HomeMy WebLinkAboutStaff Report 303-08City of Palo Alto
City Manager’s Report
TO:HONORABLE CITY COUNCIL
FROM:
DATE:
SUBJECT:
CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
JULY 14, 2008 CMR: 303:08
REVIEW OF PROCESS FOR QUANTIFYING POTENTIAL FISCAL
IMPACTS OF THE STANFORD UNIVERSITY MEDICAL CENTER AND
STANFORD SHOPPING CENTER PROJECTS
RECOMMENDATION
The purpose of the study session is to provide the City Council with a preliminary overview of
the process for quantifying the potential fiscal impacts of the Stanford University Medical Center
(SUMC) Facilities Renewal and Replacement Project and the Simon Properties - Stanford
Shopping Center (SSC) Expansion Project.
BACKGROUND
Review for this project has been divided into two phases: Phase I (Information Sharing and
Preliminary Area Plan) from December 2006 through July 2007 and Phase II (EIR and
Entitlements) from July 2007 through the end of 2008, culminating with certification of the EIR
and the City’s decisions on the applications. A single EIR is being prepared for both the SUMC
and SSC. The Draft EIR is tentatively scheduled to be released in Fall 2008.
Development applications were submitted in August 2007. There are five (5) main components
to the SUMC project:
2.
3.
4.
5.
Hoover medical office building reuse and expansion;
Lucile Packard Children’s Hospital (LPCH) expansion;
Stanford Hospital and Clinics (SHC) replacement and reconstruction;"
Medical School building reconstruction; and
Redevelopment of existing hospital site.
Simon Properties is proposing to expand the Stanford Shopping Center by adding 240,000 square
feet of new retail stores and restaurants, a new 120 room hotel and parking for a net addition of
1,234 vehicles.
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DISCUSSION
The purpose of this meeting is to provide a preliminary overview of the potential fiscal benefits
and impacts of the two projects. Separate from the EIR, a contractor for the project applicants
will produce an initial fiscal impact analysis and the City will then conduct a peer review report
of.that, analysis. These reports and the scope of analysis are described in more detail below.
Potential Fiscal Benefits and Impacts:
Revenue Benefits
The Stanford University Medical Center and Stanford Shopping Center are key economic
engines that provide a significant source of Utility and General Fund revenues for the City. They
attract visitors to Palo Alto as centers of shopping and world class health and medical care. As
some of the largest employers in Palo Alto, these two sites directly and indirectly generate
revenues that support City services, such as police, fire, library, and recreation and community
services.
The Stanford Shopping Center, as a single entity and geographical area, is the largest sales tax
generator in the City of Palo Alto. In analyzing the potential impact of the Shopping Center
expansion, it should be noted that expansion and enhancement of the Shopping Center’s ability
to compete with other regional centers will be critical in order to avoid a decrease in retail sales
over time. Currently, the Shopping Center sales taxes approximate $5.7 million or nearly 27
percent of the City’s annual sales tax revenues, comprising 4 percent of the City’s total revenue
base. A decline in this source would have a significant impact on the City’s ability to provide
services in future years.
On-going potential positive fiscal benefits of the projects include increased sales, property, and
transient occupancy taxes (TOT). These revenues flow into the General Fund and can be used for
a variety of municipal purposes. Payment of one-time fees such as building permits, connection
fees and development impact fees will be another source of revenue and will offset the impacts
to the city for direct costs of services. Each key revenue source is discussed below:
1. Sales Tax
Sales tax revenues will potentially increase from several sources, including expansion of the
Shopping Center through the direct payment of point-of-sale taxes and, with Stanford’s close
cooperation and consistent support, through the collection of a Sales and Use Tax for equipment,
supplies and construction materials for both the SUMC and SSC projects.
Stanford Shopping Center - The proposed 240,000 square foot expansion of the Stanford
Shopping Center will generate increased sales tax collections. Based on estimates of
projected taxable sales by CBRE Consulting, the firm under contract with Stanford
University and Simon Property Group to conduct a fiscal analysis, the shopping center
expansion is projected to produce a $1.6 million increase in annual sales tax.
Stanford University Medical Center - To ensure that taxes from other taxable sales (e.g.,
the purchase of out-of-state equipment and materials) are received locally, the City has
requested that Stanford alter its sales or use tax permits, as well as those of its
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construction contractors, to designate Palo Alto as the point-of-sale for such purchases.
Staff has approached Stanford on this effort in the past two years, but the SUMC
representatives have not responded to date. An estimate of this revenue source can be
provided once the hospitals provide potential purchasing information and agree to the
point-of-sale designation.
2. Property Taxes
e Stanford Shopping Center - The expansion at the shopping center is projected to produce
an increase of $0.7 million in property taxes annually based on an estimate produced by
CBRE Consulting. The estimate is based on the net improvement value of the project
and includes related motor vehicle in-lieu property tax revenues.
Stanford University Medical Center - Increases in property tax revenues would occur
based on the change in assessed value of any taxable properties, e.g., medical practitioner
offices that are located within the City boundaries of Palo Alto. An estimate of the
potential revenues will be determined in the fiscal study. The city is also exploring
options for an "in-lieu" property tax applied to the tax-exempt development on the
SUMC site, to be discussed in Development Agreement negotiations.
3. Transient Occupancy Tax
The proposed construction of a new 120-room boutique hotel as part of the proposed Shopping
Center expansion would generate a significant increase in Transient Occupancy Taxes (TOT) as
well as taxable sales from its restaurant and catering facility. Based on PKF Consulting’s
October 2007 market study, CBRE Consulting estimates that a new hotel will generate $1.1
million annually. Staff has commissioned a hotel study to evaluate the feasibility of increasing
the size of the hotel and assuring that its location maximizes revenue potential to Simon and the
City.
4. Utility Users Taxes
Staff expects that the expansion projects will generate additional .Utility User Taxesl
estimates for each project will be developed in the fiscal impact study.
Detailed
5. Development Impact Fees and Building Permits
In addition to the revenues listed above, there are also one-time fees that will accrue to the City
from the proposed Shopping Center expansion. These include Building Permit Fees of
approximately $760,000 and Development Impact Fees of approximately $6.6 million for the
project as proposed. The citywide Traffic Impact Fee could result in estimated fees from the
proposed projects of approximately $2.2 million total, based on present l~lans. Only the
shopping center and a portion of the medical center site are subject to housing impact fees under
the City’s current fee structure.
Revenue Summary
Based upon the preliminary analysis, the Shopping Center expansion project could generate
approximately $3 million annually in new General Fund Revenues and approximately $12.3
million when one-time fee and permit revenues are included. This revenue would offset some of
the potential fiscal impacts of the projects. These numbers do not include all of the potential
revenue streams due to the limitations identified above.
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The table below summarizes the ongoing revenues for the Stanford Shopping Center Expansion
as estimated by CBRE Consulting:
Revenue
Estimated
Annual Revenue
with Buildout
(est. 2015)
Sales Tax
TOT
UUT
Motor Vehicle In-Lieu Property Tax
Property Tax
$1,634,324
1,106,914
TBD
49,762
205,842
Sub Total $2,996,842
Notes:
Source: CBRE Consulting
All revenue estimates are pending City peer review.
Revenue estimates for the Stanford University Medical Center are being developed as part of the
fiscal impact analysis.
Expenses
Potential expenses encompass costs related primarily to public safety, recreation and community
facilities, and utilities and public works. Impacts on these services may occur either directly
through construction of the hospitals, clinics, and shopping center, or indirectly from new
employees or from housing to support those employees.
1. Public Safety
As increased employment brings more people to Palo Alto, the demand for public safety services
(police and fire) will increase. The impacts on public safety will be reflected in an increase in
calls for police, fire and emergency services. Increased instances of crime, medical and other
emergency incidents will require mitigating steps to ensure that public safety response is not
compromised. These impacts will be addressed in the EIR and in the fiscal impact analysis. The
work to define the fiscal component of these impacts is currently in the preliminary stages.
2. Recreation and Community Facilities
The definition of impacts on recreation and community services, particularly parks, libraries and
community centers, will also be analyzed in both the EIR and in the fiscal impact analysis. Steps
to mitigate these impacts will include the payment of fees, such as community facility impact
fees.
3. Utilities and Public Works
The definition of impacts on utilities and public works, including streets, water, sewer,
electricity, gas, and storm water, will also be analyzed in both the EIR and in the fiscal impact
CMR: 303:08 Page 4 of 9
analysis. Steps to mitigate these impacts will include the payment of fees, such as utility
connection fees and transportation impact fees.
4. Housing and School Impacts
Another area of fiscal impacts includes areas that are more indirect: housing and school impacts.
The increased employment generated from the project will create increased housing demand,
including affordable housing. While a City is not legally required to provide affordable housing
for an employment project, staff believes that the affordable housing need generated by projects
of this size should be addressed through the EIR and Development Agreements. Likewise, while
the City is a separate entity from the school district, both the City and Stanford have historically
worked with the school district to identify school impacts caused by large developments.
Summary of Process for Reviewing Fiscal Impacts:
There will be three key reports that focus on the fiscal aspects of the projects. These reports
include the fiscal impact analysis, the peer review of the fiscal impact analysis, and a hotel study.
The fiscal impact report will be separate from the EIR, but relevant data from the fiscal report
will be incorporated into the EIR analysis. All reports are tentatively scheduled to be released in
the Fall 2008.
Applicant’s Preliminar7 Fiscal Impact Analysis
A preliminary fiscal impact analysis, including a study of potential market area retail sales
impacts ("urban decay study"), is being prepared by CBRE Consulting under contract with
Stanford University and Simon Property Group.
The fiscal impact analysis will be based on a compilation of key project parameters and
assumptions such as fiscal year financial data, employment estimates associated with the mall
expansion, sales projections, property tax pursuant to ground leases, construction cost estimates,
hotel occupancy and room rates, City of Palo Alto population and employment base data, and
utility costs.
The City of Palo Alto budget will be reviewed and relevant revenue sources identified for
inclusion in the study along with procedures for estimating revenues and costs. The key revenue
sources will include sales tax, transient occupancy tax, new retail employee spending, utility
users’ tax, franchise fees and other taxes. The fiscal impact analysis will exclude fee-based one-
time revenues associated with the City’s building and construction program.
As part of the review of the City of Palo Alto budget, expense categories that are impacted by the
project expansions will be identified. The relevant expense categories and estimation
methodology will be reviewed with City staff.
The analysis of revenues and expenses impacted by the expansions will be used by CBRE to
produce the net fiscal impact findings. These findings will look at the net impact on the City’s
General Fund from the planned expansions.
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A detailed update from CBRE on the status and scope of the fiscal impact analysis is attached to
this report (Attachment A). It is expected that this report will be completed in mid-August.
Analysis of Market Area Retail Sales Impacts
A key component of the study is the retail demand and sales leakage analysis, which would
estimate retail sales impacts of the Shopping Center expansion on surrounding retail, including
downtown Palo Alto, Town and Country, and shopping districts in neighboring areas such as
Menlo Park and Mountain View. This analysis is based on a model that uses data on households,
income, and consumer spending patterns, and attempts to determine how much a market area is
or is not capturing the retail spending potential of the resident population. Areas that are not
realizing anticipated spending potential are experiencing "leakage" and areas that capture more
sales than can be generated by the residents are called "attraction categories." The analysis will
estimate expected growth in retail demand over the project time period.
CBRE will define the market areas appropriate for analysis of the mall expansion focusing first
on the primary market area and then secondary market areas that emerge from research. The
primary market area is the area from which the majority of demand for the new mall tenants is
expected to originate. The definition of the primary market area will include population
estimates using generally accepted government resources in coordination with City of Palo Alto
staff.
The fiscal impact analysis will also consider the cumulative impacts of the Stanford Shopping
Center project in relation to other new development projects that are known or are planned in the
market area of the project.
Ultimately, CBRE will provide a determination that will conclude whether or not a negative
economic impact will occur as a result of the development leading to the closure of stores or
retail properties remaining vacant in other geographic areas for an extended period. Such a
determination will have taken into account the perspectives of commercial brokers active in the
area on the potential for leasing and retailing activity in the area.
Cit7 Fiscal Analysis
The City will engage a fiscal consultant to conduct an independent review of the fiscal impact
study prepared by CBRE and provide additional fiscal analysis. This work will review and
validate all key assumptions and conclusions. Note that the City had retained Bay Area
Economics (BAE) to perform this independent review, but BAE recently resigned due to a
potential conflict. The City accepted BAE’s resignation and now staff is in the process of
selecting a new fiscal consultant that will report to and be directed by the City.
The City’s Independent consultant will complete the following tasks as part of its review of the
CBRE analysis and other analysis:
Peer Review of Fiscal Impact Study
o Review soundness and appropriateness of methodologies used by CBRE
¯Review assumptions used for revenue estimates
¯Review assumptions used for municipal services cost estimates
CMR: 303:08 Page 6 of 9
Review urban decay study prepared by CBRE
Review appropriateness of all findings and mitigation recommendations (if
applicable)
Additional Fiscal Analysis
¯Analyze the impact of increased housing demand caused by the project
¯Assess the fiscal impacts to schools caused by the projects
¯Assess the opportunity cost of the projects on the non-residential development cap
identified in Policy Number L-8 of the Palo Alto Comprehensive Plan (if applicable)
As part of the analysis of the fiscal impacts of the project, the’City will review the property tax
status of the projects before and after development. The City will ensure that it has taken into
account any possible shift in property tax as a result of the change in status of individual assessed
properties within the project area.
Hotel Study
The City will be conducting an independent review of the hotel study produced by PKF
Consulting (on behalf of Simon Property Group). In addition, the City will prepare an
independent study of the hotel demand. This independent study will determine the demand for
additional hotel rooms in the Palo Alto area that serve Stanford University, its Medical Center,
and Stanford Shopping Center. The study will consider the types of hotels that could possibly
serve the area along with the potential revenues such hotels could generate. The report will be
available with the release of the fiscal impact reports.
Housing Analysis
A housing analysis has been prepared for the City by Keyser Marston Associates (KMA) to
identify potential housing needs generated by the new employment anticipated by the projects.
The analysis further includes identification of the need for affordable housing for lower income
workers at the projects. The study will form the basis for development agreement negotiations
and has implications regarding the secondary impacts of housing on public services. The
housing analysis report will be provided to the Council shortly and a study session with the
Council to discuss housing issues will be scheduled for September or October.
PLANNING AND TRANSPORTATION COMMISSION REVIEW
On June 25, 2008, the Planning and Transportation Commission (PTC) heard an overview of the
potential fiscal impacts of the projects and the process for preparing the fiscal study. The
Commission provided extensive comments on the fiscal impact analysis and other fiscal studies.
The minutes from the meeting are contained in Attachment B. Staff will incorporate many of the
PTC comments into the fiscal analysis, but others may relate to the EIR or Development
Agreements, and some suggestions may not be feasible within the scope of the analysis.
