Deal for second Petaluma SMART station falls apart

A deal to build an east side SMART station, 225 commuter parking spots, and more than 400 housing units to Petaluma appears to have collapsed after differences emerged between the rail agency and a developer.

Lomas Partners, LLC, has been working with SMART for three years to develop its proposal to create housing and 150 parking spots on the site of the future SMART station at Corona Road and North McDowell Boulevard. As part of the deal, the Sherman Oaks-based developer was to buy and develop a SMART-owned piece of land on D Street near the existing station, where Lomas proposed adding 300 rental apartment units and 75 additional parking spaces for SMART riders.

SMART would use the proceeds from the sale of the downtown land to build the station at Corona Road.

SMART claims that tweaks to the plan, including a proposal to build a parking lot rather than a parking garage at Corona Road and relocating the parking lot to a location closer to the station, as well as a missed conference call, constitute breaches in the agreement. The agreement terminated under its own terms because of Lomas’ changes, SMART’s general counsel, Thomas Lyons, wrote in a letter.

Lawyers for the developer claim SMART breached the agreement. The tumult calls into question the future of Petaluma’s east side station and sets the stage for a legal battle.

Farhad Mansourian, SMART’s general manager, did not return multiple calls and emails seeking comment.

The erosion of the deal marks the second setback for SMART in its quest to develop transit-oriented housing along the rail line. Last month, a developer walked away from plans to build 268 units of market-rate and affordable housing, retail spaces and a public plaza on a SMART-owned lot in Santa Rosa’s Railroad Square. The deal collapsed amid finger pointing over who was responsible for its demise, with SMART arguing the developer wasn’t committed and the developer deeming SMART’s board unreasonable.

Todd Kurtin, a partner at Lomas, said his lawyer is drafting a letter of complaint stating that SMART’s termination of the contract is not in good faith. He said he’s willing to build a parking garage should SMART prefer that option, but said he has been stonewalled by the agency. If his lawyer’s calls to the agency are not returned, he plans to file the legal complaint.

Even without a SMART station, Kurtin said he plans to develop the Corona Road land with housing, though he would prefer to locate his development near a transit hub.

He hopes to salvage the deal with SMART, which would bring 112 homes, 15 percent of which would be affordable, for-sale units, to a currently underutilized Corona Road parcel. It would also unlock the potential for an east Petaluma station that would provide much-needed parking and cut down on congestion some west side merchants say is negatively impacting business.

“I’m trying to move this forward, I’m trying to get the station built at Corona, I’m trying to get the housing built - that’s exactly what the public wants and what the public policy should be and I don’t understand where SMART’s coming from,” Kurtin said.

A series of letters between SMART and the developer dating back to December outline a contentious back-and-forth leading up to SMART’s Jan. 19 “final notice” that the agreement was terminated. Part of the issue appears to be a Jan. 8 missed phone conference to discuss the change in plans, a scheduled meeting in which Kurtin says he inadvertently missed after failing to see the call-in number.

He called Mansourian on his office line shortly after the scheduled time, and followed up with an email a little more than an hour later. Still, a Feb. 8 letter from the rail agency’s general counsel said “Mr. Kurtin neither called the conference call number nor SMART’s main office phone at the agreed upon time.”

SMART also took issue with the relocation of the parking lot - a move Kurtin said was necessary to circumvent the need for state and federal permits because of the proximity to a waterway and to avoid building on a potentially contaminated site. It would also increase convenience for riders, who would otherwise have to walk a greater distance to the station, he said. Initial plans to build a modular garage were not feasible because of state regulations, he said.

Sonoma County Supervisor David Rabbitt, who represents Petaluma on SMART’s board of directors, said it doesn’t matter to him how parking is delivered, as long as it’s provided.

“I’ve said this publicly before, it’s a matter of having the most parking spaces available, if it’s in a structure or not, I don’t really care,” he said.

Rabbitt said soil and groundwater contamination at the site and the potential hang-ups related to cleanup and monitoring are of greater concern. The developer is proposing to split the lot, separating the parking lot and the future station from the rest of the plot, where contamination has been found and would require cleaning and monitoring.

“The overriding concern is not having surety that the land is clean and with the lot split that we’re sure the requirements don’t come with a long-term mitigation and unknown costs for both soil and groundwater,” Rabbitt said, adding that the public agency would be hesitant to own a potentially contaminated parcel.

David Tanouye, an engineering geologist with the San Francisco Bay Regional Water Quality Control Board, said in a letter that the footprint of the station and parking lot are outside of the known petroleum contamination at the site and the board has “no objections to the construction of the SMART station at its proposed location.”

He said soil beneath structures and “geophysical anomalies” that are slated to be removed from the parking and station areas still needs to be tested. Groundwater monitoring is scheduled for coming weeks, he said.

“There has not been evidence of contamination of soil or groundwater in the proposed construction area from recent data so far,” he said. “These measures are being taken to be protective of human health and the environment.”

Though city officials have long advocated for the Corona Road parcel and provided a credit for building the parking garage there, Rabbitt said a second location on Old Redwood Highway is still in play. Corona has been the assumed location of the city’s second station since SMART was first proposed more than a decade ago, and was incorporated in Petaluma’s 2013 master planning document to guide future development around station areas.

“Farhad and I want to sit down with (Petaluma City Manager) John Brown to talk to him about that,” Rabbitt said. “Is that the only site and are you willing to wait two, three, four or five years for it? No one can guarantee if it will be a year, or two or three or four or five. It’s already been five.”

Rabbitt said there are limited options for other east side locations, and though the Old Redwood Highway lot is outside of city limits, it could be annexed into Petaluma. While the Corona Road site is closer to housing, the Old Redwood Highway site, where Adobe Lumber was formerly located, could serve up to 5,000 people from nearby businesses, he said.

The Old Redwood Highway site, across the road from SMART’s headquarters, is owned by Cornerstone. The developer this week announced plans to turn the site into a “maker space” for food production companies. A rendering of the project shows future plans call for a “rail connection.”

City Councilman Mike Healy, a longtime supporter of the Corona Road station, said the city could consider taking the deed to the land where the station and parking would be located and leasing it back to SMART for $1 a year until the agency is satisfied there’s no contamination and can take independent ownership of the site. He said the Old Redwood Highway site is in the flood plain, which is a cause for concern.

“Corona Road is the most convenient location available on the east side of Petaluma,” he said. “For Petaluma residents commuting into Marin, the Adobe Lumber site is further away - people are driving in the wrong direction to catch a train.”

City Manager Brown said the city council isn’t likely to be open to changing plans.

“The council’s preference is the Corona Road site,” he said. “We’ve developed station area plans in partnership with SMART focusing on the Corona site and so we have a lot of history with that. I don’t think the council is going to be ready to give up on that anytime soon and they’d be very reluctant to start talking about other sites. I’m going to be looking for a way to try to keep that Corona Road site in play.”

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