HomeMy WebLinkAbout2026-03-18 Economic Development Committee Agenda PacketECONOMIC DEVELOPMENT COMMITTEE
Regular Meeting
Wednesday, March 18, 2026
Community Meeting Room & Hybrid
4:15 PM
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public comments for agendized items will be accepted both in person and via Zoom for up to
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1 Regular Meeting March 18, 2026
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CALL TO ORDER
PUBLIC COMMENT
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speakers. Public Comment is limited to 30 minutes. Additional public comments, if any, will be heard at the end of the agenda.
ACTION ITEMS
1.Recommendation to the City Council to Adopt an Entertainment Zone Ordinance to
Establish an Entertainment Zone on California Avenue
2.Update on Car-free California Avenue Outdoor Activation Program and Slow Bicycle
Lanes
3.Business Retention, Expansion, and Attraction (BRE/A) Strategy.
4.Designation of City Council Liaisons with Local Business Stakeholders and the March
2026 Economic Development Activity Report
FUTURE MEETINGS AND AGENDAS
Members of the public may not speak to the item(s)
ADJOURNMENT
2 Regular Meeting March 18, 2026
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public inspection at www.paloalto.gov/agendas.
PUBLIC COMMENT INSTRUCTIONS
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3 Regular Meeting March 18, 2026
Materials related to an item on this agenda submitted to the Board after distribution of the agenda packet are available for
public inspection at www.paloalto.gov/agendas.
California Government Code §84308, commonly referred to as the "Levine Act," prohibits an
elected official of a local government agency from participating in a proceeding involving a
license, permit, or other entitlement for use if the official received a campaign contribution
exceeding $500 from a party or participant, including their agents, to the proceeding within the
last 12 months. A “license, permit, or other entitlement for use” includes most land use and
planning approvals and the approval of contracts that are not subject to lowest responsible bid
procedures and have a value over $50,000. A “party” is a person who files an application for, or
is the subject of, a proceeding involving a license, permit, or other entitlement for use. A
“participant” is a person who actively supports or opposes a particular decision in a proceeding
involving a license, permit, or other entitlement for use, and has a financial interest in the
decision. The Levine Act incorporates the definition of “financial interest” in the Political Reform
Act, which encompasses interests in business entities, real property, sources of income, sources
of gifts, and personal finances that may be affected by the Council’s actions. If you qualify as a
“party” or “participant” to a proceeding, and you have made a campaign contribution to a
Council Member exceeding $500 made within the last 12 months, you must disclose the
campaign contribution before making your comments.
4 Regular Meeting March 18, 2026
Materials related to an item on this agenda submitted to the Board after distribution of the agenda packet are available for
public inspection at www.paloalto.gov/agendas.
Economic Development Committee
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: City Manager
Meeting Date: March 18, 2026
Report #:2602-5984
TITLE
Recommendation to the City Council to Adopt an Entertainment Zone Ordinance to Establish an
Entertainment Zone on California Avenue
RECOMMENDATION
Recommend that the City Council adopt an ordinance adding Chapter 9.05 to the Palo Alto
Municipal Code to establish and regulate an entertainment zone pursuant to Senate Bill 969 to
allow for the sale of certain alcoholic beverages by licensed establishments for consumption
outside in the public right of way on the car-free portion of California Avenue subject to a
special event permit.
EXECUTIVE SUMMARY
The proposed Ordinance would enable the City of Palo Alto to designate and manage an
entertainment zone— a geographically defined area where the outdoor consumption of alcohol
purchased from licensed California Department of Alcoholic Beverage Control (ABC)
restaurants, bars, wineries, and breweries is temporarily allowed, subject to a special event
permit. This new tool supports local businesses and the City’s experience economy by enabling
more flexible, creative event formats on the car-free portion of California Avenue.
The Ordinance includes safety and permitting measures, developed in coordination with the
Palo Alto Police Department. Implementation will be managed through the Police Department’s
existing special event permitting framework, ensuring efficient coordination, regulatory
compliance, and facilitation for organizers and businesses. Upon approval and adoption, the
Ordinance will advance Palo Alto’s business vibrancy goals while strongly focusing on public
health and safety. A potential application of the entertainment zone Ordinance is an activation
involving the California Avenue monthly activations between April and September 2026, where
the Car Free California Avenue Zone allows attendees to enjoy alcoholic beverages from
multiple participating licensed businesses while gathering in a shared outdoor permitted event
space. This flexible approach enhances the City’s ability to support major events, enliven
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California Avenue’s commercial district, and create memorable public experiences that
strengthen Palo Alto‘s position as a vibrant destination.
