HomeMy WebLinkAbout2003-10-20 City Council (3)City of Palo Alto
City Manager’s Report
TO:HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT: PLANNING
DATE:
SUBJECT:
OCTOBER 20, 2003 CMR: 462:03
ORDINANCE ADOPTING A COORDINATED AREA PLAN FOR
THE SOUTH OF FOREST AREA, PHASE 2
RECOMMENDATION
Staff recommends that the City Council:
Adopt the resolution (Attachment A) certifying the addendum to the South of
Forest Area Final Environmental Impact Report
Adopt the resolution (Attachment B) amending the Land Use Map of the
Comprehensive Plan to designate the area generally bounded by Forest Avenue,
Addison Avenue, Alma Street, and Ramona Street as "South of Forest Area, Phase
2 Coordinated Area Plan".
o Adopt the ordinance, included in Attachment C, approving the South of Forest
Area, Phase 2 ("SOFA 2") Coordinated Area Plan ("CAP").
Clarify whether Ordinance 4730 (Retail Protection Ordinance) protecting certain
uses on the Homer/Emerson Corridor applies to the entire site or only to the street
facing portion of the site.
Direct staff to return with an ordinance permitting Transferable Development
Rights (TDRs) to be transferred from SOFA 2 to the CD district.
BACKGROUND
The SOFA 2 CAP is the culmination of a planning process that began in 1997.
Originally, the planning area comprised the 18 blocks bounded approximately by Alma
Street, Addison Avenue, Forest Avenue, and Kipling and Cowper Streets. The area was
subsequently divided into two phases, and Phase I was approved in March 2000. Phase 2
CMR:462.:03 Page 1 of 6
includes the nine blocks approximately bounded by Forest Avenue, Addison Avenue,
Alma Street, and Ramona Street. A Working Group of residents, developers, and other
interested parties had been appointed to advise Staff on SOFA 1 and SOFA 2.
On April 17 and 18, 2002, the Historic Resources Board (HRB) and the Architectural
Review Board (ARB) reviewed the proposed SOFA 2 CAP, which consisted of the
Working Group recommendations and some alternative standards recommended by staff.
Their comments were forwarded to the Planning and Transportation Commission (PTC)
for further review. The PTC reviewed the CAP in meetings on May 8 and 16, June 5 and
31, August 7 and 21, and September 5, developing a version of the plan that adopted
some of the staff-recommended alternatives while maintaining the majority of the
Working Group plan.
On October 7, 2002, the City Council held a public heating regarding the two
recommendations. At that meeting, it directed staff to respond to comments and
questions regarding the plans. The Council also requested additional, focused review by
the ARB and HRB on specific issues. This review was held in an HRB meeting on
January 15, 2003 and an ARB meeting on January 16, 2003. Both boards commented on
the massing model developed to evaluate different density options and procedures for
review of projects in SOFA 2 by the HRB and ARB. In addition, the HRB commented
on the staff-recommended modifications to the historic preservation provisions.
On February 4, 2003, the PTC reviewed the massing model of SOFA 2 and the additional
information provided by staff in response to Council questions. At that meeting, the PTC
made recommendations and requested that staff return with proposals for resolving any
issues raised by stakeholder groups such as the SOFA 2 property owners and the
Working Group. Staff subsequently held two outreach meetings, one with the SOFA 2
property owners and one with the Working Group, on May 22 and May 29 respectively.
On June 25, 2003, the PTC reviewed staff’s suggestions for modifications to the
proposed CAP to address the concerns raised at these meetings, made some
recommendations, and left other issues to be resolved by the City Council.
The Council held a public hearing and gave direction on eight unresolved policy issues
over the course of three meetings: July 21, July 28, and August 2, 2003. Staffhas
incorporated that policy direction into the SOFA 2 CAP (see Attachment C).. A matrix
showing Council actions and where they may be found in the CAP is included in
Attachment D.
DISCUSSION
The CAP, presented in Attachment C, is divided into six chapters and eight appendices.
The first chapter sets forth how the CAP is organized and how it relates to the
Comprehensive Plan and the Zoning Code (Title 18 of the Palo Alto Municipal Code).
CMR:462.:03 Page 2 of 6
The second chapter contains the vision for SOFA 2, while the third lists policies for the
area, which are supplemental to Comprehensive Plan policies. The fourth chapter
contains design guidelines for projects in SOFA 2, for use by the ARB and other review
bodies. The fifth chapter presents the development standards, the zoning for the area.
The sixth chapter lays out the procedures for reviewing projects under the plan.
The Council’s policy direction on several topics has been incorporated into the plan.
Attachment D may be used to find the locations where Council policy direction has been
added. The text implementing the Council’s direction has been underlined.
Permanent Rental Housing.
One proposal that staff brought to the Council and that the Council approved required
additional study from the City Attorney’s office. The Council supported granting
additional FAR for residential buildings where all the units would be rentals, rather than
condominiums. To grant such FAR bonuses, the City needs a long-term guarantee from
the owner of the property and its successors that the building will remain a rental
building. Recorded agreements that "run with the land" and bind future owners are used
by the City for a number of programs already, including the Historic Preservation
Transferable Development Rights (TDR) program. The SOFA2 ordinance proposes
them in this case. Particular care will have to be taken in drafting them because the Ellis
Act, which governs rent control in California, gives property owners the right to
withdraw rental units from the market. The Council is not proposing rent control in
SOFA2 and the Ellis Act may seem irrelevant. However, property owners have used the
Ellis Act to challenge local zoning regulations not directly related to rent control. Court
decisions generally have been in favor of cities’ zoning power, but there is as yet no
decision on this particular case. The Ellis Act specifically authorizes agreements to
maintain rental units when a City makes a direct financial contribution to the construction
of a new building. The ordinance is written so that the City need not approve extra
square footage unless it is satisfied that it has an enforceable rental agreement.
Transition Setbacks
In addition to the topics Council addressed at previous meetings, there are some areas of
the plan where provisions have been clarified or minor provisions have been added. Staff
has clarified setbacks and daylight planes in the CAP, ensuring that there are setbacks
and daylight planes protecting adjacent low-density residential districts from the impacts
of RT-35 residential, commercial and mixed-use projects. The daylight plane for the
RT-50 district has been checked to ensure that it reduces the visibility of fourth floors
near RT-35 districts, creating a smooth transition between the two districts.See
Attachment E showing locations of special transition setbacks and daylight planes.
CMR:462.:03 Page 3 of 6
Floor Area Bonus Pro~am.
Staff has also quantified the Bonus Floor Area Program (see report from Bay Area
Economics in Attachment C). Under this program, sites in the RT-35 district could go
from the base 1.15:1 FAR to 1.30:1 FAR, while RT-50 sites could go from 1.30:1 to
1.50:1. In order to do so, they would have to provide public parking spaces, additional
BMR units, or commercial space reserved for nonprofits or childcare providers. In order
to determine the number of parking spaces, BMR units, or commercial square feet
required for bonus square footage, Bay Area Economics (BAE) analyzed the return that
could be realized from the bonus square footage and weighed that against the opportunity
cost of providing the public benefit. The following table shows the amount of public
benefit required for each 1,000 square feet of bonus square footage, and gives an example
of what could be achieved on a large (approximately 26,000 sO site in SOFA 2:
Results- 26,250 Sq. Ft. Lot
1.15 FAR to 1.3 FAR
(3, 938 bonus sq. ft.)
2 additional BMR
units
1.3 FAR to 1.5 FAR
(5,250 bonus sq. ft.)
2.5 additional BMR
units
Public Benefit Conversion Rate
BMR Units 500 BMR sfper
1,000 bonus sf
Commercial space for 600 sfper 2,240 sffor 3,100 sffor
Child Care or Nonprofits 1,000 bonus sf childcare/nonprofits childcare/nonprofits
Public Parking (Podium)5 spaces per 18 public spaces 25 public spaces
1,000 bonus sf
Public Parking 3 spaces per 12 public spaces 16 public spaces
(Underground)1,000 bonus sf
The BAE analysis is based on the assumption that a project would be feasible (would
justify the purchase of the land) at the base FAR, and that any bonus FAR would simply
increase the overall return from the project, part of which would be used to provide
public benefit. This approach is consistent with the intent of the Public Benefit Floor
Area Bonus program, which is to provide incentive to the developer of a feasible project
to expand the project in exchange for sharing some of the incremental increase in profit
in the form of certain public benefits. It should also be noted that, because of the
variability of economic factors, this floor area bonus program will most likely be
attractive for some projects, but not for others, and will be more attractive during certain
market conditions.
Protection From Office Conversion on the Homer/Emerson Corridor
The City Council directed that in SOFA 2 retail, personal services, eating and drinking
and automotive service uses would be protected from conversion to office use on Homer
Avenue and parts of Emerson Street. These are the provisions of Ordinance 4730, the
Citywide Retail Protection Ordinance. Staff is requesting that the Council clarify
CMR:462.:03 Page 4 of 6
whether this protection from office conversion applies to the entire site or only to the
street-facing portion of the site. The advantage of applying it only to the street frontage
is that an office use in the rear portion of the building could subsidize a retail type use in
the street facing portion of the building. This could be especially applicable to auto
service buildings because of their size and configuration. If it is the Council’s intent to
protect the street frontage, staff will include a provision in the CAP stating that
Ordinance 4730 applies to the portion of the building fronting on Homer or Emerson,
including a minimum of 50% of the area occupied by the protected use.
