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In October 2000, the Santa Cruz City Council voted unanimously to adopt an ordinance requiring new retail stores over 16,000 square feet to obtain a special permit. Only stores that add to a balanced and diverse mix of downtown businesses are allowed.

"The continued establishment of large square footage retail businesses in the Downtown, if not monitored and regulated, may frustrate the Downtown Recover Plan goal of establishing and maintaining a diverse retail base with a 'unique retailing personality,'" the ordinance states.

Specifically, a new store must demonstrate that it 1) adds a desired type of business, 2) contributes to an "appropriate balance of local or non-local businesses," and 3) contributes to an "appropriate balance of small, medium and large-sized businesses." In addition to enhancing the overall diversity of the downtown business district, the new store must be a "good neighbor" and contribute to community life by becoming a member of a business or neighborhood organization, hiring local residents whenever possible, and participating in festivals and other events.

The ordinance favors maintaining the community's authenticity and unique retail character, and presumes local businesses are more likely to accomplish this. Other guidelines for granting permits include reducing the amount of profit that leaks out of the city and encouraging local investment and employment in the downtown.

The full text of law can be found here.