BACKGROUND
Adopting an Ordinance that defines the entertainment zone’s boundaries, operating
hours, types of alcoholic beverages, and approved containers;
Establishing a process to verify that individuals consuming alcohol in the Entertainment
Zone are at least 21 years old;
Notifying local law enforcement and requesting feedback on potential health and safety
impacts, as well as strategies to mitigate those impacts; and
Conducting a biannual review of the entertainment zone’s operation to ensure it
maintains public health and safety, and reports findings to the ABC.
ANALYSIS
Staff suggests proceeding with the Entertainment Zone boundary that includes the car-free
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portion of California Avenue only for security and safety reasons. A phased approach will allow
staff to assess the California Avenue Entertainment Zone in the following 6-12 months and
return for the City Council’s consideration of a potential boundary extension based on specific
findings.
Implementation and Management
Permit Requirements for Activation
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submit an advance notice of their participation to ABC. Notifications must be submitted
annually by participating businesses through the ABC website, and failure to do so may result in
enforcement actions by the ABC or jeopardize the business’s alcohol license.
FISCAL/RESOURCE IMPACT
STAKEHOLDER ENGAGEMENT
ENVIRONMENTAL REVIEW
ATTACHMENTS
APPROVED BY:
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NOT YET APPROVED
1
Ordinance No. ____
Ordinance of the Council of the City of Palo Alto Creating New PAMC Chapter 9.05 (Entertainment
Zones) and Establishing an Entertainment Zone on a Portion of California Avenue
The Council of the City of Palo Alto does ORDAIN as follows:
SECTION 1. Findings and Declarations. The City Council finds and declares as follows:
A. In 2025, the State of California authorized cities to create entertainment zones with the
passage of SB 969 (2025), as codified in various sections of the Business and Professions
Code (BPC).
B. In compliance with BPC section 25692, City staff have notified and received feedback from
the Palo Alto Police Department about (1) potential health and safety impacts that might
be generated by the entertainment zone and strategies to mitigate those impacts; and (2)
the zone’s proposed boundaries, days and hours of operation, types of alcoholic
beverages permitted, and approved nonglass and nonmetal containers.
C. The City Council now desires to adopt this ordinance to create new Chapter 9.05 in the
Palo Alto Municipal Code (PAMC) to implement entertainment zones in Palo Alto. This
ordinance will also establish one entertainment zone on the car-free section of California
Avenue.
SECTION 2. New Chapter 9.05 (Entertainment Zones) is hereby added to Title 9 (Public
Peace, Morals, and Safety) of the Palo Alto Municipal Code to read as follows:
9.05.010 Purpose
The purpose of this Chapter is to implement Senate Bill 969 (2025) as codified in various
sections of the Business and Professions Code through the establishment and regulation of
entertainment zones to allow the purchase of open container alcoholic beverages for
consumption outside in common spaces such as plazas, public streets, sidewalks or public
rights-of-way during certain hours.
9.05.020 Definitions.
The definitions set forth in this Section shall govern the application and interpretation of this
Chapter.
"ABC" means the California Department of Alcoholic Beverage Control.
"Entertainment Zone" has the meaning set forth in Section 23039.5 of the California Business
and Professions Code, as may be amended; and their locations are described under PAMC
Section 9.05.050.
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Attachment A -
Entertainment Zone
Ordinance
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154_20260304_ts24 2
"Entertainment Zone Event" means an event that occurs within the boundaries of an
Entertainment Zone in compliance with state law, local laws, and regulations, including this
Chapter 9.05, and subject to the requirements of a special event permit issued by the City.
9.05.030 Entertainment zone requirements.
(a) All persons and legal entities of any type (including businesses and non-profit
organizations) sponsoring an Entertainment Zone Event, or selling alcoholic beverages at an
Entertainment Zone Event shall comply with all applicable state and local laws and regulations,
including:
1. All applicable ABC license and permitting requirements;
2. Sections 23357, 23358, 23396 of the California Business and Professions Code, as may
be amended from time to time regulating licensed beer manufacturers, licensed
winegrowers, and on-sale licensees, respectively;
3. All other laws governing the sale and consumption of alcoholic beverages; and
4. All permit requirements for special events issued by the City.
(b) Open alcoholic beverages may only be consumed within an Entertainment Zone during
an Entertainment Zone Event, subject to any other restrictions imposed by state or local law,
regulations, and permits.
(c) All open alcoholic beverages consumed during an Entertainment Zone Event may only
be purchased from a premises located within the Entertainment Zone that is authorized under
California Business and Professions Code Section 23357, 23358, 23396, as may be amended, to
permit the consumers to leave the premises with open containers of alcoholic beverages for
consumption off the premises, or an organization that is authorized by an ABC special event
permit or license to make such sales within the Entertainment Zone.
