Neighbors sue to block Sonoma County’s sale of former Santa Rosa hospital site

Sonoma County’s sale of its old Santa Rosa hospital complex has been officially challenged in court by a group that says it represents more than 200 concerned residents, setting up a high-stakes legal battle over the controversial real estate deal intended to generate hundreds of new housing units along Chanate Road.

In a 20-page lawsuit filed Wednesday in Sonoma County Superior Court, the group calling itself Friends of Chanate shed more light on the reasons behind its attempt to unwind the 82-acre property sale, accusing the county of neglecting its legal duty to study possible environmental impacts, abusing state public-meetings requirements and violating the California Constitution, among other claims.

Residents want the court to require the county to set aside its approval of the sale, temporarily block the deal from moving forward and nullify the ordinance authorizing the sale agreement. They also want the county to cover their legal fees.

“The issues that are going to arise from the sale and eventual development of the property were not addressed at all by the county when they sold it,” said Jim Barnes, a member of Friends of Chanate who lives near the site on Cobblestone Drive. “It’s not the developer’s fault; it’s the county’s fault. The county’s the one where the buck stops with them, because the developer got a better deal out of the county than the county got out of the developer.”

The group is represented by attorney Noreen Evans, a former state legislator who ran an unsuccessful campaign last year to represent west Sonoma County on the Board of Supervisors. Evans signed a letter earlier this week informing the county of neighbors’ plans to challenge the sale, which supervisors unanimously approved in July.

Even as a candidate for supervisor, Evans said she had concerns about the way the county was moving toward a sale of the Chanate Road site, which Sutter Health vacated in late 2014 when it moved to its current hospital on Mark West Springs Road.

“It seemed pretty clear that people in the community did not feel they were involved sufficiently in the decision-making process,” Evans said.

The lawsuit characterizes the sprawling Chanate Road property as “prime real estate located in one of the most desirable neighborhoods in Santa Rosa.” It accuses the county of breaking the public’s trust and its own legal responsibilities by “secretly negotiating a sweetheart deal with a well-known local developer,” Bill Gallaher, at the expense of taxpayers.

The lawsuit delves into many of the same themes raised by critics in public comments and other forums this year, including claims the deal was rushed through in a secretive fashion by supervisors, warranted greater public input and environmental review, and the sales price was too low.

County leaders have consistently pushed back on those arguments, contending their process was fair and legal, and the deal provides substantial monetary value for taxpayers while paving the way for the introduction of desperately needed housing units, particularly those affordable to poorer families.

“We believe we followed all of the appropriate procedures. Period,” said Supervisor Shirlee Zane, the board chairwoman whose district includes the old hospital complex. “This is nothing other than a thinly-veiled attempt by the neighbors to try and stop an affordable housing project. We’re deeply disappointed that a clearly recognized community need such as housing for veterans, seniors, working people, is being blocked by a few with vested interests.”

County officials have also stressed their actions thus far have not constituted approval of any particular project - they say they have only authorized a property sale, and the details of what will get built on the site are left in the hands of Santa Rosa officials, since the site lies within city limits and must now pass through the city’s planning and permit approval process.

The city hasn’t made any decisions about what can be built at the site, but Gallaher’s team has provided a conceptual plan, per the county’s request. He has envisioned building as many as 800 rental units, 20 percent of which would be affordable to very-low income residents, plus additional housing for homeless veterans, a grocery store, amphitheater, dog park and other amenities. Much of the land would remain open space.

Under terms of the deal approved by supervisors, Gallaher’s team agreed to pay $6 million in cash for the land, planning for at least 400 units, and the price would rise by $13,800 for each additional unit he is allowed to build, resulting in a maximum expected sales price of $11.5 million.

But the neighbors’ lawsuit alleges the deal allows the developer to sell the site “for far greater value” to a third party who would not be bound by the terms of the sale agreement. Gallaher’s team has given no indication that he has any plans to sell, and his project manager, Komron Shahhosseini, could not be reached for comment Thursday.

Assistant County Counsel Robert Pittman said only a lender who foreclosed on the property would be exempt from the sale agreement’s requirements, and he characterized that as a standard provision.

Additionally, the Friends of Chanate lawsuit accuses the county of violating state public-meetings law by going beyond the scope of what supervisors are permitted to discuss behind closed doors. The suit further alleges the county wrongfully concluded the sale wouldn’t significantly affect the environment and state law required it to conduct a more thorough environmental study.?Neighbors also claim that aspects of the deal, including the sales price, constitute a “gift of public funds” in violation of the state constitution.?Pittman rejected each of those arguments, saying the county fully adhered to legal requirements for public meetings and environmental study and neighbors were “narrowly defining value based on cash dollars.”

Including the cost of developing the planned affordable housing and the demolition and maintenance costs avoided by selling the site, among other factors, the county has said the deal could be worth as much as $71.9 million - more than six times the maximum cash sales price.

The two parties don’t have a court date yet, but Evans said she hopes to resolve the case “as expeditiously as possible.”

“I don’t think the intent of the litigation is to stop development,” Evans said. “The intent is to improve the proposal and to increase the value that the taxpayers are receiving for the property.”

The county has 30 days to respond once it’s served with the lawsuit, which Pittman said had not occurred by 5 p.m. Thursday.

You can reach Staff Writer J.D. Morris at 707-521-5337 or jd.morris@pressdemocrat.com. On Twitter @thejdmorris.