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State Oversight Agency: Palace Demolition Not Necessary

Senior staff at a state agency designated to oversee possible contamination studies at the Palace Hotel site are ruling out any need for demolition to do investigative work at the downtown Ukiah site.

The declaration of the North Coast Regional Water Quality Control Board comes at a critical juncture in a public debate over the historic structure’s fate, and it undermines a taxpayer-funded scheme surrounding a proposed sale by current Palace owner Jitu Ishwar to the Guidiville Rancheria and a group of investors.

The Guidiville group is seeking $6.6 million in special funding from the state Department of Toxic Substances Control for demolition of the Palace, and costs for contamination studies, clean-up, and site preparation for a proposed new private development at the Palace’s downtown site. The City of Ukiah has put on hold enforcement action against Ishwar for allowing the Palace to become a “public safety hazard” pending outcome of the Guidiville grant application. 

“We have never required demolition of a building to do any investigation for ground contamination,” said Heidi Bauer, senior engineering geologist in the Regional Water Quality Board office in Santa Rosa.

Under state protocols, the Regional Board will oversee contamination studies at the Palace Hotel’s downtown Ukiah site if a state grant is awarded to Guidiville. The agency does not determine the fate of the grant, or how much is awarded, but its engineering staff in Santa Rosa will decide what work is necessary.

It is clear, however, after interviews with Bauer and Kelsey McLaughlin, an engineering geologist, that demolition of a building listed on the National Register of Historic Places is unnecessary to complete a possible contamination assessment.

“Investigation work can be done without demolishing the building,” said Heidi Bauer, senior engineering geologist for the Regional Water Board.

Bauer added, “We have never required demolition of any building no matter in what condition to determine if there is contamination at a site, and to what extent.”

Bauer said technology allows experts to determine the level of contamination on site and what might be needed for remediation without razing any structure. “Even in worst case scenarios we can make that determination,” said Bauer.

The Guidiville scheme for taxpayer support of demolition emerged soon after current owner Ishwar, a local hotel/motel operator and former president of the Greater Ukiah Chamber of Commerce, walked away from a planned sale to a Ukiah financier last summer. Minal Shankar had developed plans with the aid of noted architects and designers specializing in historic preservation. It was the second offer in three years for purchase of the Palace that Ishwar spurned in what a court-appointed receiver described as a “real estate play.”

It seems Ishwar believes he can be made “whole” for his 2019 investment in the Palace even though he has taken no steps since then to stem the landmark’s decline by protecting it from the elements, including a leaking roof, uncovered windows, and interior mold and rot.

Following his rejection of the Shankar offer, Ishwar quickly made a follow up deal with Guidiville and its partners, who launched a campaign to use public funds to tear down the sprawling structure and clean up the site so they could move ahead with a private development project. They envision erecting a six-story faux Palace, according to their application for state funding.

The original part of the Palace Hotel at the corner of State and Smith streets dates to 1891. Subsequent additions were made in 1914 and 1929. Hotel operations shut down in the 1980s, and little has been done under two ownerships to protect the historic structure from the elements over three decades.

Palace Hotel, 1991

Engineering geologists Bauer and McLaughlin said they were unaware until recently that Guidiville is specifically seeking state money for demolition of the Palace. The tribe is applying for special state funds earmarked exclusively for tribes, nonprofits, and municipalities in poor areas, money unavailable to private developers. Under its proposed deal with investors, Guidiville will have majority interest in a new development company if the purchase from Ishwar is completed.

Bauer and McLaughlin said their agency as is typical agreed at that time to do the needed oversight with expectations of state reimbursement for the costs.

“We thought it was a typical request for our agency to oversee contamination studies. Had we been aware of the demolition element, we could have raised our hands then,” said McLaughlin.

Another odd element in the Guidiville application is the fact that a purported 2023 study supporting the Guidiville group’s claims for demolition based on suspected ground contamination has never been turned over to either state agency. 

