City Council
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: Planning and Development Services
Meeting Date: April 14, 2025
Report #:2411-3800
TITLE
PUBLIC HEARING/QUASI-JUDICIAL: 70 Encina Avenue [24PLN-00095]: Adopt an Ordinance Rezoning the Subject Property and an Adjacent Vacant Parcel to Planned Community/Planned Home Zoning and Adopt the Record of Land Use Action to Demolish a Surface Parking lot and to Construct a New Three-Story, 19,035 Square Foot Building with 10 Residential Condominium Units. CEQA Status- Streamlined Review in Accordance with CEQA Guidelines Section 15183 (Comprehensive Plan Consistency). Zone District: CC (Community Commercial).
RECOMMENDATION
Staff recommends City Council take the following actions:
1. Consider the CEQA Guidelines section 15183 checklist analyzing the project’s consistency with the Comprehensive Plan 2030 Environmental Impact Report (SCH #2014052101);
2. Approve an Ordinance (Attachment B) rezoning the subject site from Community Commercial to Planned Community/Planned Home Zoning; and
3. Approve the Record of Land Use Action (Attachment C) approving the proposed project, based on findings and subject to conditions of approval to the City Council.
EXECUTIVE SUMMARY
Hayes Group Architecture, representing a prospective purchaser, proposes to rezone the subject property at 70 Encina Avenue and an adjacent vacant parcel from CC (Community Commercial) to Planned Community (PC)/Planned Home Zoning (PHZ).1 The project includes demolition of an existing surface parking lot on two contiguous parcels adjacent to the Town and Country Village Shopping Center (Town & Country) and construction of 10 condominium units, two of which would be provided at below market rate (BMR). The applicant recently filed a separate application for a tentative map. Approval of the tentative map and final map would 1 Referred to in this report as "Planned Home Zoning (PHZ)” to emphasize the focus on housing as the benefit to the community. Still, PAMC Section 18.38, which outlines the requirement and process for Planned Community (PC) Zoning, remains the underlying code supporting application of this policy.
be required, prior to issuance of a building permit, to merge the two parcels and for the proposed 10-unit condominium subdivision.
As required in accordance with the rezoning process, Council held a prescreening to consider the proposed legislative action prior to the applicant’s filing a formal application. The applicant also filed a preliminary Architectural Review application prior to filing a formal application. In accordance with the PC/PHZ process set forth in PAMC Section 18.38, the project subsequently obtained an initial recommendation from the Planning and Transportation Commission (PTC) to forward the project to the Architectural Review Board (ARB) for review and received formal recommendations from the ARB and then the PTC prior to returning to Council for a decision.
The City, acting as the lead agency, prepared an analysis in accordance with the California Environmental Quality Act (CEQA) Guidelines Section 15183, which includes streamlining of infill projects that are consistent with the Comprehensive Plan and the associated Comprehensive Plan Environmental Impact Report. The analysis concludes that the project is consistent with the previously adopted EIR and would not result in any new or more significant impacts than were previously evaluated.
BACKGROUND
On February 3, 2020, City Council unanimously endorsed using PHZ for housing and mixed-use housing projects to help spur housing production. In exchange for deviation from certain standards as allowed under the rezoning, if approved by Council, the project must include approximately 20% of the housing units as deed restricted at below market rate.
Prior City Reviews & Action
The PHZ application process requires PTC initial review of a conceptual plan, Architectural Review Board review of the development plan, and PTC recommendation on the Ordinance to rezone the site and proposed development plan, prior to Council’s decision.
City Council Prescreening
Council held a prescreening on September 12, 2022,2 for the proposed rezoning of this property. The initial proposal included 20 condominium units in a five-story building. City Council encouraged the applicants to work with the operators of Town & Country, Ellis Partners, and to scale down the building to better align with the scale of existing Town & Country buildings. In response, the project was redesigned to a 10-unit, three-story development. The applicant filed a preliminary ARB application to obtain ARB feedback on December 7, 2023, prior to submitting a formal application. 2 City Council, September 12, 2022 Staff Report:
https://cityofpaloalto.primegov.com/Public/CompiledDocument?meetingTemplateId=9048&compileOutputType=1 Planning and Transportation Commission Initial Review
Following submittal of the formal application, the PTC held a public hearing on September 11, 2024.3 At the PTC hearing on September 11, 2024, Commissioner comments included:
•Recognition and appreciation of the applicants’ work with Town & Country; •Support for the proposed height as appropriate;
•Support for the accessible units and the bedroom count as desirable for families; •General support for current design in terms of visual compatibility with Town & Country; •Concern with limited amount of greenspace and need for improved circulation; •Direction to remove the proposed bulb-outs and entrance gate that encroached on public property; and
•Suggestion that future CC&Rs should include a provision to prevent residents and guests from parking at Town & Country.
The PTC voted unanimously to move the project forward to the ARB.
