Water deadline for Stanislaus County resort extended 3 months. Tax sale issue looms
A potential date for shutting off water deliveries to Diablo Grande in western Stanislaus County has been extended to March 31 as officials express optimism about negotiations with Kern County.
The Western Hills Water District was facing a Dec. 31 shutoff date as it and the Kern County Water Agency considered proposals for a new water transfer agreement.
The Kern water agency board approved the three-month extension at a meeting in November. It provides Kern officials more time to respond to a counterproposal from Western Hills, according to communications cited by Western Hills.
The Kern County Water Agency, some 200 miles from Diablo Grande, had threatened to stop water deliveries June 30 if the financially troubled Western Hills district did not resume payments for an annual 8,000 acre-feet allocation.
Kern extended the deadline to Sept. 30 and later said it would continue deliveries through Dec. 31 if Western Hills came up with money to make monthly payments. Residents at the 600-home Diablo Grande resort have been charged about $700 a month for water service since July, which has provided the money for payments to Kern.
A previous developer at Diablo Grande stopped making payments to Kern for the annual water transfers in 2019. A more affordable agreement with the Kern agency, allowing purchases of smaller amounts of water, would allow Western Hills to lower the monthly residential rate.
In another development, the Western Hills board last week authorized a bankruptcy filing for the Diablo Grande Community Facilities District No. 1, due to inability to pay property taxes. The county Board of Supervisors recently postponed a decision on holding a February sale of tax-delinquent parcels. Western Hills doesn’t know whether the county on Dec. 9 will include the Diablo Grande parcels in the tax sale tentatively set for Feb. 23.
Western Hills’ public announcement Nov. 25 said the bankruptcy process provides legal tools for restructuring or eliminating debts that have burdened Diablo Grande for years.
A Chapter 9 bankruptcy filing would enable Western Hills to seek court-supervised restructuring of the community facilities district’s debt obligations, including $1.9 million in unpaid property taxes and $38 million in Mello-Roos bond debt. In addition, the Diablo Grande homeowners association has threatened to place liens on 63 custom lots in the facilities district for nonpayment of fees.
The Western Hills announcement Nov. 25 stressed that the proposed bankruptcy applies only to the community facilities district.
“It is entirely separate from (Western Hills’) daily operations and has no connection to our negotiations with the Kern County Water Agency or any other district financial obligations,” the announcement said. “This action is being taken solely to protect the Diablo Grande Community from the county Tax Collector, the HOA’s actions and to responsibly address the lingering debt owed to the bondholders.”
County Treasurer-Tax Collector Donna Riley could not be reached Friday.
Western Hills foreclosed on 91 of the parcels in 2023 for nonpayment of Mello-Roos assessments, but the district hasn’t been able to pay the annual tax bills. Those parcels included undeveloped land, portions of two former golf courses, the clubhouse and bare residential lots.
The Western Hills announcement said restructuring the debts would place Diablo Grande in a stronger position to attract a company that would continue with the resort’s development. Western Hills has said that a 2,200-home residential community could support a self-sustaining water system.
