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Store Wars Episode 2

How three grocery stores fit into Truckee’s future
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Regardless of Town planning commission approvals in the last year, three grocery chains attempting to open stores in Truckee are still working to get off the ground. Nugget appears dead in the water for now; Grocery Outlet is trying to appease nearby concerned residents as a Town Council discussion approaches; and Raley’s is tied up in a lawsuit, despite plans to break ground this summer. The perfect storm of store proposals has people alert for what a potential 100,000 square feet of total new grocery store space means for the town. Here is a status appraisal.

When it Rains, it Pours

“Most people in the Town — certainly Town Hall — were pretty surprised that we would get three … proposals for grocery stores literally all at once,” Truckee Town Manager Jeff Loux said. “It certainly [presented] a challenge that the Town of Truckee staff had not faced before.”

Each property targeted for grocery development was zoned for these uses in the Town’s plan, Loux said. Each fits into the broader designs for how Truckee will look and function in the future — plans that have been decades in the making through typical planning processes, he said. Yet, the approvals have raised questions about whether the Truckee economy can support the opening of three new stores within a relatively short amount of time, and if a new study needs to be done to take stock of the current marketplace.

“In hindsight I think we can say that it would have been useful to have updated those economic studies so that people would feel comfortable that all the data were on the table,” Loux said. “The thing that one has to remember is that when developers come in for their applications they become quite insistent that those applications move along quickly, and they push pretty hard … it drives everybody to try to get it going and that’s just good customer service — we do that for everybody.”

Raley’s at Joerger Ranch

Although all three projects have come to a head within the past year (see timeline, above), each of the properties has a long backstory.

Joerger Ranch, or Truckee’s Planned Community - 3 (PC3), was not the originally intended site for the proposed Raley’s project. When JMA Ventures founder and chairman Art Chapman was first approached by the Raley’s team, who are family friends of Chapman, he originally proposed the store be built on non-aviation land at the Truckee Tahoe Airport. Chapman said it seemed an easy choice following his recent success with the nearby Clear Capital project, but local smart growth nonprofit Mountain Area Preservation (MAP) suggested the developer utilize the nearby Joerger Ranch property.

A goal for the Joerger Ranch specific plan, approved in 2015 after more than a decade of discussion and planning, is to “help diversify Truckee’s economy without creating a new downtown or a passé strip shopping center,” according to the plan, and much of its development is intended for businesses that might be cumbersome downtown.

Stefanie Olivieri, owner of Cabona’s in downtown Truckee and founding member of MAP, was a strong voice in bringing the project across the street from the airport to Joerger Ranch in the fall of 2015, but later personally balked at the size of the grocery proposal, saying its potential for competition with downtown is too great, and it needs to build housing concurrent with the project. Olivieri and Protect CEQA, a Sacramento-based unincorporated association with a history of opposing grocery store developments, sued the development following its Town council approval on March 13. A settlement offer proposed by Chapman to cut back the retail space in the development and replace it with ‘achievable’ housing was treated with skepticism by Olivieri.

“The reduction of commercial is an excellent idea, but I’m not sure much more than that would be supportable, anyway,” Olivieri said. “It’s great to have that additional housing, but it does not answer the concern that there is no housing proposed concurrent with the development of the retail; there could be years’ lag.”

In spite of the suit — with a hearing date planned for November — the developer plans to move ahead on construction of the 36,000-square-foot store. “We intend to proceed with construction of the Raley’s — the first phase,” Chapman said. “We’re focusing our efforts to getting that under construction and then we’ll look at the other 11 acres out there and see what we can do with it.” Although he highlighted the importance of workforce housing in the area, Chapman is unsure of the extent of the housing component on the Joerger Ranch plot if his settlement isn’t received. He hopes to break ground before the snow falls and to go vertical in the spring.

According to Jeff Loux, the Raley’s team has the legal ability to break ground this year despite the lawsuit. “There’s nothing that would stop them from moving forward except at this point they don’t have a permit for their engineering site work and they don’t have a building permit,” Loux said. He added that the lack of those permits was not for any legal reason, though, and the developer can apply for a permit as soon as they are ready. Loux said the Town had heard from the litigant’s attorney that they are interested in trying to stop construction by some method, possibly by an injunction of some sort, but Olivieri says that at this point she has no plans to attempt to halt the construction.

The PC3 parcel intended for the Raley’s has been zoned for a grocery store since it was created, but a 2010 study by Bay Area Economics that helped lead the specific plan claimed “the success of a grocery store at this site would likely be at the expense of other Truckee grocery stores (existing or planned).” A market study was also comissioned by Protect CEQA with Area Research Associates that determined large revenue losses due to the multiple grocery proposals currently on the table. Raley’s President Keith Knopf disagrees, saying the store would be primarily supported by diverting customers from shopping in Reno, and even its own store in Incline Village.

“We know through a lot of science that we’re going to pull a lot of those health minded, quality conscious customers away from the Whole Foods in Reno, and I think that’s going to be several million dollars,” Knopf said. “In fact, our economics are dependent on pulling those several million dollars worth of the Whole Foods Reno volume.”

