ACTIVE/205987237.1
Patrick P. Gunn
+1 415 733 6145
[email protected]
Goodwin Procter LLP
525 Market Street
Floor 32
San Francisco, California 94105
goodwinlaw.com
+1 415 733 6000
April 1, 2026
VIA EMAIL AND FEDERAL EXPRESS
Gary B. Bell, Esq.
Town Attorney – Town of Yountville
Colantuono, Highsmith & Whatley PC
555 University Avenue, Suite 275
Sacramento, California 95825
[email protected]
Re: Yountville Commons – The Case Against Municipal Self-Construction and a Survey of Legally Sufficient, Fiscally Responsible Alternatives for Satisfying the Town’s 2023–2031 Housing Element Obligations
Dear Mr. Bell:
We write again on behalf of our client, Gary Jabara, as a follow-up to our letter of March 16, 2026. As anticipated in that correspondence, the referendum petition challenging Ordinance No. 26-539 has now been certified. The Town Council is accordingly confronted, at the April 7 meeting and thereafter, with a binary statutory choice: repeal the ordinance or submit it to the voters at a future election. For the reasons explained below and in our prior letter, placing the Yountville Commons project as currently conceived before the voters of this small community is, in our view, an unrealistic path. A referendum vote would almost certainly result in the ordinance’s defeat, leaving the Town where it started — but having spent, by its own accounting, approximately $14.1 million in public funds with nothing built.
This letter is intended to be constructive. Its purpose is to educate the Town Council about what California Housing Element Law actually requires of Yountville, to expose the fiscal imprudence of the Town’s current self-construction model, and to survey the range of legally sufficient and financially responsible alternatives that other California jurisdictions of comparable size routinely employ to satisfy their Regional Housing Needs Allocation (“RHNA”) obligations. The message is a simple one: the Town is not required to build anything. It is required to plan for housing and to facilitate its production. There is a significant difference between those two things.
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I. WHAT RHNA AND HOUSING ELEMENT LAW ACTUALLY REQUIRE OF THE TOWN OF
YOUNTVILLE
The point of departure for this analysis must be an accurate understanding of what state law requires.
California’s Housing Element Law, codified principally at Government Code sections 65580 through 65589.8, imposes a planning obligation on local jurisdictions, not a construction mandate.
Under the sixth RHNA cycle (2023–2031), the Association of Bay Area Governments (“ABAG”) allocated to the Town of Yountville a specific number of units across four income categories: very low income, low income, moderate income, and above-moderate income. The Town’s certified Housing Element, adopted consistent with that allocation, must identify adequate sites zoned at sufficient density to accommodate those units. Government Code section 65583 requires that the Housing Element include, among other things: (a) an inventory of land suitable and available for residential development; (b) an analysis of governmental and nongovernmental constraints on housing production; and (c) programs to implement the plan. It does not require the Town to serve as developer, contractor, owner, or landlord of any housing project.
This distinction is not a technicality. It goes to the core of the statutory scheme. As ABAG has explained in its own guidance materials on the RHNA process, the final result of RHNA is the allocation of housing units by income category to each jurisdiction as a whole — and it is in the local Housing Element that local governments select specific sites, zoning strategies, and policies for addressing housing needs. RHNA does not dictate where housing goes within a jurisdiction, much less who builds it. The California Department of Housing and Community Development (“HCD”), which reviews and certifies Housing Elements, has acknowledged that local governments satisfy their obligations through a combination of zoning, incentive programs, regulatory streamlining, and facilitation of private development — not by themselves becoming real estate developers.
The Town of Yountville appears to have conflated its obligation to plan for housing with an obligation to construct it. That has led directly to the current situation, in which one of the smallest municipalities in Napa County has committed $14.1 million in public funds and is now contemplating total project expenditures of $91.5 million — all without a single unit permitted, financed, or built.
II. THE YOUNTVILLE COMMONS SELF-CONSTRUCTION MODEL IS FISCALLY IMPRUDENT ON
ITS FACE
Before surveying alternatives, it is worth pausing to examine in detail why the self-construction model that the Town has pursued is so concerning for a jurisdiction of Yountville’s size. The numbers tell a worrisome story.
A. The Cost Per Unit Is Very High.
The Town’s own figures contemplate total project costs of approximately $91.5 million for between 120 and 150 units. That implies a cost of between approximately $610,000 and $762,000 per unit — in a workforce housing project intended to serve households ranging from very low income (below 50% of April 1, 2026
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Area Median Income) through moderate income (up to 120% AMI). By any standard, this is a large figure. Experienced non-profit affordable housing developers routinely build comparable units in the North Bay for $400,000 to $550,000 per door — and they do so using federal Low Income Housing Tax Credit (“LIHTC”) equity, state grant programs, and other sources of subsidized capital that the Town, acting as a direct municipal developer, cannot access as efficiently or at all.
