COUNCIL AGENDA REPORT
TO: Mayor and City Council
FROM: Tom Watson, City Attorney
DATE: October 21, 2025
SUBJECT: Adoption of a Resolution Approving Execution of a Settlement Agreement and Related Support Document s in the Matter of City of Santa Maria vs. California State Water Resources Control Board
Description:
The City Council will consider adopting a Resolution authorizing the Mayor, or designee, to execute a Settlement Agreement and related support ing documents in the matter of City of Santa Maria vs. California State Water Resources Control Board et al. (Case No. 25CV-0136) and all related litigation , appropriation, and authorization of payment of settlement funds.
Environmental Notice: The Project q ualifies for Class 6 and 7 Categorical Exemption s pursuant to Sections 15306 and 15307 of the California Environmental Quality Act (CEQA) State Guidelines.
RECOMMENDATION:
1. Adopt a Resolution approving the Settlement Agreement and related support ing documents in the matter of City of Santa Maria vs. California State Water Resources Control Board et al. (Case No. 25CV -0136) and all related litigation, appropriation, and authorizing payment of settlement funds; and
2. Authorize the Mayor, or designee, to execute the Settlement Agreement and any related supporting documents.
BACKGROUND:
Between 1949 to 1987 SEMCO Twist Drill and Tool Company (“SEMCO”) operated its precision tool manufacturing business at 2936 Industrial Parkway, Santa Maria, California which used a petroleum hydrocarbon -based lubricant and volatile organic compounds, such as trichloroethane in its operations. In approximately 1985, these compounds were detected in a nearby water well during testing by the City of S anta Maria. Following detection of these compounds in the well and a subsequent report by the city to the Santa Barbara County Public Health Department , the well was closed. In 1987, following closure of the well , the California Regional Water Quality Control Board, Central Coast Region (“Regional Board”) issued a Cleanup and Abatement Order (“CAO”) to SEMCO and its successors in interest for ongoing monitoring and remediation of the site. Despite the issuance of this CAO, the CAO was not completed to existing environmental standards or to the satisfaction of the Regional Board and on April 27, 2023, the Regional 2 Board issued its intent to issue a second CAO to the Santa Maria Public Airport District, County of Santa Barbara and City of Santa Maria based upon the fact that al l three (3) entities owned the land between 1949 and 1968 while SEMCO rented the location for its business operations. Despite a lack of any evidence that the City of Santa Maria or other public entities had knowledge or control over SEMCO’s business safety or environmental protection practices, the Regional Board issued a new CAO (No. R3 -2023-0070) on September 23, 2023. The new CAO included the successors in interest of the SEMCO property along with the public entities (including the City) based solely on the prior ownership of the property for the cleanup and monitoring of the site. Initial cost estimates for the complete implementation of the second CAO exceeded $25 million dollars.
Following issuance of the September 26, 2023, CAO all public entities submitted a timely administrative appeal to the State Water Resources Control Board (“State Board”) which is the entity that oversees Regional Board decisions. The State Board did not respond to the administrative appeals which functioned as a denial of the appeals as a matter of law pursuant to the Water Code. Due to the lack of administrative relief from the State Board, all public entities challenged the Regional Water Boards issuance of the CAO by filing separate Petitions for Writs of Mandate reque sting the California Superior Court to independently review and invalidate the Regional Boards issuance of the CAO against the public entities based upon a lack of evidence connecting the entities to the practices of SEMCO which led to the condition of the site.
Based upon the facts of the case as challenged by all public entities along with input from independent engineering and environmental consultants, the Regional Board and public entities entered negotiations in the spring of 2025 to seek an informal resolution that would ensure proper site remediation while limiting the cost to the public entities. On April 17, 2025, the Regional Board and the public entities reached a tentative agreement on basic settlement terms for the resolution of this matter. Following this tentative agreement, the parties have worked through legal counsel, along with professional environmental engineers and consultants to create a detailed formal settlement agreement which sets forth an agreeable site work plan for monitoring and remediation which limits the cost to the public entities.
DISCUSSION:
The County of Santa Barbara received title to real property which contained the SEMCO site in June 1949 following conveyance from the US Army. Shortly thereafter the County conveyed one half of its interest in the real property to the City of Santa Maria where it was held by the City and County as tenants in common until 1964 when it was conveyed to the newly formed Santa Maria Public Airport District. Thus far in the litigation, the only link between the City of Santa Maria (and other public entities) to the SEMCO site is the ownership of the land. Accordingly, the only connection between SEMCO and the City of Santa Maria was a landlord/tenant relationship. However, although the re is a strong argument that the lack of evidence connecting the city with any knowledge, direction or control over the SEMCO operation favors its position in the litigation, the uncertainty of litigation combined with the costs including expert witnesses, testing fees and laboratory 3 analysis favors strong consideration of settlement if an agreement can be reached at reasonable costs and conditions.
