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HomeMy WebLinkAbout1999-05-03 City CouncilCity of Palo Alto City Manager’s Report TO: FROM: DATE: SUBJECT: HONORABLE CITY COUNCIL CITY MANAGER MAY 3, 1999 DEPARTMENT:CITY MANAGER CMR: 191:99 ECONOMIC RESOURCES PLANNING STRATEGY UPDATE This is an information report and no Council action is required. BACKGROUND The Economic Resources Program (ERP) for the City of Palo Alto was initiated in 1992. In November 1993, staff formulated an Economic Resources Plan that was reviewed and approved by the City Council. The key elements of the plan were: Initiate a "’Business Outreach Program" that incorporates promotion of the City of Palo Alto as a business friendly community and provide staff representatives to major business/retail groups. Formalize a City review process for public/private partnerships and establish a regular City forum to promote discussions on economic issues. Assign an expeditor for major development projects; solicit community input on major City policies and work towards improved coordination of City development processes. Institute a business retention program with targeted assistance to major revenue generating areas and uses in the City. Develop a program that would help expedite the City process for those existing businesses desiring to expand within the community and for targeted new businesses wishing to locate in Palo Alto Activelyparticipate in regional economic strategic efforts Consider, on a selective basis, the use of traditional economic development tools utilized across the state and nation to accomplish specific economic goals These strategies represented sound economic development planning, considering the state of the local and regional economy and economic trends in place at the time of the adoption of the plan. CMR:191:99 Page 1 of 10 The purpose of updating the Economic Resources Planning strategy is to develop guiding policies and an implementation plan for business and economic development that will sustain Palo Alto’s economic growth and stability. It has been almost seven years since Council approved the Economic Resources Plan. In the interim, the community and Council have engaged in a multi-year effort to develop consensus on a long-range vision for Palo Alto, which was operationalized into the revised Comprehensive Plan. It was critical to the development of an updated Economic Resources Plan to incorporate the Comprehensive Plan vision. Six goals were identified in the Comprehensive Plan for the City of Palo Alto, which are primary to the Business and Economics Element of the Plan. These goals will serve as guiding principles for the accomplishment of Economic Resources Planning program objectives. These goals are: [] [] A thriving business environment that is compatible with Palo Alto’s residential character and natural environment (Goal B-1) A diverse mix of commercial, retail and professional service businesses (Goal B-2) New businesses that provide needed local services and municipal revenues, contribute to economic vitality, and enhance the City’s physical environment (Goal B-3) City regulations and operating procedures that provide certainty and predictability and help businesses adapt to changing market conditions (Goal B-4) Attractive, vibrant business centers, each with a mix of uses and a distinctive character (Goal B-5) Thriving employment districts at Stanford Research Park, Stanford Medical Center, East Bayshore/San Antonio Road area and Bayshore corridor that complement the City’s business and neighborhood centers (Goal B-6) The Comprehensive Plan goals identify the long range vision; the steps to accomplish this vision are reflected in the strategies set forth in this report. DISCUSSION Goal B-1 envisions a thriving business environment that is compatible with Palo Alto’s character and natural environment. The Economic Resources Plan strategies that address Goal B-1 are: Business and corporate outreach Creation of an Intemet/e-commerce working group, and a study to quantify Internet impacts on the local economy Coordination of joint resident and business meetings Establishment of an "early warning" system for at-risk businesses and economic sectors Business and community outreach efforts focus on issues that emerge as a result of one-to CMR:191:99 Page 2 of 10 one meetings with local businesses and corporations. These visits will be conducted with small businesses that have one or two employees and extend to include the City’s largest corporations. By meeting individually with local companies, ERP staff will be able to understand how regional trends impact local businesses. For example, as local rents have escalated and vacancies have dwindled, the ability of small businesses to remain competitive has been threatened. Rising City residential and commercial property values have had both positive and negative affects. While escalating values have accounted for the highest year to year property tax increases in the past five years (and subsequent revenues to the General Fund), the cost of living in Palo Alto and operating a businessin Palo Alto have similarly increased dramatically. Rental costs in Palo Alto are not characteristic of the rest of the Peninsula or even of the Silicon Valley in general. Higher rents, lower vacancy rates and increases in downtown business rents have been in some cases, as much as 50 percent higher than those in the rest of the region. What does this mean to a small restaurant? Should marketing strategies change? There are other competitiveness issues, such as the impacts of Internet sales on the local economy. While Internet issues are a challenge, they are also an opportunity. If strategies can be set in place to take advantage of trends such as emerging shopping patterns on the Internet, there is a benefit to both the business community and the City. Partnerships to grow these opportunities and develop appropriate strategies must involve both the private and the public sector. The ERP staff will initiate an Intemet/e-commerce working group to identify impacts of the Internet on local businesses, track critical legislation, quantify projected online sales impacts and chart a course to deal with issues as they emerge. One outcome will be the completion of a study to quantify impacts of the Internet on the local economy