Transferable Development Rights
The CAP would allow TDRs transferred out of SOFA 2 to be used for either residential
or commercial use; this creates a larger incentive for seismic and historic rehabilitations
in SOFA 2 while moving development out of the area and into the more intense areas
within the assessment district. In addition, this is consistent with what is currently
permitted in the CD-S district. However, because SOFA 2 will no longer be part of the
CD district, minor text changes in the Palo Alto Municipal Code are necessary to permit
such transfers. To accomplish this, staff will return with an ordinance to be reviewed by
the PTC prior to Council action.
A related policy question is the use of TDRs transferred from SOFA 2 to Downtown to
construct residential units. Because of density limitations Downtown, it is not possible to
build the smaller, more affordable units that can be built in SOFA 2. Staff proposes
allowing TDRs from SOFA 2 that are transferred into the Downtown for residential use
to be developed without density limits and with the 1250 square foot maximum average
unit size, as would be the case if the TDR were used in SOFA 2. This would permit
smaller, more affordable units Downtown, in the assessment district. Two potential
benefits of this would be more housing units and smaller units in the Downtown near
transit, and the potential shifting of development out of SOFA 2 into Downtown. If the
Council approves the SOFA 2 CAP and directs staff to include this provision, it will be
brought back along with the other cleanup legislation that is required to permit transfers
out of SOFA 2 and into the CD district.
Second Units in the R-2 District
Another policy question has also come to Staff’s attention. In the R-2 district located in
SOFA 2, three sites are under their maximum FAR and would be able to have a second
unit except for the 7500 square feet lot size requirement in R-2. These three parcels,
located at 904, 926, and 934 Ramona, are each 5600 square feet, have Historic Resource
houses on the site and back up to commercial property. These three parcels are larger
than the minimum lot size required for a second unit in the DHS zoning directly across
the street. Staff is recommending that for the R-2 zone in SOFA 2, Historic Resource
properties with minimum parcel size of 5000 square feet be allowed to have a second
unit, and the second unit may be over a garage. This would serve the purpose of
CMR:462.:03 Page 5 of 6
providing an incentive for historic preservation while also encouraging the provision of
up to three more rental housing units. The language that would implement this proposal
is in subsection 5.110(c) on page 66 of the CAP.
RESOURCE IMPACT
Adopting the SOFA 2 CAP would not require significant additional staff time or other
significant outlays of resources.
POLICY IMPLICATIONS
Adopting the SOFA 2 CAP would fulfill Comprehensive Plan policy Program L-22:
"Prepare a Coordinated Area Plan for the South of Forest Area and the Palo Alto Medical
Foundation site."
ATTACHMENTS:
A: Resolution certifying the SOFA FEIR as the environmental document for SOFA 2
and Addendum to SOFA FEIR (Exhibit A of Attachment A).
B:Resolution Amending the Land Use Map of the Comprehensive Plan for SOFA 2.
C:Ordinance approving the SOFA 2 CAP and SOFA 2 CAP (Exhibit A of
Attachment C)
D:Matrix of Council Policy Direction
E:Map of setbacks and daylight planes
F:Report from BAE re: Public Benefit Floor Area Bonus Program
PREPARED BY:
VIRGINIA WARHEIT
Senior Planner
DEPARTMENT HEAD REVIEW:
,LIE
Director of Pl~nity Environment
CITY MANAGER APPROVAL~ ,( /O, ~ ~
EMILb~-~AR~ ~-’N~ -
Assistant City Manager
CMR:462.:03 Page 6 of 6
Attachment A
NOT YET APPROVED
RESOLUTION NO.
RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO
CERTIFYING THE ADEQUACY OF THE SOUTH OF FOREST
AREA COORDINATED AREA PLAN FINAL EIR AS THE
ENVIRONMENTAL DOCUMENT FOR THE SOUTH OF FOREST
AVENUE COORDINATED AREA PLAN, PHASE 2 AND MAKING
FINDINGS THEREON PURSUANT TO THE CALIFORNIA
ENVIRONMENTAL QUALITY ACT
The Council of the City of Palo Alto does RESOLVE as
follows:
SECTION I. Backqround. The City Council of the City of
Palo Alto ("City Council") finds, determines, and declares as
follows:
A. On March 27, 2000 the City Council adopted Resolution
No. 7950 certifying that the South of Forest Area Coordinated Area
Plan Final Environmental Impact Report ("2000 SOFA EIR") had been
prepared in compliance with the California Environmental Quality
Act ("CEQA") and that it was an adequate analysis for Phase 1 of
the South of Forest Area Coordinated Area Plan. The 2000 SOFA EIR
analyzed a project that included a twenty-one block area bounded by
Forest Avenue, Alma Street, Addison Avenue, and Kipling Street.
The project was subsequently divided into two phases. The South of
Forest Area Coordinated Area Plan, Phase I, governing the south-
eastern portion of the site, was approved in March of 2000 by
Resolution No. 7951 and Ordinance No. 4626. The remainder of the
project, governing a nine-block area generally bounded by Alma
Street, Forest Avenue, Ramona Street, and Addison Avenue, is known
as the South of Forest Area Coordinated Area Plan, Phase 2,
("SOFA 2 CAP.")
B. The 2000 SOFA EIR consists of the following documents
and records: "South of Forest Area (SOFA) Coordinated Area Plan
Draft Environmental Impact Report" dated February 1999; "South of
Forest Area Coordinated Area Plan Final Environmental Impact Report
dated November 1999;" and "South of Forest Area Coordinated Area
Plan Final Environmental Impact Report - First Amendment dated
March 2000;" and the planning and other City records, minutes, and
files constituting the record of proceedings. The Final EIR was
prepared pursuant to the California Environmenta! Quality Act,
Public Resources Code section 21000, e_~t seq. ("CEQA"), and the
State CEQA Guidelines, California Code of Regulations, Title 14,
section 15000, et seq. The Fina! EIR is on file in the offices of
the Director of Planning and Community Environment and, along with
020930 syn 0091143
NOT YET APPROVED
the planning and other City records, minutes and files constituting
the record of proceedings, is incorporated herein by this
reference.
C. Preparatory to the adoption by the City of the SOFA 2
CAP, City staff reviewed the 2000 SOFA EIR to determine whether a
subsequent EIR was required by CEQA, or whether the 2000 SOFA EIR
could be used, augmented only by an Addendum as authorized by CEQA
Guideline 15164. The intensity of deve!opment permitted under the
SOFA 2 CAP, is less than that analyzed in the 2000 SOFA EIR for the
nine-b!ock Phase 2 area. It would not generate impacts beyond
those evaluated in the 2000 SOFA EIR and no additional mitigation
measures are required. None of the other situations identified in
Guideline 15162 requiring a subsequent EIR exist. Therefore, the
City has elected to proceed on the basis of the 2000 SOFA EIR,
augmented by the Addendum attached to this resolution as Exhibit A.
The 2000 Fina! EIR and a draft Addendum were presented to the
Planning and Transportation Commission for its review and
consideration prior to its fina! recommendation to the Council on
September 5, 2002.
F. The City Council finds that the SOFA 2 CAP incorporates
al! mitigation monitoring program and includes a monitoring and
enforcement program through the requirement for certificates of
conformance with the CAP. Therefore, no additional mitigation
monitoring program is needed to comply with Public Resources Code
Section 21081.6.
G. The City Council has reviewed and considered the
information contained in the Final EIR and the Addendum and the
record of proceedings.
SECTION 2. Certification. The City Council certifies,
based upon the record before it, that it is entitled to rely upon
the previously certified 2000 SOFA EIR in reviewing the SOFA 2 CAP.
The City Council has reviewed and considered the information
contained in the Final EIR, the Addendum, staff reports, oral and
written testimony given at public hearings on the proposed Project,
and all other matters deemed material and relevant before
considering for approval the various actions related to the SOFA 2
CAP.
SECTION 3. Significant Impacts Which Can Be Mitigated To A
Less Than Significant Level. The City Council finds that the 2000
SOFA EIR identifies potentially significant environmental effects
of the Project with regard to Traffic and Circulation, Noise,
Geology, Hydro!ogy, Health Hazards, Solid Waste Disposa!,
Vegetation and Wildlife, and Cultural Resources. The City Council
finds that, in response to each significant effect listed in this
020930 s)m 0091143
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Section 3, all feasible changes or alterations have been required
in, or incorporated into, the Project which avoid or substantially
lessen the significant environmental effects identified in the
Final EIR as summarized below. Each of the Mitigation Measures
summarized be!ow is more fully described in Summary Table A in the
Final EIR. Because all mitigation measures are included in the
Phase 2 SOFA CAP, no additional mitigation measures are required.
