Scotia, California, in Humboldt County, is a tiny place, smaller than a square mile, tucked just below U.S. Highway 101, which runs from Oregon to Southern California. Most people on the 101 drive right by. “It would be a good place if you were in witness protection,” a Scotia resident told me recently. “No one’s looking for you here.”
If you do pull off the highway and head down Main Street, you’ll come upon a deep-brown building crafted out of redwood trees and bearing a gold-lettered sign that says “Town of Scotia.” People sometimes knock on the door of this building looking to pay their water bills or hoping for a guided tour of the local mill, having assumed that the workers inside are public employees. Insurance companies make this mistake, too, Steven Deike, the president of the Town of Scotia, says. “No, we are a private company,” he tells them. “We just happen to be called the Town of Scotia.”
Scotia has always been a company town, but it hasn’t always been a company. It was created a century and a half ago by the logging giant Pacific Lumber, which wanted its lumberjacks to live closer to its trees. For most of Scotia’s existence, nearly everyone in town was employed by Pacific Lumber, or PALCO, as it came to be called, and PALCO owned all of their houses and the land they stood on. In the nineteen-eighties, a financier led a hostile takeover of PALCO, and racked up hundreds of millions of dollars in debt in the process; two decades later, the company turned to a Manhattan investment firm called Marathon Asset Management to stay afloat.
Marathon specialized in distressed assets: entities that are priced below their market value and are usually in dire straits. “We recently won the P.D.I. award for distressed investor of the year,” a Marathon employee told me last spring, referring to industry awards handed out by Private Debt Investor, a trade publication. Marathon manages more than twenty billion dollars; its minority owners include Blackstone, one of the world’s largest investment firms. Starting in 2006, Marathon poured millions into PALCO to help it meet payroll and cover bills. Nonetheless, PALCO declared bankruptcy within a year. As a primary creditor of the company, Marathon received two major assets as collateral for what it was owed: a portion of PALCO’s remaining logging business, and Scotia.
Marathon thus became the sole proprietor of two hundred and seventy-two houses, a museum, a hotel, a shopping center, a community center housed in a former movie theatre, and a partly abandoned hospital. “It isn’t unusual for hedge funds to take ownership of assets in debt deals,” the Wall Street Journal reported, in 2013, but Marathon “appears to be the only fund that owns an entire town.” Marathon didn’t want to own it. The firm created the Town of Scotia Company in order to sell off the properties, piece by piece. “We all know what the goal is,” Deike told me. “To put ourselves out of business.”
Deike is bald and often wears a camo-patterned baseball cap. He favors bluejeans and monochromatic collared shirts. When he began managing the sell-off, more than fifteen years ago, the process wasn’t expected to take long; he set his computer passwords to be “retire2011.” He no longer uses that password. He’s seventy-six now, and his work is only about half done.
There’s no home mail delivery in Scotia, so residents pick up letters and packages at a one-room building on Main Street that has a row of P.O. boxes and a single window. Many linger a while to catch up with the post office’s sole employee, Johnny Valencia. “It is like this old-town coffee shop,” Angela Hunt, who opened a store down the street in 2022 selling handcrafted and upcycled items, told me. “You go in there, and there’s all the old guys, and they’re all talking to Johnny.” Valencia sports a mustache and a stud earring and has an easy friendliness about him. He and the residents who come by talk fishing, PET-scan results, and local politics. Often, they exchange memories of the old Scotia.
Lumber companies began pushing up the California coast after the gold rushes of the eighteen-forties and fifties. Enormous redwoods in the state’s upper reaches had trunks nearly twenty feet around, and it could take several days for two men to chop a single one down. When logging season was over, the men who did this work often decamped to single-room-occupancy hotels in San Francisco and Portland—the stereotype of a lumberjack was a man “who works for a season, comes back to town, blows his whole wad on booze and women,” the historian James Michael Buckley told me.
In 1863, Henry Wetherbee and A. W. McPherson bought six thousand acres along the Eel River and formed the Pacific Lumber Company, building its first mill on the land about two decades later. Pacific Lumber wanted a steady and reputable workforce, so the company planned a housing settlement on the land and christened it Scotia. The company bought farms and began raising its own cattle and pigs; it opened a saloon, where it could control the sale of liquor. Eventually, there was a bank, a fire department, and a school. Scotia even had its own currency, good for use at the company store, well into the twentieth century. There were company-hosted picnics with barbecues and sack races and softball games. At Thanksgiving, Pacific Lumber gave out frozen turkeys to every employee, and, at Christmas, the company bought presents for the children in town, traditions that residents still remember. People I spoke to recalled receiving a gift of the board game Life or a packet of butter balls.
