It's been a year and a half since Edgewood Plaza's new grocery store opened for business in Palo Alto, but the city and the plaza's developer remain embroiled in a legal standoff, with little signs of compromise.
The City Council received an update on Monday about the city's dispute with Sand Hill Property Company, which redeveloped Edgewood Plaza and which is legally required to keep a grocery store on-site. The council didn't take any reportable action after its closed session discussion. It did, however, receive a ream of correspondence from city residents urging the city to keep the developer's feet to the fire.
Tensions between the city and Sand Hill escalated in 2015, after Fresh Market shuttered its store. In October of that year, the city began issuing fines against Sand Hill, which escalated from $500 to $5,000 daily.
Sand Hill subsequently sued the city, arguing that the zoning ordinance only requires the "continued use" of the property as a grocery store, not the store's "continued operation." In December 2017, Santa Clara County Superior Court Judge Peter Kirwan agreed with that interpretation and nullified about $318,250 in fines that the city issued to Sand Hill over the prior year. He did not rule, however, on the first 56 citations (which totaled $382,250), finding that Sand Hill did not exhaust all of its administrative remedies before taking the city to court.
In January 2018, the City Council voted to reject a settlement offer from Sand Hill, which would have kept the developer on the hook for the first 56 citations, while forcing the city to refund $318,250 (in citations 57 to 72). The council also agreed at that time to appeal Kirwan's ruling, which called for the city to issue a refund.
The dispute stretched through 2018, with each side filing a brief to support its positions on the first 56 claims. At the same time, Sand Hill has appealed all citations filed after January 2018, which means it is entitled to an administrative hearing by the city. The two sides agreed to defer that hearing until after the court case is settled.
Since the Kirwan order, the two sides continued to make their respective cases by filing supplemental briefs. Rick Jarvis, the city's consulting attorney, reiterated in a March 2018 brief that the developer had failed to exhaust the administrative remedies before taking the city to court. David Lanferman, who represents Sand Hill, argued that the "exhaustion" defense is not relevant because the fine was invalid in the first place. In his brief, he argued that Sand Hill should get relief from all citations.
"The City's contention that it should be allowed to retain its 'ill-gotten gains' and fines imposed under Citations 1-56, despite the absence of a violation, is contrary to equity, and would inequitably allow the City to be 'unjustly enriched,'" Lanferman wrote in his February 2018 brief.
Lanferman also argued that fines for the first 62 citations were issued by an employee, Code Enforcement Officer Judy Glaes, who was not authorized to issue these citations, making them "unauthorized." The city strongly disputed this, with Jarvis noting that city law authorizes an "ordinance compliance inspector" to issue fines and that Glaes had all the necessary authority to do so.
While the courts have thus far awarded limited victories to each side, residents around the plaza are framing the ongoing litigation as a battle over the grocer's existence. Dozens have emailed council members, urging them to appeal Kirwan's December 2017 ruling, which they view as an invitation for Sand Hill to shutter the store and keep the land vacant.
"The Edgewood situation is a clear test case," wrote Robert Marinelli, who lives on Walnut Drive. "Please appeal and keep fighting against abuse of the public benefit rules. I suspect many will see dropping the case as yet another example of a way-too-developer-friendly Palo Alto City Council."
Colleen Crangle, a resident of Kirby Place, also urged the council to appeal the 2017 ruling, which she called "absurd."
"The city and its people negotiated in good faith, allowing Sand Hill to put housing worth millions of dollars at the site in exchange for a viable grocery store for the people," Crangle wrote. "If the city fails to mount an appeal, the ongoing presence of a grocery store is in peril and the city will lose the $1.6 million in penalties levied against Sand Hill."
Candice Gonzalez, Sand Hill's chief housing officer, strongly rejected the notion that the company is interested in seeing the store shutter. Far from it, she told the council Monday. Gonzalez, who lives in the Duveneck/St. Francis area, said The Market at Edgewood is her neighborhood store and that her family "would love to see it survive and thrive."
"The lawsuit at hand has nothing to do with the grocery store being open," Gonzalez told the council. "What will help it survive is all residents supporting it."
Some residents had argued that they're doing just that and that issuing heavy fines against Sand Hill during vacancy periods is critical to keeping a market at the plaza. The fines, they argued, would incentivize the developer to give more support to the market, including possibly subsidizing its rent.
In their letters, residents heaped praise on The Market at Edgewood, with some calling it "a wonderful shop" and an "amazing grocery store." Robert Row, a neighbor of Edgewood Plaza, said his family shops at it almost daily and called it "a place to meet friends, a place to build our community."
Gonzalez also said she loves the grocer. She rejected, however, the notion that Sand Hill has the power to make the market stay. Only consumers, she said, have that power.
"Rent can be free and if that store is not making money, that free rent will not incentivize the grocery owner to stay if they can't sell their product. ... Even if the rent is free, in a small store like that, they still need to sell products," Gonzalez told the Weekly. "And if no one is buying, will they care that rent is free?"
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