Bowing down to intense community pressure and years of criticism from land-use watchdogs, Palo Alto officials have announced a plan to suspend and reform the city's controversial "planned community" zoning process, which allows developers to barter zoning exemptions for public benefits.

Planned community (PC) zoning -- originally devised to allow for unconventional developments that would contribute to the public good -- was at the forefront of last November's election battle between the City Council, which approved a PC-zoned housing project on Maybell Avenue in June, and the residents who mounted a referendum against it. The referendum, which led to an overwhelming Election Day victory, alleged the proposed housing development was incompatible with the rest of the neighborhood's zoning and character.

Even before the Maybell project was shot down, residents, watchdogs and even Planning and Transportation Commission members warned that the zoning process was fraught with problems. Many cited "public benefits" that were promised but that never materialized, with the most glaring examples being the public plazas at Cafe Riace in the California Avenue area and next to St. Michael's Alley restaurant downtown. Each plaza was offered as a benefit for a PC project and was subsequently swallowed up by the adjacent restaurant.

The problem has become more pervasive in the years following the 2009 economic downturn, with more applicants proposing beefy PC projects whose massiveness would be offset by the public benefits.

The renovated Edgewood Plaza along Embarcadero Road and downtown's Lytton Gateway, a four-story commercial project at 101 Lytton Ave., were the most recent PC projects to win the council's green light (not counting the overturned proposal on Maybell, which included 60 units of housing for low-income seniors and 12 single-family homes).

The planning commission, which reviews all such proposals, recognized the challenges with PC projects more than a year ago when a troika of commissioners issued a memo calling the existing process "the greatest challenge to land-use planning in Palo Alto today."

To address this challenge, city staff is now recommending a "time out" period for PC projects -- a moratorium that would stay in effect until the city revises the zoning rules. In a report issued Wednesday afternoon, planning staff acknowledge that the process has been "viewed by many as too opaque and transactional."

"While many acknowledge the success of some past PC developments and advantages of PC zoning as a tool, the process and some of its outcomes have been critiqued as inadequate," the report from the Department of Planning and Community Environment states. "Furthermore, the ad-hoc nature of each separate negotiation has contributed to the community concerns about the lack of a coherent set of values or vision for the future."

The proposed time out would allow staff to consider possible reforms, including ones recently suggested by the planning commission. These include specifically defining the types of projects that may apply for a PC district; defining the minimum size of a property that would be eligible for PC zones; establish a buffer zone between such projects and low-density residential zones; creating a menu of "public benefits" that a developer could offer under a PC proposal; and establishing a "better mechanism" for monitoring stipulations and conditions placed on a project.

Though the reforms would not resolve all the issues around the zoning (the council would still have to weigh the drawbacks of high density against the benefits offered), they would add some predictability to a process that has at times resembled a late night, high-stakes poker game between developers and elected officials. Because the zoning code doesn't specifically define "public benefits," the offerings have ranged widely, from small plazas and large angel statues to affordable-housing units and cash.

Perhaps the boldest public benefit ever offered was Jay Paul Co.'s recent proposal to build the city a new police headquarters in exchange for permission to build 311,000-square-feet of office space at a site that is already built out to the zoning limit. In December, with the Maybell election in the rearview mirror and public tensions rising high over dense developments, Jay Paul withdrew the offer, citing the city's "political climate."

The new recommendation signifies a determination by staff that the only way to save the PC zone is to kill it, at least temporarily. With the Jay Paul application withdrawn and the Maybell project defeated, the only PC project now in the city's pipeline is 2755 El Camino Real, site of a former Santa Clara Valley Transportation Authority (VTA) lot on the busy corner of El Camino and Page Mill Road. If approved, the 33,000-square-foot office project would consist of four stories of office space to be occupied by a bank.

Palo Alto officials have recently commissioned an independent study to consider the value of the offered public benefits, which include $275,000 toward intersection improvements at El Camino and Page Mill, $175,000 for electric-vehicle charging stations near California Avenue and a $1.4 million contribution toward the city's soon-to-commence upgrade of California Avenue. According to the planning report, consultants had concluded that a "potential development could be profitable under both a PC zoning designation and a C-S (service commercial) zoning designation." If the City Council agrees on Monday to accept staff recommendation, the project at 2755 El Camino would be put on hold until the process is reformed.

This would not be the first time that the city is making changes to the PC zone, which has been in existence since 1951. Intentionally vague, the ordinance establishing PC's stated that the districts are intended to accommodate projects such as "neighborhood and district shopping centers, professional and administrative areas, multiple housing developments, single-family residential developments, commercial service centers and industrial parks or any other use or combination of uses which ca be made appropriately as part of a planned development."

In 1978, the city reformed the process and introduced a more extensive public-review process for PC projects, along with the concept of "public benefits" that a developer has to offer. The revised PC ordinance, which remains in place today, specifies that the "planned community district is particularly intended for unified, comprehensively planned developments which are of substantial public benefit, and which conform with and enhance the policies and programs of the Palo Alto Comprehensive Plan." Though it was initially intended as an exception to enable particularly beneficial project, it has become commonplace in recent decades, particularly during times of economic boom. The city currently has between 100 and 150 such developments.

Recognizing the frequency of such applications and public anxieties surrounding them, planning Commissioners Mark Michael, Eduardo Martinez and Michael Alcheck wrote in their March 2013 memo, "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 process of reforming the PC zone coincides with the city's revision of the Comprehensive Plan, its land-use bible. In the Wednesday report, staff offers two options for proceeding with the time out. One would freeze the zoning mechanism until late summer, when staff presents the council with an analysis and recommendations. Another approach would link the PC conversation with the broader update of the Comprehensive Plan, an option that would extend the timeline for reforming the zoning process.

Whichever approach the council chooses, members are unlikely to kill the PC zone entirely. At their Dec. 2 discussion of the topic, several council members said that while they would be open to reform, they would be reluctant to scrap it entirely, as many in the community have urged. Then-Mayor Greg Scharff said he would support, for instance, inclusion in staff reports of the "pros and cons" of such proposals.

"What we need is community buy-in into the PC process and not this fear," Scharff said.

Councilman Pat Burt, meanwhile, observed that for all the hype, PC projects make up only a small portion of the proposals in front of the council (only two were in the pipeline during the time of the Dec. 2 meeting, which was two weeks before Jay Paul pulled out). The more pertinent issue, Burt said, is large developments in general. Those people who are focusing on the PC zone as the "primary culprit of our problems of having too much development occurring too rapidly -- which I agree with -- are misguided and doing a disservice to those in the community who are concerned about the rate of change and growth," Burt said on Dec .2.

Councilman Larry Klein was the most outspoken opponent of a moratorium at that meeting, observing that moratoriums often have "unintended consequences." Councilwoman Karen Holman, meanwhile, took the opposite stance and said the city should "have a moratorium on PCs, including those in the pipeline."

"I'd like to be a community where commercial entities that want to enter Palo Alto are welcomed, not referended, not appealed," Holman said.