News

Palo Alto fixes zoning 'mistake,' invites legal challenge

City Council votes to remove code provision that prevented conversions of 'grandfathered' buildings to different uses

Seeking to correct what is believed to be a zoning error, the Palo Alto City Council adopted a law on Monday that gives owners of "grandfathered" downtown buildings greater flexibility to switch to other uses — provided this conversion doesn't result in the loss of housing units.

In doing so, however, the council also included in the new ordinance a "waiver" provision that some critics say weakens the new law. The provision allows applicants who want to make the switch from residential to non-residential use to appeal to the council for exceptions. Several residents argued that the waiver clause effectively invites developers to violate the restriction on uses.

The ordinance applies to downtown's "grandfathered" buildings, which are considered structures that were built before the city instituted the current height and density regulations and that exceed these regulations. In January 2016, the council approved a "cleanup" of the zoning code that included, as one of its many components, a new provision that banned grandfathered buildings undergoing renovation to convert from one allowed use to another. Planning Director Jonathan Lait said staff believes the clause was inserted inadvertently in what he described as a "copy and paste" error.

The zone change has put several downtown property owners in a bind. Several downtown retail establishments and restaurants, including the buildings that occupied The North Face and The Cheesecake Factory, have been vacant because owners had not been able to move ahead with planned conversions to other code-conforming uses. The change also created a barrier for Adventurous Journeys Capital Partners (AJ Capital), the Chicago-based real estate investor that is trying to convert the 75-unit President Hotel Apartments building at 488 University Ave. into a 100-room hotel.

The council's Monday vote is largely consistent with the direction that it took last December, when members agreed that the city should fix what appears to have been a planning error. At that time, then-City Manager James Keene compared the process to a surgeon leaving a sponge inside a patient and then having to go in to take it out.

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The council also agreed in December not to rush to remove the clause on an "emergency" basis, as staff had recommended. Instead, it directed its Planning and Transportation Commission to review the ordinance before returning it to the council for adoption. At its review on Jan. 30, the commission endorsed the removal of the clause and supported the restriction on converting existing housing units to non-residential uses. The commission did not, however, support adding a "waiver" process that developers can use to get around that restriction.

But the council, heeding the advice of its city attorney, agreed on Monday to include the waiver, which staff argued would strengthen the city's position in a potential legal challenge. A report from the Department of Planning and Community Environment notes that the waiver provision will require the property owner to "present all of its claims and supporting evidence to the City Council first, for the Council's evaluation and consideration, before seeking relief in Superior Court."

"This gives the City Council and the public it serves the opportunity to fully understand the arguments and evidence of a property owner who claims local law violates its rights," the report states. "And if litigation is filed later, the City can seek to limit the scope of the dispute to evidence submitted to the City as part of its administrative hearing."

The waiver provision will also give the council an opportunity to adjust land use regulations as needed to address cases where the restrictions appear to violate state and federal law. The council, rather than the property owner or the court, "should have the first and primary opportunity to fashion a solution, with public interest foremost in mind," the report states.

"The waiver provision gives the Council that opportunity," the report states. "Without the waiver provision, the property owner would skip the Council and go straight to court, where the legal issues and proposed remedies would be framed by the property owner and potentially determined by the court."

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Not everyone was thrilled about the waiver provision. Several residents argued during Monday's hearing that the waiver is basically encouraging developers to seek zoning exceptions. Mary Sylvester was one of several residents who argued that the council should instead strengthen its laws to prevent conversions of housing developments into commercial projects. She called the recent displacement of President Hotel tenants to make way for the proposed hotel "an ethical outrage for this community."

"Our city is failing to protect our renters," Sylvester said, "We need a citywide residential protection law. Any waiver that goes into existence must protect renters."

David Lanferman, an attorney for AJ Capital, likewise argued that the waiver process is unnecessary. From his perspective, that's because the entire prohibition on conversions from residential to non-residential uses is illegal. The waiver process, he argued, does not change that.

