Petaluma Creamery, a Sonoma County landmark, confronts uncertain future

City leaders have ordered the Petaluma Creamery to draw down its operations after the flagship dairy business failed to pay more than $1.8 million in fines and fees accumulated in the past several years.

Facing an ultimatum this week, creamery representatives raced to submit cashier’s checks totaling $1.2 million, but with hundreds of thousands of dollars outstanding, officials have moved to shut off access to the city’s wastewater infrastructure and place liens on the property.

In a letter submitted late Tuesday, City Manager Peggy Flynn advised the company that it would have until March 12 to wind down operations before it would no longer be allowed to dispose of wastewater with the city.

The move could shutter the 110-year-old creamery, which employs 56 workers at its five-acre campus just west of downtown Petaluma, where it provides milk processing services for local dairies.

Officials with the city did provide a path forward, however, offering to allow the facility to continue to operate under strict conditions, including compliance with wastewater discharge rules and building safety requirements the creamery has long flouted, as well as an agreement to pay the remaining $600,000-plus it owes.

“The creamery’s decade-long avoidance of regulatory compliance has come to an end,” Flynn said in a statement submitted to the Argus-Courier. “We have provided them a path to avoid business interruption, while ensuring full compliance for environmental protection and public safety. We will continue to work with them to achieve that result. The creamery’s destiny is in the creamery’s hands.

Larry Peter, the local dairy farmer who has owned the Petaluma Creamery since 2004, declined an interview request at the creamery this week. A lawyer for the business also declined to comment when reached by phone Monday. Previous attempts to reach Peter through the creamery or the Washoe House, the historic roadhouse he bought in 2015, were unsuccessful.

On Tuesday morning, the Petaluma Creamery’s westside campus was placid, its charming neighborhood environs along Western Avenue belying the local institution’s financial turmoil.

Just steps from City Hall, a few workers weaved between a pair of tanker trucks near the back entrance of the facility along English and Upham streets. The faint whirls of the working dairy complex were drowned out by the sounds of rambunctious toddlers playing at a nearby daycare.

Neon-colored signs, courtesy of the city of Petaluma, plastered the corporate offices’ glass doors Tuesday. One notice, dated Dec. 8, 2020, described damage to the boiler room’s roof, requiring permitted repair. A few inches away, another, from Feb. 18, instructed the business to cease construction work, citing a lack of permit approval.

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 iconic, banana cream-colored storefront is a fixture for many Petalumans.

The front patio adjoining its retail shop swells with patrons seeking the sweet relief of ice cream cones during the hot summer months. And on sunny spring mornings, groups of nylon-clad cyclists are frequent visitors, with some area riding groups regularly meeting at the westside shop before tackling the undulating hills along Western Avenue and Chileno Valley Road.

The plant was previously owned by Dairy Farmers of America, which closed the facility in 2004. Today, it processes milk from at least 10 dairies in Sonoma and Marin counties.

Lynda Carinalli, who runs the small, 60-head Carinalli Dairy outside of Sebastopol, credits Peter with saving the creamery, a Petaluma landmark, and she questioned the city’s reasoning in moving to close the business. If the creamery closes, she said, she’ll likely be forced to sell out.

“I don’t know the situation between him and the city, but they’re not only putting Larry down, they’re putting a lot of different dairies down, plus truck drivers, plus people who buy product – everybody in the community,” Carinalli said in a phone interview Monday.

But in the years since Peter took out a $10 million loan to buy and refurbish the creamery, an effort to spare it from demolition, city officials and third-party auditors have documented the company’s penchant for flouting the rules and running up massive unpaid bills.

“Petaluma Creamery has been chronically violating the city’s … oil and grease local limits since 2008,” a city-hired auditor determined in a 2017 report. “Since the last (inspection), the city has issued 15 notices of violation and has maintained the maximum fine per violation ($5,000) authorized under a 2015 administrative order issued to the industry.”

Those violations, documented in dozens of pages of reports obtained by the Argus-Courier, continue to this day. In her Tuesday letter, Flynn outlined infractions Feb. 4 and Feb. 19 related to excess oils and fats, and other pollutants sent into the city’s sewer system as further justification for the city’s decision to revoke the creamery’s wastewater permit.

In the past week, the creamery has made a push to come into compliance on a variety of fronts, including reconfiguring processing systems to avoid the use of problematic ammonia, which was removed this week, and paying a portion of the fines and fees due to the city.

But the creamery still owes $552,248.30 in permit violation fines and $66,096.20 in wastewater capacity fees, according to city documents.

Flynn issued an initial warning to the Petaluma Creamery in late December, more than three years after the city served it with an administrative complaint and ordered the business to pay hundreds of thousands of dollars in fines and unpaid fees.

“We have diligently worked with you for the past three years to help Petaluma Creamery achieve compliance with the complex rules and regulations governing its operations, but Petaluma Creamery has consistently violated the conditions of its wastewater discharge permit,” Flynn said in the December letter.

After more than a decade spent working with the creamery, a landmark institution in Petaluma, city officials are simply asking for accountability and safety, Mayor Teresa Barrett said in an interview this week.

“If anything, the city has bent over backward to help this creamery along because we so support the agricultural neighbors outside city limits,” Barrett said.

The city’s action won’t automatically force operations to cease at the creamery, which could still truck its wastewater generated from production lines and other processes to Santa Rosa’s Laguna Treatment Plant. But if it continues to use Petaluma’s wastewater infrastructure, the creamery will face civil or criminal penalties, according to the city’s letter sent last week.

Monday’s deadline represented the culmination of a protracted struggle to reach a solution related to the creamery’s chronic violations and sizable debts. The years-long effort to bring the Petaluma Creamery into compliance, which city officials acknowledge they pushed along because of the creamery’s historical significance, have now reached a crescendo, threatening to close one of the city’s oldest businesses in an industry synonymous with the town.

“As part of our efforts, they have made some corrections, but the compliance hasn’t been consistent and the agreed upon next steps have not been completed to date,” Flynn said in an Jan. 5 update emailed to other city leaders. “That said, we will not let our commitment to supporting the viability of a local business compromise public safety, and therefore we have taken significant next steps in our enforcement action.”

Argus-Courier reporter Kathryn Palmer contributed to this report.

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