News

Palo Alto to challenge Edgewood Plaza ruling

City Council votes in a closed session to appeal ruling that favored Sand Hill Property Company

Palo Alto plans to appeal a December court ruling that invalidated the city's fines against Sand Hill Property Company for failing to maintain an operational grocery store at the redeveloped Edgewood Plaza.

By a 7-2 vote, with Mayor Liz Kniss and Councilman Greg Tanaka dissenting, the council directed staff Monday night to appeal a Dec. 15 ruling by Santa Clara County Superior Court Judge Peter Kirwan, which effectively invalidated about $318,250 in fines that the city issued to Sand Hill last year.

In issuing its citations, the city had concluded that Sand Hill had violated the conditions of its "planned community" zone by not having an operational grocer at the plaza at 2080 Channing Ave.

The grocery store, which was the primary public benefit of Edgewood's redevelopment, was vacant from March 2015, when The Fresh Market pulled out of the plaza, until December 2017, when The Market at Edgewood opened its doors. In October 2015, the city began issuing daily fines against the developer, which started out at $500 and escalated to $5,000.

But even though Sand Hill's long search for a grocer finally reached a successful conclusion last month, the Monday vote ensures that its legal battle with the city will continue into the foreseeable future.

Each side has already scored a limited victory. In April 2017, Administrative Hearing Officer Lance Bayer affirmed the city's right to levy fines against Sand Hill and ordered the developer to pay $248,250 in back penalties. Sand Hill appealed and received a favorable ruling in December, when Kirwan negated these penalties with interest.

Kirwan did not, however, rule on the more than $700,000 in penalties (plus interest) that had accrued between October 2015 and January 2017, instead directing both sides to file supplemental briefs. With the passage of time, the stakes have gotten even higher. If the appeal prevails, Sand Hill can be on the hook for more than $1 million in fines.

In directing staff to pursue the appeal "at an appropriate time," the council effectively rejected a settlement offer that Sand Hill submitted last week. According to the proposed settlement, the developer had agreed not to seek a refund for the first 56 citations, which totaled $382,250.

Sand Hill proposed that the city "direct these funds to benefit the local community that Edgewood Shopping Center serves."

The settlement offer from Sand Hill also calls on the city to refund the $318,250 that Sand Hill paid under citations 57-72, consistent with Kirwan's order. The interest on these payments would be donated to the community under the offer.


"All parties and members of the community appear to appreciate the successful efforts to find and support The Market at Edgewood," Sand Hill's attorney David Lanferman wrote in the Jan. 26 letter. "Settlement at this time has the advantage of allowing the City to avoid further expenditure of public funds, and would eliminate exposure to potential award of additional damages and attorneys."

Matt Larson, spokesman for Sand Hill, reiterated this offer in his comments just before the closed session. The company, he said, is "not looking to profit off of these fines."

"We want to see these fines go to the community," Larson said. "In return, there would be no further legal action on either side."

Kirwan's ruling was based on the fact that the city's "planned community" ordinance, which granted Sand Hill the right to redevelop Edgewood Plaza, did not specifically mandate "continued operation" of the grocery store. Rather, it only required "continued use" of the property as a grocery store.

"While a grocery store was not functioning or operational during the relevant time due to the cessation of a tenant's business, Petitioner was not required under the terms of the ordinance to ensure the actual operation of a grocery store on an interrupted basis," the ruling states.

The city and Sand Hill did agree on one issue. Kirwan requested that each side submit a supplemental brief this month. Instead, the two sides co-signed a stipulation requesting more time to reach a possible settlement. Signed by attorneys from both sides, the stipulation states that they are "engaged in preliminary and tentative discussions endeavoring to resolve all of the remaining issues related to this case."

Kirwan granted the stipulation, which calls for Sand Hill to submit its brief by Feb. 28 and for the city to do so by March 16.

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Comments

18 people like this
Posted by Waste of public funds!
a resident of Charleston Meadows
on Jan 30, 2018 at 9:29 am

What a waste of public funds! It looks like the only winners are the lawyers.


18 people like this
Posted by Nick
a resident of Duveneck/St. Francis
on Jan 30, 2018 at 9:59 am

Settle and move on!! Stop paying funds to lawyers!
Pass these funds to Edgewood Plaza neighborhood, where it can be used to fix infrastructure like potholes and safe intersections.


