Beer boom strains Petaluma

At first glance, the upper stretch of North McDowell Boulevard in Petaluma doesn’t look like Sonoma County’s newest must-see attraction.

The mostly nondescript blocks are lined on both sides with industrial buildings and office parks. Sidewalks end abruptly at certain portions and tractor-trailers cruise down the street at 40 mph, while many vehicles surpass that speed limit. This area could have been a perfect set location for “The Office” TV show, but certainly not for a growing tourist spot.

Yet, crowds continue to flock there given its prominence as a beer mecca, the home of three local breweries. The largest draw by far is Lagunitas Brewing Co., the nation’s No. 5 craft brewer, which has garnered international attention for its hoppy beers, the music that is played in the amphitheater, and its decidedly non-corporate ethos and renegade attitude of its founder and owner, Tony Magee.

Visitors come as a result of continuing national boom in craft beer, which pumped $170 million into the local economy in 2013, according the county’s Economic Development Board.

The strain created by Petaluma’s expanding beer industry has been evident for some time, but one major step is being taken to lessen some of the problems.

Lagunitas is undertaking an approximately $30 million renovation to make its headquarters easier to visit, improve its transportation hub and increase its annual production in Petaluma from 450,000 barrels to 750,000 barrels.

A new parking lot will be built on south side of its property, 10 new fermentation tanks will be added to help boost production, a new wastewater treatment plant will become fully operational and access will be improved to its taproom and trucks that enter the plant.

The upgrades may not resolve the traffic, and other lingering issues still exist. Right across the street, the much smaller Petaluma Hills Brewing Co. operates its own taproom as it looks to grow in the market. In addition, HenHouse Brewing Co. brews at the Petaluma Hills facility and is exploring its next steps.

And a block down on Scott Street, the owners of 101 North Brewing Co. have just applied to the city of Petaluma to open its own 44-customer tasting room, which is likely to be a hit given the company has made great inroads by landing distribution deals with Safeway and Costco and has garnered good publicity with its flagship Heroine IPA.

“Nobody wants to stay small. Everybody wants to grow their business,” Magee said of his nearby competitors. “There may be another brewery and maybe two or more.”

Need for a plan

Moments later, Magee touched on the crux of the issue facing the city: “What’s the plan?”

Increasingly, more people are asking that same question as the craft beer boom collides in a quarter-mile area that it was never originally planned for. In fact, that area was more known as the birthplace of tech startups in the 1990s when it picked up the moniker “Telecom Valley.”

“A lot of this happened organically,” said former Councilman Mike Harris. “I think we now need to step back and analyze this for the entire city.”

The transition from telecom into becoming more of a Suds Alley began when Magee moved his plant from Ross Street to McDowell in 1999. Lagunitas kept growing, first by taking over the Bibbero warehouse and office building to the north and then obtaining a long-term lease to the building to the south where the tenant, Abode Creek Wine Storage, has a sublease to remain through May 2016, according to planning documents.

The more formal influx of visitors came in 2009 when Lagunitas opened its TapRoom and Beer Sanctuary, which can accommodate up to 325 patrons. They include out-of-town drinkers making their first visit, those coming to seeing indie music acts like Lucius, or veterans attending its carnival-like Beer Circus. Many would also take brewery tours.

Rocky road with city

While the taproom helps build up the brand and foster customer loyalty, which is crucial in the craft beer market, Magee notes it is just a sliver of his business.

“The taproom is totally incidental for what we do,” he said. “We do $200 million in sales. The taproom is about $2 million.”

As the brewery grew, relations between Lagunitas and the city planners became rocky - which is a charitable description. From Magee’s view, he was trying to build his brand in a very competitive and rapidly changing marketplace with little capital, while at the same time bringing in needed revenue to the city. The perception at some quarters in City Hall was a little different: Magee was viewed more as a guy who acts first and then asks for permission later, which went along with his contrarian image.

To get a sense of Magee’s view on the city’s planning department, one only has to read his book, “So You Want To Start a Brewery? The Lagunitas Story.” The planning department, which in 2009 was outsourced to a private firm as a result of budget cuts, gets its own index section in the book. “When I think of these city department folks, I am reminded of Carlos Castaneda’s petty tyrants,” Magee writes of his past battles.

