The Napa of pot? Some say Ukiah is perfectly positioned as its business culture opens up

UKIAH - Can one new store change a town?

Business leaders and elected officials in this city of 16,000 believe the new Costco that opened up last month might trigger a wave of economic development here for a place still searching for a new business identity following the decadeslong decline of local logging jobs and shuttering of pear-packing plants.

After all, they insist, the Issaquah, Washington big-box retailer knew the potential here, with up to 5,000 shoppers on weekends coming from Lake, Humboldt and even Sonoma counties in addition to the 88,000 residents who live in Mendocino County. City officials are already enthusiastic with the estimated $2 million in sales tax revenue that is expected to come into Ukiah's coffers, increasing its general fund by 11 percent.

“I'm very bullish around here,” said Jay Epstein, an agent for State Farm Insurance in Ukiah.

But the optimism goes beyond new retail offerings such as In-N-Out Burger and Chipotle Mexican Grill that provide 21st century creature comforts and avert the need for an hour drive south to Santa Rosa. They believe the city on the Highway 101 corridor is perfectly positioned to take advantage of two major trends affecting Northern California: escalating housing costs that are making the dream of owning a home elusive for many middle-class families; and the emergence of the newly legalized multibillion- dollar cannabis industry.

Mayor Kevin Doble noted the Costco project - located on 15 acres of redeveloped land on the city's south side - sparked opposition from some residents over traffic and environmental concerns, which were addressed but tacked on years of delay.

However, such anti-growth sentiment appears to be subsiding in the city, he said, as younger leaders emerge and want to ensure Ukiah can remain a city that attracts young professionals and their children. That means not just attracting ubiquitous fast-food jobs. The Costco store, for example, employs 230 people, more than half of them full-time, and pay starts at $14 an hour, with some of the best benefits in the retail sector.

“I just think the (business) message from the past in Ukiah has been ‘stay away,'” said Doble, 44, who grew up in Sebastopol. “I think that might be changing.”

Doble could be right. The area has recently received some additional good news as Gary Breen, a local developer who owns the Campovida farm and winery in Hopland along with the Stock Farm bar/restaurant and inn, confirmed that he has bought Mendocino Brewing Co. and plans to revive the Ukiah-based label.

Mendocino Brewing was a pioneer of the American craft beer movement but closed amid financial problems earlier this year. Its brewery is located right next to the Costco, near the Ukiah Municipal Airport. The label will start small, producing such classics as Red Tail Ale and Eye of the Hawk on a local basis this year to determine the appetite of consumers, Breen said. But if demand picks up, Breen said he could eventually open up a taproom at the brewery given the amount of customers coming there just for Costco.

He also has plans for a 50-acre cannabis education center as well as the new Thatcher Hotel, which will open by the end of the year to court tourists. Both are located in Hopland, a small community 13 miles south of Ukiah.

“What I see on the demand side is with wine, weed or beer,” Breen said of the area.

The Ukiah area has some benefits that other Mendocino County cities do not have. It is the county seat with a government workforce as well as home to Ukiah Valley Medical Center and Mendocino College, which has more than 5,000 students. It also has a small but burgeoning manufacturing sector, including Factory Pipe, which makes exhaust systems for the motorsports industry.

In addition, the Ukiah Valley also is noted for its wine industry. Although not as large as the wine sectors in Sonoma or Napa counties, Mendocino County is home to Fetzer Vineyards, which employs 200 workers and has been at the forefront of environmental farming of wine grapes since its foundation 50 years ago.

But the unofficial economic sector for decades has been cannabis. Ukiah is the gateway to the Emerald Triangle - the country's largest and most highly regarded marijuana region - within Mendocino, Humboldt and Trinity counties.

The region already has experienced the effects of legalizing cannabis for recreational use in California, which was approved by voters in November 2016. The economic results so far have been negative for many local growers, who have seen their incomes decrease as a result of lower prices paid for the plant and new costly regulations, residents and industry officials said. Some marijuana farmers have dropped out of the business.

The impact can be felt in the region's downtown business districts. Historically, some families earned as much as $50,000 in supplemental income by farming cannabis. That money would be spent in cash - so as not to attract the notice of law enforcement or the Internal Revenue Service - at local businesses.

