Letter from E. E. Bennett (Los Angeles) to William Reinhardt, September 3, 1948

LOS ANGELES - Sept. 3, 1948 File: 80 Mr. Wm. Reinhardt: Referring to Mr. Folger's letter of August 27th to you, his file W 23-1, attaching letter from Mayor E.W. Cragin of the City of Las Vegas asking the water company to extend its facilities to territory adjoining the City of Las Vegas but without the corporate limits of the City, for the purpose of furnishing fire protection to the hotels and other resorts along the "strip"; Mayor Cragin states that the furnishing of water through these extended facilities would be for the sole purpose of furnishing fire protection to these hotels and resorts and that the County of Clark would be willing to grant us a franchise which would not obligate us to furnish water for any other purpose. In order that you may have before you the situation with respect to the rights and duties of our water company, I submit the following information! In 1909, the Board of County Commissioners of Clark County granted to the Las Vegas Land and Water Company, a corporation, a franchise under and in pursuance of an act of the legislature to construct, install, lay, operate, maintain and manage for municipal, agricultural, household and other purposes, a system of water pipe lines etc. in, along and across all the avenues, streets and alleys of the unincorporated town of Las Vegas in the territory more particularly de-scribed in the franchise. This franchise ran for a period of 26 years from and after September 2, 1909. On January 21, 1930, the Board of Commissioners of the City of Las Vegas granted to the water company what is designated as a permit, but is in substance a franchise, to install, lay down and maintain water pipe lines and appurtenances in, through, over and across, any of the streets and alleys of the City of Las Vegas, and any and all additional tracts, subdivisions, and additions which may hereafter be added to the City of Las Vegas or hereafter laid out or subdivided for the purpose of supplying the inhabitants of the City of Las Vegas with water. This permit ran for a period of 50 years from the above date and is still in effect. Mr. Wm. Reinhardt: Page 2 Sept. 3, 1948 File: 80 The 1909 franchise above referred to was, as I have stated, under a then existing statute of the State of Nevada which limited the operations of water and other public utilities to unincorporated towns and cities and pursuant to that franchise our operations were specifically limited to the unincorporated town of Las Vegas. The permit of 1930 does not contain such legal limitations but is granted only with respect to the streets etc. of the City of Las Vegas and for the purpose of supplying the inhabitants of this city with water. There is no legal restriction in that permit which would prohibit our going outside of the City of Las Vegas if we so desire. If the company can be compelled to extend its operations beyond the city limits, such compulsion must come by order of the Nevada Public Service Commission to which there is no doubt we are subject. The question arises therefore, as to whether the Commission could compel as to so extend our operations when for a period of approximately 40 years, we have confined such operations first, to the unincorporated town of Las Vegas and second, within the municipal boundaries of the City of Las Vegas. The general principle of the law which la pretty well accepted throughout the United States, is that the obligation of a public utility to serve the public la limited by the extent of the provision or undertaking by the utility to serve the public. To require a public utility to devote its property to a service which it has never professed to render, or to the service of a territory which it has never undertaken to serve, is tantamount to taking that property for public use without just compensation. I have not been able to find any Nevada cases on this subject but desire to refer you briefly to one of the leading oases in California where the factual situation was quite a bit similar to the one we have before us, the case being Del Mar Water Light & Company vs Eshelman, 167 Calif. 666. In that case, the real estate organization organized the town of Del Mar for the purpose of a real estate subdivision and later incorporated the Del Mar Water, Light and Power Company for the primary purpose of supplying water, light Mr. Wm. Reinhardt: Page 3 Sept. 3, 1948 File: 80 and power to the developments of its townsite and the distribution of water was confined to the residents of the townsite with one or two exceptions which will not be considered here. A resident of an abutting real estate subdivision filed an application with the then Railroad Commission of the State of California demanding that the Del Mar Water Company serve him with water and the Railroad Commission having determined that the water company was a public utility and its facilities and supply was sufficient, ordered it so to do. The matter went up to the California Supreme Court and the opinion of Justice Shaw, which I think pretty well establishes the general law on this subject, contains the following language: "There can be no doubt, therefore, that the owner of a water supply may make a limited dedication of it to public use, confining the use to such territory as he sees fit. Nor can there be any doubt that one owning a water supply is not compelled to dedicate all of it to public use, or that he may dedicate