Elmwood Struggles With Business Quota System

Tuesday June 22, 2004

What began as a seemingly simple request to city planning staff turned the June 12 Zoning Adjustment Board meeting into a spirited debate about the future of Berkeley’s Elmwood Commercial District. It ended with a sharply-divided ZAB unable to reach a conclusion on what direction Elmwood should take. 

Berkeley residents voted to form the Elmwood Commercial District in 1981, troubled by the influx of restaurants that many feared would drive out the host of locally owned businesses that catered to the needs of the surrounding community. Adopted at the same time was a system of rent control and eviction protections for neighborhood merchants. 

A judicial ruling axed the rent control seven years later, but the commercial district and its system for allocating business slots by a system of quotas remains.  

But economic pressures, driven in part by landlords eager for the higher rents they can collect from restaurants and high-end clothiers, are threatening to transform the neighborhood into something far different from what exists today. 

All parties agree that the quota system has serious flaws, not least because the city had no system for keeping up with the changes in the neighborhood centered on the intersection of College and Ashby avenues.  

For months before the ZAB meeting, city planners Debra Sanderson and Stephen Ford had been rethinking the quota system in cooperation with the Elmwood Merchants Association and its president, Jon Moriarty. From that process emerged the four-page memorandum Sanderson and Ford submitted to ZAB before this month’s meeting, evaluating the status of the quotas and actual uses of commercial space, and offering recommendations to update and clarify the existing system. 

Beyond the limits on business types, any attempt to expand a business must first win city approval—though just how and through what process remains ambiguous. 

While Elmwood area supporters of the existing system admit it needs revision, College Avenue clothier Jeremy Kidson, the owner of Jeremys, told ZAB members “I disagree with the quota system entirely. It’s nonsense. It doesn’t work. At the most there should be restaurants or no restaurants, like on Solano” Avenue. 

Jeremys has been an Elmwood staple since 1990, steadily expanding into one vacant space after another in the building Kidson owns at the southeast corner of College and Ashby avenues. 

His attempt to swallow up yet another space played a part in the attempt to revise the neighborhood system snarl.  

Kidson started his highly successful discount business in San Francisco, where he still maintains his largest store in the South of Market district. His steadily-expanding Berkeley outlet has proven a big hit, with long lines gathering outside the store when new merchandise arrives. 

But to merchants like Moriarty, whose 14 Karats jewelry store at 2910 College makes all the jewelry it sells, the key issue is diversity. 

The push for the creation of the Elmwood Commercial District was prompted by merchants and neighbors who hoped to preserve a shopping hub that served the surrounding community by providing both goods and essential services. 

“When the district was created, we had a watchmaker, a show repair shop, a tailor, a Christian Science Reading Room—none of which can afford rents of $3 a square foot with triple net,” Moriarty said, adding that he’s not resistant to change. “A lot of people want to keep the quotas as they are, but they have to change.” 

John Gordon, Berkeley’s major broker of commercial rentals, agrees. “I live here in the neighborhood, and none of us want to see any significant changes. But something has to be done to reevaluate the way the system works.” 

Gordon is the leasing agent for the largest bloc of vacant space in the Elmwood, the two-story Victorian shop building at the northwest corner of College and Ashby and two adjoining buildings. The smaller two structures both need retrofitting. 

He has tenants eager to rent, but none qualifies under the existing system. 

“If someone sells cookware and wants to sell coffee to customers so they can drink while they shop and offer cooking classes where the food is consumed when it’s finished, then they are listed as food service, and all those slots are filled. And if a store that sells baby furniture also wants to offer sleepware, then it’s a clothing store and can’t qualify because those slots are filled,” Gordon said. “I also have someone who wants to move an existing business up from Telegraph, but their quota is also filled—so you can’t even retain a business in the city without having to go through a four- to eight-month permit process.” 

Gordon concludes, “There are good reasons to have quotas, but something has to be done to streamline the process.” 

Further complicating the Elmwood picture are the limited available parking, the frequent traffic snarls on Ashby, and the maze of barricaded streets the city has created in the surrounding neighborhood. 

“We’ve had people who live nearby tell us it’s taken them 20 minutes to drive here and 20 more to find a parking space,” Moriarty said. 

Berkeley zoning ordinances limit the Elmwood Commercial District to two banks or savings and loans, seven full-service restaurants, 10 service businesses, seven barber and beauty shops, 10 clothiers, four book and magazine stands, two copy stores, 12 jewelry or crafts shops, three carry-out food vendors, seven quick-serve restaurants, and six full service restaurants. 

