Roaring drills and clanging hammers mixed with blaring rock music at Alma Village in Palo Alto on April 1 as workers in hard hats pounded nails and screws into the plywood skeletons of future homes. Once completed, the row of houses will signify the completion of a long-debated development at Alma Street near East Meadow Drive.

Across a paved parking lot from these houses, a very different story is unfolding. Miki's Farm Fresh Market, which last fall signified the revival of the defunct shopping center, was in the last gasp of its short-lived existence. About a dozen customers walked past the half-empty shelves and abandoned aisles inside the grocery store, taking advantage of the going-out-of-business sale. A few workers organized the remaining cans and jars; another one wiped down the empty, movable shelves in the barren Seafood section. The market, which was founded by former Berkeley Bowl manager Michael "Miki" Werness, aspired last year to be a smaller version of the venerable Berkeley grocer. It went out of business in less than six months.

Alma Village, formerly known as Alma Plaza, is perhaps Palo Alto's most famous, or infamous, example of "planned community" zoning, a designation that allows builders to bypass zoning regulations by giving "public benefits." What this means varies from project to project. In 2009, when the City Council approved the Alma development -- which includes a grocery store, 37 homes and 14 apartments -- the main public benefit was the grocery store. Despite heavy criticism from the surrounding community and a recommendation to reject the project from the Planning and Transportation Commission, the council green-lighted it in hopes that the new store would fill a vacancy left by Albertsons in 2005.

The project also exemplifies the changing nature of planned-community -- or PC -- projects in Palo Alto. The city introduced the zoning designation in 1951 as a way to foster valuable developments that would fill community needs and that would otherwise be impossible under existing regulations. Senior-housing developments such as Lytton Gardens, Palo Alto Commons and Channing House all relied on this designation, as have, more recently, the Opportunity Center, which provides services for the homeless, and the Tree House, which offers affordable housing in a city that sorely needs it.

A shift began in 1978, when the city revised its zoning code in the aftermath of a development boom and introduced the intentionally vague concept of "public benefits" -- that is, benefits that are not intrinsic to the project but that would be provided by the developer in exchange for zoning exemptions. That summer, developer Harold Hohbach became the first builder to pitch public art as a benefit for a large development -- a residential complex on Sheridan Avenue. In exchange for building at greater density, Hohbach proposed, among other things, having winged, angel-like sculptures grace the four corners of the building.

The angels idea didn't fly, though nearly two decades later, Hohbach finally got the zone change he needed after offering a list of benefits that included a public plaza with sculptures of Greek warriors. The most prominent of these is the 12-and-a-half-foot bronze statue called the "Body of the Urban Myth," which features a Grecian female lifting a spouting washing machine over her head. While the fountain is still around, the public plaza has essentially been appropriated by Caffe Riace for outdoor seating. For critics of the city's PC zoning, this Riace plaza is a prime example of disappearing public benefits and feeble enforcement by the city.

Past efforts to reform the process haven't gone very far. In the late 1990s, then-Vice Mayor Ron Andersen and Councilwoman Micki Schneider argued that PC zoning allows developers to benefit at the expense of the city. At the time, Andersen described it as "zoning for sale." But despite their arguments for a clearer definition of "public benefits," no major overhaul was undertaken.

That debate over benefits has escalated in recent years, as developers propose more planned-community projects. Judith Wasserman, who retired from the city's Architectural Review Board after more than a decade, wrote in a Weekly opinion piece last year that "nothing brings out Palo Alto citizens with the pitchforks as fast as a Planned Community application." The topic has become even more urgent since then, with land-use watchdogs now calling PC projects a "scam," council members demanding profit projections from developers and planning commissioners looking at more substantive changes to the planned-community process, including establishment of benefit "menus" for developers to use.

And land-use watchdogs aren't the only ones who argue that the process is failing. Councilwoman Liz Kniss said at a recent hearing that she shares the sense of many of her constituents that developers have been getting too much from these projects at the expense of the public. She called the "misuse" of the planned-community zone one of the top issues raised by constituents during last fall's council campaign.

"There were very few issues that we heard about more than the misuse of the PC and how it's been interpreted in such a way that developers have been advantaged," Kniss said.

