Item 11 March 16, 2016

Planning and Development Department Land Use Planning Division

2120 Milvia Street, Berkeley, CA 94704 Tel: 510.981.7410 TDD: 510.981.6903 Fax: 510.981.7420 E-mail: planning@ci.berkeley.ca.us

STAFF REPORT

DATE: March 16, 2016 TO: Members of the Planning Commission FROM: Elizabeth Greene, Senior Planner SUBJECT: Considering Elmwood Commercial District Quotas Modifications

Background/Introduction

On January 17, 2012, the City Council sent a referral to the Planning Commission to

consider zoning amendments to simplify the Elmwood Commercial (C-E) District’s numeric

limitations (more commonly known as “quotas”) (see Attachment 1). Staff held a community

meeting with residents, merchants and property owners in October 2012, and the Planning

Commission held two meetings on the topic in 2013. The item was postponed during the

discretionary review process and subsequent lawsuit related to a new restaurant at Wright’s

Garage.

Since that time, the Council forwarded a second referral regarding a temporary relaxation of

quotas on Telegraph Avenue and extended the suspension of quotas in the Solano Avenue

Commercial (C-SO) District. Based on these actions, the Planning Commission reviewed

quotas in all four quota districts (C-E, North Shattuck Commercial (C-NS), Telegraph Avenue

Commercial (C-T) and C-SO) at the September 16, 2015 meeting. At that meeting, it was

determined that the issue should be divided into two tasks:

1) Eliminate quotas in the C-NS, C-T and C-SO Districts; and

2) Simplify the quotas in the C-E District.

Action was taken first on removal of the quotas from the three districts. On December 16, 2015, the Planning Commission sent a recommendation to Council to remove quotas from the C-NS, C-T and C-SO Districts. This report will resume the C-E quota modifications discussion and provide recommendations in anticipations of a Public Hearing in the near future.

Discussion

The headings below identify the staff recommendation for modifications to C-E quotas and

their impacts, community outreach and CEQA and General Plan review requirements.

Consider Elmwood Quota Modifications Item 11 Page 2 of 6 March 16, 2016

General recommendation

The C-E District has quotas for both Food Service (restaurants) and retail/commercial

uses. Based on the Council’s referral for more simplified quotas in the Elmwood District,

information from the Office of Economic Development (OED) related to economic trends in

the City’s commercial districts, and the experiences in the Solano District with the quota

suspension, staff suggests the following changes to simplify the Elmwood District quotas:

a. Remove the six retail/commercial quotas; and

b. Consolidate the three restaurant quotas (Carry Out Food Service, Quick

Service Restaurants and Full Service Restaurants) into one restaurant quota.

This recommendation is similar to the proposal from the Council referral dated January 17,

2012, which suggests removing the range of retail quotas, and reducing the restaurant

quotas from three to two types; the difference being that staff recommends reducing the

quotas down to one quota for restaurant uses. The Elmwood Business Association

supports this general direction (see Attachment 3).

Specific recommendations

These modifications to C-E quotas would essentially create a system with limits on

restaurant uses, and no limits on other uses, such as retail, office, personal household

service, that are permitted in the district. The goal of these recommendations is to

maintain a balance between restaurant uses and other allowed uses in the district.

Limiting the overall number of restaurant uses will allow for a healthy food to other

commercial balance. The C-E District differs from other commercial districts in the City in

that it has very low vacancy rates, so retaining quotas in some form makes sense and is

supported by economic development data about healthy retail/food service mixes.

To implement this modified system, staff recommends the following mechanisms to make

the new system functional:

Define Quota slots in a simple manner;

Increase the number of Food Service slots;

Use the Administrative Use Permit (AUP) process to allow exceptions to the quota;

Allow “incidental” carry-out restaurant uses; and

Require discretionary review for newly created spaces that could house restaurant

uses.

Define a quota slot as a tenant space: Staff determined that the most easily and

consistently tracked method, for both staff and the public, is to use tenant spaces. Staff

considered different methods on which to base quotas, such as limiting the total

square-footage of a business type to a percentage of the square-footage of the entire

district, or limiting the number of tenant spaces available to a certain type of business.