A. Traffic and Circulation. Potentially significant
impacts are identified if two-way traffic is reinstated on Homer
and Channing Avenues. However, the SOFA 2 CAP does not implement
two-way traffic. Therefore, no mitigation is required.
B. Noise. Potentially significant noise impacts are
identified for residential and mixed use development in areas where
the ambient noise level exceeds 60 dbL. The provisions of
Mitigation Measure 3 in the Final SOFA EIR have been incorporated
in Chapters 4 and 5 of the SOFA 2 CAP and no further implementation
is necessary.
C. Geoloqz. A potentially significant impact is that
existing and proposed structures in the CAP area may be damaged by
shrinking and swelling of soils. This impact wil! be reduced to
less than significant levels by Mitigation Measure Number 4
included in the SOFA 2 CAP, Chapter 5. This measure instructs the
building officia! to require, as the building official deems
appropriate, soils studies, and the implementation of the
recommendations of such studies in order to reduce this impact to a
less than significant level.
D. Hydrology. A potentially significant impact is that
pollutant runoff from construction and operation of new projects
could be cumulatively significant. This impact will be reduced to
less than significant levels by Mitigation Measure Number 5
included in the SOFA 2 CAP, Chapter 5, requiring incorporation of
Best Management Practices described in Policy N-27 and 29 of the
Comprehensive Plan, and Chapter 16.28, Excavations, Grading and
Fills of the Palo Alto Municipa! Code.
E. Health Hazards. A potentially significant impact is
exposure of a future population to contaminated soil and
groundwater in the area. This impact wil! be reduced to less than
significant levels by Mitigation Measure Number 6 included in the
SOFA 2 CAP, Chapter 5. A second potential impact is from release of
asbestos during demolition of existing buildings. This impact will
be reduced to less than significant levels by Mitigation Measure
Number 7 included in the SOFA 2 CAP, requiring compliance with the
City of Palo Alto Fire Department standards and procedures for
asbestos containing materia!.
3
020930 syn 0091143
NOT YET APPROVED
F. Schools. The EIR notes that implementation of the CAP
will increase the demand on existing schools. State law declares
that school impact fees collected by the Palo Alto Unified Schoo!
District on all new construction are ful! and complete mitigation
of any impact on schools. Therefore, the City cannot require any
additional mitigation.
G. Solid Waste Disposal. A potentially significant
impact is an increase in solid waste from the demolition of
existing buildings and the construction of new offices. The SOFA 2
CAP includes Mitigation Measures Numbers 8 and 9 included in the
SOFA 2 CAP Chapter 5, requiring construction recycling plans and
operation recycling programs as part of the project approva!
process. This will reduce any impacts to a leve! of
insignificance.
H. Vegetation and Wildlife. A potentially significant
impact was identified on heritage and landmark trees and publicly
owned trees in the right of way. The SOFA 2 CAP includes
requirements to preserve trees and landscaping. Mitigation Measure
Number I0 is included in the SOFA 2 CAP in Chapters 4 and 5. These
mitigation measures wil! reduce the potential impacts to vegetation
and trees to a leve! of insignificance.
I. Cultural Resources. A potentially significant impact
was identified on prehistoric and historic resources from future
development, grading, and construction.
!)
2)
The SOFA 2 CAP, like the SOFA CAP, Phase i, permits
parking exceptions up to 25% for historic properties,
which has a beneficial impact on preservation.
Mitigation Measure Number ii proposed the mandatory
preservation of National Register-eligible properties
and certain other historic buildings in the area, and
incentives for the preservation of other historic
properties. The SOFA 2 CAP provides for preservation
of National Register-eligible properties except in
very limited circumstances. It also provides
incentives ¯for preservation of historic properties in
the Residential Transitional Districts. These
measures reduce the potential impact to a level of
insignificance.
3)
020930 syn 0091143
Mitigation Measure Number 12 specifying procedures to
be fol!owed if archeological resources or human
remains are discovered during grading or construction
activities, is included in Chapter 5 of the SOFA 2 CAP
NOT YET APPROVED
arid will reduce potential impacts on
resources to a level of insignificance.
prehistoric
Since all mitigation measures are incorporated in the SOFA 2
CAP and enforceable through the requirement to obtain a Coordinated
Deve!opment Permit prior to construction or alteration of
buildings, no additional monitoring program is required.
SECTION 4. No Significant Impacts Which Cannot Be Fully
Mitigated. The Fina! EIR identified a significant environmenta!
effect on open space if 1.3 acres of parkland could not be secured.
However, parkland has been acquired. Therefore, the City Counci!
finds that this effect has been reduced to a level of
insignificance.
SECTION 5. The City Council previously certified that the
Fina! EIR describes a reasonable range of alternatives to the
Project that could feasibly obtain the basic objectives of the
Project. The City Council has evaluated the comparative merits of
the alternatives and rejected them in favor of the proposed Project
as summarized below:
A. Alternative #I - No Project Alternative.
This alternative assumes no rezoning of the site, with any
future development on the site consistent with existing zoning.
This alternative is not desirable for the City because it would not
achieve the goals and policies of the SOFA 2 CAP for more housing
and parkland.
B. Alternative #2
Alternative Land Use Plan.
Palo Alto Medical Foundation
This alternative is not relevant to the SOFA 2 area.
C. Alternative # 3 - Alternative Circulation System Layout.
This alternative replaces the paired one-way circulation on
Homer and Channing Avenues with two-way traffic on each street.
The SOFA 2 CAP concludes that further study is needed before a
decision can be made on this proposal. While some believe that
two-way traffic would slow traffic, there are concerns about
!oading for commercial activities, traffic shifts, garage access
for Channing House, and deterioration of intersections.
020930 syn 0091143
Do
Transition.
NOT YET APPROVED
Alternative #4 - Alternative Land Use Confiquration and
This alternative recommended a different land use
configuration for the SOFA CAP, Phase i, which ~is not relevant to
this project, and a lower intensity of development for the MU-I and
MU-2 ("Mixed Use") areas, which include most of the Phase 2 area.
The Area Plan analyzed in the 2000 SOFA EIR (in 1999) was expected
to produce approximately 215 new residentia! units and 193,000
square feet of additiona! office space in the Mixed Use Areas. The
SOFA 2 CAP further reduces the new office square footage while
providing zoning and incentives for generally relatively smal!
dwelling units in an area c!ose to services and transit. The SOFA
2 CAP is superior to Alternative #4 in addressing the City’s
imbalance between jobs and housing.
SECTION 6. Impacts Found Not To Be Significant. The City
finds that the Final EIR neither expressly identifies, nor contains
any substantia! evidence identifying significant environmenta!
effects of the Project with respect to any of the environmental
impacts dismissed through the scoping process with "no" responses
on the initia! Environmenta! Assessment (contained in Section 7.1
of the Draft EIR). It was identified, through the Initial Study,
that the proposed project would not have any impacts on endangered
or threatened habitat or species.
SECTION 7. No Recirculation Required. The City Council
finds that no new significant information has been received that
requires preparation of a subsequent EIR.
SECTION 8. Substantial evidence supporting each and every
finding made herein is contained in the Final EIR, and Addendum
including amendments, revisions and records of proceedings.
//
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020930 syn 0091143
NOT YET APPROVED
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:APPROVED:
City Clerk Mayor
APPROVED AS TO FORM:
Senior Asst. City Attorney
City Manager
Director of Planning and
Community Environment
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7
SOUTH OF FOREST AREA
COORDINATED AREA PLAN
FINAL ENVIRONMENTAL IMPACT REPORT
ADDENDUM
October 2002
Department of Planning and Community Environment
City of Palo Alto
TABLE OF CONTENTS
PREFACE AND SUMMARY
I.
II.
Pa~e
........ ............................ .......... .........3
PROJECT LOCATION, BOUNDARIES AND SITE ....................5
CHARACTERISTICS
ANALYSIS OF LAND USE, TRAFFIC/PARKING AND
CULTURAL ISSUES SPECIFIC TO SOFA CAP 2 .....................5
ATTACHMENTS:
Attachment A:SOFA 2 Area Map
2
PREFACE AND SUMMARY
The City of Palo Alto certified a Final ?::onmental Impact Report (FEIR) in
March of 2000 for the South of Forest :dinated Area Plan (SOFA CAP). The
FEIR consists of the following docum~,and records: "SOFA CAP Draft
Environmental Impact Report dated February 1999"; "SOFA CAP FEIR dated
November 1999"; and SOFA CAP FEIR - First Amendment dated March 2000";
and the Planning Department files, other City records and minutes constituting the
record of proceedings. The FEIR is on file in the office of the Director of Planning
and Community Environment.
