By Christmas 1974, Santa Rosa City Hall was at war. Not good, but at least the bleak concrete architecture that made the government complex look like a fortified bunker now seemed fitting.
The city was fighting its war on several fronts. The county was suing the city, accusing it of exploiting a loophole which would cheat the treasury out of millions of dollars per year. Hugh Codding was now on his seventh lawsuit to block Santa Rosa’s Urban Renewal Agency (URA) from working with the developer planning to build the downtown mall, and likewise the city had sued Codding to put obstacles in his plans for a shopping center in Rohnert Park. (A peek into our crystal ball shows that about a year later Rohnert Park will be suing Santa Rosa over building the downtown mall and the developer will sue Codding.) And meanwhile Santa Rosa’s City Council was warring with the public, not only refusing to allow a referendum vote on the shopping center but calling the referendum proposal itself as being illegal.
Watch “Game of Thrones”? What happened in Santa Rosa during 1974 and 1975 was filled with just as much conflict and intrigue – not to mention being just as difficult to follow, should you not keep up with each confusing turn in a story that seemed as if it would never end.
The key takeaway from this chapter should be there was never any resistance to building the downtown shopping mall from the City Council or other Santa Rosa decision makers. Making a deal with Los Angeles developer Ernest W. Hahn had broad support from the beginning, even from downtown merchants. They believed it would make Santa Rosa a more prosperous and better place to live.
But as the project became more ambitious the city became more dependent upon it being built, and they indebted the town in ways that would have been considered risky, even scandalous, in other times. City planners convinced themselves the mall would bring in staggering piles of cash and every delay in construction meant the town was being cheated out of what was its due. Money fever raged through the many offices in City Hall like a pandemic, and people who raised questions or urged caution were deemed enemies. Community betterment took a backseat to making sure developer Hahn was kept happy. That 1974 Christmas lawsuit was over the Board of Supervisors fearing school districts would be screwed out of funding in order to keep Hahn’s property taxes artificially low.
(Developments described here follow key events in 1972 and early 1973 which were introduced in the previous chapter. If there are unfamiliar terms or names “MR. CODDING HAS SOME OBJECTIONS” is a good starting point, with an index to the whole “ROAD TO THE MALL” series also available.)
Our story resumes as Codding’s second lawsuit was filed in June 1973. It raised a valid complaint there had been no public hearings concerning a downtown shopping center – much less, government approval to build same – yet the city was more gung-ho than ever over Hahn’s mall.
Another point made in the suit was more important, yet difficult to understand from coverage in the Press Democrat. Codding wanted to block a new city bond from being issued. The bond had “nothing to do with the shopping center,” the URA director told the PD – although that was inaccurate, as the main purpose of the bond was to obtain a federal grant to buy some of the property where the mall would be built. 1
From that point onwards, there were major new developments almost every month.
The Renewal Agency opened the door to sell the land to Hahn (it was an “interim resolution,” so there was still wiggle room). At the same time, the Rohnert Park City Council – which was rooting for Codding to build his “Coddingland” shopping center there – said they were considering suing Santa Rosa because the mall would “monopolize [county] sales tax revenue”. The mayor of Santa Rosa told them to butt out; we hadn’t made a fuss over their projects.
Hahn announced he had commitments from Sears and Macy’s for his future mall. Macy’s was the whale that Santa Rosa failed to land in the mid-1960s for the Courthouse Square area, so that was undeniably an impressive win. But what was the deal with Sears? They already had a store at the corner of B and 7th and it wasn’t even that old. The official reason was the chain wanted to double their space to put more emphasis on fashion and home furnishings, but as discussed later there was quite a bit more to it behind the scenes.
At the close of the previous chapter, the City Council had expanded the border of the urban renewal study area from Fifth street to Seventh. As of that September, this additional acreage had a name: Phase III.
Phase Three was quite different from Phase Two. It was to have a single store (Macy’s, although that decision was apparently in the future) along with its surrounding parking garage. Nor was it mentioned in early newspaper coverage whether it would be attached to the mall, thus closing off easy access to Railroad Square.
What readers of the Press Democrat were told was the new combined assessed value of Phases 2-3 was $13.7 million – a 550 percent increase over the mixed-use neighborhood it was replacing. The PD loved quoting such figures from URA Executive Director James K. Burns: “Discussions with Burns leaves one’s ears ringing with the promise of millions of dollars of economic improvement in exchange for blight.”
