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Sobrato threatens lawsuit over city's plans for Fry's site

Palo Alto delays decision after property owner's attorney likens city's zoning interpretation to an illegal taking

The commercial building that housed Fry's Electronics until December 2019 is now at the heart of a zoning dispute between the city and the property owner. Embarcadero Media file photo by Veronica Weber.

Concerned about Palo Alto's plans to phase out some of the commercial uses at the former site of Fry's Electronics, the owner of the Portage Avenue property is now threatening to sue the city unless it reconsiders its interpretation of the zoning code.

The City Council was scheduled to consider on Monday night a question that is at the heart of the debate: What types of uses should be allowed at the prominent Ventura campus at 3200 Park Blvd. and 340 Portage Ave? While the site has been zoned for multifamily housing, the council voted in 2006 to allow Fry's to remain at the site indefinitely as a nonconforming use. With Fry's shuttering in December 2019 and its space still unoccupied, city planners and council members are now in the process of determining what types of uses should be allowed in its former building, as well as other spaces at the Ventura campus.

City planners had determined that because Fry's had left more than a year ago, the site can no longer be designated as a "non-conforming" use, a designation that disappears after a year of disuse. The Sobrato Organization pushed back against this determination, noting that it has been aggressively trying to attract other retailers, including Target, to the property. Through its attorney, the company is also resisting the city's suggestion that the existing uses at the campus need to be "rebalanced" so that the composition of uses is similar to what it was in 2006, as specified by the zoning provision that the council approved at that time. In its last discussion of the topic on June 14, council members leaned toward accepting the staff interpretation and suggested that the city undertake an amortization study that would lay the groundwork for phasing out some of the uses at the site.

On Monday, Sept. 14, the council deferred taking any formal action on the zoning question after it received a letter from Sobrato's attorney suggesting that following the course laid out by planning staff would expose the city to litigation. Tamsen Plume, an attorney representing Sobrato, characterized the city's proposal to "rebalance" the uses at the site as an unconstitutional property taking. If the council approves the recommended interpretation, Plume wrote, Sobrato "will exercise its rights under the Takings Clause of the Fifth Amendment," as it applies to states under the 14th Amendment.

In making the case for Sobrato, Plume noted that the company bought the property in 2011 and has substantially improved it through acquisition, such that it now has a value in excess of $200 million. If planning staff's interpretation holds and Sobrato will be required to "rebalance" the tenants, the property value "simply cannot be reasonably protected or recouped," Plume wrote.

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Pluma also contended that none of the nonconforming use provisions in any other jurisdiction within Santa Clara or San Mateo counties has anything close to a "rebalancing" requirement proposed by Palo Alto planning staff.

"It should not be simply assumed that the internal space of any building, particularly the Cannery building, can be easily or economically changed to another use — that is just not the case," Plume wrote.

Plume also raised procedural questions, arguing that planning staff has not made any formal determination before issuing its zoning code interpretation. The process did not give Sobrato an avenue to appeal the determination, though the company had submitted numerous letters that argued against the idea that the retail use as the Fry's building has been discontinued since the store's departure.

"This process is unsupported and legally inadequate, given the potential impact on the owner's Property value — particularly in the context of the interpretation of the existing legal non-conforming use provision presented in the Staff Report," Plume wrote. "At minimum, the City must first provide a reasoned, supported final determination and must provide Sobrato an opportunity to respond and appeal."

Plume's letter prompted the city to continue the hearing to a later date. City Manager Ed Shikada and Planning Director Jonathan Lait issued a memo on Monday requesting more time to consider the arguments from Sobrato. They plan to issue an updated memo to the council in the next several weeks, when the discussion resumes.

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To date, the city had argued that because Sobrato has failed to find a replacement for Fry's within a year, the property should revert to RM-30 zoning, which allows up to 30 dwelling units per acre. Palo Alto has long considered the site as suitable for housing, with the city's Housing Element identifying it as having a realistic capacity of 221 residences.

"The municipal code defines a nonconforming use as being discontinued or abandoned if not re-established within one year," a recent report from planning staff states. "Since no retail use reoccupied the former Fry's tenant space, that portion of the building can now only be occupied by a conforming RM-30 land use."

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Sobrato threatens lawsuit over city's plans for Fry's site

Palo Alto delays decision after property owner's attorney likens city's zoning interpretation to an illegal taking

by / Palo Alto Weekly

Uploaded: Wed, Sep 15, 2021, 9:55 am

Concerned about Palo Alto's plans to phase out some of the commercial uses at the former site of Fry's Electronics, the owner of the Portage Avenue property is now threatening to sue the city unless it reconsiders its interpretation of the zoning code.

The City Council was scheduled to consider on Monday night a question that is at the heart of the debate: What types of uses should be allowed at the prominent Ventura campus at 3200 Park Blvd. and 340 Portage Ave? While the site has been zoned for multifamily housing, the council voted in 2006 to allow Fry's to remain at the site indefinitely as a nonconforming use. With Fry's shuttering in December 2019 and its space still unoccupied, city planners and council members are now in the process of determining what types of uses should be allowed in its former building, as well as other spaces at the Ventura campus.

