How CVS Conned Sebastopol

[John Eder]

How CVS Conned Sebastopol
by John Eder, former Sebastopol City Council Member

Part 1 of 5

I served on the Sebastopol City Council from 2012 to 2016, during the period when many of the events described in this account took place. I have attempted to present this information in the most accurate, complete and factual manner possible.

Background

Longs Drugs was founded in Oakland in 1938. After growing to 521 stores, they were acquired by CVS in 2008. Longs had a store in the Redwood Marketplace in Sebastopol for many years prior to their acquisition. The store is owned separately from the remainder of the shopping center. CVS independently owned the store at this location, and has most likely either sold or leased it at this point.

Business Model Differences

Most of Longs Drugs locations were in shopping centers or downtown business districts, averaging around 30,000 square feet, and did not include drive through windows. CVS, on the other hand, has concentrated on creating new locations at heavily-travelled, high traffic count intersections, averaging around 15,000 square feet, with drive through windows being a standard feature. As a result, CVS is in the process of relocating as many of these shopping center stores as they can to busy corners, most being equipped with drive through windows.

As a sidebar, the largest competitor that CVS faces nationally is Walgreens. They have been battling it out with each other through the construction of new stores at high-visibility locations, often across the street or close by to one another. Currently, Walgreens is in the process of seeking approval to merge with Rite Aid, who has an existing store two blocks from the new CVS store in downtown Sebastopol. Thus, our downtown may be the next battleground for these warring corporations.

CVS Comes to Sebastopol

In early 2010, Armstrong Development (on behalf of CVS) submitted an application to the City of Sebastopol to develop a project consisting of a CVS drugstore (17,000 sq. ft.) and a Chase bank (3,800 sq. ft.) on the former two and a half acre Pellini Chevrolet site, which had been dormant since the end of 2008. The first proposal was stunning in its inappropriateness for Sebastopol. It was a generic, “as-seen-anywhere” suburban strip mall eyesore.

Only 15% of the site was designated for buildings, with the balance paved over for parking, far in excess of City requirements (this is still the case). In a nod to our expressed concern over concealing parking areas, the CVS store was oriented so that the parking was behind it, with blank stucco walls and the drive through window facing Screamin’ Mimi’s. It was apparent that the applicant had likely never spent much (if any) time here, getting a sense of our town. To the credit of the City, CVS was essentially told, “Nice try- come back with an acceptable proposal.”

Government Process 101

In my opinion, Sebastopol has a really disjointed process for project approval. The Planning Commission looks at projects from a land use perspective, separately and, sometimes, prior to, the Design Review Board, which looks at projects from a design/aesthetics point of view. Rarely are the two merged. The Planning Commission has been asked to approve a project without the ability to see what it will look like.

This occurred with the CVS project. I was at the Sebastopol Planning Commission meeting in May, 2011 (as a member of the public) when Commissioner Clare Najarian stated, “How am I supposed to approve a project that I have no idea what it even looks like?” A majority of her colleagues agreed, voting 4-2 for denial (the votes to approve coming from Commissioners Colin Doyle and Robert Green, the husband of then-Councilmember Kathleen Shaffer, a staunch advocate for the CVS project) of the Initial Study (IS) and Mitigated Negative Declaration (MND) prepared by City staff for this project (an IS and MND are the basic documents required under CEQA (California Environmental Quality Act), a state law). They are the easiest route to satisfying the requirements of CEQA for project approval; otherwise, an Environmental Impact Report (EIR), a potentially complex and expensive document, is required. Unfortunately, in the absence of direction from City staff at this meeting, the Planning Commissioners failed to develop adequate “findings” to legally support their denial. This floundering would come back to haunt the then-Sebastopol City Council.

Having abandoned their initial “Anytown, USA” generic building design, Armstrong Development hired a local architect, Kevin Kellogg, to produce a custom design for Sebastopol, in an attempt to give the project a “West County” vibe, with actual glass display windows and doors that faced our public streets. Oftentimes, the project seemed to be going backwards with each successive revision. Ultimately, the Sebastopol Design Review Board (DRB), after several meetings, denied the project due to design issues and lack of compliance with Sebastopol’s Design Review Guidelines. It was felt by them to be too modern and overbearing in its presence, and incompatible with our downtown core.

A Religious Calling

My initial interest in this project was piqued by the appearance of a notice from the California Department of Alcoholic Beverage Control in a window at the defunct Pellini dealership, indicating that an application had been filed to sell alcoholic beverages on the site. I immediately started to closely monitor the proposed CVS project as a citizen. It was never my intent to stop this project- my goal was to help realize a better result.

