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This paper examines the institutional origins and functioning of the Monterey County Water Recycling Project (MCWRP), a centralized tertiary-treatment facility that began operating in April, 1998, and delivers urban recycled water to growers at the mouth of the Salinas River, a site of extensive seawater intrusion to coastal aquifers. The Salinas Valley supports extensive irrigated agricultural production and several towns. The MCWRP was established with the cooperation of federal, state, regional, and local authorities. Federal sources financed roughly 70% of the initial capital costs, while local authorities own and manage the project. In turn, growers receive urban recycled water and pay acreage fees. Reasons for the success of this project include cost sharing among all beneficiaries, devolution of sufficient authority to regional and local authorities to impose alternative solutions, federal and state financial support, and development of innovative project management institutions. Future challenges could arise from increasing competition for all water supplies in the region. [ABSTRACT FROM AUTHOR]