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<br />OG';.O{S <br /> <br />TRUSTEE RELATIONSHIP BETWEEN DISIRICI' BOARDS AND WATER USERS <br /> <br />Structuring water trades to benefit water users may be politically necessary, but many <br /> <br />may find that compensation is not necessarily suitable for irrigation districts. After all, a .district <br /> <br />is a quasi-governmental entity probJ."bited from making a profit Can a district make a profit if <br /> <br />it remits the proceeds to its water users. Or in other words, can a district structure a water <br /> <br />trade which makes it operate "like a mutual?" In my view, the answer lies in the trustee . <br /> <br />relationship between the board and. its water users. <br /> <br />The board of an irrigation district manages the district's water supply under a trustee <br /> <br />obligation. As trustee, the board holds legal tide to the water. It is legally obligated to <br /> <br />administer those rights for the benefit of individuals who hold an "equitable and beneficial" <br /> <br />interest in the trust Statutes and case law in the west have generally bestowed -landowners <br /> <br />served by the district with the equitable and beneficial interest in the district's water supply. <br /> <br />A proposal has been suggested for structuring water trades to pass the benefits of <br /> <br />transactions through to water users, while conforming with an economic interpretation of the <br /> <br />trustee relationship between irrigation districts and water users.7 Beyond the specifics of the <br /> <br />proposal, the discussion illustrates the fact that a water trade involves the board in negotiations <br /> <br />with at least two types of parties: (1) the acquirer of water; and (2) its water users. Execution <br /> <br />7 See "Just Rewards: Making Water Marketing Work for Local Interests," Water Strategist <br />1, 2, 11,12 (July 1987). For a more extensive discussion of the relation of the proposal to <br />California law, and of the economic effects of the method, see Smith, "Water Transfers, <br />Irrigation Districts, and the Compensation Problem," 8 J. of Policy Analysis and Management 446 <br />(1989). <br /> <br />11 <br />