The initial agreement between the parties as contained in the Settlement Agreement requires a monitoring and remediation plan of the site through two (2) technical work plans which specify a Soil Vapor Extraction (“SVE”) and Deep Groundwater Zone Assessment and Monitoring. Upon final execution of the Settlement Agreement by all parties which is anticipated to occur in October 2025, the Regional Board will Stay enforcement of the Cleanup and Abatement Order as to the public entities, and the public entities will dismiss their respective Petitions for Writs of Mandate (without prejudice) currently pending in the Superior Court. The parties will then work collaboratively to achieve the goals of the remediation and monitoring work plans which will be implemented by the environmental engineering firm Langan, CA, Inc. and monitored by Santa Barbara County and its separate environmental engineering consultants. Under the terms of the Settlement Agreement, the City of Santa Maria and County of Santa Barbara are committed to the remediation, monitoring and reporting requirements for a period of twenty -four (24) months or until the work plan goals are achieved. The settlement agreement requires a financial contribution by the City of Santa Maria of $437,500.00 which will be used to pay for its share of the settlement work. If completion of the work plans does not fully meet the agreed upon remediation and monitoring standards, additional costs will be shared equally between the City of Santa Maria and the County of Santa Barbara. Any additional charges require joint pre-approval by the city and county.
This settlement brings certainty by substantially reducing the financial impact to the city by reducing its potential financial obligation in cleanup costs, ongoing court, legal, and expert fees initially estimated at $25 million to just over $1 million. Settlement also demonstrates a commitment to the prioritization of the safety of our community through environmental cleanup efforts of the former SEMCO site. If approved, the settlement is expected to be completed within twenty-four (24) months and upon completion will result in a Release of Liability as to the current Order, the removal of the public entities as site dischargers, a dismissal (with prejudice) of the litigation and an enforceable commitment by the Regional Board to take no further action a gainst the city or other public entities in this matter.
The City Attorney’s Office has worked closely throughout this litigation with legal counsel for the County of Santa Barbara and Public Airport District and recommends the approval of this settlement including appropriation and authorization of payment of the related funding. The County and Airport District have approved the proposed settlement terms and are prepared to execute the settlement agreement and related documents. If the Settlement Agreement is approved, the parties will also execute related documents which are attached hereto which reflect further terms to carry out the settlement including two (2) written Work Plans produced by Langan in consultation with professional environmental engineering consultants and the Regional Board which are incorporated into the Settlement Agreement setting forth the technical details of the remediation and monitoring requirements for project completion.
4 Alternative(s)
The alternatives to settlement of this case are continuing litigation efforts against the Regional Board through the city’s pending Petition for Writ of Mandate in the San Luis Obispo Superior Court, or a dismissal of the challenge to the Order with a full commitment to completing the orig inal Cleanup Order. Completing the CAO as originally ordered is not only unfair to the city and its residents as there is no evidence that the city caused or contributed to this pollution, but the monetary costs are very large as previously articulated. Continued litigation is also costly and uncertain. If the City completely prevails in litigation, mounting legal costs including court fees, expert witness fees and environmental consultants could cost hundreds of thousands of dollars or more.
Additionally, pursuant to section 13305 of the California Water Code, if the subject property were to become nonoperational while containing an ongoing condition of pollution or nuisance and the owner does not or cannot correct the condition, the Regional Board can request the city and county perform the abatement or cleanup of the condition.
Accordingly, even if the city prevails, the Regional Board could seek further assistance in cleaning up the site under certain conditions.
Fiscal Considerations
As part of any settlement agreement reached in this case, the city currently has $635,643.04 available from the initial $800,000.00 committed to resolve this matter.
Based upon initial environmental testing and consultant recommendations which have been tentatively approved by the Regional Board, the settlement amount to resolve this matter is $437,500.00.
Impact on the Community
The proposed settlement terms will limit the liability of the City by performing cleanup and monitoring of the site for a limited period and at a certain and limited cost to the city while prioritizing the health and safety of the community.
Other Agency Review
The Utilities Department has worked with the City Attorney’s Office throughout this litigation and is aware of the tentative settlement terms and agrees that the terms of this proposed settlement is the best alternative currently available to the City of Santa Maria.
ATTACHMENT(S)
A. Resolution
B. Settlement Agreement (w/attached work plans)