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Council votes to repurchase downtown lot after developer misses deadlines amid litigation
Summary
The council voted 5-1 to exercise its contractual right to repurchase a city-owned lot at 410 B Street from Cornerstone Communities LLC after the developer failed to meet post‑closing entitlement and plan submittal deadlines. Council cited years of missed milestones, staff time expended and active litigation among partners as reasons for action.
The Santa Rosa City Council voted to repurchase a city parking lot at 410 B Street, moving to reclaim the parcel after a developer missed multiple contract deadlines and litigation among the developer’s partners raised questions about its ability to complete the planned downtown project.
By a 5-1 vote (Councilmember Benuellos opposed), the council approved a resolution to exercise the city’s call right and repurchase the lot at the contract’s purchase price. The motion was made and carried following staff reports, legal summaries and public comment from people who both supported and opposed the repurchase.
City Real Estate Manager Jill Scott summarized the history: the city entered a purchase and sale agreement with Cornerstone Communities (closing in August 2021) that included post‑closing obligations — notably, entitlement submittals for 410 B Street and building permit submissions for related Cornerstone sites. Scott told council the developer repeatedly missed deadlines; staff granted multiple extensions and sought to renegotiate, but said that after years of no meaningful progress the city’s option to repurchase was appropriate.
Ethan Walsh, outside counsel for the city, informed council that public filings show active litigation between Cornerstone partners alleging misuse of funds and transfers between entities controlled by different principals. Walsh said the litigation raises a realistic possibility that the companies owning the Santa Rosa parcels would lack the resources to complete entitlements or secure financing even if more time were allowed.
Cornerstone representative Pauline Block told council the company disagreed with staff’s view that Cornerstone was in default and asked council to defer any repurchase decision so staff could process entitlements for the combined downtown parcels. Cornerstone and its allies argued the combined, multi‑parcel project (which Cornerstone estimates would create high‑density housing and community benefits) should be allowed to proceed through entitlement and a development agreement process.
Scott, Walsh and other staff described the city’s due diligence: the original contract required entitlement submittals within 18 months after escrow closed; the developer received extensions (approved by the city manager and later by council) but staff said entitlement applications were not submitted in the required form. Staff said the city had expended substantial time attempting to work with Cornerstone, and recommended repurchase to avoid further delay on a critical downtown housing site.
Council debate reflected two strands: some members said the city should be patient and allow the entitlement process and public hearings to proceed because the combined project would be transformative; others said the developer’s repeated missed deadlines, uncertain litigation and lack of clear financing made further extensions risky and costly to the city. Councilmember Benuellos voiced support for more time; others favored clearing title and restarting the procurement to identify a developer who can deliver in a timely way.
The recorded vote: Councilmembers Rogers, O’Krepkie, McDonald, Vice Mayor Alvarez and Mayor Mark Stapp voted to repurchase; Councilmember Benuellos voted no; Councilmember Fleming was absent. Staff said the repurchase price (the contract “call” price) is $1,340,000. If the city completes the repurchase, staff proposed initiating the state Surplus Land Act process and, if necessary, issuing a new request for proposals to identify a developer capable of timely delivery.
Cornerstone and its supporters said the company has invested heavily in downtown and urged continued partnership; Cornerstone’s representatives and consultants said they were prepared to pursue entitlements and a development agreement. City staff said Cornerstone could still compete if they resolve legal matters and submit a viable, timely proposal during any future RFP process.
The council’s action returns the property to city control and opens the path to a new procurement process intended to accelerate downtown housing delivery if Cornerstone does not clear the outstanding issues.
