San Ysidro Ranch Racks Up Penalties for High Water Use

During one of the worst droughts on record, the San Ysidro Ranch in the foothills of Montecito, listed by Forbes as the No. 1 hotel in America, has paid more than $250,000 in penalties to the Montecito Water District for using too much water, exceeding its allocation in 19 of the past 24 months, records show.

Now the 500-acre luxury hotel at 900 San Ysidro Lane faces an additional $57,000 penalty charge for December, one of the largest assessed by the water district in the drought. The hotel manager is appealing the charge, alleging that an underground leak went undiscovered until late in the month because it pooled on a neighboring property.

The San Ysidro Ranch, a favorite retreat of the rich and famous with its 40 classy bungalows, extensive gardens, and views of mountains and ocean, is owned by Ty Warner, a Montecito resident who made his fortune on Beanie Babies, a stuffed animals fad in the 1990s.

Beginning in March 2014, according to a district memorandum, the San Ysidro Ranch was assigned an allocation of more than 12 million gallons of water per year, or roughly what 170 Montecitans would use. On average, records show, the hotel has exceeded its allocation by 20 percent each year for the past two years, resulting in heavy penalties. “It is sometimes a business decision by the customer,” said water district board director Doug Morgan. “It could be cheaper for them than trucking water in.”

Under district ordinances, the general manager can install a flow restrictor on the service lines of any property that exceeds its monthly allocation by more than 25 percent, as the San Ysidro Ranch has done nine times during the past two years. The district also can reduce a customer’s yearly allocation by the amount of overuse during the previous year. But Morgan said the board has never enforced these sanctions. “We’re a small, friendly district,” he said.

San Ysidro Ranch representatives did not respond to a reporter’s emails seeking comment. The hotel’s water bill for December, not counting the penalty for overuse, was $23,700, records show. Hotel guests pay from $845 per night for a “romantic garden hideaway” (475 square feet with a king bed and fireplace) to $6,000 per night for the Warner Cottage (2,500 square feet with two master bedrooms and two bathrooms). On its website, the hotel highlights its outdoor hot tubs and showers, swimming pool, and organic gardens.

In a January 21 letter of appeal to the district, Alejandro Vazquez, the hotel controller, said an underground utility corridor had conveyed leaking water off the property. The leak was not discovered until late December; it took additional time to identify whether the source was a district pipeline or a hotel pipeline; the hotel lost money because some of its cottages could not be occupied during excavations, and the repairs would cost at least $12,000, Vazquez said.

In response, district staff recommended forgiveness of a portion of the $57,000 penalty because the leak was difficult to locate and the work extended into January. But, as the staff memorandum noted, “Account is frequently over allocation, making it difficult to judge how much of over-allocation usage is attributable to leak and how much to overuse.”

On March 24, the district Appeals Committee, formed by board members Jan Abel and Sam Frye, held a hearing on the San Ysidro Ranch. Through an attorney for the district, they said they had not yet made a recommendation to the full board. A board hearing on the appeal is expected to be held in May.

The San Ysidro Ranch appeal is one of 400 that the district has fielded from customers since it established a system of monthly allocations and penalties for water overuse two years ago. Since then, the district’s 13,500 residents in Montecito, Summerland, and Toro Canyon have cut demand by more than 40 percent overall, most months of the year.

To date, records show, the district has collected $7.4 million in penalties, mostly from the owners of single-family homes. The penalties, in turn, have paid the $4.1 million cost of supplemental California aqueduct water imported by the district to make ends meet during the drought. The district has little groundwater to draw from, and Jameson Lake and Lake Cachuma, its main sources in wetter years, are approaching record lows.

This Tuesday, the district board is expected to seal a deal with the Antelope Valley-East Kern Water Agency for additional supplemental water, enough to supply Montecito for more than a year. The cost will be $1.2 million. “If it comes our way, we’ll have enough water to see us through 2018,” Morgan said.