Seeking to shield local shops against an office incursion, Palo Alto officials unanimously passed late Monday night an emergency law that they hope will halt the troubling trend.
It took more than three hours of tense and vigorous debate for the council to reach a consensus on an ordinance that every member has consistently supported over the past two months.
The new law prohibits the conversion of ground-floor retail in all sections of the city to office use. It also prohibits the existing practice that allows uses such as banks and medical offices to acquire permits and occupy sites intended for retail. Existing establishments that don't conform to the new retail ordinance would be preserved.
The provisions aim to address a trend that has recently become a council priority -- retail preservation. According to city planners, the city has lost about 70,000 square feet of retail space since 2008, with rising rents generally seen as the culprit.
The newly passed ordinance notes that while office and retail rents have both been on the rise, offices consistently fetch higher rents. While the average monthly rent for office has increased from $4.57 to $5.12 per square foot between 2013 and 2015, retail rent went up from $4.21 to $4.88 per square foot during the same time.
Property owners have often heeded the advice of the free market and went ahead with the lucrative conversions. The list of retail operations converting to office use includes former sites of Zibibbo on Kipling Street, the former Fraiche Yogurt site on Emerson Street and Jungle Copy on High Street.
For the council, the solution seemed clear and straight-forward at two prior meetings in March and April, when all members agreed that the conversion of ground-floor retail to office use should be prohibited and directed staff to draft such an ordinance. In response, staff came back on Monday with an "urgency ordinance" that takes effect immediately and that lasts for 45 days, with an option to extend it for about two years. The interim ordinance is a stop-gap measure that will give staff time to draft a permanent law strengthening ground-floor protections.
"The public's health, safety and welfare are currently and immediately detrimentally affected as neighborhood-service retail service and related uses are priced-out by rising rents and replaced by uses that do not provide similar services or activate the street frontage by creating pedestrian activity and visual interest (i.e. shop windows and doors)," the ordinance states. "These changes affect neighborhood quality of life, and mean that local residents have to drive to similar retail destinations in other locations, diminishing the public health benefit when residents can walk to needed services and increasing traffic congestion, vehicle miles traveled and greenhouse gas emissions."
The 9-0 vote belied the tense and protracted nature of the council's discussion. Because the ordinance was an emergency law, it required eight votes for passage. Councilman Greg Scharff advised his colleagues early in the discussion not to modify the staff proposal too much because doing so would introduce potential schisms and reduce the bill's chance of passage. Council Cory Wolbach agreed.
"My strong inclination is to stick with something very clear and simple this evening," Wolbach said, noting that the real work of updating definitions should be performed on a permanent ordinance, rather an interim one.
Instead, the opposite happened and the discussion transformed into a convoluted bout of legislative rigmarole featuring numerous amendments, multiple motions and tense, prolonged wrangling over procedures and details.
Councilman Eric Filseth proposed a series of modifications to the city's existing definition of "retail-like uses," as requested by staff, and the council debated and took a vote on each proposed change, ultimately adopting most. One proposal that proved an easy sell was including daycare centers in the definition of "retail," a use that is currently omitted and that easily won the council's unanimous support. Another, which added gas stations to the definition, also won support quickly. Councilwoman Liz Kniss called the inclusion of gas stations an "obvious" inclusion.
"Our real problem is lack of service stations," Kniss said. "There were far more five to 10 years ago. I'm not sure I heard of anyone recently who wanted to open a gas station."
Another Filseth proposal, to make sure retail is intended for the public at large rather than for a particular corporation (as in Palantir's downtown cafeteria) also won widespread acceptance.
But Filseth's suggestion to also include automotive service proved a tougher sell and initially failed by a 7-2 vote, with Marc Berman and Scharff the only dissenters. Councilman Tom DuBois spoke for the majority when he said Palo Alto is losing its auto-service spots.
"They're tending to convert to office," DuBois said. "I think it's worth protecting so people don't have to drive out of town to Mountain View or Redwood City to service their automobile."
But given the unusual procedure and the steep requirement, it was the two dissenters, Marc Berman and Scharff who prevailed. Both were loath to get to creative on the interim law, which was only intended as a bridge to get to the permanent one.
"We should not allow ourselves to open the floodgates to all other uses," Berman said.
Filseth and Councilman Pat Burt both disagreed and lobbied to include automobile-service establishments.
"It seems artificial to me to allow an automobile dealership that has a service bay but not allow an automotive service place by itself that doesn't sell cars," Filseth said.
That vote was followed by procedural debate over whether the 7-2 vote was on a formal amendment or whether it was an informal "straw poll."
Councilman Pat Burt, a proponent of including automotive service in the definition of "retail," suggested attaching the amendment to include automotive services to the main motion, effectively daring Scharff and Berman to vote against the main motion and thus reject the retail-protection ordinance in its entirety. That didn't happen though, with council members recognizing that a defeat would merely lead to a new vote, this time without the amendment.
Ultimately, after much negotiation and an agreement by the majority to delete a separate amendment that Scharff didn't like involving a development on Park Boulevard, the inclusion of automotive-service establishments was accepted by all. The motion approving the emergency law then passed unanimously.
The new law would apply to all applications that were permitted or were operating as of March 2 or thereafter. Ultimately, the council plans to approve a permanent ordinance that would tailor retail-protection laws to particular neighborhoods. A staff report notes however that permanent revisions to the city ordinance would take "considerably more time, involving City Council input and direction, discussions with residents, property owners, merchants, and other stakeholders."