The original SOFA area (December 1998 SOFA Plan) was approximately 18
blocks bounded by Alma Street on the west, Addison Avenue on the south, Forest
Avenue on the north, and mid-block between Kipling Street and Cowper Street on
the east. This overall area was later divided into two phases for development
because a large number of parcels in the Phase 1 area were being vacated by the
Palo Alto Medical Foundation (PAMF) and the private redevelopment of those
parcels would occur much more quickly than the rest of the area. The SOFA CAP
FEIR described and analyzed the differences between the December 1998 and
June 1999 SOFA CAP proposals, and the effects of the decision to adopt the
SOFA CAP in two phases.
Phase 1 - the nine blocks between Forest Avenue, Addison Avenue, mid-
block between Kipling and Cowper and Ramona Street, including a small
mid-block section on the west side of Ramona Street, includes all properties
owned by he Palo Alto Medical Foundation (PAMF).
Phase 2 - the nine blocks between Forest Avenue on the north, Addison
Avenue on the South, Alma Street on the west, and Ramona Street on the
east, excluding the small mid-block section on the west side of Ramona
Street that was included in Phase 1.
The 1999 FEIR is a Program EIR that accommodates the phasing of the plan and
provides the environmental analysis for the entire SOFA CAP area. Phase 1 of the
SOFA Plan was further analyzed in the First Amendment to the FEIR and was
approved in March 2000. Future land development actions within the Phase 1 area
will include design and land use approvals, subdivision of land, demolition and
relocation of structures, construction activities, and infrastructure improvements.
This Addendum to the Program FEIR focuses on the Phase 2 area and land
development actions within that area. Upon SOFA 2 Coordinated Area Plan
(SOFA 2 CAP) adoption, development proposals in conformance to the Plan may
be processed under the procedures described in the SOFA 2 CAP. Development
3
proposals not consistent with the Plan may require additional environmental
analysis as focused environmental impact reports and will be processed as
amendments to the Plan requiring review by the Planning Commission and City
Council.
The California Environmental Quality Act (CEQA) allows for the revision of an
EIR after public review. These revisions can discuss changes in the project itself,
or its setting, or simply provide additional information. The entire EIR must be
"recirculated" only if significant new information prevents the public of a
meaningful opportunity to comment on:
a substantial adverse effect of the project
a feasible way to mitigate or avoid such effect, including a feasible
alternative rejected by the applicant.
No new substantial adverse affects have been identified from project revisions or
changes in the project setting for the SOFA 2 area. Feasible mitigation measures
and alternatives have been incorporated in the Revised SOFA CAP Phase 2, and
no substantial adverse effects remain. Therefore, recirculation is not required for
this Addendum to the FEIR.
4
SECTION I
PROJECT LOCATION, BOUNDARIES AND SITE CHARACTERISTICS
Phase 2 consists of the nine blocks between Forest Avenue on the north, Addison
Avenue on the South, Alma Street on the west, and Ramona Street on the east,
excluding the small mid-block section on the west side of Ramona Street that was
included in Phase 1, see Attachment A, SOFA 2 Area Map.
A major impetus for Phase 2 of the SOFA CAP preparation was the emergence of
new development in the commercial portions of the nine-block area. These new
developments generally included commercial office and residential uses in denser
developments than the existing automobile-oriented service uses, which
previously dominated the area. High land values, high tech related employment
growth, and the limited opportunity for growth in commercial districts throughout
the downtown has fueled this development trend. These conditions are likely to
result in continued development pressures in the area. Therefore, Phase 2 of the
CAP specifies the appropriate land use pattern and intensity of development in the
nine-block area and addresses such concerns as; compatibility of development
with existing uses, parking, traffic, historic resources, recreation/open space,
architectural!design issues, development standards, the relationship between the
SOFA Phase 2 area and the Downtown, and new land use designations.
SECTION II
ANALYSIS OF LAND USE, TRAFFIC~ARKING AND CULTURAL
ISSUES SPECIFIC TO SOFA CAP 2
A Working Group was appointed by the City Council to advise the City on the
issues, alternatives and substance of the SOFA 2 CAP. The Working Group
recommendations and the Planning Commission recommendations vary on certain
issues. This Addendum includes an analysis of the key issues. The Council retains
the ultimate decision making responsibility for policy direction, plan content and
plan adoption.
Policy Implications
Phase 2 of the SOFA Plan is consistent with Comprehensive Plan Policy L-25,
which calls for enhancing the character of the South of Forest Area as a mixed-use
area, and Program L-22, which calls for the preparation of a coordinated area plan
for the South of Forest Area and the Palo Alto Medical Foundation site(s).
The Policy Framework states that development proposals found not to be
consistent with the Plan will be processed as amendments to the Plan requiring
review by the Planning Commission and City Council. The Policy Framework
5
does not state that Planned Community (PC) zones are not or should not be
permitted. If the ability to apply for a PC is permitted within the Plan, that process
would allow those applications that are consistent with the vision, goals and
objectives of the plan but not the development standards to be evaluated on the
project merits. The Planning Commission, ARB (and HRB if an historic site or
structure is involved), and the City Council all review PC applications. The PC
process also allows multiple opportunities for public review and input. Applying
for a PC zone would not necessarily mean that the project is inconsistent with the
Plan, but rather that the development standards may not best address the unique
circumstances found on a particular site.
All of the goals and policies in the SOFA CAP 2 support mixed-use development
with any additional floor area, over and above that which is permitted under the
existing zoning, to be used for additional housing.
Development Standards
Two different Residential Transitional (RT) districts are proposed. In the RT-35
district, closer to SOFA Phase 1 and existing single family neighborhoods, the
maximum height for new construction is 35 feet, and the base maximum FAR is
1.15 to 1. This can be increased to 1.3 through floor area bonuses, and 1.5 with a
PC District. In the RT-50 district closer to Alma Street, the height limit is fifty
feet, (excluding daylight plane areas along Homer Avenue), the base maximum
FAR is 1.3, increasing to 1.5 with bonuses, and with a maximum FAR with a PC
district of 2.0, except for affordable housing, for which the FAR will be
determined during the review process. Within the overall maximum FAR limits,
office use cannot 5,000 square feet on a site, and commercial uses of all kinds
cannot exceed 0.4:1 FAR. In the Phase 2 area as a whole, height limits are lowered
from the existing 50 feet in areas closest to existing residential development and
historic low rise areas such as Homer Avenue. In the RT-50 area, the existing rule
that lowers the height limit in proximity to residential and mixed use development
is eliminated.
Parkin~
The plan calls for on-site parking to be provided in accordance with the provisions
of 18.83 of the Municipal Code. The plan calls for parking reductions based on
the inclusion of transportation demand management (TDM) programs in
development proposals and for proximity to the train and other forms of public
transportation.
Cultural
The Final EIR identified impacts on historic resources because changes in land use
regulation might encourage new construction that damaged their historic integrity.
It concluded that the impact could be mitigated to a level of insignificance. The
6
Final EIR identified the historic resources in both the SOFA 2 and SOFA 1 areas.
These included sites on the City’s own Historic Inventory and additional sites that
had been identified as potentially eligible for the National Register of Historic
Places or the California Register of Historic Resources. Mitigation measures were
revised in the First Amendment because the City did not adopt a historic
preservation ordinance of general application. Instead, the SOFA Cap, Phase 1
itself requires preservation of National Register eligible buildings and provided
encouragement for preservation of others.
The SOFA CAP, Phase 2 provides the same or greater level of protection to
historic resources as the SOFA CAP, Phase 1. It protects both National Register
and California Register sites and provides transferable floor area bonuses, parking
exemptions, and liberal non-conforming use continuances as incentives. It
includes all relevant mitigation measures for them, and there are no new impacts.
Policies and standards for historic preservation, and for assuring that nearby
development respects historic resources, are set forth in Policies DC 6-14 and
Chapter 5.110. There is a staff recommendation that under limited circumstances,
the City Council may authorize demolition or relocation of non-National Register
eligible buildings where it does have a significant effect on the City’s historic
preservation program as set forth in Chapter 16.49 of the Palo Alto Municipal
Code.
A plan that does not protect National Register-eligible structures would, as
indicated in the Final EIR, have a potential significant impact on historic resources
and a statement of overriding concerns would have to be made before it could be
adopted.
Review Process
The plan calls for non-historic sites that are not adjacent to or across the street
from historic sites or structures to go through the standard ARB process for new
development and remodeled existing development. All historic sites would be
reviewed by the HRB.
Cumulative Impacts and Recently Anticipated~ Pending, Approved~ under
Construction or Finalized Development Proiects in the SOFA 2 Area
The SOFA CAP 2000 FEIR includes an analysis of the cumulative impacts
associated with the development of projects within the entire SOFA CAP area.
The Phase 2 Area Concept Plan, See Attachment E, consists of mostly Mixed Use
Development including Housing (MU-1, MU-2). This zoning would allow
residential development of up to 50 units/acre provided by allowing additional
office square footage and a total FAR up to 2.5. The revised plan changes the
zoning in the SOFA 2 area from MU to Residential Transition districts that reduce
the FAR to between 2:1 and 1.15:1. The revised Concept Plans result in the
reduction of potential intensity of development in the SOFA 2 area. The following
list describes known projects within the SOFA 1 and SOFA 2 areas.
