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A judge has voided Sonoma County’s controversial sale of public land on Chanate Road to a developer, clouding the future of Santa Rosa’s largest proposed housing project by siding with neighbors who sued to block the real estate deal.

Sonoma County Superior Court Judge René Chouteau said county officials erred in determining their agreement to sell the 82-acre site of the old county hospital complex was exempt from state law that triggers environmental review. On Wednesday, Chouteau ordered the county to vacate its July 2017 approval of the sale agreement.

The ruling was a major setback for county officials, who had touted the development as crucial to addressing the county’s dire housing crisis, one worsened by the loss of nearly 5,300 homes in October’s wildfires.

But neighbors opposing the sale and housing development in northeast Santa Rosa said the county rushed to close a deal they claim favored one of the largest local developers without properly studying the potential environmental impacts.

“It was obvious to us from the start that Sonoma County wasn’t complying with the California Environmental Quality Act,” said Noreen Evans, a Santa Rosa attorney representing the neighbors who filed the lawsuit. “It’s a shame that the county has wasted taxpayer money going this far. They should have done it right the first time.”

Lawyers representing the county and the developer, Bill Gallaher, said Thursday they were still reviewing Chouteau’s 25-page decision, which they could challenge at the appellate court level.

County officials characterized the judge’s decision as a blow to efforts to provide more affordable housing in a region where the new median home price is now above $700,000.

“It’s extremely unfortunate that the development of this property is being delayed when our need for housing is so great,” Supervisor Shirlee Zane, who represents the area, said in an interview. “The workforce here is the backbone of our county, and that workforce is suffering now and they need housing now. So it’s tragic that it’s being held up.”

Gallaher’s proposal envisions nearly 870 housing units on the property. It has reached the early stages of Santa Rosa’s planning process since the Board of Supervisors agreed to sell the county-owned land a year ago.

The city held a community meeting about the project last month, when hundreds of residents came to weigh in, many of them voicing strong opposition to the development. The proposal is scheduled to get preliminary input next week from Santa Rosa’s design review board.

David Guhin, Santa Rosa’s director of planning and economic development, said Thursday the city was reviewing the judge’s decision and waiting to see how the county decides to respond. City officials also plan to reach out to Gallaher’s team as they work to determine whether the design meeting should go forward, Guhin said.

Gallaher’s team said in a written statement Thursday it “respectfully disagrees” with Chouteau’s decision that the sale agreement required environmental review. The developer’s team is “exploring its options” in light of the ruling, the statement said.

Tina Wallis, Gallaher’s attorney who led the defense in a hearing before Chouteau last Friday, said in a follow-up interview that “no decisions have been made.”

“We’re still studying the court’s decision and choosing the best path forward,” Wallis said.

The Chanate Road proposal currently envisions a mix of housing types — including 260 units for seniors and 162 units reserved for people with very low incomes — as well as a grocery store, amphitheater, dog park and other amenities.

To county officials, the deal represented a rare opportunity for the government to spur construction of a large number of much-needed new homes.

But neighbors organized under a group named Friends of Chanate have consistently objected, citing potential traffic impacts on the winding two-lane Chanate Road, in addition to various other concerns. They sued in August, arguing the sales price was too low, the county didn’t adhere to state public-meetings requirements and an environmental review was needed before supervisors agreed to sell the land.

Members of the group have insisted most of their ranks aren’t opposed to the idea of redeveloping the site in some fashion.

“It’s a question of what is developed and to what intensity and the like,” said Jim Barnes, a Cobblestone Drive resident who is part of the group. “I just want to see some sort of reasonable development on it — not none.”

In his ruling, Chouteau rejected the Friends of Chanate’s argument that the sale represented a “gift of public funds.”

Gallaher agreed to pay at least $6 million in cash for the land, though the sticker price could rise to as much as $11.5 million depending on how many units he is allowed to build. The county has argued the deal is worth far more given other public benefits, including the value of more affordable housing and the demolition costs the government avoids by selling the land to a private developer.

Chouteau also was unpersuaded by the residents’ contention that supervisors had closed-door conversations about the deal that exceeded what they were legally allowed to discuss. “Nothing in the record to which any party points indicates that there was any violation” of a state open-meetings law, the judge said.

But Chouteau did agree with the lawsuit’s most pivotal claim: that the county incorrectly decided its 82-acre real estate deal was exempt from environmental review.

The county maintained it didn’t need to do an environmental review because it was only selling the land, not approving any specific development. An environmental review would happen as part of the city’s planning and permit approvals, and the sale wouldn’t close until the completion of that process, the county contended.

However, Chouteau, a former Santa Rosa city attorney, said the county did commit itself when it chose to sell the Chanate Road property to Gallaher for housing development and other uses. In fact, the county “actually entered into a binding sale of the (Chanate) campus to the developer for such purpose, as long as the developer follows through in obtaining city approvals for the project,” Chouteau wrote.

As a judge, he has ruled on some of the region’s largest environmental battles. As a city attorney, he oversaw a range of public housing and city redevelopment initiatives.

But Zane said the county negotiated the sale for housing “to hold Mr. Gallaher accountable in terms of the public benefit that he proposed.”

“If we had just said ‘OK, write the check, here’s the property,’ he could have done whatever he wanted to with it,” she said.

Supervisors plan to discuss their legal options in a closed-door meeting Aug. 7.

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

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