Lawsuits, Annexation, and Builder’s Remedy: What’s Holding Up Housing in Santa Barbara’s North County?

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This article was underwritten in part by the Mickey Flacks Journalism Fund for Social Justice, a proud, innovative supporter of local news. To make a contribution go to sbcan.org/journalism_fund.

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Santa Barbara’s North County is growing, and the county’s largest unincorporated town, Orcutt, along with it. For nearly a half century, the community has been developing into a primarily residential area. And for decades, the property known as Richards Ranch, located in Orcutt with one side bordering Santa Maria, has remained largely undeveloped — a field with eucalyptus trees. 

Now, a developer aims to build 386 apartments, 100 townhomes, and about 100,000 square feet of commercial space on that land. 

“We want to build a walkable, mixed-use neighborhood with workforce housing and daily services,” Michael Stoltey, the property owner and project developer, told the Independent. 

But it’s not a straightforward process. Orcutt lacks water for commercial development. An application to annex the land into Santa Maria, an alternative builder’s remedy project, and a lawsuit alleging that the county has held up the builder’s remedy application process have been thrown into the mix. 

When it comes to housing projects with affordable units, lawsuits have the potential to get in the way of millions of dollars of grant funding for counties, like Santa Barbara, seeking a prohousing designation. 

Here’s a breakdown of what’s happening and how it could affect the county at-large. 

No Water for Commercial 

For at least 28 years, Richards Ranch has been zoned for commercial development. Walmart purchased it from the longtime Orcutt oil man Bud Richards and his family in 2006, with an eye on putting a superstore there. 

But water policies dating back to 1997 established that agriculture in Orcutt, generally, had rights to its groundwater. Developers could pay for supplemental water for urban development. The nearby city of Santa Maria, which purchases water from the State as part of the Golden State Water Project, allows developers to buy water from them for residential projects in Orcutt. But commercial properties are not explicitly part of that agreement. 

For Walmart, that meant no development. The corporation sold the land to Stoltey in 2021. 

Annexation for Water 

The Richards Ranch project faces the same problems Walmart did when it comes to commercial development — no available water. If the project were in Santa Maria, the city would provide water to its commercial development. 

Annexation of one site into a municipality requires a ruling by the county’s Local Agency Formation Commission, or LAFCO. In the May 8 LAFCO meeting, Stoltey said that the development team had worked for years with the county, troubleshooting how to get water to the development without annexing the site into Santa Maria, but that none were viable for the project.

The chance to build commercial there is important, according to Stoltey. At the meeting, he said that the Orcutt community needed more services, including grocery stores, which the development, if annexed, plans to include. 

Certain grocers would likely not be permitted to operate on the property; Walmart has a non-compete deed on it. Stoltey said the deed would allow a specialty grocer with Walmart’s approval.

The property itself is part of Santa Maria’s sphere of influence — that’s the region determined by LAFCO to be “probable, future physical boundary or service area of the city,” according to Santa Maria’s city documents. In November, Santa Maria’s City Council adopted a resolution to move forward with the annexation process.

Santa Barbara County does not support annexing the property into Santa Maria. At the May 8 LAFCO meeting, County Planning Director Lisa Plowman said that the site would create a peninsula, with unincorporated county on three sides. She added that the annexation would cause inefficiencies when it comes to sewage processing, traffic and roadways, and the North County Lighting District. 

Plowman also raised the question of services provided to the area.

“[This site is] essentially served by the county in every way with the exception of water,” Plowman said.

Plowman said that water could be provided to the project through an agreement between the county and the city. Santa Maria did not respond to a request for comment on this claim in time for this story. 

At the May 8 meeting, several members of the public expressed support for the development project but some raised objections to the annexation component. 

“I don’t understand, as so many others have said, why the two halves can’t meet in the middle and get us the water we need for this project,” one commenter said.

The Builder’s Remedy Backup 

In 2023, Stoltey filed a preliminary application for a housing project under builder’s remedy. This project is bigger than the annexation proposal: 750 units with 20 percent of the units listed as affordable. It would also include self-storage, which is low-water usage. 

Stoltey said the development team prefers the smaller annexation project, and that the builder’s remedy project is a fallback project if LAFCO denies the annexation. 

The Lawsuits — and What that Means for the County 

The development’s legal team alleges in a lawsuit that the county has violated state law in a “bad faith” when evaluating this builder’s remedy project proposal, with nonprofit Californians for Homeownership filing a similar lawsuit. The county has denied these allegations. 

This litigation is occurring as the county is pursuing a pro-housing designation from the state. This spring, Santa Barbara County’s Board of Supervisors unanimously approved the county’s plan to apply for the designation, which increases funding opportunities for housing and infrastructure projects, opening the door to millions of dollars for them. 

The development’s legal team stated in a May 12 letter to the county that the county is not in compliance with applicable state housing laws and that the Department of Housing and Community Development (HCD) must reject the pro-housing application until the county stops all violations. 

The HCD did submit a letter to the county on April 7, outlining that the Richards Ranch project was allowed to maintain its status as a builder’s remedy project, despite the county’s initial ruling that the application was incomplete and that Stoltey had forfeited the project’s builder’s remedy status. The day after the letter was received, the county’s Board of Supervisors upheld developer Stoltey’s appeal, determining the application complete. 

In a comment to the Independent, HCD said that ongoing litigation would not necessarily impact the application, but it could if the HCD finds merit in it. 

Currently, the department said in a statement to the Independent, they are not aware of any relevant court decisions, nor does the county have any outstanding notices of violations from the department. A case management conference for the lawsuit is scheduled for September 17. 

The Richards Ranch lawsuit also alleges that County Supervisor Bob Nelson has acted antagonistically toward the project, taking steps to oppose paths for its development and pressuring county staff to do the same.

Nelson represents both Orcutt and parts of Santa Maria and is on the LAFCO board. He said the allegations are untrue. 

“I have never pressured staff to take a particular stance on this project, nor have I acted in bad faith. What I have done is raise legitimate concerns about timing, planning, and impacts — issues that should matter to every policymaker entrusted with protecting the public interest,” he wrote to the Independent. 

Nelson said that he has not taken a formal position on the annexation, as his role is not to pre-judge projects.

The county said it did not have information regarding possible impacts to the pro-housing designation application. 

What’s Next 

As part of the annexation process, the City of Santa Maria and Santa Barbara County enter tax negotiations. At the August 7 LAFCO meeting, Mike Prater, LAFCO’s executive officer, said that Santa Maria had requested a mediator: the next step if the two sides can’t agree on their own.  

For Stoltey, this delay is another roadblock. 

“This is an infill site with existing infrastructure and broad public support, yet it’s being blocked in the middle of a housing crisis. It’s a case study in how California ends up in these situations — and why statewide and national housing advocates are now weighing in,” he said. 

In the meantime, Richards Ranch will remain without water and undeveloped.