a part of it, only, to such use, reserving the remainder for private purposes or for private sale or disposition as he sees fit. Accordingly, our decisions have recognized and have repeatedly declared the right of a water company to make such limited dedication and to decline to furnish its water to persons not within the area it has undertaken to serve. (Leavitt v. Lassen Irr. Co., 107 Cal. 92 (29 L.R.A. (N.S.) 213, 106 Pac. 404); Thayer v. California Dev. Co., 164 Cal. 138, (128 Pac. 21); Price v. Riverside Land etc. Co., 56 Chi. 433; Hildreth v. Montecito Creek Water Co., 139 Cal. 29, (72 Pac. 395); 2 Wiel on Water-rights, 3d ed., sec. 1281; Lewis on Eminent Domain, 3d ed., secs. 254, 313.) The facts stated in the commission's findings and opinion do not show that the Del Mar Company ever offered its water for use to the territory in which applicant Class lived, or to any persons other than those buying lots from the land company or residing within the 'old town' surrounded by the territory subdivided by the land company. Its dedication of its water, if it Mr. Wm. Reinhardt Page 4 Sept. 3, 1948 File: 80 has made any, extended no further than that. There has been no dedication of the water to the use of any portion of the public outside of that area. 'For these reasons I am of the opinion that even if it should be conceded that the company is administering a public use, it does not appear that it is administering a use to which Glass is a beneficiary or that Glass comes within the class of persons to which its water has been dedicated. This being so, the commission has no power to compel an additional dedication or to compel an extension of the service beyond that to which it is already dedicated, and its order directing the extension and additional service was in excess of its authority and void." It is my opinion, therefore, that the Nevada Public Service Commission could not compel us to dedicate our water facilities or to furnish water to any territory beyond which we have heretofore dedicated such services and to which we have heretofore furnished water. The next question arises as to whether if we voluntarily extended our water mains beyond the city limits for fire protection purposes only, whether we could later be compelled to broaden such services to general use. There are no cases on this particular point that I have been able to find but it is my opinion that even though such extension of service was made under such a restricted reservation, that the Nevada Public Service Commission could very properly, after hearing, and upon a finding that there was sufficient water and facilities, determine that our refusal to furnish such services and water for other purposes, was unreasonable, such a ruling depending, of course, upon the adequacy of water supply, the cost of the initial investment, the return on the investment etc. Mr. Mm. Reinhardt Page 5 Sept. 3, 1948 File: 80 There is another point which I think should be brought to your attention. As you know, there hag been a petition filed by certain petitioners, under Chanter 167 of the Nevada Laws of 1947, which authorize the creation of a water district in Las Vegas Valley, Clark County, Nevada, for the formation of such a district and I am enclosing for your information, a copy of the petition and the exhibit attached thereto. You will note that this proposed district covers a territory which Mayor Cragin now desires us to serve in addition to a large amount of other territory. Under this Nevada law, such a district may be formed under the procedure required therein to acquire by purchase, gift or condemnation, any and all lands within the boundaries of the district required for the maintenance, operation etc. of a water company for the purpose of serving the district with water. The act further provides that taxes may be levied for the purpose of paying any obligation of the district during its organizational state and that after the organization has been completed, under the procedure described in the act, the district may issue bonds for the financing of the district and the 'creation of a sinking fund into which shall be paid from the revenues * * * sums fully sufficient to pay principal of and interest on such bonds*. The act also specifically provides that the district may supplement the ground water resources of Las Vegas Valley by the importation and use of the waters of Lake Mead. I am advised that this petition which was submitted to the Board of County Commissioners, was approved and an election has been preliminarily set for October 6, 1948. The newspaper clipping with reference to the action of the Board of County Commissioners states that "the district would be so organized as to handle all of the water consumed in the area, taking over the holdings of the Las Vegas Land and Mater Company and coordinating all services". It would seem, therefore, that the territory to which Mayor Cragin now desires our services may soon be adequately served upon the completion of the district formation proceedings and the functioning of the district itself in the manner proposed. Mr. Wm. Reinhardt: Page 6 Sept. 3, 1948 File: 80 Frankly, in my opinion, we should not, therefore, at this time extend our water facilities or furnish services to any persons or territory outside of the city limits of the City of Las Vegas for any purpose whatsoever, restricted or otherwise. I am returning your file 1-7334. E. E. Bennett Enc EEB:AF 2 copies to Reinhardt