38 people like this
Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Jan 30, 2018 at 10:47 am

Online Name is a registered user.

Just stop awarding more permits to Sand Hill Property Development Corp. because they've shown they don't care about the terms of their deals.

Some time during this long mess, I checked and they had about 5 or 7 permits to build office buildings / parks here in Palo Alto. So just say no more.


22 people like this
Posted by Annette
a resident of College Terrace
on Jan 30, 2018 at 10:50 am

Annette is a registered user.

Spending money on legal fees isn't prudent if there's a reasonable settlement offer on the table unless there's a fundamental principle involved. I think there is in this case: agreements aren't worth much if they can be ignored. Returning money to this developer is akin to saying "we didn't really mean it" when we said there would be penalties and that will further erode the public's confidence in the City's willingness to enforce agreed-upon terms when a planned community is approved.


13 people like this
Posted by Ron J
a resident of Crescent Park
on Jan 30, 2018 at 10:52 am

So let me summarize:

- Sandhill wins - city loses fine money and attorney fees
- City wins and Sandhill fines don't go to City operation budget
- City wins but still pays attorney's fees
- either way, city pays attorneys and gets nothing in return.

Bottom line: PA tax payers lose thx to cowardly City Council. Great...


11 people like this
Posted by Ron J
a resident of Crescent Park
on Jan 30, 2018 at 10:56 am

@ Online Name

You may not like Sandhill but we have a neighborhood market we can shop at again. Downside is it took 2 years - which was lame I agree, but it's a great market and we like it so far.

Stop complaining and actually check it out - you will be surprised.


31 people like this
Posted by Weaseling out
a resident of Barron Park
on Jan 30, 2018 at 10:57 am

Regarding this paragraph: "Kirwan's ruling was based on the fact that the city's "planned community" ordinance, which granted Sand Hill the right to redevelop Edgewood Plaza, did not specifically mandate "continued operation" of the grocery store. Rather, it only required "continued use" of the property as a grocery store."

I agree that City lawyers should have been more careful in drafting contract language. However the City's intent was crystal clear and for Sand Hill Property Company to weasel out on a technicality is the worst form of bad-faith negotiations.


20 people like this
Posted by Annette
a resident of College Terrace
on Jan 30, 2018 at 11:04 am

Annette is a registered user.

The Market is a nice grocery with the bonus that the staff is very friendly and helpful. I hope they enjoy long term success. And kudos to those who insisted on multiple 30-minute parking spaces.


15 people like this
Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Jan 30, 2018 at 11:19 am

Online Name is a registered user.

@Ron J -- I agree that The Market is wonderful, as is not having to deal with all the cross-town the traffic. Why would you assume I don't shop there?

It took way too long for the City to start pressuring Sand Hill to find another grocer to satisfy its contractual obligations, something a concerned local developer should have been working as soon as Fresh Market pulled out of the California market.


14 people like this
Posted by Anon
a resident of Another Palo Alto neighborhood
on Jan 30, 2018 at 11:28 am

Spending further money on the case is indeed prudent IF the city can learn exactly what it needs to do, and say in legal documents, in the future, to make these agreements enforceable.

For example, the following words, in criminal law, protect -both- the accused, and, law enforcement, because they spell it all out:

"You have the right to remain silent. Anything you say can be used against you. You have the right to an attorney. If you cannot afford one, one will be appointed to you by the court. With these rights in mind, are you still willing to talk with me about the charges against you?"

At the moment, the city does not seem to have a set of words that it can use to make a "public benefit" enforceable. (IMHO, until it does, no further public benefit zoning modifications should be granted.) No, I am not a lawyer and this is not legal advice. (Somebody in another thread accused me of being one!)



10 people like this
Posted by Ron J
a resident of Crescent Park
on Jan 30, 2018 at 11:45 am

@ Online Name

Since you were complaining so loudly about Sandhill, I guessed you were not rewarding them with your business.

Per you comment about the City issuing fines sooner, it would not have produced a store sooner - Fines do not create grocery stores, as evidenced by Sandhill paying $1 million in fines over a year. If you don't understand how incredibly competitive the grocery industry is and how so few new markets have opened in the past 10 years and how many more stores have closed than opened - you are 1) have no understanding of the industry, or 2) purposely blinding yourself to reality so you can remain an angry neighbor who likes to post NIMBY comments.

