Sand Hill Property Company won a temporary reprieve in its court battle against the city of Palo Alto in late June when a Santa Clara County Superior Court judge allowed it to stop paying fines to the city, pending an October hearing.
The ruling by Judge James L. Stoelker represents a victory after a string of defeats for Sand Hill, which is facing fines of $5,000 per day for failing to operate a market at Edgewood Plaza, a key "public benefit" in its agreement with the city for the plaza's redevelopment.
The developer has racked up more than $1 million in fines to date and had paid $630,500 as of April 2, when an administrative judge ruled in the city's favor and reaffirmed the fines. To date, Sand Hill has paid $700,500.
The payments have stopped in recent months, however, as Sand Hill pursued an injunctive relief from the court system. After declining an earlier request in mid-June, Stoelker agreed to do so on June 27. Requiring the developer to pay "all of the accrued and growing penalty amounts assessed by the City as a precondition to pursuing administrative and court remedies for administrative citation would impose an extreme financial hardship and prevent Petitioner from effectively exercising its due process rights."
The order bars the city from enforcing its three most recent citations against Sand Hill and from requiring the developer to prepay penalties under any new citation "arising from the vacancy of the grocery store building as a condition to obtain administrative or court relief."
In his order, Stoelker does not speculate about the merits of the broader dispute between the city and Sand Hill about the legality of the city's escalating fines. As part of its agreement with the city, Sand Hill was allowed to build 10 homes at Edgewood Plaza, along with two commercial buildings and a grocery store.
The developer fulfilled the requirement for the market in June 2013, when Fresh Market opened its doors. The market, however, closed in March 2015 as part of a nation-wide corporate strategy. The space hadn't been filled to date, though Sand Hill announced on June 27 that a new grocer will occupy the space in the fall (the market will be run by Mustafa and Kyazi Mutlu, who operate Crystal Springs Produce in San Mateo).
Meanwhile, the city has been steadily ratcheting up its fines. In November, the council agreed to raise the daily penalty from $1,000 (which Sand Hill has been paying since October 2015) to $2,500 and, ultimately, $5,000 -- the amount the developer had been paying between Nov. 30 and Jan. 8.
Though Sand Hill had initially paid the fines, it maintained that the penalty is illegal. In a November letter to neighbors, developer John Tze of Sand Hill wrote: "While we are being fined, we believe that fine is not legally enforceable, but we choose not to contest to avoid a messy situation."
While Stoelker's order offers Sand Hill temporary relief, it also makes clear that it is not disputing the city's rights "to claim new or on-going violations of the zoning code while this action remains pending, or for penalties (enforcement or collection of which is enjoyed and suspended by this Order) to continue to be accrued during the pendency of this action."
It also does not dispute the court's right to order "that all or any portion of such accrued penalties may become payable to the Respondents (the city) following trial and depending on the adjudication of the merits of this action."
The two sides are set for a court hearing on Oct. 10.