Retail in Palo Alto is easier to appreciate than to preserve, particularly at a time when soaring rents drive shops out of downtown, and encourage property owners to convert the vacated buildings to the much more lucrative office use.
To stem the tide of such conversions -- which in recent years befell Zibbibo, Rudy's Pub and Jungle Copy -- the City Council last year passed an emergency law prohibiting the practice and mandating that all ground-floor stores remain reserved for retail. Passed as an emergency measure in May 2015, the law was extended in June of that year and is now set to expire on April 30, 2017.
On Monday, in a wide-ranging discussion of the retail-protection ordinance, the council took a step toward preventing this expiration when it directed staff to slightly modify the ordinance and to make it permanent. Yet the council also grappled with one of the thorniest dilemmas surrounding the new law: What to do with those businesses that stand at downtown's peripheral areas, where foot traffic is insufficient to support retail operations?
The question was prompted by the Morris family, which recently saw Addison Antiques depart from its longtime location at 100 Addison Ave., near Alma Street. Michael Morris argued that the building is too small and too far from downtown's commercial core to attract a replacement retailer. His family, he said, has not had income from the property since July 2015 but has had to carry the costs since then.
Morris claimed that he had offered the property at well below the market rate, but still had no takers. The building, he said, has become a financial burden. And the impending relocation of Anthropologie, a longtime tenant at the nearby building, at 999 Alma St., to Stanford Shopping Center in November will make the block even less viable for retail, he argued.
"This is not a retail area. I think we all know it," Morris said. "This location, which is proximate to single-family residences, will not be conducive for all of the retail categories listed in the ordinance."
Morris is one of several property owners who in recent weeks raised concerns about the retail-preservation ordinance and its effect on their businesses. He is the only one, however, who challenged the prohibition by appealing for a waiver, claiming hardship.
The council on Monday night heard his case and ultimately denied by a unanimous vote his request for an exemption. Yet in a nod to Morris' concerns, the council also expanded the uses that would be allowed in that specific area of downtown (known as SOFA II). By a 5-3 vote, with Karen Holman, Tom DuBois and Greg Schmid dissenting and Eric Filseth absent, the council agreed to make educational facilities a permitted use in this downtown section.
The council's decision to modify the retail-protection ordinance followed a long debate in which members weighed their desire to protect existing stores against a recognition that some parts of the city just aren't as suitable for shopping as others. To that effect, the council agreed Monday that when it passes a permanent ordinance next year, the new law should create some additional flexibility for parts outside the downtown core, with more uses allowed in areas where retail is less viable.
The council was equally united in concluding that for the ordinance to have any teeth, exemptions should be avoided.
"The question we face is: How do we distinguish between greed and hardship and tell the difference?" DuBois said. "The retail protection of ground-floor space won't have any effect if we just grant exceptions when someone complains."
DuBois and his colleagues quickly acknowledged that keeping retail will, in most cases, be a far less lucrative option for developers than offices. And while they struggled to specify exactly what would constitute a real hardship for landowners, they agreed that 100 Addison Ave. falls short of that threshold.
Holman, who proposed denying the application, raised concerns about developers "gaming the system" by claiming exemptions. She suggested that the building -- while somewhat ill-suited for traditional retail because of its industrial character -- can support "creative" uses such as a design firm or a nursery.
Holman also suggested that because the developer raised the rent on Addison Antique, he in a sense created his own hardship. (Morris countered that he didn't intend to raise rent and only proceeded to do so after the store tenants requested a switch from a two-year lease to a one-year lease in the aftermath of Anthropologie's relocation announcement).
"If I owned that property I'd be working closely with owners of Anthropologie to create an environment there that would be a destination place and something that the community can support and embrace," Holman said. "I'm not persuaded a real attempt has been made to get retail uses that can attract that kind of space."
Morris isn't the only property owner to raise concerns about Palo Alto's new rule. Boyd Smith, owner of 425 Portage Ave., claimed that his building should be exempted from the retail-preservation ordinance because it is -- at least in a legal sense -- a warehouse. A letter from his son, Lund Smith, stated that the building has "always operated as a warehouse," most recently for Pet Food Depot.
Now Pet Food Depot is preparing to move out and the family is "faced with the tremendous hardship of trying to lease out this building to a retail user even though it is a warehouse building surrounded by office buildings.”
But the argument that Pet Food Depot isn't "retail" quickly fizzled after several residents publicly recalled their frequent shopping trips to the store to buy dog food and other pet essentials.
Jeff Levinsky noted that the business is advertised as a store on its website and is listed as such on Yelp. Just to make sure, he visited Pet Food Depot earlier and bought a squeaky tennis ball, which he proceeded to squeak for the council during his presentation.
"They didn't ask me if I was a wholesaler or if I was going to be reselling it at all," Levinsky said. "It's a store."
The Portage Avenue issue wasn't a formal waiver request and, as such, did not require a vote. Neither did an argument from the company Vance Brown, which recently bought a neighboring building at 3241 Park Ave. with the intent of using it to expand its office space. The problem, however, is that the building had previously housed a auto-service shop, Park Avenue Motors. This means that the building, under the city's new law, would have to remain retail.
Vance Brown challenged this interpretation, noting that an auto shop is not an allowed use in the "general manufacturing" zone (where 3241 Park is located) without a conditional-use permit, which the property owner never obtained.
"This incorrect designation makes no sense given the complete zoning history for this property and its location, its isolation from other retail uses and given that Park Avenue Motors was imminently vacating the building," a letter from the property owner, 3241 Park Boulevard, LLC, stated.
The council didn't make any decision on the Park Avenue property on Monday. But in an unanticipated move at the end of the discussion, members began to lobby for new uses that should be allowed on the fringes of downtown, where traditional retail may be hard to entice.
Mayor Pat Burt's proposal to include medical offices and educational facilities in these areas fell by a 4-4 vote, with Holman, DuBois, Scharff and Schmid dissenting. A separate proposal from Scharff, which included education facilities but not medical offices, fared better, advancing 5-3.
"I think that would be really helpful for those broader uses outside of the downtown core," Scharff said, referring to the broader criteria.
The council also agreed in the waning minutes of Monday night that it will need to have another full discussion of the broader retail-protection ordinance before it finalizes the permanent law, which it plans to adopt next spring.