LL council tables water rights issue
Updating the village water rights ordinance was tabled "indefinitely" at the Los Lunas Council meeting last week.
It was decided a separate meeting for further discussion with interested parties was necessary.
There were two issues, updating the water rights ordinance and developers wanting to be compensated for water rights credits, said Los Lunas Village Administrator Greg Martin in a phone interview.
Developers attending the meeting said they would like to get their water rights credits transferred out of the village.
According to the village ordinance, an applicant for subdivision approval must have water rights equal to the project.
The developer, Curb South, LLC, purchased more water rights than it needed to process subdivision maps, and has water rights credits with the village, said Stan Strickman of Curb South.
"What we're attempting to do is to request the village to allow us to transfer our water rights out of the village," he said. "This way we'd be able to sell them in locations other than just Los Lunas."
Since the housing market dropped with the recession, Curb South hasn't been able to use them, and holding onto them is expensive, Strickman said.
Curb South has about 300 water rights credits in village wells, and millions of dollars in loans that purchased the water rights, he said.
When he purchased water rights, the price per acre foot ranged from $10,000 to $20,000, he said.
Max Kiehne, of Centerfire Real Estate, has about 47 water rights credits with the village.
"We deeded water rights over to the village, water rights is what we should get back," Kiehne said.
In a phone interview, the village's utility director, James Blasing, said the village attorney and the water consultant had advised that it could be illegal to transfer water credits out of the village.
Village officials had decided it was necessary to update the water rights ordinance at a budget workshop in June because the ordinance hasn't been updated since the 1980s, said Blasing.
The amended ordinance outlines how the village would compensate developers for water credits if the village chose to purchase them, he said.
The ordinance spells out that the village would contact at least two water rights brokers to determine the average price of the three most recent sales of fully transferable water rights in the Middle Rio Grande Valley, Blasing said.
If the village decided to purchase the water credits, the updated and amended ordinance stipulates the village would pay 75 percent of the average price of an acre-foot of water rights.
Twenty-five percent would be held back in order to cover expenses the village pays in legal and development fees regarding water rights and the transfers of ownership, as well as to account for the risk factors of market fluctuations.
"You spend a lot of time and effort and money to get those water rights, actually, successfully transferred in and to get the ownership transferred in to the village name," said Carole Cristiano, a staff member of Lee Wilson & Associates, the village water consultants.
The village has had to maintain records of all the credits from every single transfer, every single developer, she said.
"So, there's a lot of expenses," said Cristiano. "But I think it's more the risk (the village) is going to be assuming. If you purchase the water credits for what the current market value is, the market value could go down."
The village owns the water rights in its wells, and what it would be doing is purchasing credits, she said.
"It is not our role as stewards of the public assets to speculate the future value of a water credit at the taxpayer's expense, said Blasing, in a phone conversation.
In Santa Fe, developers were paying $30,000 an acre foot, Cristiano said.
"They transferred the water rights into the Santa Fe wells, and they assumed that even if their development didn't go forward, they would be able to sell those credits to someone else," she said. "They believed the price of water rights was going to continue to go up.
"They paid so much money, and now people can go out on the market and pay $12,000 an acre foot and transfer those rights in," she said. "So, the people who own the credits that they purchased at $30,000, they don't even have a market to sell them unless they want to go down to $12,000, $13,000 an acre foot. The village could be in that situation, so we definitely think there should be a discount."
The updated ordinance would guide the village on any purchase of water credits if it chose to buy them, but does not obligate the village to purchase water credits, nor force anyone to sell their credits, Cristiano said.
As the ordinance stands, it only allows the village to purchase water credits at $2,400 per acre-foot.
Strickman said Curb South paid for the water rights and all the costs to transfer them into the village wells.
"And in return, the village gave Curb South credit, so for every acre-foot that we transferred to the well … the village then gave Curb South one acre-foot credit, which could be used anywhere in the village, which was primarily acquired for use in Huning Ranch," Strickman said.
"Well, since there's no market, we're asking the village to give us back our water rights that we paid for, and we'll give the village the credits they gave us, so it's like an even trade and there's no dollars involved," he said. "It doesn't cost the village anything other than some of their attorney's time and staff time to process this."
Strickman said they are in the process of setting up a meeting with village officials.
-- Email the author at firstname.lastname@example.org.