NEXT STEPS
In addition to the housing study session, ongoing study sessions and preliminary review of
design guidelines and separate components for both projects are scheduled with ARB in the July
through September timeframe. The fiscal impact analysis will be provided near the release of the
EIR, in late 2008, with adequate time for each report to be reviewed.
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ENVIRONMENTAL REVIEW
An EIR is under preparation for both projects. No discretionary action is requested at this time.
PREPARED BY:
DAVID RAMBEI~G v
Assistant Director, Administrative Services
DEPARTMENT HEAD:
Director, Administrative Services
DEPARTMENT HEAD:
CURTIS WILLIAMS
Interim Director of Planning
Environment
and Community and
CITY MANAGER APPROVAL:
STEVE
Deputy City Managers
MORARIU
ATTACHMENTS
Attachment A- CBRE Consulting memorandum providing an update on the fiscal impact
analysis.
Attachment B - June 25, 2008 Planning and Transportation Commission minutes and answers to
Planning and Transportation Commission questions
COURTESY COPIES
Cara Silver, Senior Assi~stant City Attorney
Dan Doporto, Special Counsel
F. Gale Connor, Special Counsel
William T. Phillips, Stanford Management Company
Jean McCown, Stanford University Government/Community Relations
Charles Carter, Stanford University Planning Office
Catherine Palter, Stanford University Planning Office
Mark Tortorich, Stanford University Medical Center
Barbara Schussman, Bingham McCutchen
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Art Spellmeyer, Simon Property Group
John Benvenuto, Simon Property Group
Anna Shimko, Cassidy, Shimko, Dawson, Kawakami
Bruce Fukuji, Fukuji Planning & Design
Trixie Martelino, PBS&J
CMR: 303:08 Page 9 of 9
CBRE CONSULTING, INC.
ATTACHMENT A
MEMORANDUM
ECB RICNARD ELLIS
4 Ernborcodero Cenfer, Suile 700San Francisco, CA 94111
T 415 781 8900
F 415 733 5530
www.cbre.com/consulling
To:
From:
Bill Phillips, Senior Associate Vice President, Stanford University
Amy L. Herman and M~lina Raffin
Date:June 17, 2008
Subject:Stanford University Medical Center Facilities Replacement and Renewal Project and
Stanford Shopping Center Expansion Fiscal Impact Analyses - Status of Work Update
Please find below a summary and update of the fiscal impact analysis of the Stanford University
Medical Center Facilities Replacement and Renewal Project (’SUMC") and Stanford Shopping Center
Expansion and Hotel ("Shopping Center") that CBRE Consulting is currently conducting:
SUMC PARAMETERS/ASSUMPTIONS
1.The data are presented in constant 2008 dollars for the year 2015 (Shopping Center buildout
year and SUMC Phase 1) and the year 2025 (SUMC’s buildout year).
2.Existing and projected employment estimates were provided by PBS&J’s Draft EIR, Chapter 2
"Project Description".
3.Existing and projected patient statistics were provided by PBS&J’s Draft EIR, Chapter 2 "Project
Description".
4.Existing and projected visitorship statistics were provided by PBS&J’s Draft EIR, Chapter 2 "Project
Description".
5.Construction cost estimates for SUMC, excluding the Stanford School of Medicine, have been
provided by Elizabeth Chaney, .Director of Real Estate Planning and Development, Stanford
University Medical Center. Construction costs for the Stanford School of Medicine are to be
provided by Stanford University.
6.Local employee retail expenditures are based upon research conducted by the International
Council of Shopping Centers (ICSC), "Office Worker Retail Spending Patterns 2004". Since
ICSC’s expenditure figures are presented in 2003 dollars, they were inflated to 2008 dollars to
be consistent with the analysis. For 2003 to 2007, inflation was based on the consumer price
index for all urban consumers in the San Francisco-Oakland-San Jose Metropolitan Statistical
Area. For 2007 to 2008, inflation was estimated at 3.0 percent.
7.Regarding patient and visitor retail expenditures, Stanford University provided a summary of
existing and proposed revenue-generating SUMC programs (i.e., cafeteria, gift shop, pharmacy,
and other retail). The Advanced Medicine Center (AMC) pharmacy is owned and operated by
Walgreens.
8.City of Palo Alto and Sphere of Influence (SOl), which includes the Stanford campus, population
base was estimated using data provided by Roland Rivera of the City of Palo A’To Department of
Planning and Community Environment, Department of Finance (DOF), and Association of Bay
Area Governments (ABAG). The population base is estimated for fiscal year 2008-09 to be
consistent with the City of Palo Alto’s "2008-09 Proposed Operating Budget". A draft of the
population base estimate has been provided to the City of Palo Alto for review.
9.City of Palo Alto and SOl employment base was estimated using data from ABAG. The day-time
population was then calculated by adding the population base to half of the employment base.
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10.
11.
12.
This is an industry standard approach. A draft of the employment base estimate has been
provided to the City of Palo Alto for review.
Average hotel room rate (ADR) was estimated based on a list of hotels and motels provided on
the Stanford University Medical Center website and a list of Palo Alto hotels from Smith Travel
Research, a hotel industry data provider.
Regarding hotel occupancy associated with SUMC, Erin Champion, Manager Care-A-Van for
Kids & Housing Departments, Lucile Packard Children’s Hospital provided hotel nights and
number of families for the last two fiscal years. CBRE Consulting will develop an estimation
procedure for hotel occupancy associated with Stanford Hospitals and Clinics.
The City of Palo Alto’s utility user tax rate is applied to electric, gas, and water customer charges
and to telephone usage. Projected SUMC utility usage for electric, gas, and water were provided
by PBS&J. Eric Keniston, Utility Rates Analyst with the City of Palo Alto, provided the relevant
utility rate schedules. With respect to SUMC phone usage, Lambert Viado, Stanford IT Services
(ITS), has informed CBRE Consulting that the local government chooses whether to impose the
telephone utility users’ tax and what rate tax is applied. CBRE Consulting is to contact the
Corporate Tax Department to obtain a list of all Tax Rate Area codes and rates. Diana
Takiguchi and Zach Pozner are in the process of trying to get additional billing information from
ITS.
SUMC GENERAL FUND REVENUES
Sales Tax
CBRE Consulting is in the process of estimating sales tax associated with SUMC construction
Based on construction costs provided by Stanford University.
CBRE Consulting is in the process of estimating sales tax associated with ongoing operations,
including employee and patient and visitor spending. With respect to estimating local sales tax
associated with SUMC spending, CBRE Consulting is reviewing Stanford University’s .annual
report.
Use Tax
3.CBRE Consulting has interviewed the State Board of Equalization (BOE) regarding estimating use
tax revenues associated with SUMC construction. CBRE Consulting is in the process of
determining whether to estimate this source of revenue. Estimates of contracts that may exceed
the $5 million threshold would be needed to estimate this source of revenue.
4.CBRE Consulting has interviewed BOE regarding estimating use tax revenues associated with
ongoing SUMC operations. CBRE Consulting has followed-up with Zach Pozner regarding
working with hospital controllers to provide data on sales and use tax that LPCH and SHC have
paid annually as well as future projection of these taxes based on the projected growth in
inpatient days and outpatient visits after the expansion projects are completed.
5.CBRE Consulting is in the process of scheduling a follow-up phone conversation with Wes
Palmquist, Vice President, Stanford Hospitals and Clinics and Lucile Packard Children’s Hospital
General Services, regarding the potential for a use tax direct payment permit.
Transient Occupancy Tax
6. CBRE Consulting is in the process of estimating transient occupancy tax (TOT) associated with
hospital stays, patient visitations and clinic visitations. The origin of visitors was provided by
PBS&J’s Draft EIR, Chapter 2 "Project Description".
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Utility Users’ Tax
7. CBRE Consulting is in the process of estimating utility users’ tax revenues based on electric, gas,
and water data received from PBS&J and the City of Palo Alto. As noted above, CBRE
Consulting will need additional data from Stanford University and AT&T to estimate such
revenues generated by phone usage.
Franchise Fees
8.Cable franchise fees accrue to the City’s General Fund.CBRE Consulting needs to estimate
cable usage to estimate this source of revenue.
Business License Fee or Tax
9. The City of Palo Alto does not currently have a business license fee or tax.
Other
10. The City of Palo Alto has indicated that it does not expect the "Other Taxes and Fines" category
to increase as a consequence of the SUMC project. Other Taxes and Fines consist of Motor
Vehicle-in-Lieu Fees, Documentary Transfer Taxes, and Fines and Penalties. CBRE Consulting
will determine what is included in Fines and Penalties and whether it is reasonable to estimate
this General Fund revenue for the SUMC project.
11. CBRE Consulting is not estimating fee-based, one-time revenues associated with SUMC
construction such as building permits and other planning and processing fees.
SUMC IMPACT FEES
1.CBRE Consulting has reviewed ordinance section 16.47.030 of the Municipal Code to confirm
that SUMC’s hospital uses are exempt from the City of Palo Alto Affordable Housing Fund
impact fees. CBRE Consulting understands that the Clinic, School of Medicine, and medical
office buildings are not exempt from the affordable housing impact fee and will therefore
estimate them accordingly.
2.CBRE Consulting has estimated community facilities impact fees including parks, community
centers, and libraries, associated with SUMC construction. Per the City of Palo Alto’s request,
CBRE Consulting is in the process of reviewing the "City of Palo Alto, CA - Parks and
Community Facilities Impact Fee Study" to determine how much the General Fund subsidizes
costs associated with parks and community facilities as a result of commercial development.
3.CBRE Consulting has estimated school impact fees associated with SUMC construction. CBRE
Consulting is in the process of reviewing LPCH school-age patient data provided by Stanford
University. Per the City of Palo Alto’s request, CBRE Consulting has attempted to schedule a
phone conversation with Bob Golten of the Palo Alto Unified School District to determine if the
school impact fees compensate the costs associated with school provision.
4.CBRE Consulting has estimated the City Wide Transportation Impact Fee (TIF) associated with
SUMC construction.
SUMC GENERAL FUND COSTS
Per the City of Palo AIto’s request, CBRE Consulting is using the most recent City budget, the City
of Palo Alto’s "2008-09 Proposed Operating Budget". This document provides the data
necessary to estimate additional expenditures associated with SUMC. All cost categories will be
estimated on an average cost approach. In addition, some cost categories such as fire and
police protection will be estimated on a case study approach.
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2.CBRE Consulting is in the process of determining variable cost assumptions by analyzing the City
budget. CBRE Consulting will seek input from City staff regarding those assumptions.
3.CBRE Consulting has met with the Palo Alto Fire Department (PAFD) to discuss data needs.
CBRE Consulting is in the process of reviewing the City of Palo Alto-Stanford University Fire
Protection Agreement (applicable to Stanford lands in unincorporated Santa Clara County and
the Stanford Linear Acceleration Center) and the City of Palo Alto and Menlo Park Automatic Aid
Agreement. PBS&J is in the process of determining if Station 6 needs to be relocated. CBRE
Consulting will complete the fire department analysis for SUMC once the calls for service,
staffing, and potential mitigation cost figures are provided by the PAFD, which is in process.
4.CBRE Consulting has met with the Palo Alto Police Department (PAPD) to discuss data needs.
The PAPD has provided the necessary data regarding calls for service, staffing, and potential
mitigation cost figures. CBRE Consulting is in the process of completing the PAPD analysis for
SUMC.
SUMC CONSTRUCTION-RELATED FISCAL IMPACTS
1. CBRE Consulting is in the process of estimating retail sales tax associated with expenditures
made by construction workers. The construction staffing for SUMC was provided by PBS&J’s
Draft EIR, Chapter 2 "Project Description".
2.CBRE Consulting is to determine whether to estimate retail sales tax associated with SUMC
construction purchases made by project contractors. This decision depends on whether the
contracts pass the criteria established by the California State Board of Equalization.
SUMC OTHER
1. CBRE Consulting is documenting services that SUMC provides to the Palo Alto community,
including subsidizing and sponsoring of local programs.
2.CBRE Consulting is documenting the benefits a prestigious institution such as SUMC brings to its
community.
SHOPPING CENTER-RELATED WORK
With respect to additional work conducted for the fiscal impact analysis of the Shopping Center,
building on the preceding SUMC-related work:
1.CBRE Consulting estimated construction costs and net value for the Shopping Center in order to
estimate property taxes accruing to the City of Palo Alto’s General Fund.
2.CBRE Consulting estimated sales tax associated with the Shopping Center based upon the sales
estimated in the draft "Stanford Shopping Center Expansion Economic Impact/Urban Decay
Analysis". CBRE Consulting expects this study to be available to the City in June 2008.
3.CBRE Consulting has reviewed PKF Consulting’s "Proposed Stanford Shopping Center Hotel -
Phase 1 Market Study," dated October 2007 to estimate TOT revenues accruing to the City’s
General Fund as a result of the proposed hotel.
4.Similarly to SUMC, projected Shopping Center utility usage for electric, gas, and water were
provided by PBS&J. Eric Keniston, Utility Rates Analyst with the City of Palo Alto, also provided
the relevant utility rate schedules. However, for the Shopping Center, there are a multitude of
stores, each with their own utility services. In addition, there are ’master’ meters serving the
overall complex (landscaping, lighting, etc). CBRE Consulting is in the process of researching
industry sources to estimate phone usage for the Shopping Center as a basis for estimating
further utility user tax revenues.
5.Beginning in the 2005-2006 fiscal year, the State reduced the Vehicle License Fees (VLF)
received by cities and offset the reduction by property tax in-lieu of VLF. This offsetting revenue
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CB RICHARD ELLIS
is based on the growth of the real pr.operty assessed value in the City of Palo Alto as a result of
the proposed project. CBRE Consulting has estimated motor vehicle-in-lieu property tax for the
Shopping Center based upon this methodology.
CBRE Consulting is currently estimating impact fees for the Shopping Center.
CBRE Consulting will complete the Palo Alto Fire Department (PAFD) analysis for the Shopping
Center once the calls for service, staffing, and potential mitigation cost figures are provided by
the PAFD, which is in process.
CBRE Consulting has met with the Palo Alto Police Department (PAPD) to discuss data needs.
The PAPD has provided the necessary data regarding calls for s~rvice, staffing, and potential
mitigation cost figures. CBRE Consulting is in the process of completing the PAPD analysis for
the Shopping Center.
N:\]’EAM-SEDWA¥\PROJECTS\2007\1007043 STANFORD\WORKING DOCUMENTS\1007043 JUNE 2008 STATUS OF WORK MEMO02.DOC
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Planning and Transportation Commission
Verbatim Minutes
June 25, 2008
ATTACHMENT B
DRAFT EXCERPT
Stanford University Medical Center and Stanford Shopping Center Expansion Projects:
Study session to discuss preliminary fiscal information.
