Our April issue is about all things Construction and Real Estate.
CONSTRUCTION & REAL ESTATE
Materials costs, shipping delays and labor shortages—North Bay construction firms navigate a shaky post-pandemic foundation Through the roof!
Inside: Mountain Play · Sterling Vineyards Pacaso or timeshare? · NAR’s big no-no Custom crush · Black Steer Steakhouse
April 2024
$4.95
Simpson Sheet Metal Promoting Women in Construction My name is Nancy Taylor, I have been a part of the Simpson Sheet Metal family since 2017. My grandparents Bill and Nancy Simpson started Simpson Sheet Metal in 1981 and took great pride in running their business with the core values of integrity and respect. I had the honor of being promoted to vice president, and as I grow in this company my goal is to never stray from the principles my grandparents built this company on. I cannot express my profound gratitude for the opportunities I have had at Simpson Sheet Metal, and the incredible team I get to work with.
Tanya Bruno, Chief Financial Officer at Simpson Sheet Metal, blends diverse business expertise with a passion for fostering individual growth. Her professional approach is marked by enthusiasm and a forwardthinking mindset. With a bachelor’s in business management, Tanya actively engages in community service, receiving recognition for dedication to education and youth. As President of Windsor Wicked Girls Travel Softball, she is passionate about building confidence and leadership. Beyond her career and volunteer work, Tanya finds balance through outdoor activities and quality time with her family. Her commitment to both professional and personal aspects defines her multifaceted and impactful approach to life.
I, Kendall Richardson, am grateful and honored to be promoted to the purchasing agent position at Simpson Sheet Metal Heating and Air Conditioning. With six years of experience as a material expediter, I have gained extensive knowledge in warehouse management, coordinating deliveries, ensuring product availability and building relationships with suppliers. This promotion allows me to contribute to decision making and make a positive impact on purchasing operations at Simpson. I am excited about this opportunity and believe it’s a result of my hard work, dedication and the trust placed in me by the company. I am ready to make a positive impact on purchasing operations and grow professionally.
Put Your Trust In Us
Celebrating more than 40 years as a family owned business. Our team is here to meet all of your HVAC needs.
707-576-1500 • simpsonsheetmetal.com • Santa Rosa, CA
April 2024
NorthBaybiz 3
License #301487
F or over 55 years, the Eddinger family has built a successful business that thrives on old-fashioned values, attention to detail and strong relationships with clients and community. A full-service construction firm, Eddinger Enterprises builds both residential and commercial projects of many sizes. From remodels, outdoor living spaces and custom homes to wineries, resorts, hospitality, and manufacturing facilities, the Eddinger team can build and manage any project with a high level of professionalism backed by decades of experience. All employees are well-trained, experienced professionals, dedicated to quality, customer service and sustainable building practices. As a multi- generational premier construction company, their reputation for honesty and fairness is matched by their commitment to quality craftsmanship. Because of strong relationships, most projects include customers, architects, subcontractors, and suppliers they work with on a continuing basis. The team at Eddinger Enterprises looks forward to building Sonoma County for another 50 years and is proud to be known as your community builder since 1968.
707-433-5113 www.eddingers.com • Healdsburg
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April 2024
49 YEARS OF BUSINESS INTELLIGENCE
April 2024 • Volume 49 • Number 5
LEAD STORY 18 FITS AND STARTS Jessica Zimmer Local construction companies weather rising costs, supply delays and more
WORK/LIFE 13 CONSTRUCTION AI
15 HAPPINESS 17 INFLATION
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FEATURE STORIES 28 The divide over timeshares Janis Mara No welcome mat for Pacaso’s ‘fractional homeownership’ model 36 THE 6% SOLUTION Jason Walsh North Bay Realtors weigh in on game-changing commission structure 42 Climb every mountain Bo Kearns Putting on the Mountain Play every year is no walk in the park 50 NATURAL CRUSH Emily Weber Sonoma’s Magnolia Wine Services is helping natural wines get off the ground
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Helping grow your business isn’t just something we do... it’s all we do!
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COLUMNS 11
DEPARTMENTS 8 LETTERS 64 GREAT TASTES Alexandra Russell Sterling Vineyards in Calistoga 66 DINE WISE Jason Walsh Black Steer Steakhouse & Saloon in Novato 69 ON THE MOVE 70 WHAT’S HAPPENING Upcoming North Bay events 72 BIZ SCENE
FROM THE EDITOR Jason Walsh Rising costs bring the building blues
27 NAPA INSIDER Christina Julian The woman behind Ray Ray’s Tacos 35 ECON 101 Robert Eyler Economic sanctions, explained 41 TECH TALK Michael E. Duffy AI—seeing is NOT believing 49 ONLY IN MARIN Bill Meagher BioMarin’s newest investor 63 VINE WISE Adam Lee The wine industry’s youth problem 68 IN THE KITCHEN John Ash Halibut, the other white fish
Bodega Murals and Rohnert Park Chamber breakfast with Bill Dodd 74 BEYOND THE BOARDROOM Rosie Padilla Rachel Calvert, award-winning civil engineer for Marin
Printed by Publication Printers Corp., an FSC Certified printer. Please recycle this magazine.
