To underscore the importance of the housing issue, the council retreat included an overview by Planning Director Hillary Gitelman on staff's proposed Housing Work Plan for 2018 and 2019. The plan, which the council will consider in greater depth Monday, calls for a host of zoning revisions to promote more housing as well as new studies that will pave the way for an expansion of the city's inclusionary-zoning program.

Councilman Adrian Fine noted that housing and traffic solutions are "far and away the things the community is asking for" -- a characterization that no one disputed. Traffic continues to drive local frustrations, as evidenced by annual citizen surveys. Housing is increasingly cited as an area of major concern, particularly when it comes to affordability. The council now has a goal of building about 300 units per year -- roughly triple the number that the city has been permitting in recent years -- to meet the goals of its Comprehensive Plan .

And on the topic of grade separation, the council specified that it wants to select an alternative for redesigning the intersections along the rail corridor this year.

By a 7-0 vote, with councilmen Tom DuBois and Greg Tanaka absent, the council chose four official priorities for 2018: transportation, housing, finance and grade separation. The council also specified that the "finance" priority should include as a special focus the creation of an "infrastructure funding plan" that considers the recent escalation of construction costs .

Palo Alto needs to approve 300 housing units, select a new alignment for the rail corridor and make inroads in fighting traffic and addressing budget challenges before the end of the year, the City Council agreed during its priority-setting retreat Saturday.

Mayor Liz Kniss stressed the urgency of reaching a decision on a potential rail design by the end of the year. She noted that Mountain View and Sunnyvale are now "way ahead of us" in developing plans for grade separations.

Fine said Saturday that while housing and traffic tend to get the most community comments -- the other two priorities on the city’s list are equally critical. On infrastructure, the city is facing a $56 million gap in this funding and is preparing to reassess its priority projects. And on grade separation – the separation of the railway from surface roads -- Palo Alto is vying with Mountain View and Sunnyvale for funding from Measure B, Santa Clara County's 2016 transportation measure.

Fine and Wolbach will also be intimately involved in the grade-separation discussion. Both serve on the new Rail Committee (which also includes council members Greg Scharff and Lydia Kou), where much of the work on adopting a rail alternative will take place.

Kniss, who as mayor has purview over council committees, said the Policy and Services Committee will be altered this year so that it can delve deeper into housing policies. The committee will be chaired this year by Councilman Adrian Fine, lead author of a memo that the council adopted last fall, urging widespread revisions to the zoning code to encourage more housing near jobs and transit.

The meeting drew a crowd of about 50 residents, most of whom gradually filed out over the course of the discussion. Some urged the council to adopt "airplane noise" as a priority. About a dozen held up "No Jet Noise" signs during the early part of the meeting.

"I'm hard-pressed to think there is any more important issue and decision that needs to be made in the next year to three years than how we'll proceed on the grade separation issue," Keene said, pointing to project's massive scale and high cost, as well as to actions that other communities are undertaking that may impact the city's choices.

"If eminent domain is triggered, it's likely the option chosen will be highly disruptive in neighborhoods during construction and the result will turn local roads into thoroughfares and will exacerbate traffic through our neighborhoods," Shen said.

For David Shen, grade separation was a cause of concern. He was one of several who asked the council to remove eminent domain from consideration when designing a new alignment for the rail corridor.

"If we have a crisis in this town it's the crisis of traffic that current residents of the city face every single day," Welch said.

"I hear noise during the day and it disturbs me during work," Liu said. "I hear noise at 2 a.m. and it wakes me up during my deep sleep. It drives me crazy."

Palo Alto council adopts 2018 goals

City looks to choose grade-separation alternative, add 300 housing units this year