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Income inequality is surging, and there are few countries where it is rising faster than the United States. The distance between rich and poor is greater in America than nearly all other developed countries, making the US a leader in a trend that economists warn has dire consequences. GlobalPost sets out on a reporting journey to get at the ‘ground truth’ of inequality through the lenses of education, race, immigration, health care, government, labor and natural resources. The hope is to hold a mirror up to the US to see how it compares to countries around the world.

After the housing boom, opportunity dries up in Fernley, Nevada

Once among the country's fastest-growing places, a town near the end of the Truckee River hit with economic drought.

“It’s a sad state of affairs,” said Jim, who works from home these days, as does Diane. They don’t drive to Reno much because of the high cost of gasoline. “Fernley is very much hurting right now.”

Those who grew up here, like City Councilman Dan McCassie, remember a small farming town with just one traffic signal on Main Street.

“It used to be this little town, everybody knew everybody,” McCassie, 47, said from behind the counter of the well-stocked pawn shop he’s owned for several years, Main Street Pawn. “If you lied or did something wrong, it would follow you.”

Everything changed in the 2000s as property developers bought up farmland and water rights, seeing an opportunity to transform Fernley from a bedroom community of Reno into a commercial hub. Young couples and retirees flocked from California and the population more than doubled in just a few years. US Census numbers showed that in 2005, the area’s population growth was the third-fastest in the country, as Fernley surged from about 8,500 people in 2000 to at least 20,000.

“We gained the pluses of that growth,” McCassie said. “But we also got the negatives. We’re seeing home invasions in Fernley, Nevada. It’s just crazy, we never had that.”

And as foreclosures have pushed families out of their homes, investors have swept in to buy them at pennies on the dollar and rent them out. The effect has been to create a new, lower class of residents in a place wary of outsiders.

“I think it’s a lower income, it’s a different quality of people,” McCassie said. “You can drive around and tell which one’s a rental. There’s no lawn, there are cars everywhere, there’s trash.”

In hindsight, said the day trader Dees — chatting at McCassie’s pawn shop on a weekday morning as the councilman deftly alternated between the conversation, minding the store and fielding calls from his constituents — it’s clear there was too much growth, too fast. But it wasn’t just about how many, but where hundreds of new homes were built: in a dry catch basin where excess water naturally accumulates.

“People built houses where they shouldn’t have built them,” Dees said. “When that area flooded in the past, it was all farmland and so it was at worst a minor inconvenience. The city planners should have never granted building permits in the areas where they did.”

And in Fernley, residents say, there is plenty of blame to go around. Class-action lawsuits filed by flood-affected residents named the city of Fernley, its surrounding county, the Truckee-Carson Irrigation District (TCID) and companies who built and sold homes in the basin as responsible for the damage.

This January, more than four years after the flood, approximately 600 victims received a share of a $10 million settlement that was reached last year. After $3.3 million in attorney’s fees and $700,000 in other fees, the average payout was $10,000 per victim.

“When the housing explosion happened, the proverbial carrot got dangled in front of everybody,” Dees said. “All they saw was money and dollar signs. And everybody just lost focus.”

Icicles hang from a pier separating a public beach on Lake Tahoe, the source of the Truckee River, from a private one. 
(Kevin Grant/GlobalPost)

Conflict over water is nothing new in Nevada, the driest state in the country. The state government has haggled for decades with California, with which it shares water from Lake Tahoe and the Truckee River. Government entities ranging in size and influence from the Department of Interior to local city councils are all engaged in a tangled battle over not just water access but water quality — including the level of development permitted on the shoreline of the vacationer’s paradise of Tahoe.

“It’s a huge quagmire and I’m not even getting into the political part of it,” said TCID’s Rutan, who remains concerned that powerful players to the west can outmaneuver towns like Fernley. “They’re not our enemy. There’s plenty of water, but not if they take it all.”

From resort development along Lake Tahoe to the Truckee Meadows Water Reclamation Facility treating the sewage of Reno and Sparks before pumping the reclaimed water back into the river, Fernley residents say in recent years they’re more worried about what’s in their water than how much of it they own — especially because they now pay extra for it, starting at approximately $400 per year.

Over the protestations of homeowners who didn’t want it so close to their properties, Fernley began building a new water treatment plant in 2007 after the Environmental Protection Agency reduced the legally acceptable level of arsenic in drinking water from 50 micrograms per liter to 10 micrograms per liter.

The city’s official website warns that “long-term exposure in drinking water, in excess of 10 micrograms per liter, causes increased risk of skin, lung, bladder, and kidney cancer, as well as skin-related problems,” risks that became widely known after the National Research Council published studies on arsenic in 1999 and 2001.

The water treatment plant became operational in 2009 with a price tag of $75 million, tens of millions more than initial estimates, causing Fernley to incur debt just at the time its economy was crashing down. As a result, last May the City Council enacted a Water Bond Debt Fee for all customers that may remain in place as long as 30 years — or until the debt is paid off. Many residents still refuse to drink the tap water; those who can afford it buy bottled.

The Fernley City Council also passed a resolution in December 2011 guarding its water interests against the residents at the true end of the Truckee, members of the Pyramid Lake Paiute Tribe. The resolution prevents the tribe from purchasing water rights from Fernley.

“After years of good faith negotiations between Fernley and the Tribe to ensure the long-term viability of Fernley while restoring water to Pyramid Lake, we are deeply disappointed that the Fernley City Council has reversed course and adopted a provocative, ill-informed resolution maligning the integrity of the Pyramid Lake Paiute Tribe,” said Tribal Chairman Wayne Burke.

Along the banks of the Truckee with Highway 80 rolling by in the distance, Reno resident Dave Stanley was teaching two first-timers how to fly-fish for brown and rainbow trout, flicking the long lines back and forth over their heads. The desert sun was partway out, warming the Alpine breeze.

“I’ve been making my living on the river for 30 years,” said Stanley, a professional fishing guide. He spoke highly of environmental groups, like the Nature Conservancy, that spent millions of dollars to study and restore large sections of the river.

But the economic boom and lingering bust in Fernley and the larger area concern him, he said.

“At some point you’ve got to say, ‘Hey, you can’t afford to expand anymore,’” Stanley said. “My personal view is that I hope somebody has done the math. The river can only support so many people.”