Agenda Item Wording:
title
Ordinance authorizing the City Manager to award a contract and approve a long-term lease agreement for 408 acres of open ground to Correia Custom Farming Inc. - First reading of Ordinance No. 2026-08 to authorize the City Manager to award a contract and approve a long-term lease agreement for 408 acres of open ground to Correia Custom Farming
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Agenda Date: 07/20/2026
Prepared by: Rehana Lustyan, Senior Project Manager Rehana.Lustyan@visalia.gov 559-713-4176; Nick Bartsch, Public Works Director Nick.Bartsch@visalia.gov 559-713-4428
Department Recommendation: Staff recommends that the City Council introduce the first reading of Ordinance No. 2026-08, authorizing the City Manager to award a contract and approve the long-term agricultural ground lease agreement with Correia Custom Farming Inc. for the lease and agricultural management of approximately 408 acres of City-owned open ground farmland, including the agreement's five-year initial term with up to five one-year renewal options, annual rent of $25 per acre, surface-water recharge provisions, groundwater pumping prohibition, lessee responsibility for maintenance and improvements, and other terms and conditions substantially as set forth in Attachment 2 - long-t agricultural ground lease agreement.
Summary:
The City issued Request for Proposals (RFP 25-26-15) for the long-term lease and agricultural management of approximately 408 acres of City-owned open ground near Highway 99 and Highway 198. Correia Custom Farming Inc. submitted the only proposal and was determined to be qualified based on its agricultural experience, knowledge of the property, and ability to manage SGMA-compliant farming and surface-water recharge operations. Staff negotiated a long-term lease that provides a five-year initial term with up to five one-year renewal options, annual rent of $25 per acre, continued agricultural stewardship, groundwater recharge opportunities, and a City allocation equal to ten percent (10%) of qualifying flood-release and storage-release surface water applied to the property. The agreement prohibits groundwater pumping, relies on available surface water for irrigation and recharge, and assigns ongoing maintenance and infrastructure responsibilities to the lessee. Correia Custom Farming Inc was awarded a short-term lease executed in December 2025 and has maintained continuous stewardship of the property which is being temporarily extended at no additional cost to the City until Council considers the long-term agreement. The complete lease terms and conditions are provided in Attachment 2 - Long-Term Agricultural Ground Lease Agreement.
This item is the first reading of Ordinance No. 2026-08, required because the proposed Long-Term Agricultural Ground Lease Agreement exceeds five (5) years in duration. Per Visalia Municipal Code Section 16, “no lease shall be made for a period longer than five years except by ordinance adopted by the Council.”
Background Discussion:
City-Owned Agricultural Lands
The City of Visalia owns and manages several agricultural properties surrounding the Water Reclamation Facility (WRF), including open ground, pecan orchards, and other historically farmed areas. As part of the City’s broader agricultural land portfolio, the 408-acre open ground parcel has been maintained in active agricultural use to support land stewardship, weed and dust control, and compatibility with WRF operations. SGMA restrictions and evolving water-management conditions have increasingly influenced how these properties can be operated, particularly with respect to groundwater pumping and surface-water availability.
Short-Term Lease (December 2025 - July 2026)
While preparing the long-term RFP, staff conducted an informal solicitation of short-term proposals from local agricultural operators to maintain the property, control weeds and dust, and avoid compliance issues or field degradation. Correia Custom Farming Inc. submitted the most responsive short-term proposal and entered into a short-term Ground Lease Agreement with the City in December 2025.
During performance of the short-term lease, the lessee successfully maintained the property in accordance with the agreement, including wheat production, irrigation infrastructure maintenance, compliance with the prohibition on groundwater pumping, and proper management of authorized surface-water use. The short-term lease provided both the City, and the operator, an opportunity to evaluate long-term operational feasibility under current SGMA requirements while ensuring the property remained in productive agricultural condition.
Under the agreement, the lessee farmed wheat on approximately 405.82 farmable acres, excluding 2.18 acres encumbered by an SCE easement. The lessee paid the City $10,145.50, based on the contractually required rate of $25 per acre. The lease included strict limitations on water use: no groundwater pumping was allowed, surface water could only be applied with prior written City authorization, and City booster pumps were excluded from use unless expressly approved. The lessee maintained all irrigation infrastructure, performed shredding and tilling of crop residue, and kept the land in proper agricultural condition consistent with State and County requirements.
The short-term lease was set to expire on July 1, 2026. To prevent the land from being left without an authorized operator, and to avoid City-incurred weed, dust, and fire-risk mitigation costs, staff recommended a brief extension of the short-term lease at no cost to the City. Because the original lease required full payment up front rather than prorated rent, extending the end date did not change the financial terms or leave any revenue unrealized. During the extension, the operator continued preparing the land for fall/winter cropping at their own risk should Council decline approval of the subject long-term lease. This interim extension ensured continuous maintenance and stabilization of the property at no financial impact to the City.
The short-term lease provided critical operational continuity, prevented land degradation, and allowed both the City and the operator to evaluate long-term feasibility of SGMA-compliant operations.
