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HomeMy WebLinkAboutStaff Report 13411 City of Palo Alto (ID # 13411) City Council Staff Report Report Type: Action Items Meeting Date: 9/13/2021 City of Palo Alto Page 1 Summary Title: 340 Portage: Interpretation on Nonconforming Uses Title: Request for City Council Interpretation of Palo Alto Municipal Code Section 18.70.070(b)(2)(E) and Related Direction to Staff Regarding Nonconforming Uses at the 340 Portage/3200 Park Site. Environmental Analysis: Not a Project, as Defined in Public Resources Code 21065 (7:15 PM - 8:00 PM) From: City Manager Lead Department: Planning and Development Services Recommendation Staff recommends that Council: 1) Provide a formal interpretation of Palo Alto Municipal Code (PAMC) section 18.70.070(b)(2)(E) with respect to nonconforming uses at 3200 Park/340 Portage/Olive Avenue, as documented in this report; and, 2) If the interpretation requires rebalancing of nonconforming uses, allow the property owner to rebalance the nonconforming use ratios within the building as current tenant leases expire. Executive Summary The subject property at 3200 Park/340 Portage/Olive Avenue is zoned RM-30 (multi-family residential). The RM-30 Zone District allows for residential uses as a permitted use and a limited number of other non-residential uses with a conditional use permit. Most commercial uses (e.g. office, research & development, warehouse, and most retail uses) are not permitted within this zone district. Generally, non-conforming uses existing when zoning regulations change are permitted to continue, subject to several restrictions. These restrictions include required termination of the nonconforming use after a period of 20 to 35 years, depending on the type of building 6 Packet Pg. 62 City of Palo Alto Page 2 construction involved. PAMC Section 18.70.070(b)(2)(E) provides a site-specific1 exception from this timeline for required termination for 3200 Park/340 Portage/Olive Avenue. Attachment A includes a location map showing the subject building containing nonconforming uses. On February 11, 2021 the property owner, Sobrato Organization, sent a letter to City staff requesting clarification with respect to the allowed nonconforming uses at 340 Portage (Attachment B). Staff engaged in several conversations with the property owner regarding possible interpretations of the site-specific language in the code, which are summarized in an April 22, 2021 letter (Attachment C) and in this report. The Director of Planning and Development Services may issue a formal interpretation of the Zoning Code, which can be appealed to the City Council (PAMC Section 18.01.025). Given the significant public interest in present and future uses of this site, staff believe it is appropriate for the City Council to provide an interpretation of the code. On June 14, 2021 Council held a hearing to discuss this code interpretation. Councilmembers generally expressed their opinions regarding the interpretation and other considerations for the site, including whether the retail use has been discontinued, code enforcement considerations, and future amortization of non-conforming uses. No formal action was taken at that Council hearing, but the Council’s intent was discussed, and the matter was continued to a date uncertain. This report reflects the Council’s initial perspective and if supported, would require the property owner to rebalance the existing mix of uses within the building, over time, to re- align with the approximate ratio of uses that existed in 2006. Background2 Based on a review of the 1995 Council minutes, it appears the original code section related to amortization of uses at this site was added to the code around 1983-84 and that the nonconforming uses were required to be terminated by 1999. On December 11, 1995 Council adopted Ordinance 4314 and 4315. Ordinance 4314 amended the amortization date for nonconforming uses at 3200 Park Boulevard/340 Portage Avenue/Olive Avenue to July 16, 2019 and established special requirements related to the continuance of those uses beyond July 16, 1999 (limiting retail uses to 60,000 square feet and restricting noisy outdoor activities). In conjunction with that action, Ordinance 4315 rezoned the site from a split zoning of R-1 (single family residential) and GM-B (general manufacturing combining) to RM-30 (multi-family residential) zoning. 1 Although there are additional structures on the same lot as 3200 Park Boulevard/340 Portage Avenue/Olive Avenue, staff understands this language to apply only to the specific building (the Cannery) referenced. 