Either way, stop it - I want the market to succeed and bitter comment turn people off to it.


11 people like this
Posted by Too funny
a resident of Old Palo Alto
on Jan 30, 2018 at 11:46 am

Too funny! And to think that these are the politicians voted in by Palo Alto residents. What a pity!


29 people like this
Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Jan 30, 2018 at 12:05 pm

Online Name is a registered user.

@Ron -- the city needs to have the backbone to force the developers to adhere to the terms of their contracts in a timely fashion and without years of pressure from residents before it finally acts.

Look at all the boondoggles surrounding the markets promised as "public benefits" to get concessions from the city on increased density, under-parking etc.

When the city starts protecting residents and our interests over developers and THEIR interests, I'll stop complaining.


38 people like this
Posted by resident
a resident of Duveneck/St. Francis
on Jan 30, 2018 at 12:08 pm

Shame on Kniss, with whom I met to request her support to encourage Sand Hill Properties to make good faith effort in bringing a grocery to Edgewood Shopping Center, with one possibility being the City Council's increasing the fine. Shame on Tanaka who, when running for office, met with residents of this neighborhood and heard them make the same plea. Shame on the City Attorney and staff who failed in their duty to ensure that the negotiated agreement was solid. Shame on the Judge for failing to employ common sense.


42 people like this
Posted by Developer money rules
a resident of Old Palo Alto
on Jan 30, 2018 at 12:10 pm

Don't you just love it? the two councilmembers under investigation by the FPPC for hiding Thousands of dollars of developer contributions to their campaigns,
both voted NOT to pursue the cheating developer. SandHill is a billion-dollar company, so we understand Kniss and Tanaka's loyalty.

Ms. Kniss and Mr.Tanaka, you are true to your money interests, not to the residents of Palo Alto. For shame.
We need to get people who do not represent us, off the Council.


30 people like this
Posted by John
a resident of Crescent Park
on Jan 30, 2018 at 1:27 pm

Apparently there is no shame in politics: Kniss and Tanaka are looking after their constituents - developers - at the expense of residents.

Whatever the outcome. let's ban Sandhill properties from further development in Palo Alto. They have cost us too much in too many ways.


10 people like this
Posted by Len Ely
a resident of Old Palo Alto
on Jan 30, 2018 at 3:21 pm

As I tried to tell the group gathered at the Edgewood picnic during the campaign. This would most likely be the outcome of raising the fine to $5000.00. Within a week the Council had raised the fine and a week later SandHill sued. As stated a few times above, the Council/staff should learn from this mistake, which they must have because the PC agreement at the old JJ&F site clearly states "operating " store. Appealing this is a waste of money.

When a mistake is made, learn from it, move on and try not to make it again.

In the future I would suggest, as I did at the picnic, that prior to administering or raising fines that both the City Council and their constituents read what is required by the PC prior to suing.


14 people like this
Posted by Anonymous
a resident of Duveneck/St. Francis
on Jan 30, 2018 at 4:44 pm

I agree with those who say shame on Liz Kniss and Greg Tanaka for voting against appealing the initial decision; Thank You to the City Council members who did vote to move forward and “fight back” against developer Sand Hill Property Co. I am convinced that the majority decided to do the correct action. As a neighbor of Edgewood Shopping Center and concerned Palo Alto resident, Thank You again.


14 people like this
Posted by The PC Truly Requires an Operating Grocery
a resident of Crescent Park
on Jan 30, 2018 at 5:57 pm

To Len Ely's comment above that people haven't read the PC, the real question is whether the judge did. He never addressed the separate phrase in the PC that requires:

"Provision of a grocery store in the 20,600 sq. ft. building"

The 20,600 square foot building is the grocery building. Sand Hill was not providing a grocery store in it once Fresh Market left. Why the judge ignored this requirement is a good question, but it's pretty plain English and excellent grounds for a strong appeal.


7 people like this
Posted by @PAFreePress
a resident of another community
on Jan 31, 2018 at 5:25 am

History does repeat itsself in Palo Alto...CITY OF PALO ALTO AND ENRON SETTLE FOR A TOTAL AMOUNT OF $21.5 MILLION Web Link It was not disclosed total attorney costs which no doubt cost millions as well....

