Project at Farmers Market Endorsed : Development: A city planner rules that the scaled-down version can go ahead despite potentially negative effects. It would include two department stores and senior housing.

A Los Angeles City Planning Department official ruled Tuesday that the developers of a proposed shopping center at the Farmers Market can go ahead with a scaled-down version of their project despite a potentially negative impact, including increased smog and traffic.

The action endorsed a recommendation by City Councilman John Ferraro, who said last month that the developer’s original proposal to build three department stores and a hotel as part of a 2-million-square-foot development should be cut to no more than 700,000 square feet.

As approved by hearing officer John Parker, the project at the corner of 3rd Street and Fairfax Avenue would include two department stores, 150 senior housing units and movie houses with room for up to 2,000 spectators.

The existing Farmers Market, where shoppers have browsed for fruits, vegetables and souvenirs since 1934, would remain virtually unchanged.

But it was not immediately clear whether the developers, the A.F. Gilmore Co. and its Chicago-based partner, JMB Urban Investment and Development Co., would go ahead with the project.

When Ferraro first made his proposal, spokesmen for the partnership called its proposal a drastic reduction, but they declined to say whether they would go along with it until they had a chance to study Parker’s decision.

They were not immediately available to comment on the ruling when it was issued Tuesday afternoon. Any appeal must by filed by Nov. 26.

The issue would then leave the hands of the city planning bureaucracy and go up for consideration by the politically appointed members of the Los Angeles City Planning Commission. It will eventually go to the City Council, where Ferraro, who not only represents the area but wields considerable political clout as president of the 15-member council, is expected to prevail.

“Basically it looks like what we wanted,” said Renee Weitzer, Ferraro’s aide.

In his ruling, Parker found that traffic congestion would be aggravated at seven of 17 nearby intersections if the project goes ahead in the already chronically clogged Fairfax District.

The project’s impact would be mitigated by measures including the widening of Fairfax Avenue, installation of new traffic signals and the creation of a private street to help circulation inside the 31-acre site, one of the last underdeveloped parcels of land on the Westside.

Automobile emissions would also contribute to smog in the long run, Parker said, but countermeasures, including a requirement to look for workers who live within a five-mile radius, would help deal with the problem, he said.

Despite the potentially negative impacts, he said overriding considerations justify the project.