2 Links to previous staff reports, minutes, and ordinances referenced in this report with respect to the legislative history of this code section are available at: https://www.cityofpaloalto.org/News-Articles/Planning-and- Development-Services/340-Portage 6 Packet Pg. 63 City of Palo Alto Page 3 On November 6, 2006 Council adopted Ordinance 4923, which eliminated a firm termination date but added a requirement to maintain the existing ratio of nonconforming uses in the building. The special requirements limiting retail uses and restricting outdoor noise were not amended; there was no discussion of how to address the fact that existing retail uses in the building far exceeded 60,000 square feet. The Palo Alto Municipal Code 18.70.070(b)(2)(E) currently states: “(E) The nonconforming uses of the property at 3200 Park Boulevard/340 Portage Avenue/Olive Avenue for retail, research and development, warehouse, and storage uses are permitted in approximately the same ratio of uses existing as of October 16, 2006, subject to the following limitations: (1) retail uses shall not exceed 60,000 square feet, and (2) truck deliveries and other noisy outdoor activities shall be limited to the hours of 8:00 a.m. to 9:00 p.m. weekdays and 9:00 a.m. to 9:00 p.m. weekends.” The staff report prepared for the October 16, 2006 hearing and the minutes from the meeting suggest that eliminating the amortization date was primarily intended to allow Fry’s Electronics to continue operating at this location. Fry’s ultimately ceased operation in December 2019 and the space has remained vacant since then. In 2019 (as in 2006), the Fry’s retail space totaled 84,000 square feet and represented approximately 42% of the ratio of uses that existed in 2006. The municipal code3 defines a nonconforming use as being discontinued or abandoned if not re-established within one year. Since no retail use reoccupied the former Fry’s tenant space, that portion of the building can now only be occupied by a conforming RM-30 land use. The interpretative question presented to the City Council on June 14, 20214 was whether the remaining mix of uses could remain as it exists today – in terms of existing floor area, or if the floor area for the existing nonconforming land uses needed to be rebalanced to include retail and align with the approximate ratio of uses that existed in 2006. While no motion was made to establish the Council’s perspective, it appeared based on the Council’s deliberation, that it was leaning toward the later – requiring rebalancing. However, the Council also signaled its support to allow the rebalancing to occur over a defined period of time. 3 PAMC Section 18.70.040(b) provides: “[A] nonconforming use of facilities designed and constructed for nonresidential purposes which is discontinued or abandoned or otherwise ceases operation and use of the site for a period of one year or more shall not be resumed, and all subsequent use of such site and facilities thereon shall conform to this title.” 4 June 14, 2021 Council Report: https://www.cityofpaloalto.org/files/assets/public/agendas-minutes- reports/reports/city-manager-reports-cmrs/2021/id-12271.pdf June 14, 2021 Summary Minutes: https://www.cityofpaloalto.org/files/assets/public/agendas-minutes- reports/agendas-minutes/city-council-agendas-minutes/2021/06-14-21-ccm-summary-minutes.pdf 6 Packet Pg. 64 City of Palo Alto Page 4 Discussion Based on its initial discussion, the Council appears to be leaning toward an interpretation that would require the property owner to maintain a mix of nonconforming uses at 340 Portage (former cannery building) in an approximate ratio relative to each other nonconforming land use as it existed in 2006. As nonconforming uses are abandoned or discontinued, such as Fry’s Electronics, the floor area associated with the remaining nonconforming uses must be adjusted to align with the 2006 ratio. The following table summarizes how floor area would be approximately distributed with this interpretation: Use Floor Area in 2006 Ratio of Uses 2006 Floor Area in 2016 Ratio of Uses in 2016 Floor Area Following Interpretation Ratio of Nonconforming Uses Following Interpretation R&D 123,368 53.3% 142,744 61.4% 82,056 55.3% Retail 98,339 42.4% 84,000 36.1% 59,947 40.4% Warehouse 10,000 4.3% 5,639 2.5% 6,380 4.3% Conforming Uses N/A N/A N/A N/A 84,000 N/A Total 231,707 100% 232,383 100% 232,383 100% This interpretation retains the mix of uses previously authorized for this site, including retail, and requires a reduction in the R&D floor area. It also affirms staff’s conclusion that the Fry’s Electronics use has been discontinued in accordance with the municipal code section referenced above and in contrast to the property owner’s arguments provided in Attachment D. Accordingly, the 84,000 square feet of discontinued nonconforming floor area could only be repurposed toward a conforming RM-30 use; the remaining 148,383 gets rebalanced as shown in the table above. During the June 14, 2021 Council hearing, some Councilmembers suggested that the property owner be given reasonable time to rebalance their uses in accordance with this interpretation. At least one councilmember suggested providing one year to bring the site into compliance. Staff’s recommendation is to base this compliance on the termination date of existing leases, including lease options, in order to reduce impacts to operational tenants, to limit vacancies, and to reduce legal risks. Amortization At the June 14, 2021 hearing, some Councilmembers expressed an interest in understanding the amortization process for the site. Amortization is a process by which the City requires a land use(s) or building type to be removed or abated and made to comply with current regulations. The current site has some commercial and R&D land uses, but the underlying zoning of the site is residential. If the City Council wanted to see these nonresidential uses abated, it could 6 Packet Pg. 65 City of Palo Alto Page 5 explore amortization as a means of requiring only compliant land uses within a certain period of time. If Council is interested in pursuing amortization for this