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CHAPTER IV UTILIZATION OF AGRICULTURAL WATER RIGHTS A number of techniques for water rights evaluation are being used and tested in the western states. These include income capitalization, land value differentials between parcels with and without water, development cost analyses, and the comparable sales approach. The last approach is commonly used in areas where recent water sales provide data upon which to appraise local water rights. The reliability of such appraisals is often undetermined, however, by the sporadic history of comparable sales and by the varying physical and legal characteristics between so-called "comparable" water rights."' Comparable sales in the Upper Colorado River Basin have an extremely wide range of income levels. In ski resort towns, $3,000/AF is not uncommon, whereas in an agricultural community such a cost would be prohibitive. The value of a right to a potential buyer also depends on 1) its historic use, 2) location in the basin, 3) its seniority, 4) whether the water right had water available and the time of year during which the potential buyer needed water, and 5) the intended use of the right. Water sales recorded in the Water Market Update indicate prices around $3,000/AF are not unusual. On the other hand, 25 AF of water were purchased by a developer near Vail, Colorado, for $20,0002 or about $800/AF. Locally, and possibly more indicative, in 1989 the city of Gran d Junction purchased the 11,000 acre Sommerville Ranch on Kannah Creek for $1,600,000. The anticipated yield of the water rights after the change in use proceeding is 1,600 AF/year which results in a cost of $1,000/AF. As a general rule, the city tries to purchase water from farmers within the Kannah Creek drainage for $1,000 or less per AF. Typically the change in use proceeding reduces the yield of the original agricultural water right by 50 percent. Therefore, the city of Grand Junction's costs vary from $1,000/AF to about $2,000/AF. In another case, the Ute Water Conservancy District of Grand Junction, recently paid $600,000 for a 300 acre ranch, mostly irrigated, with 1,300 AF of water. The 1,300 AF represents the historical diversions by the ranch. After going through a change proceeding, the yield of the right was 508 AF or about $1,200/AF. This does not include legal fees or administrative costs. Based on these and other transactions, it appears necessary to purchase land with water even though only the water is desired. Water Market Update, Western Network, 1215 Paseo de Peralta, Saate Fe, NM 87501, January 1987, pp. 10-11. z Ibid. October 1988, p.3. 29 t