Mr. Seven Turner, Proiect Manager: Good evening Commissioners. Believe it or not this is our
eighth Planning Commission meeting since the projects were introduced to Council back in
December of 2006. We have done a lot in the past 18 months. In front of the Commission we
have introduced the projects to you, we have discussed the benefits and challenges of each
project, we discussed the Area Plan at two meetings, we had an EIR scoping session, Staff
presented some of our key planning issues and objectives with regard to the projects, and we
have also presented a draft issues/benefits and mitigations list. We have had some good
discussion over those seven meetings.
Throughout those meetings the Commission and the Council have expressed their desire for Staff
to bring forward specific items for discussion that really goes to the heart and the meat of these
projects. We started that to some extent at our last meeting with regard to presenting Staff’s
proposal for Village Concept and we had our Urban Design Peer Reviewer present to the
Commission about how Staff may approach the Village Concept in terms of the alternatives for
the EIR. We wanted to continue that vein of discussion and bring forward to you tonight a very
specific discussion on the status of our fiscal impact study and the progress that we have made
toward completing that study.
We would also like to continue over the next couple of meetings to bring you very specific issue
items for discussion including housing and transportation. We will be setting up meetings for
those discussions as well. For tonight we are focused on the fiscal issues. I would like to
introduce members of the fiscal team who will present the Staff Report and answers questions
that you may have. First we have the Director of Administrative Services, Lalo Perez, in green.
We have Joe Saccio the Deputy Director of Administrative Services here in blue. Presenting the
Staff Report is David Ramberg, Assistant Director of Administrative Services in white. Thank
you.
Mr. David Ramberg, Assistant Director of Administrative Services: Thank you Steven.
Chair Holman: It would be good if you introduced yourself for the record.
Mr. Ramber~: David Ramberg, Assistant Director of Administrative Services. I would like to
point out our role as the fiscal team. I am in the role of leading the fiscal analysis team here at
the City and joined by the Deputy Director, Joe Saccio, and headed up by Lalo Perez, the
Director. One other introduction that I think is appropriate for tonight is we do have the
consultant for Stanford and Simon present, CBRE Consulting is represented by Amy Herman.
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They are responsible for producing the fiscal analysis and the urban decay analysis. They are
present tonight as well.
What we plan to do tonight is provide a brief discussion of the purpose of the study session, give
a little bit of project status update to date, which Steven has already done a little bit of, look at
some of the financial information giving a current economic and financial profile of the Stanford
University Medical Center and the Stanford Shopping Center, look at potential revenue benefits,
talk about some expense impacts, look at some key analysis issues that we are staying focused
on, talk about next steps, and then get into questions.
Before the purpose of the study session, just to put this into context, Steven mentioned a number
of things you have already been reviewing here as part of the EIR over the past year or so.
Today is the fiscal impact analysis discussion and then coming at some point will be the
Development Agreement where community benefits will be discussed. So tonight is looking at
the fiscal impact analysis, which will ultimately be a view of each project once that is brought
forward. We will try to delineate the two as much as we can tonight.
The purpose of the study session is a preliminary overview of the potential economic and fiscal
impacts of the Stanford University Medical Center and the Stanford Shopping Center Expansion
Projects. The status update overall on the project is noting a number of key phase two
accomplishments that have occurred to date. The project applications have been receives and the
Draft EIR of course initiated in August of 2007. Since then there have been three Planning and
Transportation Commission meetings, three City Council meetings, and in 2007 there had been a
number of community issue meetings, and a hotel/hospital peer review report completed,
ongoing architectural review meetings will be continuing. A little bit more detail on the status
update of the fiscal analysis, attached to your Staff Report is a memo from CBRE Consulting
that outlines in detail the steps and the tasks that they have accomplished to date. I won’t go into
those in any detail but it does cover the main points that you see here. There are parameters and
assumptions being looked at, general fund revenues, impact fees, general fund costs, construction
related fiscal impacts, that is a duplicate there of revenue estimates that is already being covered.
Then that final sub-bullet is really going to be an item that is separate of the fiscal analysis. It is
the urban decay study. We are calling it here the impacts on market area business and that will
be a separate item that will be part of CBRE Consulting’s work.
Those above items will be reviewed by the City’s contractor for the peer review process. The
City has contracted with Bay Area Economics to do a peer review of the fiscal impact analysis
work performed by CBRE Consulting. We will also have BAE peer review the urban decay
study. In addition to those work products Bay Area Economics will produce an independent
hotel study for the City as well. That hotel study will look at the demand for hotel in the project
area, provide some options in addition to what has been provided in the hotel study, and they will
also review the hotel study that has already been produced.
Getting a little bit more into the financial information that forms the basis of tonight’s discussion.
I want to start by outlining a little bit of current fiscal and economic profile of the Stanford
University Medical Center and the Stanford Shopping Center. They are obviously very
important to the City of Palo Alto. They are key industry clusters in retail and shopping for the
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shopping center and in healthcare. As key industry clusters they bring lot of visitors to the City
of Palo Alto, they also are employment hubs for the City of Palo Alto, and both of those produce
economic impacts/benefits for the City. On the non-economic side the centers provide access to
the community to a host of services and adds to the community’s vitality. There are other
indirect revenues that are generated by all this activity. There is TOT revenue generated and
sales tax revenue to name a couple. It is also important to note that the projects are driven by
competitive and regulatory forces in their respective marketplaces. These competitive forces
particularly in relation to the Stanford Shopping Center are something that we are very cognizant
of when we start looking at our sales tax figures. The next couple of bullets are some data that
we have to present to you tonight on the current profile particularly on the shopping center. We
are highlighting the sales tax there on the Stanford Shopping Center. It presently brings in about
$5.7 million in sales tax. That represents about 27 percent of the City’s entire sales tax amount,
which is about $22.4 million. That $5.7 million also represents about four percent of the City’s
entire revenue base. So that statistic, that piece of information, alone portrays the financial and
economic significance of the Stanford Shopping Center as a sales tax generator.
As for property tax the Stanford Shopping Center brings in about $400,000 in property tax
currently. The Stanford University Medical Center is exempt from property tax. Then we don’t
have the figures there for Utility User Tax but they both generate Utility User Tax revenue for
the City of Palo Alto through their consumption of utility commodities and utility services. The
shopping center again back to that sales tax figure the focus on making sure that there is a
continued competitiveness that allows for that sales tax figure to remain healthy is a chief focus
of the City. It is really pertinent these days as in the past few years we have been talking about
the context of preserving the City’s revenue base if not able to grow it as we need to find funds
for community needs and priorities. That has been much of the budget discussion in recent
years. So it is really critical that we maintain our existing bases and we grow them where
possible. That is no doubt one of the contexts here of the expansion project.
It is a possibility that without the expansion of the shopping centerthere would be some leakage
of sales tax that would be a concern if the sales tax figure dropped. There is also the potential on
the other side with the expansion that there would be an increase in sales tax and clearly that is
what we are trying to highlight here in the next couple of slides, what that potential revenue
benefit would look like.
We will have some figures here in a minute but on the potential revenue benefits side we will be
looking at a whole host of areas under revenues. Revenue is broken into two major categories
Ongoing Revenues and One Time Revenues. I will talk about the Ongoing Revenues first. The
fiscal study will separate out all these revenue categories based on each of the projects. We will
be looking at sales tax revenue, property tax, motor vehicle in lieu, Transient Occupancy Tax
that is our hotel tax, Utility Users Tax, and any of the other indirect benefits from spending
activity that we can quantify. Then we will be looking at one of the issues of out of state sales
and use tax. One of the areas that we are wanting to stay focused on and is also on our issues list
is to do what we can to ensure that sales that are generated by the construction project, if any of
those sales are out of state sales that we have a point of sales recorded in the City of Palo Alto so
that we can receive the sales tax from those sales. So we are working to see if we can have that
put in places, as well as have that be an ongoing, go forward, relationship with Stanford so that
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we can have a recording of sales tax in Palo Alto. We think that would have some benefit
certainly as a result of the construction phase and then ongoing as well have a benefit to our sales
tax base.
One note on the property tax is we will be looking at any possessory tax impacts that are part of
the property tax context. We know that there are some private entities on the Stanford
University Medical Center property that do produce sales tax and as a result of being private they
do also pay a possessory tax instead of a property tax. We will be looking at any impacts there.
We are not thinking those will necessarily be great impacts but that will be a consideration and
something that will be looked at.
On the One Time Revenue side there are primarily one time development related fees that will be
coming as a result of this project. There are building permits, development, and transportation
impact fees that will be one time in nature and part of this project.
This is a table that also appeared in your Staff Report and I need to right off the bat draw your
attention to a correction that we have made in tonight’s presentation that is not reflected in your
Staff Report. The motor vehicle in lieu number in your Staff Report that number is about
$500,000 and it was due to an incorrect figure that was in the original CBRE Consulting
calculations. It has since been caught and we have a revised figure in tonight’ s table of about
$50,000. The rest of the information here is provided by CBRE at this point but will be part of
the City’s peer review so we will certainly be probing these numbers considerably. Sales tax is
estimated by CBRE to be in the $1.6 million range, TOT with the current hotel configuration that
is being conceived is about $1.1 million, we are not proving a UUT estimate at this time that will
come however. The City of Palo Alto has done some very rough calculations on UUT that might
somewhere in the $100,000 to $200,000 range once it is produced. Then property tax is
estimated to be an increase of about $205,000. All of this comes into the neighborhood of about
$3.0 million increase to the ongoing General Fund revenue base once full build out is achieved.
So this column is really depicting what the annual revenue increase will be once we have full
build out, which is estimated to be about 2015. There will be a gradual phasing in of some of
these revenues up until that time but once it is reached this is the total annual that we are
expecting once we cap out at the increased revenues.
Just to sort of put this in perspective a little bit the $3.0 million represents about two percent of
the overall General Fund revenue base right now. So it is a significant piece. To put it into a
little bit more perspective it is about 45 percent of the library department budget. For example
they have a budget of about $6.2 million so this is a sizeable piece of that.
I will now shift to a little discussion on the potential expense impacts. Tonight we are not
bringing forward estimated figures on expense impacts. We don’t have those produced yet but
want to give you a sense of the areas that we are looking at. The public service impacts, which
are the primary areas of expense impacts, will be depicted in the Public Services section of the
EIR as well as the fiscal impact analysis, as well as in the City’s peer review of the fiscal impact
analysis. They are made up of three bullets here, public safety, which is police and fire, and then
we have recreation and community service, utilities and public works service impacts. The last
two sub-bullets, recreation and community service and utilities and public works, are public
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1 service impacts that will be offset. In other words, they are cost recovery so the costs of those
2 impacts will be recovered through impact fees, permit fees, utility hookup fees, and those sorts of
3 charges. The costs of the public safety impacts are not cost recovery in that way. They are
4 based on what are projected to be increased costs associated with servicing increased call
5 volume. So as both of the sites expand there will be more activity based on current call volume
6 for police and fire services. We can project or estimate what increased calls would look like to
7 both of these areas and with that we can estimate, and we are in the process of estimating, what
8 those impacts will look like and trying to attribute some costs to those impacts. It is expected
9 that those costs for those impacts, the aggregate costs of those public safety impacts, will be
offset in part by some of the additional revenue that we have talked about. We will need to look
at that closely to make sure that that is the case.
There are also not so much directly expense impacts necessarily but we wanted to make sure you
knew that we were looking at a couple of other areas outside of public services. The school
impacts will be explored and analyzed through Bay Area Economics. Then there will be some
other economic impacts looked at particularly housing and affordable housing. That is obviously
a very broad category but it will be pretty specific under economic impacts once that is flushed
out.
One other number that I would like to give you is back in 2006 we estimated the impact fees,
permits, and one-time fees to be somewhere in the neighborhood of about $9.0 million. That
was a 2006 figure when we presented some very preliminary information on this project. Those
are probably figures you saw in 2007. Those numbers will be updated just to give you a ballpark
of what some of those one-time fees might look like. I think in the Staff Report we cited total
ongoing and one-time fees somewhere in the neighborhood of $13.5 million but clearly the one-
time fees go away after that first period.
Just to round out the discussion on impacts we are not exploring these so much tonight but
clearly the Environmental Impact Report will look at transportation, housing, noise, open space,
and any other impacts contemplated there. Some costs of the mitigation measures will also be
identified in the Environmental Impact Report.
Now we want to come to some of the key analysis issues that we are continuing to focus on
closely and making sure that we don’t lose sight of throughout our analysis and we certainly
won’t. Chief among them is the net change in property tax. We are aware that there could be or
there is expected to be some shift of property tax generating entities as part of the Medical
Center expansion that would shift from property tax generating entities into parcels that are
exempt from property tax. So that would be potentially a net decrease in property tax. There
might also be some gains in property tax and certainly in terms of the entire project we know that
the Stanford Shopping Center will produce a gain in property tax. So we want to make sure we
get a complete sense of the shift and thus the net change in property tax overall. There is the out
of state sales and use taxes, which I mentioned. I did mention that we have been in conversation
with Stanford for a couple of years now, even prior to this project, on trying to put in place an
agreement that would allow the City to be the point of sale and thus receive the sales tax on
major purchases. We are hoping that we can put that in place. We have been a little bit
concerned so far that we haven’t had something put in place yet through these couple of years of
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conversation but hopefully this will be the opportunity to do that. We have another key issue
that we are focused on which is the market area retail and competitive impacts. I mentioned to
you the urban decay study will be produced by CBRE Consulting. The City has received a
preliminary draft of that just in the past week and is in the early stages of reviewing that and the
City’s status on that review will be forthcoming. We wanted to make sure that our other retail
centers in Palo Alto understand the impact that this project may have on any of our other retail
centers as well as our neighboring communities. We are working closely through this project
with our neighboring communities. The other area of key focus for us is the hotel size and
location. I mentioned to you that we will have an independent hotel study. So we want to
review the study that produced the 120-room configuration, which is what is behind the $1.1
million TOT figure. We want to fully understand the potential demand for other possible hotel
configurations and sizes. So we will have our study do that and that study will also look at
possible site location options for that hotel.
That brings us to Next Steps. After tonight we will have a study session with the City Council
on this same information. We will be bringing forward as part of that tonight’s discussion, your
comments and discussion to the City Council for their consideration as they look at all the fiscal
information as well. That is currently scheduled for July 14, 2008. Then some time after that
there is a series of things here that we don’t have dates assigned to right now but you have
probably seen some dates attached to these. I think Planning Staff could update you on any of
these dates but they are all essentially in flux to some degree so I didn’t want to put any hard
dates in here. We will have a fiscal impact analysis produced that will be separate from the Draft
EIR but right around that same time. The City’s review of the fiscal impact analysis and hotel
study will come about that same time as well. There will be preliminary architectural reviews
happening in addition to Development Agreement negotiations. Then are updates on the project
at the Commission and the Council, bringing forward the Draft EIR at public hearing at both the
Commission and Council, and then final action. That brings us to the period of questions and I
want to just say that the Administrative Services team and Planning Staff are here to answer your
questions, thank you.