NorthBay biz (ISSN No. 1542-3549: USPS 097-770) is owned and published monthly (plus three bonus issues annually) by North Bay Media Group, LLC. Editorial offices are at 3392 Mendocino Ave., Santa Rosa, CA 95403 USA: (707) 528-4434. Sub- scription price is $35 per year. Periodicals Postage Paid at Santa Rosa, CA 95402 and at additional mailing offices. Copyright 2022, NorthBay biz. Reproduction of this issue in whole or in part is strictly forbidden without written permission by the publisher. POSTMASTER: Send address changes to NorthBay biz, 3392 Mendocino Ave., Santa Rosa, CA 95403 USA.
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April 2024
Thank you Sonoma County. We are honored to be your local bank.
exchangebank.com
2023
Letters
Publisher
Lawrence Amaturo
Editor-in-Chief
Jason Walsh
Letters to the Editor That headline is a crime Mr. Walsh, The recent story on retail crime [“Retail Crime Has Been Trending Down for Years,” February] conflicted with my own observations, and I’m guessing many of your readers in retail. The quoted Council on Criminal Justice report that “shoplifting incidents in major cities have fallen 7% since 2019” (excluding New York and LA) led you to write a misleading headline. I don’t want to sling data arguments—but want to provide some important context to help you and your readers understand that’s a misleading headline. I just read the COCJ report and looked especially at data for our city home before moving in 2023 to Sonoma County. The report showed a 20% drop in “reported incidents.” I can say from personal contact with major retailers, the key word is “reported.” Shoplifters demonstrated amazing math skills to take merchandise totaling just below the $950 felony threshold. Retailers tell employees to avoid confronting shoplifters for fear of injury, and security attempts to stop—let alone prosecute—$900 thefts are severely restricted. I’m told shoplifters often return to
Associate Editor
Rosie Padilla
Work/Life/ Retail Retail crime has been trending down for years
Contributing Editor
Bill Meagher
By Rosie Padilla
H ave the countless headlines in recent months fomenting alarm about a retail crime wave sweeping the U.S. been, er… lifted from bad data? That’s the case regarding at least one influential report from the National Retail Foundation (NRF), which claimed in its April 2023 survey that around $45 billion in merchandise had been lost to U.S. retailers the prior year due to organized retail crime
What merchandise is most-frequently targeted by retail thieves? According to data from NSW Bureau of Crime Statistics and Research, these are shoplifting’s Fab Four: Alcohol 37% Retail theft greatest hits
Design Director
Anne Schenk
Clothing/footwear 22% Food and beverages 15% Perfume/cosmetics 12%
(ORC). But in November, trade publication Retail Drive called out the data as faulty—and on Dec. 1 the NRF revised its report, conceding the data was inaccurate. The problem? It’s more likely that $45 billion amount reflected the overall inventory loss, or “shrink”—not necessarily all of it from theft. Shrink is often used interchangeably with the term theft, but the NRF says shrink more directly refers to all lost inventory for retailers— including administrative errors such as inaccurate inventory costs, accounting errors, incorrect pricing, paperwork mismanagement, E-commerce fraud and inventory damage. The NRF’s mistake could be chalked up to something along the lines of the old game of Telephone—their report possibly stemmed from 2021 testimony before U.S. Congress, when retail analyst Ben Dugan mischaracterized the $45 billion as retail loss from theft; and he may have gotten his info from a 2016 retail trade group survey which reported that amount more accurately as overall shrink. The good news: While there remain pressing issues about organized retail crime—a kind of professional shoplifting run by crime rings, including smash-and-grab, truckjacking and cargo theft—overall shoplifting incidents in major cities have fallen 7% since 2019, according to the Council on Criminal Justice, with notable exceptions in New York City and Los Angeles. Closer to home, the San Francisco Police Department was recently awarded a $15.3 million grant to crack down on organized retail theft and the SF District Attorney’s Office received a $2 million grant to help prosecute ORT.
Administrative Assistant
Jodi Pasquini
Note: While swiping any and all booze is popular among thieves, particular favorites are bourbon, whiskey and vodka, according to the NSW
Marketing Consultant
Lori Rooney
Writers Bo Kearns Janis Mara Jason Walsh Jessica Zimmer
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NorthBaybiz 15
the same store to steal again after selling their lifted goods for cash nearby. The result is a rash of $900 thefts that go “unreported” and uncontrolled— fostering a new culture in today’s downtown retail. And store closures. The COCJ report actually points out that changes in reporting practices pose a risk for analyzing its data—but it’s a small note amidst a lot of sentences of “reported” incidents. — Jack Byrne, Sonoma County
Emily Weber Rosie Padilla
Columnists Adam Lee Alexandra Russell Bill Meagher Christina Julian Jason Walsh John Ash Michael E. Duffy Robert Eyler
Photographers Duncan Garrett
For more recent NorthBay biz issues, check out northbaybiz.com. Email comments, complaints and witty observations to jwalsh@northbaybiz.com. Please include name, address and phone number. Letters will be edited for length and clarity.
Helping grow your business isn’t just something we do .... it’s all we do!
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8 NorthBaybiz
April 2024
Experience the ultimate celebration of Louisiana’s French Kreole culture in Sonoma County’s backyard!
MAY 11, 2024 • 12pm - 6pm
On May 11, 2024, the highly anticipated Kreole & Krawfish CommUNITY Gathering will return to SOMO Village Event Center in Rohnert Park, CA, A truly inspiring event that aims to raise funds for the “Are You Ready To Learn with Andre Thierry” children’s and family music program. Indulge your senses in the mouth-watering flavors of Louisiana’s cuisines and refreshing drink specials at the full-service bar while entertained by lively French Kreole La La, Zydeco, and Accordion Soul Music. This outdoor event is excellent for families and dance enthusiasts alike! Plus, it’s free for children under twelve, and plenty of free parking is available. Join us and enjoy the musical traditions passed down from generation to generation as we share the heART of the French Kreole culture!
