A policy that requires developers in the Reno metropolitan area to dedicate necessary water to Truckee Meadows Water Authority (“TMWA”) in order to receive water service for their developments has created a market for Truckee River surface water rights. In early 2015, a consolidation of TMWA and Washoe County’s water department was completed, and TMWA is now the major water utility in the region.
When developers dedicate surface water to TMWA, they must pay a one-time water meter retrofit fee of $1,830/AF. They must also dedicate or purchase from TMWA an additional 0.11 AF per 1 AF of demand, which is required by the Truckee River Operating Agreement and used for drought storage. Developers may be required to dedicate additional water resources to make up for any return flow obligations of the rights they dedicated for demand. Groundwater can also be dedicated, though historically prices to do so have varied widely. Truckee River water rights trade at prices that depend on several factors, including water quality, location, and urban growth in the area.
Prices remain below the $7,660/AF point where they settled in 2013 after declining from the all-time high of $32,848/AF in the first half of 2006. Before the run-up in 2005 and 2006, prices were at $5,264/AF and changes were incremental.
In the first half of 2017, the price that TMWA charged when developers acquired the necessary water from the authority was set at $7,500/AF—marking a return to the level they were at in 2015, when TMWA charged $7,500/AF to $7,520/AF. In 2016, prices had dropped to $7,460/AF in the first half of the year and $7,490/AF in the second half of the year. (see chart)
Activity climbed again with a total of 756.71 AF purchased from TMWA in the first half of 2017. In the second half of 2016, TMWA sold a total of 416.54 AF, reaching the highest level since 2008. Volume totaled 42.43 AF in the first half of 2016. During 2015, there were no dedications in the first half of the year and only 17.21 AF dedicated in the second half of the year. In 2014, 219.33 AF were dedicated in the first half of the year and 331.66 AF in the second half of the year. The all-time highest level of activity came in the second half of 2005 when nearly 5,000 AF traded.
A demand for water rights driven by a growth boom ran up prices and activity in 2005 and 2006, but like much of the west, the development market in northern Nevada receded during the economic downturn and has been slow to recover. Is the continued increase in activity signaling a return to normal?
Written by Marta L. Weismann