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Toiling through tedious building process for the love of wine

Silicon Valley/San Jose Business Journal

The image is tempting: owning a small, highly regarded boutique winery, pouring for friends and customers. But before that first drop is decanted, years of effort and potentially hundreds of thousands of dollars must be poured first.


“By the time you finish putting the winery in, you’re going to have between $20,000 and $30,000 an acre in the crop,” says Tom Russell, who, with his wife, Carol, planted DeTierra Vineyard in 1998.

About midway between Salinas and Monterey, the Russells say their three acres of merlot was California’s first certified organic vineyard. They won a silver medal in the International Eco-Wine Fest in June 2003.

“Once we picked (the grapes), we knew,” Mr. Russell says. “It was so perfectly in balance.”

Wine-making is not a venture for those easily cowed by cool weather or draining bank accounts or by sometimes sluggish bureaucracy. Before the juice of the first crushed grapes is bottled, there is the cost of cultivation, spraying, licensing, trellising and installing the rest of the infrastructure needed to support the vines.

While many boutique wineries can start by buying juice from vineyards and then handle the barreling, blending, bottling and retailing, others prefer to be vertically integrated right from the roots of their own vines. That gives ultimate control, but adds hugely to the cost.

It typically takes six years, at least, from the initial vineyard design to the first glass of wine. That doesn’t include going through the permit process.

“Oh boy,” Mr. Russell says, referring to the extensive process he went through with the federal Bureau of Alcohol, Tobacco and Firearms and the California Alcohol Beverage Control Department. Local zoning, planning and agriculture commissioners also have a say in regulating what happens at a vineyard.

“It almost took us as long to get the permits as it did for me to grow the grapes,” Mr. Russell says. “It was a race to the finish.”

The Russells spent almost three years getting permits for the winery; estimate lawyers and permitting fees have added $3 per bottle.

Much of Santa Clara County’s agricultural history had been paved over. Its first vineyards were planted in 1798 at the Mission Santa Clara, according to the Santa Clara Valley Wine Growers Association. The valley was once home to a premium wine industry, thanks to European immigrants. Crops, however, were nearly wiped out by a pest in the late 1800s and then later took a huge hit with prohibition in the 1920s.

About 60 years ago there were 40 wineries with their own vineyards in the county farming 8,000 acres, but development eventually moved most of them out of the area, the wine growers association says.

This year Santa Clara County moved toward a more lenient process to encourage vineyards, updating its zoning practices to simplify winery regulations, allowing them as a matter of right in rural areas rather than only after a discretionary review process.

“I wouldn’t say that they’re growing in leaps and bounds but as a county, Santa Clara (County) is encouraging agriculture,” says James Reilly, associate planner for the county.

The Planning Office denotes three categories of vineyards: limited, general and expanded. No use permit is required for the smallest or “limited” vineyard that produce 10,000 cases or less annually.

Santa Clara County also allows limited associated and ancillary uses of on-site tasting areas or rooms, limited recreational yards, and retail sales of related products such as bottle openers and wine glasses. Mr. Reilly calls the county’s zoning ordinance “very permissive.”

“If the applicant is looking for a small-scale winery limited to 10,000 cases or less, he or she would bypass Planning and go straight through to the Building Department for permits,” Mr. Reilly says. “The structural aspects of the building would be focused on such as access, fire protection, environmental and health issues.”

Larger-scale wineries are allowed in all rural districts with a permit process, which includes issues related to land use and traffic.

General category includes vineyards that produce more than 10,000 cases of wine annually. That category elevates to “expanded” if the vineyard property has a facility for functions such as parties, weddings and other special events, all requiring a much more rigorous permit process.

The major challenge is that owners don’t realize what’s involved in expansions of use, says Fred Goodrich, assistant director of the San Benito County Planning and Building Department. Opening up a site to weddings, wine tastings and concerts “changes the whole dynamic,” he says. Noise, traffic, the impact on neighbors in quiet, rural communities all have to be examined, along with health and food preparation issues.

In Monterey County, where grapes are the county’s fifth largest crop, Assistant Agricultural Commissioner Bob Roach suggests anyone considering a vineyard visit the local planning department overseeing that patch of land before making any decisions.

“Every county is different,” he says. “They all have some rules and regulations that could apply to you, and there are some specific vineyard development ordinances.”

Agriculture tends to be widely permitted in denser residential or industrial business areas in Monterey County, but some small, boutique vineyards have had trouble with development on slopes and had to later remove them, Mr. Roach says. Erosion control is important.

“The message is, don’t create a problem with erosion in a vineyard and figure out a way to deal with runoff later,” Mr. Roach says. “That will often get you in trouble with your local agency.”

“Make sure you have plenty of time because there’s no way to rush it,” says Frank Léal, who in 1999 planted a variety of vines on about 37 acres in the foothills east of Hollister. He says it took him two years to get permits for the 7,500-square-foot winery.

“Whatever (San Benito County) said that’s what we did,” he says. “They said it was time to do a traffic impact report; we did it. They said do a percolation test; we did it. It’s not like you can speed up one guy and push it through. Go to each agency and find out exactly what they need and work with all of them.

“It’s basically this circle you just keep pushing. You’re filling out paperwork the whole time. By the time it lands on someone’s desk and they actually get it back to you, it may be 60 days (turnaround), so you work on something else.”

In 2001, Mr. Léal’s first harvest made about 4,000 cases of wine. He says he now plans on hosting weddings and receptions — which introduces the need for new permits.

“The minute you decide to build a winery, work on the building permit first,” he says. “Once you get that going, there’s plenty of time to plant your vineyard and get your plants to grow.”

So is it worth all that work?

“I’ve heard some guys say they didn’t make a dime for nine to 11 years,” says Mr. Léal, who supports the vineyard through his old business as a contractor. “You need to be prepared. I hope to break even one of these days.”

In reality, he says, a vineyard is the worst investment you can make.

“The only reason people make this investment is because they have their heart into it. You’d be way better off in the real estate market buying a house or something than getting into the wine business.”

JENNIFER PITTMAN is a freelance writer based in Santa Cruz.

This article is published here.

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This entry was posted on October 17, 2003 by in Agriculture, Business.

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