It’s a question we’ve heard many times over the years: “I own more shares than I need for the size of my property, so why don’t I get more water than my neighbor who has the same size property but doesn’t own as many shares?”
This reflects a common misunderstanding of what shares are and how they work. This article will explain why our pressure irrigation (PI) customers have shares, and just what those shares mean.
This article refers to PI (Class A) shares, not culinary (Class B) shares. Any customers who are not connected to the PI system are not required to own Class A shares.
Why do we even have shares?
WaterPro/Draper Irrigation Company (DIC) is owned by you, our customers. Every customer must be a shareholder, and every customer is a part-owner of the company. This system of ownership is common in irrigation companies throughout the state. It dates back to the times when farmers pooled their water rights and formed irrigation companies so they could build and maintain the systems of canals and ditches they needed for bringing the water to their fields.
DIC switched from canals and ditches to our PI system (where water is delivered through pipes) in the 1990s, but we still issue shares to our customers.
Don’t my shares represent the amount of water I own?
No. Under Utah law, the state owns all water, and issues water rights to individuals and organizations. DIC owns a certain amount of water rights. Your shares show that you are part of the company, but the company owns the water rights, not the individuals who own the shares.
How do people get shares?
For the most part, shares are tied to property served by the PI system. In general, every one-third acre lot should have one share. When people buy a home in Draper in an area that is served by the PI system, at least one share of Class A stock is required with the property, depending on the size of the lot. Shares are generally sold along with the property.
For historical reasons, many having to do with a stock split that occurred in the 1990s, some property owners wound up with more shares of stock than their property size warrants.
Are my shares an investment?
Not really. Shares have value, but they don’t pay dividends and may increase or decrease in value. Further, there is a remote chance that the state could one day reduce the amount of water DIC is entitled to, which might make these excess shares worthless.
So, how much water do my shares entitle me to?
Under state water rights, each acre of land is entitled to as much as five acre-feet of water per year. This allotment is determined by acreage, not by the number of shares you own. So no matter how many shares you have, you are not entitled to use more water than allotted by state law.
How do PI meters change things?
Historically, irrigation systems operated on “turns,” where each shareholder was assigned a certain number of hours for taking water from a ditch. Most farmers were assigned turns based on the number of shares they owned. In those days most irrigation companies billed by share, because the number of shares was proportional to the amount of water used.
Once DIC installed our PI system, we began billing by lot size. That system worked fairly well, but there was one big flaw: people who conserved water subsidized the over-users, because there was no way to know the exact amount of water each property owner was using.
Fortunately, water meter technology has improved to the point where it’s now feasible to put meters on our PI system, and we are in the process of doing that. Once the system is fully metered, all customers will pay based on the amount of water they actually use. PI customers will still be required to own shares, because that is the way the company is structured.
Are there any advantages to owning excess shares?
Not really. Shares give owners voting rights in the company, but with thousands of shares in the PI system, a few extra shares will not increase anyone’s influence in the company.
What can I do with my excess shares?
The company will buy them back. Contact our office if you have any questions about your shares or if you are interested in selling excess shares.