HomeMy WebLinkAboutStaff Report 2605-6424CITY OF PALO ALTO
CITY COUNCIL
Special Meeting
Monday, June 15, 2026
Council Chambers & Hybrid
5:30 PM
Agenda Item
20.FIRST READING: Adoption of an Ordinance to Amend Palo Alto Municipal Code Title 18
(Zoning) Section 18.18.120 (Noncomplying Uses and Facilities) to Allow Existing Floor
Area to be Replaced in New Buildings Without Increasing the Degree of Existing Non-
Compliance as Recommended by the Economic Development Committee. CEQA Status:
Exempt from CEQA per Section 15061(b)(3) (Common Sense Exemption).
CITY COUNCIL
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Planning and Development Services
Meeting Date: June 15, 2026
Report #: 2605-6424
TITLE
FIRST READING: Adoption of an Ordinance to Amend Palo Alto Municipal Code Title 18 (Zoning)
Section 18.18.120 (Noncomplying Uses and Facilities) to Allow Existing Floor Area to be
Replaced in New Buildings Without Increasing the Degree of Existing Non-Compliance as
Recommended by the Economic Development Committee. CEQA Status: Exempt from CEQA per
Section 15061(b)(3) (Common Sense Exemption).
RECOMMENDATION
The Economic Development Committee and staff recommend that City Council adopt an
ordinance to modify Palo Alto Municipal Code (PAMC) Section 18.18.120 consistent with the
applicant’s request.
EXECUTIVE SUMMARY
On August 15, 2022,1 City Council held a prescreening for an applicant proposed text
amendment to PAMC Section 18.18.120 to allow modifications to the requirements for non-
complying uses and facilities in the Commercial Downtown (CD) District. Although the applicant
chose not to pursue the code change at that time, a formal application for that text
amendment has since been filed.
On October 8, 2025, the Planning and Transportation Commission (PTC) held a study session
and provided feedback on the proposed code change.2 On February 25, 2026, the PTC voted
unanimously to recommend Council approval of the applicant’s proposed text amendment.
On June 3, 2026, the Economic Development Committee voted unanimously to recommend
Council approval of the proposed Ordinance to Amend Palo Alto Municipal Code Title 18
(Zoning) Section 18.18.120 (Attachment A).
The proposed amendment removes PAMC Section 18.18.120(a)(2)(C) and (b)(2)(C), allowing
replacement of existing noncomplying floor area through renovation or new construction
1 Link to the August 15, 2022, City Council Meeting Study Session (Agenda Item 3):
https://cityofpaloalto.primegov.com/Public/CompiledDocument?meetingTemplateId=9028&compileOutputType=1
2 Link to the October 8, 2025, PTC Staff Report (Agenda Item 3):
https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=16596
without restriction to the existing building envelope (the three-dimensional shape and size
occupied by an existing building), currently referred to as the “shrink wrap rule.”
BACKGROUND
5
6 the PTC held a study session on the proposed code amendment and
provided general feedback supporting efforts to clarify the Zoning Code and reduce barriers to
reinvestment in existing buildings, while noting concerns about avoiding unintended increases
in redevelopment flexibility beyond pre-2016 standards. The Commission did not take formal
action and continued the item to allow additional staff analysis and coordination with other
ongoing policy initiatives.
7 the PTC considered the revised Zoning Text Amendment in the context
of broader downtown planning efforts, including the Downtown Housing Plan, Senate Bill (SB)
79 implementation, and the Housing Element update. Discussion focused on the implications of
modifying the “shrink wrap rule” on redevelopment feasibility, including effects on
noncomplying buildings, potential housing production, mixed-use redevelopment, and
commercial reinvestment, as well as related considerations around seismic safety and building
modernization. Commissioners also discussed uncertainty regarding the scale of potential
redevelopment and housing outcomes, and the appropriate timing of advancing the
amendment relative to other City initiatives.
5 June 3, 2026, Economic Development Committee Meeting Agenda Item 2:
https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=20451
6 October 8, 2025, PTC Meeting Agenda Item 3:
https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=16596
7 February 25, 2026, PTC Meeting Agenda Item 3:
https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=19288
noncomplying uses and facilities to be repaired, renovated, or rebuilt, it requires that any
reconstructed noncomplying floor area remain within the original building envelope. The
proposed amendment would allow greater flexibility in how noncomplying floor area is
replaced. Specifically, buildings could maintain their respective non-complying floor areas, but
could have differing heights, footprints, and building envelopes when redeveloped. However,
below-grade floor area still cannot be moved above grade. These building changes would still
be subject to the governing CD District regulations and would not increase the degree of
existing non-complying floor area.