The closure of Miki's adds even more fuel to a debate that has grown more critical with every giant proposal that arrives at the city's Development Center. This month, the council is set to consider the grandest and most controversial of these -- a proposal by developer John Arrillaga to build four tall office towers and a performing-arts theater at 27 University Ave., a site that currently includes MacArthur Park restaurant in the historic Hostess House. (Though no formal PC application has been submitted, the concept proposes major zoning exemptions in exchange for negotiated benefits.) And later this month, the Planning and Transportation Commission will grapple with a PC proposal from San Francisco-based developer Jay Paul, who last year approached the city about building two, 71-foot-tall office towers with 311,000 square feet of commercial space at 395 Page Mill Road, site of AOL's Silicon Valley headquarters.

At the same time, staff is trying to fix problems with planned-community projects that have already been approved. This includes both the sudden grocery-store vacancy at Alma Plaza and the renovation of Edgewood Plaza, where a construction company erroneously demolished a historic building whose restoration was listed as a public benefit. The city is also considering another PC project at the central and often congested intersection of El Camino Real and Page Mill Road.

The tidal wave of controversial PC developments and the recent mishaps involving planned-community projects are prompting a fresh evaluation by the city. In an unprecedented move, the city has just hired an economic analyst to evaluate the economic "private benefits" of the Jay Paul proposal so that the council can more easily gauge how much it should demand in public benefits. It's a procedure that City Manager James Keene said last December would become standard for large projects.

Planners have also become more diligent about enforcement, compiling a list of recent PC projects and performing regular inspections, according to Planning Director Curtis Williams. As a result, one violation has been corrected. And the Planning and Transportation Commission last month began what promises to be a long and complex conversation about ways to bring more clarity, transparency and quantifiable standards to the process. The result could be the biggest transformation of the "planned community" in more than three decades.

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Last month, in a highly unusual step, three planning commissioners co-wrote a memo calling for major changes to planned-community zoning. In the first sentence of the memo, Chair Eduardo Martinez, Vice Chair Mark Michael and Commissioner Michael Alcheck call the existing process "the greatest challenge to land-use planning in Palo Alto today" and predict that the issue will become more pressing in the coming years.

"The forces for development in Palo Alto, the scarcity of available land, the impact of higher density land uses, and the infrastructure required to support existing and new development demand that we revisit this aspect of the 'Palo Alto Process,'" the memo states.

PC projects -- the city has around 150 of them -- were supposed to be exceptions: projects so laudable that they warrant bending or tossing aside standard zoning regulations. Instead, they have become the rule. Planning Commissioner Carl King observed at the March 27 discussion that developers these days are looking for "planned community" zoning for just about every major project. If he were a developer, King said, he'd do the same thing.

While developers still routinely talk about the benefits intrinsic to their proposals, that argument is getting harder to make in an era of lucrative office developments. Last May, the council approved the four-story "Lytton Gateway" building at the intersection of Alma Street and Lytton Avenue, a site formerly occupied by a Shell gas station. Developer Lund Smith said the project is meant to be a "beautiful, memorable building" that would greatly enhance a prominent entrance into the city for Caltrain commuters.

"I genuinely feel that is one of the public benefits," Smith said.

That argument didn't get much traction in the downtown neighborhoods, where residents have long complained about worsening traffic congestion and insufficient parking. The council approved the project only after debating the building's effects on parking in downtown neighborhoods, particularly in Downtown North. In this case, the developer agreed to contribute $2 million for future parking improvements, such as a new downtown garage, as a public benefit.

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The irony of Palo Alto's planned-community projects is that they're usually neither planned nor communities. Other developments are forced to abide by the regulations in the city's zoning code, which includes restrictions on height, density and setbacks from adjacent properties. The zoning code, in turn, draws its logic from the Comprehensive Plan, the city's official land-use bible, which is developed and revised over many years and includes extensive feedback from city officials, staff planners and members of the wider community.