Chair Holman: Thank you. Commissioners at this point we have just two cards from members
of the public. Do you have any questions that are clarifying in nature or can we go to the public?
Commissioner Keller and then Commissioner Lippert.
Commissioner Keller: With respect to the hotel location study what locations will it consider?
Will it consider two locations that are identified by Stanford7 Will it also consider Hoover
Pavilion as a potential location7
Mr. Ramber~: It Will certainly look at the existing locations as part of its review. Curtis has a
response on that second piece.
Mr. Williams: We’will discuss that with the economic consultant. I think we have to talk a bit
about the feasibility of using Hoover as a hotel site in its condition, or upgraded condition. If it
appears to be a feasible option we will probably at least look at that but probably not in the same
level of detail as they would look at the sites that have been identified on the shopping center or
other sites on the shopping center property.
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Commissioner Keller: Thank you. The other question is with respect to use tax I a two-part
question. The first part of this is what is the scope of the entity for the use tax? Is it the medical
center, is it Stanford University as a whole, what is the scope of that that we are considering?
Mr. Joe Saccio, Deputy Director of Administrative Services: Well for the use and sales tax
scope would have to be limited to the Palo Alto boundaries. So the part of Stanford University if
you are talking about any building within the county that sales tax or use tax would go to the
county. So we are only focusing on those areas within the City boundaries. The hospitals for
example are within the City boundaries so we would look to obtain use tax from the hospitalsl
As David was said before we have had some discussions about that if they buy equipment from
out of state instead of the tax going out of state and into a pool there are ways of capturing it and
having it directly accrued within Palo Alto, paid by the hospital, and then the point of sale would
be within the City boundaries.
Commissioner Keller: The second half of the question is do we know what the point of sale is
currently for the Lucile Packard Children’s Hospital for the Stanford Medical Center?
Mr. Saccio: If there are over the counter sales that are taxable, there is a luncheon area within
the hospital, those sales tax dollars would go to the City. If there is some sales tax that comes
out of the pharmacy and Hoover Pavilion we would get those sales taxes.
Commissioner Keller: I mean in terms of use tax. At one point in time I had a sales and use tax
permit and I was required to file a use tax form.
Mr. Saccio: That has been our inquiry as to whether there are sales that we could get as use tax.
That is what David was referring to, we had a meeting with Stanford a while ago to be able to
capture those because we don’t know whether the City is getting them or not.
Commissioner Keller: Okay. I guess the other piece of that I am just going to raise and we can
deal with it later is with respect to the medical school itself that is a little ambiguous because the
medical school is attributed to being part of Stanford and that is not a separate entity. So that is
where it gets a little bit more tricky.
Mr. Saccio: That piece that is the medical school may be outside the City boundaries. I am not
quite sure whether it is or it isn’t but we have been trying to work with the hospitals, Lucile
Packard and Stanford Hospital, and not as much with the school. We would love to explore the
school to see if there are opportunities to legally get use tax from there too.
Commissioner Keller: Thank you.
Chair Holman: Commissioner Lippert to be followed by Vice-Chair Garber.
Commissioner Lippert: I have several follow up questions. With regard to utilities I guess in
supplying the hospital with electrical and gas and water that would have to be generated
somewhere and I am particularly interested in the electrical. Is that figured in your analysis at all
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as to whether the City would just simply go out and buy more kilowatts somewhere or whether
they would actually build infrastructure that would generate those kilowatts?
Mr. Lalo Perez, Director of Administrative Services: We have a different group that is looking
at that component. My understanding from the Utilities Director is that it is not a capacity issue
it is more a transmission cost issue. I believe we should be able to accommodate that with the
current infrastructure.
Commissioner Lippert: Okay. Then with regard to the potential revenue benefits down at the
bottom, one time development related fees, under there is transportation impact fees. Those are
one time. Would there be a TDM program in addition to that or is that basically the TDM
program?
Mr. Williams: No, there would be a TDM program. The transportation impact fees relate to
essentially the net increase in trips and peak hour trips. So if we determine that there were X
number of peak hour trips being generated by the project, either project, and then the TDM
program had some reduction factor back down to 80 percent of X. Then that increment would be
subject to the transportation impact fees.
I should point out though that we have Development Agreements on both of these projects. So it
could just be a straight supply a transportation impact fee or in this Development Agreement we
might work out other transportation solutions and feel comfortable that those are better solutions
than applying the transportation impact fee. We have done an initial calculation based on the
projects and if you just said flat out said this is the transportation impact fee what would the
dollars be.
Commissioner Lippert: One last question. With regard to the not for profit status of the hospital
if they were at some point in the future decide to become a for profit hospital, cast aside the not
for profit status, how would the property taxes then be reappraised or imposed?
Mr. Saccio: Well, I believe if they were treated as any other business or corporation much like a
business over in the Research Park they would have to pay property taxes. The assessed values
for those properties whether taxable or non-taxable are on the county rolls. If that exemption
were to go away then they would taxed just like the shopping center.
Commissioner Lippert: Okay, so in other words, there would still be an appraisal done by the
County Assessor and that would remain on record it is just that they are not paying any taxes.
Mr. Ramber~: Yes, there is a certain amount of property tax that is exempt. You will see the
full valuation and then you will see the exemption, which for nonprofits is the total assessed
value of the property.
Commissioner Lippert: Thank you.
Chair Holman: Vice-Chair Garber.
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1 Vice-Chair Garber: Regarding the market study or the decay study as it is described do you
2 know what the components of that study are now? How it is organized?
3
4 Mr. Ramberg: I think we ask Amy Herman of CBRE Consulting to come up and describe those
5 components.
6
7 Vice-Chair Garber: Did the City have a specification that gave them instruction or you don’t
know at the moment?
Mr. Ramber~: The urban decay study work is part of the fiscal analysis, work that CBRE
Consulting is doing on behalf of Stanford and Simon.
Vice-Chair Garber: When will that come before the Commission?
Mr. Williams: We will distribute the study to you when it is ready as far as passing out. I don’t
think we will have a separate meeting on it. It will probably be incorporated into our discussion
of the fiscal impact study when that is all completed.
Vice-Chair Garber: Okay, thanks.
Chair Holman: I have some questions of course but I think I will hold off. Shelley H~bert will
speak on behalf of the applicant. You will have 15 minutes as the applicant. Then the public
will speak starting with Michael Griffin and Tom Jordan.
Ms. Shelley H~bert, Applicant: Good evening Commission members and City Staff. I am
Shelley Hdbert, Executive Director for Public Affairs for Stanford Hospital and Clinics. On
behalf of the adult hospital and Packard Children’s Hospital I want to comment briefly on two
items in tonight’s Staff Report. Also on a third topic that is of significant concern to the
hospitals as we plan for the future of healthcare services in our community.
The first item concerns the potential for direct payment of sales taxes by the hospitals on items
purchased from out of state vendors versus the standard practice of those sales taxes being paid
by the vendors. I want to confirm that we are currently study if and how this concept may apply
to the hospital’s specific circumstances and that we expect to respond to this question by fall.
We are now being assisted in this analysis by the consultants at CBRE as part of the fiscal impact
analysis.
The second item concerns the reference in the Staff Report to exploring options for in lieu
property tax being applied to the tax-exempt development. It is important to point out that the
hospitals and School of Medicine are already tax exempt because they are nonprofit entities. The
properties they occupy have not historically been part of the property tax revenues received by
the City. These projects do not change that status. However, the proposed renewal project could
affect the property tax status of specific individual properties within the Medical Center. These
include three properties located at 1101,703; and 701 Welch Road. Under the proposed plan
these properties would convert from currently paying approximately $150,000 in annual property
tax to qualifying for tax-exempt status because their uses will change. About ten percent of the
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1 property tax currently paid, or approximately $15,000, actually goes to Palo Alto. At the same
2 time as the Hoover Pavilion site shifts from university and clinic use in order to provide offices
3 for community physicians that property will change from being fully tax exempt to generating
4 property taxes. It is likely that this change will more than offset the tax exemptions for the three
Welch Road properties.
Finally, I want to focus on an issue of very significant concern to the hospitals. It involves the
discussion of community benefit and how that very important concept is being applied in this
process. As I mentioned previously both Stanford Hospital and Packard Children’s Hospital are
nonprofit healthcare providers. As such they are legally required to report annually to the state
on the extensive community benefits they provide in order to maintain their nonprofit status. In
2007 the hospitals provided a combined total of $217 million in charity or uncompensated care
and care that. is provided to beneficiaries of programs such as Medical that reimburse us
significantly less than it costs the hospitals to provide care for these patients. In addition, we
provide extensive free community services ranging from the Stanford Health Library to ongoing
illness, injury prevention programs for children, the elderly, and other vulnerable individuals in
our community. We believe it is essentially that in addressing the potential impacts of the
proposed project that the inherent community benefits the hospitals provide be given primary
consideration.
In 2007 over 2,100 Palo Alto residents were admitted to Stanford Hospital for inpatient treatment
and 4,000 were seen in the emergency room. Over 1,100 expectant mothers and their babies
were served at Packard Children’s Hospital and over 2,100 Palo Alto children received
outpatient care. Stanford Hospital provides the only level one trauma center between San
Francisco and San Jose. A seriously injured patient has a 20-25 percent better chance of survival
if taken to a level one trauma center instead of a standard emergency room. For Palo Altoans
being just minutes away from that level of care is a tremendous community benefit that can make
the difference between life and death or in the case of a stroke between permanent disability and
full recovery. Community benefit is inherent in why the hospitals exist and in the services they
provide every day. This fundamental principle must inform our discussions in the months ahead
as we seek to balance potential project impacts with fair and reasonable mitigation measures and
the terms of a Development Agreement that will guide us toward a healthier future for our entire
community. Thank you.
Chair Holman: Thank you very much. Are there questions for Ms. H6bert? Commissioner
Keller.
Commissioner Keller: Thank you very much I really appreciated the data that you provided. I
am wondering of the $217 million of charity and uncompensated care do you have an idea what
portion of that was to residents of Palo Alto. You gave figures for the Palo Alto residents for
inpatient, emergency room, expectant mothers and children, and outpatient care of the Children’s
Hospital. I am wondering if you have comparable figures for the services provided to people
outside of Palo Alto.
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Ms. H6bert: We do not have available tonight a breakdown such as you are requesting. I am not
certain about the availability of extracting Palo Alto specific information on the charity and
uncompensated care but we would be happy to look into that for you.
Commissioner Keller: Thank you.
Chair Holman: Commissioner Lippert.
Commissioner Lippert: I am a subscriber to Blue Shield as my health provider. Recently I
received a letter from them saying that Stanford Medical Center was being taken out of the
system. I don’t use Stanford I am at a different clinic. Then at the same time the Lucile Packard
Children’s Hospital has also been taken off of that. I know there are a lot of people in Palo Alto
that use Blue Shield. Isn’t it important that for the members of the community to make use of
that facility and that hospital that there be some sort of relationship in terms of the health
insurance companies and the Children’s Hospital and Stanford University and that we can count
on that? What is the relationship and how can that be maintained?
Ms. H6bert: Both the adult hospital and the Children’s Hospital have numerous contracts with
many, many health insurance companies among them Blue Shield and many others. As is
typical in any contractual relationship when those contracts come up for renewal there is a
negotiation process. In the particular instance that you are referring to that company happened to
be one of the companies that was paying the lowest rates for services at the hospitals. In order
for the hospitals to remain financially viable and to be able to invest at the level that is going to
be necessary for building these new facilities it is essential that we have fair contractual
agreements with all of our managed care contracts. We strive to do that. We also strive to keep
people informed as we are going through that process. It is a situation where we have to do the
responsible thing in terms of keeping the hospitals fiscally sound, meeting the needs of the
managed care companies, and serving the needs of our patients.
Commissioner Lippert: Doesn’t that in fact put certain members of this community, particularly
children, at risk in case there was a trauma or some sort of accident with a child and they cannot
make use of the Children’s Hospital or it is going to ruin a family, take them to the poorhouse.
Ms. H6bert: First of all, no one is ever turned away from either of the two hospitals in need of
medical care for financial reasons. It is important for everyone to understand that. Having said
that, I have just been reminded that we are still in negotiations on the particular contract issue
that you referenced. But we don’t turn people away for financial reasons.
Commissioner Lippert: Okay, thank you very much.
Chair Holman: Before you leave I have a follow up to that. I think Commissioner Lippert raises
an important question because there is the give and take of course on the part of the hospital and
also on the part of the community members. I also am Blue Shield as I know a lot of members of
the ,community are, especially those of us who are self-employed, I got the same two letters
followed by a 41 percent increase in my premium rate, which came shortly thereafter. So my
question is no one is turned away which is great but I also do wonder if you are not turned away
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what happens to your bill after that? If you are not one of the preferred providers you could also
end up with, as Commissioner Lippert indicated, a bill that could bankrupt you as well. So what
happens in that circumstance?
Ms. H4bert: It is hard to speculate on the individual circumstances of a particular person at a
particular time. I can tell you that our financial and patient billing departments work with people
on an individual basis according to their individual circumstances and individual needs. As I
mentioned we are still in negotiation on that particular contract. We are certainly very hopeful of
reaching an agreement. We have been through these cycles in the managed care world in the
past and in almost every circumstance there has been an agreement reached. We remain hopeful
that that will be the case in this circumstance also.
Chair Holman: There is not an attempt to put you on the spot here just trying to get some
information although we are literally putting you on the spot. We are digressing a little bit from
our City impacts but these are impacts to individuals in the community who are also affected.
Commissioner Keller did you have another question for her?
Commissioner Keller: Yes. You had mentioned that there was $217 million of uncompensated
care in 2007, which is an amazingly large figure. To help put that in context do you have an idea
how much the compensated care was?
Ms. H4bert: You mean how much revenue we received in reimbursed care?
Commissioner Keller: Yes.
Ms. H4bert: I would have to look into that figure for you.
Commissioner Keller: Okay, because it would help to understand what $217 million is. It is a
big number.
Chair Holman: Thank you Ms. H4bert. Our next speaker is Michael Griffin to be followed by
Tom Jordan. If anyone else in the public cares to speak now would be the time to submit a card.
Mr. Griffin you will have five minutes.
Mr. Michael Griffin, Palo Alto: I am another Blue Shield subscriber. With all due respect to Mr.