ANALYSIS
302 total parcels zoned CD (228 Property Parcels and 74 airspace subdivisions)
66 parcels with historic resources (Not subject to text amendment)
66 parcels with more than 1:1 FAR (Subject to text amendment)
87 parcels with commercial remodels/additions from building permits from 2011-2025
35 parcels built within the last 30 years (unlikely to rebuild soon), 19 of which are over
1:1 FAR
which had the effect of limiting redevelopment. Staff anticipates the applicant’s proposed
amendment would restore redevelopment flexibility that existed prior to 2016, rather than
introduce new development potential beyond what was historically allowed.
FISCAL/RESOURCE IMPACT
STAKEHOLDER ENGAGEMENT
ENVIRONMENTAL REVIEW
without increasing the degree of noncompliance. These potential reconfigurations would
involve negligible expansions of existing or former uses that are still subject to compliance with
their governing zoning district regulations, City design guidelines, and project-level CEQA
review.
ATTACHMENTS
APPROVED BY:
*NOT YET APPROVED*
1
0160189_20260528_ay16
Ordinance No. _____
Ordinance of the Council of the City of Palo Alto Amending Section 18.18.120 of
Title 18 (Zoning) of the Palo Alto Municipal Code to Allow Greater Flexibility for
Noncomplying Facilities in the Commercial Downtown District
The Council of the City of Palo Alto ORDAINS as follows:
SECTION 1. Section 18.18.120 (Noncomplying (Grandfathered) Uses and Facilities) of
Chapter 18.18 (Downtown Commercial (CD) District) of Title 18 (Zoning) of the Palo Alto
Municipal Code is amended as follows (additions underlined; deletions struck-through):
18.18.120 Noncomplying (Grandfathered) Uses and Facilities
(a) Noncomplying (Grandfathered) Uses
(1) The following uses and facilities may remain as legal noncomplying (grandfathered) uses,
and shall not require a conditional use permit or be subject to the provisions of Chapter 18.70:
(A) Any use which was being conducted on August 28, 1986; or
(B) A use not being conducted on August 28, 1986, if the use was temporarily discontinued
due to a vacancy of 6 months or less before August 28, 1986; or
(C) Any office use existing on April 16, 1990 on a property zoned CD and GF combining,
which also existed as a lawful conforming use prior to August 28, 1986, notwithstanding
any intervening conforming use.
(2) The legal noncomplying uses in subsection (1) shall be permitted to remodel, improve, or
replace site improvements on the same site, for continual use and occupancy by the same
use, provided such remodeling, improvement, or replacement complies with all of the
following:
(A) shall not result in increased floor area;
(B) shall not relocate below grade floor area to above grade portions of the building;
(C) shall not result in an increase of the height, length, building envelope, building
footprint or any other increase in the size of the improvement. For purposes of this
section, “building envelope” shall mean the three dimensional shape and size occupied
by an existing building. It is not the maximum, buildable potential of the site;
(D)(C) shall not increase the degree of noncompliance, except pursuant to the exceptions
to floor area ratio regulations set forth in Section 18.18.070; or
*NOT YET APPROVED*
2
0160189_20260528_ay16
(E)(D) in the case of medical, professional, general business or administrative office uses
of a size exceeding 5,000 square feet in the CD-S or CD-N district that are deemed legal
noncomplying pursuant to subsection (1), such remodeling, improvement, or
replacement shall not result in increased floor area devoted to such office uses.
(F)(E) The Director may approve minor changes to the building’s footprint, height, length,
and the building envelope through Architectural Review of minor aesthetic architectural
improvements and to improve pedestrian orientation provided there is no increase to the
degree of any non- complying feature.
(3) If a legal noncomplying use deemed existing pursuant to subsection (1) ceases and
thereafter remains discontinued for 12 consecutive months, it shall be considered abandoned
and may be replaced only by a conforming use.
(4) A use deemed legal noncomplying pursuant to subsection (1) which is changed to or
replaced by a conforming use shall not be reestablished, and any portion of a site or any
portion of a building, the use of which changes from a legal noncomplying use to a conforming
use, shall not thereafter be used except to accommodate a conforming use.
