Seeking to raise money for popular community projects, Palo Alto officials are preparing to sell to local bidders the rights to build more than 10,000 square feet of development in exchange for nearly $4 million.

The City Council is preparing to approve on Monday night the sale of "transferable development rights" to three bidders: Thoits Bros., Sal Giovannotto and Villa Rosa. According to a new report from the Administrative Services Department, the sale will bring in $3.98 million in funding, of which $2.5 million will be used to help fund the city's contribution toward the rehabilitation of the Avenidas building at 450 Bryant St.

The remainder will be used to foot the city's share in the expansion and reconstruction of the Palo Alto Junior Museum and Zoo. While the project is relying primarily on private fundraising (the nonprofit Friends of the Junior Museum and Zoo has raised $25 million for the new zoo, with $15 million coming from the Peery family), the council agreed in May to up the public stake in the project.

To date, the council has committed about $5 million toward each of these two major projects, neither of which is included in its 2014 plan of infrastructure priorities.

While both projects are broadly popular, the city's financing mechanism is less so. On Monday night, the council heard from dozens of residents about the city's escalating traffic problems, which many attributed to commercial development. The sale of transferable development rights – which aims to encourage renovation and rehabilitation – effectively allows developers to build at a higher density than they otherwise would, albeit for a price.

The program is meant to encourage seismic upgrades and renovations of historic buildings by providing floor area bonuses for such projects. These bonuses can be transferred to new developments in the downtown area.

In this case, the TDRs were generated through the ongoing reconstruction of the Avenidas building and the completed upgrade of the College Terrace Library. The TDRs sold will allow the three developers a bonus of 11,866 square feet, collectively.

The largest share of the TDRs was purchased by Thoits Bros., the developer whose properties include 285 Hamilton Ave., the commercial building across from City Hall, and 500 University Ave. The company is set to receive 5,844 square feet of development rights, for which it is paying $2.07 million. Giovannotto is paying $1.32 million for 3,896 square feet of TDRs, while Villa Rosa paid $588,296 for 1,948 square feet.

While the council has consistently supported the two projects, not everyone favors the sale of TDRs as a financing mechanism. Vice Mayor Eric Filseth and Councilwoman Lydia Kou both dissented during the May vote that authorized the sale of TDRs from the two construction projects. Filseth characterized the sale of TDRs as "using zoning exceptions as currency."

"If you want to buy something, you've got to find a way to pay for it with actual money," Filseth said at that meeting.

For the council, the sale of TDRs fetched more cash than it had expected. In May, the council specified that the development rights be sold at a rate no lower than $275 per square foot, which they expected to bring in about $3.12 million. All three bids exceeded that rate, bringing the city's profits to $3.98 million.

The council is scheduled to authorize the sale this Monday, Oct. 29, on its "consent calendar," where a number of items are simultaneously approved without discussion.