For instance, Epstein noted his office would receive about $40,000 to $50,000 per month in checks and cash for policy payments from his customers. “And probably almost $30,000 was in cash. That has dropped significantly,” he said. “I'm hearing banks … they say we don't see near the cash we had been.”

Conversely, legalization also has presented some opportunities. Some entrepreneurs see the possibility of making the Ukiah Valley the center for commerce and tourism for cannabis, given its history and culture, as well as receptiveness among local officials compared to elsewhere in the state. They contend what Napa is for wine, Ukiah can be for cannabis.

“The potential is unlike any other county in California,” said Michael Steinmetz, CEO of Flow Kana, a San Francisco-based company that wants to be the Whole Foods Market for the cannabis sector. It is one of the leading companies in the new industry along with Santa Rosa-based CannaCraft, another cannabis manufacturer, which has its own dispensary in Hopland located next to a 12-acre farm tailored to ecotourists.

Flow Kana is ramping up its production and manufacturing facility at the former Fetzer Vineyards property in Redwood Valley, with eventual plans to make it a tourist spot akin to what local wineries have done throughout Napa and Sonoma counties to court their customers.

The company aims to eventually employ up to 150 workers at the Redwood Valley facility, with many of those in higher-paying positions such as inventory managers and scientists.

The benefits should flow through the region, Steinmetz said, as companies hire full-time workers who live in the community as opposed to the so-called “trimmigrants,” outside laborers who would work for months at a time trimming cannabis and then leave the Emerald Triangle with their cash wages to spend elsewhere.

“Mendocino County really has an opportunity to stake a flag and create the epicenter for cannabis culture for sophisticated travelers,” he said.

A lower cost of living also helps. The area's housing prices are an incentive to attract workers given that a single-family homes can start in the $350,000 to $400,000 range, making it affordable for younger middle- class families. In contrast, Sonoma County's median single- family sales price reached $705,000 in June. The Ukiah area's median sales price in May was $410,000, according to RealtyTrac.

“There is a huge progression going north right now and I think it's going to continue,” said Todd Schapmire of W Real Estate, which has offices in Ukiah and Santa Rosa. “We're getting to the point where we are hitting the ceiling. The median person can't afford 700 grand.”

New buyers, he said, are mostly from two groups: those priced out of Sonoma County looking to buy a home with a family member who likely works in Santa Rosa or its nearby cities; and those in the North Bay who are phasing into retirement and want to buy a place with more land than they can get in their current residence. The emerging cannabis industry will put additional pressure in the scramble to find housing.

The Ukiah housing market needs new development, Schapmire said. He said two long-standing proposals - one 120 single-family subdivision amid vineyards just north of the city and another 200-home development in abandoned vineyards south of the city - need to go forward to really drive growth in the area.

“We lack the product mix to attract what's really needed,” he said of new homes.

Without a doubt, Ukiah still retains a segment of counterculture activity, which can be viewed daily over at the Ukiah Natural Foods Co-op where shoppers can pick up Herb Quarterly magazine and organic Preggie Pop Drops. But it is also home to almost 10 pizza places, with the Mountain Mike's Pizza chain exploring its first location in the city.

Over at Slam Dunk Pizza & Family Fun Center, owners Matt and Stephanie Dunken said they mix the traditional customers - families with children and local youth sports teams - with those who want a vegetarian or vegan pie or one with a cauliflower crust.

Many of their millennial customers are more discerning. “They're foodies. You need to keep up with them,” Stephanie Dunken said of her younger customers.

The couple employs slightly more than 40 workers - both part-time and full-time - drawing at least 40 percent from local high schools and Mendocino College. Through a community program, it also has employed recovering drug addicts, which has worked out well for the restaurant.

They say their business is dependent on the city attracting more young couples, who will eat at their restaurant as their kids play sports and other activities. It has been in business for almost five years.

“My big concern is bringing in too many minimum-wage jobs. We need industry up here,” she said.

The community is changing as hardcore opponents to growth don't have the sway they once did, Stephanie Dunken said, noting there has been very little criticism of Costco around town since it opened its doors on July 19.

“The community does have a tendency to fight things a little bit,” she said. “Ukiah will be better at accepting new things. I hope.”

Editor's note: The story has been updated to clarify that the Hopland dispensary is located next to a 12-acre farm tailored to ecotourists.

You can reach Staff Writer Bill Swindell at 707-521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell.