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HomeMy WebLinkAboutStaff Report 2602-5984CITY OF PALO ALTO Retail Committee Regular Meeting Wednesday, March 18, 2026 4:15 PM     Agenda Item     1.Recommendation to the City Council to Adopt an Entertainment Zone Ordinance to Establish an Entertainment Zone on California Avenue Staff Presentation 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 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 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 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: 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. 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. 154_20260304_ts24 3 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): 154_20260304_ts24 4 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. // // // // // 154_20260304_ts24 5 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 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. 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. March 18, 2026 Entertainment Zone Ordinance Economic Development Committee Presenters: Nanci Hochroth Management Specialist Former Dir. of Econ Dev, City of San Jose Ruth Carias Economic Development Specialist PaloAlto.gov/Business 1 TITLE 40 FONT BOLD Subtitle 32 font March 18, 2026 CA Senate Bill 969 •Effective January 1, 2025, SB 969 allows cities to establish Entertainment Zones that allow the sale of alcohol to be consumed outdoors within a geographic public area – streets, sidewalks, plazas •Goals: Activate the public realm and streets with entertainment and community -driven events to support businesses, create a festive atmosphere, and spur economic development CA Senate Bill 969 Requirements •Cities must enact a local ordinance to define geographic boundaries/operating hours •Cities must consult with law enforcement PaloAlto.gov/Business Background 2 March 18, 2026 PaloAlto.gov/Business Implementation •Entertainment Zone Location •Car Free California Ave;El Camino Real to Birch Street on California Avenue •Entertainment Zone’s Phased Approach •Allows staff to assess the California Avenue Entertainment Zone in the following 6-12 months •Return to City Council for consideration of a potential boundary extension based on specific findings 3 Map of California Ave Business District with the Car Free Portion Highlighted in Yellow TITLE 40 FONT BOLD Subtitle 32 font March 18, 2026 •Activation of an Entertainment Zone will be part of the City’s Special Event Permit application, obtained through the Police Department •Entertainment Zone can only operate during the hours —between 12:00PM to 10:00 PM, and on Sundays from 10:00 AM to 10:00 PM •All ABC license conditions apply •Each participating business will be responsible for checking identification to ensure individuals are of proper drinking age, and all participants will be required to wear the same - colored wristband •Alcoholic beverages must be served in approved non-glass, non-metal containers determined with in the Special Event Permit PaloAlto.gov/Business Proposed Process and Regulations 4 TITLE 40 FONT BOLD Subtitle 32 font March 18, 2026 •If supported by the Economic Development Committee, the ordinance would proceed to the City Council for consideration on the following dates: •1st Reading: April 6, 2026 •2nd Reading: April 20, 2026 •City staff is preparing a webinar to further ensure California Ave Merchants are aware of the Entertainment Zone requirements NEXT STEPS PaloAlto.gov/Business 5 RECOMMENDATION Staff recommends that the Economic Development Committee: Recommend to the City Council to Adopt an Entertainment Zone Ordinance to Establish an Entertainment Zone on California Avenue 6PaloAlto.gov/Business Thank you! 7