The City Council has cleared the way for Orchard Supply Hardware to open at Alameda Towne Centre, denying an appeal from local merchants who said it would take away their business.

The new store will be located at the former Safeway building, which now will be expanded and get new landscaping and other features.

The Planning Board approved the project in July.

But on Tuesday Phillip Jaber of Encinal Hardware and others appealed, saying the board should have included the proposed store's outdoor nursery as part of its floor area, which could have made securing approval more difficult.

They also questioned a city study that found an Orchard store would not hurt Encinal Hardware and other smaller businesses.

"In the abstract, that may even be true," said Rob Ratto of the Park Street Business Association. "But this is not the abstract. This is Pagano's. It's Encinal Hardware. It's Encinal Nursery. It's Thompson's Nursery. And these people have been running these businesses for years and years and years. They are Alameda traditions. Orchard Supply will never be an Alameda tradition."

Resident Arthur Lipow called the new store "a terrible blow to this community."

The council, however, noted that zoning regulations permit the hardware store at the shopping center.

"We are not the property owners," Mayor Beverly Johnson said. "We don't get to pick the tenants."

Councilmember Marie Gilmore pointed out that the appeal was based on the major design review — or the changes that Orchard proposes for the site — and not on the building's use.

If Orchard had opted not to make any changes, it could have moved into the former supermarket without seeking city approval because it falls under a permitted use in the neighborhood, Gilmore said.

Mike Corbitt of Harsch Investment Properties, which owns the shopping center, said he did not think an Orchard store would hurt the smaller businesses.

"When Nob Hill went in (at Bridgeside Center), you did not see Trader Joe's or Safeway or Harsch say, 'That's not fair,' " Corbitt said. "I would contend that (Orchard) would hurt Home Depot in Oakland more than they would hurt Pagano's or Encinal."

The makeover at the former Safeway calls for increasing the building size by 1,500 square feet — it's currently 37,230 square feet — and installing a 35-foot front parapet, as well as new landscaping, benches and bicycle racks outside.

An outdoor garden center will be on the north side of the building.

The effort to bring Orchard to Alameda Towne Centre comes as part of a drive by Harsch to increase the number of "anchor" businesses at the site. Among those already open are Trader Joe's and Borders bookstore.

Councilmember Doug deHaan was the lone vote against the motion by Vice Mayor Lena Tam to deny the appeal, saying he considered Pagano's and the other businesses "anchor" stores in their neighborhoods.

In other business Tuesday, the council held a public hearing on amending the city's Municipal Code to ban Kmart, Wal-Mart or other so-called "super stores" within Alameda.

Currently, no stores here fall under the ordinance, which would ban any store that exceeds 90,000 square feet and has more than 10 percent of floor area devoted to non-taxable merchandise, such as food.

Ironically, the ban would not apply to Alameda Landing — where a developer is negotiating to bring in a Target store — because the site is protected by a development agreement that limits the city's ability to impose zoning regulations.

Reach Peter Hegarty at phegarty@bayareanewsgroup.com or 510-748-1654.