site, staff would work to obtain a cost and scope from a qualified consultant in order to prepare an analysis of property owner costs for past site improvements. This is the necessary first step in establishing an enforceable timeframe for amortization of the site. Staff would return to Council for approval of the contract and a budget amendment to fund preparation of this study. This request is not included in the staff recommendation; if the Council were interested in pursuing this, the following direction should be provided in the Council’s motion: Direct staff to take initial steps to study the potential amortization of the nonconforming uses on the site and return to Council. Other Applications Staff acknowledges that there are currently other relevant pending applications and ongoing City efforts related to the subject property. These include the City’s proposed North Ventura Coordinated Area Plan efforts as well three applicant-proposed projects: 1) a request for a zoning code amendment to remove the language “in approximately the same ratio of uses existing as of October 16, 2006” from the municipal code; 2) a proposed multi-family residential project on a portion of the subject property, referred to as the 200 Portage Project; and 3) a Vesting Tentative Map to subdivide the site into two parcels and for a condominium subdivision for the 91 units proposed at 200 Portage. These other pending projects are not the subject of this staff report and Council should refrain from forming opinions regarding these proposed applications. The purpose of Council’s interpretation is to understand how the current code affects the types and size of uses within the building, as it exists today. However, Council’s interpretation of the code may have implications that relate to these projects; therefore, for informational purposes, Attachment E includes a summary of these ongoing projects. Policy Implications Council’s interpretation of the City’s code with respect to the 3200 Park/340 Portage will provide clear direction to staff and the property owner regarding the allowed uses and size of such uses in the building. Council’s interpretation of the code would not introduce new language that may have policy implications. Council’s interpretation of the existing code could alter the mix of uses in the building but would not result in an increase in square footage or a change to the types of conforming and nonconforming uses allowed at the site. Without a legislative change (e.g. municipal code text 6 Packet Pg. 66 City of Palo Alto Page 6 amendment), the applicant would not be allowed to expand the square footage of active non- conforming uses in the building and the interpretation would require a reduction in R&D floor area. The building is not subject to the retail preservation ordinance under PAMC Section 18.40.180 because the existing retail use is no longer a conforming use within the RM-30 zone district. The building is within the City’s Annual Office Limit area and Research & Development uses are subject to the annual office cap. Resource Impact Council’s clarification on the interpretation of this code would not have a fiscal impact on the City. If Council directs staff to begin studies in order to consider amortization of this site staff would return to Council with a proposed contract and associated budget amendment for consideration. Timeline This code interpretation provides immediate clarity to the property owner and staff regarding the allowed mix of nonconforming uses in the building. Staff anticipates that the property owner would utilize the information to inform any future proposals for this property or to otherwise determine if the building is currently in conformance with the code. Stakeholder Engagement The City has received wide range of feedback with respect to the desired future uses of the site as part of the NVCAP process, which are reflected in the proposed NVCAP Alternatives. Staff received a letter from one members of the public prior to the June Council hearing. The letter requested the legislative history of the subject code section. This information is provided on the City’s webpage5 and was also included throughout the previous staff report. The member of the public also voiced concern about amending language in the code without going through the code amendment process. The request requires interpretation of the existing code language, not a code amendment, and is not subject to the code amendment process. Environmental Review Council’s interpretation of the existing code does not qualify as a project in accordance with the California Environmental Quality Act as defined in Public Resources Code 21065. Attachments: Attachment6.a: Attachment A: Location Map (PDF) Attachment6.b: Attachment B: February 9, 2021 Letter from Sobrato to City (PDF) 5 Links to previous staff reports, minutes, and ordinances referenced in this report are available at: https://www.cityofpaloalto.org/News-Articles/Planning-and-Development-Services/340-Portage 6 Packet Pg. 67 City of Palo Alto Page 7 Attachment6.c: Attachment C: April 22, 2021 Letter from City to Property Owner (PDF) Attachment6.d: Attachment D: May 12, 2021 Letter from Sobrato to City re non- conforming uses (PDF) Attachment6.e: Attachment E: March 9, 2020 Letter from City to Property Owner (PDF) 6 Packet Pg. 68 132-39-071 132-39-043 132-39-042 132-33-033 