Ramberg and Mr. Turner whose skills I respect I think my expectations were a little too high for
this Staff Report this evening. I was hoping to find substantive discussions of at least some of
the major expenses relating to these mega projects and it didn’t happen. It seems to me that
review of the hardcore problem areas keeps being pushed off to dates down the road and the
danger is that we will have a perfect storm of a data dump this fall when the EIR and the fiscal
impacts reports hit the desks at the same time. It is going to be a lot to digest all at once and in
my opinion it is going to inhibit adequate review of these very complex issues. Nevertheless in
your discussion tonight you at least can talk about what it will mean to deal with 2,000 additional
car trips a day entering and leaving Palo Alto when these mega developments come online. The
minimal reference in the Staff Report to mitigations of impacts to what they refer to as streets
and I take it that means the road network in town, "will include the payment of fees such as
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transportation impact fees." That is a good thing, payment of impact fees. While transportation
impact fees are a great concept what ifPalo Alto’s standard fee structure turns out to be
insufficient to pay for the actual impacts brought on by these.extraordinary developments? What
happens when the avalanche of cars hits the city’s road network and jams up at the level
crossings in front of the railroad tracks? Now, a fix for this is grade separations but no one really
wants to talk too much about grade separations because of their outrageous cost. If we don’t
start talking about this mitigation now, for example tonight in this study session, how long do we
wait? Are we really going to wait for a traffic meltdown before getting Stanford to address their
obligations to avoid this likely eventuality?
Meanwhile there is more, offsite or satellite parking systems with shuttle buses are another
expensNe solution that needs consideration. Additional subsldizing of Caltrain tickets for
employees, the hiring of private bus companies like Google does and other Silicon Valley
employers, new computerized traffic signal management systems, these are just a few of the
obvious solutions and they all cost money, a lot of money. One wonders who is going to pay the
price of buying these mitigations. If not Stanford, then are Palo Alto taxpayers going to pony up
the money to pay for all of this?
My feeling is that the transportation impacts and resulting mitigations are going to be a hugely
expensive amount of money. Now is the time, tonight, to raise your concerns, our concerns as to
how we jointly with Stanford are going to deal with this systemic blockage of Palo Alto’s road
system. Delaying this discussion and keeping putting it off until the fall or the winter just makes
it more difficult when it finally comes to decision time. Thanks.
Chair Holman: Thank you very much. Tom Jordan to be followed by Bob Moss.
Mr. Tom Jordan, Palo Alto: Chair Holman and members of the Commission I want to start by
talking about why this is so important. Hold this in your mind and everyone who hears my
voice. Palo Alto simply has no excess money in its General Fund to cure or to handle mitigation
of impacts from Stanford. Nothing can demonstrate that better than the Manager’s search for
$5.0 million in the General Fund to pay for the police building. Now people can disagree on
how far he has gone, how successful, but by my count he is at least $2.0 to $3.0 million short
even though he has been working on it for months. I don’t think he can close the gap. So if
there is no money that can be found by the current Manager in the General Fund for the police
building, and it is beside the point whether we have it or not, the fact is there is no extra money
there. So the thing to hold in mind is the very first traffic improvements or any improvement
that has to be paid for by Palo Alto will come from the General Fund that there is no excess
money. So if there is a single intersection improvement at a cost of $1.0 million the money isn’t
there and if it isn’t there then it really should come from the people who are causing it.
My next point is to ask that you and hopefully the Council will enforce that never again will
Staff present a report of benefits of the two projects melded together. These are two independent
projects. The applicants are different legal entities. They will receive different permits. They
will build on a different schedule and there is no interrelation between the two projects. For
example, you cannot count for the hospital impacts money coming from the shopping center.
There is no obligation on the part of Simon Brothers to carryout their permits that they will get.
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So the must be from now on studied separately. To show you an example of how it can be
confusing to the public who doesn’t read carefully, in the Staff Report at the bottom of page 3 of
8 they talk in terms of $3.5 million in the new General Fund. It turns out if you just turn the page
and read a little more carefully it all comes from the shopping center..So from now on please
separate the two. It is completely improper to blend the two. It is true they have the same EIR
but that is the only thing in common they have.
My next point is to build on what the speaker before me said. In your list of expenses two major
things are omitted, traffic which he dealt with well, and housing. Housing is being studied. It
says that City has engaged Keyser Marston Associates but it is not even listed in the list of
expenses. That is something that really could be started now because we already have
preliminary figures on employment increases, we know ABAG’s formula, I have heard several
City Council people speak in very specific terms about how much it costs the City per unit, at
least the lower income living accommodations. That can start to be computed now. We don’t
need anything more. Now, when you get final figures then you can crank them in and adjust it
but there is no reason not to start on housing. Housing and traffic will be the two biggest and
nothing has been done that I can see.
The other thing to please be careful of is as they begin to list the revenue increases, the
development impact fees and so forth, remember that each one of those traffic impact fees was
put in there and actually offsets actual cost to a certain extent. There may be a few like Transient
Occupancy Taxes that are true net gains, there are some, but many of those like money going to
the Planning Department really pays for extra work imposed on the Planning Department. So be
sure that from now on as soon as possible we are only dealing with net available money to offset
impacts not money that merely offsets increased cost to the City.
Finally, I think the most important thing now that we know who our guys are, Bay Area
Economics and Keyser Marston Associates, the public would really like to know and I hope it
comes out well, I am not saying it won’t. What are the professional qualifications? How were
they chosen and by whom? How are they paid? How are they directed? Thank you very much.
Chair Holman: Thank you. Bob Moss will be our final speaker.
Mr. Robert Moss, Palo Alto: Thank you Chairman Holman and Commissioners. I agree with
the previous speaker’s comments. I think they had some excellent points but I have a few
additional of my own. One of them is when we talk about sales taxes at the bottom of page 2 of
the Staff Report it talks about expansion of the shopping center and then sales and use taxes for
equipment, which is used for construction materials. Those are two totally different things. The
sales tax from a commercial retail operation such as the shopping center is an ongoing item and
you can hope you are going to get something every year. The money that comes in for
construction equipment that is a one-time thing so they should not be talked about in the same
paragraph. Traffic was never mentioned as an impact in this report and of course traffic is going
to be a huge impact. When they talk about housing on the top of page 5 there is no comment at
all about the number of housing units, which will be required, based on the number of additional
workers. I have seen figures ranging anywhere from 600 to 2,000. For your information, each
and every new housing unit built in the City 0fPalo Alto today has a net cost to the City
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Treasury of approximately $1,200 to $1,400 per year. That is what it costs to service a home in
Palo Alto. That is a net cost and that should be put into the equation. Another thing that is not
mentioned is the fact that this facility, the hospital, is a regional facility. It services people
within approximately a ten-mile radius but the impacts are going to be local. So people from
Cupertino to San Mateo will be using the hospital. People in Palo Alto will be paying the cost. I
think that has to be recognized and addressed.
We have a limited ability to raise taxes thanks to the California system of taxation, which could
not be worse if you went out and designed something that was idiotic. So what this does by
putting additional requirements in the community makes our financial issues much more severe.
Once this facility comes online and we have all the additional traffic, all the additional need for
parking, all the additional need for facilities and utilizes we are going to find severe impacts.
One example is under Utilities it talks about the need for more water. I have bad news for you.
In ten years California is going to have a severe deficit of water. We live in basically a desert
and with climate change it is going to be more of a desert. We are not going to be able to use the
runoff from the mountains because the snow level is going to be dropping. You can’t take it
from the Colorado River because that is down below what its historic amounts were. So we are
going to be out of water in about 15 or 20 years. Where are all these new people going to be
drinking from? You can create water sources but they cost money. Where is the money going to
come from? None of this has been discussed. None of these things are considered. None of the
long-term costs are even looked at let alone tried to come up a real figure for it.
This is a huge project. It is going to have a huge impact on our economic ability to survive and
also on our ability to survive in terms of let’s call it keeping the community healthy and active
and effective. You should look at all these issues not just dollars and cents looked at in a very
narrow viewpoint, which is what this report does and is what has been done in the past. There
are a lot of costs. There are a lot of problems, which are not really identified in the report and in
the presentation you had tonight. We need to have a lot more attention paid to these things or we
are going to be in real trouble in ten years.
Chair Holman: Thank you very much Mr. Moss. Are there any anticipated questions for
members of the public or can we close the public comment? Okay, potentially so we will leave
it open for a little bit. Questions from Commissioners? Curtis.
Mr. Williams: I would like to address some of the comments that were brought up, which I think
are generally valid as far as issues that we want to keep our eyes on. I just want to try to clarify
that what we focused on here for the most part is the fiscal impact analysis that CBRE is
preparing that Bay Area Economic will review and the hotel study as well. There are a couple of
mentions in the Staff Report of housing specifically and recognizing that there are impacts
associated with it. Number one that employment is generating the need for new housing and
number two that there are impacts associated with that new housing that will be addressed to
some extent through fiscal impact analysis but more to some extent through the EIR and to some
extent the housing analysis that is being done separately.
Traffic was also mentioned and obviously that is a very key element of the EIR. We are here to
talk about fiscal impacts and that. Until we know wh~t those numbers are, what intersections are
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affected in what way, etc. to have a discussion of the cost of mitigation would not be very
meaningful. Now we did have some community work sessions where we got a number of ideas
for potential mitigation, traffic mitigation, potential housing mitigation, and how to address
housing issues. That is what those community sessions were for. We are trying to get this input
so that we are sure that our studies are addressing the issues that you want to be sure that we are
addressing. I just want to clarify that they are not all in one study necessarily. Some of them do
depend on Environmental Impact Report and housing analysis study. I think there is a lot of ’
attention being paid to them. We are doing whole separate studies just to focus on those two
issues. Once we have those numbers we will definitely be looking at the costs of the mitigation
measures and weighing those against the effectiveness of them and against who pays. We
certainly walk into this anticipating that to the extent that it is identified as a mitigation in the
EIR and a feasible one at that that it is the applicant’s responsibility to pay for that. Again, we
have a Development Agreement. We may have tradeoffs in terms of what that cost is and paying
for one type of improvement if we think there might be a better way to achieve that from a larger
community sense. So we do have our eyes on the fiscal impacts and the costs of mitigation for
housing and traffic but again I don’t think that is the focus of the fiscal impact analysis for the
most part. It will come out in those other studies as well.
As far as the question of timing and being overburdened by having a lot of these things come
together at once I understand that. We will try to have some discussions and work arounds and
see what we can do so that you don’t have everything in front of you at one time. We will try to
get some room in there and have some time to actually deliberate about the fiscal impact analysis
while it is in front of you and not have to say we don’t have time to do that and the EIR both and
get into that kind of crunch. We will try to work on what we can do to be sure that you have
adequate time to look at all the studies you need to look at. We will be getting the housing
analysis study to you well ahead of the EIR coming out and the fiscal impact analysis. We hope
that we can have a study session on that issue with you before you have to deal with those other
issues.
Chair Holman: So having to do with the timeline and I know it has been a moving target but I
think it would be helpful, and I have asked for this previously, it is still an issue for me.. If we
could have updated timelines just so we know where we are right now and what the timing of is
of one report in relation to another and how much time we are going to have. That would be
really helpful. We haven’t had any updated timelines in a considerable amount of time. It would
be helpful for the public and it would be helpful for the review bodies as well. Commissioner
Lippert would you care to ask some questions?
Commissioner Lippert: Yes. Curtis, just a follow up on your comments with regard to fiscal
impacts. If there is a housing element to the hospital expansion that would be subject to regular
property tax whether it is on Stanford land or it is on privately developed land, correct?
Mr. Williams: I think there would be. I think we are assuming there would be and that there
would be the various impact fees and such if it is in the city. Again, if the sites are housing sites
in the county as the two General Use Permit sites that have been identified so far are then even if
there were property tax benefit there they would not accrue to the City they would accrue to the
county. The same thing with our impact fees. Again, we are in a Development Agreement
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situation and we anticipate that if we look at it that way that is what we are at least going to have
on the horizon for the City is to try to workout ways to be sure that we are all whole as far as
property taxes and impact fees go as if they were in the city.
Commissioner Lippert: My understanding is that Stanford University does not stop at San
Francisquito Creek in fact they own a portion of land across San Francisquito Creek that private
individuals have land leases with. They lease the property and own the houses on that property
and they do pay property tax. I believe down around the faculty section again they lease that
property from Stanford they don’t own it. The professors own their houses and again pay the
property taxes on those lands. So I guess the same would apply to Stanford West where that is
built on Stanford land. It is rental housing but there is property tax generated by that, correct?
Mr. Saccio: It would probably be best to look into that. The Stanford West you are referring to
is the housing project along Sand Hill, right? As long as that is within the city boundaries, I
believe there are property taxes on it but I would like to follow up with a little bit of research on
it.
Commissioner Lippert: So the question I am raising here is if there was development of lands on
the south side of Sand Hill Road for housing could that trigger annexation of that land by the
City of Palo Alto in terms of property taxes?
Mr. Saccio: Are you referring to non-Palo Alto lands?
Commissioner Lippert: Correct, unincorporated lands, which might be contiguous or just on the
opposite site.
Mr. Saccio: Well if it were not within the City of Palo Alto boundaries but as far as an
annexation we wouldn’t get the taxes, but if it was annexed we would. I am not an expert in
annexation but I think that takes discussions for that to occur to include annexed property that is
not within our boundaries right now into the city. So I think that is definitely a discussion
process that would have to take place.
Commissioner Lippert: Does it have merit if there is a nexus between the hospital and the
housing? Maybe Cara can answer.
Ms. Cara Silver, Senior Assistant City Attorney: It is possible to annex contiguous property.
You would have to go through the Lefgo Annexation Process if that is the question. The City
would have to decide whether the benefits of property tax and other benefits accruing would
offset the other municipal services that would be triggered by that annexation.
Commissioner Lippert: Okay. I will pass for now.
Chair Holman: Commissioner Keller and then Vice-Chair Garber.
Commissioner Keller: Thank you. To follow up on things that Commissioner Lippert said it
was identified that the county General Use Permits sites along Welch Road, right? I’m sorry
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along Quarry Road. Correct me if I am wrong but I believe that those are for mitigating the
projects in the General Use Permit and do not count towards mitigating the proposed medical
center expansion and shopping center expansion, is that correct?
Chair Holman: Can you tie to that to a fiscal question?
Commissioner Keller: Well, to the extent that there are housing sites to be identified or housing
to be built you can’t double count that housing as mitigating two different projects. I am just
confirming for the record because it was brought up in conjunction with Commissioner Lippert’s
question.
Mr. Williams: I would prefer not to go in the direction of talking about the housing and where it
can go or can’t. We have talked about those two sites several times. There appears to be some
leeway. The number of sites that were approved through the General Use Permit was more than
what was necessary to respond to the growth in the academic campus. So the number of units
identified exceeded that so there may be a gap there that could be used in this case and wouldn’t
be necessary to satisfy their numbers under the General Use Permit. Although the sites were
identified through that process and we have talked about that in some other meetings and we will
continue to explore that and believe there might be realistic potential to use those sites in
response to these projects.
Commissioner Keller: If there was sufficient extra housing units in these sites and they were
used for mitigating the housing demand based on increased jobs for the proposed projects.
Unless those housing units are located within Palo Alto as Commissioner Lippert then they
wouldn’t satisfy our ABAG application, is that correct?
Mr. Williams: I will let Julie Caporgno respond to that one but it is getting a little off topic.
Chair Holman: I was just going to say that is not directly fiscal.