(d) All types of beer, wine, spirits, and other alcoholic beverages that are allowed for sale
and consumption by the State of California are permitted within an Entertainment Zone,
subject to any further restrictions imposed by regulations, license, or permit conditions. This
subsection does not authorize any specific ABC licensee to sell or serve types of alcohol not
permitted by their license.
9.05.040 Entertainment zone hours.
Outdoor consumption of alcoholic beverages during an Entertainment Zone Event shall only
occur between the hours of 12 noon and 10 p.m., inclusive, and on Sundays from 10 a.m. to 10
p.m., inclusive, subject to more restrictive days or times imposed by state or local law,
regulations, or permits.
9.05.050 Entertainment zone locations.
(a) Car-Free California Avenue. All plazas, pedestrian malls, public streets, sidewalks and
public rights-of-way that are located on either side of California Avenue between El Camino
Real and Birch Street are hereby designated as the California Avenue Entertainment Zone under
Sections 23039.5 and 25690 of the California and Business and Professions Code.
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Entertainment Zone
Ordinance
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9.05.060 Entertainment zone implementation.
(a) Within 90 days of the establishment or modification of an Entertainment Zone, the
City’s Office of Economic Development, following consultation with the Police Department,
shall provide the following information to ABC, pursuant to Section 25690 of the California
Business and Professions Code:
1. A copy of the ordinance establishing or modifying the Entertainment Zone;
2. Information as may be necessary to identify the boundaries of the Entertainment
Zone;
3. The days and hours of operation of the Entertainment Zone;
4. The types of alcoholic beverages permitted within the Entertainment Zone; and
5. The approved nonglass and nonmetal containers in which alcoholic beverages may be
authorized.
(b) The City Manager or designee is authorized to promulgate regulations under this
Chapter 9.05. The regulations shall include the following requirements:
1. Establish a process or procedure to readily identify individuals purchasing or
consuming alcoholic beverages within the Entertainment Zone as being 21 years of age
or older;
2. Any person or organization seeking a special events permit shall comply with the
insurance requirements applicable to that permit; and
3. Any additional requirements not otherwise imposed by state or local law, including
but not limited to additional requirements for approved beverage containers, additional
restrictions on hours and/or location of operation for the Entertainment Zone Events,
and other time, place and manner restrictions.
(c) Upon adoption or revision of the regulations, the Office of Economic Development shall
transmit a copy of the regulations to ABC as applicable under ABC requirements.
(d) Any holder of an ABC license or permit that wishes to allow customers to leave the
premises with open containers of alcoholic beverages for consumption off the premises during
an Entertainment Zone Event shall provide the City a copy of the notice provided to ABC under
Section 23357, 23358, 23396, or any other applicable section of the California Business and
Professions Code, as applicable, at the same time such notice is provided to ABC.
(e) In compliance with Section 25692(b) of the California Business and Professions Code,
the City Manager or designee shall review the operation of the entertainment zone every two
years following the adoption of the entertainment zone to ensure that the entertainment zone
is being maintained in a manner that protects the health and safety of the general public. This
review shall be conducted in consultation with the Palo Alto Police Department and any reports
produced during the review shall be made available to the Department upon request.
SECTION 3. Section 9.04.010 of Chapter 9.04 (Alcoholic Beverages) of Title 9 (Public
Peace, Morals, and Safety) of the Palo Alto Municipal Code is hereby amended to add
subsection (c) to read as follows (new text in underline):
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Entertainment Zone
Ordinance
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9.04.010 Streets, sidewalks, highways, alleys - Consumption of alcoholic beverages
prohibited.
(a) It shall be unlawful for any person to consume any alcoholic beverage upon any street,
sidewalk, highway or alley except as may be authorized by City Council.
(b) Notwithstanding subsection (a) of this section, alcoholic beverages may be consumed in a
city-owned or controlled right-of-way by patrons within legally permitted eating establishment
seating areas in accordance with, and subject to a conditional use permit issued pursuant to
§ 18.76.010 of this code.
(c) Notwithstanding subsection (a) of this section, alcoholic beverages may be consumed in a
city-owned or controlled right-of-way when duly permitted within an Entertainment Zone and
in full compliance with Chapter 9.05 (Entertainment Zones) and all applicable regulations, and
permit and license conditions.
SECTION 4. Severability. If any provision, clause, sentence or paragraph of this
ordinance, or the application to any person or circumstances, shall be held invalid, such
invalidity shall not affect the other provisions of this Ordinance which can be given effect
without the invalid provision or application and, to this end, the provisions of this Ordinance
are hereby declared to be severable.
SECTION 5. Effective Date. This ordinance shall be effective on the 31st day after
adoption.
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Entertainment Zone
Ordinance
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SECTION 6. CEQA. The City Council finds and determines that this Ordinance is
categorically exempt under CEQA regulation 15305 (minor alterations in land use limitations)
and 15323 (normal operations of facilities for public gatherings).