132-32-034 132-32-033 132-32-028 132-37-044 132-37-042 132-38-046 132-32-026 132-32-025 1 132-33-042 132-33-005 132-33-004 132-33-002 132-33-022 132-33-045 132-33-043 PARKING GARAGE 199.7' 149.7' 65.6' 149.7' 65.7' 199.7' 50.0' 199.7' 50.0' 199.7' 50.0' 199.7' 50.0' 50.0' 50.0' 49.9' 150.0' 150.0' 166.4' 32.5' 1.9' 108.2' 6.6' 270.2' 100.0' 10.0' 198.3' 100.0' 199.7' 98.9' 71.4' 90.0' 199.7'54.7' 26.3' 116.5' 55.4' 116.5' 55.4' 105.0' 25.0' 105.0' 25.0' 55.4' 116.5' 55.4' 116.5'55.4' 116.5' 55.4' 116.5'55.4' 116.5' 55.4' 116.5' 9.8' 69.0' 4.6' 45.4' 78.8' 50.0' 75.0'105.0' 75.0'105.0' 90.0' 550 120.0' 25.0' 47.1' 120.0' 50.0' 120.0' 50.0' 120.0' 50.0' 120.0' 50.0' 120.0' 50.0' 0' 45.0' 105.0' 50.0' 28.8' 105.0' 28.8' 105.0' 25.0' 105.0' 25.0' 105.0' 78.8' 55.0' 78.8' 55.0' 50.0' 51.6' 3.4'.1'.1'.4' 49.5' 105.0' 50.0' 50.0' 60 30.0' 47.1' 25.0' 63.0' 139.6' 50.0' 139.6' 50.0' 754.2' 119.7' 50.0' 119.7' 50.0' 119.7' 50.0' 119.7' 50.0' 119.7' 50.0' 119.7' 50.0' 119.7' 50.0'119.7' 50.0' 233.0' 282.3' 116.5' 151.0' 143.4' 50.0' 105.0' 105.0' 50.0' 55.4' 116.5' 55.4' 116.5' 105.0 50.0' 116.5' 49.2' 116.5' 49.2' 137.6' 158.7' 39.0' 88.7' 78.0' 7.3' 50.0' 103.2' 49.2' 116.5' 49.2' 116.5'49.2' 116.5' 49.2' 116.5'49.2' 116.5' 49.2' 116.5'49.2' 116.5' 49.2' 116.5'49.2' 116.5' 49.2' 116.5'49.2' 116.5' 49.2' 116.5'49.2' 116.5' 49.2' 116.5'49.2' 116.5' 49.2' 116.5' 49.2' 116.5' 49.2' 116.5' 49.2' 116.5' 49.2' 116.5' 49.2' 116.5' 49.2' 116.5' 49.2' 116.5' 49.2' 116.5' 49.2' 116.5' 49.2' 116.5' 49.2' 116.5' 49.2' 116.5' 49.2' 116.5' 49.2' 116.5' 49.2' 116.5' 49.2' 116.5' 49.2' 116.5' 49.2' 116.5' 116.5' 49.2' 116.5' 116.5' 49.2' 49.2' 80.2' 103.2' 79.9' 110.2' 116.5' 49.2' 116.5' 49.2' 90.0' 44.8' 90.0' 4 44.8' 90.0' 50.0' 134.5' 50.0' 134.5' 55.3' 65.0' 79.4' 60.3' 79.4' 52.7'95.9' 50.0' 95.9' 51.8' 109.3' 50.0' 109.3' 51.1' 119.7' 50.0' 119.3' 55.3' 105.6' 119.7 50.0' 119.7' 50.0' 119.7' 50.6' 119.7' 50.0' 119.7' 50.0' 119.7' 50.0' 32.0' 17.5'34.6' 97.9' 165.0' 137.0' 50.0' 134.5' 50.0' 134.5'50.0' 134.5' 50.0' 134.5'50.0' 134.5' 50.0' 134.5'50.0' 134.5' 50.0' 134.5'60.0' 134.5' 60.0' 134.5'60.0' 134.5' 60.0' 134.5'60.0' 134.5' 60.0' 134.5' 48.7' 13 45.0' 131345 60.0' 134.5' 60.0' 134.5' 60.0' 134.5'134.5' 60.0' 134.5' 60.0' 50.0' 134.5' 50.0' 134.5'134.5' 50.0' 134.5' 66.7'90.0' 4.0' 60.0' 54.0' 105.0' 50.0' 221.4' 221.4' 186.2' 186.2' 159.0' 159.0'159. 0' 159.0' 98.0' 98.0'159.0'159.0'159.0' 159.0' 24.6' 24.6' 77.9' 77.9' 159.0' 159.0' 91.7' 91.7' 134.5' 134.5' 48.8' 148.7' 51.0' 51.0' 148.7' 200.0' 200.0' 200.0' 200.0' 150.0' 150.0' 99.8' 9 199.7' 165.4 85.1 34.6 150.0' 50.0' 100.0' 50.0' 100.0' 149.7' 149.7' 149.7' 115.7' 165.7' 100.0'50.0' 85.1 199.7' 149.7' 250.0' 98.8' 67.2' 166.4'166.4' 119.5' 119.5' 119.5' 119.5' 119.5' 50.0' 50.0' 50.0' 50.0' 50.0' 50.0' 50.0' 250.0' 20.0' 78.5'78.5' 198.4'291.2' 370.9' 188.2' 427.3' 13.9'56.2' 123.4' 164.9 199.7 109.85' 458.75' 239.70' 150.05' 129.85' 308.64' 129.85' 102.65' 129.85' 102.56 129.85' 205.99' 129.85' 206.05' 478.7' 21.8' 109.8' 19.8' 38.4' 38.4' 15.1' 15.1' 43.1' 47.3' 50.2' 133.3' 49.2' 49.2' 92.2'92.2' 116.5'116.5' 110.8' 78.3' 22.4' 35.9' LAMBERT AVENUE EL CAMINO REAL EL D ORADO E MERSON STREET LAMBERT AVENUE CHESTNUT AVENUE ASH STREET BIRCH STREET BIRCH STREET PARK BOULEVARD ALMA STREET ACACIA AVENUE PORTAGE AVENUE PENINSULA CORRIDOR JOINT PO W ERS BOARD RM PF PF RM-30 R-2 G M 20 LM GM (AD) CS (AD) CS This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. Legend Project Site abc 3200 Park/340 Portage Building 0' 209' 3200 Park/340 Portage CITY O F PALO A L TO IN C O R P O R ATE D C ALIFOR N IA P a l o A l t oT h e C i t y o f A P RIL 16 1894 The City of Palo Alto assumes no responsibility for any errors ©1989 to 2016 City of Palo Alto chodgki, 2021-05-24 13:13:50 (\\cc-maps\Encompass\Admin\Personal\Planning.mdb) 6.a Packet Pg. 69 857 Montgomery Street, San Francisco, CA 94133 | 415.364.0000 | lighthousepublicaffairs.com Jonathan Lait Planning Director City of Palo Alto City Hall, 5th Floor 250 Hamilton Avenue Palo Alto, CA 94301 Re: 3200 Park Boulevard/340 Portage Avenue – Confirmation of Allowed Legal Non- Conforming Uses Dear Jonathan: On behalf of the Sobrato Organization, to support its ongoing marketing and re-tenanting efforts for the above-referenced property (“Property”), this letter requests additional confirmation of the zoning applicable to the Property. The Property is currently zoned RM-30, but is currently developed and has been continuously used for the following allowed non-conforming uses: retail, research and development/office, warehouse and storage uses pursuant to the following property-specific non-conforming use provision, Palo Alto Municipal Code Section 18.70.070(b)(2)(E) as follows: (E) The nonconforming uses of the property at 3200 Park Boulevard/340 Portage Avenue/Olive Avenue for retail, research and development, warehouse, and storage uses are permitted in approximately the same ratio of uses existing as of October 16, 2006, subject to the following limitations: (1) retail uses shall not exceed 60,000 square feet, and (2) truck deliveries and other noisy outdoor activities shall be limited to the hours of 8:00 a.m. to 9:00 p.m. weekdays and 9:00 a.m. to 9:00 p.m. weekends. This provision was last amended on October 16, 2006, and Sobrato last obtained a determination from planning on January 19, 2016 its tenant Playground