With planned-community projects, the zoning code effectively goes out the window as the city engages in ad hoc negotiations that combine elements of poker and auctioneering. Notes get passed at City Council meetings and projects have changed in the 11th hour without an opportunity for the public to review the latest changes. The council typically spends a few hours asking developers if they are willing to trim some square footage off the proposal, reduce the building's height, contribute more funds or add some public amenities -- parks, community rooms and so on. During the discussion of Lytton Gateway, Councilman Greg Schmid proposed upping the ante and requiring a greater financial contribution from the developers, prompting Councilman Pat Burt to say, "This is starting to feel like 'Squeeze the applicant until he screams "Uncle."'"

Usually, after a few revised pitches and several rounds of nodding and head-shaking by project applicants, the two sides come to a late-night agreement and the developer gets to build a project that is a bit smaller than initially proposed and a bit larger than residents and council members hoped it would be. In the end, most people are satisfied but few are thrilled, as befitting a compromise.

The ad hoc and largely reactive nature of the approval process has long rankled local watch-dogs. At a recent hearing on the Jay Paul proposal, Fred Balin, a College Terrace neighborhood resident who has long advocated for more transparency in the planning process, urged the council to give more weight to what should be appropriate for the site and less to what the developer is pitching.

"Zone for what you want -- not for what's presented to you ad hoc," Balin said.

Burt made a similar point at the September discussion of the Jay Paul project, which includes as one of its benefits the construction of a new police building for the city. Burt shared the view of most of his colleagues that the proposal -- while laudable in many ways -- is out of scale with the site. In this case, Burt said, it would take more than cosmetic changes to make it work.

"If we had a developer come and propose a doubling of existing zoning -- an additional 200,000 square feet -- ordinarily, our first reaction would be that we would say, 'Holy cow! That's a lot,'" Burt said. "Now, because they're proposing 300,000 square feet, we think we can nip and tuck and cut a little tiny bit.

"We need to take a step back as a council and say: 'What do we think would be an approximate reasonable amount of building for this site that would balance the interests?'"

The word "community" in the designation is also a bit of a misnomer these days. When PC-zoned projects were approved based on their intrinsic value, it was easy to call them communities -- or community-oriented. While the term can still apply to developments like Edgewood Plaza, Alma Village or the proposed senior complex at 567 Maybell Ave., it's a little harder to make it jibe with dense, office-heavy projects like Lytton Gateway, the College Terrace Centre on El Camino Real and the mammoth commercial proposals pitched by Jay Paul and Arrillaga.

With financially lucrative office buildings on the rise and the concept of "intrinsic benefit" on the wane, it's extrinsic public benefits -- sculptures, road improvements, grocery stores, bike lanes and contributions to the city's housing and parking funds -- that now dominate the conversation. Local law offers little guidance. The zoning code specifies that planned-community zoning is "intended for unified, comprehensively planned developments which are of substantial public benefit" and that these developments "will result in public benefits not otherwise attainable by application of regulations of general districts or combining districts." What exactly this means is anyone's guess. Nor does the code say anything about the challenge of sustaining ephemeral public benefits like Miki's Farm Fresh Market -- benefits that disappear after a few months, leaving the city with a vacant space and a housing project that no one on the council or in the surrounding community really wanted.

Wasserman, who had reviewed a myriad of PC projects while serving on the architectural board, blames the ordinance's vagueness for fostering public rancor. In her opinion piece, she presented three possible solutions to eliminate the confusion: eliminate the PC zone altogether; specify that public benefits refer only to things outside the project itself; or do the opposite and limit the definition of the term to the project itself -- a throwback, in a sense, to the 1950s.

The three planning commissioners proposed in their memo three categories of public benefits: those intrinsic to the project, those that come from enhancement of the project and those that contribute to the city's overall need. Yet even with the categorization, the memo states, "the definition of a public benefit remains elusive."

"Without a precise definition, measuring a public benefit and determining whether it meets the general purpose and intent of a PC-zone designation is cumbersome and unpredictable," the memo states.

The memo proposes, as a possible solution, a menu of benefits that could be "expanded or tailored to meet our unique priorities and concerns." The commissioners cite the example of Santa Monica, which in 2010 adopted a system that provides developers with five categories of benefits (traffic management, affordable housing, physical improvements, cultural facilities and historic preservation) and allows them to earn points based on these elements. If a developer proposes a certain amount of benefits, the project becomes eligible for a second zoning "tier," which allows greater height and density. Those who provide even more benefits become eligible for "Tier 3," which grants even greater height and density exemptions. But the system has its own problems. Since Santa Monica adopted its land-use plan in July 2010, the number of development-agreement applications has skyrocketed, prompting city planners to request in December a slowdown in application processing. At least a dozen of these applications are for Tier 2 or Tier 3 projects, according to a recent report from Santa Monica's planning director.