Architectural Review Board
The ARB first reviewed the project on November 7, 2024,4 and made no design changes but continued the item until environmental review was complete. On February 6, 2025,5 the ARB voted 4-1 (Hirsch dissenting) to recommend Council approval. The dissenting vote reflected a preference to pursue a broader housing plan for the Encina Avenue corridor.
During public comment, a representative from Ellis Partners (Town & Country operators) noted early discussions with the applicant about a joint housing project that would redevelop the entire north parking lot. While the applicant was open to collaboration, they still sought approval of the current proposal. The ARB discussed the potential for a coordinated plan along Encina Avenue, with one member strongly advocating for a unified approach. Others supported future coordination but agreed to proceed with a recommendation on the project as proposed, acknowledging the applicant does not own adjacent parcels.
The ARB also voted 4-1 to recommend that Council consider rezoning the north parking lot area (excluding the subject parcels) for residential use. The dissenting vote again reflected a preference for a broader housing plan along Encina Avenue.
Planning and Transportation Commission Final Review
The project returned to the PTC on February 26, 2025.6 After extensive discussion, the Commission could not agree on whether previous concerns had been addressed, largely due to 3 Planning and Transportation Commission, September 11, 2024 Staff Report:
https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=13723 4 Architectural Review Board, November 7, 2024 Staff Report:
https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=13926 5 Architectural Review Board, February 6, 2024 Staff Report:
https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=15748 6 Planning and Transportation Commission, February 26, 2025 Staff Report:
https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=15720 the project’s isolated nature. A motion to recommend approval failed on a 3-3 tie (Summa, Chang, Ji dissenting). The PTC then voted 5-1 to forward the project to Council with a split recommendation, reflecting the prior tie vote. The dissenting vote was based on dissatisfaction with moving a project forward without consensus.
The motion also recommended that Council consider:
1. Requiring one BMR unit at 80% AMI and one at 120% AMI (instead of two at 100% AMI); and (see discussion below where staff clarifies both units would be restricted to 80% AMI).
2. Enhancing pedestrian safety near the Encina Avenue connection to the CalTrain bike/multi-use path.
Discussion also included support for more green space and a larger rear setback. During public comment, the Ellis Partners representative reiterated prior remarks about potential redevelopment of the north parking lot. While such a project would undergo standard Planning review, its possibility gave some commissioners pause. Commissioners Hechtman and Summa proposed minor edits to the PC Ordinance and Findings, which were incorporated.
ANALYSIS
As detailed in Attachment C, the project aligns with several aspects of the Comprehensive Plan, particularly the Land Use, Housing, and Business Elements. Approval of the proposed ordinance amending the zoning of the site would be consistent with the zoning ordinance. Based on staff and the ARB’s review, the project is believed to be appropriate to its context in terms of scale, massing, and materials and enhances the area by providing residential uses adjacent to retail and other office uses.
Consistency with the Comprehensive Plan, Area Plans, and Guidelines7 The Comprehensive Plan designation is Community Commercial, which is defined as: “Larger shopping centers and districts that have a wider variety of goods and services than the neighborhood shopping areas. They rely on larger trade areas and include such uses as department stores, bookstores, furniture stores, toy stores, apparel shops, restaurants, theaters and non-retail services such as offices and banks. Examples include Stanford Shopping Center and Town & Country Village. Non-retail uses such as medical and dental offices may also locate in this designation. In some locations, residential and mixed-use projects may also locate in this category. Non-residential FARs range from 0.35 to 2.0. Consistent with the Comprehensive Plan’s encouragement of housing near transit centers, higher density multifamily housing may be allowed in specific locations.” 7 The Palo Alto Comprehensive Plan is available online: bit.ly/PACompPlan2030 This project is consistent with this designation, as it proposes housing within a half mile of the Palo Alto Caltrain Station and Transit Center. As discussed in the Record of Land Use Action (Attachment C), this project promotes a number of Comprehensive Plan policies and does not conflict with other policies specific to Town & Country. In summary, this location is described as being within the Town & Country, however it does not contain retail use, and will not decrease the retail use at the shopping center. Additionally, one of the parcels (APN 120-34-006) was included in the Housing Element Sites Inventory, with an expected capacity of four units. The proposed project merges parcels to allow for additional capacity. The proposed ten units therefore, exceed the anticipated capacity in the Housing Inventory. The project supports Comprehensive Plan policies to provide affordable housing, infill development, and to promote high-quality design.
Zoning Compliance
Attachment D includes a summary of the project’s consistency with the existing CC Zone District. The PHZ process rezones the site and, through the proposed ordinance and development plan, sets forth the development standards for this project. Therefore, through this rezoning process as set forth in PAMC Section 18.38, the project will deviate from the existing zoning in a manner that is consistent with the zoning ordinance. There are several aspects of the project that deviate from the CC zoning base district development standards, including:
•Floor area ratio of 1.57:1, where the existing regulations allow 0.5:1; •Lot coverage of 58.6%, where the existing regulations allow 50%; •Rear setback of seven inches, where the existing regulations require 10 feet; •No ground-level open space, where the existing regulations require 30%; and •An average of 95 square feet usable open space per unit, where the existing regulations require 150 square feet per unit.
