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Railroad Square developer walks away from disputed senior housing project


The San Francisco developer who once planned a sweeping transit-oriented retail and housing complex in Railroad Square has abandoned a scaled-back version of the project, citing political opposition by the City Council.

John Stewart, the managing partner of Santa Rosa Canners, LLC, sent a letter Wednesday to Mayor Scott Bartley explaining his decision to cease all work on the project.

“Financing and construction of this project is difficult enough as it is, let alone without broad-based, top-down support from the city,” Stewart wrote.

John Stewart of The John Stewart Company out of San Francisco stands near the old cannery buildings in Railroad Square. (PD File, 2004)

John Stewart of The John Stewart Company out of San Francisco stands near the old cannery buildings in Railroad Square. (PD File, 2004)

The City Council voted 4-3 last week not to support Stewart’s latest plan to build 93 units of affordable housing for seniors on his 2.1-acre property on Third Street.

The majority of council members questioned the appropriateness of the site for low-income seniors and didn’t feel the benefits to the city justified the public subsidies.

Supporters thought the project could jump-start development in the area, and called it unwise to turn away $10 million of redevelopment and grant funding that would have funded key infrastructure upgrades in the area.

Early plans for the 11-acre site called for a 40,000-square-foot food-and wine center similar to the Ferry Building in San Francisco, 40,000 square feet of office space, 279 units of market rate and affordable housing, a 263-space parking garage and several restaurants.

Stewart noted that the 2008 plan “encountered the worst market collapse since the Great Depression” followed by the demise of the state’s 425 redevelopment agencies.

While he acknowledged the chance of another vote on the issue next week, something Councilwoman Julie Combs said she was considering, Stewart said that with both the mayor and vice mayor against the project, “it appears to us and our advisers that the city’s body politic is and will remain deeply divided.”

Stewart said Vice Mayor Erin Carlstrom’s characterization of the proposed project as a “bailout” was a “particularly offensive but instructive harbinger” of the project’s fate.

He noted that his company has spent $7.4 million trying to develop its two Railroad Square properties to date, and would have recouped “about a fifth” of the $3.6 million expended on the cannery site.

“This doesn’t feel like a bailout. It feels like private sector investment in a challenging site that would have generated significant public benefits,” Stewart wrote.

Carlstrom previously said that she considered the project a bailout of a private developer because it proposed using millions in public dollars originally set side for the development of the entire site, not just Stewart’s property.

She said that 85 percent of the $27.3 million project was being funded with public subsidies. She arrived at that figure by including $13.2 million in low-income housing tax credits, she said.

But that’s misleading, Stewart said, because the $13.2 million would all be private equity. Investors in such projects get tax breaks, but that doesn’t make it a government subsidy, he said.

“She’s flat-out wrong on the 85 percent,” Stewart said after last week’s vote. “Where did she come up with that?”

Stewart said he was surprised when Carlstrom made the statement about a bailout because it seemed anyone familiar with the development of affordable housing knows some public support is required.

“That one really took us all aback because it suddenly personalized this whole thing,” Stewart said.

Carlstrom said the project had changed so much since it was first proposed that many of the public benefits that would have flowed from the larger project were not in the scaled-back version.

“At that time, it was appropriate that we support a project like that through public money,” Carlstrom said. “At this stage, without those benefits, I see it as a bailout.”

Carlstrom and her husband, political consultant Nick Caston, lived in Railroad Square until 2011. They were also involved in efforts by the Accountable Development Coalition to negotiate a so-called“community benefits agreement” with Stewart for his project.

Carlstrom stressed that her efforts preceded her time on the council and that other council members also have met directly with Stewart.

“I actually think it gave me really great insight into the project,” Carlstrom said.

The ADC pushed Stewart to hire union labor, build to the highest environmental standards and to include affordable housing for all ages, Carlstrom said.

The Sonoma County Young Democrats, in which Carlstrom also was active, strongly supported all-age affordable housing for the project.

But other groups pushed in other directions. The West End Neighborhood Association pressed for the affordable units to be for those age 55 and older.

Stewart said he tried hard to make the project pencil out with some affordable units for families, but couldn’t because of increased parking requirements, need for larger units and limited space for amenities for children on the tight creekside site.

Mayor Scott Bartley said he “went back and forth” on the issue at last week’s meeting, but is comfortable with his vote against the project.

He said the latest plan struck him as an effort by a developer to build anything instead of what was right for the property.

“To my mind, sometimes nothing is better than something,” Bartley said. “There’s nothing wrong with waiting for the right thing to happen.”

Timing as much as anything else may have doomed the project.

Stewart is suing the state Department of Finance to prevent the state from “sweeping” up $5.5 million in redevelopment funds set aside for the development. The next hearing is set for May 17. Even if the council voted to reconsider the issue next week, the issue would have to come back for another hearing May 2, which may have been cutting it too close.

Stewart will likely remain a player in the development of the site. He still owns property that offers key creek access and space for a possible parking garage. He has pledged to cooperate with the city; Sonoma-Marin Area Rail Transit, which expects to be running trains through the area by 2016; and any new developers of the property.