Our multicultural events, projects, and programs share world music with inspirational rhythmic experiences, benefitting our local and global communities. info@poweredbymusicllc.com.
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NorthBaybiz 9
Books Are Portable Magic The Possibilities are Endless
Reading to my grandchildren is one very important way to pass along to them the knowledge and wisdom contained in books. Hopefully it will inspire them to look at life’s possibilities through the eyes of others, both in written words and also pictures. It helps them develop curiosity and excitement about the world. As they grow and begin to read chapter books they will begin to learn the meaning of words, expanding their little minds as they are exposed to life through books. An early background in reading will help them tremendously as they enter school as a first grade student and continue to help them through their higher learning experience. Imparting learning through reading is an opportunity for us all to support the youth around us, not only in learning, but in developing a sense of self and confidence in speaking to others. Always remember to take the time to read with your children every chance you get. You will be helping to build their imagination, thinking skills, language skills as well as empathy for others. Most of all, reading with your children helps to create memories that will last a lifetime.
“For more than 40 years, we’ve protected people from the elements. Now it’s time to help our kids in the community.” —Barbie Simpson, Owner and President
Read on Sonoma!
Celebrating more than 40 years as a family owned business. Our team is here to meet all of your HVAC needs.
Put Your Trust In Us
707-576-1500 www.simpsonsheetmetal.com Santa Rosa, CA
From the
Even with the pandemic fading in the rear-view, local building and construction businesses continue to grapple with challenges that could jackhammer even the most optimistisc of building crews.
Design of the times By Jason Walsh
“A ll problems are solved by good design,” observed long-ago English statesman Stephen Gardiner. That guy clearly didn’t have a contractor’s license in the 21st century North Bay. Even with the pandemic fading in the rear-view, local building and construction businesses continue to
they’d never bought one in the first place. Meanwhile, if lofty mortgage rates are keeping prospective buyers out of the market, there may be some relief: The real-estate industry’s 6% agent commissions
have been 86’d. At least that’s likely the result following the March settlement between the National Association of Realtors (NAR) and groups of lawyered-up home sellers from Missouri, who filed anti-trust lawsuits last year alleging NAR and a pair of
grapple with challenges that could jackhammer even the most optimistic of building crews. In our latest issue focused
on local construction and real estate topics, we look at both pressing concerns of the construction industry, as well as the latest changes to the world of real-estate and what it all means at the local level.
brokerages conspired to keep agent commissions artificially high. NorthBay biz spoke with local agents about the ruling some are calling a game-changer for buyers, sellers and the agents themselves. Of course, another thread that ties all these stories together is the never-ending quest for industry players— from the builders to the buyers and everyone in between— to lessen expenses to realize their dreams, whether they be running a profitable company, investing in a vacation home or jumping into the housing market for the first time. All problems solved by good design, eh? Some of us prefer: A penny saved is a penny earned. And if you disagree, we’ve got an incredible timeshare we’d like to sell you. n
Post-pandemic supply chain delays, materials costs and labor shortages have put more than a spanner in the works for many construction companies. In our lead story, reporter Jessica Zimmer asks local companies what they’re doing to mitigate the effects of inflation and keep their scheduled starts, renovations and payroll dates from suffering any unexpected, er… developments. If those frustrated by a lack of construction starts are hoping the market for pre-existing housing stock enjoys a sudden uptick in inventory—we know one company that won’t be adding much to the MLS: Pacaso. This winter, the City of St. Helena joined other North Bay jurisdictions in passing an ordinance limiting timeshares in their communities—targeting Bay Area company Pacaso, which sells “fractional” homeownership for up to eight purchasers to enjoy the benefits of a second home for an evenly split portion of the year. Pacaso insists it’s not a timeshare—but, then, what is? Reporter Janis Mara looks behind the scenes at timeshares—those that love ‘em and those that wish
Jason Walsh is editor in chief of NorthBay biz magazine and northbaybiz.com . A North Bay native, he’s spent his career covering the news, lifestyles and people of Sonoma, Marin and Napa counties. When not up to his elbows in page proofs, you can find him and his family exploring all corners of the North Bay from their home base in Novato.
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April 2024
Work Life AI
By Jason Walsh Thank you very much, Mr. Roboto… A rtificial intelligence isn’t just for flying cars and virtual reality headsets. AI is used for projects big and small—including major construction and renovation. Just ask your site manager, C3PO. One major area of construction AI is in project planning and design. AI can use algorithms to analyze complex datasets to optimize mapping and layout, considering factors like material strength, cost and environmental impact, leading to more sustainable and cost-effective structures. Remember the Three Little Pigs? The one who built his house out of straw should’ve used AI. In construction management, meanwhile, AI streamlines project workflows with automated project scheduling and resource
allocation. Its ability to weigh risk assessment also improves project timelines and resource utilization. And just because the kids in the neighborhood aren’t flying their Toys R Us drones over your backyard these days, doesn’t mean that technology isn’t coming in handy for big industry—AI-powered drone cameras are being used for site inspections and real-time data collection. And we weren’t kidding about C3PO donning a yellow hard hat. AI- driven robots are used to perform repetitive tasks, such as bricklaying or 3D printing—and they do it quickly and accurately—reducing unnecessary labor costs and human error. As the technology continues to improve, the construction industry expects to see further advancements in productivity, sustainability and innovation.
