Staff Report
PREPARED BY : MONICA RENN
Economic Vitality Manager
Reviewed by: Town Manager, Assistant Town Manager, Town Attorney, and Community Development
Director
110 E. Main Street Los Gatos, CA 95030 ●A 40 8 -354 -68 32
www.losgatosca.gov
MEETING DATE: 06/05/18
ITEM NO: 18
TOWN OF LOS GATOS
TOWN COUNCIL REPORT
D ATE : MAY 3 1, 2018
TO : COUNCIL POLICY COMMITTEE
FROM: LAUREL PREVETTI, TOWN MANAGER
SUBJECT: A DOPT A RESOLUTION SUSPENDING TOWN CODE SECTION 29.20.185
REGARDING THE REGULATIONS FOR FORMULA RETAIL BUSINESSES IN
THE C -2 ZONE FOR A PERIOD NOT TO EXCEED 18 MONTHS AS
RECOMMENDED BY THE POLICY COMMITTEE.
RECOMMENDATION :
A dopt a resolution (Attachment 1) suspending Town Code S ection 29.20.185 regarding the
regulations for Formula Retail Businesses in the C -2 zone for a period not to exceed 18 months
as recommended by the Policy Committee.
BACKGROUND :
In 2015, the Policy Committee identified and discussed land use policies and ordinances that
govern businesses in Los Ga tos, particularly those in D owntown (C -2 zone), including f ormula
r etail . This item was discussed at several public meetings including on January 13, 2016 by the
Planning Commission, who made a recommendation to the Town Council for a Town Code
amendment that included t he addition of restaurants and qualifying information that helped
identify formula retail businesses . The Town Council discussed the item on March 15, 2016 ;
however , the Planning Commission recommendation was not adopted , and the topic was sent
back to the Policy Committee for further review along with other Economic Vitality items.
tAtheAPolicyACommittee’sA January 2018 meeting, the Committee discussed its work plan items,
including several Economic Vitality initiatives and prioritized the topics to be addressed ;
f ormula r etail was among those priorities.
PAGE 2 OF 5
SUBJECT: A DOPT A RESOLUTION SUSPENDING TOWN CODE SECTION 29.20.185
REGARDING THE REGULATIONS FOR FORMULA RETAIL BUSINESSES IN THE C -
2 ZONE FOR A PERIOD NOT TO EXCEED EIGHTEEN MONTHS AS
RECOMMENDED BY THE POLICY COMMITTEE.
MAY 31 , 2018
S:\COUNCIL REPORTS \2018 \06 -05 -18 \18 Formula Retail \Staff Report.FINAL.docx
B CKGROUNDA(Cont’d):
At its March 15, 2018 meeting, the Policy Committee discussed f ormula r etail and directed staff
to return with the proposed languag e from 2016 , draft alternatives for the definition , and
suggest ed options for modifying the application of the definition in the C -2 zone. Staff returned
to the Policy Committee in April for further discussion. At this meeting, the Policy Committee
asked staff to provide a draft resolution that would allow f ormula r etail regulations to be
suspended for a pilot period of 18 months .
DISCUSSION :
The retail industry continues to evolve throu gh online shopping and new shopping models,
often creating difficulty or the inability for businesses to innovate under the current Town C ode
regulations. In 200 2 , the Town adopted an ordinance that defined Formula Retail Businesses
(Section 29.10.020) and through the Conditional Use table (Section 29.20.185) require d any
business with more than seven existing locations to obtain a Conditional Use Permit (CUP) to
operate in downtown Los Gatos, and those larger than 6,000 s quare feet in the other
commercial zones.
Formula r etail businesses are an important part of the retail mix in any location. They provide a
draw for shoppers seeking specific items or brands while creating retail synergy for shoppers to
discover and re turn to the independent retailers in the surrounding areas. It has become
known that brick and mortar retailers, both independent and formula , struggle with expanding
or opening new brick and mortar locations because of the competitive online marketplace.
Many independent retailers will seek a location within proximity to a well -known restaurant or
formula retailer to gain exposure and drive business.
In the case of downtown Los Gatos, there have been several retail spaces that have become
difficult to lease or hold an independent business for a long period of time for a variety of
reasons . A review of the sales tax patternsAinAtheATown’sAfourAgeographicAcommercialAdistrictsA
would indicate that the sales tax in downtown is either declin ing or flat rela tive to the other
districts. This , coupled with the potential ease and availability of new commercial space coming
online in the North 40 d evelopment (P hase 1) that would not require formula retail to obtain a
CUP , led the Policy Committee to recommend th at the Town Council adopt a resolution
suspending the need for formula retailers to obtain a CUP in downtown Los Gatos for a period
of 18 months, or if a threshold of five new formula retailers is met before the 18 -month period
has ended. T his pilot program would afford downtown the ability to have more options for
retailers with less process to keep the downtown vital, relevant, and successful. The Policy
Committee expressed interest in maintaining a mix of independent retailers downtown, and for
PAGE 3 OF 5
SUBJECT: A DOPT A RESOLUTION SUSPENDING TOWN CODE SECTION 29.20.185
REGARDING THE REGULATIONS FOR FORMULA RETAIL BUSINESSES IN THE C -
2 ZONE FOR A PERIOD NOT TO EXCEED EIGHTEEN MONTHS AS
RECOMMENDED BY THE POLICY COMMITTEE.