B. The Financing Structure Exposes the General Fund to Unacceptable Risk.
The financial structure underlying Yountville Commons appears to depend, in part, on bond financing or other debt obligations that will ultimately be serviced from Town revenues. For a municipality of Yountville’s size with a small commercial tax base and dependence on hospitality industry revenues that are inherently cyclical the assumption of long-term debt obligations in the range of $60 to $91 million for a single project carrying projected operating losses represents a threat to the Town’s fiscal stability. The Town’s own financial projections have acknowledged that the Project is not expected to be cash-flow positive in its early years of operation. Committing the general fund of a small municipality to underwriting operating losses on a housing project of this scale, in perpetuity, is not a responsible exercise of municipal fiscal stewardship. And this comes in the wake of concerns about a downgrade in the Town’s credit rating.
C. The Procurement Record Reflects Apparent Mismanagement, Not Isolated Decisions.
The fiscal imprudence of the self-construction model is compounded by what the procurement record reveals about the discipline (or lack thereof) with which the Town has apparently managed public funds throughout this process. As our companion letter of today’s date details, of the professional services vendor engagements associated with this Project from March 2024 through March 2026, only one appears to have been competitively procured. The Town’s two largest consultants were engaged at sub-threshold amounts by the Town Manager, then expanded through serial amendments totaling increases of 838% and 341% respectively, all without competitive process. Paid consultants who developed the RFQ evaluation criteria sat on the design-build evaluation panel in an arrangement inconsistent with the RFQ’s own conflict-of-interest provisions. A branding firm which to our knowledge had no documented municipal experience received a $250,000 on-call contract for civic wayfinding work. The foundational financial feasibility analysis was commissioned under the Town Manager’s authority for an amount that does not appear to have been disclosed. + This pattern of procurement conduct is relevant to the Council’s evaluation of whether the selfconstruction model is viable. A project that has consumed $14.1 million over two years, largely through non-competitive processes, without producing a single permitted unit offers the Council little basis for confidence that future spending will be better disciplined.
III. ALTERNATIVES THAT SATISFY HOUSING ELEMENT OBLIGATIONS WITHOUT MUNICIPAL
SELF-CONSTRUCTION
The following alternatives are legally sufficient under California Housing Element Law, proven in comparable California jurisdictions, and more fiscally prudent than the Town’s current approach. This April 1, 2026
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survey is not exhaustive, but it is intended to demonstrate the breadth of options available to a jurisdiction that is willing to act as a facilitator rather than a developer.
A. By-Right Zoning and Streamlined Permitting for Private Developers.
The single most cost-effective action a small California municipality can take to increase affordable housing production is to eliminate the discretionary barriers that make development expensive. By establishing clear, objective development standards, by-right permitting (eliminating design review discretion for conforming projects), and streamlined infrastructure connection processes for identified RHNA inventory sites, the Town can reduce the cost and risk of development for private builders.
Projects that qualify under Government Code section 65913.4 (SB 35 streamlining) or that satisfy the Town’s objective standards under the Housing Accountability Act are entitled to ministerial approval.
The Town’s job is to set the rules clearly and get out of the way.
B. Inclusionary Housing Requirements and In-Lieu Fee Programs.
The Town can require, through an inclusionary housing ordinance, that new residential and mixed-use development projects include a specified percentage of affordable units or pay an in-lieu fee into a housing trust fund. Inclusionary requirements spread the cost of affordable housing production across the development community rather than concentrating it entirely on the public fisc. In-lieu fees, deposited into a dedicated housing trust fund, can then be deployed as gap financing for non-profit developer projects, ADU programs, or other housing production mechanisms that leverage private and philanthropic capital.
C. Community Land Trust Structure.
A Community Land Trust is a non-profit entity that acquires and holds land permanently for the purpose of maintaining long-term affordable housing. The CLT model has been adopted successfully in numerous California communities, including in wine country contexts analogous to Yountville. Under this structure, the Town could convey an appropriate site (or a portion of it) to a newly formed or existing CLT, which then manages the property for affordable housing purposes in perpetuity, with community oversight built into the CLT governance structure. This model removes the Town entirely from the role of developer or landlord while ensuring that the housing remains permanently affordable and community-controlled. HCD has generally recognized CLT and similar permanently affordable housing structures as qualifying mechanisms for satisfying Housing Element programs, though the specific treatment of any CLT proposal would require confirmation with HCD as part of a Housing Element update.
D. Accessory Dwelling Units (ADUs) and Junior ADUs.
The Town’s own zoning code, as amended by Ordinance No. 26-539 (now suspended), recognized the potential of ADUs and JADUs by expressly permitting them in the new Commons (C) district.
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California’s ADU statutes — Government Code sections 65852.2 and 65852.22 — establish a ministerial approval process that significantly streamlines ADU permitting. ADUs count toward a jurisdiction’s RHNA allocation. A well-designed ADU incentive program, including pre-approved architectural plans, fee waivers or deferrals, and low-interest financing assistance through existing state programs, can generate meaningful affordable unit production with virtually no direct municipal capital expenditure.
