upr000160 98

(COPY) Omaha - January 7, 1952. 3703.1, Vol. 10. Mr. A. E. Stoddard: CC - Mr. R. M. Sutton Mr* W. R* Rouse Please refer to your letter of Dec. 10, 1951, file 199, attaching copy of Mr. Reinhardt*s letter to you of Dec. 4, 1 9 5 1 and attachments thereto suggesting a change in the corporate set-up of the water producing and distributing facilities in Las Vegas. I have been giving this matter considerable study and I am not in favor of setting up a new corporation, principally because this apparently envisions our continued operation of the water system in Las Vegas - at least until its problematical sale on some basis to the Las Vegas Valley Water District. Whereas in my opinion, for reasons which I will try to bring out, we should divest ourselves of title to and any interest in the property and its operation just as promptly as possible. While by setting up a new corporation with capital­ization divided between stocks and bonds, somewhat along the lines suggested by Messrs Renwick and Wehe, we might escape any legal obligation with respect to operation of the property, 1 think we are not here confronted with a legal problem, but by one which is more a political problem and one of public relations. In no event would I be in favor of retaining any first mortgage bonds, which we might have to foreclose on, and be in the same boat we are now in, unless they would be immediately marketable and if they were, we should promptly get rid of them. I will try to set out hereunder the reasons back of my views, viz:- (l) The population of Las Vegas is growing and has every prospect of continuing to grow* As an instance, shortly after the first of this year the Government has contracted to spend well over $1,000,000 to make permanent the Desert Rock camp, which serves the atomic experiment site in Frenchman*s flat and this will bring in added army personnel. The Flamingo Hotel is presently adding 100