Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. PICO HOLDINGS INC /NEW (830122) 10-K published on Mar 13, 2020 at 8:45 am
Reporting Period: Dec 30, 2019
The Nevada State Engineer called for and held a hearing in September 2019 with respect to the Nevada State Engineer’s request for guidance and further information to make a determination of the boundaries of the Lower White River Flow System (LWRFS) in Southern Nevada. Kane Springs Valley is located at the northern portion of the LWRFS, and several participants in this hearing recommended inclusion of Kane Springs Valley as part of the LWRFS, where currently it is not included. We believe that Kane Springs Valley is not a part of the LWRFS and at the hearing called by the State Engineer we, along with our other water rights owners in the area, defended our position with scientific and hydrogeological data and presentations. If Kane Springs Valley is included as part of the Lower White River Flow System, it will lower the priority date of our current water rights and will likely impede the pursuit of our existing applications in the basin. The Nevada State Engineer is likely to rule on the management of the LWRFS by the third quarter of 2020.
According to EDAWN’s most updated report dated January 23, 2020, Reno was rated first in the U.S. for Metropolitan Service Areas (MSA) in job growth and third for economic strength. In addition, Reno was in the top 15 of the projected fastest growing real estate markets for the coming decade. The McKinsey Global Institute in a report dated July 2019, projected Reno as one of the top 25 U.S. cities to experience sixty (60%) percent job growth by 2030.
A shortage on the Colorado River system will be declared by the Secretary of the Interior when on January 1, of any year, Lake Mead’s surface water elevation is at or below 1,075 ft. Under the Drought Contingency Plan (DCP), a new tier, “Tier 0”, applies when Lake Mead is at an elevation between 1,075 ft. and 1,090 ft. and a shortage declaration has been declared which went into effect January 1, 2020. This requires Arizona to cut-back its allocations by 192,000 acre-feet, and Nevada by 9,000 acre-feet. When Lake Mead is at an elevation between 1,050 ft. and 1,075 ft., Nevada’s share of the shortage is 13,000 acre-feet and Arizona’s cut-back to its allocation is 320,000 acre-feet. In contrast, California suffers no loss to its allocation from the Colorado River (2007 Shortage Sharing Guidelines).
Currently the Pinal AMA, a largely agricultural area located in between the Phoenix and Tucson AMAs, is experiencing a physical shortage of water supplies for new developments within this AMA. This area, like the Phoenix metropolitan area, is increasingly under pressure to grow from new residential, commercial, and industrial users; however, according to the Arizona Department of Water Resources analyses, there is “...insufficient, groundwater in the Pinal Active Management Area to support all existing uses and issued assured water supply determinations.” Proposed projects have been denied unless new water sources can be found to sustain this new development. The use of our banked water in Harquahala could be used to help satisfy this need.
Deferred tax assets and liabilities and federal income tax expense in future years can be significantly affected by changes in circumstances that would influence management’s conclusions as to the ultimate realization of deferred tax assets. Valuation allowances are established and maintained for deferred tax assets on a “more likely than not” threshold. At December 31, 2011, the Company considered it more likely than not that the deferred tax assets would not be realized and a full valuation allowance was provided. At December 31, 2019, after evaluating the positive and negative evidence, management concluded that there was insufficient positive evidence to enable the Company to conclude that it was “more likely than not” that certain of these deferred tax assets would be realized, and the Company continued to maintain a full valuation allowance against its deferred tax assets. However, given the Company’s more recent earnings history, management believes that there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to allow management to reach a conclusion that a portion of the valuation allowance will no longer be needed. Release of valuation allowance would result in the recognition of certain deferred tax assets with a corresponding decrease to income tax expense for the period the release is recorded. The exact timing and amount of the valuation allowance release will be predicated on the basis of the level of profitability that the Company is able to actually achieve, and demonstration of additional positive evidence such as reliable projections of future earnings.