When Palo Alto began work two years ago on its most ambitious planning project — the reimagining of the Ventura neighborhood — city leaders saw the area as a land of opportunity: centrally located, close to transit, eager for affordable housing and starving for community amenities such as parks and retail.
But as the City Council is preparing to review on Monday a menu of development options for the neighborhood, it is confronting a stark reality: the only way its housing goals can be achieved is if the city also allows property owners in the 60-acre area to add more than 80,000 square feet of office space, according to an analysis by city staff and its consultants. Only then, the analysis suggests, would the area generate adequate revenue for developers to create an incentive for them to build more affordable housing, open space and other community benefits.
The report's conclusions create a quandary for the council, which will consider a set of alternatives that range from highly contentious to largely infeasible, with little middle ground. When the council launched the process in 2017, its stated goals were to create housing, improve bike connections and improve the fabric to a centrally located neighborhood bounded by El Camino Real, Lambert Avenue, Page Mill Road and the Caltrain tracks.
There was little talk back then of new commercial development in the area — with the notable exception of neighborhood-serving retail — and city leaders generally agreed that the site at 340 Portage Ave., which until recently housed Fry's Electronics, will play a major role in the city housing goals (the city's Housing Element envisions 249 residences at the site).
But as the council gets ready to review the finished product, the Ventura vision remains murky. The North Ventura Coordinated Plan Working Group, a 14-person panel comprised of property owners, residents and other stakeholders, struggled to reach a consensus on what the area should look like and only one member is supporting the alternative that is now being recommended by staff. The owner of the Fry's site, The Sobrato Organization, has indicated that it has no interest in redeveloping 340 Portage Ave. or shifting away from commercial use at that building. And the city's economic consultant has concluded that Palo Alto is unlikely to see significant housing in the north Ventura area unless it allows developers to build more offices.
The plan, which was crafted over the course of two years and 17 meetings, led to the development of three alternatives. At the lowest end is Alternative 1, which would create about 500 new residences mostly through constructing townhomes and mid-rise apartment along some of the busier streets in the area. Office use would be gradually phased out as commercial buildings get demolished over time and replaced with residential use.
Alternative 2 would take development up a notch by including more residential and commercial growth, in part by demolishing and rebuilding a significant portion of the Fry's building and adding apartments to 340 Portage Ave. According to the plan, this alternative would yield about 1,170 residences and 33,300 square feet of additional commercial space. It includes the reconfiguration of the commercial site at 395 Page Mill Road, which is occupied by Cloudera, to create space for mid-rise residential building.
The main flaw with these two alternatives, from staff's perspective, is that neither is likely to actually happen. That was the conclusion of Strategic Economics, the consultant that considered the alternatives and deemed both of them financially infeasible. According to its report, the value of existing office space is about $1,400 per square foot, according to the city's study. In a market-rate rental apartment building, the estimated value is about $1,125 per square foot. Affordable housing, meanwhile, would be even less lucrative.
"There is no financial incentive for private developers to demolish the existing office space in the 340 Portage building and convert to multifamily residential, especially if there is also a significant parkland dedication,” Strategic Economics concluded.
The only option that the consultant deemed to be feasible was Alternative 3, which envisions the demolition of both 340 Portage Ave. and 395 Page Mill Road and creation of residential uses at these sites. To give developers incentive, the city would allow office uses in other areas, adding a net 83,800 square feet of commercial space in the Ventura area. The plan includes 50-foot-tall buildings along Portage and Lambert avenues and higher density buildings, with retail and residential use and heights of up to 70 feet, along El Camino Real.
In March, the planning commission voted 4-2, with Doria Summa and Ed Lauing dissenting, to recommend Alternative 3 with two modifications: addition of park space and a requirement that 20% of the new housing units be designated for affordable housing (up from 15% in the original Alternative 3). This modified alternative, now known is Alternative 3B, is what staff is now recommends for council adoption.
Some residents agree with this recommendation. Gail Price, a member of the Working Group and board president of the nonprofit group Palo Alto Forward, concurred with Strategic Economics' conclusions about the need for the city to modify its development standards if it wants to see significant change in Ventura. The area, she wrote to the council in March, is "uniquely positioned as a great site for new and varied housing."
"It is close to services, shopping, transit, and jobs, which would set new families and low-income residents up for success," Price wrote. "In order to ensure this happens, we must adjust our height limits, parking policies, fees, and FAR (floor area ratio) to accommodate for more homes and make it economically feasible to build.
"Unless Palo Alto is willing to create incentives that enable appropriate development, the property owners will not be inclined to create bolder and imaginative solutions and will largely retreat to what is feasible under the current development standards."
A new staff report describes Alternative 3 as the only option that "matches housing types, parking standards, and allowances for office development to achieve feasibility and generate additional below-market rate units, open space, and other community benefits." But even if it's economically feasible, it promises to be a tough sell politically.
Working Group members and many Ventura residents have largely opposed this option, with only Price voting to support the alternative during the group's October meeting. Working Group member Angela Dellaporta was one of several speakers who urged city leaders to consider other options that would create a mix of housing options and park space without "bowing to the needs of developers" by turning up the dial on office space.
"There are cities all over the Bay Area and indeed the country that have successfully created developments that embody the values of inclusivity, natural beauty, environmental balance, and community connection that are Palo Alto hallmarks," Dellaporta said at the March 10 meeting of the Planning and Transportation Commission. "I find it really difficult to believe that in this city where unparalleled wealth has been created by unparalleled innovation, we could not figure out how to use that wealth and that spirit of innovation and creativity to craft a feasible development that lives up to these essential Palo Alto values."
Other group members pitched another option, known as Alternative M, which calls for the city to buy the 12-acre Fry's site at 340 Portage Ave. and convert it to below-market-rate housing. The plan also calls for converting an existing office building at 3201 Ash St. into a community center with a small eatery. The project would be financed through a municipal bond, according to Working Group members Keith Reckdahl and Terry Holzemer and Ventura Neighborhood Association Moderator Becky Sanders, who developed Alternative M.
Jeff Levinsky, a land-use watchdog affiliated with Palo Alto Neighborhoods is among the supporters of Alternative M. He asked the planning commission in its March review not to spend any more time crafting "megadollar developer giveaways that relegate new residents to living in dense office complexes on overcrowded, underparked streets."
"Instead focus on what the community is asking for, mainly traffic reduction, housing for those with the greatest economic need, community centers, parkland, and to raise North Ventura up to the level that other neighborhoods in our city enjoy," Levinsky said.
The commission, for its part, concurred that all three of options presented by staff and consultants are far from ideal. Summa concluded that Alternative 3 has "too much office," that it doesn't improve Park Boulevard and that it assumes that the Fry's building can be torn down — an assumption that has been undermined both by Sobrato's unwillingness to redevelop the site and by the "historically significant" status of the building, which was built by Thomas Foon Chew in 1918 and that in 1920 was as the third largest cannery in the world.
"If it isn't something that anyone is excited about, I don't know why we're doing it and I think we can do better," Summa said at the March meeting, just before the vote.
Even those who supported Alternative 3 had some reservations about the North Ventura Plan. Commissioner Michael Alcheck said it would be a waste of the city's resources to pursue alternatives that are both deemed unfeasible by the city's consultants and unappealing by the property owners.
"This is literally the worst possible result — that the work group couldn't come up with an alternative that was endorsed by the various commercial parcel owners, representing a real compromise among all the relevant stakeholders," Alcheck said. "This is the worst. This is … it's a terrible, disappointing, and unfortunate failure."