The relationship became strained again this spring. The city lodged a stop work order - known in the vernacular as a “red tag” - when four of the tanks arrived at the Lagunitas facility without the proper permits, said Heather Hines, planning manager for the city of Petaluma and a principal at the M-Group.

Magee said the problem occurred when some of the tanks arrived early as Lagunitas was working through the permitting process in all of its modifications through one application. After about 10 days and with the intervention of City Manager John Brown, Magee said, the city split off the permitting to allow the tank construction to go forward while the other items would proceed to Planning Commission, which approved the campus modifications last month.

In an interview, Magee stressed that “there are no good guys and bad guys” in the incident. Hines also downplayed any spat, noting that Lagunitas has seen such an incredible growth rate - including a new Chicago brewery - that it has struggled in trying to keep up with the demand, which has affected its permitting. “That has been the challenge of working with Lagunitas,” she said.

Troubles elsewhere

Still, it isn’t the first red tag for a brewery in the area. Petaluma Hills got hit with one in December 2013 when owner JJ Jay decided to brew without the proper permits, which took three months to fix. Jay attributed the problems to delays in permitting his taproom, and were resolved once the production and taproom applications were split. He conceded that “I took the bad boy route,” but said his business could not wait with all the delays and still be viable.

“I don’t think they (the city) understands the business model for a brewery,” said Jay, noting that he thinks the city’s economic development official doesn’t have enough political pull to help smooth out such issues.

Councilman Gabe Kearney said the issue cuts both ways, though he is a booster of the craft-beer sector. He said he didn’t want to single out anyone, but “they just can’t do whatever they want to do and think we have to accommodate them.”

Water savings

The debate comes even as the council is viewed as much more pro-business than previous ones going back more than decade, and the fact that the Lagunitas’ improvements will bring many benefits to the city, most notably through the brewery’s new wastewater treatment plant. The plant will save about 85,000 gallons a day, reducing current water demand by 18 percent. Even with the increase in production, the number of daily truck trips will remain between 30 to 46, given that the wastewater plant will eliminate nine daily truck trips to a wastewater plant in the East Bay.

“I think it’s great that they’re putting Petaluma on the map .?.?. even though there are some growing pains,” Councilman Mike Healy said. “Lagunitas has a very good story to tell on water conservation.”

Jay said he would also recommend the city review its tasting room ordinance, which was drafted in 2011 (Lagunitas was approved before the new rules). He believes it focuses more on a wine tasting room where the customer has a small sample, possibly buys a bottle at retail, and then leaves, rather than breweries where people will sit and have a pint or two. “There is some truth to that,” Hines noted.

Jay said he faced scrutiny from the city when he put up a TV at the request of customers who wanted to watch the 49ers on Sundays in the fall. “The Planning Department was not happy about it,” he said.

A key test on how the city will respond to growth in the area is whether it will explore installing a crosswalk or a stoplight at the Scott Street crossing, especially given many people park on the side street and dash across McDowell to Lagunitas, then make the trip back after a few beers.

“I think at the very least there needs to be a crosswalk,” Magee said. “You have a lot of high-speed traffic there.”

Hines said the Planning Commission discussed the issue when the Lagunitas plan went before the panel last month. But commissioners felt the new parking lot, which will nearly triple its size from 167 to 468 spaces when completed, could alleviate the problem.

Healy said he has been informed by city staff that the speed is too high to have a crosswalk on McDowell and Scott. “It’s the same reason you don’t see crosswalks across highways,” he said.

But Jay said even with the addition of extra space at Lagunitas, people will continue to park and cross at the spot right in front of his brewery. Some will be creatures of habit, he said, and others will be lured to visit his place and 101 North’s taproom once it is operating. Food trucks may park nearby, making it a greater incentive to cross there.

Given the numerous issues, Kearney said it may be worth tackling all these issues together, rather than in a scattershot approach, similar to talk in the past about creating a special brewery district in the area. “Ideally, it would be great to have staff to dedicate to this,” he said.

City leaders could also address issues such as the need for more sidewalks in the area. “I’ve seen people walking on the west side in the bike lanes,” Magee said. In addition, as they lobby for a second station for the Sonoma-Marin Area Rail Transit system, such a discussion could provide perspective on the number of tourists and employees who come to the area specifically because of the breweries. Issues of wastewater treatment are also likely to come up as the smaller breweries grow.

“I would love ideally to come up with some targeted plan on how we can grow this area and how we can grow these businesses,” Kearney said.