After crashing into a wall of community opposition last year, Palo Alto officials on Monday formally hit the restart button on their planned transformation of a prominent downtown site commonly known as 27 University Ave.

Now, adopting a process that will likely last more than a year, the city's strategy is to come up with a community vision for the 4.3-acre site bounded by El Camino Park, Urban Lane, El Camino Real and Alma Street. The area's future became a hot-button issue last year when developer John Arrillaga proposed relocating the historic Hostess House, which currently houses MacArthur Park restaurant, and building a dense office complex and a performing-arts theater.

While city planners praised Arrillaga's proposal as a great opportunity to make long-awaited improvements to traffic circulation around the prominent but labyrinthine transit hub, residents blasted it for being far too big and criticized the process for a lack of transparency.

On Monday night, the City Council signaled that it received the message when it voted after a long discussion to proceed with "focused community input," which will include between six and eight public meetings and a new stakeholder group – an abridged version of the process that the city used a decade ago to develop a community vision for the South of Forest Avenue (SOFA) neighborhood. After squabbling over the details, council voted 5-3, with Larry Klein recusing and Pat Burt, Karen Holman and Greg Schmid dissenting, to launch the process.

Though the vote was not unanimous, all council members agreed that planning for 27 University needs to be significantly slowed down. Those dissenting argued for an even more intense process with more meetings. With its vote, the council committed to holding more meetings than the two to three that staff had recommended in a report last week. All on the council agreed the staff number was insufficient.

City Manager James Keene acknowledged in his introductory comments that the project "got off on the wrong foot" last year, when staff proposed bringing a dense office-and-theater development to the public for a vote. The initial proposal called for four office buildings ranging from 118 to 162 feet in height. A revised proposal then called for buildings between 99 feet and 114 feet tall, still far beyond the city's legal height limit of 50 feet. Under Arrillaga's proposal, the office buildings would be donated to Stanford University while the new theater would become the home of TheatreWorks, a nonprofit company that currently splits its time between Lucie Stern Community Center and the Mountain View Center for the Performing Arts.

In December, after hearing criticism from dozens of members of the public, the council directed staff to take a step back and consider other alternatives for the small but centrally located site. Rather than return with design options, staff proposed a community-engagement process that would arrive at a "master plan" for the site, said Aaron Aknin, assistant planning director.

"We thought this was an important enough site to really think through the different options to really give the council options for community input and master planning," Aknin said. "We need to make sure that vision directs development. We really need to better connect the Stanford area to the downtown area. Even if nothing was to be built on this land, we need to improve the transit station so that it facilitates increased ridership in the future."

The proposal has generated a swell of community interest, as evidenced by more than 50 people who attended the Monday hearing on the new process. Some urged the council to proceed in a transparent fashion. Others praised the planned redevelopment and its significance for TheatreWorks, a nationally recognized company. Among the latter was Robert Kelley, the company's artistic director. A performing-art theater between downtown Palo Alto and Stanford University would create a "cultural bridge between Stanford and the city."

"We believe the arts offer a tremendous public benefit to the proposal and a theater is one art form that combines all the others," Kelley said.

Others were more skeptical. Elaine Meyer, president of the University South Neighborhood Association, urged the council to make new development at the site comply with the city's 50-foot height limit and to ensure that the project would not create traffic or parking problems.

"Proposals should follow rather than ignore public opinion," Meyer said. "The public is sick of monster giveaways and is not going to support them."

Conservationist Emily Renzel, a former councilwoman, called the proposed outreach process "another ploy to wear the public out and avoid proper comprehensive planning for the city."

"All of this backroom dealing has created an atmosphere where the public has to wonder if anything we say will make a difference," Renzel said. "How much 'meeting of the minds' has already taken place with respect to Palo Alto's real estate and parkland?"

Council members indicated on Monday that they would be all too willing to take a few steps back and start working on a new vision for the busy area, a subject that experts have been exploring for decades. A "dream team" of architects and urban designers from the city and Stanford worked in the 1990s on a redesign of the heavily used transit area, though their dream ended up languishing because of lack of funding. The idea of improving transportation options also re-emerged in Palo Alto's negotiations with the Stanford University Medical Center over Stanford's expansion of its hospital facilities. The city's agreement with Stanford provides funds for designing and improving circulation around the intermodal center.

But it was Arrillaga's dramatic proposal that kicked the conversation into high gear and turned it into a community debate over everything from building heights, public benefits and the rising prominence of dense office proposals in downtown Palo Alto. Vice Mayor Nancy Shepherd, who supported the the staff recommendation (though with more meetings), said it gives the city a chance to look at the site "with our eyes wide open" and make sure the community's values are reflected in the site's future.

"This particular project is going to get developed sometime, maybe not this time, but if we develop the plan, we will end up with a much better project than if we allow others to just try to do an application," Shepherd said.

She called the Monday discussion "the beginning of the restart process."

Schmid and Holman agreed that the process needs to be restarted, though they supported an even broader and more in-depth process. Schmid suggested that the council's Policy and Services Commission come up with guiding principles for redesigning the site before the public meetings kick off. He also proposed that the council, before launching the redesign process, hold a joint meeting with the Planning and Transportation Commission to discuss "planned community" zones, a common mechanism in which developers exceed zoning regulations in exchange for negotiated "public benefits."

"One of the things that an intelligent, smart community wants is to make sure that when they start a process, they know the rules of the game," Schmid said. "They don't want to engage in a process for 6 or 12 months and come back and say, 'Oh, we didn't tell you. Here are the principles, guidelines and context that you should've had before you started this process."

Holman and Burt, who were both involved in creating the SOFA plan, stressed the need for a stakeholder group (including the landowner, which in this case is Stanford University) to hold its own discussions as part of the process. Holman had suggested a council-appointed group, though her colleagues elected to let staff determine the composition of the group and then bring it back to the council.

Councilwoman Gail Price initially joined Schmid and Holman in supporting the broader, longer process, though she ultimately voted with the majority after Shepherd agreed to the compromise that increased the number of public meetings.

"I feel as if we got a message loud, and clear and individuals and community members want to have more engagement and meaningful engagement," Price said.

Councilwoman Liz Kniss agreed.

"The public in Palo Alto is more than glad to share their position, which I think is positive. It's part of our process," Kniss said. "We're beginning the process tonight."