for use in future economic planning. The input of local neighborhood groups in the development of neighborhood .serving retail centers is critical. Coordination with local neighborhood organizations and sponsoring of joint residential/business forums fosters the creation of neighborhood and business solutions. Recently, in the case of Printer’s, Inc., the coalition of business and community resulted in a "second chance" for a business that was truly at risk. The concept of identifying "businesses at risk" is essential to business outreach and retention. Through the review and analysis of local economic data, such at risk businesses will be identified and acceptable City roles will be developed to address these business sectors. ERP staff plan to develop an "early warning system" for at-risk businesses in the community. Not only are small booksellers and retail stores experiencing a time of change, but electronics firms are experiencing some flattening as a result of the ongoing Asian economic conditions. Goal B-2 identifies the City’s intention to sustain a diverse mix of commercial, retail and professional service businesses. A number of strategies can assist in the accomplishment of this goal. ERP staff will do the following: CMR:191:99 Page 3 of 10 Adopt a business ombudsman role for Economic Resources Planning, facilitating business assistance and coordination with internal City departments Participate in local and regional business organizations Link businesses and neighborhoods with local, regional and state resources Review financing options that include tools like assessment districts and business improvement districts to facilitate neighborhood and shopping center improvements Develop an inventory of long term vacant, unsafe and underutilized buildings and parcels of land ERP acts as a first point of contact for many businesses. Through participation in local and regional business groups, staff interacts daily with the full spectrum of firms who conduct business in the City. As companies locate, expand and relocate throughout the City, ERP staff assists in the development process, connects businesses with important resources and directs individuals to appropriate local, regional and state agencies. These linkages facilitate good relationships and a business climate that supports the local economy. As an ombudsman, ERP staff works with businesses locating and expanding within the City. Local businesses have myriad issues that can be facilitated through linkages with internal departments such as Building, Planning and Public Works. Sometimes City roles are confused with those of County and State agencies. Because ERP staff understands the functions and responsibilities of these departments and agencies, firms can be assisted through direction to and follow-up with appropriate agencies to receive information or mitigate problems. Recently, one Palo Alto company that was having difficulty with health department issues was referred to the Economic Resources Planning program by the Palo Alto Chamber of Commerce. Staff followed up with County inspectors and the local building department and the issues presenting difficulty were mitigated. This business recently completed its expansion with all health and building issues resolved. The City can also offer assistance in identifying financing mechanisms to subsidize enhancements that support business development. Resources, often available on a regional or State level, include Small Business Administration loan programs, technical assistance and incentive programs that provide resources not available locally. As business districts grapple with issues from the need for additional maintenance to parking and traffic flow issues, sources for financing these projects becomes critical. An appropriate role for ERP staff is to coordinate with internal City departments and business groups to identify appropriate methods to finance improvements. These may include assessment districts, business improvement districts or other mechanisms to assist in the accomplishment of shared objectives. Comprehensive Plan Goal B-3 identifies the need to support new businesses that provide needed local services and municipal revenues, contribute to economic vitality and enhance the physical environment. Several strategies will assist in achieving this goal. These are to: CMR:191:99 Page 4 of 10 Develop, maintain and update Economic Resources Planning marketing materials and City web site Identify and analyze economic trends that will guide decision making by policy makers Facilitate public/private partnerships that leverage community resources The City web site is a pro-active tool that effectively promotes the location of desirable businesses to Palo Alto. Currently "under construction," the Doing Business web page will assist companies in obtaining site selection information on Palo Alto, its businesses and residential community. Other data of interest to a prospective business will also be available. Information on the cost of doing business in Palo Alto and pro-business enhancements such as the newly opened Development Center and permit processing improvements will be highlighted. As additional information such as the Internet study (Goal B-l) and retail strategy (Goal B-5) become available, that information will be added, as well. To complement the information available on the Intemet, marketing materials and a brochure will be developed, to be ready for distribution by Summer 1999. These marketing materials will include the updated Economic Resources Plan. Data such as sales tax, property tax, commercial/residential/industrial vacancy rates and transient occupancy tax information will serve as a guide to economic trends within the City. ERP, in conjunction with other City departments, (Administrative Services, Planning) will monitor and review available data, analyze trends and make recommendations to City management on issues of concern and possible strategies to address issues, as appropriate. Whenever possible, both the public and private sector will be engaged to find solutions that leverage resources and provide the most efficient answers to critical situations. For example, the E1 Camino Real is one area that most would agree needs attention. Local developers, architects and interested residents have begun the