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April 2024
Work/Life/ Happiness
Happiness Police: Young people need an attitude adjustment By Jason Walsh
A new report has wiped the grin off America’s faces. According to the 2024 World Happiness Report released this spring, the United States has dropped out of the top 20 happiest countries—it’s the lowest U.S. ranking since the annual Gallup survey measuring world contentment first published in 2012. And which Americans is it who can’t seem to turn their frowns upside down? Gen Z, according to the report. Survey respondents under 30 “single handedly knocked” the U.S. lower in the rankings, is how middle-aged grouches at USA Today framed it. The report found that such factors including poor living situations, lack of support systems and a decreasing confidence in government contributed to younger respondents’ overall malaise. The report surveyed nearly 150,000 people in more than 140 countries. For a seventh-straight first-place finish, the Finnish topped the list. Following Finland were other joyous Nordic countries: Denmark (2), Iceland (3) and Sweden (4).
John Helliwell, editor of the report, told CNN that Finland fosters a culture of community and institutional trust and promotes work-life balance, resulting in high happiness rankings. In general, the top-ranking countries tend to have a strong social safety net. Until recently, the U.S.’s happiness has followed a U-shaped curve, showing happier times under age 30 and over 60—with drearier days in middle age, when the stresses of young children, pricey mortgages and long work hours tend to put a damper on one’s chill vibe. Typically, the young have been happier than the old—but that has shifted in North America, according to the report, with unease for those under 30 rendering them for the first time less happy than those over 60. Perhaps unsurprisingly, the least happy countries tend to have critical challenges due to widespread poverty, political instability and war. The lowest ranked European country is Ukraine (105). The least-happy country overall is Afghanistan (140). Check out the full list at worldhappiness.report/ed/2024 . For those wondering about North Korea, it seems the Hermit Kingdom didn’t participate in the survey, preferring to instead compile its own happiness index. Its most recent ranking from 2011 showed China at No. 1, followed by North Korea, Cuba, Iran and Venezuela. Dead last, of course, was the “American Empire” (203). No doubt their researchers spoke to a lot of those Debbie Downers in Gen Z. What makes people happy at work? According to HR management site lattice.com , the following factors are the prime contributors to a happy workplace: 1. Making enough money
2. Having a good boss 3. Having autonomy 4. Variety of tasks 5. Healthy work/life balance
For the first time, Americans under 30 are unhappier than those over 60.
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Imagine the possibilities...
17235 Bodega Hwy, Bodega CA • $939,000
Experience the allure of history and the charm of coastal Sonoma County as the new owner of the Historic Bodega Art Gallery building. Situated in the Town of Bodega—site of Hitchcock’s 1962 classic “The Birds”—this 1880s commercial gem offers a unique investment opportunity to own a piece of what was originally known as “Bodega Corners,” a bustling crossroads where three main roads converged.
n The building, originally a 19th century blacksmith’s workshop, is 1,320 square feet and features distinctive brick floors and soaring open- beam ceilings. For the last 60 years it has been home to an art gallery. The lot is 5,440 square feet and includes a shed and RV hookup. n There are multiple scenarios for expansion, with the potential to also purchase the adjoining parcel with a building site and sweeping views. Additional options include a proposed lot line adjustment for additional land above the gallery and a 4-bedroom perc for an eventual septic system. n The upper portion and additional land is not in the historic zone. n An extraordinary opportunity to own a piece of Bodega’s storied history and be a part of shaping its future. The possibilities are as vast as your creativity and county regulations allow.
ownbodegahistory.com
ALLISON NORMAN / STEPHANIE NORMAN Realtors • Real Estate Agents • Your North Bay Real Estate Connection
1860 Mark West Springs Rd $995,000 • 22.06 acre lot Bring your big country dream and enjoy the simple life on your own 22-acre parcel. Held by the same family for generations, this Rural
1860markwestsprings.com Residential parcel offers a rare opportunity at the edge of the Mayacamas Mountains. Gently rolling hills, majestic oaks, open pastures, several level/open building sites, and views from the upper portion make this parcel the perfect canvas. Build your estate, family compound, hobby vineyard, horse property/equestrian retreat, or start small and build your forever home later. Just 4 miles from Larkfield/Hwy101, and the Larkfield Fire Station. 15 minutes to Healdsburg and 20 minutes to Calistoga. In the heart of the Sonoma County wine country, just minutes to the Napa valley. 1 hour to San Francisco, or to the Sonoma coast. 20+ GPM well n a previous 5 bedroom septic-perc. n Gated entry n Paved driveway
KSRO SONOMA COUNTY’S NEWS TALK FM
FM 103.5 96.9 FM 1350 AM
707-799-3617 AllisonNorman.com Allisonnorman@kw.com
Hosts of The Real Estate Hour on KSRO Sundays 9-10am
16 NorthBaybiz DRE# 01720334 - 02209237
April 2024
Work/Life/ Inflation
Inflation, interest rates plateauing
I nflation in the U.S. edged up slightly in February, as rising housing costs continued to put upward pressure on the Consumer Price Index, while an increase in energy prices compared to January also contributed to higher- By Felix Richte than-expected overall inflation. According to the Bureau of Labor Statistics, the Consumer Price Index for All Urban Consumers (CPI-U) increased 3.2% over the last 12 months before seasonal adjustment, up from 3.1% in January, which was what economists had expected for February as well. On a monthly basis, prices edged up 0.4% with the indexes for shelter and gasoline alone accounting for more than 60% of the overall increase. Meanwhile core inflation, which excludes volatile food and energy prices, came in at 3.8% in February, down slightly from 3.9% in January and the slowest increase since April 2021. Due to its weight in the Consumer
latest jobs report that showed job gains picking up in February and unemployment remaining below 4%, the latest CPI reading will dampen hopes of the Fed starting to cut rates soon. The Federal Open Market Committee has kept the Federal Funds Rate steady at 5.25 to 5.5% since July, putting the breaks on what has been the most aggressive tightening cycle since the early 1980s.