Lanferman argued that the city's prohibition on conversions from residential to non-residential uses violates the state Ells Act, which grants rights to landlords wishing to exit the rental business. Creating a process that requires applicants to pursue "a burdensome, time-consuming and costly 'waiver' process would unlawfully impose a 'prohibitive price' on the exercise of rights protected by State law."

"Even if well-intentioned, the proposed waiver process would not achieve its stated purpose, but rather would merely create an arbitrary, futile, and pointless obstacle to lawful efforts to repurpose or restore old or possibly blighted properties to otherwise beneficial and conforming uses in this one area of Palo Alto," Lanferman wrote.

The council, however, agreed to include the restriction in the new ordinance, a provision that will almost certainly invite a legal challenge. By a 6-1 vote, with Councilwoman Lydia Kou dissenting, the council adopted the ordinance proposed by staff, including the waiver provision.

Kou cited confidential legal advice that the council had received earlier in the day and said members should schedule a closed-session meeting to consider the legal ramifications of the new ordinance before formally adopting it.

"We're rushing into this on something that has consequences — consequences that we have already seen," Kou said. "The hotel is no longer tenant-occupied and there may be other ramifications. I think rushing through this is not the wise thing to do."

The rest of the council was swayed by staff arguments that the new ordinance, including the waiver provision, should be adopted. Councilwoman Liz Kniss, who supported the staff proposal, called the 2016 code change an "honest mistake" that has hindered some downtown property owners' plans to attract new retailers and restaurants.

"If you can only put in what was there before, in one case a clothing store, in another a restaurant ... if you can't find someone to fill that in, you're really in a difficult situation," Kniss said. "That's what we're looking at changing tonight."

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Palo Alto fixes zoning 'mistake,' invites legal challenge

City Council votes to remove code provision that prevented conversions of 'grandfathered' buildings to different uses

by / Palo Alto Weekly

Uploaded: Tue, Apr 2, 2019, 12:41 pm

Seeking to correct what is believed to be a zoning error, the Palo Alto City Council adopted a law on Monday that gives owners of "grandfathered" downtown buildings greater flexibility to switch to other uses — provided this conversion doesn't result in the loss of housing units.

In doing so, however, the council also included in the new ordinance a "waiver" provision that some critics say weakens the new law. The provision allows applicants who want to make the switch from residential to non-residential use to appeal to the council for exceptions. Several residents argued that the waiver clause effectively invites developers to violate the restriction on uses.

The ordinance applies to downtown's "grandfathered" buildings, which are considered structures that were built before the city instituted the current height and density regulations and that exceed these regulations. In January 2016, the council approved a "cleanup" of the zoning code that included, as one of its many components, a new provision that banned grandfathered buildings undergoing renovation to convert from one allowed use to another. Planning Director Jonathan Lait said staff believes the clause was inserted inadvertently in what he described as a "copy and paste" error.

The zone change has put several downtown property owners in a bind. Several downtown retail establishments and restaurants, including the buildings that occupied The North Face and The Cheesecake Factory, have been vacant because owners had not been able to move ahead with planned conversions to other code-conforming uses. The change also created a barrier for Adventurous Journeys Capital Partners (AJ Capital), the Chicago-based real estate investor that is trying to convert the 75-unit President Hotel Apartments building at 488 University Ave. into a 100-room hotel.

The council's Monday vote is largely consistent with the direction that it took last December, when members agreed that the city should fix what appears to have been a planning error. At that time, then-City Manager James Keene compared the process to a surgeon leaving a sponge inside a patient and then having to go in to take it out.

The council also agreed in December not to rush to remove the clause on an "emergency" basis, as staff had recommended. Instead, it directed its Planning and Transportation Commission to review the ordinance before returning it to the council for adoption. At its review on Jan. 30, the commission endorsed the removal of the clause and supported the restriction on converting existing housing units to non-residential uses. The commission did not, however, support adding a "waiver" process that developers can use to get around that restriction.

