Palo Alto voters could have a say as early as next spring on a sweeping proposal by billionaire developer John Arrillaga to build a four-tower office complex and a theater near the downtown Caltrain station -- a project that would create a new "arts and innovation district" in one of the city's most central locations.

The city is still a long way from approving the ambitious plan, which would bring about 260,000 square feet of office development to a prime location between Palo Alto and Stanford University and give the nonprofit TheatreWorks the permanent home it has long sought. But while the designs of the new buildings are still being refined, the general concept received mostly positive reviews from the City Council Monday night, even as some members and residents called for the office component -- which could reach 10 stories in height -- to be scaled down.

After a long discussion that stretched into Tuesday morning, the council voted 7-0, with Mayor Yiaway Yeh and Councilman Larry Klein recused, to start laying the groundwork for two ballot measures related to the development proposal at 27 University Ave. The council directed the City Attorney's Office to draft measures that would allow voters to weigh in on the huge development in March 2013. One measure would give voters a say on the zoning changes that would have to be made to enable the project. The second one would allow the city to use a portion of the nearby El Camino Park for the proposed development.

The vision, from the city's perspective, is to create a new arts district in the prominent downtown location -- an area that would connect "town and gown," according to Deputy City Manager Steve Emslie. The office buildings, meanwhile, would be built by Arrillaga and donated to Stanford University under the current proposal, Emslie said.

The city, he said, had launched several planning efforts in recent decades in hopes of making significant improvements to the Intermodal Transit Center, where the Caltrain station is located. But without funding, all these plans have languished. Emslie called the Arrillaga proposal for this central area "bolder than anyone has proposed in recent memory."

"It's a rare opportunity," Emslie said. "And I think it's a rare opportunity for the public to be able to influence, in a democratic way, the future of their city."

The council heard from a large group of volunteers from TheatreWorks, a group that currently shuttles between the Lucie Stern Community Center in Palo Alto and the Mountain View Center for the Performing Arts. Robert Kelley, the group's artistic director, said that once the theater is built, "TheatreWorks will have a home that will ensure outstanding theater for years to come, rededicating our community to the arts and ourselves to creating something bold innovative, new and totally exciting."

Phil Santora, managing director of TheatreWorks, said the organization views the proposed theater as "a vibrant cultural hub open to all from morning to evening."

"We believe so strongly that this facility will elevate our ability that we're willing to raise the tens of millions required to outfit this building," Santora said.

But while council members lavished praise on the idea of a new theater, some found the proposed office buildings a bit too bold. The tallest of the four towers would be 10 stories and 161 feet tall -- three times the city's 50-foot height limit for new developments (the other three towers would be nine-, seven- and six-stories high).

Councilman Pat Burt said the project "has some really enormous community benefits" namely, a new theater with a public plaza; improved walkways and bike paths around the transit center; and the relocation at the developer's expense of MacArthur Park Restaurant, a historic building at 27 University. But Burt also said he'd like to see the commercial buildings shortened.

"I accept that this development will be above our normal limit, but what I'd like is to see it reduced from what's proposed here," Burt said.

He also noted that even though the potential 2013 measure would be an "advisory" one, he would consider it binding on his decision.

Burt's colleagues shared some of his concerns, with varying degrees of enthusiasm. Councilwoman Gail Price was particularly receptive to the proposal, calling the plan a "tremendously exciting opportunity" and saying she has "great praise and admiration for the work that's been done."

"I think this is an excellent example of how public-private partnership can and should work," Price said. "And many other communities have done that successfully."

Other reactions were more mixed. Councilman Sid Espinosa said he is concerned about the height and mass of the office buildings but praised the proposed improvements to the transit center.

"There are some incredible opportunities provided in this project," Espinosa said. "There are serious issues that we need to work though and we need to get answers to before we can really go to the public with the information I think they'll need to make a decision, maybe come March."

Councilwoman Karen Holman proposed keeping the MacArthur Park building, which was designed by famed architect Julia Morgan, at its current location. She also argued that the city is rushing into the 2013 measure without having done the necessary analysis of the project's impacts. And, like others, she said she was concerned about the proposed height of the office buildings.

"We ought to call out what it is," Holman said. "One-hundred-sixty-one feet is not compatible with anything around it."

Daniel Garber, a former Planning and Transportation Commission member who stepped down from the commission to work on this project, said the office component is critical because "it's the impetus for the interest of the applicant." Garber said the design team had encouraged Arrillaga to "instead of spreading out, to go up" with the new office building, thereby creating a better pedestrian environment. Garber, who is also on the board of trustees for TheatreWorks, added that the goal is to "create a very contemporary expression that is unique to downtown Palo Alto."

The proposal has already won over Clement Chen, who owns and runs the Westin and Sheraton hotels near the project site. Chen told the council he was initially skeptical of the plan, given the project's great density but began to support it after hearing about measures to improve traffic flow in the area.

"We have a once-in-many-lifetimes opportunity because of Mr. John Arrillaga being able to consider the benefits to traffic, theater and everything that can really transform an underutilized, confusing and really tough, tough area," Chen said.

Not everyone, however, was jazzed about the proposed arts district. Bob Moss, a land-use watchdog and frequent critic of large new developments, called it the "most appalling proposal I've seen in Palo Alto" in almost 40 years.

Resident Martin Sommer, who lives near the project site, took his opposition a step further and began circulating a petition seeking to prevent the buildings from going up. Sommer, whose condominium building is bordered by Alma and High streets, said the large buildings would cut off the residents' view of the Santa Cruz Mountains and severely impact their real estate values.

"People are getting angry about these proposed buildings," Sommer wrote.

He said he's getting a great response for his petition, which can be found at 27university.com.

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