(b) Noncomplying (Grandfathered) Facilities
(1) Any noncomplying (grandfathered) facility existing on August 28, 1986 and which, when
built, was a complying facility, may remain as a legal noncomplying facility and shall not be
subject to the provisions of Chapter 18.70.
(2) The legal noncomplying facilities in subsection (1) shall be permitted to remodel, improve,
or replace site improvements on the same site, provided such remodeling, improvement, or
replacement complies with all of the following:
(A) shall not result in increased floor area;
(B) shall not relocate below grade floor area to above grade portions of the building;
(C) shall not result in an increase of the height, length, building envelope, building
footprint, or any other increase in the size of the improvement;
(D)(C) shall not increase the degree of noncompliance, except pursuant to the exceptions
to floor area ratio regulations set forth in Section 18.18.070;
(E)(D) The Director may approve minor changes to the building’s footprint, height, length,
and the building envelope through Architectural Review of minor aesthetic architectural
improvements and to improve pedestrian-orientation provided there is no increase to the
degree of any non- complying feature, except as provided for rooftop access and
amenities in Section 18.18.060(e).
(F)(E) The residential portion of any legal noncomplying facility shall not be converted to
a non- residential land use or reduced in gross floor area or number of units. An applicant
asserting that the operation of this subsection (F) is preempted by state or federal law
*NOT YET APPROVED*
3
0160189_20260528_ay16
shall submit a statement of its position with all claims and all supporting documentary
evidence at the time it applies for a change of use. The City Council shall hold at least one
noticed public hearing in accordance with the procedures set forth in PAMC 18.77.080 to
consider whether to waive or adjust the requirements of one or more provisions of Titles
18 or 21. The City Council may seek additional information including, without limitation,
third party peer review paid for at the applicant’s expense.
SECTION 2. The Council finds that this Ordinance is exempt from the California
Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15061(b)(3) because it
can be seen with certainty that there is no possibility that it will have a significant effect on the
environment.
SECTION 3. This Ordinance shall be effective on the thirty-first date after the date of
its adoption.
INTRODUCED:
PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
____________________________ ____________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
____________________________ ____________________________
Assistant City Attorney City Manager
____________________________
Director of Planning and
Development Services
November 18, 2024
Mr. Jonathan Lait
Director Planning & Development
City of Palo Alto
250 Hamilton Avenue, 5th floor
Palo Alto, CA 94303
Re: Proposed text Amendment to PAMC §18.18.120
Noncomplying (Grandfathered) Facilities
Dear Mr. Lait,
Hayes Group Architects has been working for building owners in the Palo Alto community since 1989.
During this time, I have witnessed a natural evolution of Palo Alto’s downtown with new buildings
replacing older buildings unable to support the requirements of our modern lifestyle and workstyle. Even
old buildings that were rendered non-complying because of Floor Area Ratio limits changing over time,
were allowed to be replaced in newly configured buildings without losing floor area -- until 2016, when the
City’s 25-year old interpretation of the zoning ordinance was abruptly changed, without adequate analysis
or public input.
It is respectfully submitted that it is time to reconsider that poorly-conceived 2016 action and move
forward with a corrective text amendment to the Palo Alto Municipal Code, particularly § 18.18.120.
History
In 1986, the City Council adopted Ordinance 3696, put in place as a reaction to the intensification of
development and traffic congestion in Palo Alto’s downtown. The ordinance reduced the amount of floor
area allowed on a parcel in the CD-C, CD-N and CD-C zoning districts from what had previously been
allowed. It also prudently made provisions for buildings which were rendered “non-conforming” as a
result of the changes in the zoning ordinance, because those buildings now exceeded the newly-reduced
floor area allowed on a parcel. Ordinance 3696 provided that those buildings should be deemed to be
“compliant facilities” and allowed their owners to remodel and replace their floor area in new or renovated
buildings that better served the community and the built environment.
Ordinance 3696 as adopted 1986:
(c) Noncomplying Facilities. Chapter 18.94 notwithstanding, a noncomplying facility existing on
the effective date of this chapter and which, when built, was a complying facility, shall be deemed
to be complying. Such a facility shall be permitted to be remodeled, improved or replaced without
necessity to comply with site development regulations. Any such remodeling, improvement or
replacement shall result in increased floor area, height, length or any other increase in the size of
the facility only pursuant to the exceptions to floor area ratio regulations set forth in section
18.48.060.