Global. A copy of that approval is enclosed for ease of reference. According to this provision and the 2016 interpretation, we conclude that the owner has the right to re-tenant any part of the vacant space in the Property with any of the following legal nonconforming uses in the square footages that existed as of October 16, 2006, subject to the limitations noted above with respect to maximum retail, truck delivery and noisy outdoor activities. We note that the property included approximately 98,339 sf of retail in 2006. With the 60,000 sf retail maximum, approximately 38,339 sf of the building is therefore unallocated. We conclude that this square footage can be allocated among the remaining allowed uses on an approximately proportional basis on a case-by-case basis. • No more than a maximum of 60,000 sf of retail; • Approximately 123,386 sf of research and development/office; • Approximately 10,000 sf of warehouse and/or storage. 6.b Packet Pg. 70 LIGHTHOUSE PUBLIC AFFAIRS 2 We would greatly appreciate your confirmation as soon as possible to facilitate the owner’s re- tenanting efforts. If you have any questions or it would be helpful to discuss by phone, please let me know. Sincerely yours, Steve Emslie Partner, Lighthouse Public Affairs Enclosure Cc: Ed Shikada, City Manager (Ed.Shikada@CityofPaloAlto.org) Rachael Tanner, Assistant Planning Director (Rachael.Tanner@CityofPaloAlto.org) Tim Steele (tsteele@sobrato.com) Robert Tersini (rtersini@sobrato.com) 6.b Packet Pg. 71 6.b Packet Pg. 72 6.b Packet Pg. 73 6.b Packet Pg. 74 6.b Packet Pg. 75 6.b Packet Pg. 76 PLANNING & DEVELOPMENT SERVICES 250 Hamilton Avenue, 5th Floor Palo Alto, CA 94301 (650) 329-2441 CITY OF PALO ALTO | 250 HAMILTON AVENUE, PALO ALTO, CA. 94301 | 650-329-2441 April 22, 2021 Tim Steele, Sobrato Organization 599 Castro Street, Suite 400 Mountain View, CA 94041 Email: tsteele@sobrato.com RE: 3200 Park Boulevard/340 Portage Avenue; Allowed Legal Non-Conforming Uses This is in response to your letter dated February 11, 2021 and our recent conversations regarding allowed non-conforming uses at this property. Non-conforming uses are governed by Chapter 18.70 of the Palo Alto Municipal Code (PAMC). This includes not only PAMC Section 18.70.070, subsection (b)(2)(E), which you cite, regarding required termination of non-conforming uses, but also PAMC sections 18.70.020 through 18.70.060 regarding limitations on expansion, change, discontinuance, facility maintenance and facility replacement with respect to non-conforming uses.1 In particular, it appears that PAMC section 18.70.040, subsection (b), may now be relevant to the subject property. That section provides: “[A] nonconforming use of facilities designed and constructed for nonresidential purposes which is discontinued or abandoned or otherwise ceases operation and use of the site for a period of one year or more shall not be resumed, and all subsequent use of such site and facilities thereon shall conform to this title.” The City understands that approximately 84,000 square feet of the site, which used to house Fry’s Electronics, has now been vacant for more than one year. If so, consistent with the City’s long-standing application of Section 18.70.040(b), any subsequent uses of this space must conform to the current RM-30 zoning. Allowed uses under this zoning are outlined in Table 2 of PAMC Chapter 18.13. The remaining square footage on this site may continue in non-conforming use, but only in accordance with PAMC Section 18.70.070. That section generally provides that non-conforming uses are required to terminate within a certain timeframe based on the type of construction for the building, or within 15 years from the date the use became non-conforming,2 unless a site-specific exception applies. The subject property enjoys a site-specific exception in subsection (b)(2)(E), which currently states: 1 See the attached letter, dated March 9, 2020, from Assistant City Attorney Albert Yang regarding allowed uses on the site. 2 The site was rezoned to RM-30 by Ordinance 4315, which took effect in January 1996. DocuSign Envelope ID: 5440F8E5-BDF6-4493-AF39-A2C9C6B33241 6.c Packet Pg. 77 CITY OF PALO ALTO | 250 HAMILTON AVENUE, PALO ALTO, CA. 94301 | 650-329-2441 “The nonconforming uses of the property at 3200 Park Boulevard/340 Portage Avenue/Olive Avenue for retail, research and development, warehouse, and storage uses are permitted in approximately the same ratio of uses existing as of October 16, 2006, subject to the following limitations: (1) retail uses shall not exceed 60,000 square feet, and (2) truck deliveries and other noisy outdoor activities shall be limited to the hours of 8:00 a.m. to 9:00 p.m. weekdays and 9:00 a.m. to 9:00 p.m. weekends.” As we have discussed in recent weeks, this language is susceptible to more than one interpretation. In particular, when the square footage devoted to non-conforming uses changes, there is a question about how to interpret the phrase “in approximately the same ratio of uses existing as of October 16, 2006.” This phrase could be interpreted to require that the ratio among the various non-conforming uses remain the same, such that any non-conforming uses of the site would be a mix of retail, R&D/office, and warehouse uses. Alternatively, the phrase could be interpreted, as you suggest in your February 2021 letter, to require