NEW DEVELOPMENT PROJECTS IN SOFA 1 AND 2
Project Name/Location
901-925 High Street
SOFA 2
Status
Pending
Type of Proj ect
Residential: 12 units
800 High Street
SOFA 2
Pending Residential: 61 units
Retail: 1,600 sq. ft.
PAMF - Summerhill Homes
270 Channing Avenue
SOFA 1
Approved SFR: 15 units
SOFA Child Care Facility
Channing and Ramona
SOFA 1
Under Construction Institutional:
5,000 sq. ft.
Summerhill Homes
Bryant Street
SOFA 1
Approved SFR: 30 units
Summerhill Homes
Condominium Project
SOFA 1
Approved MFR: 37 units
Oak Court
Affordable Housing
Bryant and Channing
SOFA 1
Approved MFR: 53 units
Premier Properties
820 Ramona Street
SOFA 1
Approved Office/Retail
37,000 sq. ft.
Source: City of Palo Alto Planning Division (Updated June 28, 2002)
8
Economic Analysis
The Coordinated Area Plan ordinance (No. 4454) calls for the coordinated
planning effort to include an analysis of the economic environment so that the
planning process works in conjunction with the marketplace, rather than
independent of it. A complete economic analysis was conducted during Phase 1 of
the CAP process, and a complete economic analysis was recently conducted by
Bay Area Economics (BAE) for the SOFA 2 CAP.
BAE analyzed the zoning alternatives for a 1.15 Floor Area Ratio (FAR)
maximum recommended by the SOFA 2 Working Group, an alternative specifying
a 1.5 FAR maximum proposed by City staff, and a third 2.5 FAR alternative. For
each of the. zoning alternatives a series of illustrative development prototypes was
developed by the urban design firm of Freedman, Tung and Bottomlety (FTB).
FTB created a development prototype for each FAR level for both a small and
large site. For each of the different prototypes, BAE estimated parking
requirements (reduced and standard) and estimated the resulting residual land
values.
In addition to the different density regulations, BAE evaluated the economic
viability of restriction on ground floor office uses in certain portions of the SOFA
2 area. BAE also evaluated the general demand for retail space and viability of
retail uses within specific corridors of the SOFA 2 area.
The results of the BAE report are summarized below. The entire BAE report is
attached to the SOFA 2 CAP.
Parking
The reduced parking alternative adds to the efficiency of the site but only provides
marginally higher returns where a site can physically accommodate the higher
parking requirements without reducing the building intensity. Existing zoning
standards do not provide sufficient economic incentive to landowners to redevelop
their property. Owners of smaller parcels have more barriers towards
redevelopment than larger sites because the larger sites offer better economies of
scale and improved site parking efficiencies. Redevelopment potential for sites
that do not have sufficient size to build underground or partially submerged
podium parking would be severely limited under the standard parking
requirements. In addition, a City policy that restricted parcel consolidation would
reduce redevelopment feasibility due to a loss of economies of scale and reduction
in site efficiencies.
Small Site Redevelopment Opportunities
Existing market conditions would not provide sufficient incentive to redevelop a
small site (approximately 12,000 square feet or less) under a 1.15 FAR alternative
9
if the small site contained an existing site; however, redevelopment would be
possible with an underdeveloped site or a site with obsolete buildings. While a 1.5
FAR parking alternative provides redevelopment incentive for smaller sites,
redevelopment would likely result in condominium projects and not mixed-use
projects because of the higher parking requirements for office and retail uses. The
2.5 FAR low parking requirement would generate the highest.land residual value.
Large Site Redevelopment Opportunities
Due in part to the lower economic value of the substation and greater site
efficiencies, the 1.15 FAR standard parking alternative would provide sufficient
financial incentive for redevelopment. Similar to the small site, the standard
parking alternatives for the 1.5 and 2.5 FAR alternatives would curtail the total
building square feet regardless of the FAR limitations.
Office and Retail
Curtailing ground floor office uses within the SOFA 2 area altogether may deter
redevelopment projects that create mixed-use products. Properties not within close
proximity to other retail services that could not create retail synergies are likely to
struggle to maintain a retail tenant at comparable office lease rates. The result
would be a greater emphasis on residential projects compared to building both
retail and residential mixed use. Furthermore, if parking availability is exceedingly
constrained within the area, developers may have difficulty competing with nearby
downtown retail space, which are a part of a parking district. Notwithstanding,
current retail market conditions are relatively healthy and would likely support
new retail. A possible alternative could be to limit ground floor office uses along
specific retail nodes and allow ground floor office in areas that are less conducive
to retail. Based on existing retail conditions, logical retail locations appear to be
Homer Avenue and Emerson Street. Corridors less conducive to retail include
Alma and Ramona Streets.
10
ATTACHMENT A
XOr~er AvenU~
Channing Avenue
Addison
South of Forest Area
District Map
Attachment B
NOT YET APPROVED
RESOLUTION NO.
RESOLUTION OF THE COUNCIL OF THE CITY OF PALO
ALTO AMENDING THE LAND USE MAP OF THE PALO ALTO
COMPREHENSIVE PLAN FOR THE AREA GENERALLY BOUNDED
BY ALMA STREET, FOREST AVENUE, RAMONA STREET, AND
CHANNING AVENUE (SOUTH OF FOREST AVENUE
COORDINATED AREA PLAN, PHASE 2) AND ADDING
"COORDINATED AREA PLANS" TO THE LAND USE
DEFINITIONS IN THE LAND USE AND COMMUNITY DESIGN
ELEMENT OF THE COMPREHENSIVE PLAN
WHEREAS, the Planning Commission, after duly noticed public
hearing, has recommended that the Council amend the Land Use Element
of the Palo Alto Comprehensive Plan; and
WHEREAS, the City Council has held a duly noticed public
hearing on the matter, and has reviewed the contents of the
Environmental Impact Report ("EIR") prepared for the project and all
other relevant information, including staff reports, and all
testimony, written and oral, presented on the matter.
NOW, THEREFORE, the Council of the City of Palo Alto does
RESOLVE as fol!ows:
SECTION I. The City Council finds that the public interest,
health, safety and welfare of Palo Alto and the surrounding region
require amendment to the Land Use Map of the Palo Alto Comprehensive
Plan as set forth in Section 2 hereof to implement Phase 2 of the
South of Forest Avenue Coordinated Area Plan (the "SOFA 2 CAP") in
accordance with Land Use Policy L-25 and Land Use Program L-22, and
the related amendment of the land use definitions in Chapter Two.
SECTION 2. The City Council hereby amends the Land Use Map
of the Palo Alto Comprehensive Plan by changing the designation of
the area depicted in Exhibit A to "South of Forest Area Coordinated
Area Plan, Phase 2." Exhibit A is attached to this resolution and
incorporated into it by this reference.
SECTION 3. The City Council hereby amends the Land Use and
Community Design Element of the Palo Alto Comprehensive Plan by
adding a new section at the end of the Land Use Definitions Section,
(page L-13) to read as fol!ows:
Coordinated Area Plans
020926 syn 0091144
NOT YET APPROVED
South of Forest Area Coordinated Area Plan
Program L-22 directs the City to prepare a
Coordinated Area Plan for the South of Forest Area
(SOFA) and Paio Alto Medical Foundation (PAMF)
site. The area is approximately 50 acres.
Phase 1
Phase 1 was adopted in 2000, covering
approximately 24 acres, including the P~tMF site
and adjacent area generally bounded by Waverley
Street, Homer Avenue, Ramona Street, and Channing
Avenue. It was implemented in part through a
deve!opment agreement with PAMF. Phase ! includes
a public park, child-care center, and
approximately 160 new units of affordable and
market rate housing. Residentia! densities range
from eight to fifty units per acre. Maximum f!oor
area ratio for new structures is 1.5.
Phase 2
Phase 2 was adopted in 2002.It covers
approximately 26 acres generally bounded by Forest
Avenue, Ramona Street, Addison Avenue, and Alma
Street. Existing densities when the CAP was
adopted were 8 to 260 units per acre. New
development will usually range from 15 to 50 units
per acre. Maximum non-residential FAR for new
structures is 0.4; maximum total FAR is 1.5 or
2.0, with the higher FAR closer to Alma Street.
SECTION 4. The City Council adopts this resolution in
accordance with the California Environmenta! Quality Act ("CEQA")
findings adopted by Resolution No.
//
//
//
//
//
//
//
//
2
020926 syn 0091144
NOT YET APPROVED
SECTION 5. This resolution shall be effective upon the
thirty-first (31st) day after its adoption to allow a complete and
exclusive opportunity for the exercise of the referendum power
pursuant to the Charter of the City of Palo Alto and the
constitution of the State of California. A referendum petition
filed after the effective date shall be rejected as untimely.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:APPROVED:
City Clerk Mayor
APPROVED AS TO FORM:City Manager
Senior ~sst. City Attorney Director of Planning and
Community Environment
020926 syn 0091144
The City of
Palo Alto
D:\Gloria I\GIS\FireRun\landUsekSofa II Cmr
Date:
File No:
Propose Action: Change existing land
use designations to SOFA I1 Coordinated
Area Plan
This map is a product of the
City of Palo Alto GIS
Attachment C
NOT YET APPROVED
ORDINANCE NO.
ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO
ADOPTING THE SOUTH OF FOREST AREA COORDINATED AREA
PLAN, PHASE 2 AND AMENDING SECTION 18.08.040 OF
THE PALO ALTO MUNICIPAL CODE (THE ZONING MAP)TO
CHANGE THE CLASSIFICATION OF CERTAIN PROPERTIES
GENERALLY BOUNDED BY FOREST AVENUE, RAMONA STREET,
ADDISON AVENUE, AND ALMA STREET TO SOUTH OF FOREST
AREA, PHASE 2 DISTRICTS
The Council of the City of Palo Alto does ORDAIN as
follows:
SECTION I. The City Council finds as follows:
A. Coordinated Area Plans ("CAPs") are intended to be
used to facilitate neighborhood based planning for the use and re-
use of land and buildings. The purposes of a CAP are described by
Palo Alto Municipa! Code section 19.10.010 as follows:
(a) To create enhanced opportunities for building a
sense of community through public involvement in planning processes
which are designed not only to satisfy constitutional due process
requirements, but also to provide residents, and business and
property owners with early, meaningfu! opportunities to help shape
the physica! components of their neighborhoods and community.
(b) To emphasize and enhance architectural qualities,
public improvements, and site design by providing a graphic, visual
linkage between policies and programs established in the
Comprehensive Plan and specific development entitlements and public
improvements.
(c) To facilitate physical change by each of the
fol!owing methods:
(i) Accelerating and coordinating the planning
process within selected areas so that private development and re-
use can proceed under streamlined City review processes.
(2) Encouraging rational private investment by
providing specific, dependable information about the design
requirements, development standards, and uses allowed on a
particular site.
031008 syn 0091146
NOT YET APPROVED
(3) Analyzing and considering the economic
environment so that the planning process works in conjunction with
the marketplace, rather than independent of it.
(4) Coordinating and timing public infrastructure
investment to facilitate desirable private land uses.
(d) To assure Palo Alto’s environmental quality by
using the Comprehensive Plan Environmenta! Impact Report to focus
environmental review on area and site-specific issues and changed
circumstances.
(e) To facilitate orderly and
implementation of the City’s Comprehensive Plan.
consistent
B. The City Council has conducted a public hearing on the
South of Forest Area, Phase 2 ("SOFA 2") Coordinated Area Plan
"cAP").
C. The City Council has reviewed and considered the
information contained in the SOFA CAP Final Environmental Impact
Report, and the Addendum to it, and has certified the adequacy of
the environmental review and has made findings upon the significant
environmental impacts identified in the EIR.
D. The City Council finds and determines that the SOFA 2
CAP is consistent with the Comprehensive Plan of the City of Palo
Alto, as amended. The City Counci! has specifically considered the
regiona! welfare and the impacts of the development agreement upon
the regiona! welfare. The City Council finds and determines that
the benefits of the project set forth in the EIR and CAP establish
the reasonable relationship of the project to the regional welfare.
E. The City Council has specifically considered and
hereby approves integration of the SOFA 2 CAP with the City’s
Capita! Improvement Program in order to assure timely
implementation of the public improvements set forth in the CAP.
F. The City Council has specifically considered the
economic and fiscal feasibility of the SOFA 2 CAP in light of
market place factors and incentives and disincentives to the
desired development product, as well as a cost-benefit analysis of
the public infrastructure investments and projected economic
benefits to the city and community, and hereby finds and determines
as follows:
(i)The proposed development is economically
feasible under current market conditions;
031008 syn 0091146
(2)
NOT YET APPROVED
The deve!opment intensity proposed is warranted
by the area’s c!ose proximity to both transit
and neighborhood and downtown retai! services,
and to existing single and multiple family
development; and
(3)The public infrastructure investment of
approximately $i0,000,000 in Phase 1 of the CAP
resulted in the City acquiring a tota! of 2.41
acres of land and the historic Roth building for
park, affordable housing and public facility
purposes. This public investment was warranted
by the City’s need for affordable housing and
parkland. In addition, 1.5 acres of the 2.41
total were dedicated without cost to the City.
Public infrastructure planned for the Phase 2
area includes the Homer Avenue pedestrian/
bicycle undercrossing and street improvements.
The public infrastructure investment will total
approximately $3,200,000, most of which will be
reimbursed through grants from various sources.
G. The City Council hereby finds that the adoption of the
SOFA 2 CAP will serve the public interest, health, safety and
general welfare.
SECTION 2. The SOFA 2 CAP shall be deemed to include the
fol!owing documents:
o South of Forest Area Coordinated Area Plan, Phase 2
attached as Exhibit "A;"
The environmental mitigation measures identified in
the accompanying "Resolution of the Council of the
City of Palo Alto Certifying the Adequacy of the South
of Forest Area Coordinated Area Plan Fina! EIR as the
Environmenta! Document for the SOFA 2 Coordinated Area
Plan and Making Findings Thereon Pursuant to the
California Environmenta! Quality Act," each of which
has been incorporated into Exhibit "A"; and
This Ordinance Adopting the South of Forest Area,
Phase 2 Coordinated Area Plan;
SECTION 3. The City Council hereby adopts the SOFA 2 CAP
as the coordinated area plan and zoning regulations for SOFA 2.
SECTION 4. Section 18.08.040 of the Palo Alto Municipal
Code, the "Zoning Map," is hereby amended by changing the zoning of
031008 syn 0091146
NOT YET APPROVED
that area property shown on the map labeled Exhibit "B," attached
to this ordinance and by this reference made part of it, to
SOFA 2 CAP, and more particularly to its districts, SOFA R-2, SOFA
RM-15, SOFA RM-30, Residential Transition RT-35 and Residential
Transition RT-50. Planned Community Districts 2697, 3707, 4283,
and 4389 remain in effect, subject to the additional requirements
of the SOFA CAP, Phase 2.
SECTION 4. This ordinance shall be effective upon the
thirty-first (3!s~) day after its passage and adoption.
INTRODUCED:
PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:APPROVED:
City Clerk
APPROVED AS TO FORM:
Mayor
City Manager
City Attorney Director of Planning and
Community Environment
031008 syn 0091146
4
NOT YET APPROVED
EXHIBIT A
SOUTH OF FOREST AREA COORDINATED ARE PLAN, PHASE 2
(ATTACHED AS SEPARATE COVER)
EXHIBIT "B"
Forest Avenue
¯
South of Forest Area
District Map
Attachment D
<
0 o
0
Attachment F
MEMORANDUM
TO:Lisa Grote, City of Palo Alto
FROM:Alexander Quinn, Senior Associate
Matt Kowta, Principal
RE: SOFA II Floor Area Bonus Economic Analysis
DATE: September 29t~, 2003
The purpose of this memorandum is to provide the analysis, findings, and recommendations
regarding a reasonable Floor Area Bonus to grant development projects in the South of Forest
Area in exchange for the provision of certain public benefits.
Study Objective
The City of Palo Alto retained Bay Area Economics to perform an analysis of the amount Floor
Area Bonus (FAB) that the City of Palo Alto should grant developers in exchange for the
provision of public benefits as part of their development projects within the South of Forest
Area (SOFA). The City Council is currently in the process of developing a FAB program that
will allow development within the RT-35 zone an increase in maximum density, from 1.15
Floor Area Ratio (FAR) to 1.3, and development within the RT-50 zone to receive a increase
from 1.3 to 1.5 FAR by providing additional public benefit. Public benefit is defined as
converting a market rate residential unit to a below market rate (BMR) unit; leasing commercial
space to either a child care provider or non-profit organization; and/or providing public parking
spaces. This analysis is intended to assist the City of Palo Alto in setting the amount of public
benefit a developer must provide in order to receive a FAB.
Summary of Key Assumptions and Findings
BAE performed a static pro forma analysis using the building and market inputs developed for
the South of Forest Area Coordinated Area Plan, Phase II Economic Analysis. BAE based its
analyses on three key assumptions:
The FAB has no bearing on the base project’s feasibility.’ Rather, the base project is
economically feasible before the FAB. The FAB is an additional incentive and not an
assumed component of any given project within SOFA II.
The FAB does not dramatically change the general design or site layout of the project
and represents a minor adjustment to the base project. Thus, construction costs for the
FAB are incremental and do not dramatically change the overall project costs. For
example, the FAB would not require a project to change from partially submerged
podium parking to fully underground parking.
The base project is a project at the allowed floor area ratio before the allowed floor area bonus progam.
Sacramento Region Office
740 G Street
Davis, CA 956516
Headquarters
530.750.2195
539.750.2194 ~x
bayareaeconomics.com
510.549.7310
The development cost and revenue estimates generated in the SOFA II Economic
Analysis represent a reasonable depiction of current market and development
conditions. Further, the site and building prototypes defined for the SOFA II Economic
Analysis represent typical development likely to occur within the SOFA II area.
