HomeMy WebLinkAboutStaff Report 7048
City of Palo Alto (ID # 7048)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 6/20/2016
City of Palo Alto Page 1
Summary Title: Request for Waiver from Retail Preservation Ordinance
Title: Denial of a Request for Waiver of the City's Moratorium on Conversion
of Ground Floor Retail for the Property at 100 Addison Avenue
From: City Manager
Lead Department: Planning and Community Environment
Recommendation
Staff recommends that the City Council deny the request for waiver from the City’s moratorium
on conversion of ground floor retail uses as it applies to the property at 100 Addison Avenue
based on a finding that the requestor has not demonstrated that the City’s moratorium would
effectuate an unconstitutional taking of property.
Background
On May 11, 2015, the City Council adopted an urgency ordinance establishing a moratorium on
the conversion of ground floor retail and “retail like” uses to other uses (Attachment A). The
urgency ordinance was extended on June 15, 2015 (Attachment B), and will remain in effect
until replaced or until it expires on April 30, 2017.
The ordinance contains provisions regarding “waivers and adjustments” (18.85.104) that allow
an applicant to request a waiver based on economic hardship by “showing that applying
requirements [of the ordinance] would effectuate an unconstitutional taking of property or
otherwise have an unconstitutional application to the property.”
The ordinance also states that “the applicant shall bear the burden of presenting substantial
evidence to support a waiver or modification request… and shall set forth in detail the factual
and legal basis for the claim, including all supporting technical documentation.” Requests must
be submitted to the Director of Planning and Community Environment “together with an
economic analysis or other supporting documentation” and must be acted upon by the City
Council.
On May 11, 2016, Ms. Kristina Lawson, representing the owners of 100 Addison Avenue, the
True Morris Family, LLC, submitted a request for waiver (Attachment C). This request followed
several earlier inquiries and requests that had been rejected as incomplete by the Director of
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Planning.
As explained in Ms. Lawson’s request, the building at 100 Addison Avenue was occupied by
Addison Antiques, a retail use, until June 30, 2015. Since that date, the owners have been
unsuccessfully seeking to lease the building to a new retail or “retail-like” tenant(s).
Discussion
The attached request for waiver from the City’s moratorium on conversion of ground floor
retail uses argues that the City’s ordinance “goes ‘too far’ in imposing upon the owner an
unreasonable economic loss and interfering with the owner’s distinct investment-backed
expectations, thereby amounting to a de facto taking of the Property for public purposes.”
As explained in the request, the property owner was on the verge of leasing the 4,000 square
foot building and parking lot at 100 Addison Avenue to an office use at a rent of $5.20 per
square foot in June 2015, when they became aware of the City’s moratorium. Thus, the
requestor believes the owner has “lost” a significant sum of money. (See the request, p. 5.)
Since then, the property owner has sought to lease the building to a retail or “retail-like” use,
but without success, and the requestor believes that “in the unlikely event” that a retail tenant
can be found, the base rent would be for approximately $1.50 per square foot. (See the
request, p. 6.)
The requestor identifies the owner’s annual carrying costs as $273,622, but this includes “lost
opportunity costs of $194,880” based on the inability to lease for office use and management
costs of $65,142. Without these line items, the owner’s annual carrying costs (taxes, utilities,
and insurance) would be $13,600. (See the request, p. 7.) The requestor also agrees with
staff’s position that “the City has no obligation to maximize the owners return on investment
and that all zoning regulations have some impact on revenue potential.” (See the request, p.
8.)
City staff does not believe the requestor has demonstrated that an unconstitutional taking of
property has occurred. While the location is not central to downtown, and will never be able to
command rents as high as those in other locations, the Department of Planning and Community
Environment has received inquiries from potential retail tenants, and believes that the subject
property is leasable for a retail or retail-like use at a rent that would enable the property owner
to at least recover their costs. It is notable that the requestor offers expert opinions stating
that “if a retail tenant were actually secured, the base rent for such tenant would be
substantially lower than what we have received” implying that the rent would be lower than
desired, not lower than the owner’s expenses. In addition, staff notes that the applicant’s only
evidence of inability to find a retail tenant is an August 2015 from the applicant’s realtor stating
he was unable to secure a retail tenant. Based on the letter (not signed under penalty of
perjury), it appears the property was marketed as a retail property for approximately 6 weeks
in 2015. There is no evidence of more recent marketing and no evidence of marketing to “retail
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like” uses permitted under the ordinance. Further, there is no discussion of whether modifying
the proposed lease term or rent or the offering of a tenant improvement allowance or other
incentives would have yielded a viable retail or retail like tenant. Finally the restriction is only
for a two year period. State law recognizes that comprehensive land use planning may require
temporary moratoria and expressly allows for such moratoria for periods up to two years. The
City’s retail preservation ordinance was enacted under the State moratoria law. Placing a time
out on the conversion of retail use to office use while the City evaluates the long term
feasibility of ground floor retail outside the core downtown is precisely the aim of the
moratorium.
The permanent ordinance developed for consideration before the expiration of the current
interim ordinance in April 2017 can re-evaluate the appropriateness of ground floor retail at
this location. City staff has encouraged the property owners and their representative to
participate in the public process associated with the permanent ordinance when it occurs.
Environmental Review
The requested action would require the subject parcel to be reused for the same use that was
in place in June 2015, and would not constitute a “project” requireing review under the
California Environmental Quality Act (CEQA).
Attachments:
Attachment A: Retail Preservation Ordinance No. 5325 Adopted May 11, 2015 (PDF)
Attachment B: Retail Preservation Ordinance No. 5330 Adopted June 15, 2015 (PDF)
Attachment C: May 11, 2016 Request for Waiver - 100 Addison (PDF)
ATTACHMENT A
ATTACHMENT B
ATTACHMENT C