Planning Commission decision supports affordable housing

MacArthur Place Hotel, seeking to add eleven guest rooms, will be required to contribute $1.1 million to the City of Sonoma’s Affordable Housing Trust Fund should it proceed with its expansion. At its recent meeting, Sonoma’s Planning Commission insisted that an expansion of guest rooms at MacArthur Place Hotel only be allowed with this payment. The fee is in exchange for a waiver of the requirement to create housing as part of the guest room expansion, a condition of Sonoma’s Development Code.

The hotel, which is owned by Wall Street’s JP Morgan, an investment bank with a current market value of $333.8 billion, had asked for the housing requirement waiver, arguing that building housing on its grounds was incompatible with its hotel operation. The commission, however, unanimously agreed that despite that opinion, some benefit to the city’s effort to create affordable housing was essential. An unusual “negotiation” then took place, which resulted in the imposition of the fee, which requires an annual payment of $200,000-plus during each of the next five years until the $1.1 million total payment is made.

The architect for the project, Michael Ross of RossDrulisCusenberry Architects, attempted to dissuade the commission from imposing any requirements for housing or payments, arguing that the hotel already contributes considerable TOT (Transient Occupancy Tax) to the city. That tax, however, is merely collected by the hotel and is paid by the hotel guests for guest room charges. He also advocated for the waiver, explaining that a waiver has been granted several times during previous expansion of the hotel over the years. Commission opinion, however, differed, and commissioners argued that whatever waivers were granted in the past are now irrelevant, given the present housing affordability crisis.

Joe Walsh, representing the hotel owner, was resistant to any payment, and after some hesitation, offered a $60,000 payment to the Affordable Housing Trust Fund. His offer was soundly rejected by the commission, which unanimously insisted upon a $100,000 per-room payment, this after discussion of what the cost of construction for 3,000 sq. feet of housing – the amount required under the development code – would actually cost.

The Affordable Housing Trust Fund was created by the City of Sonoma several years ago to aid in the creation of affordable housing in the city. At present, that fund has little in revenue. One percent of the TOT is contributed to the fund as are housing impact fees assessed when a commercial building permit is issued, but the lower occupancy during the pandemic has reduced that contribution to far less than normal. The funds in the trust can be used to purchase land, subsidize housing creation by affordable housing developers, and potentially offer financial assistance to buyers and renters. Lacking funds, the city will continue to be unable to attract affordable housing developers, who typically require financial assistance from the jurisdictions in which they build.

The decision of the commission can be appealed to the City Council for reversal or modification. Such an appeal must be filed within 15 calendar days of the commission decision. It is unknown if the hotel will file such an appeal.