City Council
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: City Manager
Meeting Date: June 17, 2025
Report #:2506-4786
TITLE
Approve a Resolution to Allow Dining and Retail Encroachments on Car Free California Avenue under PAMC Ch. 12.11; Direct Staff to Approve the Car Free California Avenue Outdoor Activation Program Regulations Including Reference to the Program fees in the FY 2026 Municipal Fee Schedule; Adopt a Resolution Allowing Open Containers in Conjunction with Third Thursday Performances in 2025; Direct Staff to Review Differences Between the Open Container Resolution and an Entertainment Zone as Recommended by the Retail Committee.
CEQA Status – categorically exempt.
RECOMMENDATION
The Retail Committee and staff recommend that the City Council:
1. Approve the Car Free California Avenue Outdoor Activation Program Regulations (Attachment A)
a. Set program fees (application fee, renewal fee, license fee for use iof the public right-of-way, and deposit) in alignment with the existing Ongoing Parklet Program as recommended in the FY 2026 Municipal Fee Schedule (scheduled for Council adoption on June 16);
2. Adopt a Resolution allowing dining and retail encroachments on Car Free California Avenue under existing PAMC Ch. 12.11 (Parklets) Attachment B.
3. Adopt a Resolution to allow open containers in conjunction with the Third Thursday music performances in 2025 (Attachment C); and
Refer to staff a review of differences between the expired open container resolution and an entertainment zone for future consideration.
EXECUTIVE SUMMARY
The Outdoor Activation Program sets forth the permit design requirements for outdoor dining and merchandising for the car-free section of California Avenue in alignment with the City Council direction for staff to return with guidelines for outdoor activation in advance and in
preparation for the 2025 winter weather months. The proposed program, reviewed and recommended for Council approval by the Retail Committee (“Committee”)1, will facilitate flexible outdoor dining and merchant activities, enabling the commercial use of public sidewalks and roadway space. This staff report highlights:
Vision for outdoor dining
Merchant feedback regarding outdoor dining
Key differences between parklets and the outdoor activation program Outdoor dining requirements and guidance
Signage
Impact of outdoor dining on sanitary sewer infrastructure Restroom capacity
Outdoor Activation fees
Issues with building structures in the public right-of-way Revisions per Retail Committee feedback
Implementation timeline
Open Container Resolution and Entertainment Zone
The document serves as guidance to businesses, City staff, designers, and the public. The program will be administered by the Public Works Department via the City’s existing parklet permit process but will be subject to these guidelines that are specific to car-free California Avenue. Included in the program is the fee structure for use of the public right of way, with the recommendation from the Retail Committee to remain consistent with fees used in the Ongoing Parklet Program with some consideration for the costs of additional public infrastructure specific to California Avenue.
The program is consistent with Council economic development priorities and the specific 2025 priority objective “Council approval of outdoor activation guidelines for California Avenue” and advances Council action for California Avenue to be a “community street.”
BACKGROUND
Since the COVID-19 pandemic in 2020, the City Council has repeatedly affirmed its desire to have portions of California Avenue remain a car-free street. This action was continued through interim ordinances, with final action to amend the Comprehensive Plan and permanently designate California Avenue between Birch and El Camino Real as a community street on March 10, 2025. As part of efforts to enhance the aesthetics of the car-free street, staff presented preliminary information on place identity, signage, and wayfinding, as well as outdoor activation guidelines to the City Council on February 3, 2025. On May 21, 2025, Staff presented 1 Retail Committee voted two (2) in support of recommending City Council approval and one (1) absent (Councilmember Burt).
the Car Free California Avenue Outdoor Activation Program to the Retail Committee,2 which voted to advance the program to the City Council.
In addition to supporting the activation program, the Committee included in its motion a recommendation for the Council to have staff explore the adoption of an open containers resolution and the establishment of an entertainment zone. Notably, in June 2024, the Council approved a resolution under PAMC section 9.04.010 allowing the consumption of alcohol on California Avenue during the 3rd Thursday Events, effective from June through December 2024.3
ANALYSIS
The outdoor activation program advances the City’s comprehensive economic development strategy, to “Reinforce each districts’ distinct scale and offerings by embracing California Avenue as a community and neighborhood serving place.” And “Adopt policies that reflect changing market conditions by easing regulatory burden for businesses, removing outdated restrictions that create hurdles to tenancy, and focus retail and retail like uses in places where they are market supported.”
Purpose and Vision
The purpose of the outdoor activation program is to enable restaurants to occupy the public right of way for outdoor seating to support the economic and community vitality of the street, through a streamlined permitting program, that does not impose undue time and cost burdens on applicants, nor impact the safety and function of the street.
