Transcript of interview with Patricia Mulroy by Stefani Evans and Claytee D. White, January 03, 2017

i AN INTERVIEW WITH PATRICIA MULROY An Oral History Conducted by Stefani Evans and Claytee D. White The Building Las Vegas Oral History Project Oral History Research Center at UNLV University Libraries University of Nevada Las Vegas ii ©The Building Las Vegas Oral History Project University of Nevada Las Vegas, 2016 Produced by: The Oral History Research Center at UNLV University Libraries Director: Claytee D. White Editor: Stefani Evans, Franklin Howard Transcribers: Kristin Hicks, Frances Smith Interviewers: Stefani Evans, Claytee D. White Project Manager: Stefani Evans iii The recorded interview and transcript have been made possible through the generosity of the UNLV University Libraries. The Oral History Research Center enables students and staff to work together with community members to generate this selection of first-person narratives. The participants in this project thank the University for the support given that allowed an idea and the opportunity to flourish. The transcript received minimal editing that includes the elimination of fragments, false starts, and repetitions in order to enhance the reader’s understanding of the material. All measures have been taken to preserve the style and language of the narrator. In several cases photographic sources accompany the individual interviews. The following interview is part of a series of interviews conducted under the auspices of the Building Las Vegas Oral History Project. Claytee D. White Director, Oral History Research Center University Libraries University Nevada, Las Vegas iv PREFACE Patricia Mulroy served Las Vegas as the general manager of the Las Vegas Valley Water District from 1989 to 2014. She served the state of Nevada as the general manager of the Southern Nevada Water Authority from 1993 to 2014. Patricia helped to build the Authority, and saw the state through the devastating drought of the Colorado River. Patricia was born in Frankfurt, Germany on February 24, 1953. As a young girl, she lived in several different countries, but always felt that the United States was her home. Her experiences abroad fed her to develop a fascination with government work and state service. She arrived in Nevada in 1974 to attend UNLV. In 1989, Patricia became the general manager of the Las Vegas Valley Water District. She entered the field at a tumultuous time, facing the drought of the Colorado River and tension within the districts. She pioneered the Water Authority, which revolutionized Southern Nevada’s water rights system and allowed the districts to deal with the issue cooperatively. She worked with other Southwestern states and Mexico to support Las Vegas and Nevada through the drought. Patricia retired in 2014, but has chosen to remain active in politics and business. She is currently working with the World Bank in China on the World Economic Forum. She is also a nonresident Senior Fellow at the Brookings Institute, a faculty advisor for the Desert Research Institute, and a board member of the Wynn Board of Directors. v TABLE OF CONTENTS Interview with Patricia Mulroy January 3, 2017 in Las Vegas, Nevada Conducted by Stefani Evans and Claytee D. White Preface………………………………………………………………..………………………….………..iv Discusses institutional conflicts over water; moratoriums on will-serve letters; inventorying resources; remembers Bob Broadbent and his impact in the Department of the Interior; the creation of the Southern Nevada Water Authority and its Board; encouraging development in Nevada; talks about Faraday Futures and infrastructure development; explains the role of the Water Authority in planning and development; explains the Southern Nevada water system and connection charges; compromises to build regional facilities; discusses casinos trying to leave the power grid………...……………………………………1-15 Explains the separation between the Water Authority and NV Energy; discusses current projects and jobs; protecting vulnerable water resources; discusses the water crisis in Flint, Michigan; reacts to public criticism of the Water Authority; Boulder City’s successful control of growth; talks about the growth of cities in the near future; discusses the Trump Administration and the debate over climate change; the future of pipelines in Las Vegas and the Colorado River …….………………………………………..…..…16-271 1 Today is January third, 2017. Stefani Evans and Claytee White are here with Pat Mulroy. What I'd like to do today is to build on your last interview from 2013. Thirteen? No. No, it can't be '13. I think it was. November 2013. Really? I was still at the [Las Vegas Valley Water] District. Yes, but you had just announced your retirement. Got it. I'd like to go back to when you start talking about developing the Southern Nevada Water Authority, because you were talking about how the different entities in Southern Nevada were at war with each other over water. Because this is Building Las Vegas, or Building Southern Nevada, I'd like to get to the heart of that—why that was so critical and what kind of effect that had to help the different jurisdictions work cooperatively to sustain their growth and to plan for future growth. Let me come at this a little bit differently. In 1989, when I took over as general manager of the Water District, you're right, the entities were at war. The real growth spurt had started