Bluewater Terrace in Chelan—Another Short Term Rental Project?

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Bluewater Terrace (“Bluewater”) is a proposed development in Chelan located at 380 State Highway 150 on what is currently vacant, uncultivated land. The proposal is to develop the 14.79-acre site with a resort to include a winery and tasting room, an events center capable of accommodating 120 people, pool and spa facilities, and, critically, 20 short-term rental units for up to 80 guests. Bluewater has applied for a Conditional Use Permit from the City of Chelan on the theory that the proposed resort somehow complies with the City’s Agricultural Tourism Zoning Code.

A critical issue is whether Bluewater qualifies as a true “agricultural-tourism” development. If it isn’t, the 20 vacation rentals Bluewater hopes to locate on the property would be prohibited by the City’s Short-Term Rental zoning regulation. Bluewater hopes to end-run the STR regulations by claiming that the vacation rentals are “Home Stay Establishments,” which are allowed in a legitimate agricultural-tourism development. To be legitimate, however, the development would have to be a “working farm” or similar agricultural operation which produces agricultural products as its “primary source of income.”

Currently, there is no existing farm or other agricultural activity on the property. Further, the only “agriculture” contemplated for the development is less than two acres of grapevines. Bluewater has argued, seemingly successfully, that the wine it proposes to produce in its winery (from grapes grown onsite and also purchased elsewhere) is an “agricultural product” that would allow Bluewater to define itself as a working farm/agricultural operation. RC3 believes that a winery does not qualify as a “working farm” or similar agricultural operation and that Bluewater’s attempt to brand its proposed development as such is both disingenuous and completely at odds with the statutory framework governing agricultural tourism. That framework seeks to preserve existing agricultural operations and allow existing agricultural operators/owners to make additional income through ancillary tourism-related endeavors, e.g., u-pick, hayrides, etc. Bluewater seeks to turn the agricultural tourism statutory scheme on its head and simultaneously avoid the City of Chelan’s STR ordinance. If Bluewater succeeds, the implications are dangerous. Any area zoned Special Use District (as is this property) would then be developable as a resort, as long as it appended a winery and pretended that wine sales would be its “primary source of income.” Here, it is quite clear that the income derived from the 20 STRs will dwarf the income from the sale of grapes from less than two acres.

RC3 is following developments on the Bluewater Terrace project closely. A hearing is tentatively set before the Hearing Examiner on January 18, 2024.