The future of Sutter County?: Decades later, new community of Sutter Pointe preparing for infrastructure

Apr. 19—With the vast majority of Sutter County located in a flood plain, development throughout the region has posed a long term challenge, limiting the county's options in terms of residential planning and economic opportunities for its citizens.

Sutter Pointe has, for over 20 years, been heralded as the eventual solution to this problem; the key word being "eventual."

Discussions for what would become Sutter Pointe — a planned residential community in south Sutter County just four miles north of Sacramento — date back decades. In 2009, the Sutter County Board of Supervisors approved the Sutter Pointe Specific Plan, encompassing over 7,500 acres in the Natomas River Basin that will eventually host a mixed-use development featuring over 17,500 homes in addition to businesses. Preemptive plans and amendments for Sutter Pointe over the years have noted that this project would take between 20 and 30 years to come to fruition.

Sutter Pointe is envisioned to become a master-planned community with integrated networks of employment villages, residential neighborhoods and activity centers designed to provide financial opportunities to Sutter County residents, eventually becoming a new city.

The first phase of Sutter Pointe was approved in 2020, and it's on track to bring over 1,200 homes to the area in the near future, Sutter County Development Director Neal Hay said. Known as Lakeside at Sutter Pointe, this first step in the overall development will eventually see 3,388 single-family and 399 multi-family homes built near Riego Road along Highway 99, but phase one of Lakeside will be an active adult community reserved for residents age 55 and older. Lakeside, upon completion, will also feature 44.8 acres of employment centers, 25 acres of commercial centers, 59 acres of parks, 55 acres of open space and up to two K-8 schools established upon full buildout, the Appeal previously reported.

Other amenities include a lake, bike and pedestrian paths, parks and a community center.

The Board of Supervisors approved a final lot map for Lakeside in August 2023, which gives developers the opportunity to fund and finance necessary infrastructure improvements for the project. The map identifies lots for 1,464 single family, medium density and high density homes as part of an active adult community for senior residents.

According to a county staff report from 2020, Lakeside will include offices and industrial uses featuring direct transportation links to Sacramento International Airport, Roseville, south Placer County, downtown Sacramento, and the greater Sacramento region.

Hay told the Appeal that after decades of planning, developers are prepared to lay crucial infrastructure to kickstart phase one of Sutter Pointe.

In addition to Lakeside, Sutter County Administrator Steve Smith said that lead developers are looking to connect a sewer line from the Sacramento Area Sewer District by approximately seven miles and extend wastewater infrastructure into an industrial area, which could be rezoned to include more commercial developments.

The Specific Plan allows for residential and commercial development in exchange for providing infrastructure that will enable industrial job development desired by Sutter County.

With discussions of implementing distribution centers and warehouses near Sutter Pointe, Sutter County would be exposed to a greater revenue source, Smith said. The state Department of Tax and Fee Administration changed the way sales taxes are allocated when handling online retail distribution centers. According to Smith, it used to be that if Sutter County residents ordered something online, Sutter County would receive the sales tax from that purchase. Now the sales tax is allocated to the distribution center and whichever county or municipality it's located in.

"What we're hoping is if we rezone — and there are a lot of ifs — once you have the infrastructure in, then you can look into getting some of those big warehouses or distribution centers that can produce a lot of jobs, for one, a lot of sales tax and property tax from the size of the facilities," Smith said. "If the distribution center is in Sutter County and they deliver to Roseville, we would get that sales tax. It's controlled by the large counties. Us rural counties are essentially hurt by that because most of the distribution centers are in the large metropolitan counties. We're fortunate that we're close to a large metropolitan county that we're hoping to get some of those here and get a lot of benefits for the community."

How did we get here?

According to Hay, the groundwork for Sutter Pointe was laid with Measure M, an advisory measure that provided a broad outline for the development and authorized Sutter County to draft plans within the allotted 7,500 acres.

However, prior to Measure M's passage in 2004, conceptual neighborhoods in south Sutter County were subject to over a decade of false starts. In the late 1980s, land developers were interested in developing around 25,000 acres in the area for a project known as Sutter Bay, according to George Carpenter, past project manager for Sutter Pointe and vice president for Winn Communities. Ahmanson Development Company, lead developers for Sutter Bay, envisioned 80,000 residential units in a 36-square-mile new town.

According to the California Planning and Development Report, Sutter County voters blocked competing residential growth initiatives in 1991, leading to the approval of Sutter Bay. The Board of Supervisors at the time approved a specific plan for the project in 1992, but Sutter Bay faced a series of road blocks after a new board was inducted a year later, Carpenter said. Three new members of the board rescinded the Sutter Bay development agreements in early 1993. Months later, voters rejected the project in a referendum election.

