Jaws dropped this month when developers paid an average of more than $40,000 an acre-foot to Washoe County to purchase water rights to serve Lemmon Valley paying nearly three times the appraised value.
That's a fluke,water brokers are quick to point out, and owners of water rights elsewhere can't expect those kinds of prices.
At the same time, however, the prices of water rights are rising quickly through the area, and large landowners and developers are banding together to develop strategies to limit the increases.
Water rights that sold for $4,000 or $5,000 an acre-foot a year ago sell today for $9,000 or more.
In fast-growing Lyon County, some water rights are selling for $20,000 an acre-foot.
In Stagecoach,where speculators bet houses will follow new jobs in the nearby Tahoe Reno Industrial Center,water rights that sold for $3,500 not long ago cost $10,000 to $14,000 today.
And in some special situations the Lemmon Valley sale this month, for instance the price can go even higher.
Earl Kessler, whose Resource Management and Development Inc.
is active in the water business, notes that Lemmon Valley, a separate basin from the rest of the Truckee Meadows, is both in high demand for residential development and historically short of water rights.
Because land in the area has been relatively inexpensive in recent years the lack of water hurt selling prices developers such as Centex Homes were willing to open their pocketbooks to buy water rights, says Vahid Behmaram,water rights manager for the county.
Says Kessler,"It's far different in that basin than it is elsewhere." The conventional wisdom about the reason that water prices are headed upward so quickly fast population growth demands more water isn't entirely accurate.
While northern Nevada's population is growing quickly in a desert climate, the shortage of water isn't the issue.Most folks in the water business say the region will run out of land for growth before it runs out of water.
But while plenty of water remains, the rights to it are split into thousands of pieces often tiny pieces that need to be assembled before they can be used to support residential development.
Most of the big parcels of water rights available in the region the dozens or hundreds of acre-feet once used to irrigate ranches and farms were converted into municipal use long ago.
But John Erwin, director of resource planning and development for Truckee Meadows Water Authority, estimates that about 56,000 acre-feet of water rights sit unused in the region.
They're attached to land used for streets or alleys.
Some older homes have small water rights say a half acre-foot attached to the land.
Fifty-six thousand acre-feet is a lot of water it's enough to support 168,000 new suburban homes but the small bits aren't useful to a developer who needs to deliver a big package of water rights to TMWA or the county before building begins.
That's created an opportunity for brokerage firms willing to spend untold numbers of hours knocking on doors, convincing sometimes- reluctant owners to sell and assembling packages of water rights that are useful to developers.
The biggest part of the work: Laboriously tracing sales records, often back to the 1800s, to ensure a clean title to the water.
Traditional title insurance isn't available for water rights.
"There's just as much work in half an acre-foot as there is in 20 acre-feet," says Skip Roggenbihl of Truckee Meadows Water Research of Nevada, whose firm is active in the market.
The amount of work in assembling a package pushes up the price.
Nearly all the water rights packages in the market are purchased by developers.
Washoe County Water Resources isn't buying any rights, and TMWA executives believe the agency is being priced out of the market.
TMWA does not keep a big inventory of water rights to begin with, Erwin says, as it encourages developers or speculators to look elsewhere.
But it does usually have a few dozen acre-feet on hand to sell to builders with small needs.
This may change soon.
"I don't know if we will buy at all in the future," Erwin says."We're being priced out of the market.
It's kind of inevitable."
TMWA in recent weeks was offering to pay $5,650 an acre-foot for water,well below the market price.
And sellers look for top dollar.
Developers,meanwhile, are looking to calm the market.
A new group, the Nevada Water Management and Administration Coalition, draws together developers and builders responsible for about 90 percent of the new homes in the region, and the organization is fine-tuning its focus.
"The market is dysfunctional right now," says Perry DiLoreto, a member of the coalition and the developer of Damonte Ranch."It's chaotic."
A starting point, the coalition believes, is improvement in the title process perhaps a state-run system to track and guarantee title to water rights.
The developers are willing to pay for additional help in the state engineer's office to improve the title system, DiLoreto says.
TMWA's Erwin agrees that developers who need the rights and profit from development should foot the bill.
Over the longer term, DiLoreto says even more substantial change might
be warranted.
One idea kicked around recently, for instance,would declare that water rights that aren't used by their owners would revert to a state-operated pool,where they could be sold.
Rights now owned by homeowners in areas such as one stretch near Mayberry Drive,whether the owners are aware of them or not, could be used for new development.
But some homeowners, aware of their water rights, have refused to sell, hoping to slow development, says Erwin.
Others, upon discovering a few thousand dollars under their houses, have quickly grown water-savvy and sold to the highest bidder.
Another possibility, DiLoreto says, is a system in which all water rights for development would be owned by a water agency such as TMWA or Washoe County Water Resources.
That agency might be the only purchaser of water rights and might charge developers the market rate to assign water to their projects.
"We've got to get the pressure off," DiLoreto says."Natural resources don't belong in the speculative marketplace."