The vision for the outdoor activation program is:
A community-oriented, car-free street environment
Prioritizing economic vitality, pedestrian experience and social interaction Flexible, open, visually cohesive public space
Lively, inclusive atmosphere for residents and visitors Accessible, safe, high design quality, and regularly maintained Merchant Preferences
The program is responsive to California Avenue merchant feedback on their preferences for outdoor dining:
Desire for design equity and aesthetic improvements
Interest in weather protection (shelter, wind screens, heating) Support choice in materials, colors, signage
2 Retail Committee, May 21, 2025,
https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=17618 3 Staff Report 2405-3093 on Consumption of Alcohol on California Ave:
https://cityofpaloalto.primegov.com/Portal/viewer?id=0&type=7&uid=7b643945-3828-4941-8858-ff95939f6fb3 Permit variety of seating and merchandizing, decorative lighting, flowers and plants on the enclosures, outdoor host stations, hanging blade signs and other elements Preference to avoid temporary-looking or low-cost construction that avoids such things as corrugated plastic roofing, overly brightly colored furniture, post and rope barriers and unneeded traffic safety elements
Outdoor Dining Requirements
The program is organized into general requirements and design elements as presented in the following table:
Design ElementsGeneral Requirements
(applies to all permits) Required Optional
Planters
Lighting
Electrical
Waste management
Railings
Sidewalls
Overhead shelter
Branding and signage
Heating
Platforms (where
appropriate)
Location
Setbacks
Use
Accessibility
Operator
responsibilities
Permitting process
and conditions
Design Guidance applies to each element
Design elements are either required, or optional per the applicant‘s discretion. When an applicant selects a design element, they must meet all of the requirements for that element.
Design Guidance is to encourage best practice, promote high quality design, and ensure consistency for the aesthetics of the street. This structure allows businesses to customize their outdoor space while maintaining safety, accessibility, and a cohesive street environment.
Signage
Staff recommends allowing limited use of sandwich boards within designated outdoor activation areas to support visibility of businesses for pedestrians walking down the center of the street. The City’s sign code currently prohibits freestanding signs in the public right-of-way, including sandwich boards. This allowance would support merchant visibility while maintaining pedestrian flow and safety. Per discussion at Retail Committee, Merchants will be permitted up two signs in outdoor activation areas, with no more than one sandwich board sign. Staff will need to coordinate to make any necessary adjustments to the City’s Sign Ordinance.
Differences from Ongoing Parklet Program
The program draws from the City’s Parklet Program (currently in place for University Avenue and other streets with vehicles) while responding to the unique conditions of a car-free environment. At the May 21, 2025 Retail Committee, staff noted the following differences from the City’s parklet program:
(1) Design elements are to be free-standing and not attached to the roadway to enable immediate response to an emergency, such as a gas leak, as required to meet the City’s utilities responsibilities.
(2) Businesses can choose electric or propane heaters, however the use of propane heaters requires two sides of an outdoor dining area to be open air per fire/life safety requirements.
(3) No changes are proposed from city requirements regarding permitting amplified music. (4) Parklet roof and enclosures are not permitted on Cal Ave. (See discussion below on permanent structures.)
(5) Lighting and electricity are required. Electrical service is to meet electrical code, and service is to be provided overhead in areas with glass mosaic sidewalks, so as to not damage the sidewalk.
(6) Outdoor activation enables more right-of-way to be available for outdoor dining than what can be permitted under the on-going parklet program.
Impacts of Outdoor Activation Dining
Sanitary Sewer Infrastructure: The expansion of outdoor dining on California Avenue has significantly increased total restaurant capacity, leading to more meals served and a higher potential discharge of fats, oils, and grease (FOG) into the City’s sanitary sewer system. Grease Control Devices (GCDs) in many restaurants were originally sized for pre-pandemic indoor seating. Expanded seating is increasing the risk of FOG entering building drainage systems and the City's sanitary sewer (SS).
Several restaurants have high efficiency hydromechanical grease interceptors (HGIs) connected to most kitchen fixtures, but others operate with outdated or undersized GCD systems (e.g., legacy HGIs, no GCD, or limited fixture connections). These conditions increase the risk of untreated FOG entering the sewer system and raise concerns regarding additional maintenance costs.
Currently, approximately 13,700 square feet of public right-of-way is used for dining. Using the building code standard of 15 square feet per person, this equates to roughly 880 additional seats. Data from 14 establishments indicates an average increase in seating of 180 percent.
