Arrested development: How SLO County's water worries stalled one housing development for more than 20 years 

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The land to the northeast of Oak Park Boulevard is a picture-perfect representation of the pastoral beauty of rural SLO County. The tract of land, wedged between Oak Park Road and James Way, is rolling hills covered in drought-parched yellow grass and clusters of oak trees that stand out against the cloudless summer sky.

None of it should be there.

The grass should be mostly paved over, replaced by winding streets and sidewalks, the oak trees excommunicated to make room for residential homes interspersed with small parks. The land, part of unincorporated SLO County, should instead belong to the city of Pismo Beach.

That was the vision for the Los Robles Del Mar housing development project. Hatched more than 20 years ago, that vision remains nothing more than a mirage, never coming closer to reality than a few black and white schematics buried in long-forgotten documents. After years of hearings, meetings, and lawsuits, most would consider the project dead, in part due to concerns over its potential water use. But with a lawsuit filed on Aug. 10, the developers behind the project are still pushing to get it built and turn the mirage into a concrete reality. 

The first try

Plans to develop the 182-acre parcel of land that’s supposed to be home to the Los Robles Del Mar project have been in the works since as early as 1992, when it was identified in the city of Pismo Beach’s general plan as a site for “residential dwellings and a private school.” SLO County’s Local Agency Formation Commission (LAFCO) placed the land, which borders both Pismo and Arroyo Grande, in Pismo’s sphere of influence in 1987. The commission is in charge of approving annexations of any unincorporated land into SLO County cities.

In 2001, Simi Valley developer Larry Persons, president of Pacific Harbor Homes, along with development partners—collectively referred to in court fillings simply as LRDM—submitted a site-specific plan for the development. The plan called for 252 single-family residences, 60 senior housing units, and 75 acres of public and private space. In 2004, the Pismo Beach City Council approved plans for the project, and adopted a resolution requesting that LAFCO consider annexing the land.

Annexation was a critical factor in moving the project forward. The Los Robles Del Mar homes required city utilities, said David Church, LAFCO’s executive officer. 

“The developer prepared a specific plan with the city, and that plan called for urban services to be provided, like sewer and water,” he said.

Church said it was LAFCO’s job to make sure Pismo could supply such services to the newly annexed area. In the end, it was concerns over the development’s impact on local water supplies that led to Los Robles Del Mar’s first big defeat. Commission members voted to deny annexation in January of 2008 at the recommendation of LAFCO staff, largely based on concerns over the city’s ability to provide an adequate and sustainable supply of water. According to the LAFCO staff report, Pismo said that it would not be able to provide that water from its existing supplies and would need to use on-site wells to tap into nearby underground aquifers to get water to Los Robles Del Mar. It was a sticking point for commission staff, which stated that the development would be pumping from an aquifer already used by the neighboring city of Arroyo Grande and property owners of an estimated 776 rural parcels in the area. 

“The cumulative impacts of all planned and proposed pumping would exceed the safe yield of the aquifer,” the report stated. “There is insufficient water to meet existing and anticipated future water demand.” 

The $3.6 million deal

In the wake of the blow against Los Robles Del Mar, LRDM filed a lawsuit against the city of Pismo Beach, claiming that it misrepresented its ability to provide water for the development, thus leading to the annexation denial. The lawsuit, filed in SLO County Superior Court, ended in 2011 with a stipulated judgment that required Pismo to back Los Robles Del Mar’s annexation for a second time and required the developers to obtain a new source of water to offset the project’s anticipated demands.

To fulfill the requirement, LRDM needed to purchase water from the State Water Project (SWP), California’s largest water supply and delivery system. The project stores water and distributes it to urban and agricultural suppliers in Southern California, Northern California, the San Francisco Bay Area, the San Joaquin Valley, and the Central Coast. But buying state water isn’t as simple as placing an order with SWP. The project doesn’t sell directly to developers.

“It’s more complicated than that,” said Ben Fine, who has been Pismo Beach’s public works director since 2012. “If you want to buy, you have to find a seller.”

And back in 2011, Pismo Beach had a seller. According to public documents, the city sold the rights to 140 acre-feet of state water to a company called Pismo-98 LLC in 2005. The company and its manager and president, Brad Wilde, paid a $280,000 deposit on the water and were required to make regular payments to the city for the water rights. But by September of 2010, Wilde hadn’t made any payments in more than a year and a half, according to letters sent by then-city manager Kevin M. Rice. The city had to make payments on Wilde’s behalf, first from the $280,000 deposit, then from its own coffers. By September of 2010, that money was gone, and Wilde owed the city $205,985.

“This is an important matter,” Rice wrote to Wilde in a Sept. 7, 2010, letter. “If the city does not receive the money due, I will recommend to the City Council that it consider legal action to obtain unrestricted rights for the city to the 140 acre-feet of water.”