Consider Elmwood Quota Modifications Item 11 Page 3 of 6 March 16, 2016

Allow up to 30% of the tenant spaces in the Elmwood District (27 spaces total) to be

used for restaurant uses: Currently, the Elmwood District has 23 restaurant slots out of

93 tenant spaces, equaling 25% of the district (see Attachment 2 for map of Elmwood

tenants). Allowing four additional restaurant quota slots would bring that percentage to

29.0%. OED staff presented research at the April 15, 2015 Planning Commission

meeting regarding economic trends in business districts. The research indicated that in

most districts, a ratio of 30% restaurants to 70% other businesses is considered a

healthy business mix.

Allow businesses to exceed the quota with an Administrative Use Permit (AUP): Staff

recommends changing the current requirement from a Use Permit to an Administrative

Use Permit. Currently, businesses subject to a quota can exceed the quota if the

Zoning Adjustments Board (ZAB) approves a Use Permit. Staff believes that allowing

for some flexibility in business mix is important for a district, and supports having a

strategy to consider additional restaurants even after the quota total is filled. The AUP

process is less expensive and faster than the Use Permit process, yet continues to

allow businesses and neighbors to comment on uses applying to exceed the quota

limit. In addition, AUP decisions of particular concern to the community can be referred

directly to the ZAB for consideration at a public meeting.

Allow incidental restaurant use: Staff recommends allowing carry out food service to

be permitted with a food product store as long as it meets the definition of an incidental

use. Food product stores often sell pre-made or made-to-order items.

Incidental use is defined in the Zoning Ordinance in the following way:

“A use of a lot and/or building that is secondary to the principal permitted use,

but that by nature could be independent. An incidental use shall not exceed

twenty-five percent (25%) of the floor area of the primary use, and if it consists of

the commercial sales of a different line of products or services than the primary

use, such incidental use may not generate gross receipts in excess of thirty-

three percent (33%) of the gross receipts generated by the primary use.”

The Elmwood community has mentioned the concern that Food Product Stores

(grocery stores, delis, candy stores) sometimes offer items made for immediate

consumption, either pre-made or made to order. These type of sales are typically

considered incidental uses, because they are usually a small portion of the overall

business. These incidental uses do not include seating areas for consumption of the

food. However, the Elmwood District merchants are interested in seeing these

incidental uses require a restaurant quota slot.

Consider Elmwood Quota Modifications Item 11 Page 4 of 6 March 16, 2016

Staff recommends that carry-out uses that are incidental to the primary retail use, be

allowed. Thee uses do not have tables and chairs inside the business. Quick Service

or Full Service restaurants, which are both identified by tables and chairs inside a

business, would not be considered an incidental use when operating in conjunction with

a food product store, regardless of the amount of floor area used. The addition of

tables and chairs to a food product store would trigger the need for a separate business

license and a restaurant quota slot.

Require restaurant uses in newly created spaces to obtain a quota slot, regardless of

previous use: Staff was asked how the expansion or contraction of a restaurant would

be addressed. The C-E District currently requires an AUP to change the use of floor

area between 2,000 and 3,000 square feet, and a Use Permit for any use changes over

3,000 square feet. Staff recommends maintaining this requirement, and adding a

requirement for discretionary review of any expansion of a restaurant use into a non-

restaurant tenant space. Staff also recommends that if a tenant space occupied by a

restaurant divides into two or more spaces, that the restaurant slot may only be

assigned to one of the reduced spaces. Any of the other spaces would have to apply

for an additional quota slot in order to operate a separate restaurant.

Benefits and impacts of changes

These changes will have the following benefits/impacts:

1. Clarity and consistency: Removing and simplifying quotas would make zoning

ordinance requirements more comprehensible to the public and more consistent

with regulations in other districts. Businesses in the C-E district would continue to

be subject to the basic required permits, without an extra layer of review.

Restaurants in the C-E would still require AUPs in order to become established.

2. Flexibility for Merchants: Without quota restrictions, many business owners will

have more options for locating new businesses and/or modifying their businesses to

meet market demands.

3. Flexibility for Property Owners: Without quota restrictions, property owners will

have more flexibility in marketing their properties in order to fill vacancies.

4. Simplified quota category: Having one quota category for all restaurant uses will be

easier for applicants to understand, staff to track, and less easily modified without a

building permit.

5. Increased Opportunity for Additional Restaurants: The current number of

restaurants in the C-E district is 23. Currently the cap on all restaurants except

carry out are filled, and many of the existing restaurants needed to apply for Use

Permits to exceed the quota. The staff recommendation would allow four additional

restaurants to be added to the district without some kind of discretionary review to

exceed the quota, though an AUP would still be required for any restaurant use.

