Letter from Franklin T. Hamilton (Los Angeles) to Thomas A. Campbell (Las Vegas), April 22, 1954

SUBJECT LAS VEGAS VALLEY WATER DISTRICT Mr. Thomas A. Campbell President, Las Vegas Valley Water District 135 South Fourth Street Las Vegas, Nevada Dear Mr. Campbell: The purpose of this letter is to again bring to the attention of the Board of Directors of the District the importance of federal legislation granting to the Las Vegas Valley Water District and to Basic Management, Inc. permanent rights of way for the construction and operation of water transmission lines, and appurtenances, over public lands of the United States. Our letter of February 24, 1954, outlined in detail the need for such additional legislation, gave an explanation of the purpose and history of the proposed bills, and some background concerning the status of BMI rights of way. We are advised that Senator McCarran has introduced the bills requested, and we recommend that the District and BMI provide him with any data necessary to assist in their passage. In our earlier communication, we indicated that the sale of the District's bonds could be adversely affected by the lack of the necessary rights of way, and strongly recommended that the District seek such legislation at the earliest possible time. Since that time we have had several inquiries from interested bond houses and investment bankers tending to bear out our earlier conclusion. About three weeks ago, the District sent out notices inviting bids upon the bonds, such bids to be received and opened on April 28th. Accompanying each bid was an Official Statement by the District, containing a full and fair disclosure of the lack of BMI and District rights of way and the absence of #2 Mr. Thomas A. Campbell 4-22-54 existing legislation authorizing the granting of permanent rights of way. We have recently received telephone calls from prospective bidders expressing concern over this lack of permanent rights of way. Such concern is understandable, since the principal security behind the District's bonds will be revenues derived from the sale of water. There can be no definite assurance of the continuance of such revenues, so long as the primary water supply lines of the District and BMI are not protected by a right of way which is either permanent or irrevocable, at least during the life of the bonds. The only existing federal legislation under which either the District or BMI may obtain rights of way is the Act of February 15, 1901, which permits only the granting of a "revocable license." In view of the current concern expressed by these prospective bidders, we feel it our duty to call to the attention of the Board of Directors the possible consequences of the lack of rights of way or legislation therefor. It would appear that the lack of said rights of way might have any one of three consequences. Although we would not expect it, possibly bidders might attach such importance to the matter as to fail to submit any bids. It is not Improbable that some bidders, being unwilling to assume the risk of failure to obtain a permanent right of way, may submit bids conditioned upon the District's obtaining the necessary legislation granting permanent rights of way. Such a condition could delay the delivery and sale of the bonds for a considerable period of time. The third possibility is that the bidder, although willing to make an unconditional bid and to assume the risk of lack of rights of way, may increase the amount of the interest rate bid to cover the inherent risk involved. Any of these alternatives would be undesirable from the point of view of the District, since they would either unnecessarily delay the District's acquisition and construction program or increase the Interest costs payable by water consumers and taxpayers within the District. We understand that some apprehension has been expressed that the bills may encounter difficulty because of their broad nature. A further word of explanation in this respect may be in order. It is true that the provisions of the bills are broader than the provisions of any existing general legislation. As previously stated, existing legislation provides only for "revo- cable licenses," whereas the proposed bills provide for permanent rights of way, terminable only upon the grantees ceasing to use the land for the purpose of waterworks. As set forth in our letter #3 Mr. Thomas A. Campbell 4-22-54 of February 24, 1954, we indicated that such permanent rights of way were necessary to insure the permanence of the District's revenues and the successful sale of the District's bonds. The bills submitted by the District and by BMI paraphrase in substantial measure existing Acts of Congress which were enacted for the benefit of the City of Los Angeles and Metropolitan Water District of Southern California at a time when those agencies were seeking to market their waterworks bonds. The Congressional Committee Reports covering those Acts will show that the reasons for the enactment thereof were exactly the same as the reasons of the Las Vegas Valley Water District, namely, to assure the sale of bonds under reasonable terms and interest costs. The same safeguards contained in those earlier Acts are included in the proposed Acts for the District and BMI. However, if it is felt that further protection should be provided the United States and third parties, the District should have no objection to additional conditions reasonably necessary to afford such protection. Similarly, the District should have no objection to the payment to the United States of the reasonable value of the lands conveyed. We urge that the District take immediate steps to obtain the enactment of said bills at the earliest possible time. There would appear to be no possibility that the bills can be enacted by the date of opening of bids, but it would be highly advantageous to the District to be in a position to give the bidders definite assurances concerning the probable success of the necessary congressional Acts. Without such assurance, we have considerable doubt that the District will be able to obtain bids upon reasonable terms and conditions. Very truly yours, O'MELVENY & MYERS Franklin T. Hamilton FTH:gv By