The developer for Edgewood Plaza in Palo Alto, who has faced steep daily fines for the vacant grocery-store space at the shopping center, has fired back at the city in a new letter that calls the penalties "excessive," unlawful and unwarranted.
A Nov. 21 letter from Sandhill Property Company's attorney to the city requests an independent hearing to challenge the "validity" and "legality" of the fines, as well as to seek relief for all payments that have already been made to the city. The letter includes a $28,000 deposit "made under protest, in order to have the City accept and process our request for a hearing."
The request, written by David Lanferman of Rutan & Tucker, LLP, defends Sand Hill Property Company's compliance with the city's "planning community" (PC) zoning ordinance, which required the developer to provide a grocery store at the shopping center as a public benefit.
In exchange for providing the store, Sand Hill was allowed to build and sell 10 homes. Sand Hill was also required to rehabilitate one of two historil Joseph Eichler-developed commercial buildings -- a requirement that it violated in 2013 when it demolished the structure. The council responded by fining Sand Hill $94,200 for the demolition.
Last year's departure of the original grocery tenant, Fresh Market, prompted another fine, which started at $500 per day in September 2015 and then escalated to $1,000 in October 2015. But with the space still vacant, the City Council voted in November to increase it to $2,500 per day.
Sand Hill has unsuccessfully searched for a replacement for Fresh Market, reaching out to more than 65 potential operators as it continued to comply with the "lawful conditions" or the PC zoning ordinance, Lanferman wrote.
"There is no basis for asserting or determining that the owners may be out of compliance with the PC conditions because of the independent and uncontrollable actions of the current tenant in curtailing its daily grocery store operations," the letter states, referring to the fact that Fresh Market still holds the lease. "To the contrary, the owners continue to comply with not only the conditions" of the ordinance, but have "provided for the 'continued used of the 20,600 sq. ft. building as a grocery store' to the exclusion of any other land use or activity at that building."
Though Fresh Market has closed, it remains the tenant, Lanferman wrote, making it "impossible for the owners to unilaterally seize possessions of the building, or to install some new grocery business at the site — even if such a new grocery tenant could be found."
The city also cannot "lawfully" require Sand Hill to "guarantee the continuous operation of a grocery store in perpetuity," the letter states.
Sand Hill has acted in good faith with the city, Lanferman wrote. Absent any "intentional violations or bad faith refuse to comply with valid regulations," fines should not be imposed, he added.
The hearing has been tentatively scheduled for Jan. 10 at City Hall, according to City Attorney Molly Stump. The time has not yet been determined.