SAN JOSE -- A panel of the state's 6th District Court of Appeal on Tuesday invalidated the city of Santa Cruz's environmental analysis of extending water to an undeveloped section of UC Santa Cruz eyed for university growth.

The three-judge panel overturned Santa Cruz County Superior Court Judge Timothy Volkmann's 2011 ruling that denied a challenge to the environmental impact report from a local group called Habitat and Watershed Caretakers. The appellate panel ordered the judge to grant the group's petition and have the city withdraw its certification of the report and approval of the project, as well as "correct the defects in the project description" and discussion of alternatives.

"We conclude that the City's EIR misdescribed the project's objectives, that this misdescription skewed its consideration of alternatives, and that the EIR was inadequate because it failed to consider any potentially feasible alternatives that would avoid or limit the significant environmental impact of the project on the city's water supply," the ruling said.

Don Stevens, a member of the Habitat and Watershed Caretakers, praised the decision.

"This is a historic court ruling for the future of Santa Cruz," he said. "Hopefully, the city and UCSC will realize that the old ways of unlimited growth and development are not sustainable."

Applications by the university and city to expand the city's service area and provide up to 100 million gallons more water each year to the campus were set to be heard Dec. 5 by the Local Agency Formation Commission. The city and university agreed to apply to the commission as part of a 2008 settlement agreement that requires UCSC to house two-thirds of new students on campus -- a pact that halted lawsuits over UCSC's growth plans.

Councilman Ryan Coonerty, an architect of the settlement, said he was surprised by the appellate ruling, saying it will cost the city more money on lawyers and studies while calling into question whether the university will have to live up to concessions made in 2008.

"If they continue to grow in the community, it will have tremendous impacts on housing, traffic and water," Coonerty said.

UCSC attorney Kelly Drumm said the university is weighing its options.

"The university disagrees with the conclusion that the court reached, that the city's EIR didn't analyze a broad enough range of alternatives related to the city's sphere of influence application," Drumm said. "After conferring with the city, the university will consider what steps it might take next, including whether or not to request a Supreme Court review of this ruling."

LAFCO preliminarily approved extending water to 240 acres of the undeveloped north campus in December 2011. The board then narrowly voted three months later to wait until negotiations with regulators were completed to determine how much water the city might have to cut back for fish habitat protection. The panel punted the applications until Dec. 5, but Executive Director Patrick McCormick said he doubted the commission would vote next week, given the appellate ruling.

"LAFCO staff is available to the university and city representatives to discuss their options for fixing the EIR and getting the applications back on a LAFCO agenda," McCormick said.

The university's growth plans also have been a factor in the debate over whether the city should build a seawater desalination plant to create more water during droughts.

Opponents say the city should not extend more water to the university when there isn't enough water in dry years to supply current customers. But the city says the plant is needed regardless of whether the university, which has agreed to pay for offsetting the increased use elsewhere in the system, grows in coming years.

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