City fights back over ruling on Edgewood fines

Edgewood Plaza in Palo Alto.

Daily Post Staff Writer

The city of Palo Alto is fighting back after a judge ordered the return of $318,250 in fines levied to a real estate developer that let the grocery store at Edgewood Plaza sit empty for almost three years, allegedly violating a city ordinance requiring a grocery store at the shopping center.

City Council voted 7-2 in closed session to appeal the decision last night (Jan. 29), with Mayor Liz Kniss and Councilman Greg Tanaka dissenting.

Sand Hill Property Co., headed by developer Peter Pau, was fined more than $1 million, with daily citations ramping up from $500 to $5,000 between September 2015 and Jan. 30, 2017. Pau stopped paying the fines on Jan. 22, 2017, after paying $700,500.

On Dec. 15, Santa Clara County Superior Court Judge Peter Kirwan sided with Sand Hill Property Co. and ordered the city to return $318,250, plus interest. Sand Hill is also seeking the remaining $382,250.

Developer offers to settle

After the ruling last month, Sand Hill attorney David Lanferman offered to settle with the city over the remaining causes of action, asking the city not to appeal the decision and not to levy fines for the citations beyond what Pau paid. In exchange, Sand Hill would donate the interest on the $318,250 payment to a community organization and not seek recovery of the $382,250.

At council last night, Sand Hill upped the ante, offering to donate the $318,250 in fines, not just the interest.

“We’re not looking to profit off of these fines. We want to see these fines go to the community,” Sand Hill spokesman Matt Larson said before council went into closed session. “In return, there would be no further action on either side.”

But council rejected that settlement offer and will appeal the decision over the $318,250.

The dispute started when the grocery store Fresh Market closed its Edgewood Plaza location, along with its other California stores, on March 31, 2015.

But the store remained in its 10-year lease and kept paying rent, so Sand Hill let it sit empty. The city began levying fines ranging from $500 to $5,000 per day, alleging that Sand Hill was in violation of two Planned Community zoning ordinances requiring it to use the 20,600-square-foot building as a grocery store for the life of the project.

The city had passed those two ordinances specifically to allow Sand Hill to redevelop Edgewood as a mixed-use project, with 10 new homes built.

New store opens

On April 2, an administrative hearing officer affirmed the city’s penalties through April 3, totaling $248,250, so Sand Hill fought back with the lawsuit. Lawyers for both sides argued the case in court on Oct. 17. A new grocery store, the Market at Edgewood, finally opened its doors on Dec. 1.