A growing public concern about the magnitude of a proposal made by developer and Stanford benefactor John Arrillaga and the planning process was heard loud and clear by the Palo Alto City Council before and during a five-hour discussion Monday night and early Tuesday morning.

On a unanimous vote of the seven council members participating (Larry Klein and Yiaway Yeh have conflicts), the council demonstrated good political and policy instincts and directed the staff to re-focus its work on what's best for the city rather than trying to work within Arrillaga's vision for the site, located adjacent to the downtown train station.

The city staff, which has taken a beating from the public for its initial exuberance over the Arrillaga proposal and for working in concert with him to design a "master plan" for the area, was clearly expecting the council's pivot.

As Monday night's discussion began, City Manager Jim Keene all but formally withdrew the staff's recommendations urging a June public advisory vote and an agreement with TheatreWorks, suggesting instead that the council hear from the overflow crowd and then provide direction to the staff.

Since the release of the latest staff report the day before Thanksgiving, which detailed the reductions in height and square footage and additional project improvements agreed to by Arrillaga, it became increasingly clear that neither the public nor the council was happy with the process or the proposed development.

In the end, the council voted to have the staff refocus on developing at least two alternatives to Arrillaga's concept for the site and to make sure those options are consistent with the current urban design features of downtown and are feasible given the traffic and road constraints.

Implicit was the desire for buildings to be close to, if not within, the city's 50-foot height limit and include retail or other features that would create a vibrancy to the area of interest to city residents. And there was consensus that a key objective and challenge of any development needed to be the creation of better and safer pedestrian and bike connections between Palm Drive, the train station, the shopping center and University Avenue.

But the most significant news of the evening went practically unnoticed.

As part of an answer to a question, City Manager Jim Keene pledged that from now on, staff would obtain an independent analysis of the economic value to a developer of any proposed new development rights granted by the city beyond what is allowed by the zoning. This analysis, Keene said, would give the City Council the information it needs to determine the value of public benefits required of the developer.

We have called for reforms of the so-called "planned community" or "PC" zoning process for many years, and Keene's initiative is an important step in the right direction and should be especially helpful in negotiating a future development at 27 University.

As City Hall now refocuses on developing alternative concepts for this awkward island of land between El Camino and the train tracks, we hope that traffic, transit, bike and pedestrian improvements drive the process. More creativity is needed, especially in how to handle the volume of VTA and SamTrans buses that overwhelm this area simply because it is the end of the line where the two bus systems connect and drivers take their breaks.

The new planning effort should also examine the opportunity for a hotel on the site that would include badly needed ballroom and meeting facilities and perhaps replace the aging Sheraton hotel, essentially broadening the planning area to include the current Sheraton site, also owned by Stanford.

While TheatreWorks is a treasured community institution, the new analysis should also look at alternative public benefits. We need to ask ourselves if creating a home for TheatreWorks is worth $30 million in public benefit dollars and the risk that it might be unable to raise the additional $30 million to $50 million to finish the theater, leaving the city with an empty shell.

Finally, since Stanford will be the ultimate beneficiary of any development allowed on the site, are there public benefits Stanford could provide by offering land, such as land west of El Camino to accommodate a bus transit center for VTA and SamTrans?

The City Council took the needed steps Monday night to put this possible development project on a much better path, and we now await the promised open and transparent process moving forward.