Petaluma Creamery nearing deal with city to pay $500,000 in fines, remain open

A deal struck this week would pull the city back from the brink of closing an enduring Petaluma business that has for more than a decade flouted wastewater quality rules and racked up hundreds of thousands of dollars in unpaid bills.|

The Petaluma Creamery is nearing an agreement with city officials to continue operations following two frantic weeks of negotiations and cash payments related to mounting fines and fees the downtown dairy business has accumulated in the past three years.

In a progress report issued Wednesday, Petaluma City Manager Peggy Flynn said the two parties had “reached an agreement on the substantive terms” of a consent order that would allow the creamery to continue operating beyond a Friday deadline the city established in late February.

A deal struck this week would pull the city back from the brink of closing an enduring Petaluma business that has for more than a decade flouted wastewater quality rules and racked up hundreds of thousands of dollars in unpaid bills.

“The creamery has made significant improvements recently,” Flynn said in an email. “Violation of the consent order provides grounds for revocation of the permit and we will place a lien on the property for the outstanding fines to secure payment to the city.”

As part of that deal, the creamery would agree to pay off more than $500,000 in outstanding fines, allowing the business to remove or avoid a lien the city promised to place on the property March 2.

A staff member at the Petaluma Creamery’s corporate office on Wednesday said the business had “no comment at this time.” Numerous attempts in the past two weeks to reach Larry Peter, who has owned the iconic, 110-year-old creamery since 2004, have been unsuccessful.

Since December, the creamery has faced an ultimatum, and a tightening timeline to pay back more than $1.8 million in fines and fees related to its use of the city’s wastewater infrastructure. Creamery representatives have scrambled in the past two weeks to submit three cashier’s checks totaling more than $1.2 million, including a $66,096.20 check the creamery provided during a meeting with city officials Tuesday.

City leaders appear poised to OK a payment plan for the remaining $552,248.30 in permit violation fines tied to the creamery’s penchant for flouting the city’s wastewater pollution limits, a problem for much of the past decade and one most recently documented Feb. 4 and Feb. 19. A subsequent sample taken Feb. 23 revealed no violations, which city officials credit to treatment system improvements at the plant.

Despite ordering the creamery March 2 to draw down operations, city officials offered a narrow path forward for the historical dairy business that employs 56 on a sprawling, 5-acre site near the heart of downtown Petaluma.

Among the requirements for continued operation: strict compliance with the city’s wastewater discharge and building safety rules, as well as an agreement to pay the remaining past due balance.

“The city’s goal is and has always been compliance. The city stands by its prior letters,” Flynn said. “We are entering into a consent order with the creamery to acknowledge the accomplishments it has made to date and to help it achieve compliance within this calendar year.”

Since 1913, the creamery has processed raw milk at its downtown location on Western Avenue for powdered milk, cheese and butter. Today, the creamery churns out Organic Spring Hill Jersey Cheese and Butter, Petaluma Cheese and Petaluma Gold Ice Cream.

The banana cream-colored storefront is a fixture for many Petalumans, and the business serves as an outlet for at least 10 local dairies in Marin and Sonoma counties.

The plant was previously owned by Dairy Farmers of America, which closed the facility in 2004. Peters, who took out a $10 million loan to buy and refurbish the creamery that same year, has been championed as the Petaluma Creamery’s savior, including in a glowing write-up documenting the creamery’s centennial celebration on the Sonoma County Farm Bureau’s website.

But no agricultural leaders or groups, including the Sonoma County Farm Bureau, have lobbied on Peter’s behalf amid rising tension between the creamery and the city, Flynn confirmed Wednesday.

In the 17 years since Peter bought the landmark Petaluma dairy business, city officials have issued 15 notices of violation, and the company has at least twice sought or secured payment plans in order to pay past due bills totaling hundreds of thousands of dollars, according to documents obtained by the Argus-Courier.

But the protracted struggle to bring the creamery into compliance, which appeared over just a week ago, now has new life and newfound optimism from City Hall.

“The creamery and the city have negotiated in good faith and have reached an agreement in principle,” Flynn said. “The city is preparing the written documentation for review and signatures.”

(Tyler Silvy is editor of the Petaluma Argus-Courier. Reach him at tyler.silvy@arguscourier.com, 707-776-8458, or @tylersilvy on Twitter.)

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