Attorneys for an Edgewood Plaza Shopping Center developer filed an appeal in Santa Clara County Superior Court on Monday regarding the more than $700,000 in fines the city has levied for failing to provide an operating grocery store at the center. The lawsuit also asks for an injunction against the city for future fines.
Edgewood developer John Tze, who is in partnership with Sand Hill and Edgewood LLC, pleaded his case against the city's daily fines before an administrative hearing officer, Lance Bayer, in February, arguing that the property owner/developer had no obligation under its Planned Community (PC) zoning ordinance approved by the city to provide an "operating" grocery store, only to provide the space for a grocer, which the developer has done.
The 20,600-square-foot building had an operating grocery store, The Fresh Market, which occupied the space to much fanfare in 2013. It pulled out two years later in March 2015. Since then, the store has remained empty. Palo Alto has been assessing fines against the developer for allegedly violating its PC zoning ordinance since October 2015, six months after Fresh Market's demise, claiming the zoning ordinance compels the developer to provide an operating grocer for the lifetime of the development.
But Edgewood LLC also claimed its 10-year lease with Fresh Market doesn't give the developer any ability to make decisions on a sublease. Bayer did not buy the arguments and upheld the fines, finding them to be appropriate and lawful on April 2.
The fines, which began at $500 a day, have been increased by the city over time to a current level of $5,000 for each day the store remains empty. Edgewood LLC claims the penalties have equaled $700,500, and the fines continue to accrue.
The petition asks the court to overturn Bayer's findings and determine that the developer is not required to ensure the continuous operation of a grocery store on the site, but only to prevent a non-grocery use in the building; to determine that a code-enforcement officer is not authorized to issue administrative citations for purported violations of the zoning code; to find that the code does not create a violation or establish grounds for issuing administrative penalties or fines; to find that the maximum penalty the city can assess is $1,000 under government code; to set the first day of notice by the city of violations as Nov. 29, 2016, and to grant an injunction against the city's continued fines.
The complaint also alleges that the "grossly disproportionate" fines violate the developer's rights under the U.S. Constitution's 8th Amendment. The lawsuit asks for unspecified compensatory damages and legal costs and attorney fees.
City officials maintain the zoning ordinance agreed to by Tze gave the developer special concessions to add 10 single-family residences to the property in exchange for community benefits, of which the linchpin was a community grocery store.
Edgewood said in its complaint that the city's ongoing issuance of citations and fines was hindering its efforts to restore a grocery store. The developer claims to have approached nearly 70 grocers across the country to replace Fresh Market, but to no avail.
The suit names the City of Palo Alto, Palo Alto City Council, Planning and Community Environment Department and Lance Bayer. It alleges that the city amended the PC ordinance for the property around Nov. 18, 2013, adding a new sentence of the grocery store public benefit to read "Provision of a grocery store in the 20,600 sq. ft. building. The commercial property owner shall ensure the continued use of the 20,600 sq. ft. building as a grocery store for the life of the Project."
The lawsuit does not mention, however, that the ordinance was changed after Edgewood LLC destroyed one of the historic Eichler structures it was supposed to restore under the original PC ordinance, effectively making that agreement null and void. The amended PC was the result of the developer's own actions.
City resolutions adopted in May 2014 and October 2015 provided for a maximum penalty of $500 for violations of city zoning laws, with a second violation in 36 months fined at 150 percent and a third and subsequent violation in 36 months at 200 percent. But the developer said the city adopted a new category of penalties for violations on Nov. 7 increasing the penalty-increase schedule at $2,500 beginning the 181st day following notice of a violation. The plaintiff claims the newly added penalty provision was arbitrarily enacted and specifically targeted Edgewood for increased fines.
Attorneys for Edgewood also argue that the city's contention that its PC ordinance is intended to require a guarantee of the continuing daily operation of a grocery in the building for the lifetime of the project is vague and unenforceable, beyond the city's land-use regulatory authority and unconstitutional. The complaint points to the city's spelled-out requirements for continued use of the JJ&F Market at College Terrace Centre as evidence that the city understood how to write a compelling ordinance for a developer to maintain an operating grocery store, which it did not do in the Edgewood ordinance.
Attorneys for the developer also contend that the city unlawfully levied the fines and demanded payment as a precondition to seeking an appeal.
Matt Larson, spokesman for Sand Hill Property Company and Edgewood LLC, said the company did not have any comment for publication at this time. City Attorney Molly Stump has not yet responded to a request for comment.