Montage Healdsburg builder seeks to renegotiate deal with city as resort nears opening
Initial discussions are underway between the builder of a long-planned luxury hotel just months away from completion in Healdsburg and city officials over public benefits in the original development deal that the builder wants to forgo, including on-site construction of affordable housing.
Montage Healdsburg, touted as the city’s first five-star hotel, is set to open by December, about 15 years after the previously named Saggio Hills project was put forward on 258 wooded acres on the north side of town. It includes 130 rooms and suites ranging from $695 to $1,695 a night, and plans for up to 70 villa-style homes.
But as the finishing touches on the hotel are put in place, the Robert Green Company, the Encinitas-based developer, and project subsidiary Sonoma Luxury Resort, are seeking to renegotiate some of the public amenities called for in the 2011 approval that paved the way for the project, previously estimated to cost up to $310 million.
In exchange for a $7.25 million cash payment to the city, Robert Green Jr., the company’s president and chief executive officer, wants to forgo on-site development of affordable housing and other public amenities he was required to provide, including a fire substation, construction of a community park, a trail network and two public roadways meant to aid emergency evacuation and link with the nearby Parkland Farms subdivision.
On the 14-acre affordable housing site, which Green was to grade for the city before handing over for construction, the developer instead wants place an open space easement, barring future building. The cash payment would be intended in part to help finance equivalent housing elsewhere in the city.
Green also put up $1 million held in escrow for the housing project and said he would not seek reimbursement for another $1 million already spent on housing infrastructure — utilities, according to the city.
“The finalization of these components will enable (Sonoma Luxury Resort) to move our focus to making the opening of the hotel a success for us and the community,” Green said in the June 30 letter, which cited financial and construction challenges amid the pandemic that have affected the project. “We are hopeful this approach is received with the desired intent to support the community, while allowing both (parties) to fulfill our respective obligations …”
Under the present agreement with the city, each of the public commitments must be met before April 2023, though the bulk of their completion was not tied to the opening of the resort before that date. None have been met so far, in part because the city also has failed to meet certain deadlines, interim City Manager Dave Kiff acknowledged.
“We certainly share in the struggles of getting elements completed in the time that they were expected,” Kiff said. “I do think the conditions on the ground, in particular COVID, blocked us from doing the kind of robust planning process with the community with elements like the park.”
City finances stand to benefit significantly from the resort’s opening, with Montage expected to account for more than half of Healdsburg’s annual hotel tax revenue, pegged at about $7.7 million three years from now. But for now, those revenues have plunged amid the dropoff in hotel stays during the pandemic and related shutdown. The downturn resulted in a projected 7% hit to the city’s general fund, which forced the city to freeze two police positions and eliminate three executive staff jobs, in addition to cuts to the community services department that oversees parks.
Still, that doesn’t mean the city is poised to immediately accept the new terms Green has laid out, Kiff said.
The implications for affordable housing development, a pressing issue in Healdsburg, are a big concern on their own. Based on the number of homes that could ultimately be built on the 14-acre parcel ― a maximum of 150 units ― the affordable housing site at Montage is valued at $5.3 million to $7 million, according to a recent city-funded study by consultant Economic & Planning Systems.
That land and the promise of affordable housing has been a linchpin of the existing deal, said Vice Mayor Shaun McCaffery, the City Council’s longest-serving member. Its future will factor heavily into new negotiations and direct what else happens with several of the other planned public amenities, he said.
“All that stuff hinges on that one thing, whether or not to build affordable housing out there,” McCaffery said. “I know where I am on it. I just think that that property is too valuable to trade for something else.”