North Las Vegas City Hall as seen on Thursday, March 16, 2017.

In a significant step toward bringing companies to the Apex Industrial Park, the City of North Las Vegas approved an agreement to build a 12-mile pipeline in partnership with two limited-liability corporations managed by developer Weston Adams. Economic development officials hope the new pipeline makes the park an attractive site for multiple industries, from manufacturing to distribution centers, following decades of false starts in conveying water to the arid land.

The deal came about after the developer sought permission to build a smaller 8-inch pipeline from the Las Vegas Motor Speedway to his land in Apex. The city, which has tried to build out its municipal water infrastructure to Apex for more than two decades, wanted in on the project.

City officials proposed a partnership, whereby the city would partially reimburse the developer — at a cost of about $54 million — to build an expanded pipeline, a portion of which the city could then use to deliver water to future Apex tenants. Such private-public deals, known as oversizing agreements, are not uncommon. The City Council approved the plan last week.

After the City Council’s unanimous vote, North Las Vegas Mayor John Lee said in a statement that the deal “solved the two decades-old problem of how to bring water to Apex and realize the full potential of this unique asset for the health and economic diversity of our state.”

In the agreement, the city gave the developer a “water allotment” of 400 gallons per minute. It is routine for municipalities to give commitments to developers, assurances that their projects will receive a certain amount of water, though Pat Mulroy, former general manager of the Southern Nevada Water Authority, questioned whether this particular agreement confers a greater right. Ousted City Manager Qiong Liu has criticized the waterline project more generally in the past.

Once the waterline is completed, it will connect Apex to the Southern Nevada Water Authority’s supply, and as a result, the Colorado River system. That’s significant because it paves the way for Colorado River water to leave the Las Vegas Valley. The project, as it is planned now, would be the first pipeline required to comply with a policy that mandates reuse for any water leaving the valley. The water authority’s board of directors approved that out-of-valley policy last year.

“Our objective is to maintain the same percentage of water reuse for Apex as for the rest of the city — for every 1 million gallons used, 400,000 gallons will return to Lake Mead. That’s standard across the valley,” North Las Vegas spokesperson Delen Goldberg wrote in an email.

Economic development win

Infrastructure has long been an issue in attracting businesses to the vast industrial park on the outskirts of North Las Vegas. For years, the issue has vexed city officials who have viewed the industrial park as an economic lifeline for a city that took a rough battering during the recession. 

Water infrastructure proposals have come and gone at Apex.

The dynamic looked promising for Apex landowners after the state said it would issue about $175 million in bonds as part of electric-car startup Faraday Future’s announcement that it would build a $1 billion assembly plant at Apex. Faraday paid about $6 million to design a water system but the company walked away from the project in 2016. The bonds were never issued and city officials needed a new funder.

The city started exploring a private-public partnership, an effort that eventually petered out.

The newest iteration of an Apex pipeline is a different private-public partnership. Under this deal, the developer will design, fund and build a 24- to 36-inch pipeline (the plans use a variety of different sized pipes) beyond the 8-inch pipeline that it had originally proposed. The city will then reimburse the developer for the extra costs of building a larger pipeline, funding that is expected to come out of the city’s utilities fund. The city said in the agreement that it has funds to pay for the project, but the contract provides for the city, if it is unable to meet its obligations, to obtain a performance bond. There will be a competitive bid on constructing the pipeline that the developer’s affiliate company is allowed to participate in, according to the agreement. The pipeline will give the city an ability to ship thousands of gallons per minute to Apex, a crucial selling point for attracting serious companies to the industrial park.

Pipeline price breakdown.

North Las Vegas hopes the first phase, which will cost the city about $27.6 million, will be done by late 2020. In total, the city said it would open up about 3,000 acres of land to development.

“Without water, literally, development is dead in the water up there,” North Las Vegas Utilities Director Randall DeVaul told the Las Vegas Review-Journal.

Since the deal was announced last week, Goldberg said that new companies have expressed interest in purchasing land at Apex. David Brown, a representative for the developer — and other Apex landowners — acknowledged the string of false starts. He argued, though, that this time would be different because the developer had a financial stake in improving the land.

“The difference you have now is you’ve got an underground contractor and developer who owns 1,000 acres in the park,” Brown said. “He understands the value of water.”