Long-Term RFP and Negotiated Lease Terms
RFP 25-26-15 sought proposals for a multi-year lease that would:
• Maintain productive agricultural use
• Support groundwater sustainability through managed recharge
• Ensure year-round land stewardship
• Comply with SGMA, ILRP, and local water-district rules
• Minimize City maintenance obligations
• Generate stable lease revenue
Correia Custom Farming Inc. submitted the only proposal but demonstrated substantial qualifications, including three decades of local farming experience, prior experience farming the site under the short-term lease, extensive involvement in regional water management (including leadership roles within the Mid-Kaweah Groundwater Sustainability Agency and the Persian-Watson Ditch Company), and demonstrated ability to coordinate effectively with the Tulare Irrigation District on surface-water and recharge operations.
Following receipt of the proposal, City staff conducted multiple coordination meetings with the lessee, and representatives from the Tulare Irrigation District (TID), and the Mid-Kaweah Groundwater Sustainability Agency (MKGSA) to refine operational responsibilities for surface-water delivery, recharge operations, water accounting, dashboard administration, SGMA compliance, and infrastructure feasibility. These discussions confirmed that the proposed lease structure is operationally feasible and can be implemented consistently with applicable agency requirements.
Reclaimed water is not available under this agreement.
The negotiated lease includes a five-year initial term with five one-year renewal options, $25 per-acre annual rent, flexibility for recharge operations, and full lessee responsibility for improvements and long-term stewardship.
While longer-term uses of this property are still under evaluation, the proposed lease provides some revenue, but more importantly, provides for the ongoing maintenance of the property, without utilizing groundwater.
Fiscal Impact including annual maintenance and operating costs:
Lease Revenue: 408 acres × $25/acre = $10,200 annually Projected revenue over full 10-year term (if all renewal years exercised): $102,000 Revenue will be recognized within division 4344 (WWTP Farm)
Water-Credit Value: The City receives 10% of qualifying flood-release surface water applied to the property, which may support SGMA compliance, groundwater recharge, and long-term water-portfolio resilience.
Note: The interim extension of the short-term lease has no fiscal impact.
Prior Council Action: December 18, 2023 - Council directed staff to evaluate long-term uses for City-owned agricultural lands.
Alternatives: Alternative 1 - City Fallowing / Maintenance Scenario (Not Recommended)
Under a City-maintained scenario, the approximately 408-acre property would require ongoing weed abatement, field disking, dust control, inspections, and contract administration to remain in compliance with applicable State, County, and San Joaquin Valley Air District requirements. Based on recent Central Valley agricultural operating costs and customary maintenance practices, annual City costs are estimated as follows:
|
Cost Item |
Basis |
Estimated Annual Cost |
|
Disking (3 passes) |
Approximately $20-30/acre/pass |
$30,000 |
|
Dust Control / Rule 4550 Compliance |
Conservation management practices and dust suppression |
$12,000 |
|
Weed & Pest Abatement |
Mechanical and chemical vegetation control |
$10,000 |
|
Staff Oversight & Contract Administration |
Inspections, procurement, compliance monitoring |
$7,500 |
|
Total Estimated Annual Cost |
|
$59,500 |
In addition to these direct costs, the City would forgo the opportunity to receive potential groundwater recharge credits associated with the proposed lease, reducing future flexibility in meeting SGMA-related groundwater sustainability objectives. Executing the proposed lease avoids these maintenance expenditures while generating approximately $10,200 in annual lease revenue, resulting in an estimated positive annual fiscal impact of approximately $69,700, exclusive of the long-term benefit of groundwater recharge credits. Recent updates to the San Joaquin Valley Air District's Rule 4550 continue to emphasize conservation management practices to reduce dust emissions from agricultural operations, reinforcing the need for active management of fallowed agricultural lands.
Alternative 2 - Reissue RFP (Not Recommended)
Reissuing the RFP is unlikely to attract additional proposers, would delay operational continuity, and would require the City to assume full maintenance responsibility as described above.
Recommended Motion (and Alternative Motions if expected):
recommendation
I move to introduce the first reading of Ordinance No. 2026-08, authorizing the City Manager to award a contract and approve the Long-Term Agricultural Ground Lease Agreement with Correia Custom Farming Inc. for the lease and agricultural management of approximately 408 acres of City-owned open ground farmland, substantially in the form presented in Attachment 2.
Environmental Assessment Status: Not applicable
CEQA Review: Not applicable
Deadline for Action: 07/20/2026
Attachments:
Attachment 1 - Ordinance No. 2026-08 (First Reading)
Attachment 2- Long-Term Open Ground Lease Agreement (with Exhibits A, D, and E)
Attachment 2B - Long-Term Open Ground Lease Agreement - Exhibit B Lessee Proposal
Attachment 2C - Long-Term Open Ground Lease Agreement - Exhibit C RFP 25-26-15 and Addendums
Attachment 3 - Open Ground Land Lease Map
Attachment 4 - Consultant Disclosure Form
Strategic Goal: Indicates which City Strategic Goal(s) this item supports. Check all that apply.