INTRODUCED:
PASSED:
AYES:
NOES:
ABSTENTIONS:
ABSENT:
ATTEST:
____________________________ ____________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
____________________________ ____________________________
Assistant City Attorney City Manager
____________________________
Economic Development Manager
____________________________
Chief of Police
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Entertainment Zone
Ordinance
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Entertainment Zone Participation Requirements and Guidelines
Detailed requirements and guidelines for participating in an established entertainment zone.
Requirements
Effective January 1, 2025, amendments to existing law allow for a city, county, or city and county
to enact an ordinance that creates entertainment zones within their local jurisdiction. An
established entertainment zone authorizes consumption of one or more types of alcoholic
beverages on public streets, sidewalks, or public rights-of-way located with the defined
boundaries of the entertainment zone. Licensees who would like to participate in an established
entertainment zone must meet the following requirements:
1. Must be either a licensed beer manufacturer (e.g., Type 01, 23, 75), a licensed
winegrower (e.g., Type 02), or an on-sale licensee (e.g., Type 41, 42, 47, 48). The
example license types provided are not inclusive of all license types that may be able to
participate. You should contact your local ABC office if you have questions about your
ability to participate in an established entertainment zone.
2. The licensed premises that will be participating must be located within the defined
boundaries of the established entertainment zone. You should contact the local
jurisdiction responsible for creating the entertainment zone if you have questions about
the defined boundaries.
3. Licensees who would like to participate in an established entertainment zone must notify
the department of their intent to do so on an annual basis. This can be done on-line via the
department’s Entertainment Zone Notification Tool.
Guidelines
1. Only those alcoholic beverages allowable by the license type and the ordinance
establishing the entertainment zone may be provided to patrons for purposes of
participating in the entertainment zone’s privileges.
2. Patrons leaving the participating licensed premises with an open alcoholic beverage
container must exit the premises directly into the established entertainment zone.
Additionally, this may only occur during the days and hours allowed by the ordinance
establishing the entertainment zone.
3. No alcoholic beverages purchased at a participating licensed premises may leave the
premises in an open glass or metal container.
4. Delivery of alcoholic beverages to consumers within the entertainment zone by the
participating licensee or a third-party delivery service is prohibited unless the delivery is
to a residential building or private business that is not a licensee.
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Attachment B - ABC
Entertainment Zone
Participation Requirements
and Guidelines
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5. Participating licensees whose privileges are restricted due to operating conditions or other
statutory restrictions may be prohibited from exercising entertainment zone privileges that
are contrary to those operating conditions or statutory restrictions. For example, a licensee
with an operating condition that limits sales and/or consumption of alcoholic beverages to
10:00 P.M. must still abide by this condition regardless of the time allowable by the
established entertainment zone. However, any operating conditions on the exercise of off-
sale privileges shall not apply to the removal of open alcoholic beverage containers from
the participating licensed premises for consumption within the entertainment zone.
It is the participating licensee’s responsibility to understand the privileges and restrictions associated
with participating in an established entertainment zone. Any violations associated with a licensee’s
participation in an established entertainment zone may subject the licensee to disciplinary action. Before
participating in an established entertainment zone, licensees should familiarize themselves with the
following sections of the ABC Act: Business and Professions Code Sections 23095.5, 23357, 23358, 23396,
25690, 25691, and 25692. Licensees should also be fully aware of the privileges and restrictions associated
with the ordinance that established the entertainment zone.
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Attachment B - ABC
Entertainment Zone
Participation Requirements
and Guidelines
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Economic Development Committee
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: City Manager
Meeting Date: March 18, 2026
Report #:2602-6017
TITLE
Update on car-free California Avenue Outdoor Activation Program and Slow Bicycle Lanes
RECOMMENDATION
Staff recommends that the Economic Development Committee receive this report on progress
advancing the Outdoor Activation Program and pedestrian and bicycle improvements on
California Avenue including preparation for review by the Architectural Review Board (ARB).
BACKGROUND
On March 10, 2025, the City Council permanently closed the car-free portions of California
Avenue (and Ramona Street), amending the Comprehensive Plan to create a new “community
street” classification for California Avenue. On June 17, 2025, staff redirected the Outdoor
Activation Program topic from an action item to a study session to obtain City Council and
public comments for additional community engagement. Public comments revolved around
year-round parklet activations, desire for permanent structures, cost burdens, and effective
parklet parameters, to name a few. In addition, the City Council expressed a desire for open
and transparent walls on parklets, merchants investing in durable and permanent structures,
year-round parklet activations, and pre-approved designs for swift approvals and an ARB
process to accommodate custom designs, to name a few.
Council directed staff to develop standards for parklet structures for California Avenue and to:
Utilize the ARB for design recommendations and review process for standard and
custom designs (to support year-round outdoor dining).