Many company towns compelled conformity through violence, but Pacific Lumber came to depend, to an unusual degree, on perks. According to Buckley, in the nineteen-twenties, workers paid just a dollar a month for access to medical services; those who suffered accidents or fell ill would visit a company health clinic and receive timely treatment. The company’s pension plan, introduced in the nineteen-forties, enrolled workers after two years, mandated retirement at sixty-five, and paid, on average, three-quarters of its workers’ retirement costs.
Nothing was subsidized more heavily than rent. In 1951, a three-bedroom house in Scotia, including utilities, cost twenty-one dollars a month, equal to about two hundred and fifty dollars today. Rent was so cheap that, sometime around the nineteen-seventies, the I.R.S. warned Pacific Lumber that it would begin treating it as a taxable employee benefit if the company didn’t raise rates to a range within market value.
Pacific Lumber also set aside money for the college tuition of its employees’ children. Some sources suggest that the company offered as much as eight thousand dollars a year in aid, at a time when college didn’t cost what it does now. “Took care of the family, took care of the kids,” John Broadstock, a longtime resident who served as Scotia’s fire chief for two decades, told me. “All three of my boys got the college scholarship. They put them through school.” Although corporate good will may have contributed to this approach, the overarching principle was maximizing profit. “Scotia was like a test case,” Buckley, the historian, told me. “How much can we spend on worker welfare and still make money?”
As the century progressed, and other large companies provided less and less for their employees, Scotia became an outlier. Tens of thousands of visitors began coming each year to gawk at the strange little town that flew a Pacific Lumber flag next to the American flag on Main Street. More people wanted to live in Scotia than there were beds in the town; in 1951, the Saturday Evening Post ran a story about it, under the headline “Paradise with a Waiting List.” By 1981, the waiting list reportedly stretched two full years.
Johnny Valencia came to town eight years later. He was born in Eureka, about a half hour north, in 1971, and grew up in nearby Fortuna. The year he turned eighteen, he got a job in the PALCO mill and worked there for seventeen years; he was laid off just before the company went bankrupt. He took the Postal Service exam and six years ago he was assigned to the Scotia office.
I spent about an hour with him there meeting residents. Then Valencia told me I should come back in the morning, at ten, when a man named Lonnie Dollarhide would drop in to pick up his mail. Dollarhide arrived on cue, with a baseball cap over close-cropped white hair. He said that he’d moved to Scotia in the nineteen-sixties, when the sidewalks were still made of redwood. He worked in the kiln for more than forty years; when PALCO went under, he got a job at the Humboldt Redwood Company, which took over a large share of PALCO’s remaining lumber business, and still operates in town, albeit with a fraction of the old workforce. Dollarhide recalled the pristine lawns of Scotia in its prime. Residents, he explained, were expected to maintain their yards; if they didn’t, Pacific Lumber sent maintenance crews to cut their grass, then deducted the cost from their next paycheck. “It was the best place to live,” he said.
Manicured lawns weren’t the only things aggressively enforced in Scotia. Anyone who had ever belonged to a union was placed on a blacklist that was distributed among lumber companies. (Pacific Lumber employees were not unionized.) Workers who expressed Socialist leanings were summarily fired. In the nineteen-twenties, an employee compared Pacific Lumber to the “feudal barons of old,” writing, in the Eureka-based Labor News, “There is no way to avoid the tentacles of the corporation as every foot of ground and all the material of every description is owned by the company.” Even so, the steady pay and affordable housing seem to have kept most employees satisfied. In 1922, an organizer with the I.W.W. complained, of Scotia’s residents, that “it would take a Sherlock Holmes to find any militancy in these tame apes.”
Days in Scotia were regimented according to whistles from the mill: in the morning, at lunchtime, and at 4:30 P.M., when the workday ended. The stores would all close just a little later—a woman I met who lived in Scotia until she left for college, in the nineteen-seventies, said she was amazed to learn that in San Francisco “you could go out shopping at 8 P.M.” Merilyn Ross, who grew up in Scotia and ran the town’s pharmacy for many years, told me that when you reached retirement age as a PALCO employee, you had to move out of your subsidized rental home. “Some people didn’t save up money for houses and ended up in a single old trailer,” she said. (PALCO had relaxed this policy by the early two-thousands.) And it could be worse: Johnny Valencia told me he had a colleague who was fired and lost his home along with his job. You could be fired just for being late, Valencia added. In nearly twenty years at PALCO, he said, he was only late five times, and never by more than a few minutes. He never called in sick.