I attended every meeting and provided the developer (and City) with numerous photos of highly successful and inviting multi-story mixed use developments (some, ironically, containing CVS drug stores…), often with a vintage appearance, as inspiration to create a place Sebastopol could be proud of. An assortment of retail spaces, residential units and service providers that successfully integrated visually with our town, while expanding our economic base- a walkable place where you could comfortably meet your friends, shop and hang out.

I advocated for a more efficient and intense use of the precious downtown land being consumed by this project. A higher return on the developer’s investment. A really cool place that just happened to contain a CVS drug store and a Chase bank, both as components, not as the centers of attention. All of these efforts fell on deaf ears. When it became obvious that the developers had no interest in intensifying the project, I turned my attention to attempting to improve the design of the buildings. The current building design reflects, in part, that effort.

Tomorrow, Part 2 starts with 'CVS Pushes Back'

[Shepherd]

Thanks, John, for the beginning of communicating the history. Long's was so much better than CVS. I look forward to your other 4 parts.

[John Eder]

How CVS Conned Sebastopol
by John Eder, former Sebastopol City Council Member
Part 2 of 5

(See Part 1 here)

CVS Pushes Back

CVS likes to construct stores that conform to their standard designs as often as they can get away with, especially in towns with “lazy” or grateful, welcoming city governments. As a result, the resistance encountered in Sebastopol was pushing them way out of their “comfort zone”. The Armstrong representatives acted as if we were presenting the most outlandish requirements that they had ever heard. Their higher-ups were shocked that we were so demanding. They were polite, superficially compliant, but, most of all, slick. In the face of the continued rejection of their custom-commissioned “West County” design by a majority of the Design Review Board, Armstrong Development brought in higher management officials to threaten the DRB in a “good cop/bad cop” scheme, hoping that they would eventually capitulate. The Design Review Board remained resolute in its judgment.

Appeal Of Planning Commission Denial

Armstrong Development filed an appeal on behalf of CVS with the City Council to overturn the Planning Commission’s denial of the project. After determining that the Planning Commission had failed to develop

Kathleen Shaffer
Former Seb City Council Member
and proponent of CVS project

adequate findings to support their denial (due to the lack of staff direction to do so), on July 5, 2011, the then-City Council voted 4-1 to uphold the appeal and approve the City staff-produced Mitigated Negative Declaration (MND) for the project, thereby clearing the way for it to proceed. Former Mayor Guy Wilson, Councilmembers Kathleen Shaffer, Michael Kyes and current Vice Mayor Patrick Slayter cast “Yes” votes. Current Councilmember Sarah Glade Gurney was the sole “No” vote. The late Michael Kyes eventually confided in me that he regretted his vote on this matter. Ironically, Patrick Slayter went on to later make the motion to approve a moratorium on new drive through facilities in Sebastopol, thereby triggering a costly lawsuit brought against Sebastopol by CVS. He also participated in and supported all aspects of the City’s defense efforts against the lawsuit.

The MND

To insure that a project is approved, a Mitigated Negative Declaration (based upon the Initial Study) can be written to conclude that a project either has “No Significant Impacts” or that all identified impacts can be successfully mitigated. If “Significant Impacts” are found and cannot be mitigated, then the project is either dead or on hold until an EIR is produced, and even then, approval is not assured. The conclusion of the MND prepared by City staff for this project was that all impacts noted could be mitigated- essentially, there would be no detectable difference between a dormant Chevrolet dealership and an operating CVS/Chase Bank.

After receiving the “green light” to proceed from the then-City Council, the weirdest thing happened- Armstrong/CVS went silent. It was a mystery as to why they didn’t aggressively pursue completion of the approval process. In this period, Armstrong had the primary approval required to move forward, and could have easily done so, getting everything that they wanted, including both of their coveted drive through windows. Instead, the now-fenced property went into a protracted period of decline, creating a massive eyesore in our downtown.

During the public comment period for the MND, a number of citizens, including me, had submitted, in writing, what we perceived to be obvious flaws in the City staff-prepared MND for this project. All of these concerns were essentially ignored by the City-seen as non-existent, not significant and/or easily mitigated.

The truly sad irony here is that it was eventually determined, after the appeal period had lapsed, and unbeknownst to the public, that the City’s MND contained a significant flaw, rendering it illegal. The approval tendered by the then-Sebastopol City Council for CVS, based on the City-prepared MND, was actually invalid and there was nothing that the City could do to remedy it at the point the problem was recognized.

