A policy that requires developers in the Reno metropolitan area to dedicate necessary water to Truckee Meadows Water Authority (“TMWA”) 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. In addition to the 1 AF dedication per 1 AF of demand, 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—so developers dedicating surface water must dedicated a total of 1.11 AF per 1 AF of demand. 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 have returned to near 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 2018, the price that TMWA charged when developers acquired the necessary water from the authority was $7,600/AF, matching the level set in the second half of 2017. Prices had been climbing after a brief drop in 2016, when prices $7,460/AF in the first half of the year and $7,490/AF in the second half of the year. (see chart)
A total of 548.42 AF was purchased from TMWA in the first half of 2018, compared to 368.79 AF in the second half of 2017, 756.71 AF in the first half of 2017 and 416.54 AF in the second half of 2016. Volume totaled 43.43 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.
Northern Nevada saw a growth boom and corresponding run up in water market prices and activity in 2005 and 2006 but receded during the economic downturn of the late 2000s. While the development market has been slow to recover, the overall market trends show continuing movement toward pre-2005 activity levels.
Written by Marta L. Weismann