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Palace Hotel’s Final Days?

The days are numbered for the historic Palace Hotel, especially if a pending $6.6 million taxpayer funded financing scheme of a local tribe and its planned partners wins state approval.

A grant award is likely to lead to demolition of the Palace, possibly as soon as this summer. Promoters of the new Palace deal have been claiming for weeks a state decision is imminent, but Guidiville tribal administrator Bunny Tarin said this week it is now not expected until the end of February.

“We do not have any comment on purchase plans or any processes until the funds have been secured,” said Tarin.

The Palace’s current owner and a group of unknown local investors whose point man is downtown restauranteur Matt Talbert are refusing to publicly discuss details. But newly disclosed documents submitted to the state in October 2023 outline the plans.

The Guidiville Rancheria’s grant application reveals how Ukiah’s 19th century landmark would be torn down so environmental consulting crews can examine the half-block site for possible underground contamination from old fuel storage tanks. Any site cleanup, if necessary, will be done over a two-year period. The North Coast Regional Water Quality Control Board in Santa Rosa would be charged with overseeing the work.

If the state grant becomes a reality, the tribe and the proposed purchase clears escrow with current owner Jitu Ishwar, the Guidiville Rancheria will assume controlling interest in the new partnership, according to the state application. Who besides Talbert would be among the partners is unknown because Ishwar, his attorney Stephen Johnson, Talbert, and the group’s attorney, Atilla Panczel, refuse to identify them.

What is known based on the state document is that the proposed partnership envisions constructing post-site cleanup a six-story boutique/hotel/retail/housing/office complex. Backers insist there is no gambling casino element to the plan.

The Guidiville proposal and its unorthodox approach is winning some quiet support from city officials and civic leaders. “We have to follow this path through,” said Deputy City Manager Shannon Riley, who insists the city of Ukiah has few options left after 40 years of community debate about the Palace’s fate.

Local preservation activists, however, are scorning the approach and argue that typical regulatory review processes for significant historical structures are being skirted. They cite among other issues the City Council action at a November special meeting to waive statutory review requirements required under CEQA, the California Environmental Quality Act, by declaring the Palace has become a dangerous public safety risk.

Critics also rip the city for declaring that the Palace building’s condition is so dire that it could collapse on itself, even though the structure’s overall condition has been debated and assessed for years. The City Council action was taken within days of the Guidiville grant application being filed with the state Department of Toxic Substance Control, a little known powerful state agency.

City Council members took their position based on a fire department presentation ending with an official city declaration that the Palace is a “public safety hazard.” It ordered owner Ishwar to either stabilize the building or seek a demolition permit within 30 days. As a result, scaffolding surrounds the lower portion of street-front facades of the Palace, and pedestrian safety measures are in place. Now almost three months later nothing further has been done.

Deputy City Manager Riley concedes the city is in a “holding pattern” until the outcome of the state grant application is known.

Opponents of tearing down the Palace building fear Riley and City Manager Sage Sangiacomo may be acting in concert with the proposed new buyers in hopes the state will cover the multi-million dollar cost of demolition and cleanup of the Palace site, paving the way for the property to be privately redeveloped, and finally rid the downtown of a blighted structure.

“They have exempted the building from any historic review or City Council oversight by declaring a safety hazard to the public,” said Alan Nicholson, owner of a noted Mendocino County interior design studio.

The state Office of Historic Preservation has made inquiries to city officials about the Palace plan after local complaints were taken to Sacramento. Kevin Murphy, a state spokesman for the office, said the concerns are “under review.”

The state office knows the Palace history, including details of a prior redevelopment proposal made to owner Ishwar and nixed in 2022. Then, state preservation officials began review of a restoration plan presented by local resident Minal Shankar to use historic tax credit financing to shore up and revive the structure.

Shankar hired Page & Turnbull, a noted San Francisco firm specializing in restoration of historic buildings including the Ferry Building on the Embarcadero, and the Alto design team to produce plans to rehabilitate the Palace and produce a fresh new look to include a boutique hotel, rooftop event center, and a cluster of ground level retail shops centered around an existing courtyard.

