California I-5 commuter city can’t stop megadevelopment

A massive and much-anticipated housing development tied up in litigation could potentially be back on again in a small town that borders the Central Valley and Bay Area. The question remains, however: Will there be enough water for it and the surging population nearby?

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Located about 17 miles southwest of Modesto and 70 miles from downtown Walnut Creek, Patterson, a town of about 27,000 in Stanislaus County, is a northern Central Valley community along the Interstate 5 corridor that has seen population gains this decade. One of several new proposed developments is a 719-home megadevelopment called Keystone Ranch. 

The plan to build a new suburb in the hinterlands east of the Bay Area would not only satisfy commuter needs but also the . The project is part of the city’s Zacharias/Baldwin Ranch Master Plan, which is attempting to transform large swaths of farmland into housing. The plan hit a roadblock April 2025, when the city invoked the state’s water sustainability plan, noting that the groundwater supply is coming up short and using that as the reason to stall the development. 

In 2024, local water agencies adopted the Delta-Mendota Subbasin Groundwater Sustainability Plan, which included Patterson. At the time, water authorities decided that they should .

In turn, the city of Patterson decided to single out the Keystone Ranch development and attempted to impose the cost of building a groundwater recharge facility on the development, then later denied the project wholesale on April 1, 2025.

The California Department of Housing and Community Development, or HCD, found that the city’s review of the project is inconsistent with the state housing agencies and “further, appears to conflict with the relevant portions of the draft housing element,” David Zisser, a deputy director for the state housing authority, . “HCD remains committed to supporting the City of Patterson in facilitating housing at all income levels and looks forward to working with the City to assist with implementation of state housing laws.”

The developers filed a lawsuit against the city to push the project forward, and on June 26, a Stanislaus County Superior Court judge ruled in their favor. The ruling determined that the city’s attempts to impose the “entire cost of constructing $20 million regional recharge facility on single developer as precondition to any development anywhere in the 1,300-acre MP area – was not authorized by applicable law.”

Of the water issues at the site, “the Court does not minimize the significance of those requirements,” the ruling said. But the judge concluded that the city’s denial of the project “was made without the written findings the [Housing Accountability Act] requires, and cannot be justified under the California Environmental Quality Act.”

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Keystone Ranch spokesperson Evette Davis said the developer was happy with the ruling and plans to go back to the city council to seek approval of the project. She told SFGATE on Monday the ruling was also not a surprise and that there was “nothing in the public record to support the [city’s] decision,” she explained. “We’ve asked the city to review and go back and agendize the [development] map and hear it again.”

If a master-planned community and water issues in Stanislaus County sound familiar, it’s because another community nearby, Diablo Grande, has made headlines recently for its own ongoing water issues. Diablo Grande, which is about 10 miles southwest of Patterson, has been struggling to both stay financially solvent and keep water flowing to the residents. At the end of May, the development’s own water service entity finally struck a deal with Kern County Water Agency, which pumps water into the development from hundreds of miles away, just days before a shut-off deadline. 

For their part, Keystone Ranch spokesperson Davis said they are well aware of the concerns about water and development, but hopes the recent ruling shines a light on the fact that certain projects have been singled out here while other developments have passed without nearly the same amount of scrutiny.

“The water issue is a valid issue for the state of California,” she said. “We were denied on April 1 [2025]. They did a series of approvals including a [1.2 million-square-foot] Amazon distribution center. There were no water emergency mentions. You should see consistency in every single decision.”

Editor’s note: This story was updated at 8:30 a.m., July 15, to correct Evette Davis’ job title.