So the question presented...When will the citizen of Palo Alto stand up and say enough is enough to reckless spending, to a reckless and spineless city council. An out of control city attorney... Time to fill city council chambers during oral communitions and say! Enought is enough...!!!


3 people like this
Posted by Anon
a resident of Another Palo Alto neighborhood
on Jan 31, 2018 at 6:27 am

Posted by @PAFreePress, a resident of another community

>> History does repeat itsself in Palo Alto...CITY OF PALO ALTO AND ENRON SETTLE FOR A TOTAL AMOUNT OF $21.5 MILLION Web Link It was not disclosed total attorney costs which no doubt cost millions as well....

>> Enought is enough...!!!

What is your point? You are referring to a past event involving malfeasance of the infamous Enron Corp. Enron went bankrupt in 2001 and the dismemberment was completed in 2006.


6 people like this
Posted by Mary
a resident of Old Palo Alto
on Jan 31, 2018 at 9:01 am

I don't have much of an opinion on whether the fines are legal or even desirable. However I have been at the new Market several times in the last week. I was disappointed at the lack of customers. I like the store: it's pretty similar to the departed Fresh Market operation. But so far, there doesn't appear to be much customer response. Maybe it's just the start-up period for the Market and we'll see more traffic there as people get used to the fact that there's a store there. But I have the a sinking fear that the real problem is that this particular location just won't support a competitive grocery store. If that's the case, then whatever the courts decide about the fines, we may well be back in the same position in a year or two.

With the apparent failure of the College Terrace market, the tepid customer response to the Market, maybe we should rethink whether it's a good idea for City Council politicians to decide what kind of businesses belong in certain locations in town.


3 people like this
Posted by bbulkow
a resident of Menlo Park
on Jan 31, 2018 at 9:51 am

Did anyone else read down to where WHY the judge ruled against the citys' fines?

"
"While a grocery store was not functioning or operational during the relevant time due to the cessation of a tenant's business, Petitioner was not required under the terms of the ordinance to ensure the actual operation of a grocery store on an interrupted basis," the ruling states.
"

The legal point was whether space was "used" as a grocery store. The judge believed that having the space with no grocery store in it for a year counts as "using" the space for a grocery store, because the owner kept looking for a grocery tenant and is maintaining the space with its fixtures or whatever.

The developer claims it is continuing to look for a grocer, has not let the space out to another grocery, and is abiding the spirit of the bargain.

How would you rule? Is what happened for the last year "use"?


13 people like this
Posted by Robert Smith
a resident of Duveneck/St. Francis
on Jan 31, 2018 at 11:37 am

The City did the right thing in imposing the fines. The reason is that the developer had no motivation to find a replacement grocery store since he was receiving rent payments. The fines became a motivation. I do not believe we would have a grocery store today had these fines not been imposed.

The developer has reneged on his clear agreement and used an ambiguity in the City's wording to convince the judge. In my opinion, I think that the City has grounds for an appeal based on demonstrated intent. It is important that the City make clear that it will force developers to follow their agreements.

We should note that the City has two other grocery stores associated with "planned community" projects. One of them, at College Terrace, just went out of business; the developer is required to replace it. You can bet that the developer at College Terrace is trying to figure out how to renege right now, and any weakness on the part of the City on Edgewood will be taken as an opportunity to solve their own problem.

The elephant in the room remains the "planned community" ordinance and process. This is a public nuisance and needs to be repealed or seriously rewritten.


Like this comment
Posted by @PAFreePress
a resident of another community
on Jan 31, 2018 at 11:39 am

Arron; “

What is your point? You are referring to a past event involving malfeasance of the infamous Enron Corp. Enron went bankrupt in 2001 and the dismemberment was completed in 2006.”

I guess you don’t get it... It wasn’t a Mensa question!!! But perhaps others unlike yourself will see the correlation. Wasting taxpayer dollars to prove the city is right....on appeal...as in the following case which the city LOST big time went from a requested apology to over a one million dollar settlement.

Michael SCHMIDLIN, Plaintiff and Appellant, v. The CITY OF PALO ALTO et al., Defendants and Appellants.No. H026841. Decided: December 04, 2007 Web Link


5 people like this
Posted by Robert Smith
a resident of Duveneck/St. Francis
on Feb 1, 2018 at 11:31 am

@Mary,

"With the apparent failure of the College Terrace market, the tepid customer response to the Market, maybe we should rethink whether it's a good idea for City Council politicians to decide what kind of businesses belong in certain locations in town."