in 1987 and everyone began to realize that Nevada's allocation of Colorado River water was going to be gone long before it had been anticipated to be used up. When the second stage of the Southern Nevada water system was dedicated in 1983, the Bureau of Reclamation at the time had predicted that Nevada's allocation would last it until 2025. So here we sat and we knew that in the early nineties [1990s] the water supply would be gone. To make matters worse, we had always worked in a system wherein when a builder wants to get his financing, the builder used to come to either Henderson, North Las Vegas, the district, Boulder City, and get what's called a will-serve letter. In other words, they would be able to go to 2 the bank and get financing for the project based on a guaranteed water service. Well, more water service commitments had been put out there than we had water available. It wasn't until '89 when I came in that the reality of that came home to roost and we said, "Wait a minute, we've got to step back and look at what we've got here." So we spent the better part of six months as the district looking at how many commitments we had out there and what we could reasonably expect to come out of the Colorado River and we were way overcommitted. So on Valentine's Day 1990 I had to declare a temporary moratorium, which meant that we were issuing no more will-serve letters. It's still called The Valentine's Day Massacre. There were enough commitments in the pipeline that it didn't stop the construction process. By the time we opened the doors again, the pinch that was starting to be felt at the front end of the process where the developer goes and gets his financing. So it meant that we had to do a couple of things at once, and once we did it Henderson and North Las Vegas had nowhere to go. They had to really take a good hard look at what they had committed and what water they had and realized they were in the same spot. Once we did it the developers were a little suspicious of a commitment they were getting from Henderson and North Las Vegas, as you can well imagine. So they had to follow suit. Well, at the same time we were doing this, we had begun a process to look at essentially doing a region-wide water inventory. What resources do we have? What demands do we have against those resources? And when collectively, forgetting who would fall off the cliff first, second, or third—because it's relative; it's a matter of days or weeks, not years—how long we had and how much we could still support. So we had hired a consultant from Maryland that came in. Essentially he had a computer model, for determining supply and demand. It was pretty straightforward simple supply and demand. There was no climate data that went into it back then. I mean, there were no complicating 3 factors; it was pretty straightforward. So rather than get into an argument with all the entities about who was going to pay for this consultant, we said, "Fine, we'll pay for him." Fast forward six months and they demanded to help pay for the consultant so that they would feel like they had equal rights with the consultant than we did, which was fine, silly, but fine. So everybody got to play with the model and we looked at any number of iterations. For us it became apparent pretty quickly that we were going to have to join forces. When Bob Broadbent had been commissioner of Reclamation—he became commissioner of Reclamation back in '79 and he was commissioner for two years and then he was assistant secretary for two years under Reagan. Well, during his tenure in Interior, he had inserted a little provision into the operating criteria for the Colorado River, which said that if you returned wastewater to the Colorado River, you could take that amount of additional supply out of the river. So, in other words, every gallon you put into the river treated you can take out again over your allocation. So if we take out 300,000 and we returned 150,000, then we could take 450,000 out of the river. But that meant for the bureau to enter into a contract—nobody had a contract for those return flow credits—for the bureau to enter into a contract for those, there had to be an agency that had water budgeting obligations and could make them stick across the valley because you had Henderson discharging, you had North Las Vegas through the City of Las Vegas discharging, you had Las Vegas discharging, you had Clark County discharging. So an entity needed to be created that wrapped its arms around all water and wastewater agencies of Southern Nevada so that you could establish an annual water budget. The Bureau of Reclamation, slash, Interior would have somebody to hold accountable for that because you can either reuse your wastewater directly by putting it on a park or a golf course, which Henderson had started doing, or you can return it to the river. Now, you mathematically can't do both. So somebody had to be held accountable. 