With Palo Alto's parking congestion now spreading from the heart of downtown to surrounding neighborhoods, city officials agreed on Monday night to expand the city's fledgling parking-permit zone and to set a cap on the number of permits being sold to area employees.

With four council members recusing themselves from the vote because of property interests in the downtown area, the five remaining members voted to annex 12 blocks just outside the existing permit zone into the new district. These blocks requested annexation after the city's Residential Preferential Parking (RPP) Program launched in September, creating a two-hour limit on parking in downtown's residential streets and sending commuters to areas just outside the zone, where all-day parking remains free.

After a long debate, the five council members — Vice Mayor Greg Schmid and council members Pat Burt, Tom DuBois, Liz Kniss and Cory Wolbach — also agreed to limit the number of permits being sold to downtown employees to 2,000, despite some protests from the business community.

The changes are intended to address the real but uneven success of the new parking program, which provided instant relief to blocks right around the heart of Palo Alto but added congestion to neighboring blocks.

According to Sue-Ellen Atkinson, the city's parking operations lead, the program removed between 300 and 400 cars from the permit area, though those blocks that are closest to the heart of Palo Alto remain pretty full. Atkinson pointed to the city's parking-occupancy map, which was once predominantly red, connoting complete congestion.

"What we're seeing post-RPP is higher prevalence of yellow blocks as opposed to red, which means some parking places are available," she said. "But we're still seeing a high concentration of parking close to downtown."

But for residents like Elizabeth Austin, who lives just outside the district's eastern border (currently Guinda Street), conditions deteriorated as soon as the program took effect.

"We can't find a place to park on our block," Austin said. "It's totally full because the boundary begins right on Guinda."

The new onrush of cars has also made conditions more dangerous on the windy street at the city's northern edge, she said.

"My car has been side-swiped twice," Austin said. "My neighbor's car has been sideswiped."

Perry Irvine, who lives on Waverley Street just outside the zone, also saw his block fill up as soon as the Residential Preferential Program made its debut. His block is among a dozen that sought and received annexation.

"From the day this program was instituted, the parking in front of our house and entire block going well into the next block has been completely impacted," Irvine said. "Anybody coming to visit us simply has no place to park unless they park in our driveway."

The decision to annex these areas, and to expand the district boundary to make other blocks eligible for inclusion in the near future (when the problem inevitable spreads to them), proved non-controversial, which all five members agreeing that it's a necessary step.

Council members were more ambivalent, however, when it came to employee permits. Planning staff had recommended limiting permit sales for employees to 2,000 next spring, when the next phase of the program kicks off, and then reducing the amount by 10 percent every year thereafter, ultimately reaching zero in 2016. After some debate, the council agreed that while a cap of 2,000 makes sense (that's roughly the amount of permits that was sold to workers during the first phase), it's too early to talk about future reductions.

Developer Chop Keenan, a member of the stakeholder group that helped staff design the program, proclaimed the first phase of the program a success, though agreed that the "toothpaste effect" needs to be addressed through annexation. However, he also argued that setting a cap on employee permits would be premature unless the city also expands supply.

"It's the least able to pay who are going to be affected by the RPP," Keenan said.

Judy Kleinberg, CEO of the Palo Alto Chamber of Commerce, also urged the council to solve the parking problem by building more affordable housing, constructing a garage for employees and expanding the shuttle service. Making it harder for employees to park on the streets would hit small businesses hard, she said.

"Slowly eliminating employee permits on top of high rents, lack of affordable housing, the waiting lists for garage permits, the minimum-wage and the likely BLT (business license tax) will gradually strangle our local small businesses and eventually amount to death by a thousand cuts," Kleinberg said.

Nevertheless, the council generally agreed that the number of employee permits needs to be reduced. Kniss suggested that while setting a cap of 2,000 starting next spring makes sense, she also argued that it's too early beyond that.

"I really don't want to sit here tonight and make a decision about what can happen in 10 years," Kniss said. "We're so far ahead of ourselves."

But DuBois argued that without significantly limiting the number of employee permits, the city will not solve the parking problem. It will merely spread it out to other areas, he said.

"It we continue this, it will just expand with no limits," he said.

The council ultimately agreed to direct staff to come up with a different proposal for winnowing down the number of employee permits beyond the 2,000. The reduction, the council agreed, should hinge on the success of the city's fledgling Transportation Management Association, a new group that is charged with reducing single-occupant vehicles and encouraging alternative modes of transportation.

Councilman Pat Burt agreed with DuBois that a gradual reduction in employee permits is necessary to achieve real long-term change, though a goal of zero permits might be premature at this point. Burt called the gradual reduction of employee permits a "very important component of the next phase."

"I don't see how we get anywhere unless we get that limit," he said. "That's what really controls whether we just go back to where we were."

The council also discussed ways to distribute the permits throughout downtown, so that the blocks closest to the core wouldn't be disproportionally affected. While staff and some members of the stakeholder group favored a system of three cocentric zones (one in the downtown core, one just around it and another one on the periphery), the five council members favored a "microzone" concept that would divide downtown into many more smaller zones.

While this setup would be more complex, it would also allow for more precise measurements and allocations of permits. Staff will also explore variable pricing, with permits closer to downtown's core costing more than those further away.

Another issue that has yet to be finalized is the ultimate boundary of the expanded district. Staff suggested spreading the eligibility boundaries out by about half a mile, saying that this is roughly how far commuters are generally willing to walk between their spots and their jobs.

The council agreed that this is inadequate, given the tendency of many commuters to ride bikes, scooters and skateboarders from their cars to their offices. Wolbach argued that the boundary should be spread beyond Embarcadero, the southern edge of the staff proposal.

"I don't see Embarcadero as a wall that anybody with a scooter or a skateboard or of rolled-up bike in their trunk would refuse to cross," Wolbach said.

Staff will return to the council with a revised proposal in January, with the goal of launching the program's second phase in April.