Pursue edge materials in addition to planters.
Design California Avenue to enable outdoor dining seating and square footage to be
close to equal to existing use
Staff’s response to the City Council direction is outlined in the Analysis section below.
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ANALYSIS
Staff established a work plan to update the Outdoor Activation Program to address the City
Council direction and public comments, utilize the ARB, re-engage with merchants, and employ
Urban Planning Partner’s team to update the pre-approved parklet plans. Key updates include:
Permit options with a range of investment to encourage program participation
Permit permanent parklets, both pre-approved and custom, subject to minor ARB
review and major ARB review for special cases
Developed 3 pre-approved parklet types for year-round dining with radiant heating
Adjusted outdoor seating areas to be equivalent to or greater than existing outdoor
dining square footage
Reduced structural requirements and increased overall transparency of parklets
Eliminated requiring planters with design guidance, if applicant desires planters
Eliminated large format tents
Streamlined encroachment permit process
Coordination across City departments regarding public safety
The updated Outdoor Activation Program adapts the citywide on-going parklet program for the
car-free portion of California Avenue. The Outdoor Activation Program will result in the removal
of large temporary tents and provide equivalent or greater space for outdoor dining. The
impending Outdoor Activation Standards defines parklet standards, permitting options, and
design guidance. In addition, the program will enable encroachment permits for year-round
outdoor dining with parklets and café seating in the public right-of-way. The program
addresses customer experience, accessibility, infrastructure constraints, and public safety with
building over underground high pressure gas mains. The City’s Utilities Department was
consulted, and they recommend a two-foot minimum setback from gas mains for structures to
enable a backhoe to operate.
Architecture Review Board (ARB) Ad Hoc Committee
Staff is collaborating with ARB Ad Hoc Committee members, Marton Jojarth and Mousam
Adcock, through periodic meetings resulting in valuable feedback. Staff has received feedback
from the Ad Hoc members and below is a summary of possible recommendations:
Increase the lightness and transparency of parklets, given it is a car-free environment,
reduce structural sizes, increase spans, and reduce the number of supports both on
sidewalk and roadway
For pre-approved parklets, reduce the size and blocky look of parklet roofs, add eaves
and reduce or eliminate fascia boards; modify the trellis design to provide more shade
More practical to design for 3 season weather – sun, wind, temperature and light rain,
however when rain and associated winds and cold temperatures occur, it may make
outdoor dining less desirable
Permit low curbs with windows up to 5 feet for wind protection yet keep the
environment transparent. Add roll down shades for seasonal sun, wind, and rain
protection which can be rolled up otherwise
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Where applicants request planters, provide guidance to control height of both planters
and plants to maintain openness and visibility
Rely on staff, including minor ARB review, and only have ARB review for special cases,
such as parklets of very large size, unusual roof form, exceedingly bright colors, or
unanticipated design features
Approved Parklet Plans
On February 9, 2026, the City Council approved an amendment for the on-call contract with
Urban Planning Partners who prepared the City’s adopted, pre-approved parklet plans.
Proposed adaptations for a car-free environment include lighter, more transparent structures, 3
options for year-round weather, and structural solutions to avoid pavement and sidewalk
attachments. The plan set will be updated per lessons learned from the implementation of the
current program. The proposed illustrative plan shows a hypothetical build-out where 19 of 20
existing restaurants can locate a pre-approved parklet in front or adjacent to their storefront.
The actual buildout of custom and pre-approved parklets will vary in location and size.
Two-Way Slow Bike Lanes
At the February 3, 2025, study session, the City Council requested the consideration of bicycle
speeds, conflicts with pedestrians, and potential parallel through routes that avoid the car-free
portion of California Avenue. On June 17, 2025, the City Council reaffirmed supporting
Cambridge Avenue as a route for thruway biking path, and directed staff to move forward with
signage and other calming measures to reduce bike speeds of California Avenue.
In response, staff has developed a concept design for slow-two-way bicycle lanes as well as
near term recommendations for bicycle speed calming features and signage to create a safe
and accessible pedestrian environment for users of all abilities. The design features a 22-foot
central access way for pedestrians, bicyclists, emergency and service vehicles. Design guidance
from the National Association of City Transportation Officials (NACTO) and Fehr & Peers for
California Avenue consists of the short segment of bicycle network and to:
Designate a bike facility as part of the street environment
Separate and adjust pedestrian and bicycle travel environments to reduce risk of
pedestrian and bicycle conflicts
Develop a pedestrian path with sufficient width to be a comfortable, two-way route
with direct access to attractive public space for "staying activities"
An adequate buffer separating two adjacent travel ways, however the buffer cannot
impede on emergency access or Farmers’ Market use
The proposed design provides two five-foot bike lanes, with a two-foot buffer on each side, for
a total of 14 feet, and an 8-foot-wide pedestrian path. Bike lanes have designated pedestrian
crossings. The buffer between pedestrian and bicycle lanes uses tactile warning indicators that
are not a tripping or bicycle crossing hazard but enable mobility and the visually impaired to be
aware of the bike lanes. Operationally, cyclists will be required to dismount and riding
prohibited during City and permitted events such as the farmers market and music festivals.