Shankar’s plan, the most serious ever proposed for recycling the Palace into new uses, was rejected by Ishwar, apparently because he wasn’t offered full reimbursement of what he had invested in the decrepit Palace via loans to a court appointed receivership. Guidiville Rancheria and the other new buyers have promised to make Ishwar ‘whole’ even though the Palace’s structural condition has worsened even further under his five years of ownership.

Carolyn Kiernat, a principal in Page & Turnbull, said this past week she is dismayed to learn the Palace may be on the brink of demolition.

“Preservation can take many forms, and we’ve seen buildings in similar or worse condition as the Palace Hotel brought back to life,” said Kiernat.

A specific example relating to the Palace is the Hotel Tioga in Merced where Kiernat in 2020 led a $15 million renovation to return the five-story building to downtown prominence. The Tioga was rehabilitated as a 70-unit apartment building for professionals and UC Merced graduate students, with retail space on the ground level, a fitness center, and room for a brew pub and café.

Kiernat said she believes from her team’s work for Shankar that portions of the Palace structure are stable, could be retained, and reused.

“Less stable areas “could be temporarily shored while the least stable parts of the building may need to be removed to address public safety concerns.”

Kiernat said, however, that “I don’t have any doubt that this building could be brought back to life and creatively reused in a way that is meaningful to the community.” 

Ishwar during his ownership has not publicly put forward any rehabilitation plan.

Ishwar and his wife Paru are owners/partners in several motel and hotel properties scattered across Mendocino, Lake, and Sonoma counties. They are listed as co-owners of the Fairfield Inn and the Economy Inn, a highly visible stalled rehab project on State Street in the shadow of Ukiah’s City Hall. Ishwar is a regional director of the nearly 20,000 member Asian American Hotel Owners Association. Ishwar is among American motel owners related to Patel, a surname that indicates they are members of a Gujarati Hindu subcaste which controls one out of two hotels in America.

Ishwar and attorney Steve Johnson did not respond to repeated requests for comment or updates on the new plans for the Palace property.

Attorney Mark Adams of Santa Monica was the city of Ukiah’s court appointed receiver tasked with selling the Palace. Adams, a magna cum laude graduate of Loyola Marymount University and Georgetown University Law Center, said he has served as court-appointed receiver for over 250 properties. Adams’ California Receivership Group has a checkered history according to reports in the Los Angeles Times, but Adams continues to be considered a leading expert on the subject in his field.

In the Palace case, Adams initially said his and Ishwar’s relationship was cordial, eventually leading to the January 2019 sale to Ishwar for $972,085, according to court records. The amount included loans to the receivership from Ishwar and unpaid receivership fees and expenses. Ishwar within two weeks transferred title to Twin Investments, a limited liability company formed by him and his wife.

Adams recalled that Ishwar “was presented to me as a local hotelier with an interest in the community and a possible desire to restore the Palace. So, I definitely thought he was at least potentially a force for good.”

But it wasn’t long, said Adams, before he came to believe Ishwar and attorney Johnson “were involved in a real estate play, not a community project.”

Adams said, “It was truly heartbreaking when he got so greedy with that woman (Minal Shankar) who I really did and do think was dedicated to a community orientation.”

In July 2023, attorney Johnson blamed Shankar for the collapse of the Palace deal with Ishwar. “She didn’t close the deal. It would be unfair to suggest he did anything wrong,” said Johnson. 

In an ironic twist, if and when the Palace site is cleared with state grant funds, the tribe and its co-investors are touting building a similar version to Shankar’s earlier concept, based on how the plans are described to the state agency in the grant application. The basic theme is a boutique hotel, restaurant and bar, a cluster of retail shops, and a rooftop event center and garden.

Talbert, operator of the popular Left Coast restaurant downtown, is the point man for the local group of investors partnering up with Guidiville, but he refuses to publicly identify them, or provide any details about their long-range plans. 

While public information remains sketchy about the new Palace deal, state documents that have been obtained disclose some key details. For instance, the Guidiville Rancheria, no stranger to taxpayer supported land deals involving tribes, will have the controlling interest in the proposed Palace partnership if the purchase with Ishwar is completed.

