Below are four stories by Tom Lochner published in this newspaper between October 2008 and June 2009 describing the rezoning of Hercules' Civic Arts building; the search for a restaurant site by the principals of the current Sala Restaurant; and the city's sublease of the premises at Railroad and Sycamore avenues, originally sought by the Sala principals, to the Powder Keg Pub.

Waterfront rezoning has many scratching their heads -- Oct. 5, 2008 --

A restaurant plan for Hercules' historic Civic Arts building is off Monday's Planning Commission agenda while the city staff ponders the intent of an initiative that rezoned the building to allow a restaurant.

The move caught many people, including the planning staff, by surprise and upset neighbors.

The Waterfront Now Initiative, authored by developer AndersonPacific and approved by the City Council on July 22, provides for more than 1,200 homes, offices, stores and a multimodal transit center.

Two weeks earlier, on July 7, the Planning Commission turned down an application for a restaurant, Sala Thai, at the Civic Arts building, after residents of the adjacent Hercules Historic Homes argued that the noise, light, smells and traffic of a restaurant would spoil the peace and quiet of their neighborhood. The applicant appealed the decision to the City Council.

The Civic Arts Building at the time was just outside the Waterfront District, but the initiative added a loop to the district boundary to incorporate the building.


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When the council took up Sala Thai's appeal Sept. 9, it sent the matter back to the Planning Commission for reconsideration under the new zoning rules, which require only a business license and apparently no Planning Commission review for a restaurant to open.

But City Attorney Mick Cabral has said that elements of the initiative could be a matter of interpretation.

Historic Homes residents said they were blindsided by the rezoning, which they contend was buried in the language of the initiative. And Planning Manager Dennis Tagashira said he did not receive a copy of the initiative until after the council approved it.

Tom Koch, a consultant for AndersonPacific, said the city and the developer had discussed "doing a comprehensive plan" but apparently had not specifically discussed the Sala Thai building.

"City staff is in the process of clarifying with the authors of the Waterfront Now Initiative on the intent of their initiative," Tagashira said last week. "These clarifications are under way, but have not been completed."

No new hearing date has been set for the Sala Thai matter.

Glen Cole, an engineer who represents Sala Thai applicant Kay Sala, said last month that he and Sala would go before the commission even though the new rules probably did not require her to.

He said he has "scientific proof" that the restaurant will not adversely impact the neighborhood but that he did not get a chance to show the council Sept. 9 before it sent the matter back to the Planning Commission.

The present flap has antecedents that go back more than a year. In June 2007, Sala wanted to rent a city-controlled space at Sycamore and Railroad avenues but balked at the city's $3.75-per-square-foot-per-month asking rent. The city later agreed to rent the space to the Powder Keg restaurant.

Three months ago, the city and Powder Keg were discussing a starting rent of "just over $2 per square foot" with annual escalations, City Manager Nelson Oliva said. The city came down in the rent after the area proved to be a hard sell to restaurateurs, Oliva said, and by that time, Sala had walked away.

In fall 2007, the city hired Hercules broker Michael Penner for up to $10,000 in commission to find a tenant for the Civic Arts building.

Sala said she came upon the Civic Arts building by happenstance while on a walk through the area, when she saw Penner's advertising sign on the property.

On Feb. 21, Sala Thai signed a tentative lease with the agency for the Civic Arts building at $1.65 a square foot a month, Oliva said.

Restaurant waiting (and waiting) to open --

Nov. 19, 2008 -- The buck stops with the Hercules City Council, which ultimately will decide whether Sala Thai Restaurant opens at the Civic Arts building. And despite what some residents believe, it's not a done deal, city administrative officials say.

City Manager Nelson Oliva reiterated that for Sala Thai to open, the council, sitting as the Hercules Redevelopment Agency board, would have to give final approval by ratifying a tentative lease.

"The RDA (board) can withhold it, " Oliva said. "The lease is tentative."

A zoning change over the summer that escaped the attention of many, including that of city planning staff, allows a restaurant at the historic building without planning commission review. The old "Public/Quasi-Public-Park" zoning required planning commission approval; the new "Historic Town Center" zoning does not, although officials say the planning commission might have some say whether a restaurant serves alcoholic beverages.

