Wanna Play? Gotta Pay!

City, Mesa del Sol Execs Argue Over Water Rights Would Cost Almost $48 Million

Copyright © 2007 Albuquerque Journal
BY DAN MCKAY
Journal Staff Writer

Mesa del Sol executives and Albuquerque’s public water utility have a $48 million question on their hands.

Who should pay for acquiring water rights to serve the massive development?

The developer of Mesa del Sol, Forest City Covington, says a 1993 agreement with the city of Albuquerque means the company doesn’t have to pay extra for water rights when it connects to the utility system.

The city-county water authority, on the other hand, says the agreement calls for the development to come at “no net expense” to the rest of the utility’s customers.

That means homeowners in Albuquerque and Bernalillo County shouldn’t have to subsidize the water rights needed for Mesa del Sol, said Mark Sanchez, executive director of the water authority. Instead, the company — or the new home buyers — would pay.

Mesa del Sol is a 12,900-acre planned community expected to consist of 35,000 homes and additional commercial space, within 30 years. The water authority has never had to consider a development of that magnitude, Sanchez said.

“We can’t handle that with our current water supply,” he said.

The dispute came up Wednesday in a meeting of the water authority’s governing board, which includes city councilors, county commissioners and the mayor.

The board voted 5-1 in favor of a resolution saying new development outside the
existing service area should pay for its own water rights. The measure touches on a host of other policies as well.

Mesa del Sol executives objected and asked the board to postpone action on the resolution. They said the water rights policy shouldn’t apply to them because of the 1993 agreement, which was for annexation into city limits.

Sanchez said the water rights policy isn’t new. The principle of growth paying for itself — including the need for new water rights — is already contained in the city and county’s top land-use document, the Comprehensive Plan; the Water Resources Management Strategy adopted by the utility; and the Planned Growth Strategy adopted by the city, he said.

The resolution adopted Wednesday simply compiles a host of existing policies into one document, Sanchez said.

Voting in favor were City Councilors Martin Heinrich, Isaac Benton and Michael Cadigan and County Commissioners Deanna Archuleta and Teresa Córdova.

Bruce Perlman, the top executive under Mayor Martin Chávez, voted “no.” During the meeting, Perlman said the “no net expense” policy seems reasonable, but he didn’t say why he voted against the resolution.

Earlier agreement
Mesa del Sol executives argued that the policy violates the 1993 agreement and that they had been assured by either the state Land Office, the University of New Mexico or the city administration that they didn’t need water rights.

The agreement mentions water service coming at “no net” cost to the city, but that phrase applies to water lines and equipment — not to securing more water rights, contends Forest City. The company said the regular water rates paid by each customer each month are supposed to fund the acquisition of water rights.

Michael Daly, chief operating officer for Forest City, said water rights are a “major impact on us.” The cost of water rights has been rising over time.

“We cannot have costs out of our control,” he told the authority Wednesday. “We have very tight economics.”

He said the cost of water just adds to other expenses at Mesa del Sol, such as neighborhood association fees.

“We can’t die the death of a thousand slices. It’ll ruin the project,” Daly said.

Possible lawsuit
A three-page letter from Forest City’s attorney mentions the possibility of litigation over the issue.

Cadigan said the company should have anticipated the cost of water because the 1993 agreement mentions the “no net expense” requirement and doesn’t have an exception for water rights.

“It seems to me that ‘no net expense’ means ‘no net expense,’ ’’ Cadigan said.
Failing to anticipate that cost “is a risk of doing business. If Mesa del Sol doesn’t pay for this, the existing ratepayers do.”

Córdova and others directed the authority’s staff to try to reach some kind of agreement with Mesa del Sol.

After the meeting, Daly said the policy vote wasn’t a major blow to the project and that he would continue working with the water authority to resolve the dispute.

The water authority estimated the cost of acquiring water for homes and businesses at Mesa del Sol at almost $48 million.

The cost would be spread out over several decades and could climb based on the market for water rights.

The water debate is likely to linger — developing the old Westland property and the expansion of water service in the South Valley also could raise the issue.
Sanchez pointed out that new development is required to be conservation-friendly and use only about 75 gallons daily per person — less than half what the utility’s customers as a whole consume.