4 Somebody had to put the entities all on budgets in terms of how much can you send to direct reuse and how much do you have to commit to return to the river for an aggregate benefit. So when that realization really struck home, the entities got serious and that's when the concept of creating a Southern Nevada Water Authority really started to blossom because it was the difference between keeping the doors shut and being able to open the doors again. Now, you can imagine the pressure was mounting. Steve Wynn had built the Mirage; he was building the Treasure Island. The MGM had slipped through the cracks and had actually gotten their commitment right before the doors were shut for the big MGM Grand. But there were other properties that were beginning to follow the wave. Steve essentially changed the course of the Las Vegas Strip and brought the whole concept of corporate gaming into Southern Nevada; that really spurred the economic development. So the pressure, particularly on the district, to open the doors again was tremendous. You had Howard Hughes in Summerlin anxiously building in the city of Las Vegas; they were shut down. Del Webb and Green Valley were trying to build out the Green Valley area and the Anthem area with the retirement communities; they were being shut down. Nothing was moving until this agreement was reached. So it got down to, how do we create a board? Obviously that always is the sticking point. Now, since the water agencies were going to be paying for it and the financial contribution by the wastewater agencies were going to be de minimis, even though they needed seats on the board, there was great reluctance on the part of the water agencies to let the wastewater agencies dictate how water was going to be allocated or how capital dollars for water projects were going to be spent because the authority's job was to build regional facilities—this was the concept—build regional facilities, come up with a plan to distribute Colorado River water resources and manage the water budget; those were its three primary obligations when it first came in through the door. 5 We looked around especially in the West at other structures and saw everything we didn't like. We looked at the Metropolitan Water District in Southern California, which at that time still had fifty-two board members with weighted votes based on the assessed value of the district. So the City of Los Angeles outnumbered everybody. San Diego got rolled time and again because the assessed value in the L.A. and Orange County area when the two of them combined would just roll everybody else. We knew that would never work in Southern Nevada. So we created a very different structure and it was the first of its kind, not just in the West but in the country, which really established the culture for the Water Authority going forward and it created an equal partnership. The philosophy was no matter how big, no matter how small, no one can get rolled on capital expenditures, water allocations, water budgeting issues. We were going to be equal partners across the board when it came to those water-centric issues. The wastewater agencies, however, had no vote on these. We decided on seven members. Henderson's representative represented both their water and wastewater, but they had the water vote. North Las Vegas was water and wastewater; had the water vote. City of Las Vegas wasn't in the water business, so their representative only represented their wastewater department, the sanitation system. The Las Vegas Valley Water District serves the city of Las Vegas, and the Las Vegas Valley Water District had no wastewater component; it was only the water part of it. Boulder City was both water and wastewater. And then the Clark County Sanitation District was only wastewater and didn't have any water. Then you had Laughlin, the Big Bend Water District, because they also took Colorado River water and were totally dependent on those return flow credits for their entire water supply. Laughlin wouldn't have a drop of water were it not for return flow credits, not a drop. They live on treated wastewater from the Las Vegas Valley; that's how accounting-wise they get their water. So the five water agencies were Boulder City, North Las 6 Vegas, Henderson, the district and the Big Bend Water District— Now, what about Boulder—oh, you said Boulder. Okay, sorry. Henderson, North Las Vegas, Boulder City, Las Vegas Valley Water District and Big Bend; those are the five water agencies. They controlled all the water budgeting. When it came to expenditures on the Southern Nevada water system, only these four votes mattered, but they had to be unanimous. And on any one of those issues, capital expenditures, the annual water budget, the annual water operating plan, they even have to go back to the parent agencies for ratification. So what does that create? That creates a bottom-up agency. In order for the agency to function, there can be no political brinksmanship at the board level. So we had technical committees made up of the engineers of all the agencies that met monthly on all the technical issues whether it was the water budget, whether it was the expansion of the Southern Nevada water system and how the pipes would work. The finance officers met monthly. The conservation folks met monthly. And I met monthly with all the city managers and the county manager, every single month. If issues arose out of the other committees, they were resolved at the manager level, at the city-county manager level so where by the time it got to the board there was no difference of opinion. Now, it is very difficult for elected officials to play games when they have no staff support, very difficult in the water arena to play games. It's twenty-five years now that the Water Authority has existed. Never has anyone pulled the veto card, never, because they then own it. There is nowhere to hide. One lesson I learned is that an elected official will do something horrendous if they can blame someone else. But if your vote makes you accountable instantaneously with red flags going up all around your head like halos— Everybody looking at you. 7 —you think twice. And you stop the entire valley. You think twice before you push that button. So as risky as that structure was, it actually ended up being probably the most robust thing we could do because the minute you do it, you shoot yourself in the foot. If you don't approve the water budget, well, you don't have one either. If you don't approve the capital expenditures, well, you don't have them either. You want the system to collapse? It's going to affect you as much as it affects everybody else. We're in this together, glued at the hip with one another. It was that need for unanimous vote by the water agencies on water issues and then the ratification by the parent agencies that made the smaller entities—Henderson, North Las Vegas, Boulder City—comfortable that the county commission...because, due to their ex-officio hats, they had three representatives: they had the Big Bend Water District, Las Vegas Valley Water District, Clark County Sanitation District. But because they couldn't ever roll them, it was irrelevant; they could have three; it was totally irrelevant how many they had. So that structure has proven to be extremely robust. When we decided how we were going to manage the water resources, we did something unheard of in the West; we threw away our priority water rights. We said, "They make absolutely no sense between municipal jurisdictions." The idea that water could run down the street in the Las Vegas Valley Water District service area while there's no water across the street in Henderson was counterintuitive. So we said, "We will share a priority on that Colorado River water and water will go wherever the development takes it; water will not dictate where development goes; we will not pioneer lines; we will not push facilities in order to drive development; the facilities will follow where the private sector and the development community takes the growth in the valley." Never has there been a pioneering by either the district or the authority. Now, would you define what that means? 8 Let's say the City of Las Vegas has a wide open tract of land, no developer has filed for any building permits, he's not gone in for any zoning; he's not looking to do anything. But there is this tract of land, and I as the city want to encourage development on that land and I want to run a water line there to bring utilities there, to bring it as an incentive to grow there, that wasn't what we did. We said, if a developer comes and says, "We're looking to zone this area; we're looking to develop this area..." And they will now pay big bucks to develop those facilities. So nobody does this on a whim because at the same time we were putting the authority together, we changed how you got a water commitment and you don't get a water commitment until you're so financially in it that you can't back out of it anymore; that way people can't speculate on land. When that commitment process changed—and the district had never pioneered water lines, ever, because they require the developer to pay the extension. If a developer leapfrogs across all sorts of vacant land to develop a parcel out there, he's got to pay for that whole water line and then in the next ten years he will get reimbursements if people hook in along the way. After ten years he gets no reimbursements anymore. So the onus and the cost for the development rests with the developer. No city can entice people to grow in a certain area by bringing water to that facility; that is what right now lies at the juggernaut of why Apex is so complicated and why the authority will not pay to pioneer those lines. The landowners are going to have to create an SID; they're going to have to put their money up to say, "We are looking to develop these lands and we will pay for these water facilities." SNWA will not front the cost for that because the demand is still limited. Yes, you have various private landowners out there; they're land flippers essentially; they own the land; they never intended to develop it themselves; they're looking to sell it to somebody who is going to develop the land. So it's one of these catch-22s. What comes first the chicken or the egg? So that's where the whole problem for Apex comes in; somebody else has to pay for it. So that's why the authority was 9 created and how it came about. CLAYTEE: So Faraday Future...? They are paying for it; they had to deposit into an escrow account the full cost of the facilities that SNWA built for them. It was originally going to be North Las Vegas that built them, but because North Las Vegas has no bonding capacity right now, they're financially in a hole, the legislature had no confidence. I mean, they've eviscerated their utility department; they have neither the human capital nor the financial wherewithal to do it. So the legislature, much to North Las Vegas' chagrin, said, SNWA, slash, Las Vegas Valley Water District—because they used to all be Las Vegas Valley Water District service territory. When North Las Vegas annexed the land, Shari Buck came to me and said, "Do you really care if we take over water service in the area?" I said, "Why would I care? Please, take it now." So they became the service provider for the Apex area. So the district and the authority required Faraday to put the amount of money needed to service Faraday. All the development that the district has done up to this point, the well development and the engineering, is all just to service Faraday. In order for the district to build out to other parcels that surround the Faraday, by January of 2018 the full cost of those facilities has to be deposited into an escrow account or the district doesn't move and the whole thing dies because the customers in the Las Vegas Valley are not going to subsidize commercial development in Apex. It's just that simple. Everybody thinks it's been subsidized and it's not. They are paying a hundred percent just like every developer in this valley has fronted the cost of the facilities to serve their development. But they have to build them to district specifications and then they have to dedicate them to the district once they've been built, inspected and accepted. Only then will the district take them over and then they and the valley assume the long-term operations because it's part of the larger system now. But that initial development cost falls to the developer. 10 Thank you for that. Yes. This is really helpful. So that changed completely then the way that developers approached— Oh, and the connection charges the Authority charged were horrendous. Once the Authority was created and we got the contract with [the Department of the] Interior for the Return Flow Credits, that allowed us to open the doors. But we knew our facilities weren't going to make it. We knew that we only had capacity with the 1983 additions to develop 300,000 acre feet, not 450,000 acre feet. [Ed. Note: An acre foot is defined by the volume of water necessary to cover one acre of surface area to a depth of one foot.] We didn't have treatment capacity; we didn't have pumping capacity; we didn't have an intake capacity to deliver that much water. Now, remember this is all pre-climate change. So we brought a citizens' committee together to say, "All right, let's put a capital plan together and let's then figure out how we're going to fund it." One of my biggest frustrations in life has always been that government has this backwards way of looking at the world. They say, "This is the pot of money we have and now what can we do with it?" They never say, "This is what the community needs; now how are we going to pay for it?" So we came at it the other way. We said, "Okay, first of all, what water resources do we have and can we reasonably expect to have to put together a larger resource plan for the Authority? Then what facilities will that require in order to deliver that water? And then how do we pay for it? What are those going to cost and how do we pay for it?" So this citizens' committee worked diligently and they created the first fifty-year water resource plan. Now, that water resource plan over time, especially with the recession and everything else that happened, became incredibly important. The state engineer under state law has to sign subdivision maps. You cannot build a subdivision as a developer anywhere in the state of 11 Nevada without the state engineer's signature. Now, the state engineer always relied on the will-serves from the various entities to sign those subdivision maps. With the creation of the Authority and the adoption of a fifty-year resource plan, he now bases his signature on that fifty-year resource plan that has to be adopted every single year. Every single year the Water Authority Board has to review that plan, make any changes that may have occurred, resources that may have fallen off the table; i.e., when climate change and the drought started, a development that may have been more aggressive than they originally thought in terms of what the valley was going to need, and they have to assure that they have water for the next fifty years. After fifty years that crystal ball gets really murky. But if you adopt a fifty-year resource plan every single year, you always stay fifty years out in front of yourself. So if there is a hole in that fifty-year resource plan, the state engineer stops signing subdivision maps. There cannot be a hole in that plan, ever. That's why when 2002 came along we were in panic mode, but that's a whole different story. So this citizen committee put together this first integrated resource plan, which first identified what resources we had, then worked with the engineers to develop essentially what is the regional piping grid for the valley. It's like a transmission line and a service line. So the big transmission lines—and these are twelve-foot diameter pipes—they developed the second intake, they developed a whole new treatment facilities out at River Mountain, and they developed the South Valley Lateral, the West Valley Lateral, the East Valley Lateral. The citizens' committee was really hesitant to make the community pay for it all at once. They wanted to see how the growth in the community went, which ironically it was one big phase. So they phased it. And the only way they could phase it, if the entities now really cooperated on the facility's portion. So the way the Southern Nevada water system works is, originally, there's one line that comes in and then it branches out. Henderson has its dedicated turnout, the district has its 12 dedicated turnout, North