Developer blames planning process for recent layoffs, but Santa Rosa defends lengthy reviews

Two weeks ago, developer Bill Gallaher laid off nearly half of the employees at his Santa Rosa headquarters.

The fact that a developer in Sonoma County is downsizing in the current economic climate is not surprising, even one as successful as Gallaher, who built a large chunk of Oakmont, founded a local bank and built dozens of housing communities in three states.

It's the reason for the layoffs that has the business community buzzing.

"I held off laying people off as long as I could," Gallaher said. "It's directly related to the projects in Santa Rosa."

He doesn't blame the bad economy. He blames the city's planning process, saying it has unnecessarily delayed plans to build two new housing communities. Now he says he's fed up and can't stay silent any longer.

"We're tired of it. We're tired of being kicked in the teeth," he said.

While the city says the projects are being handled appropriately, word of the cutbacks and Gallaher's frustration have stoked long-simmering resentment in the business and development community toward what it sees as the county's increasingly slow-growth, anti-development climate.

That sentiment is especially acute since the November election, which placed what have been characterized as anti-growth majorities on the City Councils in Santa Rosa and Petaluma.

Some business leaders believe that local planning processes, while perhaps well intentioned, are compounding the pain the recession has inflicted on local developers and property owners, ultimately delaying an economic recovery.

"While other communities are stimulating economic activity, our local governments are strangling it," said Keith Woods, chief executive officer of the North Coast Builders Exchange.

Developers large and small see someone as successful as Gallaher getting hung up as further evidence that Sonoma County is a tough place to do business, Woods said.

"Nobody's asking things to be ram-rodded through, but I can tell you that Bill Gallaher is just the tip of the iceberg," Woods said.

Developers who bemoan planning processes as time-consuming and expensive are nothing new. But with unemployment at 10.2 percent and cities strapped for cash, the charge that government officials are preventing the local economy from getting the shot in the arm it so desperately needs packs a punch.

Gallaher notes that when Varenna was under peak construction, it employed 350 people. In addition, the city stands to make $9 million in fees from one of his stalled projects, he said.

But instead of creating jobs, he's eliminating them.

Gallaher laid off seven of the 18 employees at his Santa Rosa-based development firm, Oakmont Senior Living, earlier this month, nearly 40 percent of the staff at his headquarters, he said.

Oakmont Senior Living is closely allied with Redmond, Wash.-based Aegis Living, the assisted living firm Gallaher co-founded in 1997. Aegis manages Oakmont Senior Living's communities, but the two companies are separate. Gallaher sold his stake in Aegis in 2007. Today, Aegis operates 34 care facilities throughout the western United States.

Draftsmen, accountants and marketing staff were among those who lost their jobs at the firm. Gallaher said he could no longer justify the positions, given the delays in his two pending communities.

Lengthy reviews

The 142-unit Fountaingrove Lodge project for gay and lesbians and the 200-unit Elnoka Village condominium project just west of Oakmont have been in the planning stages for more than four years.

By contrast, a third project, the 250-unit luxury senior community Varenna, won comparatively speedy approval in 2005. Construction went smoothly, and despite price tags as high as $1.3 million, units are selling well, Gallaher said.

But unlike Varenna, Gallaher said the other projects have been bogged down in unneccessarily lengthy planning reviews.

The environmental reports, public hearings and plan revisions for the Fountaingrove Lodge project have proven particularly costly, he said. Now future residents once committed to the project have begun to demand their deposits back, Gallaher said.

"We have depositors who are essentially saying 'you guys will never get this approved,' " he said. "Projects have a certain amount of credibility and you start losing it when you can't get them approved."

'Difficult' building sites

Gallaher's travails are raising eyebrows in the business community, in part because of how prominent a figure he is in Sonoma County.

A third-generation Sonoma County native, Gallaher has built almost 1,000 houses in Sonoma County, including 650 for seniors in Oakmont and Windsor, the Lakewood Village Shopping Center in Windsor and the Vineyard Creek apartment complex near Airport Boulevard.

In 2005, he helped found First Community Bank in downtown Santa Rosa.

He and his wife Cindy are active in philanthropic efforts, including support of local schools. In April, they donated $85,000 to save the Santa Rosa High School wood shop program.

But some say the bureaucratic buzzsaw that Gallaher claims he's run into may be partly of his own doing.

Both his latest applications are for large projects in sensitive, highly visible areas: Fountaingrove Lodge would sit on an oak-studded hillside and the Elnoka Village project sits near the politically active retirement community of Oakmont.

"Those are difficult pieces of property that he chose to build on, I will concede that. But I don't think that makes the City of Santa Rosa to blame for the delays," said City Councilwoman Jane Bender.

Appeasing neighbors

The size of the hilltop Varenna project may also be fueling concern about the nearby Lodge project, contributing to the delays. While it faced little public opposition during the planning process, Varenna outraged many Fountaingrove residents and others during construction. They decried its sheer mass, towering retaining walls and visibility from Highway 101. Even planning officials admit the review of the project was perhaps too speedy and the final product more visible than originally advertised.

"The opposition he's faced with the Lodge is because nobody believes anything he says," says Fountaingrove resident Jim Johnson, who has likened the Lodge to cramming a Costco onto a narrow hillside lot.

