Water company might cut off Diablo Grande

Deal in the works to spare development

By KEN CARLSON
kcarlson@modbee.com

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DIABLO GRANDE -- Diablo Grande's financial troubles continued this week when the company that runs the community's water treatment plant threatened to terminate the contract because bills weren't paid.

Veolia Water North Amer-ica charged in a letter Monday that the Western Hills Water District owes the company money and said it would cancel the agreement March 1 if the issue wasn't resolved.

Western Hills supplies water to the luxury resort, and the district essentially is managed by Diablo Grande officials. Veolia's letter is a concern to county and state health officials who want to ensure that residents con- tinue to have safe drinking water.

Diablo Grande's money woes escalate

If Veolia were to pull out next month, Western Hills would have to quickly make arrangements for someone else to operate the treatment system.

Charles Voltz, president of Veolia's western division, said Wednesday the company appeared to be closer to resolving the matter with Western Hills.

"We were advised this week that things were pretty close and it should be buttoned up by Friday," he said.

Voltz said he didn't know how much Western Hills owes the company, but said it was in the neighborhood of $3 million. Western Hills hasn't paid outstanding debt from construction of a 400,000-gallon-per-day filtration system that treats water drawn from the California Aqueduct, he said.

Veolia, which has provided the water treatment services since 2003, offered a revised agreement extending the period for Western Hills to pay the debt in installments. Voltz said he was informed that Diablo Grande's partners were to review the plan and decide whether to sign off on it.

Dwain Sanders, vice president of development for Diablo Grande, did not return several phone calls seeking comment. Veolia copied its letter to the state Department of Public Health, and The Bee obtained a copy of the letter.

The water issue was more aggravation for people who purchased homes at Diablo Grande, a 33,000-acre project in western Stanislaus County with plans for 2,300 homes, five golf courses, a hotel and conference center, winery, and commercial development. The resort is in the early stage of residential construction, with about 400 homes completed.

Diablo Grande closed its Ranch golf course in December and shut its other golf course, Legends, and the clubhouse last week, citing the slump in the housing market.

The project is in default on a $900,000 payment on a loan from Oak Valley Community Bank, and several mechanics' liens totaling $317,000 have been filed in recent months. The resort has been for sale for more than a year.

"We moved here because of the promises they made of a hotel, a spa, a shopping center, and none of this has panned out, and now we don't even have golf courses," said homeowner Kristina Ross-Ortiz. She said many residents don't know about the water treatment issue.

"The few of us who know are worried about it," said Christy Peterman, another homeowner.

State monitoring situation

While Diablo Grande received its land-use approvals from local government, Stanislaus County officials said the state has regulatory authority over the community water system.

Ken August, spokesman for the state Department of Public Health, said the department is closely monitoring the situation.

"We want to make sure that residents continue to get safe drinking water and that this issue is brought to resolution swiftly," he said.

Sonya Harrigfeld, county environmental resources director, said she talked with a state public health official who has been in contact with Western Hills.