Those figures were just the beginning. With each passing year, estimates of all sorts kept skyrocketing. The mall would create 1,000, 1,500, 3,000 jobs. It would more than double retail sales by 1980, which would “revitalize” downtown businesses yet not compete with them. New construction would bring in $18 million – no, wait, we meant to say $60 million. The increase in commercial taxes would pay to redevelop even more of Santa Rosa (“Railroad Square could become an exciting ‘old town’ tourist center”). Perhaps schools should have placed caviar on the lunch menus so kids could get accustomed to the good life they were soon to enjoy.
City Hall had better hope lots of money would result from adding Phase III, because there was no clear way to pay for it. “There is no more money for urban renewal for Downtown Santa Rosa,” Burns announced, as President Nixon had slapped a moratorium on new redevelopment projects.2 Without the guarantee of free HUD money, Santa Rosa would be assuming a much higher risk – and Hahn made it clear there would be no mall without this extra land. Together with Phase II the footprint would be thirty acres and he said the usual shopping center size was 50 acres, leading Hahn to grump he would have to unhappily add a second floor to make up the shortage.
It would take months to have the legally-required Environmental Impact Report (EIR) and other studies prepared for the combined Phase II-III project, and to hurry it along Hahn allowed $98 thousand of his $500K “good will deposit” to help pay for it – although he expected the entire amount given back (with interest) once the project received a green light.
During this interim the first meek voices of opposition (other than the Coddings) began to be heard – with pro-mall forces eagerly waiting to shout them down.
At its February 14, 1974 meeting, members of the city Planning Commission raised questions about traffic and whether the mall could be open air, as was Coddingtown then. Commissioner William J. Weil, a vineyard realtor, mused that we should also consider whether or not the mall should be built. (This is exactly as it appeared in the meeting transcript, with the ellipsis probably showing rhetorical pauses in his remarks):
|Has anybody really looked into this and said, you know, we need another shopping center in the town? And I think, especially the Urban Renewal Agency being a quasi-public agency, probably has a greater obligation than a private developer or private enterprise to look at the needs of the community and not to do something that is expedient for, …I don’t know how to say this thing without… in a sense feathering their nest. Then to look at the community as a whole and say this truly is the best thing. This is what the community needs.|
Milquetoast as those comments were, they apparently set off alarm bells. The Press Democrat reported “Commission Chairman Donna Born said her group has been made ‘the bad guys.’ She said strong commission statements last week were meant to be constructive.” (Bookmark that “feathering their nest” comment, by the way – the issue will resurface.)
The PD was firmly in the Hahn/URA camp, and printed (wayyy too) many articles with Burns’ ear-ringing promises of great riches certain to come. The paper also downplayed news that might portray the developer poorly. The same week Planning Commissioners were being called “bad guys” only the most observant readers might have caught a passing reference that Hahn’s design at the time called for a 700 car, two story garage between his mall and B Street. So much for pretending Hahn had good intentions for the mall to be integrated with the rest of downtown Santa Rosa.
Worse, the PD tried to suppress news about Hahn threatening to sue a town that might reconsider plans to build a mall there. In January 1974 Hahn warned Corte Madera it would “suffer the consequences” if their City Council – which had recently elected an anti-mall majority – withdrew approval.3 Although the Marin I-J had published several articles about his $17.5 million threat, nothing about it appeared here for weeks, and then only after Codding’s lawyer, William Smith, slipped copies of Hahn’s ultimatum letter to the PD and members of the Santa Rosa City Council. Hahn told the Press Democrat the Corte Madera situation was completely different from here and insisted “we’ve never threatened a suit before.” Yet our local paper still managed to spin the news as if Hahn was being unfairly attacked, with the PD article framing it as “the latest development in the Codding Enterprises-Santa Rosa Urban Renewal Agency controversy.”
(RIGHT: Undated portrait of Ernest W. Hahn courtesy the California Homebuilding Foundation)
Probably many in Santa Rosa were shocked to hear of Hahn playing lawsuit hardball. He seemed such a damnably likable fellow, a grandfatherly neighbor who might rock on his porch swing after supper, sipping a Coors Light while listening to a ballgame on the radio. Hahn came to Santa Rosa and usually made presentations or answered questions himself. And although he was a big shot, someone on FaceBook commented they would see him riding the bus from San Francisco.