City planners had determined that because Fry's had left more than a year ago, the site can no longer be designated as a "non-conforming" use, a designation that disappears after a year of disuse. The Sobrato Organization pushed back against this determination, noting that it has been aggressively trying to attract other retailers, including Target, to the property. Through its attorney, the company is also resisting the city's suggestion that the existing uses at the campus need to be "rebalanced" so that the composition of uses is similar to what it was in 2006, as specified by the zoning provision that the council approved at that time. In its last discussion of the topic on June 14, council members leaned toward accepting the staff interpretation and suggested that the city undertake an amortization study that would lay the groundwork for phasing out some of the uses at the site.

On Monday, Sept. 14, the council deferred taking any formal action on the zoning question after it received a letter from Sobrato's attorney suggesting that following the course laid out by planning staff would expose the city to litigation. Tamsen Plume, an attorney representing Sobrato, characterized the city's proposal to "rebalance" the uses at the site as an unconstitutional property taking. If the council approves the recommended interpretation, Plume wrote, Sobrato "will exercise its rights under the Takings Clause of the Fifth Amendment," as it applies to states under the 14th Amendment.

In making the case for Sobrato, Plume noted that the company bought the property in 2011 and has substantially improved it through acquisition, such that it now has a value in excess of $200 million. If planning staff's interpretation holds and Sobrato will be required to "rebalance" the tenants, the property value "simply cannot be reasonably protected or recouped," Plume wrote.

Pluma also contended that none of the nonconforming use provisions in any other jurisdiction within Santa Clara or San Mateo counties has anything close to a "rebalancing" requirement proposed by Palo Alto planning staff.

"It should not be simply assumed that the internal space of any building, particularly the Cannery building, can be easily or economically changed to another use — that is just not the case," Plume wrote.

Plume also raised procedural questions, arguing that planning staff has not made any formal determination before issuing its zoning code interpretation. The process did not give Sobrato an avenue to appeal the determination, though the company had submitted numerous letters that argued against the idea that the retail use as the Fry's building has been discontinued since the store's departure.

"This process is unsupported and legally inadequate, given the potential impact on the owner's Property value — particularly in the context of the interpretation of the existing legal non-conforming use provision presented in the Staff Report," Plume wrote. "At minimum, the City must first provide a reasoned, supported final determination and must provide Sobrato an opportunity to respond and appeal."

Plume's letter prompted the city to continue the hearing to a later date. City Manager Ed Shikada and Planning Director Jonathan Lait issued a memo on Monday requesting more time to consider the arguments from Sobrato. They plan to issue an updated memo to the council in the next several weeks, when the discussion resumes.

To date, the city had argued that because Sobrato has failed to find a replacement for Fry's within a year, the property should revert to RM-30 zoning, which allows up to 30 dwelling units per acre. Palo Alto has long considered the site as suitable for housing, with the city's Housing Element identifying it as having a realistic capacity of 221 residences.

"The municipal code defines a nonconforming use as being discontinued or abandoned if not re-established within one year," a recent report from planning staff states. "Since no retail use reoccupied the former Fry's tenant space, that portion of the building can now only be occupied by a conforming RM-30 land use."

Comments

David L Hirsch
Registered user
Crescent Park
on Sep 15, 2021 at 5:55 pm
David L Hirsch, Crescent Park
Registered user
on Sep 15, 2021 at 5:55 pm

Four new ideas for the Ventura/Fry's site:

The concept:
To create a super block that answers community requests for a major common space while providing a placemat for a significant amount of housing to respond to the pressing need; to respect the historic context; to create a unified vehicular circulation pattern that allows the car-free community space; and to accept the need to satisfy the financial requirements of Sobrato, the property owners.

The implementation:
1. Recognize that the Fry's building is not a noteworthy structure, even though it is culturally significant. Accept that a reduced section of Fry's can be retained to memorialize its history while providing a place for local community and retail uses, and that by reducing its footprint would create a large land parcel for housing development. Rezone the area PHZ to allow a greater housing density surrounding a major interior courtyard. Insist that a significant proportion of the housing is marketed at affordable rental levels.

2. Work with the owners through incentives including the up-zoning to shift their focus from retaining Fry's to accepting the housing alternative. Consider zoning increases for a potential mixed-use commercial buildings on the lots facing El Camino, also partially owned by Sobrato. Assist in the relocation of the existing Fry's R&D tenants to alternate locations.

3. Connect the separate sections of Ash to provide a through access from Lambert to Page Mill and (via the cut off to Park) California Avenue which will allow for the reduction of additional traffic on El Camino at the Page Mill intersection.

4. Provide a public bike/pedestrian path from Boulware Park through the new landscaped court to Park Boulevard so that this public space is shared by the Ventura community, the new residents and the neighboring commercial users. (Consider a Bike Bridge over El Camino to connect to Baron Park, the Research Park and beyond.)

Dreams by rationalists can become realities.






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