SMART OKs deal on Railroad Square

<p>The North Bay's rail transit agency has reached a tentative agreement with a Los Angeles developer to build a $100 million mixed-use project in Santa Rosa's Railroad Square.</p><p>"It's a major step forward," said John Nemeth, rail planning manager for the Sonoma-Marin Area Rail Transit District, a public agency that owns the 5.5-acre site adjacent to the Santa Rosa rail depot.</p><p>About 18 months of negotiations between SMART and the developer, Michael Dieden of Creative Housing Associates produced the deal approved this week by SMART's 12-member board.</p><p>The deal includes terms for the sale of the land to Dieden for at least $2.5 million, paid over the course of constructing the project, which comprises affordable rental housing, high-end condominiums, a food and wine center, shops, office space and a parking garage.</p><p>SMART also will receive a share of the revenue from sales of the 118 condos included in the project's second phase, an income stream that could yield $2.25 million to $5 million over 30 years, Nemeth said.</p><p>But a key element is missing: a $15 million to $20 million "gap" between Dieden's resources and the project cost, the developer and SMART acknowledged Thursday.</p><p>Today, Dieden said he will present City Hall with a proposal that outlines the gap and sets the stage for determining what, if anything, Santa Rosa will contribute to the project.</p><p>"It's clear the city is not going to be able to bridge the entire gap," Dieden said.</p><p>Nemeth agreed with that assessment, noting that SMART will work with the developer to pursue state and federal funding for the eco-friendly, transit-oriented, urban-infill project.</p><p>But without help from Santa Rosa, he said, "I don't think the project is viable."</p><p>Mayor Bob Blanchard said Thursday the city is eager to look at the details of the deal, but he declined to estimate what Santa Rosa would contribute.</p><p>"We're going to do everything possible to assist within our capabilities -- and our limitations," Blanchard said.</p><p>Dieden's project is a "perfect fit" with a downtown-specific plan approved by the City Council last week, the mayor said.</p><p>"Now he's got something concrete to bring forward," Blanchard said, referring to the business agreement with SMART. "Now we can talk about it."</p><p>Dieden said he expects to break ground on the project's first phase -- including 40,000 square feet of shops, 40,000 square feet of offices, the food and wine center, garage and 40 affordable apartments -- in the first quarter of 2009.</p><p>The condos have been postponed to a second phase due to the county's housing slump, Dieden said. Nemeth said the condos could start construction in 2011.</p><p>The Railroad Square project anticipates SMART's goal of establishing a commuter rail line from Cloverdale to Larkspur, although Sonoma and Marin voters last year rejected a sales tax to help pay for it.</p><p>SMART plans to put another tax measure on the November 2008 ballot, and Dieden said he is confident it will be approved.</p><p>The train will "add value to the site" and boost Dieden's bottom line, Nemeth said, "but it isn't necessary to build the project."</p><p>You can reach Staff Writer Guy Kovner at 521-5457 or guy.kovner@pressdemocrat.com.</p>