“We have never seen that document,” said Bauer.

Devin Hutchings, a state Department of Toxic Substances Control spokesman, said that agency also has not received the document.

Representatives for Ishwar and the Guidiville group did not respond to requests for comment. They include tribal consultant Michael Derry, Ishwar attorney Steve Johnson, and Attila Panczel, lawyer for the group of co-Guidiville investors led by downtown restaurateur Matt Talbert.

Hutchings, the toxic control department spokesman, said grant decisions are still expected to be announced by the end of February.

Talbert has led the public campaign to raze the Palace, contending that it is the only way a determination can be made about possible ground contamination from long ago underground fuel storage tanks. Underground tanks were common in the early 1900s across downtown because they stored oil for heating. The Guidiville group also contends a former Palace garage fronting School Street may have had underground tanks for fuel.

A 2017 study prepared for a court-appointed receiver found no evidence of fuel storage tanks remaining at the Palace site, and that there were no signs of any significant environmental degradation. The Merced firm recommended no further studies were needed.

Talbert and the Guidiville group is now claiming that study was not “accurate,” and that their own consultants last summer supposedly found six suspected sites of possible underground fuel tanks beneath the Palace. 

The current decayed state of the Palace building is not in doubt. It has suffered extensive water damage, collapsed interior support beams, and severe rot.

Whether the three-story brick building can be recycled into new uses, including a boutique hotel, retail shops, a bar and restaurant, and a rooftop event center, as envisioned by local financier Minal Shankar, before Ishwar scuttled a deal with her last summer, is a subject of debate.

Noted historic building architects and designers in San Francisco believe the Palace can be reinforced and transformed into a downtown centerpiece, as does Tom Carter, a recognized North Coast contractor who did the acclaimed Tallman Hotel and Blue Wing Saloon in Lake County among other projects.

Demolition advocates led by the Guidiville group argue the time has come for a community “eyesore” to be razed, and a new building erected in its place. 

Before the City Council officially declared on November 3 that the current Palace building has become a dangerous public nuisance, Guidiville representatives were telling state officials that there was “imminent fear of it collapsing.”

“Soil investigation is directly below the building foundation. Any future investigation will require the building to be demolished and disposed of before it falls and hurts someone,” contended the Guidiville application, dated October 13, three weeks before the official city declaration.

Guidiville claimed then that “agreements will be obtained by our local municipality to demolish the building.”

“Preliminary discussions have already begun, and we do not anticipate any barriers in obtaining these releases and agreements. We are working closely with city officials such as the City Manager, Building & Planning, and the Fire Marshal,” according to the Guidiville application.

Deputy Ukiah City Manager Shannon Riley insists City Hall has not seen the Guidiville application under review by the state and that city officials are unaware of its contents. Riley dismisses as “coincidental” elements that some critics see as the city acting in concert with the Guidiville group.

Members of a citizens group opposed to the demolition of the Palace are wary of the Guidiville group. They cite Guidiville Rancheria’s nearly two-decades long struggle with the city of Point Richmond over a failed billion dollar casino proposal there at Point Molate on San Francisco Bay. Attorney fees ran into the millions of dollars before a settlement was reached, allowing Guidiville to purchase half of the Bay frontage site for $400. A regional parks agency is currently negotiating to purchase and transform the site into a park.

Opponents of the Guidiville group’s plans said they are hopeful the “kibosh” will be put to the scheme to use taxpayer money to tear down the Palace.

“It’s beyond me how anyone can believe – or even hope – that the state would give away $6.6 million in taxpayer money to bail out the Palace’s negligent owner and demolish an historic landmark under the false pretense that it’s a toxic waste site,” said Dennis Crean.

Crean said it’s time for owner Ishwar to negotiate a sale “to real professionals in historic preservation so they can get to work redeveloping the Palace.”

“It’s also time for city officials to put some pressure on Mr. Ishwar to finally do the right thing. He’s been given a free ride for too long,” said Crean.

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