Parking and Multi-Modal Access
The proposed plan provides each unit with at least one parking space in a ground-level garage.
Six of the dwelling units would each have two garage spaces, and four of the dwelling units would each have one parking space. In terms of multi-modal access, each garage will have one long-term bike storage space (wall rack or designated space in the garage).
The project site is within walking distance (0.5 mile) of the Palo Alto Caltrain Station. In accordance with Assembly Bill (AB) 2097, because the project is located within one half mile of a major transit stop, no vehicular parking spaces are required. While there is no current provision that would require a transportation demand management (TDM) plan for the subject project, the City Council in March adopted an ordinance on first reading that would require developer’s seeking to invoke AB 2097 to also prepare a TDM plan for staff review and approval. This ordinance is not in effect but as the subject application seeks a legislative amendment to the zoning code, it is permissible to extend this City Council policy to the subject project. Accordingly, staff has included a condition of approval requiring a TDM plan prior to the issuance of a building permit.
Public Benefit
In September 2020, City Council expressed interest in allowing housing projects to pursue Planned Community rezoning, rebranded as Planned Home Zoning (PHZ) to highlight housing as the primary community benefit. Council indicated a preference for increasing the number of below market rate (BMR) units or achieving deeper affordability to address RHNA targets, particularly for low and very low-income units. To support this, Council endorsed four options8 developers could consider to enhance public benefit while maintaining project feasibility.
When the PTC reviewed the project in February, the applicant was proposing two units at 100% AMI, which was inconsistent with Council Option #2 to provide 20% of units at an average of 80% AMI. The PTC recommended the applicant consider modifying this to one priced at 80% AMI and one priced at 120% AMI. The applicant has since modified the application request to comply with Option #2. With both of the income restricted units available at 80% of AMI, the project has a weighted average of 24% and an actual inclusionary rate of 20%.
Consistency with Application Findings
As detailed in the draft Record of Land Use Action (Attachment C) and within the analysis within this report the project is consistent with application findings for a PC project.
FISCAL/RESOURCE IMPACT
Processing of this application has no fiscal impact as applicants are responsible for staff and consultant costs through applicable fees through the deposit-based cost recovery program.
Additionally, the site is a vacant parking lot; therefore, there would be no loss in sales tax revenue as a result of this project. The proposed development would require payment of Development Impact Fees, currently estimated at $770,376.55 plus the Public Art fee.
STAKEHOLDER ENGAGEMENT
The Palo Alto Municipal Code requires notice of this public hearing be published in a local paper and mailed to owners and occupants of property within 600 feet of the subject property at least ten days in advance. Postcard mailing and notice of a public hearing for this project was published in the Daily Post on April 4, 2025, which is 10 days in advance of the meeting.
Public Comments
Ellis Partners, the operators of Town & Country, have actively participated in the process. In their most recent letter, and in person at the ARB and PTC hearing, they advocated for a single 8 City Council, June 23, 2020 Staff Report: https:/www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes- reports/reports/city-manager-reports-cmrs/year-archive/2020/id-10715.pdf future housing project on their North parking lot. This hypothetical project would include this subject lot, which Ellis Partners does not own or lease, and other surrounding properties they currently lease but do not own. Likewise, the project applicants only have property rights to the two subject properties in this application. Staff notes that there is no current application for this alternative project and that any future project would need to go through the appropriate Planning Entitlement process. While the applicant for this project has expressed their willingness to continue conversations with Ellis Partners for this alternative project, they have also expressed their interest in continuing to process their submitted application.
The has also received several letters of support and one letter questioning the legality of the PHZ process. All previously received comments are included in Attachment E.
ENVIRONMENTAL REVIEW
The subject project has been assessed in accordance with the authority and criteria contained in the California Environmental Quality Act (CEQA), the State CEQA Guidelines, and the environmental regulations of the City. Specifically, the City has prepared a streamlined analysis, pursuant to CEQA Guidelines section 15183, of the project’s consistency with the Comprehensive Plan Environmental Impact Report (SCH #2014052101). The project will incorporate all required mitigation measures from the Comprehensive Plan EIR and the City’s standard conditions of approval. Overall, the findings of the 1583 checklist conclude that there are no new or more significant impacts beyond what was previously assessed in the adopted Comprehensive Plan EIR; therefore, further environmental analysis is not warranted.
ATTACHMENTS
Attachment A: Location Map
Attachment B: Draft PC Ordinance
Attachment C: Draft Record of Land Use Action
Attachment D: Zoning Consistency Analysis
Attachment E: Applicant’s Project Description
Attachment F: Neighbor’s Correspondence
Attachment G: Link to Project Plans and Environmental Analysis APPROVED BY:
Jonathan Lait, Planning and Development Services Director