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FISCAL/RESOURCE IMPACT
STAKEHOLDER ENGAGEMENT
Request to permit a range of investment options
Interest to invest in permanent solutions when the City Council approves the permanent
parklet program
There is some interest in pre-approved parklets
Desire for additional parklet options where the sidewalk and roadway are level to
maximize all weather outdoor dining and minimize impact of gas lines
Intention for best possible customer experience if paying for use of street
Strong concerns regarding speeding bikes impacting pedestrian safety
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Staff has responded to City Council direction and merchant’s feedback, and therefore
recommends that the Economic Development Committee provide feedback on progress
advancing the Outdoor Activation Program and pedestrian and bicycle improvements on
California Avenue to prepare staff for the April 2, 2026, ARB meeting.
ENVIRONMENTAL REVIEW
ATTACHMENTS
APPROVED BY:
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1 23456789
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Draft Outdoor Activation Illustrative Plan
Potential Pre-Approved Parklets & Cafe Seating
Car-Free California Avenue
City of Palo Alto
2/11/26
Joanie’s CafeLa BohemeSekoyaUmeLotusMediterranean
Wrap
Kowa
Ramen
NamasteKali Greek
Bistro
La Bodeguita del MedioIzzy Eye Works Christian
Science
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Leaf & Petal Vin Vino Wine Mini Cat Town Casual
Chic
Salon
Square Pie
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Zareen’sCalifornia Hotel Italico Croissant
California
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Anatolian
Kitchen
Zombie
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Natural FoodsTerun PizzaJin Sho
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California
Paint
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Spoke & Weal Performance GainesTerun
Omomi
Lash &
PMU
Abbey
Neuro-
psychology
Clinic
Massage
Therapy
CenterTechCU
Citibank
California Avenue
Optometry
Lee
Aldinger
Insurance
La Jolie
Nails
Salon
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Economic Development Committee
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: City Manager
Meeting Date: March 18, 2026
Report #:2602-6024
TITLE
Business Retention, Expansion, and Attraction (BRE/A) Strategy.
RECOMMENDATION
The Economic Development Committee will receive a presentation on the 2026 Business
Retention, Expansion, and Attraction (BRE/A) Strategy and provide feedback to staff.
EXECUTIVE SUMMARY
At the January 24, 2026, Council Retreat, the Palo Alto City Council reached consensus on
adopting a 2026 Economic Development priority titled, “Enhance Business Vibrancy”. The City
Council acknowledges the importance of Economic Development and the intersection between
a healthy local economy and the City’s long-term fiscal sustainability. The City of Palo Alto
continues to build from the current Economic Development Strategy to achieve the City Council’s
goals and priorities. The Economic Development team has developed a 2026 Business Retention,
Expansion, and Attraction (BRE/A) Strategy to create a sustainable, resilient, and thriving local
economy characterized by a strong sense of identity in Silicon Valley.
BACKGROUND
Economic Development is taking a proactive approach to advocating for Palo Alto’s business and
entrepreneurial ecosystem that is reflective of the population it serves. Economic Development
is a concerted effort by the City of Palo Alto’s City Council to ensure that the business climate is
healthy. As such, the Economic Development team recommends that the Economic
Development Ad Hoc Committee (formerly Retail Ad Hoc Committee) receive a BRE/A Strategy
presentation and provide feedback to staff.
ANALYSIS
A Business Retention, Expansion, and Attraction (BRE/A) Strategy will formalize Economic
Development’s Work Plan for calendar year 2026. A BRE/A Strategy consists of identifying key
industries for retention, expansion, and attraction, proactive business engagement to build
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strategic partnerships, determining areas where the City of Palo Alto can gain a competitive
advantage, and providing support for a favorable business environment that can lead to
increased employment opportunities and overall economic prosperity. The BRE/A Strategy will
result in preserving and enhancing the local business climate to ensure the City is fiscally stable
to provide essential services that the Palo Alto community deserves.