The memo from Palo Alto planning commissioners also cites other cities, including Portland, Seattle, Berkeley and Chicago, that have adopted incentive-zoning programs similar to Santa Monica's.

A menu of benefits could bring a little more clarity and transparency to Palo Alto's public-benefits discussion, but even this would come at a cost. The existing process gives the City Council complete discretion for negotiating benefits. A menu-based system would limit this discretion and effectively allow developers to automatically get density bonuses and other exemptions if they offer a menu item as a benefit. It's also not a given that a menu would eliminate the ambiguities in the public-benefit discussion.

"They've got a pretty long list," Williams said, referring to Santa Monica's system. "It probably covers almost anything you can come up with."

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Palo Alto is still a long way from solving the problem, but some changes have already been made. During recent hearings on planned-community projects, various council members talked about the need to get more information about the economic impacts of the proposed projects, both for the developer and for the city. Citizen critics of the PC process, including Bob Moss and Winter Dellenbach, have consistently urged officials to get financial data from developers and then demand the same level in public benefits.

"The benefits to the public should approximate the increased value that the developer derives by being granted a PC zoning change," Dellenbach, a Barron Park neighborhood resident who spent three years investigating public-benefit violations, told the planning commission on March 27. "So figure out the gazillion dollars more that the developer will derive from getting a PC-zone change, and you would have a very rational yardstick about the value that public benefits should equal."

The city is unlikely to go that far. Some benefits, including historic preservation, are hard to measure. And some projects, including affordable-housing projects like 567 Maybell, truly fill a deep city need. Who can argue that the Palo Alto Housing Corporation, the nonprofit seeking PC zoning for the Maybell development for seniors, should be forced to commission sculptures or construct bike lanes? And for some council members, at least, even major commercial projects could have intrinsic benefits.

In February, when the council was considering a PC zone for a property on the central intersection of El Camino Real and Page Mill, Councilman Larry Klein made the argument that the building, if done properly, would be a great benefit in itself. The corner is currently occupied by an empty lot that until recently was used by the Santa Clara Valley Transportation Authority. The city, Klein said, "missed the boat" with the other three corners of the busy intersection (which feature AT&T's retail store, soccer fields and the northern parking lot of the sprawling Palo Alto Square complex).

"My public benefit -- I expect this to be the best building you've designed in your career," Klein told project architect Ken Hayes. "If the city asks for less in terms of public benefits -- that's fine by me."

Not everyone bought this argument. Most council members agreed that the application should be revised and that more benefits should be added.

"There's the public benefit and the developer benefit -- and I think they're out of whack at the moment," Councilman Marc Berman said, reflecting the view of the majority.

But even if the city doesn't require the two columns to be equal in every scenario, it plans to at least be more informed in future negotiations with developers. Williams said in an interview last week that the city has recently hired the consulting firm Applied Development Economics to evaluate the economic impacts of the Jay Paul proposal, which is undergoing revisions. If the information proves useful, the firm (which also worked with the city on evaluating the economic impacts of the recent Stanford Hospital expansion) would also be retained to evaluate the proposal for the Valley Transportation Authority (VTA) lot at El Camino and Page Mill.

It remains to be seen whether these evaluations will become a regular part of the planned-community rezoning process. At the council's meeting last Dec. 3, Keene said he's directed staff to hire an independent analyst to assess the development value and public benefits for each large project before the city, information that would help the council reach its decisions.

Williams noted in a recent interview, however, that in many cases the information simply would not be pertinent.

"Sometimes, it's relevant how much a developer is making versus how much the developer is giving," Williams said.

"At other times, it's much more intangible and not quantifiable," he added, citing the Maybell development.

The city's drive toward requiring more economic data is also catching the attention of developers. Jim Baer, who consulted on Lytton Gateway and who is now working on the VTA-lot proposal, offered for the latter project a meta-benefit of sorts. In addition to the usual things like road improvements and a public easement for the corner property, Baer offered the city a methodology for evaluating benefits of planned-community projects.