Unlike Corte Madera, the decision-makers in Santa Rosa gave Hahn their full and unconditional faith that he would do what was best for the city. Part of the reason might be because he told them what they wanted to hear. While URA Director Burns was promising the mall would rain down riches, Hahn told them to feel good about tearing down an existing neighborhood because nothing worthwhile was being lost. “There were a lot of old buildings and vacant land there,” he said to the PD. “What are you going to do with it?”
So tight were Hahn and City Hall that we asked him to lend us money. Santa Rosa was turned down for a conventional $3.5M bank loan in order to finish acquiring land for Phase II and III. Hahn agreed to the loan at eight percent interest, the highest we could pay by law. This short term interim loan would be paid back by the muni bonds, which would in turn be paid back by the increased taxes expected once the mall opened. Gentle Reader is forgiven for now muttering, “gee, this sounds like a house of cards.”
The way the URA planned to use bonds for nearly all of the mall financing was always legally shaky, particularly since the city could no longer count on matching federal grants (see footnote 2). The Press Democrat mentioned the Hahn loan several times but was light on the details – except for one article’s scary statement “Hahn could foreclose on the property” if a judge later tossed out this use of bonds. The city and Hahn negotiated the loan for over three months before the idea was dropped.
The PD also neglected to explain that relying on Hahn as a banker might not be such a swell idea. In 1973 he had been sued for fraud and “irregular banking practices” for his role in the largest bank failure to date. The overall scandal was mentioned briefly in a 1975 profile of Hahn in the PD, but not that he personally paid a large settlement.4
The failure to land a (relatively modest) $3.5 million short-term loan threw the entire mall project into crisis, and URA Director James Burns continually barked that every month of delay in construction was costing the city about $100,000 (!) and the sole cause of all these woes was Hugh Codding and his gang of hoodlums. According to Burns, the Codding lawsuits spooked bankers from having anything to do with Santa Rosa.
Hahn was never as strident against Codding, but while defending his threat to release a courtroom Kraken on Corte Madera in early 1974, Hahn commented to the PD, “[Codding’s] attitude could jeopardize the future of downtown Santa Rosa…Other than Codding, I haven’t heard one voice in the community against the project.” That wasn’t quite true – see remarks above from the city Planning Commission – but Hahn was about to hear from lots of other dissident voices, which is the subject of the following chapter.
But a year after the 1974 Christmas lawsuit filed by the county, Ernest Hahn filed a $40M suit against Codding in federal district court in San Francisco. As summarized in the PD, Hahn alleged “Codding and his firm, Codding Enterprises, are guilty of anti-trust violations, defamation of character, and interfering with Hahn’s business relations with the city of Santa Rosa.”
1 The court dismissed Codding’s entire suit as “premature,” as the bond hadn’t been issued. The $1.8M TIF bond (see previous chapter sidebar) never got beyond URA passing a resolution for it, and it is not clear if it was ever anything more than a financial gimmick to obtain a matching amount of Community Development money. It was intended to make up for an $800 thousand shortage in the city’s required share to the overall urban renewal fund. The remaining million was to be added to the pool of money for renewal projects, such as a proposed parking lot between A and B streets or redevelopment around South Park. The week following Codding’s suit over that bond, the URA was awarded the matching $1.8 million grant for land acquisition in the Phase II area.
|2 In order to avoid cuts to the $18 billion military budget, Nixon froze large parts of the budgets for key health, education and housing programs from the Kennedy and Johnson years. The new January 1973 guidelines for HUD grants and subsidies required local governments to acquire the properties, do all improvements and sell it to a developer within one year. By September – the month Phase III was announced – the rules were tightened further, essentially ending all federally funded projects except public housing for the elderly. (MORE)|
|3 Of the $17.5M Hahn was going to demand in the Corte Madera suit, $2.25M was for studies, presumably like the ones Santa Rosa thought it was getting for free. The rest was for lost POTENTIAL income.|
|4 Hahn’s start as a shopping center developer began after U.S. National Bank in San Diego acquired a bank Hahn co-founded that was in trouble because of poor loans. Hahn was named to the USNB board and when the bank collapsed in 1973 criminal charges were filed against the bank president for tax fraud, securities fraud, embezzlement and bank fraud. Hahn, who had been an active director, was on sabbatical at the time but was among those charged by the FDIC for engaging in “unsafe and unsound” banking practices. He paid up to $2M for settlement and attorney fees. For much more, see this article in the San Diego Reader.|