Council introduces village‑center retail preservation ordinance after heated public comments over Fair Oaks Plaza plans

The City Council introduced an ordinance and adopted a companion resolution on March 18 that creates a retail‑preservation incentive program for select village‑center sites, a measure meant to encourage developers to include or preserve neighborhood retail when they redevelop shopping centers.

The ordinance (file 25‑0397) and resolution would let a qualifying developer reduce the city’s below‑market‑rate (BMR) housing requirement if the project: is at least 6 acres, is north of El Camino Real, and provides a minimum floor‑area ratio (FAR) of retail on site (staff modeled stepped incentives; a 10% FAR would waive the BMR requirement; smaller thresholds yield proportionally reduced BMR obligations). The measure is voluntary and applies only at specified village centers meeting the eligibility tests staff pulled from the Land Use and Transportation Element and site maps; staff identified Village Center 5 (Duane/Fair Oaks Plaza) and Village Center 6 (Lakewood) as qualifying under today’s rules.

Council member Mike Mellinger moved adoption of the ordinance introduction and resolution; Council member Alyssa Cisneros seconded the motion, which carried 6‑0 (Council member Srinivasan absent). The ordinance was introduced and the implementing resolution adopted in the same action.

Why the policy: city staff said the city’s long‑standing goal — laid out in the Land Use and Transportation Element (LUTE) — was to create mixed‑use “village centers” with neighborhood shopping, gathering spaces and housing. State housing law changes and market forces have, staff said, reduced the retail contained in recent redevelopment proposals. The program aims to make retail inclusion more financially feasible by trading down part of the BMR obligation for a developer that delivers minimum neighborhood‑serving retail.

Public reaction: Council heard more than two dozen public comments, most focused on the Duane/Fair Oaks Plaza proposals. Many speakers described the plaza as a neighborhood hub that provides grocery stores, multicultural restaurants, retail and services relied upon by seniors and residents without cars.

Resident Leonora (last name on file) told council: “I bought my house because of the convenience of the Fair Oaks Plaza… Losing it is not the way I’d like to see this city go.” Resident Himanshu Sethi added that replacing the plaza with townhouses would remove “essential services” and “create a food desert” and argued the redevelopment would eliminate hundreds of jobs. Several speakers urged the city to require or preserve grocery space, ask developers to keep local merchants open during construction, or increase the retail FAR or other incentives so a full‑size grocer could remain on site.

Planning and next steps: staff said the program is intentionally targeted and voluntary. Staff told council that two applicants for Village Centers 5 and 6 were close to being complete on their development applications and that the program is meant to provide a tool for those applicants and for future redevelopments. Staff said the city will continue the village‑center master‑plan work and will return to council with the master plan and recommended zoning for village centers; any zoning changes could be used to further influence outcomes for retail but would follow the master plan process.

Ending: Councilmembers thanked staff for the outreach and directed staff to continue discussions with property owners and developers. Several councilmembers said they would like staff to explore additional tools to help existing merchants remain in Sunnyvale or to keep businesses operating during construction. The ordinance introduction and companion resolution passed on a 6‑0 vote.