Valencia has never lived in Scotia; he already owned a home in Fortuna, and he had misgivings about the company’s strict rules, so he stuck to commuting. But most PALCO employees seem to have weighed the benefits against the restrictions and decided the trade-off was worth it. I spoke to many past and present Scotia residents who were living out comfortable retirements thanks to the extensive financial support once offered by their employer. Others were doing fine until Marathon started selling off properties. One described moving to Scotia in the late sixties and getting a three-bedroom apartment for fifty-eight dollars a month. Now he pays eight hundred a month, and the Town of Scotia Company is preparing the house where he lives for sale. He can’t afford to buy it. “Things change,” he said. “I don’t think it’s for the good.”
Steven Deike was born in the Scotia hospital in 1947. He got his first job with PALCO when he was nineteen, as a part-time mail boy running documents to executives in the lumber mills. After a stint in the Army during the Vietnam War, he went to work in PALCO’s land department, which handled the company’s property taxes. He became the assistant personnel director, then joined the accounting department. He got married and moved into a two-bedroom house with his wife. They paid ninety dollars a month. “I liked the way it was,” he said, when we spoke about Scotia’s past.
In 1982, PALCO built a corporate headquarters in San Francisco and the top executives all relocated to the city. Deike became the highest-ranking accountant in Scotia and, informally, the town’s controller, responsible for all of its finances. “I was basically the acting mayor, because we owned everything,” he told me. When Marathon took over and began planning the sell-off, Deike seemed like a natural choice to help make it happen.
Scotia had always been legally classified as a single property, and Deike recalls conversations with a Native American nation and a tech company about buying the town, or large parts of it, wholesale. But such a purchase would have entailed some unusual challenges. Under PALCO, Scotia generated its own electricity, sourced from a power plant at the bottom of the town. The new owner would have to pay P.G. & E., the northern California utility company, to upgrade the electricity-distribution system to comply with current regulations. The town also needed to install new water meters in every home. And if the new owner wished to subsequently sell individual properties, it would need to get Humboldt County to subdivide the town.
When potential buyers realized all this, they got “the hell out of here,” Deike said. So Marathon did the subdivision work itself. Or, rather, Deike and his colleagues did it for them. The process took years. Finally, in 2017, the houses and buildings hit the market. A couple bought the old Catholic church and turned it into a home. A real-estate investor scooped up a six-bedroom residence, once a guesthouse for Pacific Lumber executives, and made it an Airbnb, available for five hundred dollars a night. After the northern California town of Paradise was destroyed by a wildfire, in 2018, a handful of refugees from the town bought houses in Scotia. An architect from Denver named Gage Duran bought the old hospital, for a hundred and fifty thousand dollars, and began converting it into apartments, with the hope of attracting a retail tenant for the ground floor.
When the COVID-19 pandemic prompted companies to put new work-from-home policies in place—in a striking reversal of the forces that had spurred Scotia’s founding—it seemed possible that the town would receive an influx of newly remote workers searching for quaint and affordable housing. But there was only a trickle, and many individual residences remained unsold. In early 2023, sales slowed almost to a standstill, though they have since picked up again. Most of the buyers have been local.
“I’ve been trying to encourage my friends to come down,” Pauline Kate Russell, who grew up in nearby Mattole Valley, told me. Russell works for a wildlife-conservation organization based in San Francisco, where she lived for years. The organization went remote in 2020, and Russell started house hunting in Humboldt County. Prices in Arcata and Eureka, the county’s largest cities, were too high. In the spring of 2022, she took a Zoom tour of a one-story two-bedroom with a Jack and Jill bathroom in Scotia, and bought it for two hundred and seventy-two thousand dollars. Since moving in, she said, she hasn’t met many people in Scotia. “Aside from the lodge,” she told me, “there’s nowhere to hang out unless we’re at my house.”