Small Town Sebastopol (STS) Lawsuit

Helen Shane, member
Small Town Sebastopol

On August 8, 2011, a group of local citizens, the Committee for Small Town Sebastopol, filed a CEQA lawsuit against both the City of Sebastopol and CVS/Armstrong Development. Their suit contended that the traffic study performed for the project (upon which the recently-approved MND was partially based) was both flawed and inadequate, and that a full Environmental Impact Report (EIR), including an expanded traffic study, should be required by the City. They believed that an EIR would conclude that the project had impacts that were not capable of being mitigated, and, thus, should be denied by the City. It should be noted that the setting of a date for the hearing of this suit was delayed by CVS numerous times, ultimately ending in a CVS-requested settlement agreement.

Sebastopol eventually found itself as co-defendant with CVS in the STS lawsuit while simultaneously defending itself against the lawsuit brought by CVS. It is important to note that the City of Sebastopol did not initiate any litigation.

Appeal Of Design Review Board Denial

A second design for the CVS building was put forth by Armstrong Development. It incorporated a fake brick exterior, with detailing that gave it a “vintage” look, more in keeping with the feel of our downtown. While much more successful than the previous design, the Design Review Board continued to find the building and site plan lacking, and it was ultimately rejected by them.

Once again, Armstrong/CVS appealed the actions of a Council- appointed city advisory body to the then-City Council. The Council gave Armstrong/CVS final design approval on August 21, 2012. This cleared another large hurdle in the approval process. The vote was 3-2, with late Councilmember Michael Kyes and Councilmember Sarah Glade Gurney voting “No”.

A number of additional conditions were imposed by the Council, and it was agreed that the then-City Council would retain all future design approval authority. This move eliminated Sebastopol’s Design Review Board from the process from that point onwards. The result of the two major actions to date by the then-City Council (MND and Final Design approvals) was to seriously tie the hands of the succeeding Council to negotiate changes- the project was, in essence, approved and ready to move forward.

Tomorrow, Part 3 continues with The 2012 City Council Election...

[Shepherd]

My appreciations to John for all he did as a Council member and for this part 2 history of the ongoing CVS struggle. I assume that Barry probably added the photos and appreciate his good work as a moderator to get these important stories to us and to illustrate them with appropriate graphics.

Speaking about important issues before the Sebastopol City Council, the Graton Day Labor Center is mobilizing workers to attend the Council meeting this evening at the Youth Annex on Morris Street. Please consider joining us there to support immigrant workers, Muslims, and others threatened with deportation. The meeting starts at 6 p.m.

[Goat Rock Ukulele]

Now that the store is in all we can do is try to mitigate some of the negatives. When I was younger I would have just taken my 22 rifle some late night and shot out those stinking glowing red signs. But I'm not like that anymore. Man those signs are jarring and horrible on a rainy night. They need to dim them down some at the very least.

[John Eder]

How CVS conned Sebastopol
by John Eder, former Sebastopol City Council Member
Part 3 of 5

(See Part 1 here)
(See Part 2 here)

The 2012 City Council Election

Five candidates ran for office in the November 2012 Sebastopol City Council election. It was essentially a single issue event- you were either a supporter or opponent of CVS. Two candidates, incumbent Councilmember Kathleen Shaffer and former Councilmember Kathy Austin, ran as supporters of CVS, with Robert Jacob and me running in opposition. Robert and I won seats on the City Council, thereby creating a majority on the Council critical of the project. The eerie silence from Armstrong/CVS continued after the election.

The Drive Through Moratorium

No Drive throughs, please

A prohibition on new fast food drive through facilities existed in Sebastopol at the time of the CVS project’s initial application. On December 18, 2012, the City Council initiated a moratorium on any new drive through facilities. This would allow them time to study the ramifications of an expansion of the existing prohibition on fast food drive through uses to include all drive through uses except gas stations, car washes and oil change facilities. The purpose of the moratorium was to preserve the existing status quo at the time of its imposition. Existing drive through facilities were protected, unless they ceased operation for a defined period of time.

It is established state law that cities are completely within their rights to amend their laws. What they cannot do is attempt to apply new regulations retroactively to previously-approved and vested projects. Many people incorrectly perceive that this is what the City Council did to CVS by invoking the moratorium and, ultimately, a prohibition against most new drive through facilities.

The reality is that Armstrong/CVS, due to their own inaction, had failed to achieve “vested rights” in the project. Having vested rights is defined as a legal status accorded to a project once the applicant has performed substantial work and incurred substantial costs after having obtained a building permit. Armstrong/CVS failed to achieve any of these requirements at the time the moratorium was implemented; thus, they had no right to expect immunity from any changes to existing City regulations. I am curious if Armstrong, being the savvy developers that they are, knew this when they sued Sebastopol.

