State urges Stanislaus city to OK housing but also reduce groundwater pumping
AI-generated summary reviewed by our newsroom.
- State housing agency told Patterson to reverse denial of 719-home Keystone project.
- City cites groundwater limits and costly recharge basin plus state water mandates.
- State agency warned it may notify the Attorney General if Housing Act findings remain unmet.
A state agency is telling Patterson to reconsider an April 1 City Council decision that rejected the 719-home Keystone Ranch subdivision over water shortage concerns in western Stanislaus County.
The California Department of Housing and Community Development said in a Sept. 22 letter that the council decision was not consistent with the Housing Accountability Act, which aims to remove unreasonable delays for new housing in a state with a shortage.
The letter from HCD informed the city that it may notify the attorney general, the state’s top law enforcer, if it finds the city is in violation of state law. HCD asked the city for a response by Oct. 22.
City Hall is preparing a response to the state agency, saying Patterson made the required findings to deny the Keystone project. An official said the city wants to see the development in the northwest area of Patterson but has been under pressure from a different state agency, the Department of Water Resources, to reduce city use of groundwater and could not supply water for the Keystone homes.
“The problem we have is the state agencies don’t understand the interplay of all the state laws,” City Attorney Douglas White said. “We will suggest we need to have better collaboration.”
Evette Davis, a spokeswoman for Keystone, said it’s gratifying the state letter confirms Keystone’s position at the April council meeting — that the city didn’t have grounds to deny the subdivision.
“We are curious to see what the city of Patterson’s response is going to be,” Davis said.
Keystone has waged a public campaign to challenge the council’s April decision denying 719-home subdivision.
The city originally had a recommendation to approve the 95-acre Keystone project, which is part of the larger Zacharias Master Plan development area.
But Patterson is one of more than 20 entities in the Delta-Mendota groundwater subbasin, which is considered to be in critical overdraft. Those local entities are possibly facing state intervention under the California Sustainable Groundwater Management Act.
The local agencies in a 1,170-square-mile area in Stanislaus, Merced, Madera and Fresno counties developed a unified groundwater plan to appease state regulators. Under the plan, Patterson is expected to reduce current groundwater use by 10%. Going forward, new development in the city must be served by surface water.
The city has dealt with a 2023 lawsuit from the Patterson and West Stanislaus irrigation districts that challenged part of the environmental review on Patterson’s northwest development area, which concluded the development would not impact groundwater. The irrigation districts’ lawsuit charged the EIR’s conclusion was wrong.
White said it’s unreasonable to have expected the City Council to approve Keystone’s residential project until city water is available for the homes.
One of the key issues in April was a city condition that Keystone bear the entire cost for a groundwater recharge facility on Del Puerto Creek, estimated to cost almost $20 million. The recharge basin has been part of the city’s plan for water service. It will capture stormwater and put it in the ground; along with conservation that will help to stabilize groundwater levels.
Davis noted that Keystone is one of several developers in the Zacharias Master Plan area, and developers typically are expected to pay a fair share of infrastructure costs. She said the city’s requirement for Keystone to construct the recharge facility first, before building permits are issued, effectively imposed a five-year moratorium on the new housing.
Davis said a second issue is the council’s closed session held April 1. According to Davis, council members came out of the closed session, declared there was a water emergency and said the environmental impact studies no longer were valid. Davis suggested the city invented the water emergency to derail the Keystone project.
State claims Housing Crisis Act was violated
In the letter, HCD said the city failed to make required findings under the Housing Accountability Act. In addition, certain conditions imposed on Keystone’s project were not consistent with the state’s Housing Crisis Act, a 2019 law aiming to increase residential development and expedite permitting.
The HCD letter noted the $20 million recharge facility is intended to service the broader master planned development area, while Keystone’s project respresents about 14% of the planned housing.
White countered it’s common for cities to require the developer that goes first to pay for core infrastructure. That company is reimbursed when other developers bring their projects online, the attorney said.
White said he believes that providing more documentation on the April 1 council decision will satisfy HCD.
White said the City Council is holding firm to its position that developers pay the costs of new development. The city is working on efforts to secure surface water to reduce dependence on groundwater.
This story was originally published October 1, 2025 at 5:05 PM.