inflation took off, the high readings could largely be explained by the so- called base effect, as prices had fallen sharply at the onset of the pandemic a year earlier, when demand for many goods and services had suddenly dried up. Due to that initial dip in consumer prices, year-over-year comparisons were exaggerated for a while, but toward the end of 2021 inflation became a real concern, which turned into a global crisis when Russia attacked Ukraine, resulting in surging food and energy prices. Now that the conflict in
Ukraine has dragged on for more than two years, price levels are measured against already elevated prices, partially explaining the steep drop in inflation in the first half of 2023 and why progress has been notably slower since then. Combined with the
Price Index, the cost of shelter continues to be a major driver of
inflation. Rents and owners’ equivalent rents of residences increased 5.8 and 6% year-over-year in February, respectively, as the index for shelter climbed for the 46th consecutive month. In fact, excluding the impact of shelter, inflation would have stood at 1.8% last month, below the Fed’s target level of 2%. Back in the spring of 2021, when
April 2024
NorthBaybiz 17
A spanner in the works
Faced with rising construction costs, North Bay builders focus on starts and renovations
18 NorthBaybiz
April 2024
By:Jessica Zimmer
W ith construction costs high, North Bay property owners are waiting for the Federal Reserve to decrease interest rates before talking to contractors. They are concerned they will not see a return on investment on new buildings if they sell. Despite such hesitancy, the North Bay is seeing comparatively more construction than other parts in the Bay Area, especially San Francisco. The North Bay has constructed a great deal of multilevel residential housing in metropolitan areas. Local property owners are also making progress building on wildfire-affected lots. “Individuals buying and building new homes today are either people of means or taking a longer-term approach,” says Jason Lorenz, senior vice president and regional manager of commercial banking for construction for Bank of Marin, which is based in Novato. Inflation is another reason for the slowdown. Costs for materials and labor and costs for fuel have increased sharply in the past 18 months. “The combination of these factors is a recipe for developers and builders to press the brakes. A decrease in interest rates will open more doors,” says Lorenz.
Supply chain delays, materials costs and labor shortages are proving formidable challenges to the North Bay construction industry.
April 2024
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By Bonnie Durrance
20 NorthBaybiz
April 2024
The exterior of Healdsburg Lumber’s new location at 13534 Healdsburg Ave. in Healdsburg. [Photo courtesy Bee Vera Construction]
The Federal Reserve is potentially going to begin cutting interest rates in May or June. There are signs that the decreases will occur in a series of rate reductions over the rest of the year. Still, construction may be sluggish for months. It takes time to get projects approved. Already approved and fast-tracked projects could see more progress between the late spring and early fall, depending on weather and fire conditions. It is also good news that increases in materials prices are not as dramatic as at the start of the pandemic. Prices for lumber and steel are technically higher than in spring 2020. Yet, compared against the current value of the dollar, they are lower than they were when the pandemic began. “This is remarkable because a lot of manufacturers and suppliers shut down during the pandemic. Plants for finished products like cabinets also closed. A percentage of businesses and facilities never reopened. Given these concerns, it is fortunate that builders have been able to find materials and supplies to continue work,” says Tony Simmons, owner and president of Nordby Construction in Santa Rosa. In response to rising costs, some North Bay property owners have reduced the scale of projects. For example, a number of wineries decreased the size of new tasting rooms. This was also because wineries saw direct-to-consumer sales increase early in the COVID-19 pandemic. Other property owners are proceeding ahead with their original plans. “If you want a new space like a wine cave to increase storage capacity and guest visits, it’s a gamble to wait for interest rates to drop. Next year you could miss out on gains,” says Simmons. Starts set to rise, but home renovation is ongoing In 2024, nationally, construction starts are expected to increase 7%, with a $1.2 trillion forecast, according to the Dodge Construction Network (DCN). DCN is a Massachusetts-based company that offers predictions about the commercial construction industry.
Spending on nonresidential building is expected to be lower overall, with only a 4% increase, according to the American Institute of Architecture. This means many of the starts will be in housing. Locally, there is still great demand for renovation, says Dan Weaver, vice president of sales for Healdsburg Lumber Company. “With interest rates high, homeowners can’t change residences easily. So many locals are fixing up their homes. The numbers aren’t as big as they were early on in the pandemic. Homeowners still want to make their yards and decks ‘private paradises.’ They’re also remodeling kitchens and bathrooms,” says Weaver. Another trend is to expand living rooms, as well as upgrade the “pretty parts” of homes, like cabinets, windows and trim, says Chris Gaylor, contractor sales manager for Healdsburg Lumber Company. “We’re in a bubble in Sonoma County, especially in affluent areas like Healdsburg. Many newcomers are arriving from other parts of the Bay Area and the East Coast. The houses they are buying tend to be older. They require new siding and wood replaced due to dry rot or water damage. Also, rural homes tend to need more repairs. This is more common after heavy winter and spring rains,” says Gaylor. Letitia Hanke is the owner of ARS Roofing, a Santa Rosa- based roofing company. She says the 2023 fall and winter storms caused so much damage North Bay residents had to prioritize roof repairs and tree removal. Such decisions meant putting other improvements on hold. Some property owners’ lag to renovate is also related to the demand and cost for roofing materials. The 2023 storms affected most populated areas of California. Roofers, builders and developers have seen roofing materials costs increase every few months.