Once the moratorium was initiated, the City was not obligated to process any additional permitting paperwork for any project that included a drive through component during the life of the moratorium. Thus, Armstrong/CVS was unable to proceed further at this point if they intended to retain the two proposed drive through windows. As before, they could have easily continued the permitting process, although no longer with the drive throughs.

A ban on all new drive through facilities (with exceptions as noted) was signed into law on Jan 6, 2015 by the Sebastopol City Council.

Merry Christmas, Sebastopol
“While visions of lawsuits danced in their heads…”

On December 24, 2012, representatives of Armstrong/CVS slid down the chimney at City Hall and served Sebastopol with paperwork initiating litigation against the City in state court. They accused the City Council of “depriving them of their civil rights”, seeing the moratorium as directed solely at their project. Thus began the legal confrontation, created by CVS, which ultimately cost the City of Sebastopol more than $360,000.00 to defend. The case was soon dismissed by CVS in state court, refiled by them in federal court on March 28, 2014 and eventually settled in September, 2014.

Negotiations Continue

On August 20, 2014, the City Council met with Armstrong/CVS to resolve final design issues.

At this meeting, CVS resisted the Council-imposed requirement for a second entrance at the corner of Sebastopol and Petaluma Avenues, citing security concerns. When confronted with photos of existing CVS stores with similar entry configurations, they agreed to the door, which is to remain open during all hours of operation.

From the beginning, CVS had insisted on a driveway on to Petaluma Avenue. The previous City Council had converted the driveway to an Emergency Vehicle Access (EVA) pathway, inaccessible to the public. The Council had also approved a provision that CVS could come back 90 days after opening to petition the City to convert it back to a driveway (this is still the case).

There is a major flaw with this (now existing) location. Emergency vehicles would need to take the most inefficient route possible, or drive opposing one way traffic on Petaluma Avenue to utilize it. At this meeting, an alternative EVA route was approved by the Council that led directly to the project site. This was fully resolved to the satisfaction of all involved, including the Fire Chief.

Finally, the Council was told by the Planning Director at this meeting that all signs for the CVS building would come back to the Design Review Board at a future date.

Sebastopol was now a defendant in two lawsuits. It should be noted that the members of the City Council directly participated in very few of the negotiations between the City of Sebastopol and CVS/STS. Negotiations were typically conducted between the City Attorney, with assistance from outside council, and the attorneys for CVS and/or Small Town Sebastopol. The Council provided direction to our attorneys, who took those proposals to the attorneys for CVS and STS.

During this phase, the Council proposed to CVS that the building be reconfigured from one to two stories, with the upper story occupied by City offices, library, housing, senior center, or any number of other uses. Part of the building was already configured to have a second story office area for the store. To our complete shock, they indicated agreement with this requirement. However, they were clear that they did not want next door/upstairs neighbors (as they have elsewhere), so the proposal was modified to only require an actual, useable, but unoccupied second story. The Council’s thinking was that, should CVS fail at this location, the building could be repurposed, including the possible division of the first story into several retail spaces, and the upper floor utilized for yet to be determined purposes.

Overall, I would say that the City Council succeeded in getting CVS to eventually agree to most of its proposals regarding this project during the negotiations.

Tomorrow, Part 4 starts with The Settlement

[Sara S]

Oh, if only every topic (here, or anywhere) could be covered like you have done here! Thank you so much.

[John Eder]

How CVS Conned Sebastopol
by John Eder, former Sebastopol City Council Member
Part 4 of 5

(See Part 1 here)
(See Part 2 here)
(See Part 3 here)

The Settlement

While negotiations were still in process, CVS approached both the City of Sebastopol and Small Town Sebastopol in May 2014 seeking a settlement of all litigation. As a result, on October 6, 2014, the City Council voted to authorize the Mayor to sign the Settlement Agreement that had been negotiated between Committee for Small Town Sebastopol, CVS and the City of Sebastopol.