ABAG’s own guidance materials note that many Bay Area communities with little vacant land have met substantial portions of their RHNA allocations through ADU production. For a built-out community like Yountville, where new large-scale residential development sites are scarce, an aggressive ADU program deserves serious attention as a core component of any revised Housing Element strategy.
E. Regional and State Grant Funding for Planning and Infrastructure.
The Town appears not to have fully explored the substantial state and federal funding available to assist with housing planning and production. HCD’s Local Early Action Planning (“LEAP”) Grant Program, the Permanent Local Housing Allocation (“PLHA”) program, Infill Infrastructure Grant (“IIG”) funding, the California Housing Accelerator program, and other vehicles provide direct capital to facilitate affordable housing production by qualified developers, not by municipalities acting as developers themselves. These funds are most effectively accessed by experienced non-profit housing developers with track records of successful LIHTC applications. The Town’s decision to act as its own developer has, paradoxically, likely foreclosed access to some of the funding streams most relevant to its stated goals.
IV. IMPORTANT LEGAL CONSTRAINTS THE COUNCIL MUST BEAR IN MIND WHEN
EVALUATING ALTERNATIVES
While the alternatives surveyed above are legally available and financially sound, the Council should be advised of three statutory constraints that bear on how any revised strategy is structured.
First, the No Net Loss Law (Gov. Code § 65863) prohibits a jurisdiction from approving a development project at a density lower than what was assumed in the Housing Element’s site inventory, unless the jurisdiction makes specific findings and identifies replacement sites of equivalent capacity. If the school site is currently identified in Yountville’s certified Housing Element as an inventory site to meet any portion of the Town’s RHNA obligations, any alternative use of that site, whether through rezoning, a ground lease, or a CLT conveyance, must ensure that the residential capacity assumed in the Housing Element is preserved or replaced elsewhere. The no-net-loss requirement does not prevent the alternatives we recommend; it simply requires that the Housing Element be updated and that site capacity be maintained.
Second, the Housing Accountability Act (Gov. Code § 65589.5) limits a local government’s ability to deny or condition a qualifying residential project that is consistent with objective zoning and design standards. This statute actually works in favor of the approach we recommend: once the Town rezones appropriate parcels for residential use and establishes objective development standards, the HAA April 1, 2026
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constrains the Town’s ability to block a qualified private or non-profit developer who meets those standards. The Town cannot use discretionary design review or subjective criteria to effectively veto a conforming project.
Third, Article XXXIV of the California Constitution requires voter approval before any state public body can develop, construct, or acquire a “low rent housing project.” The Town’s own FAQ acknowledges this issue in the context of Yountville Commons, noting that the current project is designed to serve workforce and moderate-income earners rather than “low rent” households, and thus does not trigger Article XXXIV. The Council should be aware that some of the alternative structures we recommend — particularly a ground lease or CLT arrangement that serves very low and low income households — could, depending on the specific terms and the extent of public agency involvement, implicate Article XXXIV. Careful structuring with experienced housing counsel can minimize this risk, and in many cases a properly structured ground lease to a private non-profit developer does not constitute public development or construction under Article XXXIV. But this is an issue that must be addressed in the design of any alternative, not an afterthought.
V. THE PATH FORWARD: A RESPONSIBLE RESET
The certification of the referendum petition is not a defeat for the cause of workforce housing in Yountville. It is an opportunity to reset a process that was poorly designed from the beginning, to consult meaningfully with the community and its major employers, and to pursue a strategy that actually delivers housing without jeopardizing the Town’s fiscal stability.
We suggest the following framework for the Council’s consideration:
First, the Council should repeal Ordinance No. 26-539 and resist the temptation to submit it to the voters at a referendum, which would in all likelihood result in its defeat and further delay.
Repeal preserves maximum flexibility for the Council to revisit zoning and planning decisions with a clean slate.
Second, the Council should commission an independent, rigorous review of the full range of RHNA compliance mechanisms available to the Town. This review should not be by the consultants who designed the current failed approach. It should also not begin with the assumption that the Town must act as developer. Given the apparent procurement irregularities detailed in our companion letter, that review should also include an independent assessment of procurement practices going forward, to ensure that any new consulting relationships are established through proper competitive processes.
Third, the Council should initiate a genuine dialogue with the Town’s major employers, including The Estate Yountville, about employer partnership housing strategies, and should explore the ground lease and CLT models with experienced non-profit affordable housing developers currently operating in the North Bay.
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Fourth, the Council should acknowledge honestly that the $14.1 million already spent cannot be recovered by spending $77 million more on a project that is fiscally unsound. The responsible course is to acknowledge the sunk costs, preserve what can be preserved (the site asset, the interim community uses, the zoning work product), and redesign the approach from the ground up.
The Town has options. They are legally sound, financially responsible, and proven. We urge the Council to explore them. The failure to do is likely to result in further waste – and even litigation.
Respectfully submitted,
Patrick P. Gunn
Goodwin Procter LLP
cc: Gary Jabara