The tribe, located on a small rancheria east of Talmage, has been entangled for two decades in a failed billion dollar deal to transform an abandoned Navy depot at Point Molate on San Francisco Bay first into a controversial casino, and later an upscale housing venture. In 2022, Guidiville secured half interest in the site as part of a court settlement of lengthy litigation. It has three years to produce a development plan or sell, according to East Bay news accounts.

Local architect Nicholson, who served years on Ukiah’s Design Review Board, said he fears city administrators are so eager to rid downtown of a four-decade old eyesore that they seem to be supporting any deal to raze the Palace without even cursory reviews by Ukiah's own Demolition Review Board, the Planning Commission, or the City Council.

It’s disturbing because “there are many examples throughout the country of historic buildings in much worse shape than the Palace Hotel being restored to a second life and benefiting the building and the owners,” said Nicholson.

Nicholson added, “The profound lack of knowledge of the current owner and local administrators, using perceived structural deficiencies of the building in the devious pursuit of government funds to demolish the building is irresponsible and runs counter to the State Office of Historic Preservation requirements concerning registered historic buildings.” 

Dennis Crean, a Ukiah resident, said he understands public frustration about the deteriorating state of the Palace building.

“I get it. People are weary of seeing the dilapidated Palace Hotel and are ready for this saga to end already,” said Crean. 

“But that doesn’t mean Jitu Ishwar, the owner, should get a free pass to tear down Ukiah’s most historic building due to his own failure to take care of the property. There’s a name for that. It’s called demolition by neglect, and a lot of cities have regulations to protect against that sort of bad behavior,” said Crean.

Contention over the Palace’s fate is complicated by the secrecy surrounding the planned purchase, and who besides Talbert are in partnership with the Guidiville Rancheria. It’s the talk of town, but who’s behind the new Palace deal remains a mystery to local residents.

City officials acknowledged they have met with Talbert and others, including Ishwar and Johnson, to discuss the pending state application and the possible ramifications. 

Deputy City Manager Riley repeated her past contentions that the city only has a ‘narrow lane’ in its role in the Palace saga, and that now because of the building’s eroding condition there is no choice for the city but to focus on public safety issues. 

The City Council blamed water intrusion from winter storms in 2022-23 for making the Palace building “no longer structurally stable, posing imminent risk of damage to persons or property in its vicinity.”

Riley said that finding qualifies the Palace for exception to the prohibition on demolition of historic registered buildings, and “because of the imminent risk, the hypothetical demolition would be exempt from the requirement for review from the Demolition Review Committee and subsequent referral to the Planning Commission.”

“I don’t know a single person who is excited about the possibility that the Palace could be demolished. It’s absolutely devastating to see such an iconic building that was filled with so many memories in such an advanced state of deterioration,” said Riley.

Riley said she understands there are mounting public concerns as the possibility of demolition sinks in.

“But it’s important for people to understand that the city doesn’t own this building. The city can’t force the owner to sell the building to a specific person or manage this transaction in a specific way any more than we can dictate who you sell your house to or how you decorate it. We also can’t require someone to build a project that is economically unfeasible.”

Riley thought critics’ concerns should be eased by a city requirement that 65 percent of building materials from demolition of buildings has to be salvaged or recycled.

Riley insists she or other city leaders have not seen the pending Guidiville application for state funding.

The state agency confirms that the Guidiville Rancheria is one of two California tribes among 48 applicants seeking $90 million this year in funds under a special state program called “Equitable Community Revitalization Grants.” The program is providing more than $250 million in grants to “incentivize cleanup and investment in disadvantaged areas of California.”

“If anyone is going to get a slice of available funds, it will be the tribes,” predicted an individual knowledgeable about how state money is divvied up in Sacramento. 

In its state application, the Guidiville tribe argues that the Palace needs to be torn down so an on-site study can be done to determine once and for all if long-rumored underground fuel storage contamination and possible cleanup of the site needs to be done. 

The possible presence of old underground storage tanks and possible contamination has long been debated locally, but remains in dispute, however.