But the council, heeding the advice of its city attorney, agreed on Monday to include the waiver, which staff argued would strengthen the city's position in a potential legal challenge. A report from the Department of Planning and Community Environment notes that the waiver provision will require the property owner to "present all of its claims and supporting evidence to the City Council first, for the Council's evaluation and consideration, before seeking relief in Superior Court."

"This gives the City Council and the public it serves the opportunity to fully understand the arguments and evidence of a property owner who claims local law violates its rights," the report states. "And if litigation is filed later, the City can seek to limit the scope of the dispute to evidence submitted to the City as part of its administrative hearing."

The waiver provision will also give the council an opportunity to adjust land use regulations as needed to address cases where the restrictions appear to violate state and federal law. The council, rather than the property owner or the court, "should have the first and primary opportunity to fashion a solution, with public interest foremost in mind," the report states.

"The waiver provision gives the Council that opportunity," the report states. "Without the waiver provision, the property owner would skip the Council and go straight to court, where the legal issues and proposed remedies would be framed by the property owner and potentially determined by the court."

Not everyone was thrilled about the waiver provision. Several residents argued during Monday's hearing that the waiver is basically encouraging developers to seek zoning exceptions. Mary Sylvester was one of several residents who argued that the council should instead strengthen its laws to prevent conversions of housing developments into commercial projects. She called the recent displacement of President Hotel tenants to make way for the proposed hotel "an ethical outrage for this community."

"Our city is failing to protect our renters," Sylvester said, "We need a citywide residential protection law. Any waiver that goes into existence must protect renters."

David Lanferman, an attorney for AJ Capital, likewise argued that the waiver process is unnecessary. From his perspective, that's because the entire prohibition on conversions from residential to non-residential uses is illegal. The waiver process, he argued, does not change that.

Lanferman argued that the city's prohibition on conversions from residential to non-residential uses violates the state Ells Act, which grants rights to landlords wishing to exit the rental business. Creating a process that requires applicants to pursue "a burdensome, time-consuming and costly 'waiver' process would unlawfully impose a 'prohibitive price' on the exercise of rights protected by State law."

"Even if well-intentioned, the proposed waiver process would not achieve its stated purpose, but rather would merely create an arbitrary, futile, and pointless obstacle to lawful efforts to repurpose or restore old or possibly blighted properties to otherwise beneficial and conforming uses in this one area of Palo Alto," Lanferman wrote.

The council, however, agreed to include the restriction in the new ordinance, a provision that will almost certainly invite a legal challenge. By a 6-1 vote, with Councilwoman Lydia Kou dissenting, the council adopted the ordinance proposed by staff, including the waiver provision.

Kou cited confidential legal advice that the council had received earlier in the day and said members should schedule a closed-session meeting to consider the legal ramifications of the new ordinance before formally adopting it.

"We're rushing into this on something that has consequences — consequences that we have already seen," Kou said. "The hotel is no longer tenant-occupied and there may be other ramifications. I think rushing through this is not the wise thing to do."

The rest of the council was swayed by staff arguments that the new ordinance, including the waiver provision, should be adopted. Councilwoman Liz Kniss, who supported the staff proposal, called the 2016 code change an "honest mistake" that has hindered some downtown property owners' plans to attract new retailers and restaurants.

"If you can only put in what was there before, in one case a clothing store, in another a restaurant ... if you can't find someone to fill that in, you're really in a difficult situation," Kniss said. "That's what we're looking at changing tonight."

Comments

Kou
Embarcadero Oaks/Leland
on Apr 2, 2019 at 1:37 pm
Kou, Embarcadero Oaks/Leland
on Apr 2, 2019 at 1:37 pm

"Kou cited confidential legal advice"?? What does that mean? Did she share something she wasn't supposed to?


Anon
Crescent Park
on Apr 2, 2019 at 2:54 pm
Anon, Crescent Park
on Apr 2, 2019 at 2:54 pm

No - of course Kou did not share confidential info.