Based on these key assumptions, BAE performed a static pro forma analysis of the FAB, using.
a lot size of 26,250 square feet. This is the "large lot" from BAE’s original SOFA II Economic
Analysis. The following matrix summarizes those results.
Public Benefit
Conversion of Market Rate
Units to BMR Units
Lease to Child Care Center or
Non-profit Organization
Provide Public Parking
(Partially Submerged Podium)
Provide Public Parking
(Under Ground Parking)
1.15 FAR to 1.3 FAR
0.46 BMR units/
bonus market rate unit
570 below market sq. ft./
1,000 bonus square feet
4.5 spaces/
1,000 bonus sq. ft.
3.0 spaces/
1,000 bonus sq. ft.
FAB
1.3 FAR to 1.5 FAR
0.51 BMR units/
bonus market rate unit
590 below market sq. ft./
1,000 bonus square feet
4.7 spaces/
1,000 bonus sq. ft.
3.1 spaces/
1,000 Bonus sq. ft.
The analysis shows a FAB in SOFA II can generate up to approximately three undergound
public parking spaces for every 1,000 bonus square feet and four to five partially submerged
podium parking spaces for every 1,000 bonus square feet. In addition, the analysis shows a
developer using a FAB can convert approximately one market rate unit to a BMR unit for every
two bonus market rate units. Finally, the analysis shows a developer can lease approximately
600 square feet of commercial space to a non-profit organization or child care provider for
every 1,000 bonus square feet) The following is an example of how much public benefit the
FAB could generate based on these standards for a 26,250 square foot lot.
FAB - 26,250 Sq. Ft. Lot
1.15 FAR to 1.3 FAR 1.3 FAR to 1.5 FAR
3,938 bonus sq. ft.5,250 bonus sq. ft.
2 BMR units converted 2.5 BMR units converted
Public Benefit
FAB Square Feet
Conversion of Market Rate
Units to BMR Units
Lease to Child Care Center or 2,240 below market sq. ft.3,100 below market sq. ft.
Non-profit Organization
Provide Public Parking 18 public spaces 25 public spaces
(Partially Submerged Podium)
Provide Public Parking 12 public spaces 16 public spaces
(Under Ground Parking)
Sacramento Region Office
740 G Street
Davis, CA 956516
Headquarters
530.750.2195
539.750.2194fax
bayareaeconomics.com
510.549.7310
The following sections further detail BAE’s assumptions, methodology, and findings.
Background
As stated earlier, BAE used market and development cost data from the SOFA II Economic
Analysis to estimate the amount of public benefit the City could reasonably expect from
granting a FAB within SOFA II. The following summarizes the basic methodology and City
review process associated with the SOFA II Economic Analysis.
In June of 2002, the City of Palo Alto retained BAE to perform an economic analysis of zoning
alternatives for the SOFA 1I Coordinated Area Plan. The zoning alternatives included an option
for a 1.15 Floor Area Ratio (FAR) maximum and an alternative specifying a 1.5 FAR
maximum. For each of the zoning alternatives, the urban design firm of Freedman, Tung &
Bottomley (FTB) developed a series of illustrative development prototypes that served as the
basis for BAE’s financial analysis. FTB created a development prototype for each FAR level
for both a small and large site. For each of the different prototypes, BAE estimated the
resulting residual land value. For the small site, BAE assumed a 10,500 square foot corner lot
on Alma Street with approximately 9,800 square feet of auto-related building space. The large
site was modeled after the small corner lot site plus the adjacent City-owned parcel at 841 Alma
Street, which currently is the site for a City electric utility substation. The small site and the
City parcel combined provide 26,250 square feet of site area.
As background for the economic analysis, BAE researched existing market conditions for
office, retail, rental residential, and for-sale condominiums within the vicinity of SOFA. The
market information provided BAE with an estimate of the current balance of supply and
demand for these land uses as well as for the revenue potential that might be associated with
new development. BAE also collected development cost and operating cost inputs from local
developers, lenders, contractors, and insurers. Using the findings from the market research and
these additional inputs, BAE created a pro-forma analysis for each development prototype.
BAE presented its analysis in a series of public meetings and public hearings from July 2002 to
October 2002. During that period, BAE received public comment on the analysis, including
comments on behalf of local developers from another economic consultant, and from the local
development community. BAE revised its economic analysis based on these comments and on
comments from city staff. The City Council accepted the SOFA II Economic Analysis in
October of 2002.
The City Council preliminary decided to allow a 1.15 maximum FAR within the RT-35 zone
with a FAB of up to 1.3 FAR, and a 1.3 maximum FAR within the RT-50 zone with a FAB of
up to 1.5 FAR. The City Council directed staff to review the amount of public benefit the City
could require in exchange for the FAB while providing sufficient economic incentive to the
developer. The City Council defined public benefit as:
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¯Providing a BMR unit available to a moderate-income household (120 percent of AMI)
or lower.
¯Building and reserving spaces for public parking.
¯Leasing space to a non-profit user and/or a child care user.
Limiting Conditions
The following limiting conditions apply to this memorandum and the BAE analysis conducted
for the study:
¯All development pro~am assumptions for each scenario (e.g., number of residential units,
parking square footage, etc.) were provided to BAE and are considered reliable.
¯Most of the assumptions used in the BAE financial analysis could change over time,
depending on market and economic conditions. These assumptions include construction
loan interest rates and loan-to-value ratios, development project revenue, construction
costs, City fees and tax assessments, etc.
¯The BAE analysis did not involve in-depth market analysis of future demand for retail,
housing, or office space.
¯The BAE analysis did not include an assessment of any physical development constraints
in the Plan area such as potential environmental contamination, easements, infrastructure
capacity, etc. The BAE analysis did also not assess highest and best use for any particular
parcel.
¯The information developed in the SOFA II Economic Analysis reasonably depicts current
market and development conditions. Further, the child care and non-profit average lease
rate reported in the Palo Alto Non-profit Survey Report represents prevailing market rents
for non-profit and child care space.
¯BAE only evaluated the public benefit potential of the FAB assuming a developer would
build for sale condominium housing. At the time of SOFA II Economic Analysis, for sale
housing represented the highest and best use. BAE believes this still to be the case.
Study Approach
BAE used four underlying assumptions in developing the FAB pro forma analysis:
First, BAE assumed the FAB is a bonus for the project; meaning the bonus does not
make a project feasible that would otherwise not be feasible if built at the base FAR
limit (either 1.15 FAR or 1.3 FAR, depending on the zone). Rather, the base project is
economically feasible before the bonus and the bonus only acts as an additional
incentive to the builder to provide public benefits; it is not intended to make an
otherwise infeasible project feasible.
3
Palo Alto Non-profit Survey Report, City of Palo Alto, Planning Division, 2001.
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Second, the FAB does not dramatically change the overall design of the project. For
example, if a project receives a FAB of 1.15 to 1.3, the project does not change from
partially submerged parking to fully undergound parking, thereby shifting costs
significantly higher for the entire project. It is assumed that in these cases, the
developer would choose not to pursue a FAB because the increased costs would
outweigh the economic incentive provided by the FAB.
Third, land values (i.e., cost to the developer) are based only on the value justifiable at
the base FAR limit (1.15 in RT-35 and 1.3 in RT-50). BAE did not include additional
land costs in estimating the incremental cost to the developer to construct the FAB
portion of a project. This assumption was necessary in order to estimate the amount of
residual value the FAB would generate.
Finally, public benefit can be accommodated within the base project and not only in the
FAB portion of the project. For example, if a developer of a mixed use project requests
a FAB then he or she can use a portion of the project’s base commercial square feet to
accommodate a non-profit or child care tenant. The developer does not need to provide
the non-profit lease space within the FAB portion of the project.
Using these underlying assumptions, BAE developed a static pro forma analysis of the FAB.
BAE assessed the FAB residual value for both the small site (10,500 lot square feet) and the
large site (26,250 lot square feet) but, for the purposes of this analysis estimated the amount of
public benefit the FAB could generate based on the large site. This was primarily due to scale,
due to the fact that the small site FAB offered only a small amount of bonus square feet (1,575
square feet for the 1.15-1.3 FAB and 2,100 for the 1.3-1.5 FAB), the large site provided
significantly more bonus square feet (3,938 square feet for the 1.15-1.3 FAB and 5,250 for the
1.3-1.5 FAB) and public benefit. In each scenario, BAE maximized the FAB. This is for
modeling purposes only as it is likely that developers would review the FAB and request a
bonus amount that is within the allowable range, and is optimized to fit best into their projects.
For each FAB scenario, BAE estimated the residual value after accounting for incremental
developer costs (assuming the cost of the land has already been factored into the base project
cost before FAB) and developer incentive (15 percent return on costs for the FAB portion of the
project). The residual represents the "excess" value available to support public benefit. BAE
then matched the estimated unit cost of providing the different types of public benefit to the
residual value, in order to estimate the amount of public benefit that could be generated for a
given quantity of FAB. Thus, BAE calculated the public benefit standard per bonus market rate
residential unit and per 1,000 bonus non-residential square feet. This allows the City to apply
the standard to a FAB of any scale.