The Guidiville application cites 2023 preliminary underground radar studies that purportedly show possibly six underground tanks once holding heating fuel and gasoline for a hotel garage are located beneath the Palace.

“The site was primarily used as a hotel however we believe the suspected causes of contamination were due to the historic hotel operations including automobile fueling and servicing operations. Soils under the Palace Hotel are potentially contaminated with substances including but not limited to volatile solvents, lead, and PCB's, due to historical underground storage tanks used to supply the heating plant of the old hotel that were installed under building foundation. Kerosene and leaded gasoline were sold onsite and stored underground in tanks. The Palace garage was a fueling station and service shop back in the 20's. It is suspected that these tanks are damaged and leaking into the soil and groundwater.”

Guidiville acknowledges past environmental studies that were conducted for a court-appointed receiver overseeing the Palace property found no suspected tanks or contaminated areas.

“We don't believe the studies were done with enough accuracy,” the Guidiville application declares, however.

“In August of this year (2023) we conducted our own Geophysical Survey using ground penetrating radar, metal detectors and soil testing that revealed multiple sites, six confirmed, of suspected underground storage tanks and contaminated areas.”

Research, however, for a 2017 study by a Merced County environmental consulting firm found that in fact at one time a 30,000 gallon storage tank was in place under the ground floor of only one section of the hotel. But using similar ground penetrating radar technology the Guidiville Rancheria cites, Nelson Eviro LLC of Atwater then concluded in its report that it found no evidence of possible ground contamination, or even underground tanks. 

“Results of the survey found that no underground storage tanks were detected at this site. The areas were scanned thoroughly, and no anomalies consistent with the presence of underground storage tanks could be found. Also, no suspicious ground penetrating radar data was found/seen at time of scanning to signify any current items remains,” according to the report prepared by Mike Nelson, owner of the consulting firm that does environmental site assessments in Northern and Central California. Nelson is a registered environmental property assessor.

Former court receiver Adams said he has no reservations about conclusions of the 2017 Nelson underground tank report that he commissioned for disclosure to potential buyers. 

Adams said he is incredulous that claims of underground contamination at the Palace are being recycled again. Why would anyone, including the state, spend “$6 million to reconfirm that finding?”

“Wow,” said Adams.

Kiernat, the Page & Turnbull preservation expert, said the city should require an independent abatement company to study the exact location of the alleged tanks, complete soil testing, and devise a way to extract them and clean the site without demolishing the Palace building. 

“It can be done. I’m sure of it,” said Kiernat.

Besides the contamination and structural-related issues, there are questions whether the project Guidiville and investors envision can secure necessary city permits because the new structure would be twice the height of the current structure and sit atop an underground garage.

Asked if it is possible such a large project could make it through the city of Ukiah’s review and permitting process, Deputy City Manager Riley replied, “Maybe.”

Riley said, however, that any new development on the Palace site will be subject to a site development permit, which must be reviewed by the Design Review Board and the city Planning Commission. It also will be subject to the Downtown Zoning Code, aimed at helping create a ‘vibrant downtown.’

There are a lot of “maybes” surrounding the Palace besides securing state funding to cover demolition costs and site cleanup.

Guidiville holds a 44-acre remnant of its rancheria east of Talmage that was terminated in 1958 by the federal government. The tribe regained recognition when termination of native lands were legally challenged across California. There are now about 115 members, according to the Bureau of Indian affairs. 

Guidiville may be small in numbers and acreage, but it is no stranger to public agencies, and development proposals.

For two decades Guidiville was engaged in a high profile dispute with the city of Richmond over plans to first develop a $1.2 billion gambling casino at Point Molate on San Francisco Bay, and then a high-end bayside housing development. Eventually the tribe and its partner wound up buying half the former Naval depot site for a bargain basement $400 in 2022 and have until 2025 to produce their own development plans.

Mike Derry, the same tribal advisor in the Richmond project, is also listed on the state grant application for the Palace cleanup project. 

