Drainage feared

Bankrupt Lake Las Vegas is struggling to stay afloat financially, but the development's owners are worried a break in a pipeline underneath the lake could drain it and sink the community's financial future.

In a statement filed in the development's Chapter 11 bankruptcy case, Lake Las Vegas President Frederick Chin said a 7-foot conduit that carries storm and treated wastewater under the lake is in need of repair. Without the repairs, the development's centerpiece 320-acre artificial lake could drain away, Chin told the court.

"While lives and property would not likely be threatened, it is possible that the open pipe would function as the equivalent of a drain in the lake, causing the water to enter the pipes and be taken out to the wash," he wrote.

"Such an outcome would be disastrous for the project, because it would be virtually impossible to obtain the amount of water necessary to re-fill the lake, and the project would lose a considerable amount of its appeal were it built around a dry lake bed."

Henderson Public Works Director Robert Murnane on Tuesday agreed that a pipeline rupture would drain the lake into Lake Mead and that it would undoubtedly diminish the value of multimillion-dollar homes, resort hotels and golf courses.

Lake Las Vegas has two luxury hotels, a casino, an Italian-theme shopping and restaurant area, three golf courses, marinas and 1,600 completed residences, including one owned by singer Celine Dion, according to the Clark County assessor's Web site.

Although Murnane agrees the loss of the lake would detract from the beauty of the community, he doesn't believe it would be catastrophic, and he couldn't point to any potential financial damage to Henderson other than the loss of taxable property value at Lake Las Vegas.

"I don't see a ghost town at Lake Las Vegas. It's too nice," Murnane said.

Murnane also doesn't think a pipeline rupture would cause any environmental damage at the site.

Robert Martinez, chief of engineering and dam safety at the Nevada Division of Water Resources, said a break in the pipe could affect the dam that created the lake. Martinez, however, added that the chance of a pipe failure occurring is "way out there."

As for assertions that a breach in the pipe would drain the lake, Martinez isn't certain about that.

"That's their prerogative from a business standpoint to describe the situation as they see fit," he said about Chin's letter. "They are involved in a bankruptcy."

The need for drainage line repairs and maintenance is no surprise, Murnane noted. The drainage pipes require maintenance work every 10 years, and the development company signed an agreement in 1989 assuming those responsibilities.

Before the wash was improved several years ago, rapid currents often picked up "dirt, rocks and (even) grocery carts" and carried them downstream, Murnane said.

High-velocity debris sometimes damaged the concrete walls of the pipe.

There are actually two drainage pipes under the lake, but one has eroded and has been closed. The other carries the daily drainage from the wash and is also in need of repairs.

"It's not easy because it's very long, but it's been repaired before," Murnane said.

Repairs to the two-mile-long pipe have been delayed for more than a year because of funding issues, Martinez said.

"If you don't do maintenance, that can lead to problems," he said

A subsidiary of Chin's company, Atalon Group, foreclosed on the previous owners in January. The previous owners were billionaire brothers Sid and Lee Bass of Fort Worth, Texas, and Ronald Boeddeker of Los Angeles.

The new owners are "operating it in a safe manner," Martinez said.

Lake Las Vegas spokeswoman Sandra Sternberg said the repairs will cost an estimated $3 million and will start as soon as bankruptcy Judge Linda Riegle approves $127 million in post-bankruptcy financing, possibly at a hearing Monday.

The repairs would take about six months to complete. Sternberg said she couldn't "begin to answer" what would happen if Riegle doesn't approve the so-called debtor-in-possession loan.

The community's artificial lake has always been controversial since the idea of a lakeside resort in the desert was first raised some 40 years ago.

In the late 1980's, developers obtained all the government approvals needed for their project, but critics still complained it would be wasteful to use 3 billion gallons of water for the lake. Others said it was unwise to build a dam in the main drainage channel for the Las Vegas Valley.

The water for the lake came from Henderson's allottment from Lake Mead. County, state and water authority officials estimated at the time that about 4,500 acre-feet of water would be have to be added to the lake each year because of evaporation and seepage.

Riegle has demanded that the debtors disclose the identity of lenders who contributed to the $127 million loan syndicated by Credit Suisse. The bankruptcy judge also questioned whether it was proper for $48 million of the money to go to pay some of the debt incurred before the bankruptcy filing.

Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420. Contact reporter Alan Maimon at amaimon@reviewjournal.com or 702-383-0404 Review-Journal reporter Arnold Knightly contributed to this report.