In the latest bizarre twist to the Wendover Gas purchase, West Wendover Mayor Emily Carter vetoed last week’s council vote to kill the project.
In a letter dated last Friday Carter explained the reason for her veto was that no councilman explained their individual reasons for their vote.
Long time opponents of the $2.4 million purchase councilmen Izzy Gutierrez and Gerado Rodriguez were joined by Roy Briggs previously one of the project’s biggest boosters to kill the plan.
While Councilman Saul Andrade another supporter of the purchase voted against killing the project, his refusal to second an earlier motion to go ahead with the purchase opened the door to the kill vote.
As Carter noted in her letter there was remarkably little discussion before either of the two votes, leading many to speculate that most of the talking had been outside the council chambers and before the meeting.
Earlier the purchase of the near bankrupt company seemed all but a done deal. Long a pet project of City Manager Chris Melville the idea was also supported by a solid three fifths majority of the city council, Briggs, Johnny Gorum and Saul Andrade and Mayor Emily Carter.
A $10,000 feasibility study prepared by Bob Springmeyer of Bonneville Research enthusiastically endorsed not only buying the beleaguered utility but also the natural gas pipeline in its synopsis.
It suggested that given the right conditions the city of West Wendover could purchase the gas company and operate it at either a profit or at least at the break even point.
That conclusion also gave the council political cover to support the project and to answer critics that the council had not done its due diligence in researching the project.
But in the two weeks between the release of the study and the council vote opposition to the purchase of the as company and the construction of the natural gas pipeline was growing most significantly from casino executives who reportedly not only read the report’s synopsis but also the numbers behind the conclusion.
Wendover Gas has been in severe economic straights for over a decade primarily according to owner Nancy Green because the major casinos in town opted out of receiving their propane supplied through her companies gas lines and instead went with Wendover Gas’ own wholesaler.
According to the feasibility study West Wendover could purchase the gas company for just under $2.5 million and even without the casinos coming back on the system, the city could operate it without losing money and without raising rates.
“A lot of people, a lot of businessmen are questioning those conclusion,” Crawford said last . “My council is against it and even some executives from the casinos are having second thoughts. Wendover Gas is a failing business and we don’t see how the city could run it more efficiently.”
Those doubt however were raised long before the feasibility study was released. Most of them were voiced by former West Wendover Mayor Donnie Andersen on the two occasions when he also vetoed a council vote.
Andersen however vetoed the council going forward with the purchase.
“As much as I fought for and admired Nancy,” the former mayor said Wednesday. “It never made any sense to me for the city to buy a failing business. I was always open and up front about my position and I didn’t change my opinion.”
The withdrawal of casino support may have been crucial to Briggs about face and Andrade failure to second Gorum’s motion. Both men along with Gorum and Mayor Carter are employees of the Peppermill Corporation and have been accused of in the past of tailoring their votes to their bosses demands.
While initially favorable to the idea when it was first proposed and until late last year several executives in the casino industry began to weigh the savings offered by natural gas to the cost of the pipeline and the debt burden it would place on the city.
As the largest tax payers to West Wendover that indebtedness would have a direct impact on the industries already considerable property tax bill. And at least for the purchase of the gas company it is over $2 million that West Wendover need not have to borrow at all.
“For the city to buy the gas company for $2 million is insane,” former Nevada Public utilities financial analyst Paul Kvam said last November. “Anybody could pick up its assets for maybe $10,000 next year on the courthouse steps. Getting all the pipeline infrastructure for almost nothing would make the operations profitable. Then with those assets you could think about building the pipeline.”
The doubts whether the city could break even on the gas company was perhaps compounded with the question on the cost of the pipeline. While estimated in the feasibility report to cost just over $9 million Wendover has been burned before with overly optimistic projections.
To arrive at the estimate the study used a rule of thumb equation where the diameter of the pipe (4 inches) multiplied by the number of miles (62) multiplied by $40,000.
“It is a pretty basic formula,” said Wendover Gas trustee Steven Shute. “I have been involved in building pipelines for over 20 years and it is pretty accurate.”
But while the estimate is attractive it may not be accurate. First of all a four inch pipe may be enough to suit West Wendover current needs but much more, Kvam said.
“You have five casinos, the schools plus all the residential users,” he said. “That demand would take up a lot of the capacity of a four inch line especially if you include Wendover, Utah. Realistically to allow for the future growth and development natural gas is supposed to bring, the pipeline should be eight inches.”
The doubling of the diameter using Shute’s formula would bring the pipeline cost to about $20 million.
Bringing natural gas to Wendover is an old dream. 15 years ago then Mayor Walt Sanders and City Manager Keyth Durham initiated talks with the company planning to build what would become the Ruby Pipeline. Those talks however led nowhere. The pipeline was still in its planning stage and the cost also estimated to be over $20 million for a spur line to Wendover was considered to be too high.
If the casinos had in fact withdrawn their support what explains Carter’ veto.
According to one well connected source the veto and the issue going back on the agenda may have been done to avert a lawsuit from Green against the city for negotiating in bad faith (see related story).