approximately the same ratio of each individual non-conforming use to total square footage on the site (i.e. the discontinuance of one non-conforming use does not affect the remaining non- conforming uses on the site). The following tables illustrate these alternative interpretations: Baseline: The City understands that the uses on the site as of 2006 were as follows: Use Square footage (sf) Percentage R&D 123,368 53% Retail 98,339 42% Warehouse 10,000 5% In 2016, the City approved the following uses on the site as a sufficient approximation of the ratios that existed in 2006, and we understand this to be the status of the site as of January 2021: Use Square footage (sf) Percentage R&D 142,744 61% Retail 84,000 36% Warehouse 5,639 3% Alternative 1: As the non-conforming uses in the 84,000 square foot space formerly occupied by Fry’s Electronics have been discontinued, an interpretation requiring the same ratio among the various non-conforming uses would result in the following distribution, using the 2006 baseline: Use Square footage (sf) Percentage of non- conforming sf R&D 79,650 54% DocuSign Envelope ID: 5440F8E5-BDF6-4493-AF39-A2C9C6B33241 6.c Packet Pg. 78 CITY OF PALO ALTO | 250 HAMILTON AVENUE, PALO ALTO, CA. 94301 | 650-329-2441 Retail 60,000 41% Warehouse 7350 5% Conforming Uses 84,000 N/A Alternative 2: By contrast, an interpretation requiring that individual non-conforming uses retain an approximate ratio to overall site square footage would result in the following distribution, using the 2016 baseline: Use Square footage (sf) Percentage of total site sf R&D 142,744 61% Retail 0 0% Warehouse 5,639 3% Conforming Uses 84,000 36% Although staff believe interpretation Alternative 1 is most consistent with the plain language of the code, we acknowledge that it does present significant practical challenges. This interpretation would potentially require termination of existing leases to rebalance the mix of non-conforming uses. Meanwhile, interpretation Alternative 2 is more similar to typical regulation of non-conforming uses, which would allow existing uses to remain, so long as they do not intensify, when a portion of the site converts to a conforming use. In July 2020, you applied for a text amendment to PAMC 18.70.070, subsection (b)(2)(E), seeking to strike the requirement that non-conforming uses remain in the ratios that existed as of October 2006. At your request, staff suspended processing the text amendment following submission of an application for a housing development on part of the site. While staff is processing that housing project, there remains a need for staff to receive direction from the City Council concerning the previously cited code section related to the ratio of non-conforming uses at 340 Portage. Staff has tentatively scheduled this discussion for June 14, 2021. If you have any questions in the interim, please let me know. Sincerely, Jonathan Lait Director of Planning & Development Services DocuSign Envelope ID: 5440F8E5-BDF6-4493-AF39-A2C9C6B33241 6.c Packet Pg. 79 Certificate Of Completion Envelope Id: 5440F8E5BDF64493AF39A2C9C6B33241 Status: Completed Subject: Please DocuSign: 340 Portage (Sobrato) / Nonconforming Use Response Letter Source Envelope: Document Pages: 3 Signatures: 1 Envelope Originator: Certificate Pages: 1 Initials: 0 Madina Klicheva AutoNav: Enabled EnvelopeId Stamping: Enabled Time Zone: (UTC-08:00) Pacific Time (US & Canada) 250 Hamilton Ave Palo Alto , CA 94301 Madina.Klicheva@CityofPaloAlto.org IP Address: 199.33.32.254 Record Tracking Status: Original 4/22/2021 8:57:18 AM Holder: Madina Klicheva Madina.Klicheva@CityofPaloAlto.org Location: DocuSign Security Appliance Status: Connected Pool: StateLocal Storage Appliance Status: Connected Pool: City of Palo Alto Location: DocuSign Signer Events Signature Timestamp Jonathan Lait Jonathan.Lait@CityofPaloAlto.org Interim Director Planning and Community Environment City of Palo Alto Security Level: Email, Account Authentication (None) Signature Adoption: Uploaded Signature Image Using IP Address: 99.88.42.180 Sent: 4/22/2021 9:02:28 AM Viewed: 4/22/2021 10:55:35 AM Signed: 4/22/2021 10:56:33 AM Electronic Record and Signature Disclosure: Not Offered via DocuSign In Person Signer Events Signature Timestamp Editor Delivery Events Status Timestamp Agent Delivery Events Status Timestamp Intermediary Delivery Events Status Timestamp Certified Delivery Events Status Timestamp Carbon Copy Events Status Timestamp Witness Events Signature Timestamp Notary Events Signature Timestamp Envelope Summary Events Status Timestamps Envelope Sent Hashed/Encrypted 4/22/2021 9:02:28 AM Certified Delivered Security Checked 4/22/2021 10:55:35 AM Signing Complete Security Checked 4/22/2021 10:56:33 AM Completed Security Checked 4/22/2021 10:56:33 AM Payment Events Status Timestamps 6.c Packet Pg. 80 599 Castro Street, Suite 400 Mountain View, CA 94041 www.sobrato.com May 13th, 2021 Jonathan Lait Director of Planning and Development Services City of Palo Alto 250 Hamilton Ave., 5th Floor Palo Alto, CA 94301 Re: 3200 Park Boulevard/340 Portage Avenue; Allowed Legal Non-Conforming Uses Dear Jonathan, We received your letter dated April 22, 2021 responding to our February 11, 2021 letter and our recent discussions. This letter addresses a few items in your letter, and, if helpful, we remain available to discuss further in preparation for the upcoming June 14, 2021 City Council discussion. 