Among the items contained in the agreement:

• All drive through facilities in the project are eliminated.
• The CVS building is to be redesigned to allow an actual functional second story, unoccupied at present, but suitable for future use.
• Left turns are prohibited into or out of Barnes Avenue off of Highway 12 (Sebastopol Ave).
• Solar panels are to be installed on CVS building roof.
• Five electric vehicle charging stations are to be provided, one at CVS, with four located elsewhere
• $150,000.00 is to be paid to Sebastopol and Small Town Sebastopol to compensate STS for legal costs, with the balance to be used for traffic mitigation measures (Note: the City is legally prohibited from recovering its legal expenses at any time, even if it prevails in a case). CVS admonished the City not to refer to this sum as “recovered legal fees”, for fear of the appearance of Sebastopol setting a precedent.
• Emergency Vehicle Access to be relocated on Petaluma Avenue to make it actually useable.
• Additional glass display windows to be provided on Highway 12 (Sebastopol Ave) face of building in lieu of solid brick wall.
• A greater setback for CVS building from the intersection of Hwy. 12 and Petaluma Avenue.
• Division of the project site into five parcels to allow future infill development at the site.

CVS Cons Sebastopol

A critical aspect of the Settlement Agreement for the City Council was the two-story CVS building design. The Council had made clear that they had three requirements for the second story: a load-bearing floor, an electrical service panel and a means of access (any other second story improvements were not the responsibility of CVS). Based upon negotiations, it was understood that these were to be provided. A line in City of Sebastopol Resolution 6007, dated October 9, 2014, in summarizing the terms of the settlement, refers to, “…provision of building features that would allow for a future second story for the CVS building…” Correspondence related to the negotiations had contained language such as “…true second story”, “A redesign of the CVS building including a second story…”, “Second story on the CVS building”, “…the second story have the opportunity to be used at some point in the future.”, “…a load-bearing floor on the second story of the CVS building…” Many more references to this essential item can be found elsewhere in relevant legal paperwork. It was clear that the City had received a commitment from CVS to build a two story building.

The City Council had requested updated, detailed drawings from Armstrong/CVS for months prior to the settlement, but we were told that they were not available. The City repeatedly requested cross-section drawings, as it was unclear exactly what CVS was proposing.

The requested drawings were finally received by the City Council on the day that we were due to sign the settlement Agreement, date stamped by the City as received on October 6, 2014 . The first thing noted by the City Council was the date on the drawings- August 15, 2014- two and a half months prior to the settlement date (contrary to CVS statements). The absence of cross-section plans was also noted. These were received electronically during the meeting where the signing of the Settlement Agreement, per the previous negotiations, was to take place.

While awaiting the cross-section plans, it was noted that the two story building elevations were now annotated “Glass in thickened parapet wall”, with an arrow pointing to the upper story windows. This was the first time that the Council had seen this annotation. The cross-section plans confirmed the Council’s suspicions. The upper story was fake- much like a Hollywood set. There was no roof above the first floor, the “thickened parapet” merely being first floor walls that extended upwards to hide the mechanical equipment on the first floor roof. The upper story windows are non-functional- in the completed building, their latches and hinges are on the exterior of the building. If they could be opened, they would open outwards. Lights are provided to give the appearance of the upper story being occupied at night.

At this point, it was obvious that the City Council and citizens of Sebastopol had been misled- conned, actually, by CVS. The Council indicated to our attorneys that the fake second story was a “deal-killer”- the settlement was off. We were informed by our legal team that if the settlement was not signed that day, CVS was prepared to go to court the following week to restart their litigation against Sebastopol, with an initial estimate of “next phase” legal costs of $500,000.00, and possibly more. While our attorneys felt that we would likely prevail in court, the Council realized that the City could not sustain continued litigation costs of this magnitude (don’t forget, per state law, the City cannot recover their legal costs, even if they prevail).

The next unilateral revision depicted in the CVS drawings was the relocation of the Emergency Vehicle Access (EVA) pathway, from a Council-directed functional location back to its original illogical location. This reinstated the ability of CVS to approach the City Council at a future date to easily reconfigure it back into a driveway off of Petaluma Avenue, which was perceived as a traffic hazard by the previous Council.

But their con didn’t stop here. The CVS building signs had yet to be reviewed or approved by the Council as of the date of the settlement. When this was brought to the attention of CVS, they responded, “The signs that you see on our drawings are the signs that you are going to get.”

The con continued. The second, smaller building in the project, which had always been slated for a financial institution and designed as such, was now labeled “Retail or Bank”, a change made without agreement from the City. This unilateral redesignation is significant. It opens up the possibility of a future conflict over this building’s use. Does CVS feel that it is “grandfathered” in regards to Sebastopol’s Formula Business Ordinance, passed into law after the settlement agreement? In the view of CVS, is this a potential already-approved fast food location without a drive through?

I can’t help but wonder if CVS pulled the last minute con on Sebastopol as a means to extract retribution over the loss of their drive through window.

Tomorrow, the series concludes with "The Future"