When Palo Alto City Council members struck a deal with The Sobrato Organization in June to transform the former site of Fry's Electronics, they framed it as a win-win situation that creates opportunities for park space and affordable housing in the heart of the Ventura neighborhood.

But Terry Holzemer and other residents who have spent more than a year trying to develop a new vision for that portion of the neighborhood argued Monday that the proposed agreement falls well short of their vision and expectations. In their first opportunity to publicly comment on the plan since its June 21 announcement, he and others expressed disappointment with various components of the deal, which allows Sobrato to demolish a third of the historic cannery building at 340 Portage Ave., retain research-and-development space in the preserved portion of the building and construct 74 townhomes.

For Holzemer, one of the biggest flaws with the agreement is the planned removal of a portion of the old cannery building, which was built more than a century ago by Thomas Foon Chew, a Chinese entrepreneur who created what was then the third largest cannery of fruits and vegetables in the country. The city's historic consultant, Page & Turnbull, described the former building in its report as "a rare surviving example of Palo Alto's and Santa Clara County's agricultural past."

"This is not just another old industrial building that stands in the way of progress," Holzemer said. "This site and this building are very likely the last segments of a history that is very significant not only to us in the Bay Area but to California history."

He likened the prospect of demolishing the former cannery to removing a section of the HP garage or Hearst Castle.

Others took issue with the council's plan for affordable housing, a key priority identified by the North Ventura Coordinated Area Plan Working Group, a panel of stakeholders that included property owners, neighborhood residents and other community members who worked on creating a concept plan for a 60-acre area bounded by El Camino Real, Lambert Avenue, Page Mill Road and the Caltrain tracks.

Under the proposed deal, Sobrato would construct 74 townhomes. Rather than dedicate 15% to below-market-rate housing, as developers would typically be required to do, it would donate an acre of land to the city at the site for a future affordable housing development.

Several council members argued that this represents a victory for the city, which could potentially build more dwellings and offer them at a deeper level of affordability than Sobrato would through the inclusionary housing program, which would have required construction and dedication of about 14 townhouses at "affordable" rates.

Council member Alison Cormack pointed to the new, nearby 59-apartment development on El Camino Real known as Wilton Court, which was constructed on a half-acre site. A similar project on the donated land near the cannery building could potentially net 120 units, she suggested.

"There's a pretty big difference between 14 and 120," Cormack said.

And whereas the city's inclusionary zoning program allows developers to offer affordable units at 100% or 120% of area median income (AMI), the city's future project could target a lower income level, something in the range of 60% to 80% of AMI, she said.

Not everyone was swayed. Resident Bob Moss argued that the best way to get affordable housing is to force the developer to actually build it. In this case, Sobrato is providing land and $5 million in fees for affordable housing and park improvements.

"If you build it, you got it. If you take the money, it just sits. Bad idea," Moss said.

Council member Tom DuBois, who along with Vice Mayor Lydia Kou negotiated the deal with Sobrato over six months of Wednesday morning meetings, said he and Kou "struggled mightily" with the question of generating affordable housing in Ventura but ultimately agreed that the land dedication is the best way to go.

He acknowledged the policy disagreement and said the concept "would provide an opportunity for potentially substantially more affordable housing units at a more deeply affordable level of 60% to 80% AMI if the city were able to partner with a nonprofit or other low-income housing provider at that 1-acre portion that's been identified in that area."

"No compromise is going to be perfect," DuBois said. "I think council member Kou and I both wanted to ensure this would be a livable neighborhood and that key historic pieces of the building would be preserved and recognized."

The concept also calls for Sobrato to donate 2.25 acres of the land for a city park near Matadero Creek, which is currently a concrete channel that the city hopes to open up and restore to a more natural state. Mayor Pat Burt argued that these future improvements would create a "really desirable" location for an affordable housing development.

"This is one of the few opportunities we've actually had for a development agreement where we can negotiate terms that are even greater than what we'd be able to have through our standard zoning," Burt said. "I believe that's exactly what's happening here."

Creating certainty or dissent?

For Sobrato, the deal would deliver some certainty that the former cannery building and other structures at the site can continue to house research-and-development companies. For years, council members have discussed the possibility of amortizing the commercial uses at the site and replacing them with housing. The area is zoned for medium-density housing and Palo Alto listed the site in its Housing Element as one that could accommodate up to 249 dwellings.

But city leaders have been loath to make that switch out of concern that Fry's Electronics would depart, a fear that happened anyway in late 2019. The store's shuttering prompted renewed calls to change the land usage at the site, including the prospect of requiring Sobrato to find new retailers.

The proposed deal, which will be vetted in the coming months by the Historic Resources Board, the Architectural Review Board and the Planning and Transportation Commission, effectively halts all talk of amortization and allows the historic cannery to serve primarily as a research-and-development building. The cannery would, however, be renovated and it would include 2,600 square feet of retail space that would allow visitors to view the building's historic elements and an exhibit recognizing its significance.

For The Sobrato Organization's part, Tim Steele, the company's senior vice president of real estate development, called the proposed development agreement "a thoughtful compromise following months of work."

While the North Ventura group's work had not yet been completed when the negotiations were unfolding, its discussions had an impact on Sobrato's proposal, Steele told the council.

He also noted that Sobrato has been working with a historic architect, Architectural Resource Group, to develop plans for the former cannery and create the exhibit that would be displayed inside its retail area.

"We are currently working with them to establish site-specific guidelines on how to move forward with refurbishment of the existing cannery building," Steele said.

Some residents, however, suggested that retaining the commercial uses in the building, which currently houses the tech-focused venture capital company Playground Global and the automotive AI tech firm Nauto, flies in the face of community expectations for the site.

Rebecca Sanders, moderator of the Ventura Neighborhood Association, said she was disappointed and suggested that amortization of commercial uses should remain on the table. Resident Jeff Levinsky urged the council to publicly release the financial studies it had used to develop the concept with Sobrato and other alternatives that had been evaluated as part of the negotiations.

More information is expected to be released in the coming months, as the proposed development plan goes through the environmental review process.

Karen Holman, a former Palo Alto mayor who currently serves on the Midpeninsula Regional Open Space District board of directors, urged the council to clearly define the review process for the development and the financial benefits that both sides will receive as part of the deal.

"No one is going to get everything they want, but it's essential that good analysis and process be followed that allows the public to evaluate this or any proposal," Holman said.

She also suggested that the council recognize the historic significance of the cannery by renaming Portage Avenue to Thomas Foon Chew Cannery Way.

Julie Lythcott-Haims, who is running for a council seat this November, highlighted another area in which Ventura is historically significant: its status as one of few neighborhoods where Black and Asian residents could live back when Palo Alto engaged in "redlining" and when many parts of the city had restrictive covenants that prevented racial minorities from moving in.

"As the nation reckons with understanding and atoning for systemic discrimination against Black, Asian, Latinos and other racial minorities, when this project comes to fruition I hope it includes a recognition and celebration not just of the historic cannery but of the fact that this is where Black and Asian people have historically made their home in Palo Alto," Lythcott-Haims said.

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