Consider Elmwood Quota Modifications Item 11 Page 5 of 6 March 16, 2016

Outreach to Elmwood District

Since this process began in 2012, as a review of the C-E quotas, the Elmwood merchants

and neighborhood groups have been involved. A community meeting was held in

November 2012, and members of these groups have attended the five Planning

Commission meetings held between 2013 and 2015. Councilmember Droste’s office has

also worked with the business community regarding their opinions on quotas, the current

business mix, and what they would like to see in the District. On December 15, 2015, the

Elmwood Business Association sent a letter to the Planning Commission expressing

support for proposed changes to quotas, a desire to maintain the current ratio of restaurant

uses to commercial uses (25% to 75%), and a recommendation to enforce the new system

through an AUP process.

The most recent staff contact with Elmwood representatives was at the February 24, 2016

meeting of the Elmwood Business Association. At this meeting, Planning and OED staff

presented the recommendations included in this report and answered questions.

Comments from the attendees indicated general support for the removal of the commercial

quotas and consolidation of the restaurant quotas. Other comments included a desire to

limit the size of tenant spaces for any use, the need to ensure adequate noticing of

discretionary reviews and concern about how decisions are made to exceed quotas.

Environmental and General Plan review

Potential CEQA considerations. Modifying quotas within the C-E district is not

expected to have a large impact on the business mix in the district. The City has

already tested removal of quotas on Solano Avenue and did not experience a

significant change in uses in that case. In the Elmwood District, removing the retail

and service quotas is expected to allow greater flexibility for commercial uses to

locate in the district. Consolidating the restaurant categories into one quota would

continue to limit them to specific locations within the district.

Need to amend General Plan. Staff does not believe that there is a need to amend

the General Plan. Modifying quotas in the C-E District would allow more flexibility for

business and property owners to fill vacant tenant spaces, which would maintain and

encourage a wide range of community and commercial services (Action LU-26-E)

and attract new businesses (ED-4-A.1).

Conclusion and Next Steps

Staff asks that the Commission:

1. Give direction on simplification of quotas in the C-E District and specific changes to

the C-E Zoning Ordinance chapter; and

2. Set a Public Hearing to consider Zoning Ordinance changes.

Consider Elmwood Quota Modifications Item 11 Page 6 of 6 March 16, 2016

Attachments:

1. January 17, 2012 Council referral

2. March 2016 map of C-E tenants

3. December 15, 2016 letter from the Elmwood Business Association

Gordon Wozniak Councilmember District 8

2180 Milvia Street, Berkeley, CA 94704 ● Tel: (510) 981-7180 ● TDD: (510) 981-6903 ● Fax: (510) 981-7188 E-mail: GWozniak@ci.berkeley.ca.us

CONSENT CALENDAR January 17, 2012

To: Honorable Mayor and Members of the City Council

From: Councilmember Gordon Wozniak

Subject: Referral: Elmwood Commercial District Quota Revisions

RECOMMENDATION Refer to the Planning Commission (PC) a request to review the Elmwood Commercial District quota system and make recommendations to simplify the quota system to facilitate the opening of new businesses. In particular, the PC should consider 1) eliminating all retail quota categories, 2) combining the three food service quotas (carry-out, quick service & full service) into a single food service quota and maintain the requirement of needing to receive a Use Permit in order to exceed the numerical limitation for a food service establishment, and 3) other solutions which would make it easier to fill vacant storefronts while maintaining a vibrant business district. CURRENT SITUATION AND ITS EFFECTS When the Elmwood quota system was set up in the 1970s, the number of quotas and the quota categories were based on the business mix at the time. In the intervening decades, competition from Big Box stores and the Internet have caused many of the original businesses to lose their viability. In response to this exterior competition, some businesses have changed their product or service mix to meet changing customer demand. Sometimes as a result of these changes, business owners have found themselves in a different quota category, which was full, and thus in violation of the zoning ordinance. Since, almost all of the existing quota categories are full, property owners without an existing quota slot have had difficulty in renting vacant storefronts. A particular example is 2992 College Avenue; the location was vacant for three years before A’Cuppa Tea secured a new quota slot after paying five thousand dollars for a Use Permit and undergoing a Public Hearing, which was then followed by an appeal of the Use Permit. During the three years that the space was vacant, several individuals expressed interest in opening a retail business in this space. However, because appropriate quota categories were full and the request to exceed the numerical limitations on a quota cost substantial time and money with no guarantee of success, no potential retailer chose to pursue this option. Due to the lack of open retail quota slots the retail space was converted, via a Use Permit with a Public Hearing, into an additional food service establishment. The increase in the percentage of food service establishments and the