In February, Kay Sala, doing business as Sala Thai Restaurant, signed a tentative lease of the Civic Arts building with the city at a starting rent of $1.65 a square foot per month. On July 7, the planning commission denied Sala a conditional-use permit, siding with residents of the adjacent Hercules Historic Homes who said a restaurant with late-night hours would spoil the quietude of their neighborhood. Sala appealed the commission's ruling.

The council rezoned the building two weeks later by adopting a developer's initiative by ordinance July 22. The Waterfront Now Initiative, authored by AndersonPacific LLC, provides for more than 1,200 homes, offices, shops and an intermodal transit center. It also redraws the boundary of the Waterfront District by looping it around the Civic Arts building and puts it under the "Historic Town Center" zoning with other nearby historic buildings.

On Sept. 9, the council referred the Sala Thai matter back to the planning commission for reconsideration under the new zoning -- even though, according to a staff report, a restaurant now would need only a nondiscretionary business license from the city finance department. The planning commission was supposed to take up the matter Oct. 6 but postponed it in September pending a meeting of city staff members with AndersonPacific to discuss the intent of the initiative, including the alcohol issue. That meeting occurred Sept. 30; the staff is still studying how to apply the initiative, City Attorney Mick Cabral said.

"There is no question that a restaurant is a permitted use on the parcel, " Cabral said.

However, he said, "The City Council retains absolute discretion to approve or disapprove the Sala Thai lease."

Oliva said he expects to hold a study session soon at the planning commission, to give the public another chance to comment. No date has been set.

Sala has sought to open a restaurant in Hercules for more than a year and previously negotiated unsuccessfully to rent another redevelopment agency-controlled property, now occupied by the Powder Keg pub. In a "final offer" to the city in June 2007, directed to the attention of Oliva and then-Mayor Ed Balico, Sala proposed a starting rent of $1.50 a square foot per month, increasing to $1.75 after two years; the city had asked $3.75 a square foot a month.

A broker's sign advertising "Commercial Space for Lease" remained in front of the Civic Arts building Monday. A person who answered the phone of the broker, Penner Homes of Hercules, last week promised to call back with more information but never did. Several other calls to Penner were not returned. Sala and a representative, Glen Cole, did not return several calls.

New fight in restaurant's opening --

April 14, 2009 -- Residents of the Hercules Historic Homes have given up trying to keep a restaurant from opening at the adjacent city-owned Civic Arts building.

Now they are talking with representatives of the city and the future Sala Thai Restaurant to resolve some concerns about noise, traffic and light, ending a yearlong struggle that dented some residents' faith in the city's land-use decision-making process.

"We have never been against (Sala Thai owner) Kay Sala opening a restaurant in Hercules," said resident Brian Watson. "In fact, we hope her business will flourish in Hercules. We have felt the Civic Arts building was just not an appropriate place for it, given the proximity to the neighborhood and park."

Sala and an associate, Glen Cole, said they want the restaurant to be a good neighbor and are pleased to be talking with the residents.

In July, residents convinced the Hercules Planning Commission to deny Sala a conditional-use permit at Civic Arts.

Two weeks later, the City Council rezoned the building as part of the Waterfront Now Initiative. Under the new "Historic Town Center" zoning, a restaurant is a permitted use and not subject to Planning Commission approval. The rezoning, accomplished in part by redrawing a boundary with a loop around the Civic Arts building, caught many people by surprise, including the city's planning manager, who said he did not have a copy of the initiative until after the council approved it on July 22.

Waterfront Now started as a ballot initiative sponsored by developer AndersonPacific LLC with general plan and zoning amendments and ratification of a development agreement for more than 1,200 homes and offices, shops, a ferry terminal and train station.

Some residents complained the rezoning of Civic Arts was buried in the initiative and that they should have received separate notice of intent to rezone.

Principals connected to the rezoning have justified it -- in essence, that it reflects what the zoning should have been all along. But no one claims to be the author of the idea.

City officials have said the rezoning was the developer's doing. Yet in August, AndersonPacific's Ethan Sischo said, "When we were updating the Waterfront District Master Plan (for the initiative), we were asked to include the (historic) buildings."