process of exploring enhanced landscaping on the E1 Camin0 Real. This small working group, meeting since January, has identified issues and developed approaches to for dealing with challenges. ERP staff attends these meetings regularly and provides information when needed. Information includes a matrix of City projects already identified and, in some cases, funded. City departments supplying information include Planning, Community Services and Public Works. By providing this information, unnecessary duplication and inconsistencies will be identified, increasing the probability that the project will meet its goals. This, Combined with the proposed ERP retail study, of which E1 Camino Real will be an element, leverages the work of the private group and provides the City with assistance in the beautification and redevelopment of the E1 Camino Real. Goal B-4 envisions City regulations and operating procedures that provide certainty and predictability and help businesses adapt to changing market conditions. The fulfillment of this goal is important to the well being and profitability of local businesses. Several efforts CMR:191:99 Page 5 of 10 are already under way. Plans to assist these efforts include: Active participation in interdepartmental initiatives and teams which address continuous improvements to the development process Establishment of benchmarks to measure the effectiveness of improvements to the existing development process Facilitation of the coordination between the business community and internal City staff on critical local issues Development of cross departmental teams that address specific objectives Implementation of the Business Cooperation Program The role for Economic Resources Planning in the accomplishment of this goal is primarily as a participant in information sharing and facilitation. By playing an active part in interdepartmental initiatives that support efficiencies in the development process, ERP staff can bring insights from a business perspective. As a part of the team that determines how success is measured, ERP staff can assist in the development of accountability measures that reflect business needs. Facilitating coordination to accomplish issues of mutual concern allows both the business community and City staff to benefit. In issues such as traffic congestion and beautification of commercial strips, ERP staff can play a vital role in being a bridge between business and government. Implementation of a Business Cooperation Program (a program in place in neighboring cities that encourages large firms who pay use tax to directly allocate those taxes to the City where they operate, increasing local revenues) in Winter 1999 will be accomplished, with the cooperation of Administrative Services and the Auditor’s Office. This program, which is most effective when implemented by a cross-departmental team, can add significant revenues to the City’s General Fund. Comprehensive Plan B-5 Goal envisions attractive, vibrant business centers, each with a mix of uses and a distinctive character. Several policies are identified which induce redevelopment. Specifically, the City will encourage owners to upgrade commercial properties through incentives such as reduced parking requirements, credit for on-street parking and increases in allowable floor area. Street corridor improvements are identified as one means to catalyze economic revitalization in selected centers. To facilitate improvements in local centers and business districts, the ERP program will do the following: Develop a citywide, targeted retail strategy Participate in local business and neighborhood organizations Establish working relationships with local property owners, developers and retail center managers CMR:191:99 Page 6 of 10 Explore City participation in business assistance such as fagade improvement programs It is impos~sible to effectively prioritize retail centers and business districts to target for revitalization without first assessing all of the factors that can ensure success. This is the purpose ofa citywide, targeted retail strategy. An initial study of the City’s retail sectors will identify strengths and weaknesses and recommend strategies that will address key local issues. Following a study of the retail sector, an inventory of major older, neighborhood shopping centers and strip malls within the City will be completed. Several of these centers are located on the E1 Camino Real. Based on this information, property owners will be contacted regarding opportunities to create improvements. The goal will be to increase revenues to the City, provide needed neighborhood serving retail and increase pride in the community. Neighborhood associations and local residents play an important part in the revitalization of local business districts. By deciding where they will purchase goods and services, local residents determine the viability of neighborhood centers. In the 1980’s and early 1990’ s, sales shifted from local centers to big box retail and larger regional shopping malls. Customers drove much further to save on purchases. Many local neighborhood and strip shopping center owners allowed their centers to decline as a result of deferred maintenance. This decline resulted in plummeting sales and detrimental changes in the retail mix of centers. ERP staff intends to engage local property and business owners and forge partnerships to revitalize these small centers, business districts and strip malls. The focus of efforts will be increased investment in the centers by local property owners. The City may assist by identifying sources of income to finance redevelopment efforts. Additional technical assistance in marketing, center promotion and best practices will enable centers to reach out to the local neighborhoods who are their customers. If necessary, City staff, a retail consultant or U.S. Small Business Administration expert could provide these services. Goal B-6 is the final Comprehensive Plan goal that relates directly to the agenda for Economic Resources Planning. This goal outlines the City’s desire for thriving employment districts at Stanford Research Park, Stanford Medical. Center, East Bayshore/San Antonio Road area and Bayshore corridor that complement the City’s business and neighborhood centers. Businesses that generate quality jobs are valued in