As part of the SLO Court’s stipulated judgement, LRDM bought some of Wilde’s state water, and it’s that very water that’s part of the developer’s latest lawsuit against the city.

According to LRDM’s most recent lawsuit against the Pismo Beach—filed Aug. 10, 2015—the developers spent more than $3.6 million to purchase the rights to 100 acre feet of Wilde’s state water. Under the agreement, LRDM would keep the water and pay annual “carrying costs” on it until the land was annexed. It would then transfer the water rights to Pismo, which would use it to offset the project’s anticipated water demands.

The lawsuit harshly criticized the deal, claiming that LRDM paid far more for Wilde’s water rights than if it had gone elsewhere because the city wanted to bring Wilde’s delinquent account current. 

“We had to pay an exorbitant amount of money, for the water, plus the money that [Wilde] failed to pay,” said Michael Tidus, a lawyer representing Simi Valley developer Persons and LRDM in the current lawsuit.

But that lawsuit was years away when the state-water-buying deal was struck, and in 2011, the costly water purchase kept the Los Robles Del Mar development alive. Perhaps the cost would be worth it, if the developers would waylay LAFCO’s concerns about water use in a second bid at annexation. 

Annexation redux

The annexation of the Los Robles Del Mar development site went before the commission for the second time in March 2012. Despite the purchase of the state water rights, the proceedings must have seemed like bad deja vu when LAFCO again denied the application. In a letter issued in April of that year, the commission again pointed to the impact of the development on water usage as a driving factor in the decision. With concerns about water availability and drought rising, Church said purchase of the state water just wasn’t enough to waylay concerns about Los Robles Del Mar.

“It used to be that buying state water could be used to justify a project, but the state water source has become less reliable,” Church said. “As it becomes a less reliable, our commission has scrutinized that source more. They look at if that water supply is sustainable and is it adequate, and our commission is very strong about looking at that.”

LRDM’s second go at getting the land annexed and the development off the ground was also met with a surge of backlash from residents in Pismo and Arroyo Grande. More than 80 pages of letters to LAFCO opposing the annexation and development were among the hundreds of pages of documentation. While criticisms ranged from the project’s impact on traffic to questions about the need for more housing in Pismo Beach, concerns over its impact on water resources appeared as a repeated and consistent theme.

“My reason [for opposing the annexation] is simply that I am very worried that there isn’t enough water,” wrote Pismo resident Jeanne Aurebach in a short letter prior to the annexation hearing. “I’m concerned the city is building too fast for reasons that are unknown and then we will all suffer for it when there isn’t enough water to go around.”

Sheila Blake, who opposed the development and would later be elected to the Pismo Beach City Council in 2014, echoed a similar sentiment in her letter.

“Why can’t the developers admit that there is no demand for housing, now or in the foreseeable future?” Blake wrote, ending her list of reasons to oppose the project with: “And last but not least ... water.”

LRDM also believes that the city itself was less enthusiastic to support the annexation the second time around. The August 2015 lawsuit charges that Pismo didn’t hold up its end of the bargain, calling its efforts in the 2012 annexation proceedings as “half-hearted.” Attorney Tidus said not only did the failed annexation leave LRDM out $3.6 million, but also claimed that the company continues to pay about $110,000 each year in ongoing carrying costs for water to supply a housing development that still hasn’t been built. 

  “We wanted to build our project. [The city] said they wanted the project. Now all of sudden, they are taking the position they don’t want it any more,” Tidus said. “The only reason we can come to is that they wanted the water without paying for it.” 

Pismo Beach City Attorney David Fleishman declined to comment on these claims and others in the current lawsuit. Pismo Mayor Shelly Higginbotham also declined to comment due to the ongoing litigation. As of Sept. 1, the city had not yet filed a response to the claims in court. 

Vox populi

Los Robles Del Mar wasn’t the only Pismo Beach-area development to stall after backlash from an organized and concerned public. The efforts of residents like Blake, and citizen groups like Save Price Canyon, stymied other planned large-scale developments such as the 961-acre Spanish Springs mega development, and the 231-acre project called Pismo Ranch. Both remain unbuilt after years of meetings, public hearings, protests, lawsuits, and even a public referendum. 

“At that point it was anything they could develop, they would,” Blake said. “But they got caught.”

Conflicts between developers and Pismo residents haven’t gone away. Today that fight is occurring not in the annexable wild lands outside of Pismo, but on the shores of the city’s beach.

A group of Pismo residents called Central Coast Environmental Protection is working to halt plans to build the BeachWalk Hotel, a proposed 128-room, 94,000-square-foot resort hotel on Pismo’s beachfront. The project was approved by the city’s planning commission, and then appealed by some residents and property owners. The Pismo Beach City Council denied those appeals on a 4-1 vote on June. The decision is currently pending an appeal hearing with the California Costal Commission, and the environmental protection group filed a petition in SLO County Superior Court to intervene in the project. Unsurprisingly, one of the group’s major concerns is the proposed hotel’s impact on the city’s water supply. According to data presented to the city, the hotel would use about 17 acre-feet, roughly 5.5 million gallons, of water each year.