Labor concerns increase total costs In January 2024, the minimum wage for all California workers
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Winter 2024 progress on Valle Verde, a multifamily apartment building under construction in Napa, by Burbank Housing. [Photo courtesy Jocelyn Lin]
Rendering of The Cannery in Santa Rosa, a residential project of Midstate Construction that is currently underway. [Image courtesy Midstate Construction]
increased to $16 per hour. The 50-cent increase since 2023 makes it harder for general contractors to turn a profit. In addition, a survey of approximately 65 members of the Associated General Contractors of America who build in California said factors relating to labor are significant concerns. The top issues for 2024 include rising direct labor costs like pay and benefits (for 52% of respondents); an insufficient supply of workers and subcontractors (for 49% of respondents); worker quality (43% of respondents); and inadequate construction career education and training (22% of respondents). Lack of training typically leads to losses. An employer
must choose between training workers while paying them or completing fewer projects. Simmons says the COVID-19 pandemic helped general contractors become more flexible. “When many people in the company had to work remotely, it showed us we could be effective by mixing things up,” says Simmons. The changes led to companies becoming more resilient. This has helped firms cope with inflation. Still, the U.S. construction industry will only meet demand this year if it attracts 501,000 more workers on top of normal hiring. The estimate comes from a model from Associated Builders and
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22 NorthBaybiz
April 2024
Contractors, a national trade organization that represents the non-union construction industry. The demand for skilled labor is higher in the North Bay. Local workers have been pulled away from construction by well- paid jobs in solar panel and electrical vehicle charger installation. Hanke is also the founder and executive director of the Lime Foundation, a Santa Rosa-based nonprofit that runs the NextGen Trades Academy (NGTA) roofing and construction
In 2023, Burbank Housing, a Santa Rosa-based developer, saw construction bids come in at the expected estimates as well as some lower estimates. Burbank Housing builds affordable housing and permanent supportive housing (PSH) in Napa and Sonoma counties.
Roger Nelson, CEO of Midstate Construction in Petaluma. [Photo courtesy Roger Nelson]
Monica Nelson, vice president of marketing and business development for Midstate Construction in Petaluma. [Photo courtesy Monica Nelson]
PSH is defined as housing with on- site social services for people who formerly experienced homelessness and/or have physical disabilities and chronic health issues. Jocelyn Lin, director of housing development for Burbank Housing, says it is rare to see bids come back lower. She adds Burbank Housing appreciates it when local general contractors work with them to combat inflation, supply shortages and additional expenses related to weather delays. Lower bids have helped Burbank Housing manage project budgets amid other rising costs such as insurance. “In recent years, the
vocational program. NGTA offers three weeks of training for 16- to 24-year-old underserved youth from Marin and Sonoma counties. There are other local programs like NGTA, such as the North Bay Construction Corps’ partnership with the Marin Builders Association. These trainings ease the labor shortage. They also benefit young people by helping them determine what trades and skills they want to learn. “Many students in
the NGTA program are interested in careers in green building, renewable energy and sustainability. This involves learning how to install technologies like smart appliances and LED lighting. Our classes go beyond the basics of working with steel and insulation,” says Hanke. The NGTA program
“Most buyers aren’t looking to cut weeds and till the land.” —Eric Ziedrich, real estate agent
costs of insurance have skyrocketed. It has been tough to find companies who will insure properties dedicated to permanent supportive housing,” says Lin. Lower bids have also
helped Burbank Housing deal with specific supply chain issues. One of Burbank Housing’s general contractors is Midstate Construction in Petaluma. Wesley Barry, vice president of project management for Midstate Construction, says manufactured materials and equipment that depend on electronic circuit boards and chips are increasing in cost. The rise is occurring at a pace greater than that for other materials. “Along with the cost increase, the demand versus the availability of these goods is significantly impacting construction schedules. That in turn also increases costs. This impact is widespread as it affects numerous components, including things like fire alarms, automated door operators and irrigation controllers,” says Barry. For new starts, one of the critical components is electrical distribution panels. These panels bring power to a building. The scarcity and potential delay for electrical distribution panels impacts overall project schedules. “On one of our projects, we placed the order for the switchgear as soon as we executed our contract with the owner. This was prior to the loan being closed and before we were able to break ground,” says Roger Nelson, president of Midstate Construction. Occasionally Midstate Construction has finished a project ahead of the arrival of the switchgear.
typically graduates eight classes of students a year, with between 15 and 20 students per class. Hanke and her colleagues say many more trained workers will be needed in the next decade. Predictable as well as surprising costs for affordable housing The growing demand for renovation and general contractors’ motivation to work with high-end customers makes it more difficult for property owners with less cash to complete work. Low availability poses a problem for affordable housing, says Robert Eyler, professor of economics at Sonoma State University. “Local governments should not want to be builders. The solution is for local governments to form more partnerships with private sector developers. Governments can do more to provide incentives and pathways for projects to be completed,” says Eyler. Rohnert Park and Solano County serve as models for streamlining affordable housing construction. “Other communities, especially well-off areas in Marin and Napa counties, struggle with affordable housing construction. For decades, local residents have said new affordable housing will not fit the character of their areas. Residents also feel they will build units and there will not be enough demand for them,” says Eyler.
