Petaluma Creamery faces closure as fines, unpaid bills reach $1.4 million

The city of Petaluma on Monday will revoke the Petaluma Creamery’s wastewater discharge permit, putting one of the city’s flagship businesses at risk of closure if the creamery doesn’t pay more than $1.4 million it owes in unpaid fees and fines.

In an ultimatum issued to the company Friday, Petaluma City Manager Peggy Flynn detailed the city’s intention to place a lien on the property while giving the 110-year-old creamery two weeks to wind down operations before the city would shut off access March 13 to its wastewater infrastructure.

The move to potentially shutter the dairy business, which employs 56 workers at its five-acre campus just west of downtown Petaluma, comes after more than a decade of wastewater violations at the creamery, according to documents obtained by the Argus-Courier.

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.

Larry Peter, a longtime local dairy farmer who has owned the Petaluma Creamery since 2004, could not be reached for comment through the creamery or the Washoe House, the historic roadhouse he bought in 2015.

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 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.

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. The troubling timeline was first documented this year by The North Bay Bohemian.

“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 obtained by the Argus-Courier. “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.”

The creamery now owes the city more than $550,000 in unpaid permit violation fines, more than $425,000 in unpaid capacity rental fees and nearly $850,000 in unpaid wastewater discharge bills, according to the letter Flynn sent Friday, which also detailed the city’s rejection of an 11th-hour payment plan offered by the creamery.

After more than a decade spent working with the creamery, a landmark institution in Petaluma, city officials say the company’s bill has come due.

“We will revoke the Creamery’s wastewater discharge permit … for failure to pay your outstanding wastewater discharge charges unless payment of the entire outstanding balance totaling $1,425,258.54 is received in full by or before Monday, March 1,” Flynn wrote.

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.

Monday’s deadline marks the end of a protracted effort by all parties to reach a solution related to the creamery’s chronic violations and sizable debts. Most recently, the creamery’s ongoing negotiations with Verizon to install 5G cell towers atop the site fell through when the cellular giant caught wind of the creamery’s problems with the city, as well as recent, unexplained fires at the property.

“Regrettably, the compliance matters cannot be solved immediately,” a lawyer for Verizon wrote in a Jan. 22 letter to Petaluma Deputy Planning Manager Brittany Bendix.

The yearslong effort to bring the Petaluma Creamery into compliance, which city officials acknowledge they pushed along because of the creamery’s historical significance, now appear to have failed.

“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.”

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