Resident
University South
on Apr 2, 2019 at 3:05 pm
Resident , University South
on Apr 2, 2019 at 3:05 pm

Although it is not clear, it sounded like the Council received two pieces of information that Kou believed should be considered prior to them taking action, but the discussion would need to be in closed session due to potential legal liability. The first was a letter that the AJ Capital attorney sent just yesterday. The other may have been the third party expert legal analysis that the Planning Commission recommended the Coucil receive.


Well trained
Another Palo Alto neighborhood
on Apr 2, 2019 at 3:58 pm
Well trained, Another Palo Alto neighborhood
on Apr 2, 2019 at 3:58 pm

Holman trained Kuo well- she has taken over as a dependable "no" vote on everything, just like her mentor before her.


Kou broke the law
Community Center
on Apr 2, 2019 at 3:59 pm
Kou broke the law, Community Center
on Apr 2, 2019 at 3:59 pm

[Post removed due to same poster using multiple names.]


Anon
Evergreen Park
on Apr 2, 2019 at 4:03 pm
Anon, Evergreen Park
on Apr 2, 2019 at 4:03 pm

I believe council member Kou wanted to slow the council process down so as to have a chance to properly evaluate the information especially the two long letters from attorneys submitted only yesterday afternoon that the public and council and staff were unaware of and had not yet vetted that pertained mostly only to the president apartments property.

She recieved virtually no support which is a shame.
Kou really tried to do the right thing but one cannot act alone. The rest of council seemed weary and defeated or perhaps aware of some information that had not been shared with the public that tied their hands.

Either way the whole AJ capital interests in the president apartments seems to demonstrate how staff and council were outmaneuved by those outside our community with an interest only in optimizing their financial rewards by
ignoring local legal zoning laws; resulting in property owners who wish to manipulate local zoning and wish to get special exceptions to our local laws which do not represent the values and goals of our community and are not generally available to others.

Let’s work together to stop this


Curmudgeon
Downtown North
on Apr 2, 2019 at 5:32 pm
Curmudgeon, Downtown North
on Apr 2, 2019 at 5:32 pm

"Even if well-intentioned, the proposed waiver process would not achieve its stated purpose, but rather would merely create an arbitrary, futile, and pointless obstacle to lawful efforts to repurpose or restore old or possibly blighted properties to otherwise beneficial and conforming uses in this one area of Palo Alto,"

Only for politically naive developers who don't know how to underwrite city council campaigns.


Curmudgeon
Downtown North
on Apr 2, 2019 at 5:37 pm
Curmudgeon, Downtown North
on Apr 2, 2019 at 5:37 pm
Well trained
Another Palo Alto neighborhood
on Apr 2, 2019 at 5:41 pm
Well trained, Another Palo Alto neighborhood
on Apr 2, 2019 at 5:41 pm
housing
College Terrace
on Apr 2, 2019 at 10:08 pm
housing, College Terrace
on Apr 2, 2019 at 10:08 pm

"The zone change has put several downtown property owners in a bind. Several downtown retail establishments and restaurants, including the buildings that occupied The North Face and The Cheesecake Factory, have been vacant because owners had not been able to move ahead with planned conversions to other code-conforming uses."
Couldn't these properties be converted into much-needed multi-unit housing? Or wouldn't that be as lucrative to the developers as commercial properties?


jhoni
Registered user
Embarcadero Oaks/Leland
on Apr 4, 2019 at 12:17 am
jhoni, Embarcadero Oaks/Leland
Registered user
on Apr 4, 2019 at 12:17 am

Hi Joe Simitian passed a law (AB1945) which makes it illegal to share confidential information thanks


Kou-ky
Greenmeadow
on Apr 5, 2019 at 1:29 pm
Kou-ky, Greenmeadow
on Apr 5, 2019 at 1:29 pm

[Post removed due to same poster using multiple names.]


sunshine
Downtown North
on Apr 5, 2019 at 2:07 pm
sunshine, Downtown North
on Apr 5, 2019 at 2:07 pm

Lydia Kou is probably one of the few recent members of City Council who places the good of Palo
Alto as a whole before that of our over-zealous developers on the Council.
We need more people like her on the Council. Palol Alto should not try to demean her. She is currently the best council member we have.


