Sonoma County eyes sale of Chanate Road property for 2nd time around

Sonoma County, having renewed its bid to sell a nearly 72-acre property in northeast Santa Rosa, is in negotiations with three prospective buyers, including a company owned by Sonoma County developer Bill Gallaher, whose previous offer became mired in controversy and was dropped last year after a bitter legal battle.

The Chanate Road property, site of the old county hospital and later Sutter Medical Center, represents one of the largest pieces of land available for future housing in the city. Some neighbors staunchly opposed the more than 800 housing units proposed in the last purchase deal.

The property is now mostly vacant, its shuttered buildings a target for vandals and squatters, costing the county $800,000 a year to maintain, including security patrols.

Gallaher’s firm, OSL Properties LLC, was one of three housing developers that responded with offers following the county’s February solicitation to about 650 organizations.

The other two bidders are EAH Housing, a San Rafael-based nonprofit that has developed about 100 affordable housing projects worth about ?$1 billion in California and Hawaii, and the California Community Housing Agency.

In the previous go-round, the sprawling Chanate property was slated to be Santa Rosa’s largest housing project in at least a decade. Gallaher, well known for building homes in Oakmont and senior living facilities in Fountaingrove, wanted to build 867 housing units on the site, including rental apartment buildings three or four stories tall.

Neighbors vehemently opposed the plan and filed a lawsuit alleging the county should have conducted an environmental assessment of the project. A judge ruled in their favor, delivering the county a bruising loss and significantly delaying one of its most highly touted efforts to address the regional housing crisis.

Supervisors opted not to appeal and walked away from the multimillion-dollar deal with Gallaher in October. Two months later, the board voted to start over, prompting the request for new offers on the land.

Under the current bidding process, prospective buyers of the 71.6-acre site must be either designated public agencies or “housing sponsors” that would focus on building affordable housing. They need not be nonprofit organizations, said Caroline Judy, the county general services director.

State rules require that a quarter of the housing must be deemed affordable, with a 55-year deed restriction attached to the property, she said.

But unlike the first time around, the current proposals do not include any development plans, Judy said. Following the county’s decision on a buyer, Santa Rosa will be responsible for approving the plan - a step that was never fully launched under the previous deal.

Joanne Thomas, a Chanate-area resident who fought the Gallaher plan, previously said neighbors want to see “a safe and reasonable development” that would “maintain the character of the property and the surrounding neighborhoods.”

The county has until mid-August to negotiate behind closed doors with the three prospective buyers, whose proposals will remain confidential until they are presented to the supervisors, Judy said.

“It’s in the taxpayers’ interest that the county has the ability to negotiate the best terms that we can get,” she said. All three bidders have “years of experience in building affordable housing,” she said.

Scott Johnson, regional director of real estate for EAH, said the Chanate project is “a great opportunity to bring forth what could be a transformative development” that addresses the community’s housing needs and is compatible with the neighborhood.

Citing the confidentiality of the negotiations, Johnson declined to discuss details of EAH’s project.

But if the 51-year-old organization is selected as the buyer, Johnson, a Sebastopol resident, said EAH would be “fully transparent” and engage the community in the planning process.

Representatives of OSL Properties did not respond to repeated requests for an interview over two days. The California Community Housing Agency also did not return a call seeking comment.

The county is not required to approve the highest bid and can accept a proposal that serves “the greatest public interest,” Judy said.

The current offers must be compared with the “fair market value” based on an appraisal, she said.

The county has obtained an appraisal, which is not a public record until the proposals are brought before the supervisors in a public session.

A 2016 appraisal assigned values to the property that ranged from as little as $7 million for the unimproved land to as much as $275.5 million if it was developed with commercial uses and housing.

Gallaher had agreed to pay up to $12.5 million for the Chanate property.

Meanwhile, the vacant hospital complex has become an albatross for the county, costing $800,000 a year for maintenance and security, Judy said.

You can reach Staff Writer Guy Kovner at 707-521-5457 or guy.kovner@pressdemocrat.com. On Twitter @guykovner.