Las Vegas has its dedicated turnout, and on the other side of the mountain it goes down to Boulder City. Well, you couldn't build all three at once from a transmission perspective and phase it. But if Henderson got the South Valley Lateral first, because building pressure from the Del Webb site down there, South Valley Lateral goes in first, but they give up their capacity in their original line coming from SNWS to the district. The district then bumps its capacity up to North Las Vegas. Then everyone benefits. So now we had to share turnout capacity. So nobody has a single dedicated turnout anymore. If you lifted the map off Southern Nevada, you wouldn't know where one entity began and another entity ended; the plumbing is all intertwined, which will save this community's fanny one day. If something goes out, we can backfill because the system is now completely looped and it doesn't matter if the problem is in North Las Vegas, in Henderson. Boulder City is a little tricky because they're not connected to the in-valley grid. So for them, if anything happens on that line...That's why it became really, really important that they start paying for the third intake and we hooked that third intake into that line or they would have been without water. So then the citizens' committee came up with a phased capital plan and then the decision had to be made how to pay for it. At that time the battle cry politically and from the community was "Growth pays for growth." People in this community are not going to subsidize growth. So the big conversation had to be between the gaming industry and the development industry because those are the two big payers. There was a compromise that was reached that there was going to be a portion of the cost, because it created reliability for everyone in the valley was going to be picked up by a regional water rate that was a simple pass-through on the water bill; every jurisdiction collects it and passes it through to the authority. But then there is a regional connection charge that is horrendous and that was stepped up every single year; as we had to do more bonding that 13 automatically jumped up. The regional connection charge on a hotel can run tens of millions of dollars. Wow. Oh, yes, they're horrendous, those connection charges. So does it apply to residential? Oh, absolutely. Absolutely. It's based on your meter size. The smaller the meter, the less connection charge you're going to pay because less demand you put on the system. The bigger the meter is...Whether you use that much water or not, you are capable of using that much water because I can't control how whoever buys and owns that property is going to behave, but we know how much that meter will service. That service line, a three-quarter inch or a half-inch, there's a huge difference between those two. So the regional correction charge is put in and then there was still a hole and the builders and the gamers and the citizens that represented the seniors and the environmentalists and everybody else on the committee said the one group that's not at the table paying are the tourists; hence, the sales tax. Hence, the board said, "We'll go to the voters to see if they'll approve a quarter-cent sales tax," because the bulk of that sales tax is paid for by the tourists. Residents don't pay on food. They don't pay on medical expenses. All the essentials of life don't have a sales tax; only other stuff we pay sales tax on. But the bulk of it is paid for by the tourists. So that brought them to the table. That was an additional burden on the gaming industry, but it's a pass-through for them. So the voters approved it. And it was pretty brain-dead. I mean, do I want the tourists to pay or do I want my water bill to be higher every single month? That's a no-brainer of a question. So the sales tax passed with, what, 72, 73 percent approval rating, and that then made the various pieces of the funding formula come together. 14 I want to know how you found the members of that committee who were smart enough to do this. Well, you needed the industry representatives. You needed the big developers. So we had Robert Lewis and we had someone from Howard Hughes and we had someone from Del Webb. Then we had Richard Bunker, who was the president of the Nevada Resort Association. Then community people contacted their various boards and that all got fed into the Southern Nevada Water Authority Board and then they picked. You knew who the community activists were who cared a lot about water. They're the ones that ended up on this. But they came from very divergent perspectives, very divergent. You had mobile home park owners. You had apartment owners. You had single-family residential. You had senior citizens. You had golf courses. All the various user categories were represented on this. But the real deal had to be cut between gaming and the development community. It was a compromise reached between Robert Lewis and Richard Bunker that opened this valley up. Had those two not compromised on how to pay for those regional facilities, none of this would have happened. There were a lot of players who had to come to the table with this. And once the citizens' committee unanimously sent these recommendations to the SNWA board, they weren't going to tinker with them. Who are they to look the entire valley in the face and say, "No, we have a better idea?" And before we move o