The Santa Barbara Planning Commission on Thursday approved a proposal to replace a Montecito gas station with a mixed-use condominium complex, but with one caveat.

The project at 1298 Coast Village Road calls for building eight market-rate condo units at the site of the Olive Mill 76 Service Center, in a strip of Montecito that falls under the jurisdiction of the city of Santa Barbara.

In a 3-1 decision, with chairman George Myers voting against it, the Planning Commission said the project can move forward, except for the plan to put an emergency stairwell on the eastern portion of the building, facing Olive Mill Road. (The three other commissioners recused themselves because of their connections with the developer, longtime local businessman named John Price.)

Price must iron out the details surrounding the stairwell with the Architectural Board of Reivew.

The stairwell — one of several zoning ordinance exemptions sought by Price — juts nine feet into the mandatory 10-foot setback required by the code.

However, the most controversial request for an exemption squeaked through. This was the one asking the commission to disregard how zoning rules call for a 17-foot buffer between the proposed project and a residential property to the north. Under Price’s proposal, the new building will come within 10 feet of the neighbor’s garage.

In a straw vote Thursday, the commission deadlocked 2-2 on a motion to deny that particular request. Because it was a tie, the motion failed.

Of the four commissioners, only one — Stella Larson — supported every aspect of the project as proposed.

Larson rejected the argument, posed last week by John Wallace, the owner of the neighboring property, that the new condo project is an invasion of his family’s privacy.

“All over town we can wave at our neighbors from our backyard and windows, and I don’t have a problem with that,” she said. “Not seeing your neighbor isn’t necessarily a good thing.”

Myers voted against the project because he wanted to place even more restrictions on the eastern side of the building, which he believed to be too massive.

“I, contrary to popular sentiment, would favor a four-story project on the western side,” he said, noting that the 35-foot project falls 10 feet below the area’s height limits.

Thursday’s meeting was a continuation from last week. Previously, in front of a spillover crowd of about 150 people, the same four commissioners listened to about three hours of testimony, which was divided about evenly for and against the project. The commissioners said they needed a week to digest the arguments.

Opponents delivered a slew of arguments against the project, which, because of its location at the east end of Coast Village Road, is considered a gateway entrance to Montecito. In short, they said the three-story building is too big for the half-acre lot on which it would sit. Among other things, they charged that the project would tax the district’s already low water supply, block mountain views, clog traffic and set a precedent for bigger buildings on Coast Village Road. They also asserted the building would create a canyon-like effect, because it is across the street from what is currently the largest building on the block — the three-story Montecito Inn.

Proponents noted that the proposed 35-foot building — whose tower would reach 40 feet — falls well under the area’s 45-foot height limit. They also said it would bring three much-needed parking spaces to Coast Village Road.

They also said the project was preferable to the alternative, which is to build a bigger gas station on the property. Price, who is primarily in the business of building gas stations, has said making the current Union 76 station profitable would require doubling the hours of operation to 24, and a six-fold increase of the amount of gas pumped from there daily. The property’s current zoning allows that type of a gas station.

The three Planning Commissioners who recused themselves Thursday were Bruce Bartlett, Charmaine Curtis Jacobs and Harwood White.

White works as a land-use consultant for Price, and Bartlett is an architect for a property Price owns in Goleta. As for Jacobs, Price is a client of the law firm of her husband, Brownstein Hyatt Farber Schreck LLP.

— Noozhawk staff writer Rob Kuznia can be reached at