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 pay a one-time water meter retro fit fee of $1,830/AF. In addition, they must dedicate or purchase from TMWA 1.11 AF for each 1 AF of demand under an adjusted yield system that TMWA implemented to meet watershed needs. Developers may also dedicate groundwater, though historically prices 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 eased during 2015 (see chart). While there was no activity in the first half of the year, the price that TMWA charges when developers acquire the necessary water from the authority was set at $7,500/AF. In the second half of the year, the price increased slightly to $7,520/AF. In 2014, prices were at $7,690/AF in the first half of the year and $7,720/AF in the second half—up from $7,660/AF, 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.
Activity was nominal during 2015 (see chart), with 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 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. When will prices and activity rise signaling a return to normal?
Written by Marta L. Weismann