1. Chapter 18.70 of the Palo Alto Municipal Code (PAMC) Applies to the Uses. We agree with your finding regarding the applicability of PAMC sections 18.70.020 through 18.70.060 to the existing non-conforming uses (limitations on expansion, change, discontinuance, facility maintenance and facility replacement) in addition to Section 18.70.070(b)(2)(E). We have complied - and will continue to comply with - these sections in the operation and re-tenanting of the site. 2. There Has Been No Discontinuance or Abandonment of the Fry’s Space We must respectfully and strongly disagree with the suggestion in the letter that the space formerly occupied by Fry’s has been “discontinued” or “abandoned” for more than one year within the meaning of PAMC Section 18.70.040, subsection (b). To the contrary, we have remained diligent, active and continuous in our efforts to re-tenant the vacant space during the COVID-19 global pandemic, which has created enormous challenges and affected retail even more than most other types of land use. We note the City adopted a formal 180-day extension of land use entitlements and processing in April 2020, and while it does not apply directly it acknowledges the significant disruptive nature of the pandemic. Our diligent efforts included multiple requests for interpretation (and possible amendment) to assist in these efforts to you and your team, which unfortunately did not result in any clear direction regarding the Fry's space. We were also actively working with brokers and potential tenants, most notably extensive negotiations with Target. Attachment A summarizes the history since before we purchased the property in 2010, and our extensive efforts to re-tenant the former Fry's site. As you know, there is no specific definition of these terms in the PAMC or in any published City policies, and is made on a case by case, factual basis. We believe the facts and circumstances, particularly during the COVID-19 pandemic, confirm there has been no abandonment or discontinuance. We would appreciate your confirmation that the use has not been abandoned or 6.d Packet Pg. 81 May 13, 2021 Page 2 discontinued within the meaning of PAMC Section 18.70.040, subsection (b) at your earliest convenience. 3. Alternative 2 Represents the Most Consistent and Practical Interpretation We also appreciate you clearly laying out the City’s two alternative interpretations of PAMC Section 18.70.070(b)(2)(E). For the reasons stated in your letter, we concur that Alternative 1 presents significant practical and legal, contractual challenges and would require termination of existing leases to “rebalance” the site and significantly impact the economic viability of the property. We also concur that Alternative 2 is more similar to typical regulation of multiple different non-conforming uses – particularly those that are within an existing structure – and is how we interpret the ordinance to apply to our particular property. We anticipate submitting applications to relocate certain existing, allowed nonconforming uses within the building to alternate, more suitable locations in the building in the near future. Such changes will be fully consistent with Chapter 18.70, and we look forward to working with you on those efforts. If you need any additional information in preparation for the City Council meeting, please do not hesitate to reach out to me. Sincerely, Tim Steele Cc: Rachel Tanner, City of Palo Alto Claire Raybould, City of Palo Alto Albert Yang, City of Palo Alto Robert Tersini, The Sobrato Organization Steve Emslie, Lighthouse Public Affairs Richard Hackmann, Lighthouse Public Affairs Tamsen Plume, Holland & Knight Genna Yarkin, Holland & Knight 6.d Packet Pg. 82 May 13, 2021 Page 3 Attachment A • We communicated with the City as part of our purchase due diligence in late 2010, prior to the purchase of the site. The City provided a copy of an economic study of the Fry’s site and identified the 2006 site-specific non-confirming use provision. • We purchased the site in May 2011. • We continued to meet with Curtis Williams-Director of Planning, Amy French-Acting Assistant Director of Planning, Elena Lee-Senior Planner, Thomas Fehrenbach-Economic Development Manager and Steve Emslie-Deputy City Manager to discuss the Cal Ave and Fry’s study. The Planning Director indicated in a public forum the City does not expect Fry’s to occupy the site beyond 2014. • We met with City staff in December of 2012 and 2013 to discuss the California Plan and the City’s consideration of a possible new zoning designation for Fry’s should Fry’s not renew its lease, including CS mixed use. • Fry’s exercised its last 5 year option in December 2013. • We continued active discussions with Planning staff and elected regarding Fry’s lease, reuse of vacated space, the Comp Plan, Housing Element, Office Cap and potential redevelopment. • June 2015, we agreed to contribute to the City’s planning efforts in the area including the Fry’s site. • July 2015, Playground Global requested expanding into some of the surplus Fry’s space. • June 2016, the City provided acknowledgement of the square foot adjustments for the expansion of Playground Global. • May 2017, the Planning Director approached Sobrato to suggest the City would like to reapplying to the VTA/MTC for another Planning Grant for the