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<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Tahoma","sans-serif"'>Funny
how it all comes back to Kern River water<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Tahoma","sans-serif"'>Bakersfield
Californian-8-22-10<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Tahoma","sans-serif"'>By
Lois Henry<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:12.0pt;font-family:"Arial","sans-serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'>I
read recently that some investors in a bankrupted real estate company called
LandSource Communities Development are suing for fraud.<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'>I
know, I know, doesn't mean much to you at first glance.<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'>But
in a funny "hmmm...," rather than a funny "ha ha," kind of way,
this all comes back to the Kern River.<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'>It
also serves as a cautionary tale of the bad things that can befall us all when
we let our precious water slip away.<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'>OK,
follow along.<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'>LandSource,
controlled by LNR Property Corp. and homebuilder Lennar Corp., had one big fat
asset, the 12,000-acre Newhall Ranch tract just north of Los Angeles on which
close to 21,000 homes are planned.<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'>Around
2006, a number of entities bought in to LandSource, including CalPERS,
California's largest public employee pension group, which jumped in to the tune
of nearly $1 billion.<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'>The
idea was they'd slap up a sprawling mega development, people would buy the
overpriced homes and everyone would walk away fat and happy.<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'>Why
they couldn't read the handwriting on the wall in 2006 is a mystery, but there
you have it.<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'>The
real estate market went bust, LandSource filed for bankruptcy in 2008 and
CalPERS lost every penny of that investment. CalPERS isn't part of the fraud
lawsuit, by the way.<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'>Now,
of course, CalPERS is leaning on municipalities to increase their annual
payments to the pension system to make up for losses incurred from both the
stock and real estate markets. (The Sacramento Bee reported CalPERS lost $11
billion in its real estate portfolio in the 12 months ending April 30. Wow.)<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'>So,
Bakersfield, already strapped for cash from lower sales taxes and state funding
cuts, is faced with higher pension payments to CalPERS even as it has to cut
employees and scrap much needed public services.<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'>But
it might not have happened, or at least not been so bad, if Jim Nickel hadn't
been able to sell 1,600 acre feet a year of Kern River water in a 30-plus-year
contract to Newhall Ranch developers.<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'>No
secure water supply, no development. No development, no investment opportunity.
No crummy investment, no $1 billion loss. No loss, less need for CalPERS to
lean on Bakersfield.<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'>And
here's the real rub.<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'>Nickel
was only able to sell that Kern River water after the Kern County Water Agency used
$10 million of taxpayer money via a state bond to do an elaborate water-rights
deal with the Nickel family.<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'>The
agency bought the Nickels' so-called "Hacienda" right, which is high
flow Kern River water that only comes along every four or five years. It's
estimated to average 50,000 acre feet a year. Most years it's zero acre feet.<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'>The
agency gave Nickel the $10 million in taxpayer money and got 40,000 acre feet a
year of high flow water, whenever that occurs.<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'>The
agency also promised to deliver 10,000 acre feet a year to Nickel every single
year no matter what, plus it agreed to use its access to canals and facilities
through the State Water Project to move that water around for the Nickels to
anywhere they wanted to sell it.<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'>In
exchange, the agency gets 10 percent of every sale. So far, that's added up to
$3.2 million for the agency and $30 million for the Nickel family since the
deal was inked in 2001.<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'>The
agency did get two years of high flow water between then and now, which it
mostly tucked away in water banks for future use by farmers and for exchanges
with Southern California users.<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'>Nickel
had a steady supply of water that quickly attracted buyers including Newhall,
which has been banking that 1,600 acre feet a year as the developers' fortunes
have been in flux.<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'>And
just last year, Nickel sold 8,393 acre feet to DMB Associates, which hopes to
use part of it to develop 12,000 homes on 1,400 acres of sensitive salt marshes
near Redwood City.<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'>So,
we taxpayers spent a fortune for Kern River water we don't have the use of,
that funded a deal to make one family very rich and trigger sprawl that blew a
hole in the finances of a pension system that we're now being tapped to fill.<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'>Like
I said, funny "hmmm ..." Definitely not funny "ha ha."<o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><a
href="http://www.bakersfield.com/news/columnist/henry/x1415295836/LOIS-HENRY-Funny-how-it-all-comes-back-to-Kern-River-water">http://www.bakersfield.com/news/columnist/henry/x1415295836/LOIS-HENRY-Funny-how-it-all-comes-back-to-Kern-River-water</a></b><b><span
style='font-size:12.0pt;font-family:"Arial","sans-serif"'><o:p></o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><b><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></b></p>
<p class=MsoNormal><i><span style='font-size:12.0pt;color:gray'>Byron
Leydecker, JcT</span></i><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'><o:p></o:p></span></p>
<p class=MsoNormal><i><span style='font-size:12.0pt;color:gray'>Chair, Friends
of Trinity River</span></i><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'><o:p></o:p></span></p>
<p class=MsoNormal><i><span style='font-size:12.0pt;color:gray'>PO Box 2327</span></i><span
style='font-size:12.0pt;font-family:"Times New Roman","serif"'><o:p></o:p></span></p>
<p class=MsoNormal><i><span style='font-size:12.0pt;color:gray'>Mill Valley, CA
94942-2327</span></i><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'><o:p></o:p></span></p>
<p class=MsoNormal><i><span style='font-size:12.0pt;color:gray'>415 383 4810
land/fax</span></i><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'><o:p></o:p></span></p>
<p class=MsoNormal><i><span style='font-size:12.0pt;color:gray'>415 519 4810
mobile</span></i><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'><o:p></o:p></span></p>
<p class=MsoNormal><b><i><span style='font-size:12.0pt;color:gray'><a
href="mailto:bwl3@comcast.net"><span style='color:blue'>bwl3@comcast.net</span></a></span></i></b><b><span
style='font-size:12.0pt;font-family:"Times New Roman","serif"'><o:p></o:p></span></b></p>
<p class=MsoNormal><b><i><span style='font-size:12.0pt;color:gray'><a
href="mailto:bleydecker@stanfordalumni.org"><span style='color:blue'>bleydecker@stanfordalumni.org</span></a>
</span></i></b><i><span style='font-size:12.0pt;color:gray'>(secondary)</span></i><b><span
style='font-size:12.0pt;font-family:"Times New Roman","serif"'><o:p></o:p></span></b></p>
<p class=MsoNormal><b><i><span style='font-size:12.0pt;color:gray'><a
href="http://fotr.org/"><span style='color:blue'>http://www.fotr.org</span></a>
</span></i></b><b><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'><o:p></o:p></span></b></p>
<p class=MsoNormal> <o:p></o:p></p>
<p class=MsoNormal> <o:p></o:p></p>
<p class=MsoNormal><o:p> </o:p></p>
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