Well trained
Another Palo Alto neighborhood
on Apr 5, 2019 at 6:14 pm
Well trained, Another Palo Alto neighborhood
on Apr 5, 2019 at 6:14 pm

[Portion removed.] Why haven't the citizens that have been calling for kniss, finde and Tanaka to resign been calling for kuo to resign? Why hasn't the weekly looked into this?


Oldster
Old Palo Alto
on Apr 5, 2019 at 7:53 pm
Oldster, Old Palo Alto
on Apr 5, 2019 at 7:53 pm

Under current zoning, the owner could convert the President to condos if it gets some parking favors. But, then the income stream would be a one time pile of cash from condo sales instead of the institutional investors' favorite long term mountain of cash from an income stream that a high end hotel chain could produce. City Hall employees are eager for more hotel taxes to fund their pensions.

Palo Alto is simply not serious about the City's housing/jobs imbalance. Witth this waiver farce, City Hall shows it is happy to throw away more housing units instead of fiercely protecting existing housing.

For the owners, this is about profits while thinking it can bully it's way through a lightly enforced local zoning code. Our City leadership is now more worried about ligitation costs than safeguarding our local zoning power and quality of life.

Why the City doesn't dig in its heels on the Elephant on the Room parking issue for the grossly underparked President is a mystery. But, then it has granted waivers and favors so often for those downtown the elephants have breed into a herd.


Rainer
Registered user
Mayfield
on Apr 6, 2019 at 10:38 pm
Rainer, Mayfield
Registered user
on Apr 6, 2019 at 10:38 pm

We cannot repeat often enough:

Lydia Kou is probably one of the few recent members of City Council who places the good of Palo. Probably because as a Real Estate professional she looks through the word fog produced by the developer-finances city councilors ands the agreement at any price faction.

Palo Alto has allowed too may office buildings because of our over-zealous developers on the Council.

A council which allows buildings with 100 offices and 2 small condos to be approved as "mixed" u8se.

We need more people like her on the Council. She is currently the best council member we have, ahead of even DuBois and Filseth who try too hard to be amenable to the build at any price faction.


Well trained
Another Palo Alto neighborhood
on Apr 7, 2019 at 10:22 am
Well trained, Another Palo Alto neighborhood
on Apr 7, 2019 at 10:22 am

Kuo is just another in a long line of council members whose purpose is to stop palo alto from meeting their affordable housing obligations. Plus she has personal interest in stopping affordable housing in the city.


Looking for corruption?
Downtown North
on Apr 8, 2019 at 3:55 pm
Looking for corruption?, Downtown North
on Apr 8, 2019 at 3:55 pm

A while back it was pointed out that Keene's Deputy City Manager, Steve Emslie now works for AJ CApital.
Also a staff member from City Manager Keene's office now works for AJ Capital.

If you are looking for corruption, you need to look in the right place.


Looking for corruption?
Downtown North
on Apr 8, 2019 at 4:19 pm
Looking for corruption?, Downtown North
on Apr 8, 2019 at 4:19 pm

The former Keene staff member who now works for AJ Capital is
Richard Hackmann.

He and Emslie are betraying the city they worked for, in my opinion.


Rick
Adobe-Meadow
on Apr 9, 2019 at 10:11 am
Rick, Adobe-Meadow
on Apr 9, 2019 at 10:11 am

Kou is one of the few council members who wants Palo Alto to keep what remaining sense of community it has. Kniss and Company do -not- represent the citizens of Palo Alto. Unfortunately, although traffic and overcrowding is waking those voters up, I'm afraid it is too late. The huge development under construction are the nails in out coffin. When Google and Facebook eventually go the way of all corporate entities we will become the Detroit of the West.


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