Activists in Malibu have been pushing for years to curb the entry of chain stores into their beloved beachside town. Now, an ordinance is making its way to a City Council vote, but it faces a fight from deep-pocketed developers.

City officials last month released a draft ordinance that would restrict chain stores to 50 percent of a shopping center in Malibu’s Civic Center area, the city’s commercial and civic core. It would also limit any new chain stores in the area to 2,500 square feet. Groceries, banks and gas stations would be excluded.

The ordinance, which defines chains as “formula retail” operations with six or more locations in Southern California, is set to go before the Planning Commission and the City Council in coming months.

The release of the draft comes almost a year after city officials voted to pursue the limits and is a major step for the city’s vocal group of preservationists. After the closures of several local businesses, they are hailing the ordinance as a way to preserve the character of the city and protect local merchants.

“There’s such a preponderance of companies with large bankrolls and luxury high-end retailers coming in that’s kind of choking the marketplace for more independent retailers,” said Diana Mullen, a member of resident group Preserve Malibu. “Malibu was never intended to be a high-end shopping destination for the 1 percenters out there.”

But developers are gearing up for a legal battle. An attorney representing the major Civic Center developers said in a letter to city officials last month that the ordinance was unconstitutional and, further, that an environmental impact report is needed. The ranks of developers opposing the regulations include St. Louis Rams owner Stan Kroenke’s Kroenke Group and L.A. developer Steve Soboroff.

“It’s discriminatory,” said Soboroff, who has a pending retail development in the city. “For the government to start telling retailers who can come and who can’t come, where they go and where they shouldn’t go, has unintended consequences that outweigh any benefits.”

History of tension

The idea of formula retail regulations has been floating around for years in Malibu, where there has long been tension between the city’s 13,000 residents and outside business interests. Former Councilwoman Pamela Conley Ulich, railing against the proliferation of Starbucks and other chain stores, introduced an ordinance limiting their presence throughout the city in 2006 but it never gained traction. In 2009, the issue seemed over when the City Council voted not to put the ordinance on a citywide ballot.

But the idea was revived in 2011 after a new owner’s threats to evict a nursery and flower shop from a shopping center in West Malibu. Hundreds of residents signed petitions and held rallies successfully to save the businesses. They quickly turned that momentum into a reconsideration of a formula retail ordinance.

Last year, the City Council directed administrators to draft an ordinance, kicking off a months-long process of research and legal analysis. The city even polled residents about how they would define a chain store and how many they would tolerate.

“Our City Council is very pro business, but so many people signed petitions and screamed and yelled,” said John Mazza, a city planning commissioner and supporter of the ordinance.

The draft released last month requires all new formula retail businesses in shopping centers of 10,000 square feet or more in the Civic Center area to apply for a conditional use permit. Such a permit will not be granted if the new formula business exceeds 2,500 square feet, or if the shopping center exceeded 50 percent formula retail by square footage or in the number of leasable spaces. The city could also deny a permit if the business is deemed “incompatible with surrounding uses” or found to “impair the city’s unique, small-town community character.”

Existing formula businesses would be grandfathered in, but they would have to reapply if they move or expand by 200 feet or more.

The Civic Center area is home to a majority of Malibu’s shopping centers, the largest of which is the 114,000-square-foot Malibu Colony Plaza, owned by Kroenke Group, followed by the 81,000-square-foot Malibu Country Mart, owned by West L.A.’s Koss Financial Corp.

In recent years, residents have been irked by new high-end chain stores such as Missoni and Lanvin coming to Malibu Village, which was purchased in 2011 by a group led by Matt Khoury of Beverly Hills real estate firm KRE Capital. They have also objected to changes at the Malibu Lumber Yard, which was developed as a retail center in 2009 and purchased for $35.5 million last year by Columbus, Ohio’s Glimcher Realty Trust.

A city survey pegged chain store percentages at Malibu Village and Malibu Lumber Yard at 58 percent and 57 percent, respectively, while a newer study commissioned by the developers put them at 30 and 39 percent, respectively.

Backlash

Owners of the shopping centers and developers have banded together and are raising questions about the legality of the ordinance. Attorneys who reviewed Malibu’s draft regulations for the Business Journal said the ordinance could face challenges, even though formula retail restrictions have become more popular since a 2003 decision by a California Appeals Court upholding an ordinance putting restrictions on formula retail in Coronado.

Many cities that have passed similar regulations, including Solvang and Carmel-by-the-Sea, have been able to argue that they are protecting the city’s welfare by preserving historic character – something Malibu could have a tougher time doing, said Elisa Paster, an attorney at Gilchrist & Rutter PC.

“They don’t have an established old-time business district or historic district they’re trying to preserve, unlike some of the cases that have upheld this,” she said.

Paster also called many of the standards outlined in the draft, such as its definition of a formula business, potentially too vague and arbitrary to survive legal challenges.

The fight could be as much about future development as current tenant mix. Much of the Civic Center area remains undeveloped. A mixed-use development, La Paz, has received entitlements for more than 100,000 square feet of retail. Furthermore, the city plans to build a sewer system for the Civic Center area by 2015, which is expected to usher in a new wave of development that residents worry would dwarf the existing shopping centers.

“The ordinance is really designed in hoping to shape and balance the juggernaut of development that is in the pipeline,” said Preserve Malibu’s Mullen.