"We'd come into a study session ... and say, 'Here's a methodology on how you analyze what the applicant gets, what it costs the applicant to derive that and how we're managing public benefit,'" Baer said.

Most planning commissioners agreed during their March 27 discussion that economic data could be valuable, citing the old adage: "You can't manage what you can't measure." For Martinez, things were a bit more complicated. Martinez, who grew up in Los Angeles, invoked the example of the Century Plaza Hotel, an iconic building that went up in the 1960s and that hosted numerous dignitaries and civic functions (it was also featured in the first "Die Hard" movie). Over the next few decades, the hotel fell into disrepair and the developer was looking to demolish it. The building was saved only after a heavy push from historic preservationists and an agreement by the city to allow incentive zoning at the site, which enabled construction of two commercial buildings next to the hotel and conversion of some rooms to condominiums.

"The Century Plaza Hotel has been restored to its previous glory, and it's a beautiful building and a symbol of L.A. -- but you can't measure the public benefit of that," Martinez said. "You can't say that it was a win-win because I'm sure the developer won 10 times as much.

"But nevertheless, this historic building is still there. It's part of the L.A. landscape. It lives on for another generation or two -- who knows? And it's an example of a public benefit in a development of this site that is immeasurable."

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Figuring out the level of public benefits isn't the only issue that the city is wrestling with when it comes to planned-community projects. Enforcement is another hot topic. While Caffe Riace remains a poster child for planned-community critics, it isn't the only example. A small plaza that the city approved as a public benefit for the 800 High St. development in 2003 transformed five years later into an outdoor seating area for Saint Michael's Alley, a restaurant on High and Homer Avenue. For critics like Dellenbach, the two projects have become synonymous with lax enforcement. During her investigation, Dellenbach said, she had found numerous instances of public benefits not materializing or being transformed into other uses.

"Enforcement is absolutely critical," she said.

From Williams' perspective, the problem is a bit overstated. The overwhelming majority of public benefits, he said in a recent interview, get delivered as promised and do not require enforcement. For things like road enhancements, grocery stores and community facilities, once construction is completed, they are there for good. In his view, two most-often cited examples -- Caffe Riace and the plaza near Saint Michael's Alley -- are glaring exceptions but certainly not the rule. In fact, the public plaza near Saint Michael's Alley was almost never used before the restaurant took it over, he said.

About a year ago, Williams said, the planning department put together a list of all planned-community projects that the city had approved over the past decade, including Alma Village, the Campus for Jewish Life, and 800 High St., and began inspecting them for compliance with public-benefit approvals. In the case of the Campus for Jewish Life and the Tree House (an affordable-housing development at 388 W. Charleston Road), this means checking to see whether the projects are meeting their traffic-management goals. For other projects, this means making sure the promised public art or public plazas are where they should be. Most comply, though city inspectors found one project on Lytton Avenue that had blocked off what was supposed to be a public-access road. The city got the public access reopened, Williams said.

Checking every PC project may be next to impossible, given the sheer number of them, but the city is trying to be "more systematic" about enforcement, Williams said. In addition to the projects on the list (which get checked either annually, biennially or every three years, depending on the project), the city also performs inspections based on complaints.

Sometimes, the problem sprouts from the individual PC ordinance. In the case of Caffe Riace, the ordinance creating the planned community doesn't prohibit the restaurant from setting up tables outside its establishment. It only calls for a "plaza which will be accessible to the public" and which includes "a water feature, benches and landscaping." The city has been checking periodically to make sure the conditions are met. In 2010, after complaints from Dellenbach and others, planners directed the cafe to relocate its furnishings and create more space for the public near the fountain.

The often-cited cases of Caffe Riace and Saint Michael's Alley may be exceptions, but they offer a valuable lesson, Williams said. When the city approves public plazas as "benefits," it needs to make sure they are designed in such a way that they cannot be taken over by adjacent businesses.

"There are a very small portion of public benefits that have been a problem, in that respect," Williams said. "But those are good lessons. When we designate outdoor areas to be specific to the public, we need to do that with eyes wide open."