Palo Alto's bitter debate over how much commercial growth the city should accommodate heated up Monday night, when a divided City Council eliminated a 1986 law that limited non-residential development in the downtown area.

By a 4-3 vote, with Mayor Eric Filseth, Councilman Tom DuBois and Councilwoman Lydia Kou dissenting, the council repealed a law that set a limit of 350,000 square feet on new non-residential space in the downtown area, with 1986 as the baseline. The city had already approved more than 331,000 square feet since that time, leaving a capacity of about 18,000 square feet.

Even with the repeal, commercial development in the downtown area remains tightly regulated. Palo Alto still has an annual office cap of 50,000 square feet for downtown, California Avenue and El Camino Real. It also has a citywide cap of 850,000 square feet on non-residential development by 2030.

The downtown cap, however, offered an additional layer of reassurance to residents and council members who have long complained about the impacts of downtown's new office developments. Dozens submitted emails or attended the Monday meeting to urge the council to retain the cap.

Greg Welch, a resident of Crescent Park, argued that downtown streets are already overwhelmed with traffic during rush hour, as commuters cut through residential neighborhoods that "never intended to handle this volume or type of traffic."

"Permitting more office development will only increase these impacts and should not be undertaken until the City has deployed a proven-effective plan to improve traffic flow on our arterials and reduce cut-through traffic in neighborhoods," Welch wrote.

Palo Alto Neighborhoods, an umbrella group with members from various neighborhood associations, also weighed in in favor of retaining the cap. At a meeting last Thursday, the group's members voted unanimously to support keeping the cap in place, group co-chairs Sheri Furman and Rebecca Sanders wrote in a jointly signed letter from the group. The cap, they argued, is an important protection for downtown residents in buildings that might otherwise be converted to commercial space.

"Removing it would worsen Downtown's traffic and parking problems, intensify the city's job/housing imbalance, and take away much-needed opportunities to build housing."

The question of whether or not to retain the downtown cap was among the most divisive issues during the council's 2017 update of the city's Comprehensive Plan, a broad land-use document that sets the foundation for local zoning policies. In January 2017, the council split 5-4 on the topic, with the five members who favor more growth voting to remove the cap and the four aligned with the slow-growth "residentialist" camp supporting its retention.

On Monday, the council followed up on the January 2017 action by changing the city's zoning code to remove the downtown cap. Once again, the decision was made by a razor-thin margin, with Councilwoman Alison Cormack joining the council's pro-growth members, Liz Kniss, Adrian Fine and Greg Tanaka, in supporting the repeal of the downtown cap.

The debate turned testy at times, with both sides resorting to hyperbole to make their case. Kniss argued that keeping the cap in place would effectively "freeze downtown," even though the proposal from the "residentialist" camp made exceptions for retail. Kou, for her part, called the removal of the cap "extreme" and said it will "wreak havoc" in downtown, notwithstanding all the other existing laws constraining commercial development.

"The discussion isn't about freezing downtown growth but to look at it responsibly, not recklessly, as was done in 2017 when it was taken out of the Comprehensive Plan," Kou said.

While the vast majority of public correspondence strongly favored keeping the cap, Kniss sided with Chamber of Commerce CEO Judy Kleinberg, who argued that a vote to remove the commercial office cap is actually a vote for housing. Because office use is much more profitable than residential, she said, allowing it gives developers the financing they need to include residential components in their mixed-use projects.

"If you don't allow some of the economic office buildings to be built, perhaps in mixed-use, there won't be the money for housing," Kleinberg said. "If you get rid of the cap, you're actually helping build housing downtown."

While Kniss agreed with this argument, Fine supported the cap's removal for a different reason. If the council retains the downtown cap, he said, commercial development will simply shift to areas like San Antonio Road, Middlefield Road and El Camino Real, which don't have the kind of transit and services that downtown offers. Downtown, he said, will be "effectively frozen."

"Future office growth will go anywhere else in the city," Fine said.

Others didn't buy this argument. DuBois, a strong proponent of keeping the cap, often cited it during his election campaign last year and pointed to the proposed conversion of President Hotel from an apartment complex to a luxury hotel as precisely the type of project the cap aims to prevent. The council's Monday vote spells a victory for Adventurous Journeys Capital Partners, the owner of President Hotel, by removing one of the barriers that stood in the way of its proposed conversion.

Filseth also argued that inviting more jobs downtown will only worsen the area's parking and traffic woes, which he noted are already pretty bad. Removing the cap on office development, he said, is also inconsistent with the council's ongoing effort to encourage more housing downtown.

DuBois, Kou and Filseth had all supported a citizen initiative last year to halve the citywide cap on non-residential development, reducing it from 1.7 million square feet to 850,000 square feet by 2030. Filseth observed that the public is generally in favor of restricting commercial development. By removing the cap, he said, the council is "in denial on this issue."

"I think we're chasing a vision for downtown that is not supported by the majority of the community. ... I do think it's unlikely that a majority of residents in town feel that repealing it is a priority at this time," Filseth said. "In fact, I'm guessing it's probably the opposite. It seems like we keep finding ourselves on the wrong side of this issue relative to the residents in Palo Alto."

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