“Our current focus is on the rapid growth in Pismo Beach in the face of an historic drought, and specifically the environmental impacts of the BeachWalk Hotel development,” Ted Case, the group’s president, told New Times in a June 2015 email. 

For its part, Pismo is still figuring out exactly how to get developers to mitigate the impact of their project’s water use. The current strategy is getting builders to offset water use; in theory, canceling out the project’s impact on water supplies. According to Pismo Public Works Director Fine, that would mean, in addition to measures like installing waterless urinals and other water-saving mechanisms, developers of large-scale projects would also need to spend or invest in water-saving efforts in other areas.

“That could be something like retrofitting toilets at a school,” he said.

When it comes to allowing developers to buy the rights to state water, similar to what LMDR did, Fine said the city was “still exploring” the possibility. City Councilman Erik Howell indicated that mitigation and offsets might not be enough and has voiced support for asking developers to help Pismo build a water recycling facility at the city’s wastewater plant. 

“I think reliable recycling of the wastewater is the best for our long-term needs,” Howell, who was elected after the two LRDM annexations, said. “I’d prefer them to invest in that.”

While the city says it’s looking to hold developers accountable for the water their projects use, Marcia Guthrie says she isn’t going to be any less vigilant about the issue. A member of Save Price Canyon, who vocally opposed the massive developments proposed in 2012 and 2013, said that water offsets wouldn’t be enough to provide for continuing development in the city. 

And while the drought worsens, the number of building permits the city has issued is rising, according to Guthrie. She provided data from city reports that showed the number of building permits issued by Pismo Beach for new single family homes, multi-family homes, and commercial buildings/hotels rose from 12 in fiscal year 2012-2013 to 126 in 2014-2015.

“I’m befuddled when they keep saying ‘build, build, build,’” she said. “It’s basically saying, ‘Let’s cross our fingers.’” 

The development that wouldn’t die

Despite two failed attempts at annexation, a slew of lawsuits against the city and LAFCO, more severe drought conditions, and pushback from local residents, Persons and his partners still appear to be pushing to get Los Robles Del Mar off the ground. The August 2015 lawsuit asks the court to order Pismo Beach to back a third application for annexation from LAFCO.

The news surprised Guthrie, who said a new annexation bid would still bring up many of the same problems she raised about the development in the past.

“The issues that I had with it are still there,” she said. “Nothing has changed.”

City Councilman Howell was likewise surprised to hear of the new lawsuit, which came the same week a SLO County Judge ruled LRDM’s 2004 development agreement and a 2011 amended agreement null and void.

“It’s been years since I’ve heard anyone express support for [Los Robles Del Mar],” he said.

But still there’s a slim chance the chips could fall in favor of the development, all hinging on a series of big ifs. If the court were to rule in favor of LRDM, and force the city to apply for a third annexation, LAFCO Director David Church said the commission could consider the application and even possibly approve it if the developer was able to finally address and find a satisfactory solution to the commission’s previous concerns, including the impact of water supplies.

“They could come in with a new plan for water services from the city,” he said. “They could still develop a plan that was different and not reliant on state water.”

And while the newest battle in court will keep Los Robles Del Mar alive in theory and in spirit, the land off Oak Park Boulevard remains scenic and untouched.

Los Robles Del Mar: A timeline

1987: LAFCo designates land off Oak Park Blvd. for possible annexation into Pismo Beach.

1992: The land is marked in Pismo Beach's general plan for "residential dwellings and a private school".

2001: Developer LRDM proposes a site-specific plan for Los Robles Del Mar project.

Feb. 2004: Pismo Beach City Council approves the project.

Nov. 2004: Pismo Beach City Council approves pre-annexation of Los Robles Del Mar land.

Jan. 2008: LAFCo denies annexation.

May 2008: LRDM sues the City of Pismo Beach for breach of duty.

June 2011: Pismo and LRDM settle. Stipulated judgment requires LRDM to purchase state water and Pismo to back a second run at annexation.

April 2011: LRDM purchases rights to 100 acre-feet of state water for $3.6 million.

Sept. 2011: Pismo beach submits new application for annexation to LAFCo.

March 2012: LAFCo rejects LRDM's bid for annexation a second time. LRDM sues LAFCo.

June 2013: A SLO County judge rules LAFCo's denial of annexation was lawful.

Aug. 2015: A SLO judge rules that LRDM's development agreement with the City of Pismo Beach is null and void. LRDM files a new lawsuit against the city. Los Robles Del Mar remains un-built.

Staff Writer Chris McGuinness can be reached at [email protected], or on Twitter at @CWMcGuinness