Fry’s area. Application identified October 2019 as the Project Completion target. • October 2017, we executed a funding agreement with the City for $250,000 towards the NVCAP • Fall 2018, NVCAP process commenced, and we continued to market the Fry’s site in preparation for the end of the lease. • March 2019, we began active discussions with Target to lease the Fry’s space upon their expiration, and communicated this opportunity to City staff. • At the same time, John Sobrato informed the City Council that Sobrato is not interested in redeveloping the site and prefers a continuation of existing uses once Fry’s vacates the site. • During the fall and winter of 2019, we conducted meetings with staff and City Council members to discuss tenanting a portion of Fry’s space with Target. We conducted site visits to show the vacating Fry’s space. We noted that Target would have needed only 30,000 +/-, so we sought feedback and options to re-tenant the remaining as office to support the economics of refurbishing the architecturally valuable space in the existing building. • December 2019, the City Council discussed additional funding for the NVCAP. Sobrato publically reiterated it has no interest or intent to redevelop the site once Fry’s vacates. Several City Council members ask at the time the purpose of the NVCAP if the primary site is not going to redevelop. • Discussions continued with Target throughout 2019 and into 2020. 6.d Packet Pg. 83 May 13, 2021 Page 4 • February 2020, H&K submitted a letter on Sobrato’s behalf to the City Attorney seeking a zoning determination regarding the uses of the existing building to support marketing and re-tenanting activities, and received a response letter from Albert Yang on March 9, 2020 that confirmed the RM-30 zoning as well as the applicability of PAMC Chapter 18.70, including Section 18.70.070(b)(2)(E). • March 2020, the COVID-19 global pandemic begins and continues through the date of this letter. • July 2020, Sobrato submitted a request for a Zoning Text Amendment for 340 Portage. This letter also discusses the ongoing negotiations with Target at approximately 30,000 sq ft of the vacated Fry’s space and the need for clarity in the applicable non- conforming zoning language to be able to move forward with these discussions. We were made it clear that to afford the required code updates and lease to Target at a market rate, we would need to re-tenant the remaining vacant space as R/D office. • August 2020, Palo Alto Online published an article about Target’s interest in the old Fry’s space, and the City rethinking housing on the site. • September 2020, City staff indicated they would not support the application for a text change - with no specific explanation or alternative presented - and expressed disappointment about not having proposed any housing on the site. Staff also indicated a November or December 2020 tentative date to take text change request to Planning Commission. No hearing was scheduled, and Sobrato finally asked that it be put on hold. At the same time, staff confirmed that the City’s Retail Preservation Ordinance does not apply, but that the Office Cap does • September 2020, Target withdrew from Portage lease discussions. Marketing efforts commenced, but are hampered by the COVID-19 pandemic, particularly notable for retail uses. • February 3, 2021, Sobrato sent a letter through Lighthouse Public Affairs to the City again seeking confirmation of the non-conforming uses of the site submitted to the City to support marketing and re-tenanting efforts in light of Target’s withdrawal and lack of previous responses. The second letter request is the subject of the current discussions. 6.d Packet Pg. 84 1 March 9, 2020 Via Electronic Mail Tamsen.plume@hklaw.com Tamsen Plume HOLLAND & KNIGHT LLP 50 California Street, Suite 2800 San Francisco, CA 94111 Re: 3200 Park Boulevard/ 340 Portage Avenue Dear Ms. Plume, I write in response to your letter of February 12, 2020, seeking conformation of the zoning applicable to the above-referenced property (“Property”). The Property is zoned RM-30 and may be used for any of the uses specified for that district in Section 18.13.030 of the Palo Alto Municipal Code (“PAMC”). The Property is also subject to the non-conforming use provisions of PAMC Chapter 18.70. As you note, pursuant to Section 18.70.070. subd. (b)(2)(E), the Property has not been required to terminate and may continue the following non-conforming uses, subject to certain limitations: retail, research and development, warehouse, and storage. The limitations specific to the Property include: 1) retail uses shall not exceed 60,000 square feet; 2) truck deliveries and other noisy outdoor activities shall be limited to the hours of 8:00 a.m. to 9:00 p.m. weekdays and 9:00 a.m. to 9:00 p.m. weekends; and 3) the ratio of non-conforming uses shall remain approximately the same as existed as of October 16, 2006. In addition to the Property-specific limitations provided in Section 18.70.070(b)(2)(E), please note that the Property is subject to the generally-applicable limitations on expansion, change, discontinuance, facility maintenance, and facility replacement provided in Sections 18.70.020 through 18.70.060. Please do not hesitate to contact me with any questions or concerns. Sincerely, /s/ Albert S. Yang Albert S. Yang Assistant City Attorney 6.e Packet Pg. 85