The text of the Ordinance written above could have been clearer with regards to the restrictions for
remodeling, improvement or replacement, as its interpretation initially led to some confusion in the
Planning Department. In March 1988, to mitigate this lack of clarity, staff prepared a formal interpretation
of Ordinance 3696 and issued CMR185:8 for review by city council. The CMR reasonably concluded that
buildings could be reconfigured in terms of length, height and width so long as the existing floor area was
not increased. One benefit of this interpretation, among others listed in the CMR, was that it will:
“Permit reasonable flexibility for buildings undergoing remodeling and/or replacement so that improved
building design, that the City has identified over time as contributing to the enhancement of Downtown
Palo Alto, will be encouraged.”
Staff also concluded that such an interpretation would not result in increased non-conformity or non-
compliance in terms of floor area permitted in the rezoned areas, since floor area would not be allowed to
increase- it would only be replaced. And staff further explained that the interpretation adopted in CMR
185.5 would not result in increased non-compliance in terms of building height since any size building
(floor area) is limited to 50 feet in height.
For more than 25 years the City followed the interpretation set out in the CMR above (according to a 2022
staff report) and the City repeatedly approved projects in the CD Districts consistent with this
interpretation until 2015. A partial list of pre 2015 projects (just by Hayes Group Architects) approved by
the City using this interpretation includes the following:
171 University 1996
100 Forest (705 Alma) 1998
317-323 University 2002
101 Forest (657-663Alma) 2004
270 University 2005
278 University 2006
265 Lytton 2006
248 Hamilton 2012
301 High 2012
611 Cowper 2012
There were other projects, in addition to those listed above, that the City approved during this period
designed and built by others. All these City approved projects had at least two things in common: 1) they
all replaced existing non-complying floor area in the replacement building and, 2) they all increased the
height of the building over the building that had previously existed. And, consistent with staff’s rationale
for issuing the CMR in 1988, these new buildings were better buildings contributing to the enhancement
of the Downtown.
However, on January 11, 2016, the City Council adopted Ordinance 5373 that changed the long-standing
interpretation afforded by CMR 185:8 and inserted new language in PAMC §18.18.120. Below is an
excerpt from the January 11, 2016, staff report indicating the changed text: of the ordinance:
18.18.120
(a) Noncomplying (Grandfathered) Uses
(1) The following uses and facilities may remain as legal noncomplying (grandfathered)
uses, and shall not require a conditional use permit or be subject to the provisions
of Chapter 18.70:
(A) Any use which was being conducted on August 28, 1986; or
(B) A use not being conducted on August 28, 1986, if the use was temporarily
discontinued due to a vacancy of 6 months or less before August 28, 1986; or
(C) Any office use existing on April 16, 1990 on a property zoned CD and GF
combining, which also existed as a lawful conforming use prior to August 28, 1986,
notwithstanding any intervening conforming use.
(2) The grandfathered use in subsection (1) shall be permitted to remodel, improve, or
replace site improvements on the same site, for continual use and occupancy by the
same use, provided such remodeling, improvement, or replacement complies with all of
the following:
(A) shall not result in increased floor area:
(B) shall not relocate below grade floor area to above grade portions of the
building shift the building footprint;
(C) shall not result in an increase in the height, length, building envelope, building
footprint or any other increase in the size of the improvement. For purposes of
this section, “building envelope” shall mean the three-dimensional shape and
size occupied by an existing building. It is not the maximum, buildable potential
of the site;
(D) shall not increase the degree of noncompliance, except pursuant to the
exceptions to floor area ratio regulations set forth in Section 18.18.070; or
(E ) in the case of medical, professional, general business or administrative office
uses of a size exceeding 5,000 sf in the CD-S or CD-N district that are deemed
grandfathered pursuant to subsection (1), such remodeling, improvement, or
replacement shall not result in increased floor area devoted to such office uses.
(F) The Director may approve minor changes to the building’s footprint, height,
length, and the building envelope through Architectural Review of minor
aesthetic architectural improvements and to improve pedestrian orientation
provided there is no increase to the degree of any non-complying feature.
(b) Grandfathered Facilities:
(1) Any noncomplying (grandfathered) facility existing on August 28, 1986 and which, when built,
was a complying facility, may remain as a grandfathered facility and shall not be subject to
the provisions of Chapter 18.70.
