Montecito Water District to Sell Nearly Half of Its State Water Allotment to Solomon Hills Housing Project

Montecito residents may soon be part of a South County–North County water story few saw coming. On September 29, the Montecito Water District's board voted to approve a nonbinding letter of intent to sell roughly 40 percent of the district's state water entitlement to Solstra Communities California — the developer behind Solomon Hills, a proposed 4,000-home community on 4,200 acres of rural land south of Orcutt, as the Santa Barbara Independent reported.

The deal, which won't be finalized until the project clears county approval — a process that could take years — would convert a supply Montecito hasn't drawn on since 2019 into cash, while helping fuel one of the largest housing proposals in Santa Barbara County history.

What Montecito Is Selling — and Why

At the September 29 meeting, district General Manager Nick Turner described the state water allotment as a burden rather than a lifeline: it costs the district about $5 million annually plus variable costs, and deliveries are unreliable. Because Montecito has diversified its water portfolio — including its water deal with the city of Santa Barbara and the city's desalination plant — the district hasn't needed the allotment in years.

"It's a costly supply we don't need," Turner said, according to the Independent.

But the plan drew pushback from some public commenters at the meeting. Questions raised included what happens if the desalination plant is damaged, how future growth in Montecito — especially under state laws encouraging denser housing — might strain supplies, and what the implications would be of selling the allotment's transmission lines along with the water itself.

Boardmembers nonetheless viewed the partial sale of an unused entitlement as a net positive for ratepayers, who have effectively been paying millions a year for water the district doesn't use.

What Solomon Hills Would Be

Solomon Hills is far more than a subdivision. The project description submitted to Santa Barbara County envisions a full new community: apartments, townhomes, and single-family homes, plus office and retail space, a school, a fire station, a fitness building and pool, and a wastewater reclamation facility. Of the 400 apartments, all would be marketed as affordable. Just under two-thirds of the land would remain parks or open space.

The water question is central to the project's fate. According to the project description, imported water — including State Water Project supplies and potentially water from the controversial Cadiz project, which would extract Mojave Desert groundwater and pipe it through a former oil pipeline — would serve as the main domestic supply. Recycled water would irrigate parks, landscaping, and commercial areas, and storage basins would hold excess recycled water during wet weather.

County planners have already flagged a significant hurdle: State Water Project deliveries vary year to year based on snowpack and reservoir levels, and the imported water Solomon Hills is counting on may not actually be available when the project is ready to be built. The stakes of that uncertainty are stark. Data presented by Turner at the September 29 meeting showed that in 2021 and 2022 — the district's driest years on record — Montecito received just 5 percent of its allotment, even while continuing to pay for the full entitlement.

An Oil Field Legacy

Beyond water supply, the land itself carries complications. For decades, portions of the project site hosted oil and natural gas extraction, and today the hills, canyons, and valleys are threaded with dirt roads, wells, pipelines, and production equipment.

A more-than-1,700-page attachment to the environmental assessment for the project's first phase focuses on hazardous materials and risks of upset, and documents multiple spills of crude oil and produced water — the salty, mineral-laden wastewater from oil and gas extraction. The report does not address groundwater contamination, noting that will require "comprehensive subsurface exploration."

Solstra says on the project website that it aims to give the land "a new purpose," with all oil-related infrastructure "carefully removed in compliance with local, state and federal requirements." But specifics on that cleanup process remain to be worked out as review proceeds.

A Long Road Ahead

The environmental review process began roughly eight months ago, in March, and the project remains in its earliest stages. Ben Humphrey, director of community development for Solomon Hills, emphasized that milestone was only a beginning.

"Kicking off the environmental review last March was an exciting milestone, but it was only the beginning of a thorough and deliberate process, not the end of one," Humphrey said.

The development team is currently working with county staff to complete the project application and supply information needed for the draft Environmental Impact Report. When that draft is released, the whole county will have the opportunity to weigh in — including Montecito residents whose district's water future is now tied to the outcome.

For Santa Barbara-area readers, the deal is a reminder of how intertwined the county's water systems have become: a wealthy South Coast district with surplus entitlement, a North County mega-development hungry for supply, and a statewide plumbing system whose reliability grows shakier in drought. Whether the sale closes — and on what terms — will depend on years of environmental review, county hearings, and, ultimately, whether the water promised on paper can be delivered in practice.