County to tear down Chanate Road buildings as 2nd bidder backs out

After the second of three bidders for a potential large affordable housing complex in Santa Rosa withdrew its bid, the county will enter negotiations with the only developer left standing.|

In the face of repeated failures to unload property long tabbed for housing, Sonoma County supervisors on Tuesday told staff to tear down derelict buildings that have become a dangerous hub for illicit activity and start negotiations with the only company that still wants to buy the land.

The move came a week after the county’s preferred bidder announced it would walk away from the 72-acre property along Chanate Road in Santa Rosa, and just hours after Sonoma County developer Bill Gallaher publicly rebuked the county in a letter announcing his company’s bid on the land would also be rescinded.

The decision sets the stage for environmental and seismic studies, the removal of abandoned buildings that will cost the county $768,000 this year to maintain and open negotiations with EAH Housing, whose current offer supervisors have said they would reject outright. It will take months to change the face of the former hospital campus and clear the way for hoped-for affordable housing.

The board’s direction to tear down at least some of the 15 abandoned buildings on the site followed The Press Democrat’s publication of photographs of the wrecked interiors, which last week were littered with broken glass, dirty needles and the remnants of once-valuable copper wiring. It comes after $1.5 million in staff time dedicated to the Chanate property alone.

“It’s about how we maintain public health and safety,” said Supervisor Shirlee Zane, who on Thursday joined a group including a reporter and photographer of the site within her district. “Again, seeing is believing. We saw it. It was another wake-up call to me that we have a lot of risks there.”

Last week, the county’s favored bidder, California Community Housing Agency, rescinded its purchase offer, which involved a complex equity exchange over the course of decades.

And on Tuesday, just 30 minutes before the supervisors were set to discuss the site’s future in light of that news, the second of three total bidders pulled out.

In a scathing letter read out loud in the meeting by his associate Brandon Cho, Oakmont Senior Living founder Gallaher lays the blame for the ongoing failures, which included a lawsuit that in 2018 stopped a sale to Gallaher, squarely on the county.

Gallaher’s letter sarcastically refers to the supervisors’ plan to spend taxpayer money to tear down the Chanate buildings as “brilliant,” saying the demolition would cost the county $3 million to $4 million more than it would a private developer. Gallaher once bid up to $11.5 million for the property, a deal the county scuttled after losing a challenge from neighbors in court. His most recent offer, for $9 million, was also passed over.

“Had the county sold the property to us outright as we recommended, we would likely be under construction right now,” the letter read.

Instead, supervisors are moving on with the only bidder left standing - one that also complained of the county’s indecision.

“To not simply select us this evening seems to be an injustice given the detailed description of ongoing costs with the county,” said Mary Murtagh, executive chairwoman of the board for EAH Housing.

Murtagh, who was the CEO of EAH Housing for 30 years, reiterated the need for housing, and her company’s ability to deliver.

“We’re in the middle of an unprecedented housing crisis, and it’s been aggravated by fires,” she said. “And it’s only going to get worse. I understand you want to do more analysis, but this is a good option.”

EAH Housing provided two offers. One is for about $4 million, and involves the company tearing down the buildings. The other offers up to $11.6 million and is contingent upon Santa Rosa approval of a certain number of housing units. The offers worry supervisors and county staff because of the reliance on local competitive housing funds to match state funding.

Supervisors eventually agreed to start negotiations with the company.

Those will likely be full-contact negotiations, as most supervisors were on record Tuesday saying they wouldn’t accept the EAH Housing offer as presented. Murtagh said afterward she was pleased to at least still be in the fold, even if she’s not sure what the county wants to renegotiate.

The board’s Tuesday decision isn’t final, giving supervisors wiggle room should those options follow the precedent of repeated failure for the property.

Neither the county counsel’s office nor Board Chairman David Rabbitt expressed concern about switching up key details of the land deal for which three companies bid and entering into exclusive negotiations with just one.

“Then they should have stayed in the game,” Rabbitt said. “They’re both wise enough to know that today was going to be the day direction was given to staff.”

Rabbitt acknowledged that, among the directives to staff, the push to tear down the buildings would likely cost more if done by the county.

Environmental and seismic studies will add six-figure costs as well.

But all supervisors seemed ready to get something done at the site, and General Services Director Caroline Judy said all of the county’s appraisals since it took possession of the site in 2014 have dinged the land for unknown fault lines associated with the Rogers Creek Fault, as well as the costs of tearing down asbestos-ridden buildings.

Even in presenting four options to the board, Judy made clear the risks associated with leaving the buildings standing.

“We’re not able to secure the buildings,” said General Services Director Caroline Judy. “It’s a significant liability and an unacceptable risk. We can’t expose our employees - my employees - to these hazards. All of these vacant buildings are constantly being breached.”

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