As a result of a convergence of 2007 events, water supply is acritical issue for development in the foreseeable future. NAIOPSoCal and the California Business Properties Association (CBPA) areconcerned about how water agencies will respond to thesecircumstances, and are working with state and local policymakers toaddress the issue. However, signs suggest that, absent a series ofwet winters or enactment of a major water bond that includesincreased off-stream storage capacity, we should prepare forrestrictions and even moratoria on new water service connections.To avoid these consequences, the development industry needs to getinvolved with the policies and the actions taken by local water andcommunity services districts (CSDs).

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Most of us know we received little snow or rain last winter.This spring, the Sierra Nevada snow pack was half the normalamount. A federal court ruled on Aug. 31 that water exports fromthe Sacramento-San Joaquin Delta must be cut to protect anendangered fish—the Delta Smelt. The Metropolitan Water District(MWD) estimates it may lose 30% of its Northern California suppliesas a result.

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In February, the California Supreme Court struck down aresidential/commercial development project under the CaliforniaEnvironmental Quality Act (CEQA), stating that the project'sEnvironmental Impact Report (EIR) did not address water supplyissues. In so doing, the Court created more rigorous standards forwater supply analyses in EIRs.

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While a special water session was called in Sacramento thisfall, agreement expanding storage and delivery systems remainselusive, and appears likely to be the subject of competing ballotmeasures next June.

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Rex Hime, president and CEO of the CBPA, has been a leadnegotiator with the governor and legislative leaders as part of abusiness coalition working toward a water bond: "We were extremelyclose to a deal, but interests on the other side were unyieldingabout off-stream storage. We compromised as much as we could, butcannot simply give up on that issue. California must provide acomprehensive fix that increases storage, improves conveyance andpromotes projects that enhance environment. Unfortunately, we arefaced with a situation where voters may have to choose between twoseparate water bonds, which decreases the likelihood that anythingwill be passed."

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Overlying all of these factors is the global warming frenzy. Thestate has yet to determine how to implement AB32, and it is unclearwhat measures will be enacted. Nevertheless, the attorney generaland others have brought lawsuits under CEQA, challenging projectsfor allegedly failing to address global warming. Of great concernto NAIOP SoCal and CBPA are those cases that have not yet yieldedany guidance on whether and how global warming can be addressedthrough this process. We can expect global warming concerns will becited by no-growth activists to justify water-use restrictions anddeny future water projects.

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Water districts may respond by denying further water connectionsand entitlements. A water district (including a CSD that supplieswater) may declare a "water shortage emergency condition" if itanticipates an imbalance in supply and demand. Once this occurs, itcan impose restrictions and moratoria denying new waterconnections. With some exceptions, property owners have limitedlegal recourse, because the courts have ruled that prospectivewater users do not possess any right to water service or the sametreatment as established users.

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However, NAIOP SoCal and CBPA indicate things can be done. Waterdistricts and CSDs must hold public hearings and accept testimonyand evidence from the public before declaring a water shortageemergency and implementing restrictions or moratoria on newconnections. The districts' determinations are reviewable in court.A district denying service because of limited water supply has acontinuing obligation to exert every reasonable effort to augmentits available water supply in order to meet increasing demands.

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The prospect that water concerns will be used to delay or haltdevelopment is a real concern for the near future. You can make adifference by being engaged with NAIOP SoCal and CBPA to betterunderstand water policy.

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The views expressed in this article are those of the author andnot Real Estate Media or any of its publications.

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