A proposed deal between the city of Palo Alto and The Sobrato Organization for redevelopment of the Portage Avenue site that formerly housed Fry's Electronics could pave the way for a popular idea that until recently seemed unlikely to materialize: restoring Matadero Creek to its natural state.

At the same time, any plan to convert what is now a concrete channel overseen by Valley Water into a real creek would likely fall short of the city's dream scenario, which would have expanded the existing 30-foot-wide corridor to 100 feet and created a linear park along the creek. That's the concept that the City Council endorsed in January, when it approved the North Ventura Coordinated Area Plan, a vision document for a 60-acre area that includes the 14.5-acre Portage Avenue site.

The agreement, which Mayor Pat Burt announced on June 21, follows months of negotiations between Sobrato and a council ad hoc committee and threats of a lawsuit by the developer. Once formalized, it would allow Sobrato to maintain commercial and research-and-development space on the site, and renovate and preserve most of the historic cannery building that housed Fry's Electronics. The developer is granting the city land for a future affordable housing development and park space around Matadero Creek.

According to a new report from the Department of Planning and Community Environment, full naturalization of the creek as envisioned by the council would require the city to obtain significantly more land and would cut into Sobrato's plans to build 74 townhomes at a portion of the Portage site, a key component of the agreement that the council and the developer reached last month. A portion of the Sobrato housing project lies in the footprint of what was envisioned as the creek improvement area under "Concept 3," the council's preferred alternative.

In addition, the negotiated agreement allows Sobrato to retain parking along the creek for its commercial building at 3050 Park Blvd., which was formerly used by Audi but which would now be available for research-and-development uses. This, according to staff, makes Concept 3 impossible to achieve.

The agreement does, however, allow the city to proceed with what's known as "Concept 2," which would widen the channel to 85 feet and increase an angled bank on one side of Matadero. The area would be available for riparian plantings, enhanced landscaping and recreational access, according to staff.

Under the deal between the city and Sobrato, the developer is dedicating about 2.25 acres to the city for open space, a dedication that has an estimated value of nearly $29.5 million. The city's economic consultant, Keyser Marston Associates, pegged the value of 1 acre being dedicated to the city at $13.1 million per acre.

Burt said in an interview the day after the announced deal that while the potential creek improvement in the agreement would fall short of Concept 3, the proposal that the city and Sobrato ended up with would represent a "major naturalization of creek over time, as well as other parkland." The developer is dedicating a total of 3.25 acres, which includes 1 acre for an affordable housing site near the creek.

"The affordable housing project is essentially right up against the park and the creek — it's going to be a wonderful location," Burt said.

The prospect of naturalizing the creek has been one of few areas in the planning process that had received broad support from the council and the North Ventura Coordinated Area Plan Working Group, a panel of stakeholders that worked with staff and consultants to develop concepts for the area, which is bounded by Page Mill Road, Park Boulevard, Lambert Avenue and El Camino Real.

The group struggled and ultimately failed to reach a consensus between how much housing and commercial development should be allowed in the planning area, with some members arguing that the city should focus almost exclusively on affordable housing and others arguing that doing so would keep the plan from being economically viable and achievable.

The council voted on Jan. 10 to approve an alternative that envisions 670 residences in the planning area, of which about 100 would be restricted for affordable housing.

The council plans to hold its first public discussion of the proposed deal on Aug. 1, its first meeting after a summer recess. The hearing will give the community its first opportunity to weigh in on the agreement.

Vice Mayor Lydia Kou, who served with council member Tom DuBois on the ad hoc committee that negotiated with Sobrato, said the expanded open space will be an important benefit for the Ventura neighborhood.

"It will take a little time to get it there for them and make it a park, but it will definitely enhance open space," Kou said in an interview the day after the deal was announced.