Cupertino's 10-year-old economic development team has simply let the market determine retail use. But with all the flap about too much height and density, the team—comprised of the city council members, members of the Cupertino Chamber of Commerce, City Manager David Knapp and the city's community development and planning department directors—has gained new energy, because residents are pushing it to do what it is supposed to do, develop the city's economy.

"The residents say loud and clear that they want more retail business. It has gone beyond our comfort level to let the market determine itself," says Councilman Richard Lowenthal. "I have to drive to Campbell to buy papers and stationery."

Everyone wants to see retail thrive in Cupertino. After all, 33 percent of the city's general fund comes from sales tax. But different beliefs about how to achieve that goal have created a tug-of-war between those who want to keep the status quo and those who want more growth in the city. Even city council members are torn.

In many ways, the controversial Oaks proposal symbolizes the conundrum the city is facing, which is how to make Cupertino a retail mecca without destroying its rural charm.

When the Oaks opened 35 years ago, it was a high-end strip mall boasting a movie theater, boutique stores and a bookstore. But as businesses closed down one after another, existing retail business owners have become eager to have developer Regis Homes reinvent the shopping center by adding residential units. The developers and the retail business owners say mixed use will create the synergy and foot traffic the center needs.

But even before the plan had its first hearing at the planning commission on Aug. 25 last year, it faced strong opposition. At a later city council meeting, wearing white T-shirts with red letters spelling SAVE OUR CITY, many neighbors of the Oaks and longtime residents swamped the council chambers to protest the project.

This group says more housing will impact the already overcrowded schools and traffic and most important of all, the quality of life. They believe mixed use is not the best solution to revitalizing the Oaks.

Emerging from the fight is a grass-roots group, the Concerned Citizens of Cupertino. Encouraged by residents' fierce objection to the Oaks project, the CCC recently unveiled three initiatives to reduce the height and density and increase the setback of future developments in Cupertino. The group hopes to garner enough signatures to put the initiatives on the November ballot.

The death of the Oaks project illustrates the struggle and indecision even within the city's leadership. Two council members, Lowenthal and Dolly Sandoval, voted for the project to show their support for the center's retail businesses. Two other council members, Kris Wang and Patrick Kwok, voted against it, saying that the Oaks just needs a better management strategy. Mayor Sandy James abstained.

The same conflict has also surfaced in the process of updating the city's General Plan. For the past six months, a city council-appointed task force has met regularly to come up with a draft. After six months of discussions, the task force was divided. The majority of the task force opposes rezoning retail areas into housing, which they believe is urbanizing Cupertino. But 14 out of the task force's 72 members came up with a "minority report," which advocates more development. The city council and the planning commission will review both the "majority report" and "minority report" on March 1.

"The problem is that we haven't decided on what we want," says City Manager David Knapp.

The city's lack of resolution about what it wants has caused many developers to bring their projects to a halt.

The new owners of Vallco Fashion Park are particularly concerned. Their plan to add housing on the east side of Wolfe Road is still on the drawing board because they need to have 55 units per acre to have a financially viable mixed-use project, but the CCC's density initiative only allows 30 units per acre in that area.

While three movie theater groups are competing to move into the third floor of Vallco, all of them are waiting to see if the initiatives will win enough support and how the city council will respond to the vocal CCC. If the initiatives are passed, the theater groups are likely to withdraw their plans, according to Mike Rhode, general manager of Vallco.

City Councilman Lowenthal says, "All the years, our residents have been crying for a bookstore, a movie theater and a stationery store. All of these may not happen if the initiatives are passed."

"Retail businesses provide the services residents need. It is about quality of life, too," he adds.

Senior planner Ciddy Wordell says the three initiatives won't affect Vallco as long as the owners' plan conforms to the old General Plan. But the density of the housing might be a concern because it isn't in the redevelopment agreement.

As the city council is going to make many tough decisions about the General Plan and Vallco and developments like the Oaks, Mayor Sandy James says it is important to enable the council to see the whole picture and listen from different perspectives.

James held a study session on Feb. 3 to educate the council about retail business. Council members, directors of the city's community development and planning departments and new owners of Vallco attended the meeting to hear from retail specialists Mike Bruner and Randol Mackley.

The topic of Mackley's presentation that day addressed the council's biggest question: "How does Cupertino, as a city, position its retail inventory to be competitive relative to other shopping centers and project an aesthetic that represents the community for the next decade?"

Self-knowledge is the first step to success, he says.

"Cupertino is not a tourist destination, not a historical, scenic or amusement attraction," says Mackley of Retail Real Estate Group. "Cupertino is a high-income community, a core location for the high-tech industry and an example of the American melting pot with a significant Asian community."

A random demographic survey of a 2-mile ring in Cupertino tells the story. The estimated average household income is $134,628. More than 30 percent of residents have a bachelor's degree and about 18 percent of residents have a master's degree.

Although the city has no control over market forces, there is much the city can do to make Cupertino retail-friendly. Mackley suggests the city develop enduring design standards, focus on quality and build entry gateways. He also suggests the city solicit market input from retailers and experts. He says the city needs to have a coordinator to streamline resources and reach out to retailers.

Mackley says Cupertino has a great potential to become a big regional retail center once Vallco becomes viable again.

"Although it faces competition from Stanford Shopping Center and Valley Fair, Vallco has a great opportunity to reinvent itself," Mackley says. "It is a diamond in the rough."

Mackley says mixed use will be a trend and might work at Vallco if it is executed carefully.

During the past few years, mixed use has been popular among professional planners and in states like California where commercial property is overbuilt and there is a strong demand for more housing. In Cupertino, the market is driving toward more mixed-use projects because people want to move into Cupertino for its excellent schools, says City Manager Knapp.

Throughout the city, mixed-use, also known as smart-growth projects are popping up like mushrooms.

Menlo Equities will construct a 107-unit condominium and 6,500 square feet of new retail space at Stevens Creek Boulevard and Wolfe Road. At the northeast corner of Stevens Creek Boulevard and Blaney Avenue, Travigne Pin Brothers demolished the 19,100-square-foot P.J. Mulligan's Shopping Center and built 46 condominiums and an 11,300-square-foot commercial/office building. Several mixed-use projects are gradually finding their way into such old neighborhoods as Monta Vista.

Although mixed use seems to be a good solution for the city's retail and housing needs, Community Development Director Steve Piasecki says the success of mixed use is very site-specific.

Planning Commissioner Gilbert Wong says the Menlo Equities' project won overwhelming approval because it's not adjacent to any immediate neighborhood. "It is well designed and provides housing diversity," Wong says.

A consistent debate over mixed use and any housing development in Cupertino is about whether the city needs more housing.

"We don't want to replace too much retail space with residential units," says Jody Hansen, chief executive officer of the Chamber. "Once you take down the retail space, you have to wait for another 50 years for them to come back. The city should look at the tradeoff and how much potential sales tax revenue they are going to give up."

More housing also means more students coming to schools. While the Cupertino Union School District says it can accommodate more students, the Fremont Union High School District has reached its full capacity.

"People move to Cupertino for its schools, but the developments the city approved will affect our schools and property values," says Malka Nagel, member of the Concerned Citizens of Cupertino. "We need to preserve what makes Cupertino special."

City Manager Knapp says there is no easy answer to the conundrum the city is facing. "The need for more housing, the need for better schools and the need for retail are all competing goods," Knapp says. "The city is experiencing a major change. The community as a whole has to decide what it wants."