every community. In most cases, cities measure business contributions in dollars and jobs. Sales tax, property tax, utility tax and transient occupancy tax generate important streams of income for municipalities. While these sources of revenue are essential to City operations, the jobs created by local businesses are a critical element of economic vitality as well. Job creation is a traditional measure of a City keeping pace with the economy. Palo Alto benefits from one of the highest jobs-to-employed reside~at ratios in the region. CMR: 191:99 Page 7 of 10 Today it is estimated that there are 2.5 jobs in Palo Alto for every employed resident. This 2.5 to 1 job-to-employed resident ratio is a result of employment centers such as Stanford Research Park, Stanford Medical Center and the East Bayshore and San Antonio/Bayshore Corridor. The jobs created by these firms are among the best in the Bay Area. Thirteen companies generate approximately 35 percent of the jobs in Palo Alto. Alza Corporation Hewlett Packard Company Lockheed Martin Palo Alto Medical Foundation Palo Alto Unified School District Roche Bioscience Space Systems/Loral Stanford University Stanford University Hospital VA Palo Alto Health Care System Varian Associates Watkins Johnson Company While no statistics exist that correlate these jobs to Palo Alto residents, clearly the local community benefits from these jobs in the local economy. Palo Alto employees provide a customer base for local businesses and business-to-business sales tax is generated by the firms located in Palo Alto who purchase products and goods from each other. Several actions are incorporated into the Economic Resources Plan that address Goal B-6, including: Work to enhance relationships and identify opportunities for public/private partnerships between the local community and Stanford University and other employment centers Focus business outreach activities to include companies that have large numbers of employees Work with Stanford Management Company on issues of mutual concern Study measures that will enhance development in the Stanford Research Park and other employment centers Identify issues and establish outreach strategies to focus on the businesses located in the East Bayshore/San Antonio Corridor Encourage targeted commercial investment and activity along E1 Camino Real Stanford Research Park, a crucial component of the City’s research and development and high tech core, is a thriving district that provides jobs and revenues to Palo Alto. To maintain the viability of this area, staff will continue to work with the Stanford Management Company to stay abreast of issues as they develop at the Research Park. Indicators such as sales tax will be monitored and as trends emerge, strategies will be developed to address economic impacts. Currently, ERP staff participates in the bi-monthly Chamber of Commerce Stanford Research Park Committee meetings. In addition, regular meetings are held with representatives of the Stanford Management Company to discuss changes in the Park and implications of changes in the tenant mix. CMR:191:99 Page 8 of 10 Stanford employees are customers of a number of business districts in Palo Alto. The proximity to local restaurants and businesses sometimes results in traffic congestion. While it may not be feasible to build restaurants and service businesses within the Research Park, the exploration of methods of dealing with added traffic during peak lunch hours and during commute hours will be explored. Increased development on the E1 Camino Real, which includes restaurants and services within walking distance, is one solution. Another possibility is the addition of shuttle services during these peak traffic hours. As appropriate, solutions will be explored with Stanford’s commute program and the City’s Transportation Division. Child care, housing and workforce development are other issues that are a part of the ongoing discussions with Stanford Management Company, the Palo Chamber of Commerce and the City. Workforce development and the availability of qualified employees is one topic in which the ERP staff has provided information and assisted in identifying speakers from North Valley Private Industry Council (NOVA) and the State of California Employment Training Panel. Other geographic areas in the City provide fundamental elements of the diverse business mix in Palo Alto. The East Bayshore and San Antonio Road/Bayshore Corridors are areas that are home to a variety of businesses that include start-ups and service businesses. Strategies to coordinate with businesses in this area include: identification of businesses through Dun and Bradstreet data base; coordination of one-on-one and area-wide meetings; and development of an outreach strategy to identify business needs/challenges. Through a thoughtful outreach to these businesses, ERP staff will provide information, opporttmities to identify difficulties and devise plans to "protect" this more affordable area from the encroachment of high rents associated with other areas of Palo Alto. The businesses located in this area are an essential component of the business-to-business interrelationships necessary to support research and development and high tech companies such as those located at Stanford Research Park. E1 Camino Real (as discussed in more detail under Goal B-5 of this report) provides neighborhood-serving retail/service uses to Palo Alto residents and businesses. Reinvestment in this area is of vital importance to the City. Guided by the retail study outlined earlier, targeted development will be sought to complement City goals. Restaurants within walking distance from Stanford Research Park firms and strategic development focussed on neighborhood serving retail redevelopment are two planned outcomes of this effort. The implementation of these key strategies will ensure an integrated, effective approach to Economic Resources Planning. The pieces of the Plan are independent, but the success of the Plan relies on the ongoing interconnection of these elements. CMR: 191:99 Page 9 of 10 RESOURCE IMPACT No additional resources are necessary to implement the Economic Resources Planning strategy. PREPARED BY: Susan Arpan, Manager of Economic Resources Planning CITY MANAGER APPROVAL: HARRISON " Assistant City Manager CMR:191:99 Page 10 of 10