in water trafficking—and such stories are not uncommon—there is little wonder the Reno citizens group does not want to rely on a public body they believe has already led them through an 18-month wild goose chase. The distrust they felt for Sierra Pacific’s water politics is now being revived for local governments’ water politics.

But initiatives are not enough. They can’t cover all the issues that face government. Citizens have to inform themselves on issues like water and demand explanations from public officials. In this year when water is a surpassingly important issue, most of the officials who affect the issue aren’t even on the ballot, and those who are seldom hear about it from voters. If the public is victimized by water policies, it could be at least partly self-inflicted.