The grocery stores were not the idea of the City Council. In all three of the cases, the developers conceived, and promoted, the idea of a grocery store. They did this in order to get zoning overrides to build larger buildings than would otherwise have been permitted.

In the case of Edgewood, the developer held several meetings asking for our support at the city council. I believed him and supported the Edgewood project to the city. The developer lied.

I do believe that the PC ordinance should be repealed or seriously modified to preclude these kinds of cases. We should not have to go through this process of developers making promises that they will not trouble themselves to keep, forcing the residents to go back to the city and try to get a now-reluctant city council to back up the original deal.

I ask you to support our efforts to get what we bargained for.


3 people like this
Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Feb 1, 2018 at 12:33 pm

Online Name is a registered user.

I'm not sure about the "tepid" response to The Market. Every time I've been there -- usually in the afternoons -- it's been packed and parking very tight.

I wish them lots of luck.


1 person likes this
Posted by Robert Smith
a resident of Duveneck/St. Francis
on Feb 1, 2018 at 12:41 pm

@OnLine Name,

I think the previous poster was referring to the "tepid" response at the College Terrace grocery. That was tepid IMHO.

So far, the new Edgewood market looks like it is doing better than the previous Fresh Market. They are very similar.

Perhaps the neighborhood has gotten the word that they need to support it if they want to keep it going.


1 person likes this
Posted by Anon
a resident of Another Palo Alto neighborhood
on Feb 1, 2018 at 12:44 pm

-Posted by Mary, a resident of Old Palo Alto:

>> the tepid customer response to the Market,

-Posted by Online Name, a resident of Embarcadero Oaks/Leland:

>> I'm not sure about the "tepid" response to The Market. Every time I've been there -- usually in the afternoons -- it's been packed and parking very tight.

I've been there several times now, and, parking was very tight, yet, not that many folks in the store. Would someone who lives near The Market check the parking lot at 5 AM? I'm wondering how many of the cars outside are not shoppers. Those lots have been full when there didn't seem to be that many people shopping at The Market or at the other small businesses.

I would hate for the response to The Market to be tepid because shoppers couldn't find parking.


2 people like this
Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Feb 1, 2018 at 12:46 pm

Online Name is a registered user.

I was also referring the Mary from Old Palo Alto's post about there being few customers whenever she's been there. Anyway, I see it as more than a "neighborhood" market but as one for all of us who the traffic.

Besides, their produce prices and quality are wonderful.


Like this comment
Posted by Anon
a resident of Another Palo Alto neighborhood
on Feb 1, 2018 at 1:02 pm

-Posted by @PAFreePress, a resident of another community:

>> I guess you don’t get it... It wasn’t a Mensa question!!! But perhaps others unlike yourself will see the correlation. Wasting taxpayer dollars to prove the city is right....on appeal...as in the following case which the city LOST big time went from a requested apology to over a one million dollar settlement.

Sorry, I'm not a Mensa member-- I guess you will have to spell it out for me.

>> Michael SCHMIDLIN, Plaintiff and Appellant, v. The CITY OF PALO ALTO et al., Defendants and Appellants.No. H026841. Decided: December 04, 2007 Web Link

An entirely different case having nothing whatsoever to do with Enron?!?!?

On the original point: if the city is going to allow PC developments to exceed normal zoning limitations on the basis of public benefits, the city needs to determine exactly what it needs to do to make the public benefits defined in an ironclad way so that they can be -enforced-. Otherwise, PC should be dropped entirely; let's just make everything fit within normal zoning with no flexibility -- it is the only way to be fair.


3 people like this
Posted by Me
a resident of Gunn High School
on Feb 2, 2018 at 7:04 am

The city should make sure they pay the fine, and the fine is a threat over the company's heads going forward. If not, they will raise the rent more and more, without worry. We want on-going success. So enforce the requirement.


7 people like this
Posted by Ghuyn
a resident of South of Midtown
on Feb 2, 2018 at 10:40 am

We need to recall Judge Kirwan right now. The intent of the agreement was clear and he let SHD off on a technicality. Shame on him, but why tolerate this nonsense? We need to know contracts are real or this city is truly doomed.


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