When Karen Holman and Greg Schmid last served on the Palo Alto City Council, they often stood out among their colleagues for their staunch resistance to commercial developments and strict interpretation of zoning rules, which occasionally clashed with staff recommendations.

Now, the former mayor and vice mayor are teaming up with another former mayor, Pat Burt, to formally challenge a decision from the city's planning director that allows a downtown developer to completely demolish a building and replace it with a larger one by using a program intended for seismic rehabilitation.

The unusual challenge, which the council plans to consider later this month, could determine the fate of both the proposed development at 233 University Ave., and shape the future of the city's seismic rehabilitation program, which has been in place since 1986 and which provides incentives for property owners to upgrade vulnerable buildings.

It will also test the independence of the current council, which has faced criticism this election season from numerous candidates, including Burt, for being too deferential to staff recommendations.

The dispute here is over a simple question with wide ramifications: Can demolition be considered "rehabilitation?"

The three former council members assert that the clear answer is no. The zoning code, they note, states that a building that is deemed seismically vulnerable and "is undergoing seismic rehabilitation" shall be allowed to increase its floor area by 2,500 square feet or 25% of the existent building, whichever is greater, without having the increase count toward their density.

By suggesting otherwise and allowing the bonus to also apply to demolished buildings, city planners are effectively creating a new policy and changing the city code, the appellants assert.

"Demolished buildings by definition are not rehabilitated buildings," states the appeal, which Burt, Holman and Schmid filed in July.

The project, which the Architectural Review Board reviewed and approved in May 2019, had initially called for retaining two walls in the brick building near Ramona Street that currently houses The Tap Room, Mills Florist and Hookah Nites Lounge: the front wall and the wall that separates the building from the neighboring structure, Stanford Theatre. Constructed around 1905, the building at 233 University Ave. is an example of an "unreinforced masonry" structure that the city deems to be particularly vulnerable to collapse in a major earthquake.

In seeking to rehabilitate rather than demolish the building, the Mills family was looking to get a 2,500-square-foot density bonus that it would use to build a second story and a terrace, according to project plans.

But after consulting with engineers, the property owner decided that it would be safer and cheaper to demolish, rather than preserve, both walls. In June, Planning Director Jonathan Lait approved the new plan and confirmed that the project can still receive the density bonus associated with rehabilitation.

In his June 29 determination, Lait also indicated that other projects can similarly get floor-area bonuses in instances where builders can demonstrate to the city's satisfaction that seismic rehabilitation is "infeasible."

Lait acknowledges in the finding that his determination deviates from the city's recent practice. While the city had in the past allowed developers to demolish seismically vulnerable buildings and claim the density bonus, planners have taken a more restrictive view in recent years and only allowed the additional density for rehabilitation projects. Lait noted that "a closer review of the municipal code … suggests that to qualify for the bonus floor area, the building must be seismically rehabilitated, or retained and strengthened to contemporary structural standards."

In the case of 233 University Ave., however, Lait is suggesting that the city allow the demolition to move ahead and still grant the bonus. He cited the report from the applicant's structural engineer, Douglas Hohbach, who asserted in a letter to the city that demolishing the masonry walls would be "the most straightforward approach" to meet the intent of the zoning code and mitigate the risk of the collapse.

"None of the existing masonry walls are suitable for use as part of the new construction and if retained, will add seismic mass and irregularity to the building," Hohbach wrote.

Lait concluded that the applicant had demonstrated that retaining the walls is "not practical" to the satisfaction of the city's chief building official. He also suggested that allowing the developer to proceed with the project will be more conducive to the city's goal of protecting seismically vulnerable structures.

"In this instance, the plain reading of the municipal code and floor area bonus does not provide sufficient incentive to encourage seismic strengthening of a building type known to be hazardous to building occupants and pedestrians," Lait wrote in the finding. "Allowing replacement of the building — new building construction — would remedy the seismic hazard."

Lait also noted that the project will retain the existing masonry, which will be restored and reapplied. This, he wrote, "preserves the look and character of the building."

The three former council members firmly reject this logic and contend that Lait's finding runs counter to code, with potentially serious implications for future projects. The planning staff, they contend, clearly believes that there needs to be a change in policy but has chosen to use "a ministerial tool" — the director's interpretation — to "establish policy, thereby bypassing the PTC, City Council and public review."

"This interpretation also carries with it an inherent conflict regarding historic buildings that are in need of seismic retrofit," the appeal states. "Will the new 'Interpretation' extend to historic rehabilitations and the President Hotel or the Post Office be vulnerable to the wrecker's ball if an applicant is successful in convincing the Building Official of some undefined 'financial infeasibility' or 'impracticality' if a similar Interpretation determines the fate of such buildings?"

The new proposal for 233 University Ave., the appeal states, is a "significant code change and should not be subject to a Director's Interpretation, resulting in an expensive appeal process rather than normal and proper public hearings for zoning code changes."

The appellants already won a small victory on Sept. 21, when three members of the City Council -- Tom DuBois, Eric Filseth and Lydia Kou -- rejected City Manager Ed Shikada's recommendation that the council uphold Lait's decision and reject the appeal. The council instead pulled the item off of its "consent calendar" — a list of generally noncontroversial items that get approved in bulk — and agreed to hold a special hearing on the appeal. The public hearing is tentatively scheduled for Oct. 26.

The Mills family, meanwhile, urged the council to allow the project to proceed. Requiring portions of the unreinforced masonry building to remain, they wrote, "seems contradictory to the City's objective: public safety."

"The fact is that a new building constructed to current code is seismically much safer than one that is seismically upgraded," building owners Leslie Mills, Rodney Mills and Susan Mills-Diggle wrote in a Sept. 14 letter to the council. "Such upgrades are merely a way of reducing the chance of full building collapse in an earthquake."