Palo Alto and The Sobrato Organization are now entering the final stretch in their negotiations over one of Ventura's most disputed properties, the historic cannery that until recently housed Fry's Electronics.

On Wednesday, July 26, the city's Planning and Transportation Commission became the latest advisory board to reluctantly endorse the development agreement that the City Council negotiated with Sobrato behind closed doors last year. The agreement focuses on the 14.6-acre site that includes 340 Portage Ave. and 3200 Park Blvd. and that is at the heart of a larger planning effort for the Ventura neighborhood.

In doing so, it followed the leads of the Historic Resources Board and the Architectural Review Board. Much like the other two bodies, the planning commission criticized some components of the plan — most notably Sobrato's proposed treatment of the historic cannery building that housed Fry's — before voting to approve it.

Under the negotiated deal, a portion of the cannery building would be demolished to make way for 74 townhomes. The remaining portion of the building would be refurbished and would retain its existing research-and-development use.

With the planning commission completing its review Wednesday, the development agreement is now set to return to the council on Aug. 21 for what could be the final approval.

The development agreement will have broad repercussions for the greater Ventura neighborhood. By locking in the land uses in the development agreement, the city would effectively exempt the 14.6-acre site from future rezoning under ongoing planning for a broader 60-acre portion of Ventura, which includes the Fry's site.

With planning for the larger area in its final stages, the vibe has shifted from big dreams to managed expectations. The group of stakeholders that has been working on the new Ventura vision has failed to reach a consensus on any alternative. Most members of the North Ventura Coordinated Area Plan (NVCAP) Working Group said they supported affordable housing, neighborhood-serving retail, and preservation of the historic cannery building. For many, the development agreement falls short on all these fronts.

"There were differences in how much housing we thought we could achieve there, but what was uniform across the group throughout the process … was that we wanted neighborhood-serving business and housing," Doria Summa, who chairs the planning commission and who served on the NVCAP Working Group, said during the Wednesday meeting.

Housing advocates have also been saying for decades that the Fry's site, which is zoned for multi-family residential use, offers the city an opportunity to add more than 200 dwellings. For decades, 340 Portage Ave. has been included on an inventory of potential housing sites in the city's Housing Element.

The development agreement pours cold water on many of these dreams. The deal locks in the commercial land use allowance, bringing some long-term stability for Sobrato. While the refurbished cannery building is expected to have a small café, it will not include "neighborhood-serving retail," Tim Steele, Sobrato's vice president for real estate, said Wednesday.

And while the project will have housing in the form of townhomes, it's not nearly as much as former Housing Elements envisioned. Nor will it be nearly as affordable as the NVCAP working group called for.

The agreement does, however, create an opportunity for the city to develop affordable housing on the site. As part of the deal, Sobrato is donating 3.25-acres of land to the city for a below-market-rate housing project and a small park in the current Fry's parking lot, next to Matadero Creek.

Under the agreement, Sobrato would build a new garage next to the townhomes.

The prolonged negotiations involved compromises from both parties, each of whom has demonstrated a willingness to exercise its leverage over the other. The council controls zoning and has flirted intermittently over the years with the idea of phasing out commercial uses at the Fry's site through amortization and forcing the property owner to comply with the underlying residential zoning.

Supporters of this idea argue that the site has for decades been zoned RM-30, though the council made a temporary exception for Fry's Electronics. It later voted to make the exception permanent; another could similarly vote to eliminate it.

Sobrato, for its part, has a backup plan that limits the city's options: a separate application that it has filed for a 91-townhome development at the Fry's site. In its application, Sobrato invoked Senate Bill 330, which streamlines the approval process and bars the city from changing design standards for a project after the application is submitted.

That application is suspended while the two sides negotiate. But as Commissioner Bart Hechtman noted, Sobrato can simply revert to that application if it doesn't like the directions of development agreement negotiations.

"We can only push Sobrato so far on the alternative before they say, 'You know what? We can just go SB 330,' because it's less brain damage and more profitable for them," Hechtman said.

While the development agreement spells out how the Fry's site would be used for at least the next decade, some members of the planning commission pushed for changes to the city's land-use bible, the Comprehensive Plan, to keep the housing dream alive.

Vice Chair Bryna Chang, who led that effort, observed that the city has been thinking about multi-family housing at the Fry's site for more than 30 years.

"Now we find ourselves where we are and it's not multi-family residential and yet there's a desperate need for housing," Chang said. "So now we're kicking the can down the road, and I want to make sure we don't lose sight of that housing nirvana."

The change that they recommended was relatively minor: rezoning the land use designation in the commercial portion of the Fry's site from "service commercial," which encourages regional businesses that draw driving customers, to "mixed-use," which is more accommodating to residential developments.

The commission voted 6-0, with Commissioner George Lu absent, to recommend that change, even as members noted that its effect will not be particularly significant given the development agreement.

Commissioner Allen Akin called this change "an investment in the future rather than a significant change in what we're addressing in the short term."

Summa agreed.

"That would remind everyone in the future that what we envisioned here is a mixed-use neighborhood that's very hospitable to the residents of the neighborhood," Summa said.

Like members of prior panels that had reviewed the deal, planning commissioners took issue with the proposal to demolish a portion of the cannery, which was constructed more than a century ago by Chinese immigrant and entrepreneur Thomas Foon Chew and which for a time served as one of the nation's largest vegetable canneries.

The environmental impact report for the Sobrato proposal concluded that the demolition represents a "significant and unavoidable" impact on historical resources. Chang and Summa both felt that the document should have explored more ways to avoid this impact.

One idea that has been kicked around is preserving the entire building and having garage space in the portion that is currently set for demolition. This could entail denser residential development elsewhere on the site and it would obviate the need to build a new garage.

Summa expressed some interest in the idea, which was also proposed earlier this year by Jeff Levinsky, a land-use watchdog who opposes the cannery's demolition. The building's "immensity is part of its story," Levinsky told the commission at its prior review, on July 12.

Some commissioners shared that view. Commissioner Cari Templeton lamented that Sobrato did not consider another location for parking.

"There's any number of places you can build a parking garage that wouldn't damage this structure that's being valued highly," she said.

The topic of historic preservation has loomed large at all prior public hearings, with members of the Historic Resources Board pointing to the project as an example of the city failing to take care of its historic resources and the Architectural Review Board insisting that Sobrato provide additional public spaces to facilitate public viewings of the building's most prominent architectural feature: its two monitor roofs.

Several planning commissioners offered similar opinions. Chang and Summa floated the idea of rejecting the environmental analysis because it did not present any alternatives that would obviate the need for demolishing a portion of the cannery building.

Despite their argument, the commission voted 4-2 to recommend approving the environmental-impact report, setting the stage for the council to give the document its final approval next month.