Item 11 - Attachment 1 Planning Commission

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Referral: Elmwood Commercial District Quota Revisions CONSENT CALENDAR January 17, 2012

corresponding decrease in the number of retail establishments is a matter of concern for some merchants and neighbors. RATIONALE FOR RECOMMENDATION The Elmwood Commercial District has many more quota categories and detailed descriptions of each category than any other Berkeley business district. The ten Elmwood quota categories are:

1. Arts/Craft Shops, Gift/Novelty Shops, Jewelery/Watch Shops 2. Barber/Beauty Shops 3. Bookstores, Periodical Stands 4. Clothing Stores, including Hats, Shoes and Accessories 5. Financial Service, Retail 6. Photocopy Stores, Printing, Fax 7. ATMs

Food Service Establishments 8. Carry-Out Food Service (to-go only) 9. Quick Service Restaurants (tables, but self-service) 10. Full Service Restaurants (sit down, with table service)

The large number of quoted uses and their detailed description make zoning particularly complicated in the Elmwood commercial district. Sometimes a small change in the physical configuration of an establishment can result is a business being reclassified into a different quota category, which is already full, causing the business to be in violation of the quota system. One way to improve the situation would be to simplify the system by collapsing all of the separate retail and food service categories into two broad categories: 1) Retail and 2) Food Service. By eliminating all numerical quotas in the Retail category, but retaining the current numerical limit for Food Service category, the new system should facilitate new business startups as well as simplify administration of the quotas. In addition, if there is a vacant storefront, without a quota slot, a new system should make it easier to fill this space with a retail business, by maintaining the requirement for a Use Permit to convert a retail space into a new food service establishment. In contrast, any new retail store would not require a quota slot. CONTACT PERSON Gordon Wozniak, District 8 981-7180

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Item 11 - Attachment 2

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Item 11 - Attachment 2

Planning Commission - March 16, 2016

| Elmwood Merchant Association logo design concepts | v7 | Sept. 29, 2015

TheElmwoodBusinessAssociation�2935CollegeAvenue�Berkeley,CA94705info@shoptheelmwood.com

December15,2015PlanningCommissionAlexAmoroso,SecretaryLandUsePlanningDivision2120MilviaSt.,2ndFloorBerkeley,CA94704OnbehalfoftheElmwoodBusinessAssociation,wewouldliketothankyouforagaindiscussingtheissueofzoningquotasintheElmwoodBusinessImprovementDistrict.WeunderstandnoactionispendingattheDecember16,2015,PlanningCommissionmeeting,butthattheremaybecontinueddiscussionregardingpolicychangesinthenearfuture.WealsowantedtoclarifyourElmwoodBusinessAssociationBoardposition,knowingthatindividualmerchants,neighborhoodgroups,andotherstakeholderswillbeprovidinginputfromtheirownperspectives.HereisasummaryoftheElmwoodBusinessAssociation’sdesiredoutcomes:

1) Retailquotasub-categorieseliminated,keepablanketretailcategorytoclassifynon-foodservicebusiness.

2) Foodcategoriescombinedsothereisonlyonenon-retailfoodservicecategory.3) Limitsonnewfoodservicebusinesses,nottoexceedthecurrentpercentage/ratioof

food-to-retailintheneighborhoodbasedontotalnumberofbusinesses.Forexample,approximately75%retail(includingfoodretail)and25%foodservice.

4) Cityenforcementofanynewsystemviaadministrativeusepermitissuance/denials/appealsandtheexistingcomplaint-drivenenforcementmechanisms.

Overall,ourconcernistokeepanoptimalmixoffoodserviceandretailtoensuretheneighborhoodisvibrant,retainsitsindependentretailers,andremainsadestinationforservices,eating,entertainment,andshopping.Welookingforwardtoworkingwithyouondetailsandspecificsasthediscussionmovesforward,andwehopetohaveanupdatedframeworkthatmeetstheneedsofthisuniqueneighborhood.Best,ChristinaBegleyPresidentElmwoodBusinessAssociation

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