Kern agency releases details of deal to keep taps flowing to homes near Patterson
A reshaped agreement for the Kern County Water Agency to provide water to a housing development 200 miles to the north erased $14 million in debt, giving residents water certainty into the future just days before KCWA had threatened to shut off their supplies.
Other details contained in a “letter of intent” between KCWA and the Western Hills Water District, which serves the 600-home Diablo Grande development west of Patterson, include:
- KCWA will make up to 1,500 acre feet a year available for purchase to Western Hills, depending on how much is allocated by the State Water Project each year.
- If it doesn’t need the full amount, Western Hills can return some excess water to KCWA for credit or bank it with a third party for use in dry years.
- State costs for the water are expected to be $2,465 per acre foot in extremely low water years and about $140 per acre foot in flush years. That includes all transportation and operations/maintenance charges to be paid by Western Hills to KCWA.
- Western Hills will pay KCWA an annual administrative fee of $37,500, to increase slightly each year.
- Western Hills may buy up to 1,200 acre feet extra from KCWA in years when the State Water Project exceeds 50% of allocations to develop a dry-year reserve program.
- KCWA will offer Western Hills an option to increase its contracted amount by up to 1,000 acre feet per year with payment of an annual, non-refundable $50,000 fee.
- KCWA will erase $14 million in debt it says Western Hills owed for lack of payment on water delivered since 2019.
- KCWA will take ownership of 4,798 acre feet of water Western Hills has banked in Kern County.
The letter of intent, provided to SJV Water Monday, was signed May 28, just days before the agency said it would cut off Western Hills. The water entities are still working out a formal contract.
“It’s a very fair deal and I’m pleased,” Mark Kovich, President of Western Hills, told SJV Water.
The new, draft deal caps more than a year of back and forth between the entities over Western Hills’ skipped water payments.
How a Kern County water agency ended up supplying a housing development 200 miles to the north is a complex, somewhat convoluted, deal going back 28 years.
When the Diablo Grande development was first envisioned as a 5,500 home, multi-golf course luxury development in 1998, Western Hills bought the rights to 8,000 acre feet of state water from the Berrenda Mesa Water District for $8 million.
Developers expected to take that water off the California Aqueduct, which runs at the foot of the housing project. But the Department of Water Resources nixed the deal, not wanting to add a new contractor to the system.
KCWA, already a State Water Project contractor, stepped in.
It took over the Berrenda Mesa contract for 8,000 acre feet and agreed to sell Western Hills its banked lower Kern River water “by exchange.” In reality, Western Hills took water from the aqueduct and KCWA debited a like amount of river water held in its Pioneer groundwater bank.
As part of its agreement, Western Hills reimbursed KCWA for annual state transportation and operations/maintenance costs associated with water delivered through that exchange.
But Western Hills never took its full allotment.
The 2008 housing market crash and several other factors stunted Diablo Grande’s growth to just 600 homes and no golf courses. With so few paying customers, the Western Hills Water District couldn’t keep up with the transportation and operations/maintenance costs of the state water so stopped paying KCWA back in 2019, amassing the $14 million debt.
Diablo Grande residents voted to boost their own water rates to $600 a month in an effort to make headway on the debt, but eventually KCWA said it would have to cut off the water by May 31.
This deal heads off that dire consequence, but Kovich said water rates will likely have to stay around $400 a month to cover the district’s expenses of about $200,000 a month.