Councilman Gary Wysocky said he was surprised his colleagues were so focused on the type of affordable housing on the site that they were willing to walk away from grant money and redevelopment money that is unlikely to return.

“I’m saddened for the city,” Wysocky said. “We just walked away from $11 million.”

(You can reach Staff Writer Kevin McCallum at 521-5207 or kevin.mccallum@pressdemocrat.com. On Twitter @citybeater.)

13 Responses to “Railroad Square developer walks away from disputed senior housing project”

  1. Steveguy says:

    Anybody here that would want their Mother to live there ?

    If so, please explain why.

    Thumb up 0 Thumb down 4

  2. R.B. Fish says:

    I hope Mr. Stewart prevails in his lawsuit. Neighborhood groups, unions and other useless activists do nothing but destroy the city. Just wait and see when the SMART labor train arrives. They are literally ruining evrey town in Sonoma County.

    Thumb up 8 Thumb down 5

  3. Lisa Maldonado says:

    Beef King: Once again you are wrong about unions. The North Bay Labor Council and Sonoma Marin Building Trades were supportive of the project and willing to work with the developer to make it work and bring more local jobs to Santa Rosa. We had no problem with building senior housing and believed this was a good first project. UNfortunately Mr Stewart withdrew his plans after being attacked as wanting a “bail-out” by Erin Carlstrom and more specifically because of the lack of support by the Mayor and Vice Mayor for a project he had invested heavily in. Sorry, You can’t blame the “unions’ for this one

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  4. Beef King says:

    ‘Bear’ asks- “Who screwed this up?”

    Well Bear, look no further than Erin Carlstrom and her Union friends.

    Ask Marty Bennett, he’s got all the answers as to why he and his Union pals stop progress in Santa Rosa.

    Thumb up 16 Thumb down 8

  5. James Bennett says:

    Full blown pull out all the stops fascism.

    The City has probably long ago identified a more favored insider to be at the center of their ‘Transit Village’ ICLEI model.

    Truly beyond belief.

    Thumb up 16 Thumb down 7

  6. Warren Atkinson says:

    Is this what they mean by a “business friendly” City Council? The Mayor and Vice Mayor should be supporting a project that brings money and jobs into the city and helps develop what is now an ugly eyseore. Instead they complain that the business developer isn’t building the “right kind” of low income housing. Talk about clueless! As a senior and a resident of the neighborhood I’d like to say to Mayor Bartly and Vice Mayor Carlstrom “way to screw up our city. If this is your idea of “creating economic development” we are in big trouble.

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  7. Billy C says:

    I feel for the developer who lost his shirt trying to deliver what SMART and the ADC wanted. I also think we will be needing senior housing. I do not think that right next to the “Green Way” in rail road square is a safe location for seniors. The last time I walked that area
    it was totally over grown, covered in graffiti,littered with garbage,spent shell casings and smelled of human waste.
    I saw three people camped out right next to the path and could see larger encampments by the creek. I did not feel safe at all especially when approached or fallowed by the inhabitants.
    I know we recently spent 20 million
    fixing the place up but it just not a place that I would ever think of asking my parents to live.

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  8. Reality Check says:

    Not to worry. Who needs weak developers like Stewart. With California’s legislature poised to pass Assemblyman Tom Ammiano’s “homeless bill rights” law, can we not expect development money to flood into the downtown area? The homeless will soon be safe from petty harassment by cities intolerant of panhandling, public urination, foul odors and petty (and sometimes not so petty) crime.

    One wonders when public officials will realize that pumping money into downtowns that are home to people and behavior that repel most families is not a wise expenditure of (scarce?) public funds.

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  9. Steveguy says:

    Jerry Brown knew what he was doing to pull the ” Redevelopment ” funds.

    Otherwise this ” dream ” is $500,000 condos with a low income element with a Starbucks’s, a Yoga Studio and a Health Food Market amongst the ‘amenities’…

    But the Train is there !

    No investor in their right mind would finance the Utopian Plan. None. This guy stepped back because of the DOLLARS !!

    Serves him right for backing the SMART Train gravy. You lost. The politicians get to keep your bribes- I mean contributions. They do that to us all, wait in line .

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  10. Thank god says:

    So glad this is finely at an end. This guy had backed out on his commitment to develop the SMART site, but still wanted all the money for his own property. We need the full site! Stewart was a piece of work, we are much better off with him out of this project. And quite honestly, what type of fool does he think we are. Receiving money from tax credits is absolutely public money, just in the form of not paying taxes instead of getting a check. Stewart and Wysocky clearly don’t respect our tax dollars, unless they are taking the money to line their own pockets. Good riddance.

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  11. Grapevines says:

    Had he presented it with unlimited “bike lanes”, it would have sailed through with no problems. We all know who’s pulling the strings and greasing the spokes at city hall.

    Thumb up 24 Thumb down 9

  12. chris says:

    Good. This project changed so many times that I think the developer was trying to set a record for bait and switch attempts.

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  13. bear says:

    There’s a gunshot in my foot! Hurts like hell.

    This could have been resolved to the benefit of the city and the developer and the economy.

    Who screwed this up?

    Thumb up 31 Thumb down 5

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