Councilwoman Marsha Vas Dupre is one of those who felt Varenna's visual impacts weren't sufficiently studied. As a consequence, neighbors this time around are alert, organized and tracking the project closely to avoid a repeat of Varenna, she said.

Despite being accused by the developer of a bias against the projects, she said she supports the revised project.

"I don't think that the community is slapping the Gallahers in the face, and I am sad to hear that," she said.

Gallaher denies Varenna turned out differently than designed, saying visual studies turned out "almost identical" to current photos of the project. He says he is proud of the project and notes it has won an environmental development award.

The Lodge isn't being treated differently because of Varenna, but they are not unrelated, said city Planning Director Chuck Regalia.

Whenever there is significant neighborhood opposition to a project, the city's Community Development Department strives hard to make sure studies are thorough, all questions are answered, and there is ample chance for public participation, Regalia said.

The Lodge project is "atypical" for several reasons, including its visibility, the project's destruction of oak trees, presence of a nearby earthquake fault and its proximity to Varenna, city officials say.

Debate over delays

Investigating those issues has cost Gallaher more than $800,000 for environmental studies on the project. The reports include geotechnical surveys which he contends weren't even necessary because the city already had a similar study from the previous developer.

But the city was simply trying to make sure the project's EIR was bulletproof, since it was clear the neighbors were actively opposing the project and might sue if the EIR was weak, Regalia said.

Gallaher doesn't see it that way, and has pressed hard to speed up the process. His attorney, Stephen Butler, wrote a letter to Regalia last year saying Aegis Living was "very frustrated" by the "interminable" delays that created a risk of the project "missing the market entirely."

Regalia's reply letter puts the blame for delays back on Gallaher, whom he says he has never met.

Regalia estimated that about one year's worth of delays were "directly attributable to the applicant's withdrawal of applications, disputes over the necessity of additional technical work and suspending work by placing the application on hold."

Regalia said he's disappointed to hear Gallaher has had to lay people off, noting he had just done the same thing in his department.

"(The project) has been very challenging, and I know that they have been less than happy with that," Regalia said.

The Santa Rosa Planning Commission in May sent the project back to design review to address concerns about parking, preservation of oak trees and the building's proximity to Thomas Lake Harris Drive.

Gallaher resubmitted the project with significant changes to the city's planning department earlier this month. A neighborhood meeting is slated for this Thursday, after which the revised project is scheduled to go before the Design Review Board on Sept. 3, senior planner Erin Morris said.

The Elnoka Village project is even farther behind schedule. That project became embroiled in a zoning dispute that stoked opposition by the politically active Oakmont community next door.

Gallaher is proposing to build just over 200 condominiums on a 9.6-acre piece of a 68-acre property along Highway 12, property that in the 1990s had been part of a larger project approved for 460 senior condominiums. But Oakmont residents objected, citing traffic impacts, the lack of age restrictions and the possibility the multistory units would clash with Oakmont's architecture.

Long list of complaints

The city bears some of the responsibility for the clash, Bender said. Before Gallaher purchased the land, the city agreed to increase the density on a piece of the property in 2002 to settle a lawsuit with the Sonoma County Housing Advocacy Group, Bender said.

Oakmont residents were "caught unawares" by the zoning change, contributing to the confusion, she said.

"I don't think it was ideal for the residents around that area because Oakmont was under the impression that it was zoned for senior housing," Bender said.

Gallaher has a long list of complaints about how that project has been handled, as well, including mistakes by planners he says caused him to overpay for one parcel by $1 million, and a $220,000 environmental impact report he says is unnecessary.

He has decided to sell off the remaining 58 acres around his 9.6-acre project site, disgusted with a process he says he can't bear going through again.

"We're not having this problem anywhere else," he said. "It's only here. Santa Rosa is just so difficult."

Gallaher says he didn't object to the EIR for the Varenna project because it sits on a ridge line and required a zoning change. But he's adamant the other two EIRs were unnecessary.

Never before, in 31 other senior projects he's done in Washington, California and Nevada, has he been required to provide an EIR for a project, Gallaher said. But environmental studies have been required for all three of his latest projects in Santa Rosa.

The experience has disheartened Gallaher. If he knew then what he knows now, Gallaher says he would have steered clear of Santa Rosa entirely and chosen to build in other communities.

"I really made a tactical business error when I bought so much property around here" early in the decade, he said.

'Too ornery to give up'

Despite the setbacks, Gallaher says he's committed to finishing what he started, he said.

"I'm too ornery to give up. They've met their match with me," he said.

Whether that orneriness is helping or hurting him is another question. Aegis representative Steve McCullagh in May accused city planner Morris of "misleading" members of the Planning Commission about the project. Board members told him he was not helping his cause.

Morris said the developer has since resubmitted plans for Fountaingrove Lodge that "based on initial review . . . appear to address many of the comments of the Planning Commission," she said. The public gets its first look at the new Lodge plans on Thursday, at 6:30 p.m., at the Steele Lane Community Center.

Bender said she hopes the working relationship between the developer and the city can improve.

"We're all in this together and I wish that instead of attacking each other we could work together," she said.

You can reach Staff Writer Kevin McCallum at 521-5207 or kevin.mccallum@pressdemocrat.com.