State questions $8 million price tag Sonoma County plans to pay for Santa Rosa hotel to house homeless

While county health and housing leaders maintain hope a state grant program to curb homelessness amid the coronavirus pandemic will help the county buy the Sebastopol Inn, the state is withholding money for another hotel local officials want because of questions about how much it’s worth.

Sonoma County is set to pay at least $3 million more than the appraised value of Hotel Azura, a downtown Santa Rosa hotel where it plans to house some of the area’s homeless population, county documents show.

County officials say that number, which the county provided to the state Aug. 13 more than a month after signing an agreement to buy the hotel for $7.9 million, was simply a placeholder. An official appraisal, due this week, will set the course for ongoing negotiations with the state.

“We were on a very tight timeline,” said Barbie Robinson, Sonoma County’s interim executive director of the Community Development Commission, the county’s primary homelessness agency. “We knew we were going to have a back-and-forth negotiation with the state.”

Hotel Azura is one of two properties county housing officials have targeted through Project Homekey, a $600 million state grant program funded by federal pandemic emergency dollars. The other, the Sebastopol Inn, remains on a waiting list, and county leaders are moving forward as though the California Legislature will make more money available so the county can secure that property.

The hotels would combine to house 75 residents, with an emphasis on homeless people 65 or older, or those with underlying health problems that make them more vulnerable to COVID-19.

The long-term goal, to create permanent housing at both hotels, will require zoning changes and significant renovations — at least at 42-room Hotel Azura — in order to comply with local and state regulations. To accomplish that with the Santa Rosa property, it likely will take three years.

Negotiations with state officials, as well as the county’s agreement to buy the hotel, now hinge on the new appraisal Robinson said is due by the end of this week. Robinson said the county Board of Supervisors still will have to approve the Santa Rosa hotel acquisition, and she wouldn’t speculate about the outcome of the appraisal process.

“It’s really a negotiation,” she said of ongoing talks with state officials over the hotel deal. “We’re sensitive to having those types of negotiations played out in the open.”

If county officials do walk away without closing on the hotel, they will lose only time and a $50,000 deposit, according to the purchase agreement they signed July 7 with Hotel Azura’s owner.

Robinson said the state won’t pay above the appraised value of the hotel, and she headed off any notion that the county isn’t spending wisely.

“At the end of the day, we are stewards of the government’s money,” Robinson said. “I’m not backing into anybody’s answer about the value of it. These are the dollars of the people. Our job is to work as good stewards of those dollars.”

A timeline the county submitted to the state suggests it may be three years before Hotel Azura is fully, legally able to be used for long-term housing, and the costs to upgrade the hotel will reach nearly $3 million, according to newly obtained documents that provide a glimpse into the county’s plans, costs and its timeline for both properties.

The plans require the county to install kitchens and fire sprinklers, making up the bulk of the costs necessary to qualify the rooms for long-term housing.

In the same documents, the county acknowledges it has agreed to pay $3 million above the Santa Rosa hotel’s appraised value, which it pegs at $4.9 million. The county’s hotel purchase agreement, obtained from neighbors who requested the documents via a California Public Records Act request, show it agreed to pay $7.9 million for the property that last sold for $285,000 in 2010.

Tina Rivera, assistant executive director of the Community Development Commission, cited “significant renovations” done to the property since the owner acquired it a decade ago as at least part of the explanation for the agreed-upon pricing for the county to acquire it.

All told, county officials expect to spend $16.4 million to buy, renovate and operate Hotel Azura for the next two years as homeless housing.

The county would spend less — about $10.3 million — on the 31-room Sebastopol Inn, which Supervisor Lynda Hopkins said could be ready to serve residents more quickly, citing existing, in-room kitchenettes. But both hotels will carry substantial ongoing operations costs — $4.6 million combined annually, money the county has requested from the state. Additional money to run the hotels beyond two years is up in the air.

Supervisor Shirlee Zane pointed to Nov. 3 ballot Measure O, which would generate at least $25 million annually for mental health and homelessness services, as a possible long-term solution.

“That’s why we have Measure O on the ballot,” Zane said. “It will be the fund for some of those services.”

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