Sonoma County poised to sell troubled Chanate Road campus after legal battle, other delays

More than five years after first proposing the sale and development of more than 70 acres of prime, infill land in northeast Santa Rosa, Sonoma County appears poised to advance a sale of public land that could kickstart housing development long-envisioned for the area.

County supervisors on Tuesday afternoon will weigh seven offers, ranging from $5,000 to $7.8 million, for all or parts of the 72-acre Chanate Road property, site of the former county hospital and present offices for health agencies, the county morgue and some nonprofits.

Village Partners Investments, a Newport Beach-based development group, is the favored buyer and top bidder, putting forward an offer of $7,795,000, nearly $1.5 million more than the second leading bidder. But the top bid is still far less than what the county was prepared to accept four years ago, before local developer Bill Gallaher’s original $12.5 million purchase deal was derailed by a neighbor-led lawsuit.

“It’s taken us a long time to get here,” said Supervisor Shirlee Zane, who faced sustained political blowback as the primary champion of prior efforts to sell the property. “We’ve had a lot of starts and stops…We’ve got to sell this. We’ve got to give the city, and the developer, an opportunity to do something great with it.”

The county’s preferred buyer, Village Partners, emerged after 23,000 potential investors were contacted, 80 groups mulled bids and seven submitted offers, according to county officials. Local developers who put in bids included Gallaher’s Oakmont Senior Living ($4.2 million); Curt Johansen and Keith Christopherson, who put in a joint bid ($4.9 million); and Bruce Codding of Paulin Pavilion Investors ($5 million).

Rounding out the group of bidders was Scott Zengel of City Ventures, an Irvine-based real estate firm that offered $6.5 million; and a $5,000 bid from a man named Scott Shanks seeking one small slice of a parcel on the northeast side of the county-owned property.

Under state law, potential buyers will be invited to submit higher bids in presentations during Tuesday’s Board of Supervisors meeting, provided those offers are at least 5% greater than the leading bid.

Among the top local bidders, only Oakmont Senior Living representative Komron Shahhosseini could be reached for comment, saying he didn’t believe Oakmont would submit a competing bid Tuesday and wishing others the best of luck. The Board of Supervisors online hearing is set to begin at 2:30 p.m.

A representative with Village Partners could not be reached Monday.

Along with its $7.8 million offer, Village Partners agreed to allow the county to lease its public health lab for $1 per year for the next two years, and rent the coroner’s office and morgue for three years at the same rate.

The company has circled Dec. 31 as a closing date, providing a potential cash windfall for the county amid its costly efforts to respond to another destructive wildfire season and combat the coronavirus pandemic. The Board of Supervisors has yet to discuss how the proceeds might be spent.

“There’s a million things the money could go for,” Zane said. “We certainly have a lot of needs right now. Honestly, if it was up to me, I would take the majority of that money and put it back into housing.”

A successful sale would mark the end of a prolonged and controversial move by the county to offload the Chanate Road property, one that county leaders, including Zane, have long described as both a valuable asset and costly liability.

After Sutter Health’s move to its new Santa Rosa hospital in late 2014, the former county hospital was shuttered, making it a target for vandals and squatters, with annual maintenance and security costs escalating to as much as $768,000 in 2018-19.

The county, which has long eyed the property as potential surplus land, launched a formal sale tied to housing development in 2015, leading to the initial deal with Gallaher, a prominent Sonoma County housing and senior care home developer.

His original purchase deal, approved by the supervisors in 2017 envisioned a mix of more than 800 residential units on site. Neighbors rallied against the sale and launched a successful lawsuit that forced the county to drop the deal in 2018 after a judge found it had not sufficiently studied the environmental impact of the housing proposal.

The decision was stinging loss for the county, and the political consequences fell heaviest on Zane, who represents the area.

Constituents opposed to the project posted signs near her McDonald Avenue neighborhood, calling her out for her support. She, in turn, labeled the opponents “NIMBYs” and “elite segregationists” — comments that she would later seek to walk back after the issue became a prominent one in her campaign for a fourth term, a bid she lost this year to former Santa Rosa mayor Chris Coursey, who used the Chanate fallout to bolster his insurgent run.

After the county dropped the initial sale, Gallaher’s group came back in 2019 with a $9 million offer during a second round of bids before again walking away in a public show of frustration when it became clear the county favored a different buyer.

Another bidder, California Community Housing Authority, would back out, too, leaving only San Rafael-based EAH Housing to negotiate with the county for the property in the fall of 2019. But the EAH-led group, which included Christopherson and Johansen, crumbled, forcing county officials to again spike the sale in February.

In August 2019, when the Board of Supervisors voted to commence negotiations with EAH Housing, supervisors also voted to spend $10.8 million to demolish 13 of the decrepit buildings on the site, which had become a haven for squatters and looters. To date, a couple of trailers have been removed from the site, Sonoma County General Services Director Caroline Judy said Monday.

Amid the series of setbacks, the campus became a prominent symbol of local government’s inability to spur critically needed housing projects, especially after losing more than 5,300 homes to wildfires in 2017.

County leaders had once envisioned the Chanate campus as one of four county properties that could be repurposed to create thousands of homes. Years later, none of those sites have generated any housing, with only the Roseland Village development marking any appreciable progress, although that project has been mired in legal disputes and neighborhood objections of its own.

Escalating costs tied to seismic studies and planned demolition of asbestos-ridden buildings on the Chanate campus also have contributed to a sinking valuation of the property: It was valued at $7 million in 2016 but most recently, in 2019, was pegged at $4.24 million. Appraisers once set its potential value at $275.5 million if the site was developed with commercial uses and housing.

And the county has continued to spend hundreds of thousands of dollars annually in efforts to prevent break-ins and fires.

Still, county leaders remain hopeful.

“I will be thrilled if and when we eventually sell Chanate,” said Board of Supervisors Chair Susan Gorin. “It’s a perfect opportunity for housing.”

You can reach Staff Writer Tyler Silvy at 707-526-8667 or tyler.silvy@pressdemocrat.com.