Update: By a 4-3 vote, the Palo Alto City Council on Jan. 13 approved designating downtown as a "preferred development area." Read the full story here.

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In a bid to boost development around the city's main transit hub through state funding, the Palo Alto City Council will consider on Monday designating the downtown area as its preferred location for growth.

By designating the area around University Avenue as a "priority development area," the city will become eligible for grants under the One Bay Area Grant program, which is administered by the Metropolitan Transportation Commission. The program was established to comport with Senate Bill 375, a 2008 law that requires cities and regional organizations to work together on growth plans that reduce greenhouse gas emissions.

Palo Alto, where new housing is both a rare commodity and a high priority, currently has one priority development area around California Avenue. The designation has helped the city obtain funding for the North Ventura Coordinated Area Plan, an ongoing effort to craft a new vision for a roughly 60-acre neighborhood just south of California Avenue.

The proposed University Avenue/Downtown "priority development area" would be about 206 acres, all within half a mile of the downtown Palo Alto Caltrain station. According to city planners, the designation would be consistent with the city's growth vision, the Comprehensive Plan, and with its Housing Element, a state-mandated document that lays out the city's plans for increasing housing. A report from the Department of Planning and Community Environment notes that the designation would also align with council policies that focus on "growth in the downtown and improving non-SOV (single-occupant vehicle) connectivity to and through the downtown area.

"Designating this area as a PDA would create opportunities for the City to qualify for potential grant funding to prepare or advance a downtown coordinated area plan, multi-modal transportation planning and investment, or other infrastructure improvements," the report states.

Not everyone agrees with the staff proposal. During a Nov. 13 meeting of the Planning and Transportation Commission, members argued that the city should go further and also designated sections of El Camino Real near the downtown area as part of the "planned development area."

Given that the designation doesn't require the city to actually implement zoning changes, commissioners agreed that there is little downside to making the move. The only dissent came from now-former Commissioner Asher Waldfogel, who said he was concerned that the designation will create new obligations for the city to promote developments in the future.

"I'm a little concerned that if we designate PDAs, they (the state) will come back five years in the future and possibly penalize us in some fashion for not accomplishing something in a PDA," Waldfogel said.

Waldfogel argued that the city doesn't have enough information about the state's future plans to determine whether the designation would be a good idea or not. But because these districts intend to concentrate jobs and housing growth, one impact that the city can expect is an increase in its housing requirement, as determined through the Regional Housing Needs Assessment.

The staff report notes that even without the designation of the downtown as a priority development area, the state Housing and Community Development Department has "already signaled that significant increases are expected for the upcoming housing element cycle as it factors in additional criteria to assess regional housing needs."

Other commissioners noted at the November meeting that the downtown designation, if anything, wouldn't do enough to encourage development. The city has consistently fallen behind its goals for housing productions and few expect the designation to have a significant effect, at least in the near term. It could, however, help the city get funding for a downtown area plan, a document that would consider zoning and transportation improvements in the downtown area, including a reconfiguration of the Palo Alto Avenue grade crossing.

Michael Alcheck, vice chairman of the planning commission, said he is optimistic that the designation of downtown as a "priority development area" can create fruitful outcomes if paired with other initiatives that address some of the biggest hurdles to housing development — including the city's 50-foot height limit.

"I think one of the biggest constraints that I really feel the broader public doesn't appreciate is that the parcel sizes in this zone in downtown — where we're so enthusiastically attempting to encourage development of housing — is literally too small to create that housing under our existing height constraints," Alcheck said. "Every time we do something in this community and nothing happens, it makes the case that the hurdles we keep on ignoring are actually the hurdles we need to address."

Planning staff is also proposing designating a 2,629-acre portion of the Baylands and a 5,260-acre swath of the Foothills as "priority conservation areas," which would make them eligible for conservation funding. According to staff, such funding can be used "to study and address the impacts of sea level rise and the preservation of open space." The planning commission had enthusiastically endorsed this designation, with no dissent.