Few phrases stoke rage and cynicism in Palo Alto as effectively as "planned community," a process that allows developers to skirt zoning regulations in exchange for public benefits.

On Monday, City Council acknowledged that the system isn't working and voted 7-2, with Larry Klein and Gail Price dissenting, to suspend the planned community process while staff considers possible reforms.

Intended as a way to give city leaders more flexibility when it comes to new developments, planned community zoning has been derided by land-use watchdogs as "wildcard zoning," "ad hoc zoning" and a "sham." Last year, a PC-zoned project sparked a community revolt, with voters overwhelmingly overturning in November a housing development on Maybell Avenue that the City Council had approved in June. The civic unrest led to the demise of another PC proposal -- an offer by Jay Paul Company to build two office buildings at 395 Page Mill Road and a police station at a nearby site. A month after the November election, Jay Paul withdrew its application, citing the "political climate."

The council also voted 5-4 to apply the "time-out" to the sole PC project currently in the development timeline -- a 33,000-square-foot office building proposed by the Pollock Financial Group for 2755 El Camino Real.

Councilmen Pat Burt, Greg Scharff and Larry Klein joined Councilwoman Gail Price all argued that the suspension should not apply to the four-story project, though they were overruled by their five colleagues.

Jeff Pollock and the application team made their case on Monday for why their project should be excluded from the moratorium. Ken Hayes, the architect behind 2755 El Camino, pointed out that the project would be far smaller than the ones proposed by Jay Paul and developer John Arrillaga, who wanted to build four office towers and a theater at 27 University Ave. Hayes said the zone change would result in an additional 10,000 square feet of development beyond what would be allowed under the standard "service commercial" zoning (the Jay Paul proposal would have added 311,000 square feet to a site already built to the zoning limit). In exchange, the city would get a package of benefits that includes intersection improvements and contributions toward the city's upgrade of California Avenue.

Hayes also assured the council that the project is "fully parked" and that its design "fulfills the vision of the El Camino Real guidelines."

Assuming the building is approved, its tenant would be First Republic Bank.

The council's action effectively freezes the application at least until the coming summer, when staff is scheduled to bring back a proposal for reforms. Through a series of votes, the council paved the way for the largest overhaul of the planned community process in more than 35 years.

The "planned community" designation has been around since 1951, when the city introduced it to encourage developments such as "neighborhood and district shopping centers" and "industrial parks" that cannot comply with the underlying zoning. The ordinance was revised in 1978 to specify that planned-community projects have to provide "substantial public benefit" and to require developers to offer "public benefits" in exchange for the city's approval. In subsequent decades, the phrase encompassed everything from sculptures and landscape improvements to affordable-housing units and bike improvements.

The goal is to make the process more predictable and politically palatable. Though specific reforms won't be put forward until summer, they could include a specific definition for the types of projects that could apply for a PC zone; create minimum lot sizes for PC districts; and create a menu of public benefits a developer can offer, a change that would bring some predictability to the negotiations and address concerns about the "ad hoc" nature of negotiations. A report from city planners notes that the process has been "viewed by many as too opaque and transactional" and that the ad hoc nature of each negotiation "has contributed to the community concerns about the lack of a coherent set of values or vision for the future."

Burt, Klein and Price all argued that there is no need to include 2755 El Camino in the moratorium, given that the project has been flowing through the planning process for more than a year and given that the council has full discretion to shoot it down if it isn't happy with the public benefits. Burt said he finds it "ironic" that after two years of enthusiastic discussion about colossal planned-community projects such as Jay Paul's plan for 395 Page Mill and Arrillaga's office-and-theater concept (which, technically speaking, was neither a "planned community" nor a "project" but had most of the attributes associated with planned communities), the council now feels that a full freeze is "the only way we can control our urges."

"We're almost acting like we're the town drunk who burned down the liquor store to keep himself from drinking," Burt said. "We shouldn't need that."

But even as he argued against applying the suspension to 2755 El Camino, Burt advocated for broader zoning changes and suggested that the council consider suspending all attempts to upzone until the PC reforms are completed. The city, he said, should look beyond this one process and consider all the rules that allow increases in density beyond what existing zoning allow. This proposal died by a 3-6 vote, with only Karen Holman and Greg Schmid joining him. The majority felt such an action would be too broad and premature.

"This is something that the community in general needs to have an opportunity to weigh in on because it has huge implications," Price said.

In voting against the "time-out" Price and Klein both warned about the unintended consequences that may result from the suspension of PC projects. Klein warned that this could encourage a property owner who wants to build a truly beneficial project to reconsider.

"What are we gaining by imposing a moratorium?" Klein asked. "If the council doesn't like a particular PC proposal, they can vote no."

Most council members, however, agreed that the suspension should be adopted and that it should apply to 2755 El Camino.

"This is a time-out because we identified that the process we are currently using is broken and needs to be fixed," Councilman Marc Berman said, adding that it "doesn't seem appropriate" to use this process on any project.

Scharff spoke for the majority when he said the council needs to get a "buy in" from the community when it comes to the PC process. The reform of this ordinance will take place concurrently with a broader effort by the city to engage the community in a broad conversation about the city's future. The community-engagement process, branded "Our Palo Alto" by senior staff, was unanimously approved by the council earlier in the Monday meeting.

"We need to rebuild faith with the community with the PC process and get comfortable (with it) so that everyone feels it's a fair process," Scharff said.