Palo Alto's iconic downtown post office, a fixture on Hamilton Avenue for the past 80 years, will hit the real-estate market by the U.S. Postal Service in May, according to a new report from the city.

As the Palo Alto Weekly first reported in December, the U.S. Postal Service is looking to sell the Birge Clark-designed building at 380 Hamilton Ave. as part of its plan to cut costs and adjust to changing consumer behavior. Representatives from the cash-strapped agency will host a public hearing on the sale at Tuesday night's, Feb. 21, City Council meeting.

But even as it plans to sell the building, the U.S. Postal Service says it's committed to keeping a post office downtown. In the report Steven Turner, Palo Alto's advanced planning manager, notes that the agency has expressed a preference to retain between 3,000 and 3,500 square feet in the existing building.

Another alternative is moving to another location in or near downtown Palo Alto. Diana Alvarado, the agency's property manager, wrote in a Dec. 26 letter to the city that the postal service is looking for a smaller building within the city limits of Palo Alto. It would "house retail services within the 94301 ZIP Code area."

Alvarado attributed the decision to "right size" the downtown operation to economic and consumer trends. The agency is also looking to close more than a thousand post offices across the nation.

"Despite significant cost reductions, the Postal Services continues to experience a net loss," Alvarado wrote. "Economic drivers that generate mail volume continue to reflect the sluggish economy, and changes in customer behavior indicate the ongoing migration of electronic communications."

The Tuesday meeting will be followed by a 15-day comment period to gather input from residents. Turner wrote in the new report that "staff expects USPS to put the site up for sale on a competitive basis on or after May 15, 2012.

While the building's location near City Hall and the business-heavy downtown area should make it an attractive location for office developments, Palo Alto officials are also considering the site for public uses. At the council's Jan. 21 strategic retreat, Councilman Larry Klein asked staff to consider the possibility of using the 20,000-square-foot facility for the city's new public-safety building. Councilman Pat Burt had earlier proposed the idea of purchasing the building and turning it into the Development Center. The city currently leases space across the street from City Hall for its permitting operation.

The site's zoning designation should work in the city's advantage. The site is zoned "Public Facilities," which means permitted uses are limited to "government, public utility, educational, community service or recreational facilities." According to a fact sheet released by the city this week, the site can also accommodate "conditional uses" such as administrative offices for nonprofit organizations, recreational uses and day care centers.

The building is also listed on the National Register of Historic Places, which greatly limits a potential developers' ability to make major modifications. According to Turner's report, Alvarado indicated to staff that because of the building's historic status it would not be demolished.

The downtown post office is believed to be the first in the nation to be designed and built specifically for post-office use. A prominent local example of the Spanish Colonial Revival style, it features arcades, a stucco exterior and a red-tiled roof.

Postal Service spokesman James Wigdel had previously told the Weekly that he expects the sale of the building to take several months. In a statement earlier this month, Wigdel stressed that the Hamilton station "is not closing or being discontinued, it is simply relocating to another space that will represent a right-sizing to current standards of space and operations."

"All operations from the existing Hamilton Station, including P.O. Boxes, will be housed in the replacement facility," the statement said.