Commissioner Keller: Well, the reason I am bringing this up is because to the extent that some
of these units low-income housing units even if low income housing units were built satisfying
these projects we would not get credit for it and therefore it wouldn’t reduce the fiscal
requirements on Palo Alto to build low income housing.
Mr. Williams: I would like to have that discussion when you get the housing report but I will
have Julie give an answer.
Ms. Julie Caporgno, Chief Planning and Transportation Official: I was just going to say very
briefly there is possibility for us to get some legislation changed to recognize it if that were to be
the case. We have talked to our Assemblyman and State Senator and that is a possibility if
Stanford, the county, and the city were agreeable.
Commissioner Keller: Thank you. In the EIR process there a point in which the DEIR is issued
or released and the DEIR includes identified impacts, which are quantified, right? Then it also
identifies mitigations for these quantified impacts. So what I am wondering is to what extent do
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the quantified impacts need to be done before you figure out what the mitigations should be and
if the information on these quantified impacts will be released for analysis prior to the DEIR
being released?
Chair Holman: Again, we are trying to focus this evening on the financial. This is the fiscal
session we are having tonight.
Mr. Williams: Right. I don’t know to what extent we can do that. We are trying to explore that
but we need to also have the traffic consultants do an independent analysis and put their best
professional stamp on what are feasible mitigations and what those numbers are.
Chair Holman: Vice-Chair Garber.
Vice-Chair Garber: What is the final form of the report that will be produced? I assume that the
City and your department take responsibility for the assembly of all these various pieces and the
summarization of it is that correct?
Mr. Perez: That is correct.
Vice-Chair Garber: So what is the final form of this? How will it be organized? What are its
components?
Mr. Perez: Well part of it we are trying to figure out. We are waiting for the CBRE report to
come in. We are going to have the EIR impacts that we are going to discuss and look at that
separately and the fiscal impacts. Then we are also going to have the urban decay. Going back
to your earlier question on the urban decay and all the work that CBRE is doing, we looked at the
scope of the work that they were going to do and commented on that, and we are looking at the
impacts to Palo Alto and the surrounding areas. So once we have all that information we will
review it internally. We are also going to use our peer review consultant to help us analyze it
¯ and produce the final report.
Vice-Chair Garber: There are going to be many reports from a variety of third parties.
Presumably there is some synthesis of all this. Does that occur in your department? How do you
involve the other departments of the City in that synthesis?
Mr. Perez: Correct. We are actually working as a team. We are worldng with the Planning
Department, the Attorney’s Office, and we have various committees. For example, on the
commodity earlier you asked about the impact to the commodities and there are groups working
on that. So we are all going to work together in reviewing the data. So we are working closely
with the safety departments and the operating departments to review the data and do the
compilation as well lead.
Mr. Williams: I think what you will eventually see is a standalone Environmental Impact Report
on the environmental side. You will see probably pretty much a standalone housing analysis
package. Then the fiscal I think, correct me if you see this otherwise, I believe that you will see
a package that essentially has CBRE’s report and backup there and the urban decay study as a
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separate document with that. Then the Bay Area Economics peer review layered sort of on top
of that as a separate thing that either clarifies or synthesizes the key information for us. I think
CBRE’s report when you ultimately get it would have been revised based on Bay Area
Economics’ input on where they think changes need to be made. So I think you will get one
fiscal package that has that overall sort of umbrella from Bay Area Economics having looked at
it. Then the hotel study that they" do as well on top of that. So I think you will get one package
like that but it will be multiple reports on the whole fiscal package.
Vice-Chair Garber: In those three packages where does traffic occur?
Mr. Williams: Traffic is in the EIR. The traffic study will be an appendix to the EIR and the
bulk of the substance of that will be in the body of the EIR in terms of actually identifying the
intersection analyses and the significant impacts and mitigation measures.
Vice-Chair Garber: So if there are financial impacts with traffic they will occur in the EIR or be
referenced as part of the third piece, which is the fiscal analysis?
Mr. Williams: There may be some reference there. Typically the impacts of the mitigation
measures for the EIR and traffic impacts are done sort of as the EIR is brought to you but not in
the EIR because the EIR itself doesn’t necessarily outline the dollars associated. We know that
any city is going to want to know what is the cost of that, what is the cost to the applicant, and
what is the cost to the city of doing these various measures. So that would come to you as
probably part of the Staff Report, there may be elements of it that are in the fiscal analysis but I
think that is running kind of concurrent with the EIR so it may not have the full benefit of all the
mitigation measures there.
Vice-Chair Garber: Thank you.
Chair Holman: One of my questions is very related to that. What I would be looking for and in
order to expedite and facilitate review of the fiscal impacts is that we have a compilation report
of all of that financial data whether it comes from what we are looking at tonight or whether it
comes in the DEIR. There should be a very simple, easily understood grid that lays out all of
that. It should also identify what items are one-time fees and what is the cost to deliver those
services. So there should be a bottom line in addition to this.
There should also be a very clear explanation of what year these fees are being paid and in what
year’s basis these fees are calculated. For instance if they are calculated on 2008 impact fees but
the permit isn’t given until 2010 for instance our impact fees will have likely gone up. So there
needs to be a very close tracking of those.
Also, when it comes to sales tax and property tax to the limit that is possible it would be great to
project those out so we know what we are looking at over the long-term. Having to do with the
hotel extended stay has been a topic of conversation. So if we are looking at TOT we need to
make sure that if there is extended stay as part of the hotel that we are also able to capture TOT
from the hotel. I will move back to Commissioner Lippert.
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Commissioner Lippert: Just a clarification. When you say grid you mean like a spreadsheet or
matrix?
Chair Holman: Exactly.
Commissioner Lippert: continuing my line of questioning before regarding property tax and
housing and Attorney Silver’s comment with regard to the nexus of municipal services I guess is
the operative word. Already Palo Alto has an agreement where we provide certain municipal
services such as police, fire, utilities, I think even water, is that correct?
Ms. Silver: We provide fire services I believe to portions of the county. We do not provide
police services. I am not sure about utility services we can research that.
Commissioner Lippert: I think we do provide utilities to Stanford University in the way of
electricity, gas, but I don’t know if it is water too. I am getting a negative from the audience.
Maybe Jean McCown could clarify since the public hearing is still open.
Ms. Jean McCown, Stanford University: Thank you Commissioners I am happy to clarify. The
academic campus, which is in the county, does not get any utilities~from Palo Alto. We have a
contract with the City for fire service for the academic campus. The properties that we are
talking about tonight, the Medical Center projects are in the City of Palo Alto so they buy their
utility service from the City just as everybody else does in the city. They get fire service and
police service just as any other entity in the City of Palo Alto gets. There is no specific
contractual agreement. The only contractual agreement is academic campus in the County of
Santa Clara with a contract with the City for fire service.
Commissioner Lippert: Thank you very much. I guess this is a question for the finance staff.
With regard to paramedics when it comes to the City of Palo Alto do all roads lead to Stanford
Medical Center or the Lucile Packard Children’s Hospital?
Mr. Perez: I think the majority do. We provide the services and there is also, the possibility that
if our units are all on call and out that AMR would respond. There is a possibility that they
could go to E1 Camino if they are closer to the Mountain View boarder.
Commissioner Lippert: Diana Diamond recently had an article in the Daily Post regarding
ambulances and cost recovery there. So there wouldn’t really be an impact for paramedics with
regard to taking people to the hospital because there is cost recovery associated with that, is that
correct? Insurance companies or individuals have to pay for ambulance service.
Mr. Saccio: Right, there are fees for that service. Those fees are dependent on whatever the
medical plans will pay, or Medical will pay, or Medicare will pay. To answer your question
there are fees that are supposed to offset the costs of the service. As Jean McCown mentioned
the ambulance does respond to the campus but that is part of the fire agreement that we have
with the academic section of Stanford.
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Commissioner Lippert: Okay and it is still policy whenever there is a 911 for fire it is ambulance
and engine response, is that correct?
Mr. Perez: We are probably out of our element.
Commissioner Lippert: Is there recovery on the call for the engine being sent as well as the
paramedics?
Medical Center
Mr. Perez: It is part of the contract for Stanford if you are referring to Stanford itself. We have a
contract for communication services as well as the paramedic and fire services.
Commissioner Lippert: Okay. And the county subcontracts out their paramedics. Obviously
Stanford is not using them they are using our paramedics. From my own experience the
paramedics that I used in the South part of the county, my accident, were 30 percent more than
what we are paying. Are we subsidizing that? Are we low-bailing that number?
Mr. Saccio: I am a little bit out of my element because the fire department is supposed to be in
charge of the rates but they do look to make sure that their rates are both competitive and have
been increased appropriately compared to the private sector or whatever is out there in the
industry. So they do look at that annually and we do encourage them to be as close to cost
recovery as possible.
Commissioner Lippert: Okay, I am just asking these questions because it is a financial impact
that is directly related to the use of the hospital that impacts our community.
Mr. Williams: I understand some of the questions that are coming out. I think it might be better
and more helpful to us if you essentially rather than asking them as questions indicate that these
are things that you would like to see us evaluate in the fiscal analysis. I think we are getting into
a lot of areas with utilities and such that we really need to do the study on and some of it is in the
EIR as well as far as what services are provided and are needed for this project.
Commissioner Lippert: Thank you very much.
Chair Holman: Commissioner Keller.
Commissioner Keller: Thank you. In response to Vice-Chair Garber’s question about traffic I
believe it was mentioned that the traffic would be analyzed in the EIR and that the impacts of
that traffic and potential mitigations would then have a fiscal analysis. I am wondering whether
it makes sense to do the same thing with respect to utilities, particularly for electricity and water
since we will likely have to reduce our water use by 20 percent or more in the coming decades
on a citywide basis. For electricity since a significant part of our electricity comes from the
Hetch-Hetchy Reservoir and the O’ Shaune.ssy Damn and the hydropower. The reduced amount
of water through that may reduce the amount of electricity we have available the demand for
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additional electricity may have fiscal impacts on utilities and on other City of Palo Alto rate
payers. So I think analysis of that is worthwhile based on the data from the EIR.
Similarly for greenhouse gases with AB32 the City of Palo Alto will have to reduce it
greenhouse gases over time. To the extent that particularly large developments may increase
their greenhouse gases above baseline that increases the need for the rest of the City of Palo Alto
to accommodate reducing greenhouse gases more in order to make up for the corresponding
decrease. So some sort of quantification of that greenhouse gas implication and the mitigations
thereof might also be worthwhile having a fiscal analysis.
The last thing I am going to mention this round is in response to some of my questions there
were items that said that this or that or the other thing were part of the Development Agreement
negotiation. I am assuming that somebody is keeping track of what all the parameters are for
negotiating for the Development Agreement. It would be worthwhile from my perspective to
periodically report that list so that we would know what that was and if there were other things
that made sense to have as negotiated items. We might wish to add it or the City Council might
wish to suggest adding it. I think that is a good opportunity to maintain a comprehensive list that
will grow over time I would presume. Thank you.
Chair Holman: Vice-Chair Garber.
Vice-Chair Garber: More questions on the product itself. The third report, the fiscal report not
the reports that will be added to it but the structure of if you will the front part of that fiscal
report, are you expecting it to take the form that our Staff Report does here where it will walk
through the five physical areas and the impacts there, and then it will be organized into fiscal
benefits, impacts, review of fiscal impacts, sort of follow this form or will it take some other
form?
Mr. Perez: We have not determined the full layout yet. It is something that we need tO first
obtain the information from CBRE and then sit down with BAE and come up with the structure.
Vice-Chair Garber: Okay.
Mr. Perez: I think it is helpful as Curtis said for us to hear some of your areas of concern so we
can make sure we include them in our reports.
Vice-Chair Garber: When we get to comments I will give you a few.
Chair Holman: A part of this chart/grid/spreadsheet one thing that ought to be included it would
seem to me for looking at the total picture is the economic benefits to Stanford and the Medical
Center for the up zoning of their property. It will have benefit to them in regard to leases to
medical offices, to Simon, having a hotel. If we are going to have the complete picture of what
the fiscal impacts are and benefits are to all parties that needs to be included and I have not seen
that referenced anywhere. So can Staff include that in the fiscal analysis?
Mr. Perez: Yes.
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Chair Holman: Thank you.
Ms. Silver: I just want to add that some of that information may be proprietary but we can
discuss that further.
Chair Holman: At a minimum I would like to see on the spreadsheet reference to it even if
numbers in some cases are not available. Where they are available of course it would be great to
see them. If they are not available there should at least be reference to these subjects.
I am not sure where this one would go. I have not seen it referenced anywhere. It is never clear
to me where the wear and tear on our roadways as a result of construction who pays for that and
when that is considered. Is that being included as a fiscal impact to the City? Is Stanford going
to be held accountable for all roadway improvements post construction and during construction?
Where is that going to be captured?
Mr. Williams: The construction impacts of the project I anticipate would be covered by Stanford
having to resurface damaged roadways, bring them up to a certain standard before completion of
the project. The longer-term wear and tear of additional trips is more of the sort of public service
and in the realm of the impacts in terms of just like sewers and water systems and everything
else. We have roadway maintenance that is going to have to go on and the additional traffic has
some impact on that. For the most part unlike the utilities that is covered by the General Fund
not by fees for utilities. So it is probably something that could have some negotiation around
that but generally that longer term maintenance is part of what is assumed to be covered by the
increased revenues the same way that additional police and fire services and such are heightened
and covered by the additional revenues from the project. So that will be shown as part of the
fiscal analysis.
Chair Holman: Along that same line, as a part of the fiscal impact we are going to be looking at
what the impact of a larger Stanford Shopping Center for instance will have on the other
shopping districts in the vicinity. Is that also going to include during construction? Just to give
an example Sand Hill Road is likely to be quite heavily impacted and that can affect the way to
other shopping districts. So is that also going to be a part of this study, not the build out but the
during construction phase?
Mr. Perez: ’ We will look at that aspect as well.
Chair Holman: Thank you. I will pass to Commissioner Lippert.
Commissioner Lippert: I guess just following up on Chair Holman and Vice-Chair Garber’s
comments with regard to the grids or matrix or spreadsheets. In some way maybe these tables
should be a series of tables that are chronological so in other words it looks like a variety of
years separately. Then one table that looks at the ongoing expected fiscal impacts. So maybe
that might be a way to organize that a little bit better so it is simple.
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Mr. Perez: We will take a look and see how we are able to work that in. Some of it is not going
to be driven by us so it is difficult for us to quantify. If we are able to get the data from the
applicants then we will see if we can do it that way.