"At the time, I think there was a desire to change directions and there wasn't community support for the Sutter Bay project," Carpenter said. "In June of 1993, there was a referendum that asked the community if they supported Sutter Bay or wanted to take it out."

Carpenter speculates that this was due to a "growth versus no growth" sentiment held throughout Sutter County at the time. Ahmanson and its partners — known as Sutter Bay Associates — sued the Board of Supervisors in the years following, claiming that the new board members violated the Brown Act as well as statutes governing urgency ordinances and the development agreement cancellation.

According to Carpenter, Sutter County updated its general plan in 2001, outlining a 10,500 acre industrial and commercial reserve near the Sacramento County line in hopes of attracting job opportunities for the area. The county approved a 3,500-acre specific plan for a portion of the reserve a year later, but ultimately failed to move forward amid litigation filed by the Sierra Club and the Environmental Council of Sacramento. These groups challenged Sutter County's lack of an infrastructure financing strategy, the Planning and Development Report said.

"The county could not afford to bring the infrastructure to the area, so the industrial and commercial park never got off the ground," Carpenter said.

In 2004, Winn Communities and Lennar Homes approached Sutter County with a proposal to establish residential developments in order to finance needed infrastructure in turn, Carpenter said. The decision to develop in south Sutter County was ultimately put in the hands of voters with Measure M, which earned 59.1% approval.

Winn Communities and Lennar Homes then began drafting land entitlements for the Sutter Pointe Specific Plan, which took approximately five years to get approved by Sutter County, Carpenter said.

"Around that same time, the economy went in the tank. Sutter Pointe did not get out of the ground — it's kind of working its way out of the ground — until 2017. We approached the county because we were the only developers left," he said. "In the 2004 to 2009 timeframe, around two thirds of the Sutter Pointe area had developers with either ownership or entitlement to land options to acquire. ... Those developers all went away over the years so our group is the only group left."

Winn Communities and Lennar Homes continued to develop more refined plans for Lakeside at Sutter Pointe, which were approved in 2020.

Since the implementation of the Sutter Pointe Specific Plan, Hay said that the project has faced its own hurdles that developers have to take into account; namely the economy and the complete lack of infrastructure in the area.

"The main challenge is that they have to put in all the infrastructure," Hay said. "They have to put in a sewer system, they have to put in a water system, and they have to put in a storm drain system. They're essentially building in what are currently rice fields. That's much different than a normal person who goes to buy a house in Plumas Lake or Yuba City where everything is already graded and just sitting. The cities and agencies already have infrastructure under the streets. Here, there is no streets."

Upon its eventual completion, Sutter Pointe will be sitting on utilities for a suburban community where there currently is none aside from the Riego Road and Highway 99 interchange.

Hay estimates that total incurred costs for the development are upwards of $160 million prior to recouping costs from home sales. Sutter County officials previously said that installing infrastructure will not impact the county's general fund due to a Specific Plan policy stating that public facilities will be funded from "revenues generated by development within the Specific Plan Area."

"The market conditions (and) the interest rates have to be right for people to afford the houses, especially if people can buy in other jurisdictions where there are already houses," Hay said. "The expectation now is that they have about one year of putting in infrastructure for just a portion of the development. They're working in this area off Riego Road right now to begin developing infrastructure, and that's going to take them about a year to build that."

Developers also reimburse Sutter County for the review of planning documents as well as costs for financial, construction and environmental consultants.

"There's no direct money from the county being expended for the development to occur. It's all reimbursed by the builders," Hay said.

Natomas Basin Conservancy

Sutter Pointe will be located in the Natomas Basin, which is beholden to a FEMA A99 designation mandating that areas with a 1% chance of annual flooding will be protected by a federal flood control system. This designation is what allows construction to continue in the basin, Hay said.

"The Army Corps of Engineers is working down what's called the Pleasant Grove canal. They're shoring up all the levees so home construction can continue," he said.

The Natomas Basin stretches over 54,000 acres between portions of north Sacramento and south Sutter counties. In 1997, the Natomas Basin Habitat Conservation Plan was adopted and later revised in 2003 to promote multi-species conservation efforts alongside economic and agricultural development.

The Conservation Plan is upheld by the Natomas Basin Conservancy, which is made up of representatives from Sutter County and Sacramento. According to Smith, establishing the Conservancy is what paved the way for development through mitigating environmental losses. Oftentimes, developers are required to mitigate a percentage of land for conservation purposes.

"If you want to build an acre, sometimes you have to conserve an acre or three acres," Smith said. "One nice thing about the habitat conservation plan within the Natomas Basin Conservancy is that the ratio is only a half to one."

