Wednesday, April 18, 2012

The Silk Mill is Back in Play - Part 1

A month ago, I wrote about how retailers end up in their locations. It wasn’t a particularly profound post, mostly just a review of how business location decisions get made in the marketplace. But it seemed to resonate in cyberspace. It was the post that received my most traffic ever, more than six times the traffic of my average post. Many of the readers seemed to come from Washington, D.C. One of the links I provided was to a news report from Washington, D.C. but one wouldn’t expect Washington, D.C. readers to check a California blog for information about their own backyard. Sometimes the internet can be a strange place.

I’m back on the same subject, but with a broader perspective. In the earlier post, I wrote that public opinion has little effect on how land use decisions are made for retail uses. The broader perspective is that public opinion has little effect on most land use decisions.

That isn’t to say that public opinion has no weight. It does. But the weight is far less than we might expect. And much of the weight is proscriptive, through zoning prohibitions adopted following public comment, through denial of land use applications by planning bodies after adverse public sentiment, and through post-approval lawsuits.

Only rarely does public opinion work in favor of a project. The most common example is the encouragement to a planning body to disregard others who oppose an application.

In place of public opinion, the primary determinants on which uses occur on which sites are (1) what uses the consuming public will support, (2) on what uses a developer is willing to gamble, and (3) on what uses a lender is willing to provide funds. It is at the intersection of these three sets that development proposals take root.

I offer this quick summary because a significant Petaluma property may again be heading toward the land use arena. The current owner of the Silk Mill, a historic structure on Lakeville Street in Petaluma, has announced that his abandonment of plans for re-use of the building. Instead, he has placed the building on the market. This is the second proposed re-use of the building that has failed to reach fruition.

I came to Petaluma in the waning days of the Silk Mill operation. I never had the opportunity to see it at work, which I regret. However, I’ve spoken with many members of the community who visited the floor during operation and remained impressed years later by the noisy whirl of production. It was a mainstay of Petaluma employment and pride for many years. And it remains a dramatic and impressive landmark near the heart of town, although now encircled by weeds and marked with broken windows. It has also been designated as a National Historic Landmark.

After the Silk Mill, known in its latter days as Sunset Line and Twine, ceased operation and its equipment was removed, the first proposed re-use was upscale condominiums. The proposal was intended to comply with historical preservation standards and to celebrate the history of the building. A core group of investors devised the configuration and then solicited participation from prominent Petaluma citizens, many of whom likely cared about almost as much about historical preservation as about profit-potential.

As the planning aspects came together, the project was ripe for an entitlement application in early 2008. However, the City of Petaluma was in the midst of a General Plan update. The General Plan would incorporate updated environmental goals, such as water conservation. But at the time, the California Attorney General was suing other municipalities for failing to go far enough with their General Plan environmental goals. In the absence of an adopted water conservation goal, the City imposed a moratorium on new entitlement applications, which appeared to leave the Silk Mill development group sitting on the sidelines.

However, the Silk Mill development group had an argument to make. The expected water use for the condominium project would be less than the historical use by the Silk Mill. Therefore, they asked the City Council to exempt their proposal from the moratorium. The Council denied the request. To this day, at least one member of the development team believes that the denial was based, not on the water conservation issue, but an underlying concern about whether condominiums were the appropriate use.

Without the right to submit the entitlement application, funds were unavailable to continue the development tasks, including paying interest on the acquisition debt. After a few months of hanging on, the development group capitulated and sold the project at a loss.

The buyer reconfigured the proposed project as an extended-stay hotel project. The project moved ahead slowly. However, within the past few months an alternative business opportunity arose for the new developer. He decided to focus solely on the new opportunity. The Silk Mill was again listed for sale. The fate of the historic structure is again uncertain and the economic boost that re-use might provide to Petaluma is again deferred.

In my next post, I’ll look at how the zoning ordinance frames to the options for the Silk Mill and at the site constraints and market conditions that constrict the possibilities.

As always, your questions or comments will be appreciated. Please comment below or email me. And thanks for reading. - Dave Alden (

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