In the last two months, Brown said about 10 large-scale industrial users have been interested in Apex land, and that is without marketing. He expects interest to increase in the coming months.

Paul Anderson, executive director of the Governor’s Office of Economic Development, said the pipeline could help end Apex’s chicken-and-egg problem — the challenges it has had financing infrastructure with no anchor tenant and attracting an anchor tenant with little infrastructure.

“The largest obstacle has been water,” Anderson said. “If you remove that largest obstacle, the Apex Industrial Park becomes one of the most viable and feasible industrial parks in the state.”

Waterline concerns

According to the agreement, North Las Vegas will commit 400 gallons-per-minute to the developer. That’s not as much water as it sounds. It comes out to an annual demand of about 650 acre-feet over about 1,000 acres. One acre-foot is enough water to meet the annual demand of about two to three homes. An allocation of half-a-foot per acre is similar to what other developers use for industrial clients, Brown said, citing a similar number for the Tahoe Reno Industrial Center.

Mulroy, who led the water authority from 1993 to 2014 and is a senior fellow with the Brookings Institution, said the agreement appears to guarantee a commitment of 400 gallons-per-minute in a way that usual service agreements do not. The language, she said, could be construed to give the developer preferential treatment, putting their right to the supply above other water users.

“What North Las Vegas did was create a super-customer that has greater rights than all of the other customers,” Mulroy said. “I don’t think they thought that through.”

The city said that the language was a commitment no different than the types given to any other developers. Brown said the provision was a commitment from the city to serve a certain amount of water in a shared pipeline, but that it did not give the developer any ability to own the water.

“We don’t own the water, so we can’t be reimbursed for it,” Brown said.

The waterline also came up during the recent ousting of Liu, the former city manager. In an email explaining her decision to fire Assistant City Manager Ryann Juden, an ally of the mayor, she wrote that she had general concerns about Juden’s handling of the pipeline negotiations.

Liu’s email accused Juden of “withholding information on a spurious Apex waterline oversizing agreement.” She said it was one of several issues that “could detrimentally change the City’s financial conditions and cause major procedural as well as legal challenges.”

The city of North Las Vegas declined multiple opportunities to comment on the accusations.

Brown said that he was surprised at Liu’s statement in the email. Brown said that the developer had worked collaboratively with her office, writing in two emails that she “greatly appreciated” the developer’s efforts to fund environmental and geotechnical studies. In those emails, Liu wrote that the city was willing to enter into an oversizing agreement with the developer.

“There’s nothing to her claim,” Brown said.

A thirst for Colorado River water

For years, the water authority has anticipated that its Colorado River allocation would leave the Las Vegas Valley as municipalities expressed aspirations to develop in Apex and along the I-15 corridor toward California. Last year, the water authority approved an out-of-valley use policy to address the issues that come with pumping Colorado River water farther from Lake Mead. Most of the out-of-valley users, including some current Apex users, have traditionally pulled their water from groundwater sources.

The water authority has an additional inter-local agreement with North Las Vegas that specifically addresses a pipeline bringing Colorado River water to Apex, some of which rests in Garnet Valley, which is part of the larger Colorado River Basin but outside of the water authority’s normal operations. The pipeline would not connect to Garnet Valley during this build-out, the developer said, but could in the future.

“It would be our position, based on what we have seen thus far, that this would be outside of the valley and would need to comply with the out-of-valley use policy,” said a water authority spokesman.

The main concern is how water would be recycled. Most of the water authority’s wastewater is reused on golf courses or treated and shipped back to Lake Mead, where the water authority receives credits from other Colorado River users. This reduces its total demand for river water.

Once water leaves the valley, it is much more difficult to recycle water for credits. That’s why the water authority came up with an out-of-use policy, which calls for re-using water and places restrictions on some types of use, such as evaporative coolers and spray irrigation.

The city and developer said they intend to comply with the plan by re-injecting recycled water into a local aquifer.

Brown, who represents the developer, said that he’s cognizant of the issues around bringing more water at Apex. He said that tenants will have an incentive to reduce their water consumption.

The economics of water — where large demands mean hefty connection fees — mean that some types of companies, such as bottling plants or paper plants, are not going to work at Apex, Brown said. Because of the fees, other large water users, like data centers or manufacturers, will have an economic incentive to implement programs to lower their total water demand.

“Economics will drive the use of water down,” he said.

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