As of Dec. 31, 2023, the Conservancy has acquired 5,185 acres of land in the Natomas Basin, not including land on which the Conservancy holds easements. Most of the land owned by the Conservancy is leased for continued farming activities, primarily rice cultivation.

However, as urban development becomes more established in the basin, less land becomes available for mitigation. The Conservancy must also maintain conserved land in a separate ratio in order to prove that mitigation is actually protecting species and habitats in the basin, Hay said.

Prior to new grading or construction, proposed development must ensure compliance with both Sutter County and the Conservation Plan, including but not limited to biological surveys and payment of mitigation fees.

"It also makes development expensive," Smith said. "When the developers were grading the land and creating the lake for Lakeside, they had to have a biologist on site the entire time in case they saw a giant garter snake. All of those things add into the cost. Even the cost of the mitigation land, all that comes back to the consumer who needs to buy a house, and the prices are inflated. It's like this throughout the state."

In February this year, the Sutter County Board of Supervisors updated mitigation fees for the Natomas Basin Habitat Conservation Plan in the amount of $45,565 per gross disturbed acre when the mitigation does not include a land dedication component. If a land dedication component is in place, the price is reduced to $32,259 per acre. This fee adjustment will go into effect on April 27, county officials said.

However, developers for Lakeside at Sutter Pointe already own mitigation land within the project, Smith said.

Fee amounts are substantially influenced by land prices in the Natomas Basin. From an implementation standpoint, projects 50 acres or less in size are generally required to pay the full Conservation Plan fee, while projects over 50 acres are required to dedicate land and pay the reduced fee.

"It's essentially raising property values in the basin," Hay said. "All the property owners in the basin are benefiting from this because there's only so much land that can be used for mitigation and only so much that can be used for construction."

Next steps

With a new community underway in south Sutter County, officials anticipate that Pleasant Grove Joint Union School District and East Nicolaus High School District will be impacted at later stages of development. However, because phase one of Lakeside will be an active adult community, impacts to these schools will be minimized at this stage, Hay said.

Attorneys representing East Nicolaus High School previously voiced concerns over the possible enrollment impact Sutter Pointe could have on its schools, believing that large lot maps for the community set a precedent for future development.

County officials have made clear that future phases for multi-family development are years out.

Developers are also required to meet mitigation agreements with area school districts in order to ensure that schools can accommodate an influx of students, Smith said. Lakeside developers have not yet reached an agreement with the Pleasant Grove and East Nicolaus school districts, but continue to work toward meeting requirements.

"In the meantime, if they do a 55-plus community, for most of those communities, you cannot have a child living there except under very limited (circumstances). You can't just say, 'My grandma lives there and I want to go to that high school, so I'll move in with my grandma.' You can't do that. It protects the schools, and that development still provides some revenue out of fees for the schools, but not as much as a normal housing development would," Smith said.

Assuming that a mitigation agreement is reached, the remaining phases for Lakeside will feature market-level, residential homes. Hay said that developers intend to have model homes for phase one in place by summer 2025, which will help propel more infrastructure for later phases.

"As homes are being built, they'll start building more of the infrastructure to service more of the development. Ultimately, it's the interest rates and the economy that will dictate the pace at which they build houses," Hay said. "They probably could build 200-300 houses per year, if the economy supports that. There's approximately 3,800 houses, so you're looking at a fair amount of time until everything gets built out, and there may be some slow-downs in the economy between then."

Ultimately, residential construction will bring utilities to the area in hopes of extending them to commercial and industrial uses. Prior to recent economic uptrends, there wasn't a financial incentive to move forward with construction, Hay said.

"It really was the economy beginning to do better. It really comes down to a financial decision, and the county just has the legal obligation to process the documents," Hay said.

At this point in the planning process, identifying a future tax base within Sutter Pointe will be dependent on a number of economic factors determining the price of homes for this community. Initial revenue projections were done using $500,000 homes as a baseline, but Smith believes that average home prices could soar to the $700,000 range for market-rate houses.

According to Hay, Sutter County staff are currently generating an urban services plan for Sutter Pointe, which will review costs associated with providing county services to the new community such as public safety.

"All of those costs are being rolled up, and that document will probably come before the board before the end of this calendar year. That would be a document that will show the county will receive positive cash flow from the development. Then there will be a lot less speculation," Hay said.

Builders are in the middle of developing maps for phase two and three of Lakeside at Sutter Pointe, and will present them to the Board of Supervisors by the end of this summer. Phase two and three propose 1,985 single family homes with 132 medium-density cluster homes.

"That will be a very significant step because then they'll start working on the designs of that infrastructure," Hay said.