A proposal by the project developer's son to run the new grocery store at College Terrace Centre proved to be a tough sell Monday night, with Palo Alto officials bemoaning a lack of transparency and demanding more information about lease terms for the new market.
By a unanimous vote, a highly skeptical City Council agreed that it doesn't have enough information to determine whether the proposed grocery store, J&A Family Market, would be comparable in quality to JJ&F Market, the beloved grocer that operated on the corner of College Avenue and El Camino Real for more than six decades before it was sold in 2010 and then closed in 2013. In sending the proposal back to the drawing board, the council effectively gave James Smailey, son of developer Patrick Smailey, a choice: give us more details or bring in another grocer.
During a long and occasionally tense discussion Monday, council members criticized the project team for failing to disclose to the city pertinent information. Though Smailey submitted the lease agreement to the city, key information was redacted, including rent amount, the security deposit and the number of parking spaces allotted to the grocery store. It didn't help that aspiring grocer James Smailey has no prior experience in the industry and that he declined to provide to the city the names of key advisors that would help him operate the store. Though the city's consultant, Sutti Associates, confirmed that Smailey's advisors would have "qualified credentials to participate in managing and advising the owners of J&A Family market," this did little to assuage the council's concerns.
Councilwoman Karen Holman argued that it would be an "abdication of our responsibility" to base the approval on a consultant's judgment. Councilman Larry Klein said that the burden should be on the applicant to demonstrate that the new market would match the quality of JJ&F.
"Your insistence on keeping everything confidential makes it impossible for the council ... for us to make that determination," Klein said.
The Garcia family, the original owners of JJ&F, decided to leave Palo Alto just months after the City Council approved the College Terrance Centre, a block-long development at 2180 El Camino Real that includes 38,904 square feet of office space, eight units of affordable housing and a new grocery store planned with greater visibility. The council gave the controversial "planned community" project the green light after tense meetings in which supporters of the proposed development urged city officials to "save JJ&F."
Because preserving a neighborhood supermarket was the chief "public benefit" of the College Terrace Centre, the council stipulated in its approval that the new grocer, if other than John Garcia, would be subject to the city's approval. This approval would be granted unless the city finds that the new tenant "is not likely to be comparable in quality of products and service as JJ&F."
The council had a hard time on Monday making any finding based on the evidence at hand. Councilmen Grag Scharff and Pat Burt each questioned the applicant and his attorney, Michael C. Polentz. Scharff asked him during the discussion whether he's willing to provide an unredacted copy of the lease.
"The answer is no," Polentz responded. "We are not providing it in a public forum."
When questioned by Burt, Polentz maintained that the lease between the building owner and the new grocer has already been submitted to the city attorney, who approved it. He then specified that this was a "form lease," prompting Burt to point out that the form, without actual numbers, is "in anyone's mind quite different than conditions of the lease."
"The form and the substance are not the same," Burt said, challenging Polentz. "That starts to undermine credibility tonight."
Council members weren't the only skeptics during the Monday discussion. Numerous speakers at the public hearing raised flags about the proposal and urged the council not to approve it. Lydia Kou, a Barron Park resident who is running for City Council, urged the council to defer the decision to a later date so that the city can do "due diligence" on Smailey's proposal.
"The community deserves to have another JJ&F type of market," Kou said. "The developer agreed to this to get approval for this development. Keep them to it."
Doria Summa, who lives in College Terrace, cited the project's rocky history and also urged the council not to approve the proposed grocer.
"Unfortunately, the history of the project has been marked by manipulation and a lack of transparency on the part of the applicant's team," Summa said, "and this seems to be continuing."
The council also heard from James Smailey, who defended himself against those who pointed to his lack of experience. Smailey, whose background is in construction and property management, said he doesn't want the new store to be like Miki's Market at Alma Village, a grocery store that went out of businesses in 2012 after six months of operation. He also responded to speakers' characterization of his proposed store as a "startup."
"I'm sorry, but your whole city is based on startups," Smailey said, noting that this is what makes Palo Alto and Silicon Valley what they are.
"Everyone wants to crucify me because I want to take a shot at this and make it work. I don't want to open doors and put all my money and time and effort into it and just walk away," he said.
Even as Smailey acknowledged his lack of grocery-store background, he said he knows "customer service" and is committed to be at the store "seven days a week" to make it work.
"I want to be the greeter. I want it to be a warm and friendly atmosphere -- to have a successful grocery store."
Smailey's attorneys also noted that the team has been looking for other potential grocers but has not had any luck. Polentz said the applicants have had "commercial real estate brokers pounding the pavement" to find experienced grocers.
"To this day, we're still looking for the established grocers to come forward," Polentz said. "No one has."
While the consultant concluded that J&A "has the retail team and strategy to be successful from its opening day and into the future," the reaction from the council was neither warm nor friendly. Scharff encouraged the applicant to "be open and transparent" and to do more outreach to the community.
"I was very disappointed in the applicant's unwillingness to share the lease terms," Scharff said. "I'm very disappointed that the applicant was unwilling to provide the information about consultants.
"We have to make a decision based on record. Without the information, it's impossible to make the decision."
Holman agreed and said she didn't buy Smailey's "startup" argument.
"Yes, it is a town of startups," Holman said. "But this is not a private venture; it's a public benefit. It has very different consequences if it should fail."
Klein, who made the motion to require more information from Smailey's team, said he cannot decide on the basis of the record because "the record is inadequate."
"The applicant has chosen not to provide us with critical information," Klein said. "They have chosen to do that and it's their problem."