The proposed outdoor activation program will partially reduce the current area to approximately 11,000 square feet, or 734 seats, though the figures will depend on the number of restaurants, building frontage, setbacks and seating arrangement. This reduction is due to locating outdoor dining in front of establishments, emergency egress setbacks and street access. Future outdoor dining area may increase with new establishments. Staff conducts regular inspections to track impacts to both GCDs and the potential for impacts to the building’s drainage systems and the City’s sanitary sewer system.
Staff recommends continuing proactive inspections, requiring businesses to more frequently maintain restaurant GCD systems, identifying higher-risk systems for improvement, and mitigating future problems through plan review to correct GCD type, size and fixture connections. Depending on the success of these efforts, supplemental fees may be required for outdoor dining permits to fund increased City maintenance costs.
Restroom Capacity: Similar to sanitary sewer system demands, outdoor dining also increases the demand for restroom capacity. Increasing dining capacity or occupancy load can increase the need for additional restroom fixtures. Given the increased demand for restrooms with the overall expansion of dining, provision of public restrooms to serve multiple establishments may offer a more cost-effective and space-efficient alternative to businesses providing their own additional bathrooms. Possible locations will depend on the number and size of facilities.
Location of restrooms will depend on the number of fixtures, size of facilities and convenience of location. Larger facilities could be accommodated at surface parking however this would displace parking spaces. The Retail Committee was keen to see investment in public restroom facilities to support outdoor activation additional capacity needs and events. This investment would depend on temporary versus permanent installations and the Committee recommends the Council provide direction to staff to further evaluate and return on this issue. Staff agrees there is a need, and expect that options could be brought forward for temporary facilities and these additional costs should be considered when the program total cost and fees or shared contributions are considered. Staff recognize that further discussion with merchants on longer term solutions is needed, but can continue in parallel.
Operations and Maintenance: Operating and maintenance costs are heightened in the car-free street of California Ave. with staffing needed to support the program initiation and implementation, additional cleaning, and installation and maintenance of infrastructure. Costs for additional restrooms are being evaluated.
Outdoor Activation Fees
The Committee and staff recommend use of fees established for other outdoor activation programs in the City including Parklets and the currently closed portion of Ramona St. in Downtown Palo Alto for these outdoor activation spaces on the car-free portion of California Avenue. Specific fees (including all additional reserve and technology charges) include:
An initial application fee (FY 2026 fee expected to be $5,004) An annual renewal fee (FY 2026 fee expected to be $604) A fully refundable deposit (FY 2026 expected to be $2,750) A license fee for use of the public right-of way (Downtown charge currently $10.71/square foot annually)
Each fee is outlined in greater detail below. The retail committee did recommend consideration of alternative license fees, in consideration of the additional benefits for this specific use of the public right of way and the impacts and costs associated with it.
Initial Application Fee: An initial application fee is required to establish an outdoor activation space to fully recover cost necessary to process an application, conduct site inspections, including Public Works, Utilities, and others such as Planning if applicable review. A portion is also based on staff time required for ongoing program administration such as customer service, compliance with standards, and complaint response. The Committee and staff recommend maintain the fee consistent with the ongoing parklet program.
Annual Renewal Fee: An annual renewal fee is required to review the encroachment permit annually to fully recover costs at a flat rate. An application renewal is not expected to require the same level of staff effort as processing a new application and therefore the fee is less than the initial fee. The Committee and staff recommend maintain the fee consistent with the ongoing parklet program.
Deposit Fee: Consistent with other programs in the City, a deposit fee may be considered to address any unrepaired damage to the roadway or sidewalk or any costs that may be incurred due to the City having to remove things in the activated space. Given the recommended guidelines, this fee could be lowered or eliminated for the car-free portion of California Avenue as parklet structures are currently not authorized, however staff would recommend retaining use of it for consistency with the existing programs as there remains a cost to remove an installation from the permitted space in the event of a necessary removal.
License Fee: A license fee for use of the public right-of-way is proposed. This fee can be set based on the City Council’s reasonable assessment of the value of the land used by the operator and incorporate a certain amount of discount or subsidy for that use. The Retail Committee recommended maintaining use of the rate used for the ongoing parklet program with a request for alternative scenarios that considered the value of the use of the land in a car- free environment, without the same restrictions of space that regulate parklets. When considering the license fee, the Council may consider establishing different rates based on the permitted use of the space to align with the impacts more closely, namely, retail use versus restaurant uses and increased value of the land such as if the City provided supplemental restroom capacity as noted earlier. These variations could be studied and implemented at a later time.
The City’s existing Ongoing Parklet Program and outdoor programs operate with an annual license fee of $10.71 per square floor for use of the public right-of-way, which represented an 85% discount on the average 2022 ground floor retail rents in Palo Alto of $71 per square foot.