"It came from the city," Sischo said, although he could not say from whom specifically.

Later in August, consultant Tom Koch said it was AndersonPacific President Jim Anderson's decision "in consultation with the people that are part of his team.... to clean up the strained zoning of those properties."

Last month, Anderson told the Times it was his and his planners' decision at the recommendation of Opticos Design.

"It was zoned parkland," Anderson said. "We were trying to make it more consistent."

Opticos, of Berkeley, has worked as the consultant town architect for Hercules since about 2003.

"Essentially, we operate as an extension of the city staff," Opticos principal Stefan Pellegrini said last week.

Opticos joined the AndersonPacific team for the waterfront project. The city, meanwhile, contracted with GL Szabo & Associates to do peer review.

Pellegrini said he believes the rezoning was "not any one individual's decision, but probably a group discussion between all three parties."

Watson, the resident, quipped, "It's the zoning fairy that did it."

Sala signed a tentative lease in February 2008 with the Hercules Redevelopment Agency starting at $3,465 a month, or $1.65 a square foot. The council has the absolute discretion not to ratify the lease, City Attorney Mick Cabral has said. But few if any residents believe that is likely given the city's long involvement with Sala, which goes back at least as far as May 2007, when Sala sought unsuccessfully to rent the city-controlled premises now occupied by the Powder Keg Pub.

Pub secures sublease, rent reduction from city -- June 13, 2009 --

The Hercules City Council this week ratified a sublease for the Powder Keg Pub, 10 months after owners Theresa "Gigi" Reloj and Nicolette Endriga opened for business and a year-and-a-half since they agreed to terms with city administrative officials. The matter had been on the council agenda several times since September, only to be postponed for unspecified technical reasons.

The starting rent of $3,000 a month for the 1,600-square-foot pub comes out to $1.88 a square foot -- exactly half the asking rent of $3.75 a square foot that another restaurateur, Prathumrat "Kay" Sala, balked at six months before the city and Powder Keg came to terms. According to a city staff report, the city rents the Powder Keg locale from a private owner under the same terms as the sublease, which calls for annual rent increases that will bring it to $4,392 a month, or about $2.75 a square foot a month, in the fifth year.

The first eight months were rent-free, City Manager Nelson Oliva told the council.

Explaining the sharp drop in the asking rent in a six-month span, Oliva said last year that he moved on to another prospective tenant and negotiated a lower rate once Sala indicated she was not interested.

The city initially offered the premises to Sala for $3.75 a square foot in late May 2007; Sala counter-offered $2.25 a square foot and later reduced her offer to $1.50 to start, rising to $1.75 the third year and $2.25 the fifth year. In late November 2007, Reloj and Endriga signed the sublease that the council ratified this week, starting at $1.88 a square foot.

Attempts to reach Sala at her Richmond restaurant, Sala Thai, were unsuccessful. She and her team since have rented another Hercules locale -- the city-owned Civic Arts building on a less-busy stretch of Railroad Avenue -- starting at $1.65 a square foot.

Together with the sublease, the council also approved financial assistance of $125,000 to Powder Keg, which will be deducted from the combined principal of $439,356 of two business loans from the agency; they include a $370,000 loan in fiscal 2007-08 for Powder Keg, which opened in August, and the balance of a $75,000 loan in 2006 for another restaurant, Shinsen Sushi, which the owners since have sold. The $125,000 financial assistance brings the principal of the Powder Keg loan down to $314,356.

The $370,000 loan was part of a Business Development Loan program administered by Affordable Housing Solutions Group, a private company under contract to the city.

The Business Development loans normally have a maximum of $75,000, according to the guidelines. AHSG General Manager Walter McKinney said the City Council, sitting as the Redevelopment Agency board, approved the amount of assistance to Powder Keg. The agenda item could not immediately be found; McKinney said he would work on it.

"Basically, the Powder Keg was not merely a normal business loan," McKinney explained in an email. "It was an incubation of a full-service American restaurant that is now a strong benefit to the community, which before its development, did not have one.

"It is also generating much needed sales tax," McKinney continued. "All of this keeps Hercules on the map and continues to develop a sustainable city."