After months of negotiations, the Truckee Meadows Water Authority closed on a deal in late March to purchase a small private water company in west Reno to serve homes in nearby Verdi.

On the surface, that transaction might sound routine. But as with so many water issues, it is a complex case that highlights the conflicts between growth, city permitting and state regulations.

The water authority’s purchase of the West Reno Water Company marks the end of a stalemate between a developer and the city of Reno — a case of construction outpacing infrastructure. It also connects a groundwater-dependent area with water from the Truckee River, a more secure long-term supply for an area that is zoned for more growth. But residents worry that connecting the area to the Truckee River could mean more development in an area that’s already strained.

“It’s pretty significant in that there was recognition that the development approvals got out ahead of the infrastructure,” said Reno City Councilwoman Jenny Brekhus, a former city planner who sits on the water authority’s board and applauded the purchase of the company.

“And then there was regional cooperation to get the infrastructure out there in a timely fashion. I think that’s reflective of where we are at right now in our regional development,” she added.

The water authority finalized the purchase of the West Reno Water Company on March 20 at a price of about $800,000 for the cost of the system and improvements. Those costs, as well as other updates to the system, will ultimately be paid by the developers that benefit from them.

Reno Councilwoman Naomi Duerr, who also sits on the water authority’s board, said the deal would benefit the area because the water authority, given its scale, can provide a service that a smaller private company might not be able to. From her experience serving as a state water planner, she said a water system is often “one of those things that is better when it's scaled up."

“It’s incredibly important to supply a secure water supply to the Verdi area, regardless of what developments get approved moving forward,” Duerr said in an interview this week.

But residents of Verdi, who have pushed back against growth on the city’s western edge at council meetings and in court, described the transaction as a “double-edged” sword. On one hand, they want a secure water supply that alleviates all of the issues that come with domestic wells. On the other hand, it removes one of the main arguments against new growth in the area.

“It’s a double-edged sword. It will provide the water to the project — the 273 homes,” said Addie Argyris, a critic of Verdi development. “It will provide the water to those warehouses and it won’t drain the aquifer. The bad side of it is, it will allow more development to go forth.”

Map credit: City of Reno

The Argos project is known as Meridian 120 North. It was approved by the Reno City Council in 2016, and it was a key driver behind the water authority’s deal to purchase the private utility.

As Interstate 80 stretches toward the California border, Meridian 120 North sits to the north side of the freeway. The city approved the construction of the homes with the knowledge that water would be provided by West Reno Water Company, the small water provider that serves other local businesses. Accordingly, the developer started constructing homes. But when it came time to sell the homes, the developer was limited by state rules regulating water companies.

Under state law, small private water companies must get authorization from the Public Utilities Commission of Nevada and the Nevada Division of Environmental Protection if they want to service more than 25 residents. West Reno Water Company did not have those authorizations. As a result, the city of Reno capped the number of homes Meridian 120 North could sell at 10, even though there was water available. That put more pressure on the water authority, an already permitted water purveyor, to close the purchase of the small private water company.

Once the water authority took over the company in March, the developer was able to sell more than 10 homes. But the timing of the deal, lagging behind the project’s construction, created a strange case where a developer was unable to sell homes that had been approved by the city.

“In that regard, where you already have a development under way — all the construction and the permits — to have this impact to their development is very problematic,” Duerr said.

Bates Stringer Reno, the Argos developer, did not respond to emailed requests for an interview.

John Enloe, who directs the water authority’s natural resources and planning, said such a situation is unique to this one particular situation. He said that the deal, overall, would benefit the area by diversifying its water supply so it is not solely dependent on groundwater.

"For some of the projects that are already approved, it provides some certainty with respect to the water supply,” Enloe said. “There remains some question on how much groundwater is available to serve existing and future demands out there in the long term."

The connection could make it easier for the construction of Meridian 120 South, a project on the other side of I-80. The planning commission issued a technical denial on maps to build an initial 78 homes, a decision that the city council affirmed after a temporary restraining order from a local judge in an area of Reno that has a history of intense litigation, KRNV reported. The decision remains the subject of litigation and a hearing is scheduled for later this month.