Court Permits Flexible Water Service Agreement for Development

09.17.2025

A recent California Court of Appeal decision provides a useful framework for developers and public agencies structuring agreements for water service to new projects. On August 28, 2025, the California Court of Appeals for the First District issued a decision in Solano County Orderly Growth Committee v. City of Fairfield, and held that the City of Fairfield’s (“City”) agreement with the Solano Irrigation District to provide potable water services to a mixed-use development outside the City limits (“Potable Water Services Agreement”) was not inconsistent with the urban growth boundary in the City’s general plan because California law does not require that potable water services agreements be consistent with a city’s general plan.

Case Background

In 2022, the City and the Solano Irrigation District entered into a Potable Water Services Agreement. Under this agreement, the City would receive a water supply from the irrigation district, treat that water to make it potable, and then send an equal amount of potable water to the irrigation district, which would be responsible for distribution and billing. After the City approved the Potable Water Services Agreement, the Solano County Growth Committee (“Committee”) filed a petition for writ of mandate seeking to invalidate the agreement, alleging that the agreement was inconsistent with the City’s General Plan and therefore violated California’s Planning and Zoning Law.

California Planning and Zoning Law requires each city and county to “adopt a comprehensive, long-term general plan for the physical development of the county or city, and of any land outside its boundaries which in the planning agency’s judgement bears relation to its planning.”[1] Thus, certain specified actions and decisions made at the local level, such as the adoption and amendment of a “specific plan”[2], an action affecting interests in open-space land[3], zoning ordinances[4], development agreements[5], and proposed subdivisions and parcel maps[6] must be consistent with the city or county’s general plan.

The Land Use Element of the City’s General Plan includes an objective establishing an urban limit line, which allows for development to be satisfactorily planned before it occurs. The objective further states that “[a]ny urban development requiring basic municipal services shall occur only within the incorporated City and within the urban limit line established by the General Plan.” In its petition, the Committee argued that the Potable Water Services Agreement constituted a basic municipal service, and that because the service would be provided outside the General Plan’s urban limit line, the Potable Water Services Agreement was inconsistent with the City’s General Plan and should be invalidated. The trial court granted the petition, and entered judgement in favor of the Committee, invalidating the Potable Water Services Agreement.

The Court of Appeals reversed the trial court’s ruling and found that the Potable Water Services Agreement need not be consistent with the City’s General Plan, and even if it did, the Potable Water Services Agreement was consistent with the City’s Land Use Element.

Issue 1: The Potable Water Services Agreement need not be consistent with the City’s General Plan

The Court of Appeals determined that the Potable Water Service Agreement was not required by the California Planning and Zoning Law to be consistent with the City’s General Plan, because it did not constitute a “specific plan”, zoning ordinance, development agreement, or proposed subdivision or parcel map. Additionally, the Court of Appeals rejected the Committee’s argument that well-established case law required that “all local decisions affecting land use must be consistent with the jurisdiction's applicable general plan.” The Court stated that in Orange Citizens for Parks and Recreation v. Superior Court,[7] the California Supreme Court did not expand the range of decisions that must be consistent with a general plan beyond those listed in the Planning and Zoning Law.

Issue 2: The Potable Water Services Agreement was consistent with the City’s Land Use Element

The Court found that even if consistency was required, the Committee failed to show that the City unreasonably determined that the Potable Water Services Agreement was consistent with the City’s General Plan. Citing Orange Citizens, the Court emphasized that the California Supreme Court ruled that an action is consistent with the general plan if, in totality, it will further the objectives and policies of the general plan and not obstruct their attainment. The Court agreed that an action does not need be “in rigid conformity” with the general plan, but merely “in agreement or harmony” with it.[8] The Court found that the Potable Water Services Agreement essentially complied with the City’s Land Use policy, as the mere treatment of water does not constitute planned urban development or provision of a “basic municipal service.” The Court noted that other provisions of the general plan are merely advisory, and not “fundamental, mandatory or clear,” and therefore the Committee failed to show that the City’s finding the Water Services Agreement’s consistency with these provisions was unreasonable.

This case validates the use of “unbundled” service agreements, where agencies contract for specific functions (e.g., treatment, storage) that are not deemed basic municipal services rather than providing comprehensive retail service. This is particularly valuable where one agency has treatment capacity and another has raw water supply and a retail service area.

For questions or additional information on this ruling or its applicability to your water projects, please reach out to any of the authors of this alert or your regular AALRR counsel.

Special thanks to our post-bar law clerk John Adamson for his assistance with this alert.

[1] Cal. Gov. Code § 65300

[2] Cal. Gov. Code § 65454

[3] Cal. Gov. Code §§ 65560, 65566

[4] Cal. Gov. Code § 65860(a)

[5]Cal. Gov. Code § 65867.5(b)

[6] Cal. Gov. Code §§ 66473.5, 66474

[8] San Franciscans Upholding the Downtown Plan v. City and County of San Francisco.