Petaluma SMART deal on track despite shutdown

Petaluma, SMART officials and a developer are in the final stages of approvals of a mega deal to add more than 500 new housing units on three different sites and a new commuter rail station at Corona Road.

Behind the scenes work has continued during the coronavirus outbreak to secure entitlements on the land and reach a near final agreement between SMART and the city. But the actual construction of the new housing units or the SMART station could be complicated by the pandemic shutdown and ensuing financial crisis.

At Monday’s Petaluma City Council meeting, the council is expected to sign off on the final approvals for the Corona Station development, a 110-unit development at the corner of Corona Road and McDowell Boulevard. The council could also approve the final project map and grant a conditional use permit to build single-family homes on the site.

The Planning Commission earlier denied the permit after opponents of the project said that the density was too low near a transit station, and residents would be too dependent on cars for transportation.

The council is also poised to approve a deal with SMART that would result in the long awaited second Petaluma train station with 150 parking spaces.

The developer, Lomas Partners, is under contract to purchase a SMART-owned property near the downtown train station for $8 million, with $2 million coming from the city. SMART would use the proceeds from the land sale to finance construction of the second station.

The developer also plans to build more than 400 apartment units on the downtown parcel and another 50 units of affordable housing at the south end of the city.

The background work has continued despite the pandemic.

“The lockdown hasn’t really changed much,” said Todd Kurtin with Lomas Partners. “Everything is still progressing.”

After all the paperwork is in order, the bigger question will be when builders can break ground on the various projects. State social distancing guidelines in place through at least May 3 have put a hold on most construction. And homebuilders may want to take stock of the upended housing market before launching into a project.

Kurtin said KB Home, a national homebuilder, is under contract to build the 110 Corona Station houses. Craig LeMessurier, senior director of public relations and communications for KB Home, said he could not comment on the project until it was fully entitled.

The 405-unit downtown project between East Washington Street and D Street is being built by development company Hines, and is not quite as far along as the Corona project. Kurtin said Hines would likely submit an application for the project to the city in May.

At an informational meeting last month, Hines representatives unveiled plans for what would be the city’s largest apartment complex. The developer said at the time that they anticipate construction will begin early 2021, and they estimate it will take two years to complete.

Burbank Housing is building the affordable housing component on a parcel on Petaluma Boulevard South across from the Quarry Heights development. Kurtin said Burbank is pursuing a state grant for the project.

The projects are coming together as SMART, a key player in the deal, faces financial struggles since the COVID-19 outbreak has slashed ridership. The commuter rail agency was already hurting after its sales tax extension failed on the March 3 ballot.

The agency, which has already pared back service, this month said it would need to make $6 million in budget cuts.

Supervisor David Rabbitt, who sits on the SMART board, said the intention has always been to use the proceeds of the downtown Petaluma land sale to finance the city’s second station. But, he cautioned, other board members may look to reroute those funds to stave off a financial crisis.

“Who knows what the future of anything will be going forward,” he said. “I could see my board colleagues asking if that is the best use of those funds. I know I’m going to argue that we should stay the course on this one.”

Once the land sale is completed, which is expected to happen in May, SMART would need to act relatively quickly to build the Petaluma station. The project needs to be added to the contract that SMART has with railroad builder Stacy and Witbeck Inc., which is constructing the extension to Windsor that is expected to be completed by late 2021.

Rabbitt said one-time funds from a land sale should go toward capital projects. Using one-time funds to support ongoing operations is not sustainable, he said.

Building the second station will increase ridership, Rabbitt said.

“The Corona station will provide a lot of ridership,” he said. “It’s a good investment.”

SMART faces a budget shortfall next year of up to $14 million because of dips in sales tax revenues and a 90% drop in ridership during the coronavirus shutdown. The agency is poised to receive $10.4 million from the CARES federal stimulus package.

Petaluma City Manager Peggy Flynn said attorneys for the city and SMART were putting the final details together on the deal between the two entities.

“We’re not far off, if not in total agreement,” she said. “We just want to make sure everything is in place.”

(Contact Matt Brown at matt.brown@arguscourier.com.)