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Staff Report PREPARED BY: MONICA RENN Economic Vitality Manager Reviewed by: Town Manager, Assistant Town Manager, Finance Director, Community Development Director, and Town Attorney 110 E. Main Street Los Gatos, CA 95030 ● 408-354-6832 www.losgatosca.gov TOWN OF LOS GATOS COUNCIL AGENDA REPORT MEETING DATE: 03/05/2019 ITEM NO: 7 DATE: FEBRUARY 28, 2019 TO: TOWN COUNCIL FROM: LAUREL PREVETTI, TOWN MANAGER SUBJECT: ADOPT TWO RESOLUTIONS RELATED TO BUSINESS STREAMLINING OPPORTUNITIES THAT REDUCE THE TIMELINE AND COST OF SPECIFIC TOWN PROCESSES: A. A RESOLUTION SUSPENDING ORDINANCE 2021 AND MODIFYING THE ASSIGNMENT OF DUTIES FOR NEW CONDITIONAL USE PERMITS FOR RESTAURANTS TO THE DEVELOPMENT REVIEW COMMITTEE UNTIL DECEMBER 31, 2019; AND B. ADOPT A RESOLUTION MODIFYING THE ASSIGNMENT OF DUTIES FOR MINOR EXTERIOR ALTERATIONS ON COMMERCIAL BUILDINGS TO BE PROCESSED WITH A BUILDING PERMIT UNTIL DECEMBER 31, 2019. RECOMMENDATION: Adopt two resolutions related to business streamlining opportun ities that reduce the timeline and cost of specific Town processes: A. A resolution suspending Ordinance 2021 and modifying the assignment of duties for new conditional use permits for restaurants to the Development Review Committee until December 31, 2019; and B. Adopt a resolution modifying the assignment of duties for minor exterior alterations on commercial buildings to be processed with a building permit until December 31, 2019. BACKGROUND: Since 2015, the Town Council, Planning Commission, and Policy Committee have been working to streamline many provisions that govern businesses in Los Gatos. From providing PAGE 2 OF 5 SUBJECT: ADOPT TWO RESOLUTIONS RELATED TO BUSINESS STREAMLINING OPPORTUNITIES THAT REDUCE THE TIMELINE AND COST OF SPECIFIC TOWN PROCESSES DATE: FEBRUARY 28, 2019 S:\COUNCIL REPORTS\2019\03-05-19\Downtown Restaurants Streamlining\Staff Report.docx 2/28/2019 3:10 PM SLL BACKGROUND (continued): more flexibility with business models to reducing cost and timelines for permit processing, the Town has made strides in creating opportunities for business success in Los Gatos. Attachment 1 provides a chronology of streamlined provisions adopted from 2015 to date. Most recently, in the spring of 2018 the Town Council adopted two resolut ions: one suspending the need for a formula retail business in downtown to obtain a Conditional Use Permit (CUP) and another modifying the deciding body for restaurants to modify their CUP to the Development Review Committee (DRC) in an effort to reduce the time and cost associated with a CUP modification. Both have provided opportunities for business and property owners to modernize business use models for their spaces and create opportunities for further business growth. Since their adoption, these resolutions have both been utilized by our business community to allow for growth and business development. The Town has two new formula retailers in downtown and have had five existing restaurants modify their CUP, with a sixth currently in process. These changes have provided benefit to businesses and customers and have contributed to reducing commercial vacancies. As a whole, these changes have caused no notable negative impacts to the surrounding businesses, residential neighborhoods, or commercial zones. DISCUSSION: On January 22, 2019, the Town Council discussed and adopted strategic priorities for 2019 – 2021 in which “Streamline Policies: Land Use/Economic Vitality Measures” remained as a priority. Additionally, the Council has an adopted Strategic Priority that encourages an improved quality of life through “Community Vitality.” Staff understands this to mean that there is a desire among the Council to create vibrancy in Town through programming opportunities such as music, entertainment, outdoor dining, events, and other placemaking and community engagement. Many of these amenities could be provided by programming within the businesses themselves, if the tools and processes were available to them and attainable in terms of time and cost. By continuing to evaluate the Town’s processes and provide additional streamlining, the Town may be able to retain and attract vibrant businesses. It is important to note that aside from Town provisions, businesses are faced with additional challenges. In recent months, a series of other factors have presented themselves in Los Gatos and in the greater Bay Area that create a challenging business environment. Most notably, several businesses have recently closed locally for a variety of reasons, ranging from parent company strategic decisions to privately driven decisions such as retirements and lease PAGE 3 OF 5 SUBJECT: ADOPT TWO RESOLUTIONS RELATED TO BUSINESS STREAMLINING OPPORTUNITIES THAT REDUCE THE TIMELINE AND COST OF SPECIFIC TOWN PROCESSES DATE: FEBRUARY 28, 2019 S:\COUNCIL REPORTS\2019\03-05-19\Downtown Restaurants Streamlining\Staff Report.docx 2/28/2019 3:10 PM SLL DISCUSSION (continued): negotiations. More regionally, the cost of compensating employees has risen. The minimum wage in California has increased to $11 for companies with twenty-five or fewer employees and $12 for companies with twenty-six or more employees. Complicating this increase further for small businesses is the fact that many local cities have adopted their own minimum requirements that are much higher than the current state minimum. Cities such as San Jose, Mountain View, Palo Alto, and Sunnyvale raised their rates to $15 per hour in January of 2019, and several others adopted a minimum of $13.50, which has a ripple effect to neighboring jurisdictions such as Los Gatos who must compete with such compensation rates to retain employees. Given that there