The Scotia Lodge, formerly the Scotia Inn—a stately building with a portico and a white balcony—is the most ambitious renovation project in Scotia. The town’s sole hotel, it was built in 1925, not so much to house visitors as to provide temporary residence for new Pacific Lumber workers. During the pandemic, many Californians who might have ordinarily taken long-distance vacations travelled upstate instead, and a veteran hotel operator named Jon O’Connor saw an opportunity. He bought the lodge with his wife, Amy, and a number of staff members, and revamped the bar and the restaurant. He spruced up the front yard. The lodge now hosts weddings with some regularity. It was recently the site of a ketamine-assisted-therapy retreat.
I met O’Connor in the hotel’s lobby. He wore brown work boots and a utility jacket; he has dirty-blond hair and a faint beard. He told me that, after he and his wife bought the hotel, they heard a rumor that it was haunted. “We called a Realtor friend of ours who’s a Christian pastor,” he said. The pastor brought a few members of his congregation who’d had supernatural experiences. “They prayed and sang and all that stuff,” O’Connor said, describing the event as “a version of an exorcism.” In the end, the friend concluded that even if there were ghosts in the hotel, they did not pose a threat to visitors.
The lodge once offered a hundred small rooms. When I visited, only two of the three floors were renovated. O’Connor said that, during the previous month—March, 2023—the occupancy rate for the available rooms was a little under sixty per cent, but that it ticks up toward three-quarters full in summer. Most guests had little idea that they were staying in one of America’s last company-owned towns. “Half of the people just are coming for the redwoods,” O’Connor said. On dimly lit walls, black-and-white photos of lumber workers hung alongside a sign promoting “Proper Cannabis Delivered Daily.” At the front desk, guests could buy rolling papers for $2.75 each.
O’Connor led me downstairs, to a subterranean space that he had turned into a speakeasy-style bar, with beaded chandeliers and geometrically patterned floors. Another light fixture, behind the bar, gave the space a purple glow. I followed O’Connor to a closed-off corridor, where his team was installing a spa, featuring Himalayan-rock-salt bath crystals and a luminescent inlay. “That Bay Area tech population—we think they like these types of experiences,” he said. On my visit last spring, he told me of an ambitious plan to install a back-yard pool with a bar of the sort you might find at an Ace Hotel. But he has since scrapped his efforts to revitalize the lodge. California’s legal-cannabis market has struggled, he told me, and, because of high interest rates, he couldn’t get favorable loan terms from the bank. In Scotia, “our vision of a Napa Valley 2.0” that blended wine and cannabis experiences, he said, “didn’t really materialize.” In November, he listed the hotel for sale, for $3.3 million.
The morning after I met O’Connor, I woke up early and walked across the street to the Town of Scotia offices, as logging trucks trundled down Main Street. Most Fridays, Deike has a conference call with Joan Kramer, a former Marathon managing director who now works as an outside consultant for the fund and handles all Scotia matters. Other top Marathon executives used to make regular visits to check in on progress, but they don’t anymore. “Marathon doesn’t even ask for our financials,” Deike said. “Their auditors ask.” Kramer comes to town a few times a year, but what becomes of Scotia, in what remains of the twenty-first century, will depend on what Deike and his colleague Mary Bullwinkel can imagine for it.
Bullwinkel, who’s in her sixties, wears her hair in a bob and sports a wardrobe heavy on sweatshirts. At exactly 8 A.M. one day, she led me into a small conference room where she, Deike, and a pair of Town of Scotia employees provided one another with updates on various houses that were going up for sale. A potential home buyer had just dropped out of escrow because their funding fell through; it would have been the first new sale in months. A different house in town needed new hot-water piping; another needed a pest inspection. Others had problems more particular to Scotia. At one century-old home, maintenance crews, trying to prepare it for sale, were struggling to slip under the crawl space, because the house had been built atop a giant redwood stump. Bullwinkel said that happens often around here.
Bullwinkel worked for PALCO in the nineties, then left to work in local journalism. She returned after the bankruptcy. “The town could have just gone away,” she said. The American West is littered with company towns that became ghost towns. Bullwinkel said it was “a love of Scotia” that brought her back, and that she wants to see the town prosper again. But the things that she and other residents loved about the place—social cohesion, an unusually strong safety net—have become hard to find, not only there but everywhere. The safety net is gone, and it turns out that social cohesion is not an easy thing to make from scratch. Deike told me matter-of-factly that welcoming in newcomers is the only way to save Scotia. “None of us went into this with any false impressions that it was going to remain the same as it always was,” he said.
