Approve a Memorandum of Understanding with Reclamation District 108 and Yolo Subbasin Groundwater Agency regarding the management of Fair Ranch; and adopt a CEQA Notice of Exemption on various grounds, including section 15061(b)(3) of the CEQA Guidelines. (No general fund impact) (Pogledich)

Fair Ranch is an approximately 7,500-acre property located slightly north and west of Knights Landing. It is currently owned by Renewable Resources Group Garden Properties, LLC (RRG). Various water rights are associated with the property, including a Settlement Contract with the U.S. Bureau of Reclamation for 29,800 acre-feet annually, subject to certain conditions.

The California Department of Water Resources (DWR) has proposed a series of agreements with RRG under which DWR would pay RRG $180 million for the right to secure from the Fair Ranch a minimum of 5,000 acre-feet, and up to 16,000 acre-feet, annually of surface water for instream flow purposes, drawn from the property's Bureau Settlement Contract supply. On February 10, 2026, DWR filed a Notice of Exemption under the California Environmental Quality Act (CEQA) covering the proposed transaction. In separate lawsuits filed in mid-March, the County and Yolo Subbasin Groundwater Agency (YSGA) challenged DWR's CEQA determination and raised concerns that, among other things, diverting Fair Ranch's surface water to instream uses would create long-term pressure to substitute groundwater pumping for surface water irrigation on the property—with corresponding impacts on the sustainability of the groundwater subbasin in the vicinity of Fair Ranch.

Shortly after the litigation was filed, DWR revised the transaction to convey the Fair Ranch to RD 108 for management and operation after the closing. RRG and DWR are now coordinating with RD 108 to finalize related agreements. As a condition of finalizing those agreements, DWR required RRG to resolve and settle any litigation related to the transaction. RRG, RD 108, YSGA and the County have since worked to achieve a settlement that addresses the key concerns of the County and YSGA while allowing the transaction to proceed with RD 108 as the long-term owner and manager of the Fair Ranch.

The settlement includes two elements: (1) an MOU between the County, YSGA, and RD 108 (see Attachment A) regarding property management and related matters; and (2) a separate settlement agreement (to be considered in closed session) between the County, YSGA, and RRG that provides for payment of the County's attorneys' fees and dismissal of the litigation. The MOU sets out RD 108's operational commitments to the County and YSGA following its acquisition of the Fair Ranch. Key provisions include:

Altogether, the MOU does much to protect the interests of the County and YSGA and sets the stage for a long-term collaboration with RD 108 on matters of shared local interest. YSGA's Board of Directors approved the MOU unanimously (with two recusals) on May 18, 2026. DWR will provide a letter affirming that the MOU is not inconsistent with its rights under the various transaction documents.

The recommended actions include adoption of a Notice of Exemption pursuant to CEQA 15061(b)(3), which applies where it can be seen with certainty that there is no possibility an action may have a significant effect on the environment." Approval of the MOU fits within this standard. The MOU expressly says that CEQA review will occur in the future, as projects to implement the MOU are formulated in meaningful detail, and that execution of the MOU does not commit the County (or the other parties) to the approval or implementation of any specific project. By and large, the MOU is directed at preserving existing conditions and land management practices, in addition to prescribing actions to protect environmental resources as RD 108 strives to fulfill its obligations to DWR over time. The Notice of Exemption also relies on grounds cited by RD 108 and YSGA in their CEQA NOE documents: Public Resources Code section 21080.28(a) (acquisition of an interest in land by a public agency); CEQA Guidelines section 15325(c) (transfers of ownership in land to preserve existing conditions); and CEQA Guidelines section 15301 (existing facilities).

Finally, before providing the County's signature on the MOU and settlement agreement, this Office will confirm that the final transaction documents to be signed between RRG and DWR do not include any substantive changes (from the early March versions previously reviewed) that might support further consideration of the MOU and settlement agreement. This Office anticipates YSGA's counsel will perform the same review on behalf of YSGA.