This fee is being used for parklets and outdoor dining spaces on the closed portion of Ramona St. that are in the public right-of-way as well as for parklets along University Avenue and its adjacent streets.
As of Q1 2025 as reported by CoStar, the average rent in the University Avenue (downtown ‘DT’) analysis area is reported at $76 per square foot. On California Avenue, the average rent for Q1 2025 is $59 per square foot. Outdoor spaces will vary in size with some of the larger spaces currently reflecting upwards of 1,000 square feet in the public right-of-way. The table below shows the California Avenue rates with Downtown in grey for reference.
As noted previously, staff expect approximately 11,000 square feet of use with the recommended outdoor activations guidelines. There are currently 20 permitted spaces today.
The Committee recommended consideration of alternative “discount” from the market rent and below provides examples.
A $10.71 per square foot fee would result in approximately $118,000 in annual revenue, or $5,355 for a 500 square foot space.
A 70% discount, or $18 per square foot rate would generate $198,000 in annual revenue, and cost a 500 square foot activation space $9,000 annually. A 50% discount, or $30 per square foot rate would generate $300,000 in annual revenue, and cost a 500 square foot activation space $15,000 annually. No discount, or $59 per square foot rate would generate $649,000 in annual revenue, and cost a 500 square foot activation space $29,500 annually Revenue generated will be dependent on permits requested and vary based on square footage usage. The above are estimates.
Discount Rate/SqFt
320 Sq Ft
(~2 parking spaces,
Parklet size)
500 sq Ft
(approximately 33
additional seats*)
1,000 Sq Ft
(approximately 66
additional seats*)
DT CA DT CA DT CA DT CA
90% $8 $6 $2,560 $1,920 $4,000 $3,000 $8,000 $6,000
80% $15 $12 $4,800 $3,840 $7,500 $6,000 $15,000 $12,000 70% $23 $18 $7,360 $5,760 $11,500 $9,000 $23,000 $18,000 60% $30 $24 $9,600 $7,680 $15,000 $12,000 $30,000 $24,000 50% $38 $30 $12,160 $9,600 $19,000 $15,000 $38,000 $30,000 40% $46 $35 $14,720 $11,200 $23,000 $17,500 $46,000 $35,000 30% $53 $41 $16,960 $13,120 $26,500 $20,500 $53,000 $41,000 20% $61 $47 $19,520 $15,040 $30,500 $23,500 $61,000 $47,000 10% $68 $53 $21,760 $16,960 $34,000 $26,500 $68,000 $53,000 0% $76 $59 $24,320 $18,880 $38,000 $29,500 $76,000 $59,000 *Calculation reflects use of the building code standard of 15 square feet per person Concerns with Building Parklet with Roofs and Permanent Structures At Retail Committee, the question was raised, “Why not allow parklet structures on Cal Ave, as permitted on University Avenue, i.e. with plexi-glass roofs and without enclosure walls, within permitted parklet area limits?” Also raised, by a restauranteur, is their interest to build a permanent outdoor dining structure extending out from their building and onto the public roadway and across the sidewalk. They envision something similar to outdoor dining at Stanford Shopping Center, as it offers the following advantages:
Weather protection from the sun, wind and rain throughout the year, with lighting and heating.
Design consistency with interior restaurant space
One-time merchant investment in long-term, high-quality solution As discussed at Retail Committee, staff does not recommend permitting parklets per existing requirements akin to University Avenue, or permanent structures in the public right of way.
California Avenue has four times higher density of restaurants per fifth of a mile compared to University Avenue. In some locations, there are not enough parking spaces for existing restaurants to have a single parking space parklet. Setting aside the issue of which business could have a parklet, a building to minimum parklet standards, would result in a continuous row of parklets occupying all parallel parking spaces on the south side of the street and most of the diagonal parking spaces on the north side of the street. This would block storefront visibility and impede pedestrian and emergency access. The street will feel narrow and enclosed rather than open and walkable. This would also limit the space available to businesses.
The amount of space permitted for outdoor dining on the roadway, not including the sidewalk, is approximately double what is permitted under the current parklet program. Permitting permanent structures on Cal. Ave. under the outdoor activation program with the current restaurant density would increase the impact on storefront visibility and emergency access.
In either case, parklets or permanent structures, staff recommends not permitting this type of structure for the following reasons:
Utility access: many utilities (water, gas, sewer, stormwater, electrical, other) run beneath the right-of-way and require unimpeded emergency and maintenance access.
Structures impeding access will need to be removed, with associated replacement costs and business disruption.
