The property is on Graham Hill Road near Rollingwoods Drive, across from the entrance to Henry Cowell Redwoods State Park Campground. County planners received a pre-application for the development in April that included 161 homes. 

An updated application submitted Sept. 27 included:

• 157 homes for sale on 40 acres. It proposes 123 single-family homes and 34 below-market-rate townhomes.
• An 18,000-square-foot community center.
• A new private sewer system.
• Connection to the San Lorenzo Valley Water District.
• Removal of an estimated 585 trees. 
• 737 parking spaces.

The application takes advantage of the Builder’s Remedy, a state rule that lets most developments with enough affordable housing override local restrictions on the size and location of new housing projects. The Builder’s Remedy rules were in effect from December 2023 to April 2024 after Santa Cruz County leaders missed the deadline for a state-approved housing plan.

Mike Formico, who owns the Graham Hill Road land, lives near the property. He said he originally wanted to turn the former horse pasture into a “family compound” for him and his children. Now he wants to “help the community, because we’re in such a shortage of housing.” 

After a Sept. 30 Santa Cruz Local story described the proposal, some nearby residents said they were shocked.

Large developments should be “in an area closer to town,” said Deme Scott, who lives near the Graham Hill Road property. “This just seemed like somebody bought a piece of property and is trying to make a bunch of money,” Scott said, “having no regard for the environment.” 

Wednesday night, several dozen residents attended a community meeting about the project at MacKenzie Bar & Grill at Pasatiempo Golf Course. Many raised concerns about the size and scope of the project and traffic.

Though the Builder’s Remedy is meant to smooth the passage of new housing projects, the project still faces challenges that include a civil lawsuit in Santa Cruz County Superior Court.  

Legal battle

Cindy Krueger, who was in a long-term relationship with Formico, sued him in April 2023. In court documents, Krueger tried to assert ownership of the Graham Hill Road property and some other properties because she helped buy them.

Krueger alleged that Formico used “a variety of pressure tactics” to urge her to take out nearly $6 million in loans to finance the purchase of properties that included the Graham Hill Road parcels. Formico told her that she was a co-owner of the trust that owned the properties, she alleged in the lawsuit. 

Krueger asked the court to grant her partial or full ownership of the properties. The case is due back in court March 6. 

Formico called the lawsuit “pure harassment” and said it “is going to be resolved very quickly.” Krueger’s lawyer did not return requests for comment.

It’s not clear how the outcome of the lawsuit will factor into county planners’ decision to approve or deny the housing proposal.

Sewer, utility challenges

Even if the court case doesn’t delay the project, a lack of utilities on the property would still present challenges. The former horse pasture doesn’t have any hookups for water, electricity, stormwater or sewer.

The project would include a privately-funded sewer system to hook into a nearby county sewer line on Tree Top Drive, said Lance Tate, a development consultant for the project. 

The Graham Hill Road property is outside of the county’s urban services line, which is a boundary where the county pledged not to build further sewer or water lines. The project would require a boundary change, which would trigger an environmental review and approval from the Santa Cruz County Board of Supervisors as an amendment to the county’s General Plan, said Matt Machado, the county’s director of community development and infrastructure. 

On top of the sewer system, the development would need to build infrastructure for water and electricity, and go through environmental review. “These challenges will be very difficult to mitigate and to solve,” Machado said.

The project could receive water hookups from San Lorenzo Valley Water District. 

John Kunkel, the district’s interim director, said the district had pledged to serve a smaller version of the project that included just four homes. The proposed large-scale development requires more thorough review, including a hydrological study and a privately-funded water main. The San Lorenzo Valley Water District Board of Directors would decide whether to provide service, Kunkel said.

To approve the water and sewer service, the project would need to secure approval from the Local Agency Formation Commission of Santa Cruz County, a government entity independent of the county government that regulates the boundaries of cities, water districts and other areas. Joe Serrano, the LAFCO president, said the boundary would only be moved if the county supports it. 

“There’s a lot of obstacles for the landowner,” Serrano said. “I wouldn’t say it’s impossible, but there’s a lot that needs to be addressed before it can move forward.”

Tate, the development consultant, said the cost of the new infrastructure would pay off because of the size of the new development. And the project would likely be able to find a way to reduce or compensate for any environmental impacts, he said.

A relatively flat, sun-drenched property on Graham Hill Road could be transformed into 157 homes. (Jesse Kathan — Santa Cruz Local) 

An April pre-application to the County of Santa Cruz included this image of a proposed development on Graham Hill Road. (Fletemeyer & Lee Associates Inc.)

Advocates urge streamlined approval

Housing advocates this month cautioned that even with the urban services line adjustment and environmental review, local authorities are severely restricted from holding up density bonus projects. 

Under the Builder’s Remedy, the project can only be denied if it violates a “health or safety regulation that’s already on the books,” said Rafa Sonnenfeld, a member of Santa Cruz YIMBY. He said he’s concerned the county could try to “launder a denial through utility issues.”

The rural, single-family development differs from the type of high-density apartments in urban centers that Santa Cruz YIMBY usually champions. But until there’s more housing in city centers, sprawl is sometimes “the path of least resistance,” said Sonnenfeld. “At the end of the day, housing is housing, and we desperately need it.”

County planners can ask for edits to the application if they determine it is incomplete. But developers can sue if they believe the county is holding up the project by asking for excessive or unnecessary changes, Sonnenfeld said.

‘Something good for the community’

Formico, the landowner, said he’s frustrated with county staff for raising concerns about the project. “You just wish that our government wants to do better for our community,” he said.

Under the county’s normal rules for development, Formico would only be permitted to build one house on each of the eight parcels that make up the property. 

Those would likely be “big, multimillion dollar homes,” rather than the smaller, more affordable homes he’s proposing, he said. “Hopefully we all work together and do something good for the community.”

A map shows the location of a proposed development in unincorporated Santa Cruz County. (Fletemeyer & Lee Associates Inc.)

A housing proposal on Graham Hill Road would be near Henry Cowell Redwoods State Park. (Fletemeyer & Lee Associates Inc.)

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