Diablo Grande water provider challenges supplier's stance on $14M debt: "We didn't create this."

A long-running dispute over water deliveries to the Diablo Grande community in western Stanislaus County escalated again this month, as the Kern County Water Agency said negotiations with the community's water provider have stalled over a $14 million debt.

In a recent letter, the agency said it had proposed "certain financial adjustments in an attempt to significantly reduce Western Hills' outstanding $14M financial obligation," and offered to modify water purchase volumes to better align with the community's demand.

The agency said Western Hills Water District declined those proposals and instead requested payment terms "substantially below" the agency's actual cost of delivering water.

Western Hills board president Mark Kovich disputed that characterization, saying negotiations remain ongoing and that the district was "very surprised" and "disappointed" by the public release.

"We're fighting very hard," Kovich said in an interview.

Kern County Water Agency has warned it could shut off water deliveries after May 31 if an agreement is not reached.

The debt traces back to a contract signed roughly 25 years ago, when Diablo Grande was planned as a large residential development with thousands of homes. Only about 600 homes were ultimately built, but Western Hills remains under contract to purchase up to 8,000 acre-feet of water annually.

"We're in contract with them to purchase 8,000 acre feet per year, even though we don't use it," Kovich said.

The agency says Western Hills is more than six years behind on payments and has received water "at no cost" during that period, with catch-up payments beginning only recently.

Kovich said the current board inherited the financial situation after taking office in 2022, noting that payments stopped in 2019 under prior leadership.

"We didn't create this. The community as a whole is now suffering because of this, and we have an obligation to fight as hard as we can for the community," he said.

Western Hills has raised residential water rates to more than $600 per month for some homeowners in an effort to resume payments while negotiations continue.

Kovich said the agency's current proposal would not lower rates for residents and that the district also faces other financial pressures, including infrastructure repairs and operational costs.

"Even if we theoretically got free water, my operational costs are still high enough where the water rate is not going to be where it used to be," he said.

Both sides say discussions are ongoing.

Western Hills plans to host a public meeting for residents this week to provide an update on negotiations.