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Calum Weeks, policy director for Generation Housing. [Photo courtesy Calum Weeks]
A group of graduates of the 2022 NextGen Trades Academy at their graduation ceremony. [Photo courtesy The Lime Foundation]
“This is a logistical issue when it comes to building public housing. These projects need to be occupied before they are allotted final funding. The developer has had to power the buildings with temporary panels until the switchgear arrives,” says Roger Nelson. Monica Nelson is the vice president of marketing and business development for Midstate Construction. She says the majority of projects now include installation of solar panels or preparation for solar panels. “We also are now installing electric vehicle chargers or prepping for chargers and installing generators or prepping for generators.
This is good for the environment and residents in the long run. It allows for electric vehicle options and preparation for potential power outages,” says Monica Nelson. It is a plus for Burbank Housing and other similar developers that the conversion of older motels to residential units is often faster and less expensive than to build new construction. This is particularly true when units are in good condition. Such work is being undertaken with funds from the State of California’s Homekey program. Part of the money for Homekey projects goes to renovations of units for people with disabilities. By law, the state requires that a certain number of the units are Americans with Disabilities Act-compliant. Steps include installing entrance ramps, making
Wishing You Peace and Happiness in Your New Home
sure a doorway is level with the floor behind it, putting grab bars in showers and bathtubs and replacing traditional locks and knob handles with accessible alternatives like levers. Despite all the progress, more could be done to increase the amount of affordable and permanent supportive housing. Calum Weeks is the policy director for Generation Housing, a Santa Rosa-based nonprofit that aims to increase the amount and diversity of housing in the North Bay. The organization has crafted the North Bay NEXT initiative, a set of recommended policy changes for development. One of the suggestions is to consolidate design review authorities into planning commissions. The step would cut down on the number of meetings developers need to attend. “This step would reduce uncertainty and accelerate housing project timelines while still ensuring transparency and accountability in decision-making,” says Weeks. Weeks also advocates for North Bay counties, particularly Sonoma County, to waive impact fees for at least three years
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24 NorthBaybiz
April 2024
The hospitality building for Antinori Napa Valley, a Napa winery, completed in 2023 by Nordby Construction. [Photo courtesy Nordby Construction]
for deed-restricted affordable housing. Individuals or families making 120% of Area Median Income or below would be the target demographic for such housing. Weeks says reimagining how North Bay residents navigate communities and manage parking are critical to meeting housing needs. “For example, how about allowing residents to use golf carts to travel within cities like Cotati? This could reduce air pollution, traffic congestion on main roadways and the need for excessive parking,” says Weeks. Understanding trends for construction loans and home sales Sonoma County is seeing more new home construction, particularly in areas still recovering from wildfires. In contrast, Marin and Napa counties are seeing more accessory dwelling unit (ADU) construction. New home construction can be more expensive in Marin and Napa counties, says Michelle Anderson, chief lending officer for Redwood Credit Union (RCU). RCU is based in Napa and Santa Rosa. “Napa County tends to have larger lots that enable ADU construction. Marin County has a lot of parcels with sloping land. [It] can be challenging and potentially more expensive to build retaining walls,” says Anderson. It is typical for homeowners to tap
A $10.75 million home in Sonoma in the portfolio of Eric Ziedrich, real estate broker at The Agency in Healdsburg. [Photo courtesy Eric Ziedrich]
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NorthBaybiz 25
the equity of their homes for renovation expenses. Anderson expects this will continue until interest rates drop. “Also, homeowners have to cover unanticipated costs. For example, now it is common to pay a deposit simply to work with a general contractor. Homeowners should also be proactive and ask who will handle the paperwork and costs for the permits,” says Anderson. Given the high amount of renovation and building, 2024 promises to be a good year for buyers of residential property in the North Bay. Eric Ziedrich, CEO of Healdsburg Lumber Company, is also a real estate broker at The Agency, a real estate firm in Healdsburg. He says since the pandemic began, more buyers are looking for turnkey homes as opposed to fixer-uppers. “There’s more interest for completed and finished renovated homes, especially for high-end properties. There’s also more excitement about urban real estate, where residents can walk to downtown resources like the Healdsburg Plaza. The demand is softer for ranches and vineyards. Most buyers aren’t looking to cut weeds and till the land,” says Ziedrich. Buyers relocating to the North Bay or moving around within the North Bay tend to be older, with a higher-than-average amount of discretionary income. Ziedrich and other real estate agents have been reaching out to potential customers through a tailored approach. The tactics differ from the “shotgun marketing methods” they used in buyer- driven markets in the past. Current forms of advertising include social media posts, targeted emails, newsletters and campaigns to spread information. Agents are investing less money in printed directories, magazines and introductory postcards sent to members within certain age groups. Ziedrich adds being sensitive to buyers’ and sellers’ needs and being smart and efficient are keys to successful selling today. “Agents demonstrate their value by being resilient and nimble. By focusing on a client’s needs, expectations and limitations, we can serve a critical role in residential and commercial real estate transactions,” says Ziedrich. g
Five tips for property owners considering construction
1. Talk to an insurance broker about how the addition of a new building or room will impact the parcel’s insurance policy. Location makes a difference. For example, it will be expensive to site an accessory dwelling unit close to a large oak tree. 2. Make inquiries to understand the costs beyond construction, like permitting fees and an increase in property value for parcel tax assessment. Know the total cost for the improvement before talking to a loan officer. 3. .Talk to a real estate agent about the value of the proposed change. This is necessary to know the project’s return on investment. 4. Talk to a roofer to determine what measures are needed to protect the building while work is underway. Learn about the availability of protective equipment like large tarps as well as best practices, such as daily cleanup. 5. Typically, it is the responsibility of the property owner to purchase builder’s risk insurance for a project under construction. Ask a general contractor for their professional opinion on the appropriate coverage for a project.— Jessica Zimmer
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April 2024
Napa Insider
The older I get, the less likely I am to change—or so my father likes to not-so-gently remind me.