Commissioner Lippert: Okay, I appreciate that. Then one other part of that is I think as you
mentioned before there is some aspects which are I guess fiscal impact neutral. One thing you
were talking about was property taxes and how property taxes might be shifted or improvements
might be shifted in which we are losing property tax from some parcels that would then be part
of the nontaxable/nonprofit entity but we would see increased property taxes or revenues from
the shopping center. So it might be worthwhile in structuring this being able to look at what the
delta or the net difference is. IfI am imagining Tom Jordan’s comments earlier with regard to
looking at these as three distinct entities being Lucile Packard Children’s Hospital, Medical
Center, and Shopping Center, and then we would have a fourth colunm that would be total. So
we are looking at it totaling down and across as well. I know you don’t have very much control
over that.
Mr. Perez: No, but I agree with the speaker and that is our intent. We are going to separate it.
This was more to try to generate the discussions, start getting the viewpoints, and then going
back and we need to separate it. The applicant insists that we separate it as well so we are all in
agreement with that.
Commissioner Lippert: Okay. Then with regard to trying to reduce these I think the best way to
deal with fiscal impacts or try to mitigate them or reduce them in someway and I am thinldng to
myself energy costs like gasoline prices are through the roof. We are going to see more people
taking public transportation and increased ridership. It is really shifting things from traffic to
public transportation, more ridership on the train, how do we get people from the transit center or
from buses to Stanford Medical Center or the Shopping Center? My thought here is that maybe
as part of the fiscal impacts we would want to look at VTA or SamTrans taking over or
extending their routes but being subsidized maybe by some of the transportation impacts. That is
just a thought.
Mr. Williams: Again, I think that will fall out of the EIR and the Development Agreement.
Both of those in one way or another may touch on mitigation with transit and then who pays as
part of the Development Agreement.
Commissioner Lippert: Just my thought is that if you are taking the train you have a terminus,
which is the transit center. You get on a Marguerite shuttle and go out to the Medical Center. If
you are working in the hospital and you take the Dumbarton Express you are not going to want
to get off at the transit center you are going to want to see that Dumbarton Express go all the way
to the Medical Center and then turnaround. That is maybe something worth looking at in the
fiscal impacts and reducing those fiscal impacts.
Chair Holman: Commissioner Keller.
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Commissioner Keller: I want to observe and follow up to what Commissioner Lippert said that
the VTA provide service to the Shopping Center but not to the Medical Center while SamTrans
provides service to both.
I also agree with the comments of Commissioner Lippert echoing the audience in terms of
separating Stanford Medical Center from the Shopping Center. I think it would also be
worthwhile separating the community physicians particularly since they are on land that would
be subject to property tax while the adult hospital and the Children’s Hospital are not subject to
property tax.
With respect to community physicians it would be helpful to understand the various parameters
of the fiscal impacts of community physicians. Part of that has to do with a slightly broader
question, which is to the extent that you would have a larger Stanford Hospital and a larger
Lucile Packard Children’s Hospital, more beds, more rooms, more patients one would expect
there to be a need for more doctors. I am not sure where this fits in, what I am wondering to the
extent that there is a proper study done of how many doctors or community physicians there are
now, what the projected expectation would be for how many community physicians there would
be at full build out and what the fiscal impact would be of providing those community physicians
with the appropriate amount of spade and whether that is included in the proposed 1.3 million or
so net new square feet in the hospital. I don’t remember seeing a particular study of community
physicians and the extent to which what we have being allowed as adequate particularly with
some of the space that was going to be at the Hoover Pavilion being transitioned to be increased
space in one of the hospitals. So I am a little confused about that and I think it would be helpful
to have a clear analysis of that with the various kinds of impacts including traffic and fiscal.
With respect to some of the things that were mentioned by Chair Holman on wear and tear on
roads, I think that also relates to my question one. I think it would be helpful to identify what the
routes are that we expect construction vehicles to take. I would guess it would be E1 Camino,
which is a state highway and I am not sure how that would pay for the repair to E1 Camino and
San Antonio Road. San Antonio Road currently has some issues with respect to trees that
require the roadbed to be revamped. I am not sure if you have 20 years worth of construction
how the life of San Antonio Road, how often would we have to repave it and do whatever. To
me it helps to be a little specific, what are the exact routes and who takes them and who is
responsible for wear and tear on them and how would we cover that. Thank you.
Chair Holman: Vice-Chair Garber.
Vice-Chair Garber: I am going to assume we are moving out of the question period into the
comment period.
Chair Holman: You can do either we are kind of vacillating here.
Vice-Chair Garber: Some suggestions. Again, it is hard to tell exactly what it is we are going to
get. The CBRE memorandum is organized into exceptions and then talks about sources be they
revenue or impacts, etc. I think it would be worthwhile, and I don’t know where they are in the
construction of their report for the Administrative Services Department to work with Planning,
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which I am sure they already are but specifically to ask CBRE to organize their information in
ways that will be most helpful to us. Some clarification of what as they go through their data
what actually the existing environment is right now. What is the baseline, then clarification of
the proposed changes, and those impacts. So those three pieces organized that way stratified
however they see appropriate. Then there is discussion about the sources and how those sources
are utilized or impacted relative to the impacts that were discussed in the previous piece.
That is because in large part being a good consultant, like most consultants do, will organize
information the way that is most convenient to them and most easy to analyze but that rarely
comes in a form that is helpful for us as a client because we want to look at not sources as much
as topics, which cut across a bunch of revenues and expenses and other sorts of things. That is
why the conversation with Planning is important to establish what those things are so that we get
that data in a way that we can take action with it.
You have heard tonight a couple of the big topics, which are buried in the EIR. They are specific
in the housing report that has already been separated out. The fiscal report has a bunch of other
topics sort of buried inside of it. I think clearly traffic is one whether that is a separate report or a
subsequent report or a summary or whatever. There needs to be a document that either by
reference or as an originating document is something that someone from the citizenry, the public,
the Council, or the Commission can go to and say I have the traffic all here and I can understand
it and I can put my finger on all of that. Same thing is true probably with utilities or certainly
resources in some general sense. Again, this may be a summary that refers to other documents
but there needs to be something that we can put our hands on.
In terms of the overall organization of the fiscal analysis itself echoing some of the other
comments this evening I think it is important to be able to see the information relative to the two
projects independent of each other. There will be presumably specific mitigations and impacts
that relate to those projects. However and importantly there will be impacts I am assuming that
will occur because there are two projects that would not occur if they were just single projects.
We need to see those and it would be helpful to see those separated out. That is a key
component it seems to me of the Development Agreement that has to go into place it is to catch
those things that wouldn’t otherwise have been caught in a standard EIR process.
Just as a very general comment the standard sort of economic organization of reports in that there
are issues having to do with supply, issues that have to do with demand, and trying to find the
match between those two because where they don’t match is clearly a mitigation. I am clearly
aware that there will be a number of topics that do not relate one-to-one but down at the bottom
line whether it is actual numbers or it is numbers plus an evaluation of benefits we have to get to
the discussion that allows us to equate numbers in one sense but numbers plus the things that
cannot be quantified so that we can create the discussion around where the threshold is that the
City wants to accept or propose or demand.
Finally, as a sort of subset and I don’t want to get into the project itself or the project that the
City is going to have put together to establish some mitigations whether they come directly from
Stanford or they are requiring our resources to deliver, it would be interesting to see. Some
mitigations are going to be required sooner than others and to have some sense as to what that is
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in a very global sort of way a timeline or the matrix that Commissioner Lippert has imagined
would be helpful. Not only is there the potential for a data dump to come all at one time there is
a perception that all the mitigations occur at one time when in fact they don’t have to and that
presents certain opportunities for organization and mitigation of fiscal impacts of the City if we
recognize that these things happen a series of years. So it is suddenly not like the coffers have to
be emptied all at once to accomplish everything all at one time. Thos are my general comments.
Chair Holman: Thank you. I concur with pretty much everything I have heard this evening and
have a couple of other big picture and then some smaller picture pieces. This is a comment. I
was surprised when I heard recently at a Council meeting that Stanford was the lead agency in
providing the fiscal report because prior understanding was that Palo Alto was going to be the
lead agency and Stanford would surely be doing the peer analysis of that. So I was surprised at
that. It makes the backup data, the supporting data for the analysis that much more critical to
have completely and clearly to have a transparent process here. It is always important but I think
when we as the City are in the peer review seat I think it is even that much more critical. So that
is one.
Another is the timing of mitigations. Sometimes projects are constructed and mitigations are put
in sometime after construction and occupancy. It is especially important with projects of this
scale that allowance is made that mitigations are put in place before occupancy and that
calculation of the fiscal impact of those mitigations is calculated based on the time of occupancy.
It has to do with the impact fees that I referenced earlier but it might also have to do with
ongoing conditions. We have had projects in the past where approvals have been given but
should there be additional impacts that become apparent then additional mitigations need to be
accommodated or allowed for and the fiscal support for those additional mitigations also needs to
be accounted for. Is that understandable, Curtis? Thank you.
Impact fees having to do with such things as open space and housing are especially tricky
because of the lack of land that we can identify for those. So in some regards it doesn’t matter
how much money is set aside for open space if we can’t find a place to create it in a dedicated
fashion then it is of no purpose. So that is something that is going to have to be dealt with as a
part of both the fiscal analysis and the DEIR but they are very interrelated. So also would be the
improvements to any dedicated open space not just the land for but the improvements too. I
want to make sure that is very clear.
Having to do with utilities and Public Works it is not spelled out here and I want to make sure
that it is clear that the utility infrastructure is also included in any fiscal analysis.
Not to pick on your words David but I was a little bit struck by something -that was stated earlier
having to do with public safety. You are welcome to correct me, if I understood it correctly that
the public safety would have a fiscal impact on the community but that those costs would be
offset by income generated. The purpose of going through this project is to have a financial
benefit to the City. I am talking about the Shopping Center in particular. So I was a little
disturbed by that perspective or comment provided I understood it correctly. I just want to make
sure we are all playing by the same ground rules.
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Commissioner Lippert, do you have more?
Commissioner Lippert: I have a little bit more. First offI want to take on the issue of Transient
Occupancy Tax and the impacts there. With regard to the hotel that is being proposed one thing
that I have mentioned at previous hearings is the potential of outpatients needing a place to stay
and therefore staying in the hotel and the would be some sort of relationship between the
operator of the hospitals and the operator of the hotel. I know that when we impose Transient
Occupancy Tax after 30 days there is no Transient Occupancy Tax. What might be more
profitable or better for us in the long run in terms of the fiscal impacts is to look at perhaps
working out an agreement where there was some sort of reduced rate for people that are making
use of the hospital for outpatient services. In other words extended stays of a week or two weeks
and because the hotel is being offered as outpatient staying associated with the hospital at a
reduced rate, and us maybe eliminating the Transient Occupancy Tax on the front end rather than
on the back end over the 30-day period. That is just a fiscal impact but I think it is worth just
investigating a little bit.
My mother has Parkinson’s, she has had brain surgery several times for that, and she has stayed
in residence inns near various hospitals. I know that from their point of view they probably
generated more income in terms of the things that they bought locally in the community than
what that Transient Occupancy Tax represented. So you are collecting it back on the sales tax
end of things. So that is just a thought there.
With regard to the overall fiscal impact report I want to go back to something that someone said
earlier. We could very easily be overwhelmed by the volume of all of these reports. The fiscal
impacts, the EIR, the Development Agreements, the rezoning so to speak, and my biggest
concern is that if we get it all at once we would be squashed under the shear volume or weight of
all these reports. I think Staff probably would be a little overwhelmed as well.
What does concern me though more than anything is in reviewing each of these as separate
entities or separate items and making recommendations to Council closing the door and as Curtis
alluded to earlier and I talked a little bit about transportation that is in the EIR if it is in the EIR
but I bring it ups as part of the fiscal impacts and we sort of pass the fiscal impacts onto the
Council with a recommendation do we close the door on something there that really should have
been in there. So perhaps the way to go here is for us to have a pass at all of the volumes or all
of the sections before acting on them individually. So in other words we look at the breadth of
all of these portions or reports. That goes back to what Chair Holman said earlier which is the
schedule, where to do they fit on the schedule? I think that it would be prudent at this point to
update and publish the schedule again.
Chair Holman: Commissioner Keller.
Commissioner Keller: A couple of things. With respect to what Commissioner Lippert about
extended stay if somebody stays for 45 days, just for discussion sake, do they pay a Transient
Occupancy Tax for 30 days or they don’t pay any of the Transient Occupancy Tax?
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Mr. Perez: They have to let the hotel operator know in advance that that’s their intent otherwise
they pay up to the 3 0 days and the remaining 15 days are nontaxable.
Commissioner Keller: Thank you. So to the extent that people getting medical treatment on an
outpatient basis over an extended period of time to what extent is that being included in the fiscal
study for Transient Occupancy Tax?
Mr. Williams: Would you like us to include that in the fiscal study for Transient Occupancy
Tax?
Commissioner Keller: Yes please.
Mr. Williams: Thank you we will do that.
Commissioner Keller: Great thank you. There was a question that I asked about the Tolling
Agreement and the answer to my question with respect to we need clarification on Tolling
Agreement. My understanding is this refers to telephone service and in particular cellular
telephone service. Because there is the potential that cellular telephone service or telephone
service might not qualify under the Utility Users Tax at some point in the future due to ongoing
litigation. It would be helpful if the Utility Users Tax that was attributable to telephones were
separated from the Utility Users Tax that is attributable to other utilities because the Utility Users
Tax attributable to telephones may well go away.
Let me take this opportunity to say that I appreciate the tremendous amount of effort that has
gone into putting this together. In some sense this is sort of a table of contents of a lot of work
that is has been going on and will be going on. The Staff Report represents a lot of work and I
appreciate the work that is going on with Staff, with the myriad of consultants, I appreciate the
amount of effort that Stanford is putting into this in order to be able to allow the Commission,
the Council, and members of the public to provide appropriate and adequate oversight into the
process. I think it is very important for us to work in a collaborative way to create the best kind
of projects that will meet the needs of Stanford Medical Center, Stanford Shopping Center, and
the community of residents of Palo Alto and the future residents of Palo Alto for years to come.
I would expect that the Medical Center will be there for half a century or perhaps more in the
form that we are creating at this point. Thank you.
Chair Holman: Vice-Chair Garber.
Vice-Chair Garber: Just a small one and a suggestion. There should be a brief synopsis in the
fiscal report of the consultants that were chosen, their role, and what the responsibility is. I am
saying that in particular reference to the fact that the City isn’t simply/should be simply passively
accepting these things and passing them onto their own peer reviewer. The peer review is not
just simply reviewing did they add up the numbers correctly. Did they collect the things from
the right sources? I would expect them to do that anyway. We are also asking the peer
reviewers to do some speculative or design work as well to come up with their own conclusions
as opposed to simply testing the conclusions that the reports that we are receiving have come up
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with. So that sort of role and how we are using those consultants needs to be made clear. Again,
I think it is nothing more than a page or a half page sort of thing.
Mr. Perez: If I may, we are also using other public sector professionals or retired employees of
other organizations and our own to assist us in the review process. We will also outline that and
they are also helping us review the work as well to make sure that we have multiple eyes looking
at it. An example of what we saw was the motor vehicle number. We questioned the number
because it looked large and it was adjusted down so we are not just taking it for what it is and we
are going to look at it.
