Decision on Chanate site deal postponed as Sonoma County faces lingering questions

Sonoma County supervisors will give neighbors of a 72-acre piece of county land in northeast Santa Rosa two more weeks to digest the details of a potential sale before deciding whether to move forward on a complex deal that would pave the way for affordable housing development on the property.

The county's favored bidder, California Community Housing Agency, a public financing entity, has extended an equity-based offer to acquire and develop the Chanate Road property that served as the site of the old county hospital.

But supervisors and neighbors raised questions Tuesday about whether the affordable housing can be guaranteed, especially given the city of Santa Rosa's role in approving any eventual development.

The Board of Supervisors' decision to delay was a last-minute pause on the county's largest land sale in at least a generation, a $1 deal with at least $5 million in equity up front that represents the second attempt to unload the former healthcare campus for redevelopment as housing. It follows the county's bruising battle with Chanate Road neighbors and their allies, who successfully sued to block the previous deal, which offered the county up to $11.5 million and called for 850-plus units on the site.

The new plan is scaled down, with California Community Housing Agency proposing 250 to 750 units. Financial incentives for the county are based on development of 500 units.

Supervisor Shirlee Zane, who represents the area and was a champion of the former deal, was the first board member Tuesday to recommend postponing the vote until Aug. 6.

“The issue of mistrust in the county process was so high the last go around,” said Zane, who faced criticism from project opponents after the first sale attempt, in February 2017, to Sonoma County developer Bill Gallaher. His Winsdor-based firm, Oakmont Senior Living, was also among the three bidders in this round vying to buy and develop the property. The other was EAH Housing of San Rafael.

“If we can just give people a couple of weeks … it's an issue of trust, honestly,” Zane said.

The motion eventually drew support from all of her fellow board members, though Board Chairman David Rabbitt cautioned that costs to secure the campus continue to pile up for the county.

Neighbors were thankful for the delay. They include Jim Barnes, a local attorney who said he didn't have time to parse the 80-plus-page bid since the county put it online about 8 p.m. Thursday.

“It was concerning for our neighbors that it was going to be voted on so quickly,” Barnes said.

A decision by supervisors to accept the proposal in two weeks would open up more negotiations between county officials and the California Community Housing Agency, which is leading a coalition that includes two partners. County officials would bring a final purchase agreement back to supervisors at a later date.

The preliminary proposal offers a single dollar for the property. The county would get a $5 million equity advance, and the agency's estimates suggest the county would have access to $83.8 million in equity in year 15, after which the county would have the option to buy back the property and potentially resell it.

California Community Housing Agency would issue municipal bonds to cover the costs of development, and it intends to partner with Larkspur-based consultant Catalyst Housing Group and San Francisco-based developer BUILD to construct affordable rental housing on the property.

Representatives of California Community Housing Agency and Catalyst have not returned phone calls and emails this week and last week. BUILD founding partner Lou Vasquez represented the three-party team at Tuesday's meeting.

Vasquez assured supervisors he has experience with public engagement, while acknowledging the site's recently troubled past.

“I'm not expecting to resolve that in two weeks, two months or maybe two years,” Vasquez said. “I'm expecting to resolve it, though.”

The California Community Housing Agency's pitch to the make the entire development affordable helped give it a significant edge over the other two bidders, said Caroline Judy, the county's general services director.

Judy called the region's lack of the housing, and particularly affordable housing, a “crisis.” Tens of thousands of new homes are needed to fill the county's current and future needs, she said.

The Chanate site has been eyed for housing since at least 2004, when Sutter announced its plan to move to a new Santa Rosa hospital, opened near Highway 101 in 2014.

Except for some public health and nonprofit offices that remained on site, the campus has been vacant ever since. But supervisors were forced to scuttle their previous sale last year after a judge sided with neighbors in their lawsuit challenging the transaction on environmental grounds. The county failed to sufficiently study the impact of the housing project, the judge found - a decision the county opted not to appeal.

The new bid process follows state law for the sale of surplus government land, meaning that the sale must favor affordable housing developers and that at least a quarter of the housing built will meet those requirements.

Supervisors voiced their interest in disposing of the property, which continues to cost taxpayers $800,000 per year for security. The daily costs amount to $2,200 - or $31,000 between Tuesday and Aug. 6, when county supervisors would take up the sale again, Rabbitt said.

“That's a lot of taxpayer money being eaten up on a daily basis,” he said before agreeing to postpone the vote.

Judy said break-ins have been a near-daily occurrence at the site, and damage to the property led to a nearly $3 million drop in appraised value, according to the most recent appraisal. As of Dec. 14, the property was worth $4.24 million, according to the county. In 2016, it was appraised at $7 million.

Supervisor Lynda Hopkins echoed Rabbitt's call for expedience.

“I also feel a sense of urgency to drive the process forward,” Hopkins said. “But that urgency shouldn't come at the expense of community engagement.”

You can reach Staff Writer Tyler Silvy at 707-526-8667 or at tyler.silvy@pressdemocrat.com. On Twitter @tylersilvy.

Editor's Note: This story has been updated to reflect a wider range of potential housing units to be developed on the Chanate Road property.