The 2010 BAE study had also further surmised that with existing stores, as well as planned stores such as at the Railyard and Gray’s Crossing, “the need is estimated at less than sufficient to support a full sized conventional supermarket” for Truckee. Since then, BAE has written a letter to the Town stating that some of its estimates were conservative, and that “at the time the 2010 report was prepared, the Town was still feeling the effects of the Great Recession and expectations for recovery were uncertain.” Additionally, the Gray’s Crossing store proposal has faltered and Nugget Markets, planned for the Railyard, read the writing on the wall and pulled out of the development the same day that Raley’s was approved.

Unknown at the Railyard

Rick Holliday, developer of the Railyard project, laments the irony of this turn of events, saying that the Nugget was leaps ahead of the Raley’s before its approval turned everything around. Nugget Markets submitted a full set of plans to the Town in 2016, Holliday said, but the Town wouldn’t process it until it also looked at the Railyard Master Plan. The Nugget was eventually approved by the planning commission on Dec. 19, 2017.

Originally, the Railyard was zoned for a small specialty grocery in the 17,000-square-foot range, but this was upped to 35,000 square feet in the fall of 2016 following a vast increase in space the Railyard was allowed due to negotiations with the Union Pacific Railroad allowing it to develop within the Balloon Track that runs through the project. The alteration to the development added an additional 12 acres of land to the Railyard, and in 2013 Holliday began to reevaluate the grocery options.

It was at this point that the Railyard and the soon-to-be Joerger Ranch project became intertwined, although how this happened is subject to some debate from either side. Holliday said that in August 2015 he was emailed by, and later met with Michael Teel, Raley’s CEO, who was interested in the space at the Railyard. He was also approached by Nugget and Whole Foods during 2014 and 2015. In September 2015 the Railyard landed on Nugget as their preferred option due to the fact that Nugget wanted to buy the land as opposed to lease, had no corporate debt, and has made Fortune Magazine’s top 100 employers list 13 years in a row.

In contrast, the Raley’s team says that it happened the other way around, and Chapman disputes the store’s initial interest

entirely. Raley’s President Keith Knopf said Raley’s did not see the location as “a fit for the Truckee community,” while Chapman maintains “the Railyard interests contacted [Knopf] directly and Raley’s rejected the site, and it was only after they had rejected the site that the Railyard interests contacted Nugget. Raley’s never wanted to be down there; it was too congested and too inconvenient.”

Now that Nugget has backed out two years later, Raley’s has proposed its version of a small scale specialty foods market, Market 5-ONE-5, as an option for the space, but in a smaller capacity of less than 20,000 square feet. Holliday has denied the offer so far, saying that he “promised Truckee a full service grocery store.”

For now though, Holliday puts the grocery low on the list of priorities, and said, frankly, “I don’t want to start grocery wars with Art Chapman.” He is focusing on laying the infrastructure for the Railyard, of which he has already invested over $20 million and says will be at 80 percent completion by the end of the year, and commencing construction on the Artist Lofts affordable housing component of the project in September. Maybe when building slows down in the winter, the team will start hitting the grocery store beat again, he says.

Grocery Outlet at Gateway

On the other side of town at the Gateway, the third grocery store moving through the public process is caught in a different web. The smaller 17,000-square-foot Grocery Outlet to be built by Capitol Avenue Development and Investments is in the midst of making revisions for its plan after finding its original plan didn’t fit the existing criteria for development.

According to Kurt Reinkens, CEO of MWA Architecture and Engineering, architect for the project, the development was originally submitted under a planned development definition, which would have allowed it flexibility to make alterations in the plan by offsetting certain compliance violations with other public benefits. The project proposed a transit stop, LEED silver equivalence, and other modifications to offset cutting down on parking spaces, among other things. According to a community development director’s note from 2001 that the town stumbled upon during its processing the proposal, though, the definition had been deemed inappropriate for infill developments such as the Grocery Outlet. The developer withdrew its plan, and made modifications to be in complete compliance — added parking and one additional deed restricted workforce housing unit — and also kept all of the public benefit items it had originally proposed, according to Reinkens.

The planning commission approved the modified plan, but the approval was subsequently appealed by the same couple who had appealed the project’s prior approval, Sharon and Bud Arnold, residents of the neighborhood behind the proposed development. The Arnolds’ concern, as well as of other residents of the neighborhood, presented a hold-up when the project was heard by the Town council in May.

“[Town council’s] largest concern was that there are a number of neighbors who are worried about the impact of this project on their neighborhood,” Reinkens said. “We’ve been working with the neighborhood now a long time, trying to minimize any negative impacts and even to provide some positive features.” These features include landscaping the area between the neighborhood and the store, modifying the exit point to lessen the impact of traffic onto Vista Avenue, and a laundry list of architectural modifications designed to mitigate the project’s visual and auditory impact on the neighborhood — window aspect, color scheme, a sunken parking lot, etc.

Regarding concerns about the three potential stores all moving down the pipeline at once, Reinkens says he believes that is a “non-issue.”

“I think it’s a fabricated issue … It’s time for some competition,” he said, adding that prices aren’t going to go down until Safeway has competitors. It never hurts to plan ahead, however, and Reinkens addressed worries of failing stores and urban blight, adding, “We designed that building so that if something happens to Grocery Outlet, it turns into a really nice retail building with up to five tenants.”

The developer is currently in the process of fine-tuning its traffic studies and will appear before Town council again on July 24.

 
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September 13, 2018