Fire safety: structures can pose a fire hazard and obstruct fire access. Fire can move from one structure to another, rapidly engulfing the entire street. Restricts storefront visibility: structures would be larger in area and taller than parklets, and there could be several along both sides of the street, blocking visibility of adjacent retail storefronts and reducing the openness of the environment. Building Code requirements: structures require attachment to the roadway, foundation work and plan review by the Building Division, improvements which will increase merchant costs, time delays and conflict with below grade utilities. Lease complexity: structures on public property would require long-term leases, requiring analysis of market value and legal restrictions on use of specific property parcels.
Architectural Review: structures will trigger Architectural Review Board oversight, extending timelines and increasing costs.
Removal: Long-term maintenance and removal concerns if a business closes.
The success of this program relies on the interest of merchants to improve their outdoor activation areas based on the design guidance to evolve the street as a whole to be an open and vibrant. As a part of the longer-term design of California Avenue, appropriate locations for structures within the public right-of-way can be more appropriately considered.
Car Free California Avenue Outdoor Activation Program revisions based on Retail Committee feedback
Increase number of permitted signs from one to two, with a limit of one sandwich board Other overhead shelters may be permitted (beyond large format umbrellas and awnings), provided they are not attached to the roadway, are easily and quickly removable for utility access and meet clearance and design requirements. Limit requiring overhead electrical service only to areas with glass mosaic sidewalks.
Implementation Timeline (Tentative)
Staff recommend a phased implementation approach that mirrors the approach used when the ongoing parklet program was implemented. Below outlines an approximate timeline:
JUNE: Council review and approval of outdoor activation guidelines and accompanying resolutions and fees
JULY: Adopted standards go into effect, pre- applications / re-applications would be open and due to the City including associated fees (application and license) AUGUST: Applications accepted and installations without a pre application or application on fill will begin to be enforced for removal. SEPTEMBER/OCTOBER: Transition of outdoor spaces to follow the activation guidelines NOVEMBER: Outdoor activations must be in compliance with new standards Open Container Resolution and Entertainment Zone
The Retail committee expressed a desire and recommended that Council refer to staff further exploration of establishing an Entertainment Zone for the Car Free portion of California Ave.
Recognizing this interest, staff proactively prepared a resolution extending the open container ordinance previously in effect for Third Thursdays that sunset December 2024. Although not an Entertainment Zone, if adopted, could provide allowance for open containers throughout 2025 while the referral for further work on an Entertainment Zone in undertaken by staff.
FISCAL/RESOURCE IMPACT
The outdoor activation of car-free California Avenue represents a unique environment that will require a higher level of maintenance than currently provided by the City. In addition to the ongoing needs for cleanliness of public spaces, fiscal impacts include staff time to review and process outdoor activation permits, additional costs associated with increased inspections, potential longer-term sewer system maintenance costs, and unknown costs and contributions for public restrooms, including daily operational expenses. Staff time is partially recovered through the existing encroachment permit process
In order to ensure that car-free California Avenue is maintained in a manner consistent with local businesses’ needs and priorities, as well as supporting economic success, some level of coordination and collective support among the businesses is essential. The City will need to continue encouraging stakeholders to work together on issues of collective interest.
STAKEHOLDER ENGAGEMENT
Since February 3, 2025 Council study session, staff has continued outreach, with regular monthly meetings with Merchants, individual meetings with merchants at their businesses, in- person meeting with Evergreen Park Neighborhood Association, tabling 3rd Thursday and Earth Day events, in-person presentation to facilities managers at Stanford Research Park, and in person meetings at the Sunday Farmers’ Market as well as feedback from the Architectural Review Board on March 20, 2025. The chronology of outreach can be found on the Car-Free Streets webpage4.
ENVIRONMENTAL REVIEW
The proposed actions are categorically exempt under CEQA Guidelines Sections 15301 (existing facilities), 15303 (new construction or conversion of small structures), 15304(e) (minor temporary use of land having negligible or no permanent effects on the environment), 15305 (minor alterations in land use limitations), 15311 (accessory structures), and 15323 (normal operations of facilities for public gatherings).
ATTACHMENTS
Attachment A: Car-Free California Avenue Outdoor Activation Program Guidelines Attachment B: Resolution Authorizing Food/Drink and Retail Encroachments on Car Free California Avenue under PAMC Ch. 12.11.
Attachment C: Resolution Authorizing Consumption of Alcoholic Beverages under PAMC
9.04.010 for Third Thursdays in 2025
APPROVED BY: Ed Shikada, City Manager
4 Car-Free Streets: Cal Ave & Ramona Street Webpage:
https://www.paloalto.gov/Departments/Transportation/Transportation-Projects/Car-Free-Streets-Cal-Ave.- Ramona-Street