City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Planning and Development Services
Meeting Date: June 17, 2025
Report #:2504-4487
TITLE
Adopt a Resolution Declaring Surface Parking Lot T (APN: 120-15-100) Exempt Surplus Land and Approve an Exclusive Negotiation Agreement with Alta Housing for Development of 100% Affordable Housing on City-Owned Property Located at the Corner of Kipling Street and Lytton Avenue in Downtown Palo Alto; CEQA Status – Not a Project.
RECOMMENDATION
Staff recommends that the City Council:
1. Adopt a Resolution (Attachment A) declaring the City-owned property located at the corner of Kipling Street and Lytton Avenue ("Lot T") as Exempt Surplus Land pursuant to Government Code Section 54221(f)(1)(A) and 54221(f)(1)(B); and
2. Approve and authorize the City Manager or their designee to execute an Exclusive Negotiation Agreement (ENA) with Alta Housing (Attachment B) to develop 100% affordable housing on Lot T.
BACKGROUND
Implementation Program 1.4 of the City’s 2023–2031 Housing Element identifies redevelopment of City-owned surface parking lots for 100% affordable housing projects, prioritizing opportunities to incorporate replacement public parking and housing serving households earning up to 80% of Area Median Income (AMI) or designated workforce housing for City and school district employees.
In 2022 and 2023, the City conducted a Request for Information (RFI) process identifying Lot T as a preferred site for implementation of Program 1.4. In 2024, the City Council adopted Priority ED&T 8, which directed staff to pursue refined proposals for Lot T. Following a Request for Refined Proposals issued in September 2024, the Council on January 21, 2025, directed staff to prepare an ENA with Alta Housing for Council action to advance predevelopment work.
ANALYSIS
Surplus Land Act Compliance
Before a local government agency may sell or enter into a long-term lease of land for development, the Surplus Land Act (California Government Code Sections 54220–54234) requires agencies to follow certain notice procedures to make the land available for the development of affordable housing. Under certain circumstances, an agency may declare the land "exempt surplus" in which case the notice procedures do not apply. Two such circumstances exist for Lot T.
First, and perhaps most obvious, under Government Code 54221(f)(1)(A), surplus land may be declared exempt if it will be transferred for the purpose of developing affordable housing.
Under the proposed Exclusive Negotiating Agreement, Alta will design, and submit for the City’s planning approval, a proposal to develop Lot with 100% affordable housing, which will be deed restricted to preserve affordability to extremely low, very low, and low-income households, for a term no shorter than 30 years. Therefore Lot T qualifies for an exemption on this basis.
Second, under Government Code 54221(f)(1)(B), surplus land may be declared exempt if it is smaller than one-half acre (21,780 square feet) in area, and is not adjacent to publicly-owned land used for open space or affordability housing purposes. According to City records, Lot T is approximately 19,236 square feet in area and the adjacent properties are privately owned and used for commercial purposes. Therefore, Lot T separately qualifies for an exemption on this basis.
These findings are included in the Resolution (Attachment A). City staff received technical assistance from HCD in preparing the Resolution, and once adopted, the Resolution will be transmitted to the California Department of Housing and Community Development (HCD) as required by Government Code Section 54222.3.
Exclusive Negotiation Agreement with Alta Housing
The ENA formalizes the City’s partnership with Alta Housing and outlines the framework for negotiating a long-term ground lease, project financing terms, regulatory agreements, and other documents necessary to support project development. The ENA:
•Does not entitle or approve a specific development project; •Requires good faith negotiations toward a Disposition and Development Agreement (DDA) for a project that satisfies the affordability requirements of the Surplus Land Act and other direction that may be provided by the Council during the term of the ENA; •Sets a timeline and terms for predevelopment due diligence and community engagement;
•Establishes roles, responsibilities, and deliverables during the ENA term; •Allows Alta Housing to request reimbursement of actual costs incurred, not to exceed $200,000, if the City does not proceed with the Lot T project.
The ENA was prepared by the City Attorney’s Office and negotiated with Alta Housing and reflects typical provisions used in similar public-private affordable housing projects.
FISCAL/RESOURCE IMPACT
Approval of the ENA and declaration of exempt surplus status do not have a fiscal impact as work associated with these efforts is already accounted for in department budgets. Should the City cancel the project, staff will return to Council at a future date to request the necessary appropriation from the Housing In Lieu Residential Fund to reimburse Alta Housing. Future agreements, including the DDA and potential funding commitments for the ultimate development of the parcel, will have fiscal implications and will be presented to Council for review and approval.
STAKEHOLDER ENGAGEMENT
The proposed ENA and exemption resolution were publicly noticed as part of the June 16, 2025 City Council agenda. Prior engagement activities included:
•Issuance of a Request for Refined Proposals in 2024;
•Council review of refined proposals and direction to staff to prepare the subject ENA in January 2025;
•Housing Element community meetings and discussions identifying Lot T as a City-owned site suitable for affordable housing.
Additional engagement is anticipated during the ENA term and future project review process.
ENVIRONMENTAL REVIEW
Approval of the ENA and exemption resolution is not a project subject to environmental review under the California Environmental Quality Act (CEQA) per CEQA Guidelines Section 15378(b)(2). Any future development of Lot T will require CEQA review prior to entitlement.
ATTACHMENTS
Attachment A: Draft Resolution Declaring Lot T as Exempt Surplus Land Attachment B: Exclusive Negotiation Agreement with Alta Housing APPROVED BY:
Jonathan Lait, Planning and Development Services Director