W hile it felt like much of the winter months were spent enduring one-too-many tree-downed storms and the power outages that went with them, by the time this issue hits hands, hopefully those days are a thing of the past. The same might be said for the legal dispute between the City of St. Helena and the property-sharing Pacaso, the latter oft slammed on Nextdoor, community Facebook groups and via lawn signs staked by townies. The three-year, epic battle royale began in April of 2021, when Pacaso sued the city on the questionable grounds that the town’s prohibition on timeshares didn’t apply to them or the homes the company owned or managed at the time. While Pacaso has always been quick to try and debunk the trash talk and timeshare comparisons, its business model smacks of just that. The company holds the title for its properties, creates an LLC, and then sells off shares of said property to as many as eight co-owners, while staying on as property manager. Sound a little familiar? Sketchy, too? How about problematic to the fabric of a community? If the numerous lawn signs and walks of protest when Pacaso rolled into town are any indicator, that would be a yes. The suit was settled in February, with the slightest silver lining amid the murky waters. While the company can continue to operate its existing St. Helena holdings, it cannot expand beyond the initial four properties. Kevin Heneghan, Pacaso’s vice president of legal affairs, was quoted in the Napa Valley Register stating, “Today’s announcement is a win for Pacaso co-owners, but it’s also a win for the community. Co-ownership allows families to come together and buy a second home that is better utilized and more affordable than traditional second homes would Fast casual The older I get, the less likely I am to change—or so my father likes to not-so-gently remind me. With each passing, middle-aged year, it has become harder and harder to debunk his cliched premise. If you have read my column for any stretch of time, you may agree with dear old dad, especially when it comes to my repeated refrains about the precarious proposition of finding a quick and casual, affordable place to feed my family in the upper valley where we live. However, with the opening of the hotly anticipated Ray Ray’s Tacos in St. Helena, I might just jump off my soapbox. In March, chef Rachel Williams opened her casual Tex-Mex eatery in the historic Cornerstone building, where she serves up her famous Austin-style tacos, salads and scratch-made salsas, with a side of Pacaso, tacos and trailblazers By Christina Julian
fresh NorCal vibes. Her mission is to blend the best of Texas Hill Country cuisine with the freshest flavors in the region, and an extra “something.” “Ray Ray’s is a place to show off more than just food,” she says. “It’s a way to connect all of us. Tables are places where the walls come down, barriers are broken, and community and a sense of place come together.” What started out as a pop-up at the St. Helena farmers market in 2019, gained a loyal local following which continued to sprout, even during COVID times, when Williams pivoted and offered fresh taco kits to the masses. As each Napa Valley wine has its own unique imprint in terms of taste, so too do Williams’ tacos overflow with originality with savory selections including the Bridget (more on the names in a minute) with shredded brisket and pomegranate, and the Angelina with carnitas and kumquat. Her women-powered restaurant has flipped the switch along the St. Helena strip with the mantra of offering “fast casual” and affordable eats in an open and convivial space. Whether you crave all-day breakfast tacos, the ease of counter service, Tex- Mex Tuesdays with a playlist to match, or “Hangover Brunch” on Saturday, there is a lot to love here. Williams is quick to credit her community for weathering the pandemic and enduring the challenges that come with opening a restaurant in our Michelin-starred metropolis. “Whenever I wanted to give up, someone would come up to me at the market or on the street and say, ‘Keep going, we need this.’” And by “this” she means a place where people can jump-start their day with grab-and-go breakfast tacos, pastries and pour-your-own coffee or unwind and eat after a tough day on the tasting trail or after a Little League game. Currently open for breakfast and lunch service—dinner, outdoor dining and music nights are all on the horizon. Willams also discussed how some would assume that the “Ray” behind the restaurant name is a man, when in fact “Ray Ray” is Williams’ nickname. “It’s as if they can’t imagine that a woman could be behind this. But, hey, women are badass—aren’t they?” she says with a wink of a Texas drawl. All of the tacos on the menu are named after women, be it mothers and grandmothers in her family, or lesser-known trailblazers in history. Now that’s what I’d call badass. g
After years in the technology and advertising trenches, Christina Julian traded city life for country and unearthed a new philosophy—life is complicated, wine and food shouldn’t be. Her debut novel, a romantic comedy called The Dating Bender , is now available. Learn more at christinajulian.com . You can reach her at cjulian@northbaybiz.com.
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