(2) The Grandfathered facilities in subsection (1) shall be permitted to remodel, improve, or
replace site improvements on the same site, for continual use and occupancy by the same
use, provided such remodeling, improvement, or replacement complies with all of the
following:
(A) shall not result in increased floor area;
(B) shall not shift the relocate below grade floor area to above grade portions of the building;
(C) shall not result in an increase of the height, length, building envelope, building footprint,
or any other increase in the size of the improvement;
(D) shall not increase the degree of noncompliance, except pursuant to the exceptions to
floor area ratio regulations set forth in Section 18.18.070;
(E) The Director may approve minor changes to the building’s footprint, height, length, and
the building envelope through Architectural Review of minor aesthetic architectural
improvements and to improve pedestrian-orientation provided there is no increase to the
degree of any non- complying feature.
The addition of a new and more restrictive definition of the “building envelop” and the addition of a new
limitation to the existing “building footprint” (highlighted in red) in the 2016 Ordinance severely and
unreasonably constrain the potential options for replacing floor area that previously had been allowed to
be replaced in a new, modern building. That new text virtually locks in the existing three dimensional
structure, regardless of how out-of-date or in need of replacement it may be.
The current version of the Ordinance has become colloquially (and not admiringly) known as Palo Alto’s
“shrink wrap” rule because the only building that can replace the existing building with the same floor area
is one that matches the existing building’s envelop as though covered by a thin layer of plastic shrink
wrap. The current ordinance impairs the vested rights of the owners of lawful non-conforming buildings,
and essentially takes a building owner’s previously recognized right to replace their floor area in a new,
modern building, something they had enjoyed since 1986 when the city made the deal with them. As
noted above the 1986 ordinance states that they were still “Complying Facilities” despite their floor area
exceeding the new floor area limits enacted in the 1986 ordinance.
The impact of the ill-considered amendment in 2016 (Ordinance 5373) on the natural evolution of the
Downtown is clear. Since 2016, there has only been one new commercial building approved and built
under the new rules: Design within Reach. The Mills Florist building was approved under the new rules,
but because existing floor area had to be forfeited in the new building, it could not pencil and was
abandoned.
We have seen other buildings constructed since 2016, but they had been approved under the old rules or
the existing floor area did not exceed the allowable 1:1 so no floor area had to be forfeited to build the
new building. It is highly unlikely that an owner would choose to demolish an old building (even if no
longer functional) in order to construct the same building in its place, or to erect a smaller building,
forfeiting floor area of the existing building. The effect of the 2016 amendment has been paralyzing on
our building stock and the natural evolution of the downtown.
Downtowns need to be alive and change for the better. As staff reasoned 1988 in their CMR, buildings
that exceeded the floor area limits were still “complying facilities” allowing them to remodel and replace
their floor area in new buildings that better serve the community and the built environment.
PROPOSED TEXT AMENDMENT
To restore the rights of owners of buildings that exceed the floor area limits of the current site
development regulations in PAMC §18.18.060, we respectfully suggest a minor, but effective, amendment
to the zoning ordinance: subsections 18.18.120(a)(2)(C) and 18.18.120(b)(2)(C) should be removed.
Removing these two sections will allow existing floor area to be replaced in new buildings that better
respond to the natural and built environment. These new buildings may have different footprints, heights
and envelops but they will be able to maintain their existing floor area without increasing the degree of
existing non-compliance.
BENEFITS
The benefits to the downtown are new buildings that respond to the needs of the community, that connect
with the street and sidewalk, that are consistent with the environmental and community initiatives of our
time, and that can provide housing on upper floors. There is no downside. The commercial floor area
exists. There is no increase in the amount of office space, just better buildings, fit for our time. Here are
some additional benefits that will result from this text amendment:
• Incentivize the building of housing in mixed-use buildings. If an owner can replace their existing
commercial floor area, they are more likely to think about building a new building with housing on
upper floors. If commercial floor area cannot be replaced this eliminates many, many, properties
from redevelopment or as potential sites for housing
• No increase in office space
• Access for all those with disabilities
• Meet all current building and life safety codes
• Increased property taxes
• Better buildings with daylighting and highly efficient HVAC systems and solar arrays
• Better pedestrian experience and relationships to the public realm
We are seeking a zoning code text amendment that addresses the benefits of retiring outdated,
noncomplying buildings and encourages building owners to consider new opportunities for their properties
without losing the existing floor area.
We look forward to continuing this discussion.
Please call me at (650) 365-0600x15 if you have any questions.
Sincerely,
Ken Hayes, AIA
Principal
cc: Steve Reller, R&M Properties
Mark Moragne, R&M Properties