Budget deal challenged as resort may sue over wasterwater funds

A Henderson resort is considering a lawsuit over the Legislature's decision to help cover the state budget shortfall with money collected for a proposed wastewater project in the Las Vegas Valley.

As part of the agreement struck during the special session, lawmakers voted to transfer $62 million from the Clean Water Coalition to the state's general fund.

Lawyers for the M Resort on Las Vegas Boulevard South argue that the money was collected to fund a new wastewater pipeline to Lake Mead, and it should not be used for any other purpose.

Chris Kaempfer, outside legal counsel for M Resort, said the $1 billion property paid more than $1 million in connection fees for the wastewater project.

He said he expects the owners of the year-old hotel-casino to decide by next week whether to sue the state over the money.

If they do decide to file suit, they might have some company. A host of housing developers, resorts and even government entities such as the Clark County School District and McCarran International Airport paid connection fees for wastewater system improvements.

"We're not alone. Everyone paid into the Clean Water Coalition (fund) for the purpose of having clean water," Kaempfer said. "If you're not going to use it for that purpose, then give it back."

Henderson City Councilman Steve Kirk, who serves on the Clean Water Coalition board, said no official decision has been made about the wastewater pipeline project, but he doesn't believe it will ever be built.

Even so, he said the state had no right to take the money, which should be returned to the taxpayers it came from.

"In private business, if you were to do this, I think it would be called fraud," Kirk said. "It makes me wonder what would have happened if we were in the middle of construction. What would the state government have done then?"

The Clark County Water Reclamation District and the cities of Las Vegas, Henderson and North Las Vegas formed the Clean Water Coalition in 2002 to develop something called SCOP (pronounced "scope"), which is short for Systems Conveyance and Operations Program.

The goal of the project was to protect local water quality through 2050 and beyond by piping treated effluent from the valley's sewage treatment plants to a spot at the bottom of Lake Mead more than three miles from shore.

Then came the economic downturn, which slowed the valley's population growth to a halt and dried up the connection charge revenue that was once expected to cover about two-thirds of the project's more than $800 million price tag.

Amid mounting questions about the need for a new sewage outfall system and growing concern about how to pay for it, the coalition board voted last month to suspend SCOP.

Lawmakers approved the transfer of funds from the coalition early Monday morning as part of Assembly Bill 6, the sweeping budget measure passed by both houses shortly before the special session adjourned.

According to the bill, the money is needed in the general fund "to ensure that the government of this State is able to continue to operate effectively and to serve the residents, businesses and governmental entities of this State."

Lorne Malkiewich, director for the Legislative Counsel Bureau, said a review of the fund transfer is under way in response to questions now being raised about its legality.

The counsel bureau took a preliminary look at the idea during the special session, but now "we're researching it in greater detail," Malkiewich said.

"I think the governor is concerned about it, too. If this is not something we can do, we'll have to find $62 million somewhere else," he said.

Clean Water Coalition General Manager Chip Maxfield said his agency currently has about $63.5 million in operating and capital funds, so state officials are taking "everything basically."

"A million, a million four is about all they're leaving," Maxfield said.

Kirk said that before the state "raided" the fund, coalition board members were in the early stages of discussing how connection fee money might be returned if SCOP were scrapped altogether.

By some estimates, the proposed project was the single largest wastewater treatment venture Nevada has ever seen. Plans called for workers to drill an 8-mile tunnel through the River Mountains, construct a power plant and run pipeline from Las Vegas to the bottom of Lake Mead.

The valley must release its effluent into the lake to ensure its own water supply. For every gallon of wastewater that ends up in the lake, Nevada earns return-flow credits allowing it to almost double its annual share of the Colorado River. Without the credits, the state's river allotment would not be enough to meet water demand in Southern Nevada.

Contact reporter Henry Brean at hbrean@review
journal.com or 702-383-0350.