Enhance Business Vibrancy:
Strengthening the Tax Base
Sales Tax, Property Tax, and Transient Occupancy Tax Revenue Bases - Corporate
Visitation Program
New Investment Opportunities - Financial and Non-Financial Incentives
Competitive Advantage
Venture Capital, Incubators, and Accelerators - VCs, Incubators/Accelerators and Foreign
Direct Investment
Business Technical Assistance - Guide Businesses to Build Capacity and Reach Business
Goals
Real Estate Assets
Real Estate Network - Property Owners/Managers and the real estate brokerage and
development communities
City Real Estate Assets - Leverage the City’s Real Estate Assets for Revenue Generation
Engagement and Promotions:
Business and Community Engagement
Public-Private Partnerships (P3s) - Build Trust/Collaboration for Effective Partnerships
Open Container Resolution and Entertainment Zone - Entertainment Zone Ordinance City
Council Consideration in Spring 2026
Promotions and Marketing
2026 Activities and Events - Cultivate Vibrant Public Spaces that Attract Investment
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FISCAL/RESOURCE IMPACT
STAKEHOLDER ENGAGEMENT
ENVIRONMENTAL REVIEW
ATTACHMENTS
APPROVED BY:
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Economic Development Ad Hoc Committee
Business Retention, Expansion, and Attraction (BRE/A) Strategy
Attachment A
Enhance Business Vibrancy
• Business Retention, Expansion and Attraction (BRE/A) Strategy – Enhancing
Business Vibrancy is a 2026 City Council priority.
• Strengthening the Tax Base
o Sales tax, property tax, and transient occupancy tax revenue bases - Establish
a formal Corporate Visitation Program. Review quarterly data for
sales/transient occupancy tax revenues and bi-annually for property tax
revenues to identify and respond to changing trends. Performance Metric:
Convene up to five of the top twenty-five sales tax generators by the end of
2026 with the goal of retaining businesses that enhance the City’s long-term
fiscal sustainability on a quarterly basis.
o New Investment Opportunities - Encourage new investments that create
economic impact, multiplier effects and sales tax revenue. Performance
Metric: Staff will explore financial and non-financial incentives and develop a
list to support, retain, and grow business opportunities to drive economic
vitality by Quarter 3 2026, and present to the Economic Development Ad Hoc
Committee for review and feedback.
• Competitive Advantage
o Venture Capital, Incubators, and Accelerators - IDA Ireland, Japan Innovation
Campus (JIC), Consulate General and Innovation Centre Denmark, Nordic
Innovation House, Flanders Investment and Trade (FIT), The Hive, Archimedes
Labs, StartX, Venture Dock, etc. Performance Metric: Meet with at least four
Venture Capital investment firms, incubators, and accelerators to develop
foreign direct investment (FDI) opportunities and continue to cultivate the
innovation and entrepreneurial ecosystem by the end of calendar year 2026.
o Business Technical Assistance - Performance Metric: Partner with the Silicon
Valley Small Business Development Center (SV SBDC), Small Business
Administration (SBA), SCORE, Chamber of Commerce, etc. to host two small
business (live and virtual) training workshops in 2026.
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• Real Estate Assets
o Real Estate Network - Property Owners, Real Estate Brokerage, Property
Managers, and Development Community Network to foment relationships to
fill vacant spaces and attract a mix of retail, office, and industrial businesses
to enhance diversity of businesses for a broader customer base. Performance
Metric: Economic Development will host a Real Estate Broker roundtable by
Quarter 4 2026 to learn about new opportunities, market trends, new uses,
permit processes, and align development efforts with market needs.
o City Real Estate Assets – Leverage City’s real estate assets for revenue
generation. Performance Metric: Economic Development will execute a
lease with Nobu for the use of 20 valet services parking spaces in Parking Lot
Q by April 2026 to generate new revenues for the City.
Engagement and Promotions
• Business and Community Engagement
o Public-Private Partnerships - Engagement fosters trust and collaboration,
allowing for effective partnerships that leverage resources for community
projects - Performance Metric: Economic Development will promote the
Retail Vibrancy Ordinance reflecting flexibility in land use/zoning to the real
estate network starting in Quarter 2, and establish two office hour events on
California Avenue and Downtown for additional business and community
engagement opportunities by Quarter 3 2026.
o Open Container Resolution and Entertainment Zone - Performance Metric:
Economic Development will present to the Economic Development Ad Hoc
Committee to obtain a recommendation for the City Council’s consideration
of a California Avenue Entertainment Zone Ordinance in April/May 2026.
• Promotions and Marketing
o 2026 Activities and Events - Performance Metric: Economic Development
will partner with businesses, Palo Alto Recreation Foundation, and Chamber
on at least 3 California Avenue activities (3rdThursday/FIFA World Cup) and
promote the hospitality sector (digital/print) during the 2026 sporting events
(March Madness Tournament/FIFA World Cup) from March through July 2026.
The BRE/A Strategy is bounded by two strategic categories: Enhance Business Vibrancy and
Engagement and Promotions. The two categories are supported by nine new Economic
Development focused implementation actions for calendar year 2026.