Vice-Chair Garber: Great, eyes and brains.
Chair Holman: Just a couple more things from me as well. This is a Development Agreement
and not our basic land use project. I don’t know what the basis is that is being used for
determining the open space criteria or impact but I would suggest that if we are looking at, again
I have this concern about impact fees for open space given the scarcity of land, but I would hope
that we would be looking at a minimum of the Quimby Act requirements that we would have on
other development. To me that should be a baseline.
Also again since this is a Development Agreement on the top of page 5 of 8 of the Staff Report it
talks about housing and school impacts. It says indirect impacts on housing and school impacts
and then halfway down in the paragraph it says, while the City is not legally required to provide
affordable housing for the projects, cities often times elect to fund or facilitate affordable
housing need generated by projects of this size. I don’t know what the City’s intention is at this
point in addressing but when looking at that to make sure again that all things are considered, all
aspects of housing production, land cost, construction cost, and cost escalation over time. When
it comes to the schools also land, structures, and staffing for increased demand. So all of those
things should be considered and with a Development Agreement we have more latitude in
considering these kinds of impacts.
So I think that is it. Commissioner Lippert do. you have anything else?
Commissioner Lippert: I just want to make one comment here. In looking at fiscal impacts it
really raises the question as to whether what we are looking at here is impact neutral or whether
there are no fiscal impacts that are imposed on the City. I think that it is unfair to say that there
will be no fiscal impacts or it will be impact neutral. When you think about development in the
city we don’t ding development out in the Stanford Research Park for their development and
their impacts on the city. In the Downtown or other parts of the city we don’t ding them for the
fiscal impacts or impositions that they put on the city in terms of development. My thought here
is that even though this is a rather large development and there are fiscal impacts there are some
impacts that this community is going to have to shoulder the burden for as a matter of growth. I
guess in reviewing this it just should be identified as to what the threshold should be in terms of
these fiscal impacts as to what this community can bear. One of the speakers, I think it was Tom
Jordan, had mentioned that in this Stanford should shoulder the burden for the entire thing. I
don’t know if that is a fair and accurate statement or not.
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Chair Holman: Commissioner Lippert we are not making any decisions tonight. I am a little
concerned about projecting your thoughts about an outcome.
Commissioner Lippert: No what I am interested in is understanding better I guess as to what the
threshold might be or what the bar might be in looking at that and us making that decision and
being fair about this decision.
One last comment, even though Michael Griffin has left the building I meant to say earlier that I
know he had grade expectations when it came to transportation.
Chair Holman: Commissioner Keller.
Commissioner Keller: One of the things that was mentioned in the fiscal impacts and I would
like to understand this a little bit better. We have a citywide cap on how much nonresidential
development that we are allowing to be built in the city. To the extent that 1.3 million new net
square feet are being built for the Medical Center that means that much less can be built for other
things. So just on the hypothetical suppose it were 600,000 new net square feet for the Medical
Center and that meant that there would be an additional 700,000 that could be built elsewhere.
So what I am talking about is the opportunity to cost that the City of Palo Alto is giving up by
allocating all 1.3 million net new square feet to this development and reducing the amount of
development that could happen elsewhere in the city, which would have their own fiscal benefits
to the City. You could imagine that those fiscal benefits would include property tax payments,
might include sales tax or something else. The issue is the that there is an opportunity cost with
allocating 1.3 million new net square feet to this as opposed to something else. It would be
helpful for that to be quantified.
I agree with quite a lot of things my colleagues have said tonight. I think that there is a lot of
consensus here. I think that in terms of understanding the kind of fiscal impacts and
understanding the kind of costs that might be bourn on the City and the cost that might be bourn
by the project it is helpful to understand that cost of the overall project being multiple billions of
dollars in construction for the Medical Center and I have no idea how much for the Shopping
Center and hotel. I was quite impressed at the Stanford representative talking about $217 million
in unreimbursed care a year. That is a phenomenal amount of money and I am wondering how
that compares with the amount of costs that are what would be the full amount of the fiscal
impacts on the City and how that would compare to $217 million a year. With that I will close
my comments. Thank you.
Chair Holman: Commissioner Keller I think the opportunity costs that you bring up is a very
valid point. Before I forge[ I want toclose the public comments.
I do believe that Vice-Chair Garber brought this up earlier but just to make sure I commented
previously about the memorandum from CBRE and its readability. Everything that comes to us
from this point forward needs to be exceedingly readable and accessible information. What we
are doing this evening is outlining all of the information that needs to come forward to our best
ability in order to make decisions not to forecast opinions, but so we have information for this
body on which to base recommendations. The more information we have the more comfortable
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we are going to feel with making a recommendation. These are enormous projects as it has been
stated before some of the largest that Palo Alto has ever seen. So it is all the more important that
we have clear, complete, concise data. With that I don’t see any other Commissioners having
comments. Does Staff have anything else to add?
Mr. Williams: No thank you. I think we got a lot of good direction and we will proceed and talk
to the Council about this subject on the 14th and certainly include your minutes as part of their
package and a little summary of some of the key points that you made. I anticipate one of you
will be there to help elaborate on that as well.
Chair Holman: So you will make a grid of our comments? The rep in July is Commissioner
Lippert. You made me think of something else but it is slipping my mind. So I guess this will
close item number two or the only item on tonight’s agenda. So thank you to Staff and to the
members of the public who came and that would include the Stanford representatives.
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Responses to Questions from Commissioner Keller:
1. Will the analysis consider the increased wear and tear on Palo Alto roads resulting from
construction vehicles and transport of construction supplies and removal of construction and
demolition debris?
Resoonse: Fiscal impact analyses typically do not include analysis of road impacts during
construction. The applicant(s) will be responsible for repairs or resurfacing and removal of
debris as conditions of approval.
2. Will the analysis consider the impact on other City of Palo Alto Utilities rate payers from
increased utility use by the proposed projects? Specifically, what is the fiscal impact that an
anticipated requirement for a 20% reduction in water usage would have with increased water use
by the proposed projects along with projected growth of Palo Alto population and other
businesses?
Response: The fiscal analysis will not consider the increased utility use by the proposed
projects. The effects of the projects on City of Palo Alto utilities will be discussed in the
EIR.
3. Given ABAG mandates for housing on Palo Alto based on the jobs housing imbalance, will
the fiscal reports quantify the current and anticipated mandates for very low, low, and moderate
income housing units over time and the costs to the City of Palo Alto of building the very low
and low income housing units over the same time periods? Can this quantification segregate
development subject to the housing impact fees from development not subject? To the extent
there is a divergence between the housing impact fees and the costs of the required very low and
low income housing resulting from the jobs in the development subject to the fees, does it make
sense to adjust the fees accordingly, particularly taking into account the distribution of incomes
of those jobs? Does a nexus study have to be city wide, or can more localized studies apply to
specific projects over a certain size?
Response: The employment and housing consultant for the EIR, Keyser Marston
Associates will determine the number of households and housing units that would be
needed to serve the additional employees of the projects. The City has hired David Rosen
Associates to identify the costs of providing below market rate housing units. The range
and amount of housing impact fees applicable to the project will be a negotiated item in the
Development Agreement, as will the determination of who (applicants or City) provides
what extent of subsidy for affordable units.
4. Will the reports quantify the costs to the public of traffic delays due to increased traffic
destined for the projects, as well as traffic from consequent mitigations? Are there standard
figures for estimating the costs of waiting in traffic, as well as quantifying the amount of
increased waiting compared with 2007 baseline?
~: Costs associated with traffic delays are not expected to be a part of the fiscal
study. At this time, we do not have a standard for quantifying costs associated with traffic
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delays. The costs¯ of EIR traffic mitigations would be studied as part of the EIR.
5. Will the calculation of potential sales tax revenues take into account whether "mail order"
sales within California are credited to Palo Alto when shipped to locations within Palo Alto, such
as the proposed projects?
Response: CBRE intends to incorporate estimates of what is called use taxes (out of state
purchase name for sales tax) in their fiscal analysis. Their estimate is only for the projects
under consideration.
6. Will the Utility Users Tax calculations for telephone (wired and cellular) usage take into
account the potential that such tax may end and refunds might be required when the tolling
agreement expires in October 2008?
Response: We need clarification on what "tolling agreement" the question references.
Based on current City interpretation of the UUT ordinance, neither federal activity nor
court judgments to date indicate a need to end the UUT or return any funds. To our
knowledge, UUT calculations by CBRE or BAE will be predicated on continuance of
current ordinance into the future.
7. Will the analysis study the differential effects of whether a Development Agreement freezes
impact fees at the level that applies when the agreement is signed or whether the impact fees
calculated from future nexus studies can be applied? In the latter case, what is the time point
associated with which nexus studies apply?
Response: The range of impact fees applicable to the project and the timing of the payment
of those fees ~vill be a negotiated item in the Development Agreement. The fiscal impact
study will provide key data for these policy decisions.
8. Is there a potential for computer sales to be moved from the Stanford Bookstore location in the
middle of campus to a location at the Stanford Shopping Center? What is the potential revenue
of such a move?
Response: The opportunities for additional sales tax revenue for the City could be a
negotiated item in the Development Agreement, but it is unlikely to be as specific as to
determine tenants for the Shopping Center. The fiscal impact study will look to some extent
at tenant mix (different types of retail vs. restaurant, etc.), however.
9. Will impacts on the Palo Alto Unified School District be considered, such as from the housing
to accommodate ABAG mandates as a result of the increased jobs at the proposed projects? (I
notice that PAUSD did not receive a courtesy copy of the Staff Report.)
Response: The impact on the schools will be analyzed by the City’s peer review contractor
Bay Area Economics. (PAUSD is on the notification list, but not on the cc list - staffwill
add them for future reports).
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10. Since Simon Properties purchased the Stanford Shopping Center in 2003, please explain
whether the property tax assessments on the Stanford Shopping Center reflect this sale and were
reassessed (and if not, why they should not have been reassessed).
Response: Santa Clara County did reassess the property and, in essence, treated the long-
term lease as a property transaction. The City received a sizable documentary transfer tax
payment.
11. To what extent are the backup documents (such as the housing analysis that has been
prepared by KMA, as per page 7 of the Staff Report, and the Stanford Shopping Center
Economic Impact/Urban Decay Analysis, as per page 4 of Attachment 1 of the Staff Report)
available for analysis by the Commission, the Council, and the public? Can these documents be
made available as completed? Will they be attached in electronic form to the reports released
concurrently with the DEIR? In the event that analyses depend on confidential financial
information, can the remainder be made available after the appropriate redactions?
Response: Some of the key supporting documentation and analysis studies that are used in
the development of the fiscal and environmental studies will be made available to public,
once staff is comfortable with their content. Staff expects to release the housing analysis
and the "urban decay" analysis within the next month. The fiscal analysis will be released
at approximately the same time as the DEIR. The hotel study may be released earlier if it is
available and acceptable to staff. All of these studies and supporting documents will also be
available on the City’s website.
I2. Should taxes for taxable sales or use taxes that do not currently designate Palo Alto as the
point-of-sale (as per the top of page 3 of the Staff Report) be considered as a fiscal benefit of the
proposed projects, or the correction of an error resulting in past revenue loss?
Response: Any use tax received as a consequence of construction should be considered a
fiscal benefit since they are incremental to the City’s revenue base (note that these will
primarily be one-time revenues). We have requested that Stanford work with City staff to
identify potential out-of-state purchases that they can, through a tax permit change,
identify as a Palo Alto point of sale. Since Stanford has not supplied information on out-of-
state purchases, staff cannot yet estimate potential lost or future revenues. We believe
there probably are revenue enhancement opportunities, however. The expansion should
lead to additional purchases and possible use tax in the future. Staffs preference is to
obtain Stanford’s full support in garnering use tax not only as a consequence of the
projects, but in the course of their ongoing out-of-state purchases. Staff sees this as a key
negotiation issue in the Development Agreement.
13. Will there be a quantification of the increase or decrease in property values from surrounding
properties that result from factors such as increased housing demand from the proposed projects
or the increased traffic along arterials as well as cut-through traffic? What about the incremental
changes in rents resulting from the proposed projects in comparison with baseline projections?
Response: Staff would anticipate the urban decay analysis to address any changes in
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proper~y value/taxes, but this is a question that could be raised with the consultants.
14. Please provide references for other cities and corresponding projects in the statement: "cities
oftentimes elect to fund or facilitate affordable housing need generated by projects of this size."
(Page 5 of Staff Report) Will the analysis quantify the cost of such funding or facilitation? What
effects will there be on other city services or fees or taxes to cover said costs?
Response: The analysis of the City’s housing development consultant, David Rosen
Associates, will identify the costs of providing affordable housing that would be needed.
The effects of providing housing on other city services or fees or taxes to cover housing
costs are not known at this time, but will be part of the fiscal and, to some extent, the EIR
analysis.
15. Will the PKF Consulting study and the Bay Area Economics (BAE) evaluation consider the
demand for conference facilities and services within Palo Alto, in part due to the loss of those
services with the closure of Rickey’s Hyatt, and the effect such conference facilities and services
would have on the demand for additional hotel rooms?
(Page 7 of Staff Report)
Response: The hotel study conducted by BAE will take into account the size and type of
hotel and ancillary facilities that could be located in the project area.
16. Will the analysis consider greenhouse gas reduction targets in AB32 and the fiscal impacts
on Palo Alto for achieving those targets? Is it correct that the EIR itself will consider the
proposed projects and their impact on the greenhouse gas reduction targets in AB32?
Response: The EIR will consider the projects’ contributions of greenhouse gases. The
approach to identifying the costs of the impacts is currently under consideration.
17. Attachment 1 of the Staff Report indicates (page 1, items 2 to 4) that various statistics
*were* provided by PBS&J’s Draft EIR, Chapter 2 "Project Description". Are these statistics
available for release prior to the completion and release of the Draft EIR?
Response: The statistics referred to will be presented with the Draft EIR, but for the most
part represent data outlined in the Fact Sheets for the SUMC project. Please see the
response to #11 as to the availability of supporting analyses.
18. Will the CBRE evaluation of impact fees from commercial development and General Fund
subsidies and the corresponding Bay Area Economics independent review result in new nexus
studies that can be used by the Council to set fees to eliminate such General Fund subsidies, if
any?
Response: It is unlikely that the CBRE evaluation of impact fees and the corresponding
BAE independent review would result in new nexus studies for fees. The analyses will be
very specific to this project and fees or other approaches would be the subject of
Development Agreement negotiations.
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19. What is the antecedent of "both" that are tentatively scheduled to be released in Fall 2008
concurrent with the draft EIR? (Page 5 of Staff Report) (The potential referents are the fiscal
impact analysis, the peer review of the fiscal impact analysis, and a hotel study.)
Response: "Both" refers to the fiscal impact study and the DEIR.
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