MAY 31 , 2018
S:\COUNCIL REPORTS \2018 \06 -05 -18 \18 Formula Retail \Staff Report.FINAL.docx
DISCUSSIONA(Cont’d):
that reason, a review is recommended if a cap of five new formula retailers is reached during
the pilot period.
ToAimplementAtheAPolicyACommittee’sA recommendation , the Town Council is being asked to
adopt the attached resoluti on and not alter the current definition within the Town Code. The
resolution specifically suspends Section 29.20.185 (1) Commercial, n. formula retail business ,
which is the section of the Conditional Use table requiring formula retail businesses to obta in a
CUP in the C -2 zone. In addition, the following must be true:
The new formula retail business is occupying an existing commercial space, smaller than
6,000 square feet; and may not add additional square footage to the space through
construction of new square footage or merging with another existing space.
Should a formula retail business wish to locate in downtown Los Gatos and combine two or
more spaces or modify the square footage by adding on, then a CUP would be required and
requir e Planning Commission approval. In addition, this resolution would not a pply to any
formula retail business opting to sell items such as alcohol, as these would still require Town
Council approval.
For those formula retail businesse s that meet the requirement of this resolution, a Certificate of
Use and Occupancy and a val id Business License would still be required. These documents are
required for all commercial businesses in Town.
For the reference of the Council, Attachment 2 contains the current definition of Formula Retail
Business from Town Code Section 29.10.020 , and an exhibit illustrating the formula retailers
currently in business in downtown .
CONCLUSION :
The Policy Committee is recommending a resolution that suspends the need for formula retail
businesses to obtain a CUP anywhere in the C -2 z one within an e xisting commercial location for
a period o f 18 months, with a Town Council review if a threshold of five formula retail
businesses is met before the 18 -month period has expired. This review would allow for a
discussion on how the additions have affected d owntown , and if the resolution should continue
to be in effect.
PAGE 4 OF 5
SUBJECT: A DOPT A RESOLUTION SUSPENDING TOWN CODE SECTION 29.20.185
REGARDING THE REGULATIONS FOR FORMULA RETAIL BUSINESSES IN THE C -
2 ZONE FOR A PERIOD NOT TO EXCEED EIGHTEEN MONTHS AS
RECOMMENDED BY THE POLICY COMMITTEE.
MAY 31 , 2018
S:\COUNCIL REPORTS \2018 \06 -05 -18 \18 Formula Retail \Staff Report.FINAL.docx
CONCLUSIONA(Cont’d):
At any time during the suspension, the Town Council could review the progress and vote to
extend, modify, or rescind the resolution. It is not anticipated that there would be a large influ x
of new formula retail businesses immediately coming to Town because only vacant spaces are
the likely immediate op portunities . Most commercial spaces in T own are in multi -year leases
with options and may not be able to take advantage of this set timeframe. For those
businesses looking to come to Town, or for the building owners looking to fill their vacancies,
this resolution may pr ovide one more option for exploration and attraction as the inventory
increases withAnewAdevelopmentsAonAtheAhorizonAinATownAessentiallyA“levelingAtheAplayingAfield”A
among shopping districts and centers in Los Gatos.
ALTERNATIVES :
If the Town Council would be more comfortable with an alternative, staff has prepared the
following options:
1. Adopt a resolution suspending the need to obtain a CUP for formula retail businesses in
the C -2 zone for properties without store frontage on N. Santa Cruz Ave nue . By
excluding N. Santa Cruz Ave nue , the alternative may encourage retailers to consider
spaces along side streets and on Main Street and enhance th ese shopping area s . A
potential concern could be the north end of N. Santa Cruz Ave nue where properties can
h ave difficulties attracting foot traffic for retailers and would benefit from a destination
business.
2. Adopt a resolution that appoints the Development Review Committee (DRC) to be the
deciding body for formula retail business CUPs for a period of 18 months or five new
formula businesses, whichever occurs first. This alternative would still require a new
formula retail business to obtain a CUP ; however , it would reduce the processing time
and costs. A typical application being considered by the DRC t akes about six to eight
weeks once the application is filed versus three to four months for Planning Commission
consideration . The true timeline often depends on the completeness of the materials
submitted and the information provided by the applicant. The current fee for a CUP
application at DRC is $4,335.69 while the fee for a CUP application going to the Planning
Commission is $7,124.67.
PAGE 5 OF 5
SUBJECT: A DOPT A RESOLUTION SUSPENDING TOWN CODE SECTION 29.20.185
REGARDING THE REGULATIONS FOR FORMULA RETAIL BUSINESSES IN THE C -
2 ZONE FOR A PERIOD NOT TO EXCEED EIGHTEEN MONTHS AS
RECOMMENDED BY THE POLICY COMMITTEE.
MAY 31 , 2018
S:\COUNCIL REPORTS \2018 \06 -05 -18 \18 Formula Retail \Staff Report.FINAL.docx
COORDINATION :
The preparation of this report was coordinated with the Town Attorney , Community
Development Department , andAtheATownAManager’sAOffice.
FISCAL IMPACT :
There is no fiscal impact associated with these initiatives at this time.
ENVIRONMENTAL ASSESSMENT :
This is not a project defined under CEQA, and no further action is re quired.
Attachment s :
1. Draft Resolution suspending Town Code Section 29.20.185
2. Current formula retail definition and existing formula retail businesses in downtown Los
Gatos
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