What Vineyard Creek Apartments got in exchange for affordable housing

Vineyard Creek Apartments sits not far from Charles M. Schulz-Sonoma County Airport, “nestled among the vineyards” beside an aging mobile home park.

The 232-unit complex, which includes a community garden and balconies overlooking a swimming pool, is marketed as offering the luxuries of Wine Country, with units named for Syrah, Malbec, Riesling and Zinfandel.

When the county was considering approving the project in the early 2000s, it was under pressure to comply with a court order to greenlight more affordable housing. County officials rezoned commercial space near the airport to clear the way for Vineyard Creek. In exchange for zoning and permitting concessions, Sonoma County developer Bill Gallaher agreed to designate 47 units at the complex for low-income tenants.

But a whistleblower lawsuit filed by a former employee in June 2019 raises questions about Vineyard Creek’s compliance with the deal. In her complaint, Mariah Clark, a former property manager at the complex, accused companies owned by Gallaher of extensive affordable housing fraud at Vineyard Creek, including overcharging low-income tenants for rent and leasing out some affordable units to those who did not qualify.

The Press Democrat has reported that Clark and five companies named as defendants in the lawsuit have agreed to a $500,000 settlement over claims of retaliation and other alleged California labor code violations. The settlement also would lead to the dismissal of the fraud claims.

Three government agencies, the Sonoma County Community Development Commission, the California Attorney General’s Office and the California Department of Insurance all investigated the whistleblower claims and declined to join the lawsuit.

Attorneys for the companies did not respond to repeated requests for comment about the lawsuit and settlement last week. Gallaher also did not respond to requests for comment.

When the project was first being considered, critics worried the complex — at the time, the largest residential development proposal in the unincorporated county — was a harbinger of out-of-control urban sprawl that would strain municipal infrastructure.

But the desire for affordable housing won out.

The allocation of affordable units also enabled Gallaher to secure cheaper financing.

Three times in the mid 2000s, California officials awarded what amounted to $35 million in tax-exempt bonds, which largely financed construction of Vineyard Creek.

The state grants the bonds to encourage projects that might otherwise have difficulty securing financing. Because investors don’t have to pay taxes on earnings from the bonds, they are more likely to agree to lower interest rates for a developer.

The California Debt Limit Allocation Committee, a board that chooses which projects get tax-exempt status, is made up of representatives from the governor’s, treasurer’s and state controller’s offices.

The board allocated $23.5 million in tax-exempt bonds to Vineyard Creek in 2003. In 2007, when news reports from the time suggest the complex was already open for business, Vineyard Creek asked for another $12.4 million in bonds, citing increases in construction costs and other expenses, according to committee documents and minutes. The committee granted the request.

Outside of Vineyard Creek, none of the companies listed as defendants in the whistleblower lawsuit has an affordable housing agreement with the Sonoma County government, according to county officials.

In 2017, Gallaher obtained an exclusive deal to buy the county’s 72-acre Chanate Road campus for a housing project that could have included over a hundred affordable units. Gallaher dropped out of the running for the project last fall, according to county officials.

You can reach Staff Writer Ethan Varian at ethan.varian@pressdemocrat.com or 707-521-5412. On Twitter @ethanvarian