A proposal to construct a four-story building on the prominent downtown corner of University Avenue and Kipling Street suffered another setback Thursday morning when Palo Alto's Historic Resources Board concluded that the project's impacts on existing historical structures has to be re-evaluated.

By a 5-0 vote, with Chair Roger Kohler absent and board member Martin Bernstein recusing himself, the board agreed that the proposed development at 429 University Ave. requires a fresh historic analysis. In doing so, the board rejected the analysis recently performed by the consulting firm Carey & Co Inc., which considered the surrounding properties and concluded that the new development would not have any impact on their historic integrity.

The vote could further complicate what has already been a long and tortuous journey through Palo Alto's planning process for the proposed project at the former site of boutique shop Shady Lane. The project went through five hearings before the Architectural Review Board last year and early this year before securing the board's approval. The city's planning director followed by issuing a letter of approval on Feb. 25.

But things went south after a neighbor, Michael Harbour, filed an appeal earlier this year, arguing that the modernist, 50-foot-tall building would be incompatible with Kipling, a narrow street dominated by Victorian homes. The appeal went to the City Council which voted 5-4 in May to request a series of design changes and a new assessment of the project's impacts on historical properties.

The list of questions that the council wanted to revisit included: What is the "area of potential effect" for historical impact under state law? How will the project affect the existing historic structures on Kipling and on University? And would the mass, scale and compatibility of the proposed project affect the surrounding historic properties?

On the lattermost question, the answer from the Historic Resources Board was a resounding "yes!" Members commented on the size and scale of the proposed development and concluded that the new report from the consulting firm Carey & Co used a study area that is too restrictive. The report evaluated eight properties and confirmed that the proposed development would not affect the historic significance of the other sites.

"Although a number of individual historical resources are located on the (University) avenue, they do not form a historic district," the report concluded. "Similar to Kipling Street, the proposed project will not substantially alter the physical environment of the individual historic resources on University such that their integrity would be compromised to the degree that they would lose their historic significance."

The board took issues with this finding with board members David Bower and Beth Bunnenberg both noting that many of the buildings in the area were designed by Palo Alto's beloved architect Birge Clark and lamented the "cumulative impact" of these structures being gradually replaced by larger and more modern buildings.

Both of them argued that a historical evaluation should consider many other buildings in the area as well, including the ones further east on University, between Waverley and Cowper streets, and further north on Kipling, until Lytton Avenue.

Bunnenberg and Bower both observed that while the building is officially listed as 50-feet tall, it also includes HVAC equipment that would extend beyond this height. Each argued that the project is too massive.

"As we allow buildings to exceed the 50-foot height limit and they become extremely massive, we are setting the pattern and the cumulative effects will be felt all down the street that it's OK ... That you can take out these buildings and build something that is massive, that exceeds the height limit and it will go through alright," Bunnenberg said. "I think it is in its present form very large."

Bower concurred and said his most serious concern is that "its mass and scale is not compatible and sympathetic to the surrounding buildings." Board member Margaret Wimmer also said she wishes the design of the building were "more sympathetic" with the surrounding area.

"I do understand that the applicants always try to maximize the heights ... I just wish there were some historic references that could be applied to the building. There is a real modern theme going on right now and everyone wants a lot of glass and clean lines," Wimmer said.

Elizabeth Wong, project applicant, immediately blasted the board's vote. She recounted the project's long history and listed the changes that have already been made to the project to make it more compatible with neighboring properties, including deeper setbacks for the two upper floors in an attempt to break up the massing. She called the board's recommendation for more analysis "punitive" an "bordering on illegal."

"This is insane," Wong said. "The project should never have come here."

While she said it's appropriate for the city to re-evaluate its rules for new developments, she argued that it's "totally unfair for the project to be submitted to these strict historical guidelines that you are putting forth at this time."

The project is set to undergo another review by the Architectural Review Board before it returns to the council for a decision.