are multiple pieces of the puzzle that contribute to a business’ success, and that the business mix in any community directly attributes to the overall vibrancy and appeal of the location, it is important for the Town to continue to consider options that may reduce the time and expense of opening or expanding a business in Town, so that Los Gatos may remain competitive with neighboring communities as a destination to gather, shop, and dine. As the Town Council further considers the current business environment, it may wish to expand on the streamlined processes and provisions to provide an even more favorable business environment in Los Gatos. This report identifies two potential considerations. First, one of the largest barriers of entry to downtown Los Gatos is obtaining a CUP. For this reason, the Council may wish to consider a pilot program to modify the assignment of duties in Town Code Sec. 29.20.750, and 29.20.755 to allow the Development Review Committee (DRC) to consider and approve new restaurant CUPs through December 31, 2019 (see Attachment 2). This pilot would also require the temporary suspension of Ordinance 2021 (Attachment 3), which strongly discourages the conversion of uses from retail to restaurant, creating a process that is significantly quicker and less expensive than our current process. This approach is s imilar to the resolution adopted by Town Council on June 19, 2018 which allows for CUP modification with DRC approval. Currently, restaurants are approved at either Planning Commission or Town Council depending on how the Town Code defines the restaurant, costing the applicant $7,124.67 and $12,062.79 respectively, and typically taking anywhere from three to seven months for approval. In contrast, the DRC process takes about six to eight weeks and costs the applicant $4,335.68 to apply. This process still incorporates public noticing, input, and a full public hearing. In making this recommendation, staff considered neighboring and comparable jurisdictions’ provisions for new restaurants to determine what would make a prospective restaurant choose PAGE 4 OF 5 SUBJECT: ADOPT TWO RESOLUTIONS RELATED TO BUSINESS STREAMLINING OPPORTUNITIES THAT REDUCE THE TIMELINE AND COST OF SPECIFIC TOWN PROCESSES DATE: FEBRUARY 28, 2019 S:\COUNCIL REPORTS\2019\03-05-19\Downtown Restaurants Streamlining\Staff Report.docx 2/28/2019 3:10 PM SLL DISCUSSION (continued): Los Gatos over another location. Often, the investment of time and money are major deciding factors for new businesses, thus providing this streamlined process may attract new businesses. Attachment 4 provides benchmarking information from other cities. Staff found that Los Gatos was the only jurisdiction requiring any approval at the Town Council or Planning Commission level for a restaurant. Given the number of vacancies in Los Gatos at this time, allowing this flexibility could provide a catalyst for businesses currently deciding between Los Gatos and another jurisdiction to choose Los Gatos as their business’ new home. To provide a level of comfort and control, the Council may wish to freeze the resolution after a certain number of new restaurants are approved , to review the progress, and confirm its continuance or modify the resolution. Again, this is a similar approach to the action taken regarding the formula retail resolution in June 2018 requiring staff to return to the Council should five new formula retail businesses locate in Downtown. Attachment 5 provides a second streamlining opportunity that could both assist existing businesses and provide a draw for new businesses considering Los Gatos. This resolution would reassign the duties for minor exterior alterations on a commercial building from the DRC to the staff level with a building permit. Staff would use the provisions in the Town Code and Commercial Design Guidelines to determine if the alteration is appropriate, and to ensure the compatibility of the exterior modification. Such modifications could include changes to windows, awnings, or doors on an existing store front, and would require that they meet the same provisions currently outlined in the Commercial Design Guidelines. If the building is deemed historic, consideration by the Historic Preservation Committee would still be required; however, after this consideration the applicant could go straight to building permits. Removing the need for DRC approval reduces the process by six to eight weeks and $2,515.50. CONCLUSION: Staff is recommending that the Town Council consider expanding on their efforts to streamline business processes by adopting two resolutions: 1. A resolution suspending Ordinance 2021 and modifying the assignment of duties for new conditional use permits for restaurants to the development review committee until December 31, 2019; and PAGE 5 OF 5 SUBJECT: ADOPT TWO RESOLUTIONS RELATED TO BUSINESS STREAMLINING OPPORTUNITIES THAT REDUCE THE TIMELINE AND COST OF SPECIFIC TOWN PROCESSES DATE: FEBRUARY 28, 2019 S:\COUNCIL REPORTS\2019\03-05-19\Downtown Restaurants Streamlining\Staff Report.docx 2/28/2019 3:10 PM SLL CONCLUSION (continued): 2. Adopt a resolution modifying the assignment of duties for minor exterior alterations on commercial buildings to be processed with a building permit until December 31, 2019. COORDINATION: This report was prepared with coordination between the Town Manager’s Office, Town Attorney’s Office, and Community Development Department. Attachments: 1. Economic Vitality and Land Use Streamlining 2. Draft Resolution suspending Ord 2021 and modifying new CUPs for restaurants 3. Ordinance 2021 4. Benchmarking data 5. Draft Resolution for minor exterior modifications on commercial buildings This Page Intentionally Left Blank