Ordinances similarly ban from Elmwood: 

• Department stores 

• Pawn shops 

• Auction venues (though a firm selling customer goods over eBay is operating in the district)  

• Medical/health practices 

• Adult-oriented businesses 

• Amusement arcades 

• Nightclubs 

• Motels 

• Gas stations 

• Drive-ins 

• Amplified live entertainment 

• Hospitals 

• ATMs (except in banks) 

• Cemeteries and mortuaries 

• Dry-cleaning and laundry plants 

• Kennels 

• Testing labs 

• Warehouses, and 

• Any type of automotive businesses other than parts stores. 

“The way it is,” said Gordon, “we don’t know who we can put in there.” 

“The quota system is ineffective,” Kidson said. “It protects the merchants at the expense of the consumer. When the city comes in and imposes all these controls, the quality goes down and fewer people come to shop. As a result, the whole area suffers. Look at the area around the Safeway in Rockridge. There’s a butcher, a baker, and a number of other merchants, and they’re all thriving. Look at Fourth Street; it’s thriving. And neither area has quota.” 

Kidson added that the one thing the city can do to promote small businesses and mom-and-pop stores “is to say there can’t be any chain stores there, because a chain can put in a store that loses money while it drives out other businesses.”  

Moriarty, who opened his Elmwood shop 26 years ago, said he and his fellow merchants are “busting our asses to try to make our neighborhood work. There’ve been a lot of changes, and a lot of the merchants who were here when I started are gone, and now you can get a hard drink here for the first time since the 1930s. It’s not like we’re fighting tooth and nail to keep things the way they were.” 

But for all the work by city staffers and Elmwood merchants, ZAB members split 4-4 on suggestions for revising the quota system. 

The one member who abstained, Laurie Capitelli, did so because he owns property in the district and has a business there. 

The opponents all expressed interest in tossing the quota system altogether. 

“I guess that means the staff is on its own,” Sanderson said. “We’re obligated to make the best interpretation we can.” 

In the end, any changes will rest with the Planning Commission and City Council. 

Another proponent of change in Elmwood testified before ZAB after the vote—developer Patrick Kennedy, whose projects are changing the face of downtown Berkeley and University Avenue. 

“It’s important for the city commissions and the City Council to do everything possible to make business work here,” Kennedy said. “I was a little surprised to see that a locally owned business like the clothing store mentioned here earlier has to fight the city in order to succeed. And I have to wonder what kind of city the city wants.” 

Moriarty and his fellow merchants want a vibrant neighborhood. “If it’s just restaurants, people will only come in the evening to eat—the hours when the rest of us are closed. If it’s restaurants and clothiers, then the rents will drive most of us out.” 

And it was the merchants who rallied to save the neighborhood’s economic anchor, the Elmwood Theater at 2966 College Ave., after a fire forced owner United Artists to close the venerable institution in 1988. 

Built in 1918 and remodeled 32 years later, the theater had been a cornerstone of the Elmwood district, bringing in customers to neighboring merchants. 

Faced with the loss of a critical part of their community, the Elmwood Merchants Association created the non-profit Elmwood Theater Foundation to raise money to buy and renovate the landmark. 

Though contributions provided most of the necessary funding, an additional $215,000 was needed. To provide the city with a guaranteed system for repayment, the merchants and the city created the Elmwood Business Improvement District on July 20, 1993 to fund repayments through a system of annual assessments. 

The Elmwood Theater reopened on October 20, 1994, and the merchants’ efforts have paid off. The theater has proven a success, mixing first run and children’s fare with a solid core of art house films, and the loans are being paid off. 

“Imagine that! Someday we’ll actually own the theater,” Moriarty said. 

ZAB member Laurie Capitelli sits on the theater foundation’s board, as does Moriarty’s spouse. 

Moriarty and his colleagues have also stepped up their marketing campaign with a website—www.shopelmwood.com—that offers a virtual tour of neighborhood shops, complete with descriptions. “Restaurants will be able to post their daily specials, and retailers can list their sales items. It also includes an e-mail system so we can all stay in touch with each other,” he says. 

Moriarty came up with the idea for the site while web-surfing for places to see in London, where he and his wife were celebrating her fortieth birthday. 

Kidson says he won’t give up the fight. “I intend to spearhead a drive to get rid of this quota system. It just doesn’t work.”