Tribal Administrator Tarin, however, said in a response to a December request for comment, “Please be advised Mr. Derry is not authorized to comment on Tribal economic development initiatives. Only our Tribal Council has the authority to speak to anyone on these matters.”

Talbert over several meetings also declined to publicly discuss specifics of his or his group’s partnership with Guidiville, although he has privately outlined tentative plans with civic leaders, city officials, and a host of other interested parties.

“We don’t want to raise expectations,” said Talbert about the group’s public silence.

The Palace has been at the crossroads of Mendocino County’s past and future, boom or bust cycles for 133 years.

The hotel was once the place for generations of travelers to the Redwood Region to stop, and eat, drink and be merry in the celebrated Black Bart Room.

In a collaborative piece, writer Karen Rifkin and Allysa Ballard, archivist at the Historical Society of Mendocino County, put together a recently published history of the Palace which detail its storied past. 

The Palace survived the 1906 earthquake “with only a few broken windows and a slight loss of plaster in the upper stories,” they wrote. 

The Sandelin family owned the Palace through three generations until 1966. In its heyday the hotel was the center of social and civic activities.

In 1949, a new unit offering expanded dining and drinking areas opened. The Black Bart Room became the local watering hole, with a 7 by 27 foot mural covering the wall behind the bar. The painting, done by famed muralist Dan Clever from San Francisco, had a background of a 4-horse stagecoach coming around the bend on Orr Springs Road near Ackerman Creek. In the foreground was shown a larger than life Black Bart, reclining against a tree with a rifle across his knees and an axe and canteen by his side and a paper in hand.

In 1977, the Palace got a $3.5 million facelift, according to Rifkin and Ballard. Pat Kuleto, who later became a legendary and successful San Francisco restaurateur, oversaw the Palace revival but it was short-lived. By 1981, the Palace operation was in bankruptcy. A few years later the Palace was shut down. 

Savings Bank, the Palace’s neighbor, in 1990 intended to buy the Palace building and real estate at a tax lien sale but its representative was out of the room when the gavel went down. Instead, a Marin County group snapped up the property for $115,000. That ownership, led by Eladia Gaines, faltered over the years, and led to decades of deterioration. The Palace finally ended up in the hands of a court-appointed receivership.

As it is, if the state grant comes through, the historic Palace’s last chapter may be written.

Even local residents with deep ties and fond memories of the Palace are suggesting the decrepit hotel’s time may be up. 

Wendy Mae Thomas recently authored a moving story about her past Palace experiences. She concluded: “I love the Palace, and the thought of it being torn down tears at my heart. Since I have been reminiscing these past couple of weeks, however, I’ve come full circle and realize she can’t be restored.”

Photographer Tom Liden, co-chair of the inactive ‘Friends of the Palace Committee,’ said he is resigned to the notion the Palace could be torn down.

“I’m anticipating a necessary resolution to too many years of neglect,” said Liden.

Pinky Kushner is a Ukiah resident who opposes demolition. For several years, she assisted former owner Eladia Laines of Marin County in securing the building from vagrants and vandals. Kushner said despite the current condition, Laines did make headway in clearing the building of debris over the years. “She had a plan. She just didn’t have the resources to do it,” said Kushner.

Kushner is among those questioning the wisdom of the fast-track approach being embraced by the current owner, the prospective buyers, and city administrators.

Kushner acknowledged the Palace has been in a “serious slow slide into disrepair.” Yet Kushner said, “I am like many in the public who are pained to see the Palace move towards demolition, especially when we know nothing about what will replace it.” 

Crean, who has been outspoken about city oversight of other historic properties, asks, “So, why does it matter when so many locals and even city leaders are ready to throw in the towel?”

“Because we shouldn't ‘pull the plug’ on the ailing Palace without at least hearing from real experts. And we shouldn't buy into this ‘toxic waste site, taxpayer bailout of a private investor, but-it’s-a-dire-emergency’ storyline,” argued Crean.

Crean said, “Instead, let's give a legitimate team of architects, designers, and investors their chance to get to work. The Palace Hotel deserves at least that much.” 

(Mike Geniella is a veteran North Coast journalist and regular contributor to local news organizations.)

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