U.S. Water News Online
PRESCOTT VALLEY, Ariz. -- The Town of Prescott Valley sold 2,724 acre-feet of effluent water for more than $67 million during an innovative two-day auction on Oct. 29-30.
The town awarded the effluent water to the highest bidder -- Water Property Investors LLC, a New York-based water-resource-investment firm -- for $24,650 per acre-foot. Water Property Investors can re-sell or use the water to meet state water supply requirements for new subdivision developments.
The auction attracted both local and national bidders through the use of a unique price-floor bid process that the town's consultants, WestWater Research LLC, developed and arranged. The town set a minimum-bid price by negotiating a $53-million agreement with Aqua Capital Management, a Nebraska-based private equity fund.
The agreement would have awarded the effluent to Aqua Capital at $19,500 per acre-foot if the town did not receive a higher bid during the two-day auction.
"An auction format with a price-floor agreement is an innovative way to address the increasing water needs in the Southwest and to create a market environment for water trading," said Clay Landry, managing director of WestWater Research.
"The price floor protected the town from losses and the auction format encouraged a competitive-market outcome worth $14 million more than the original price-floor agreement."
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