Vacant storefront rules changed, fees waived for 20 new businesses, $76,000 window grants

In plain English

The council would take the first vote on changes to the city's "Vibrancy Ordinance" (Municipal Code Chapter 5.84), the rules for empty ground-floor storefronts that began as a Pacific Avenue pilot in June 2025. The changes would expand the rules in stages — full enforcement across the Downtown Plan Area starting January 1, 2027, with maintenance standards and optional window coverings citywide, and full citywide enforcement on January 1, 2028 only after a council review in Fall 2027. The council would also raise the annual registration fee for storefronts vacant two years or more from $1,621.89 to $4,000 (adjusted each January 1 by inflation starting in 2028), waive up to $14,000 each in planning and building permit fees for the next 20 new businesses citywide, and move $76,000 from the Economic Development Trust Fund into a grant program that reimburses up to $2,000 per storefront for window coverings. A yes vote introduces the ordinance for publication, with final adoption at a later meeting.

Owners of long-vacant commercial storefronts would face a higher annual fee, a shorter 90-day deadline to cover downtown windows, and rules applied to each individual storefront rather than each parcel, while new businesses moving into vacant spaces could save up to $14,000 in permit fees.

Key facts

Annual empty storefront registration fee would rise from $1,621.89 to $4,000, below the city's calculated actual administration cost of $5,487.15 per storefront; the fee change takes effect 60 days after adoption.
$76,000 from the Economic Development Trust Fund (Fund 136) would go to the Vacant Storefront Window Covering Pilot Program (PG097), serving about 35 storefronts: 50% of printing/installation up to $1,500 and 100% of design costs up to $500, plus $6,000 for ten new designs.
Permit fee removals would be extended to 20 more qualifying businesses citywide (in addition to the 20 already authorized), capped at $14,000 each; 14 businesses have used the current program.
Staff identified approximately 73 eligible vacant properties citywide; downtown expansion raises monitored storefronts from 19 to 33, and full citywide expansion would add roughly 54 more.
Downtown window coverings would be required within 90 days of vacancy instead of 180 days; the ordinance takes effect 30 days after final adoption or January 1, 2027, whichever is later.

Reasons to support

Staff report the first year worked: of 19 Pacific Avenue storefronts monitored, five joined Downtown Pops! or gave free use of their space, seven had active business or permit activity, and downtown saw 3.2% more total visitors and 2.9% more repeat visits January through September compared with last year.
The permit fee removal has been "especially well received" by incoming businesses, and staff say new tenants in currently vacant spaces generate sales tax and other revenue the city would not collect if the space stayed empty.
Phasing expansion over two years, rather than going citywide at once, lets staff build capacity and gather data before enforcing against roughly 54 additional properties.

Reasons to oppose or change it

Property owners of long-vacant storefronts would see their annual fee more than double, from $1,621.89 to $4,000, with automatic inflation increases every January 1 starting in 2028, on top of maintenance, window covering and local property manager requirements.
Staff estimate the added permit fee removals could cost the General Fund roughly $100,000 to $160,000, and as much as $280,000 if all 20 businesses hit the $14,000 cap.
Even at $4,000, the fee recovers less than the $5,487.15 the city says each registered storefront actually costs to administer, leaving the difference to be covered by other city funds; the window covering grants also draw $76,000 out of the Economic Development Trust Fund.

Official wording

First Reading of Vibrancy Ordinance Amendments Related to Commercial Building Vacancies – Budget Adjustment (ED) LOCATION: District 4 Motion to: 1) Introduce for publication an ordinance amending Chapter 5.84, “Vibrancy Ordinance” of the Santa Cruz Municipal Code; 2) Adopt a resolution to: a) Remove specified Planning and Building fees for the first twenty (20) qualifying new commercial businesses citywide; b) Amend fees and charges associated with registration when required under Municipal Code Chapter 5.84; c) Establish a window covering grant program; and d) Direct staff to update the Citywide Fee Schedule and the Community Development Department Fee Schedule and take related implementing actions; 3) Adopt a resolution amending the FY 2027 budget to appropriate funds, in the amount of $76,000, from the Economic Development Trust Fund (Fund 136) to the Vacant Storefront Window Covering Pilot Program (PG097); and 4) Find that the Council actions are exempt from CEQA pursuant to: CEQA Guidelines Section 15307 (maintenance/enhancement of a natural resource), Section 15308 (maintenance/enhancement of the environment), Section 15301 (existing facility), and Section 15061(b)(3) (common sense exemption).

Official agenda

Summary written by claude-opus-5 from the agenda and the Staff report (agenda packet, pages 500-523). It can contain mistakes. The official documents govern.