Surrounding Royal Oaks Mushrooms on Watsonville Road in southwest Morgan Hill was virtually “nothing” in the way of homes or any other kind of development when Robert Vantassel, now the farm’s operations manager, started working there in the 1980s.
He remembers some scattered row crops in the area, and what his grandparents called “permanent pasture” in the vicinity of the mushroom farm. He faintly recalls a gas station across Monterey Road, which forms the eastern boundary of Royals Oaks’ property.
Now, most of those fields host residential neighborhoods, new roads and small retail businesses. Monterey Road is a bustling commuter throughway. Oakwood School and Morgan Hill Bible Church (which also houses a school) neighbor Royal Oaks to the south and east, respectively.
There remain some vacant fields and active farmland—as well as large residential lots—to the south and west of the mushroom farm, but the increasing mixture of urban and rural land uses in such close proximity is at the crux of the debate over whether the City of Morgan Hill should annex properties such as Royal Oaks and farms in the Southeast Quadrant into the city limits.
“In the mid-1990s they built the school, and then the condos across the street, and it became very difficult for me to continue to farm there,” said Royal Oaks owner Don Hordness. “I decided to move my business. In order to do that, we needed to get this thing sold.”
In 2013, the Santa Clara County Local Agency Formation Commission approved the annexation of Royal Oaks’ Morgan Hill farming operation, which employs 55 people on about eight acres. But Royal Oaks owns about another seven acres (mostly vacant) to the west of the mushroom growing facility.
The city’s proposed extension of its Urban Service Area boundary around the remainder of Royal Oaks’ property, Oakwood School, Morgan Hill Bible Church, adjacent residential properties, a strip mall and other remaining farmland—collectively known as “Area 2”—will be considered by the LAFCO board at its March 11 meeting. (“Area 1,” the SEQ project, is on the same meeting agenda.)
The Area 1 proposal has been in the works for about a decade, Hordness said.
Hordness wants to complete the annexation of his property and move his agricultural operation to a less populated area. He plans to one day develop the Morgan Hill site into a 123-unit senior housing complex if LAFCO approves the USA extension—a precursor to a city limits expansion.
The Area 2 request includes a total of 17 parcels. Other properties are the 24.5-acre Oakwood School campus; a 2.2-acre property owned by the Santa Clara Valley Water District; the 8.7-acre Morgan Hill Bible Church site; an approximately three-acre commercial site consisting of a hair salon, masonry operation, tool supply and the Bay Area Chrysanthemum Growers’ Co-op; and seven low-density residential properties, according to the LAFCO report.
LAFCO staff has recommended denying the project, primarily because the city limits already encircle ample vacant land to develop the kind of projects proposed in the USA extension request.
“The City has enough residentially designated vacant land within its existing boundaries to accommodate its residential growth needs for the next eight to 24 years,” reads part of the LAFCO staff report. “The proposed USA expansion would result in unnecessary conversion of prime agricultural lands and would create further land use conflicts with surrounding agricultural lands and encourage development of additional lands.”
In addition to the senior housing complex on Hordness’ property, other proposed changes in the USA request area include an expansion of Morgan Hill Bible Church, more sports fields and classrooms at Oakwood School, and about 117,000 square feet of unspecified, non-retail commercial uses on six of the smaller parcels, according to the LAFCO report.
The city and the property owners submitted a nearly identical USA extension request to LAFCO in 2013, but the seven-member commission approved only the mushroom farm. The other properties were rejected for similar reasons cited in the current staff report.
This time, City Hall and property owners think they have a better chance of gaining LAFCO’s blessing because the city now has an agricultural mitigation policy. The city council adopted this policy in 2015, requiring any developer who builds on farmland within the city limits to pay a mitigation fee that goes toward the permanent preservation of an equal acreage of agricultural property elsewhere in Morgan Hill (preferably in the SEQ, which sits on the east side of U.S. 101).
The city even submitted an agreement to LAFCO, signed by Hordness Jan. 13, in which the Royal Oaks owner promises to provide such mitigation when he is finally able to develop the residential project. Hordness said the LAFCO staff recommendation is “irritating.”
“The city and myself have worked really hard to get the plan in place,” Hordness said. “After the (agreement) was done, I gave it to LAFCO and thought they would be happy, and they weren’t.”
Long time coming?
Other properties in the Area 2 expansion request, such as Morgan Hill Bible Church, simply want to use nearby city services to facilitate their growth.
“We’re wanting to be in the city so we can take advantage of the water line in front of our property instead of staying on a well, and move away from having a septic field and take advantage of local services,” said Pastor David Whitaker.
LAFCO staff say including this property in the USA would “potentially increase urban/rural land use conflicts for adjacent/surrounding lands and likely put undue development pressures on those lands.”
A letter from nearby homeowner Rod Braughton stated his and neighbors’ opposition to the USA expansion and a proposed cell tower on the Bible Church’s property. Attached to his letter is a petition signed by 17 of his neighbors.
The homeowners think the USA expansion would “add to urban sprawl (and)… add an intrusion to a quiet, rural setting.”
The LAFCO report also notes that some of the properties in the Area 2 USA request are already in the city limits, but not in the USA.
Mayor Steve Tate, who voted along with the rest of the city council to approve the LAFCO request in September 2015, said this creates an awkward boundary situation that the city hopes to rectify. He added that while there is “definitely” a supply of properties within the city limits available for development, the 67-acre area south of Watsonville Road is a “prime” area for the type of growth proposed there.
“We put Butterfield Boulevard all the way through it. It’s close to good transportation corridors. We think it’s suitable for development going forward,” Tate said.
Royal Oaks and other mushroom farms in South County appear to be thriving, as the fungus is the number two top money-making crop in the county (behind nursery crops). The mushroom industry in 2014 made about $72.1 million.
However, mushrooms grow in compost, which can emit an unpleasant odor for nearby residents. While Royal Oaks doesn’t produce its compost at the Morgan Hill facility, on days when they move the material from Hollister the neighbors can be affected.
Oakwood School Executive Director Ted Helvey said he “couldn’t be more supportive” of the redevelopment of the nearby Royal Oaks site for this reason, even though the school is in favor of local agriculture in general.
Hordness added that the surrounding housing and proposed development at Royal Oaks makes it difficult to improve the agricultural site, and commuter and residential traffic is not compatible with the transportation of farm equipment.
“I couldn’t go in there and expand the facility, and make it state of the art,” he said. “Urban use does not fit with agriculture.”
Royal Oaks has production properties in Gilroy and Hollister that can accommodate the existing Morgan Hill operation and workforce, Hordness added.
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The seven-member Local Agency Formation Commission will consider two separate Morgan Hill Urban Service Area requests at the March 11 meeting, which begins 10 a.m. at County Board meeting chambers, 70 West Hedding Street, San Jose. The public is invited to attend and address the board on the projects, which include the 229-acre Southeast Quadrant/Sports-Recreation-Leisure proposal and the 67-acre “South of Watsonville” project. Written comments can be submitted prior to the meeting by email to
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, or by mail to LAFCO of Santa Clara County, 70 West Hedding Street, 8th Floor, East Wing, San Jose, CA 95110.
