A long-awaited study that aims to measure downtown Palo Alto's capacity for growth got off to a rocky start Monday night, when the City Council balked at approving a contract for the analysis because it failed to include one of downtown's most critical sites -- an area that developer John Arrillaga is eying for a dense office-and-theater complex.

The proposal for 27 University Ave., which currently houses MacArthur Park Restaurant, fostered much community consternation last year, with many critics calling the four-office complex far too dense for an area already undergoing an economic boom and associated growing pains. After flirting with the idea of an election on the Arrillaga proposal last year, the council ultimately decided in June to launch an extensive community-outreach process for the site, which would include numerous public meetings.

Given the magnitude of the proposal and the significance of the site, next to the downtown Caltrain station and near the border between downtown and Stanford University, Councilman Greg Schmid was surprised when he saw the scope of the city's "downtown cap study" and noticed that the map excludes 27 University Ave., which is just west of Alma Street. Instead, the study proposed by staff would be bounded by Alma on the west, Middlefield Road on the east, and Palo Alto Avenue and Embarcadero Road on north and south, respectively.

The borders proposed by staff were predetermined by a law the city adopted in 1986 as part of its revision of the zoning code. At that time, the city had set a 350,000-square-foot limit for new non-residential development in the downtown core. It also specified that the city was to conduct a "downtown cap study" once the city reaches the 235,000-square-foot threshold. A recent surge of applications, including new commercial buildings at 101 Lytton Ave. and 135 Hamilton Ave., pushed the total development to about 250,000 square feet, triggering the mandatory study.

The implications of the study could be hugely significant, given the emergence of traffic and parking as Palo Alto's most critical issues and the council's highest priorities. Once completed, it is expected to guide the council in considering zone changes, parking programs and traffic measures downtown.

On Monday, in an intricate legislative dance, the City Council approved and then retracted its approval of a $200,000 contract for the first phase of the study, which was to look at the existing traffic and parking conditions downtown. The contract was placed on the council's "consent calendar," which typically includes non-controversial items that get approved in bulk, without discussion.

Schmid and Councilwoman Karen Holman both urged the council to remove the item from "consent," an action that requires three council members under a procedure adopted earlier this year (previously, it took only two council members). Their colleagues declined to support this decision and voted to approve the consent calendar, with Schmid and Holman dissenting on the contract approval. Minutes later, after hearing Schmid and Holman explain why they voted against the contract and receiving a last-minute written response from staff, Councilman Pat Burt led the council in passing a "motion to reconsider" and then joined Schmid and Holman in removing the item from consent and scheduling a fresh hearing on the proposed study at the next council meeting.

Schmid argued that the downtown-cap study and the city's consideration of 27 University Ave. should be closely linked and criticized the proposed study scope from excluding that site. Given the significance of the development and the huge public interest in traffic and parking issues, the item should not have been on the consent calendar in the first place, Schmid said. He noted that in discussing the study at prior meetings, council members had asked staff to return to the council for a discussion about the scope before an agreement is signed with the consultant.

"Development is a critical issue in front of us now," Schmid said. "To use the consent calendar to exclude the council from being involved in the scope of services is a major pre-emption of council policy."

Holman brought up a similar issue in a series of questions she e-mailed to planning staff Monday morning.

"Why is the 27 University Ave area not included in the scope of work?" Holman asked. "An artificial boundary that eliminates that potentiality will only partially measure the future of the Downtown."

At the meeting, she brought up another concern. The city, she said, should be looking "backwards" in addition to studying the existing conditions to assess how well it's been evaluating projects in recent decades.

"For there to be any real analysis and functional use for Phase 1 data, we need to know where we have come from," Holman said.

In a response to Holman, which was hand-delivered to the council during the discussion, staff explained that even though 27 University is outside the downtown boundary set in 1986, the traffic impacts around the area would be studied under the first phase. The second phase, according to a staff report, would look at the existing conditions and consider policy implications for future downtown growth.

The analysis in the first phase, staff wrote in response to Holman, "will be focused around the greater downtown including roadway segments surrounding and leading into the downtown such as El Camino Real; this ensures that the existing conditions on and around the 27 University site are captured as part of Phase 1 to help guide future Phase 2 policy discussions regarding land assumptions for future year scenarios."

Planning staff also explained that they did not return to the council for a discussion of the study's scope because of timing issues. The "window of opportunity to collect traffic data for the project is limited to 'normal traffic conditions' when school is in session (including Stanford) and pending clear weather," staff wrote.

"If the work scope were delayed for the initial data collection later in the Fall, the data collection was be delayed to the early Spring," staff wrote in a response.

The council voted 7-1, with Mayor Greg Scharff absent and Councilwoman Liz Kniss dissenting, to reconsider this item. It them re-approved the consent calendar with all the items except the study contract, which will now be taken up on Oct. 14. Staff is proposing to award the $200,000 contract to the firm Dyett & Bhatia Urban & Regional Planners.