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Economic Development staff will continue to lead, co-lead, and/or monitor 2025 City
Council priority projects currently underway including: Retail Vibrancy Ordinance, California
Avenue Signage, and California Avenue Outdoor Activation Guidelines. Economic
Development staff recommends suspending Car-free street improvements on Ramona
Street. And, obtain City Council feedback on March 9, 2026 via the values and priorities
agenda item on whether to proceed with the California Avenue Design and Funding project
given the lack of financial resources, directly focus on the aforementioned 2025 on-going
projects, and the new BRE/A Strategy.
The BRE/A Strategy lays a foundation for creating a vibrant, resilient, inclusive, and
diversified economic future. Notwithstanding, the BRE/A Strategy highlights the need for a
future Economic Development Strategy that serves as a policy document that will guide the
City of Palo Alto’s economic development activities for a designated period. Should the City
Council consider a new Economic Development Strategy, it would align with the City’s
Comprehensive Plan and the Economic Development Element, Sustainability and Climate
Action Plan (S/CAP), and other City policy documents. A new Economic Development
Strategy will serve as Palo Alto’s road map to grow and diversify the local economy, support
businesses and workers, and improve the quality of life for Palo Altans.
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Economic Development Committee
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: City Manager
Meeting Date: March 18, 2026
Report #:2602-5977
TITLE
Designation of City Council Liaisons with Local Business Stakeholders and the March 2026
Economic Development Activity Report
RECOMMENDATION
Staff recommends the Economic Development Committee discuss City Council business district
liaison designations with various community serving commercial areas, business advocacy
efforts, and receive the March 2026 Economic Activity Report.
BACKGROUND
The Economic Development Committee, established in 2024 and continued in 2025, is a Council
Ad Hoc committee that follows the California Brown Act procedures. The Committee provides a
regular forum for business and community stakeholders to engage with Council members on
implementation of the City’s economic development strategy. The Economic Development
Committee makes recommendations to the City Council on economic development and
business vibrancy efforts, such as additional business support, proposed University and
California Avenue improvements, and citywide retail zoning code changes, to name a few work
plan efforts.
At the January 24, 2026 Council Retreat meeting1, the Palo Alto City Council reached consensus
on adopting a 2026 Economic Development priority titled, “Enhance Business Vibrancy” and
renamed the Retail Ad Hoc Committee to the Economic Development Ad Hoc Committee,
reflecting a broader focus on supporting business districts in Palo Alto. This priority emphasizes
continued engagement with business districts and the hospitality sector through proactive
outreach, collaboration, and partnership to strengthen the city’s overall business environment.
1 January 24 Council Retreat Meeting Agenda:
https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=18520
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This report expands on the issue of City Council involvement with local business stakeholders
and seeks Economic Development Committee feedback.
ANALYSIS
City Council Liaisons
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Economic Development Activity Report
This March 2026 Economic Development Activity Report provides an overview of the City’s
retail landscape and notable updates for the Committee.
CoStar is considered the industry standard for real estate data and reporting. While the data
has its limitations, it provides a reliable foundation for understanding real estate market trends.
It’s important to note, however, that it does not account for all external factors. For example, a
property is only reported as vacant if no tenant is paying rent and it is available for lease or sale.
If a tenant is still paying rent, even if the space is not yet occupied, it will not be listed as a
vacancy. Nonetheless, the information remains useful for future benchmarking and
comparisons.
A map was created in CoStar bounded by Lytton Avenue on the North, Forest Avenue
on the South, Alma Street on the West, and Cowper Street on the east side. This
geographic area represents a significant portion of the retail core for the Downtown
University Business District and does not include Stanford Shopping Center. The map is
shown here as Figure 1.
The average annual asking retail rent for vacant properties within the University
Avenue Business District is $83.52 (~$6.96/mo) per square foot as of Q4 2025, representing a
minor decrease from the high of the last ten years ($84.96 (~$7.08/mo) in Q2 2020 but higher
than the low of the last ten years ($51.72 (~$4.31/mo) in Q4 of 2016).
The current retail vacancy rate is 13.4% for Q4 of 2025, an increase from 11.1% from a
year ago. Over the last ten years, the highest retail vacancy rate downtown was 17.8% in
Q1 of 2024. The lowest retail vacancy rate in the last ten years was 0.7%. in Q3 and Q4 of
2015.
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Approximately 86,606 square feet of retail space was available in the University Avenue
Business District as of the Q4 2025 Report in CoStar, a decrease of 31,379 square feet from
119,843 in Q1 of 2024 as the highest in ten years.
California Avenue Business District
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from 48,762 square feet in Q1 of 2022 as the high in the previous ten years.
Ramona Street
FISCAL/RESOURCE IMPACT
STAKEHOLDER ENGAGEMENT
ENVIRONMENTAL REVIEW
APPROVED BY:
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