Floor Area Bonus Generated
Using the small and large site, BAE first determined the maximum allowable bonus square feet
that can be obtained through the FAB. The following table summarizes the FAB.
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Maximum Allowable Sq. Ft.
before FAB
Bonus Square Feet
Pct. Increase in Project Sq. Ft.
Bonus Units
Average Unit Size (Sq. Ft.)
Small Site
(10,500 Lot Sq. Ft.)
1.15-1.3 FAB
12,075
1,575
13%
2
788
1.3-1.5 FAB
13,650
2,100
15%
2
1,050
Large Site
(26~250 Lot Sq. Ft.)
1.15-1.3 FAB
30,188
3,938
13%
4
984
1.3-1.5 FAB
34,125
5,250
15%
5
1,050
As shown in the previous table, a small site would only receive a marginal gain in the total
building square feet. A developer attempting to maximize building intensity on a 10,500 square
foot lot would increase building square feet by approximately 13 percent through a 1.15-1.3
FAB and by 15 percent through a 1.3-1.5 FAB. Further, on a small lot, a developer could
choose not to maximize the FAR and instead construct one unit at the required average unit size
(1,250 square feet), thereby only needing to build two parking spaces instead of four parking
spaces for two smaller units. The result would be only marginal public benefit to the City, as
the builder would subsidize only half a BMR unit. The FAB is more likely to be requested by
developers with larger lots where the 0.15 or 0.2 FAR bonus represents a significantly larger
increase in building space.
FAB Pro Forma Results
Tables 1 though 4 summarize the FAB pro forma results for the small site prototype and the
large site prototype under both FAB programs. For the pro forma analysis, BAE used the
following pro forma assumptions:
¯For sale condominiums would be constructed within the incremental increase in space
associated with the FAB.
¯ As stated earlier, land costs are not included in the FAB.
¯ . A 15 percent return on development costs for the FAB portion of the project is
sufficient incentive for developers to pursue a FAB.
¯FAB parking is partially submerged podium parking.
For each development prototype, BAE calculated a residual value available for public benefit.
This is the amount of project value remaining and available to offset the cost of providing
public benefits after accounting for FAB development costs and allowing for developer profit
incentive. The following summarizes the amount of residual value available to support public
benefits, by FAB and site size.
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Total Residual Value
Residual Value Per
Bonus Sq. Ft.
Small Site
(10,500 Lot Sq. Ft.)
1.15-1.3 FAB 1.3-1.5 FAB
$149,184 $244,822
$95 $112
Large Site
(26,250 Lot Sq. Ft.)
1.15-1.3 FAB 1.3-1.5 FAB
$441,824 $612,054
$117 $117
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Table 1: Floor Area Bonus Economic Analysis, FAR 1.15 to FAR 1.3, Small Site
Pro Forma Assumption: This static pro forma only analyzes the Floor Area Bonus portion of the project as it is assumed that the base project (the project
before the Floor Area Bonus) is economically feasible. The Floor Area Bonus only acts as an additional builder’s incentive to the project and is not essential
to the base project’s economic feasability. Thus, the Floor Area Bonus pro forma does not include land cost.
Ma~or Assumptions
Floor Area Bonus Program Number Unit
Lot Size 10,500 Lot Sq. Ft.
Bonus Square Feet 1,575 Bldg. Sq. Ft.
Total Bonus Units 2 Units
Average Unit Size 788 Sq. Ft. Per Unit
Parking Spaces Required 4 Spaces (a)
Incremental Development Costs Assumptions
Hard Costs
Construction Hard Costs (b)
Partially Submerged Podium Parking (c)
Price Per Unit Unit
$160 /Bldg. Sq. Ft.
$19,000 /Space
Soft Costs
Architecture and Engineering 7.5% of Hard Costs
Defect Liability Insurance 5% of Hard Costs
Impact Fees $10,600 /Unit
BMR In-Lieu Fee 7.5% of Appraised Value
Plumbing, Electrical, Building Fees $773 /Unit
Construction Loan (d)7.5% Interest
Interim Property Taxes (e)1.2% of Soft & Hard Cost
Development Overhead/Other (f)3% of Total Costs
Contingency 5% of Total Costs
Developer Profit Assumptions
Assumed Necessary Development Incentive
Sales Revenue
Price Per Square Foot (g)
Price Per Unit
Unit Sale Expenses
Brokerage and Marketing Expenses
15% of Total Costs
$500 /Bldg. Sq. Ft.
$393,750 /Market Rate Unit
5% of Potential Revenue
Notes:
a) Assumes partially submerged podium parking.
b) Assumes wood frame high-quality construction, skylight, wood floors and full
kitchen appliances. See Appendix S for a full unit detail.
c) Assumes 400 square feet per space. This only includes hard costs.
d) Assumes a 0.6 drawdown factor, 18 month construction period,
0.75 loan to value ratio, and 1.5 percentage point loan fee.
e) Assumes the property would be assessed halfway through construction.
f) Overhead/developer fee/other is percentage of total costs except contingency.
g) The price per square foot is based on the SOFA 11 Economic Analysis which
included a market review of condominium sales within the SOFA I1 market area.
Pro Forma Anal~/sis
Development Costs for Floor Area Bonus Portion
Hard Costs
Construction Costs
Parking Costs
Sub Total
Soft Costs
Architecture and Engineering
Defect Liability Insurance
Impact Fees
BMR
Building/Permitting/Impact Fess
Construction Loan (d)
Interim Taxes
Development Overhead/Other (f)
Contingency
Sub Total
$252,000
$328,000
$24,600
$16,400
$21,201
$59,063
$1,546
$27,889
$2,872
$14,447
$192,819
Floor Area Bonus Development Costs
Development Feasibility
Sa/es Revenue
Tota/ Sa/es Revenue
Less Units Sales Expenses
Brokerage and Marketing Expenses
Total Operating Expenses
Net Income
Gross Profit from Floor Area Bonus
Less Developer Incentive (h)
Remaining Available for Public Benefit
Remaining Available Per Bonus Sq. Ft.
$520,819
$787,5OO
$787,500
($39,375)
$748,125
$227,306
($78,123)
$149,184
$95
h)Developer incentive is assumed to be the developer profit
threshold (14 percent of total costs).
Sources: SOFA 11 Economic Analysis, Oct. 4, 2002; City of Palo Alto, Planning, 2003; BAE, 2003.
Table 2: Floor Area Bonus Economic Analysis, FAR 1.15 to FAR 1.3, Large Site
Pro Forma Assumption: This static pro forma only analyzes the Floor Area Bonus portion of the project as it is assumed that the base project (the project
before the Floor Area Bonus) is economically feasible. The Floor Area Bonus only acts as an additional builder’s incentive to the project and is not essential
to the base project’s economic feasability. Thus, the Floor Area Bonus pro forma does not include land cost.
Ma,ior Assumptions Pro Forma Analysis
Floor Area Bonus Program Number Unit
Lot Size 26,250 Lot Sq. Ft.
Bonus Square Feet 3,938 Bldg. Sq. Ft.
Total Bonus Units 4 Units
Average Unit Size 984 Sq. Ft. Per Unit
Parking Spaces Required 8 Spaces (a)
Incremental Development Costs Assumptions
Hard Costs
Construction Hard Costs (b)
Partially Submerged Podium Parking (c)
Price Per Unit Unit
$160 /Bldg. Sq. Ft.
$19,000 /Space
Soft Costs
Amhitecture and Engineering 7.5% of Hard Costs
Defect Liability Insurance 5% of Hard Costs
Impact Fees $11,022 /Unit
BMR In-Lieu Fee 7.5% of Appraised Value
Plumbing, Electrical, Building Fees $930 /Unit
Construction Loan (d)7.5% Interest
Interim Property Taxes (e)1.2% of Soft & Hard Cost
Development Overhead/Other (f)3% of Total Costs
Contingency 5% of Total Costs
Developer Profit Assumptions
Assumed Necessary Development Incentive 15% of Total Costs
Sales Revenue
Price Per Square Foot (g)$500 /Bldg. Sq. Ft.
Price Per Unit $492,188 /Market Rate Unit
Unit Sale Expenses
Brokerage and Marketing Expenses 5% of Potential Revenue
Notes:
a) Assumes partially submerged podium parking.
b) Assumes wood frame high-quality construction, skylight, wood floors and full
kitchen appliances. See Appendix S for a full unit detail.
c) Assumes 400 square feet per space. This only includes hard costs.
d) Assumes a 0.6 drawdown factor, 18 month construction period,
0.75 loan to value ratio, and 1.5 percentage point loan fee.
e) Assumes the property would be assessed halfway through construction.
f) Overhead/developer fee/other is percentage of total costs except contingency.
g) The price per square foot is based on the SOFA II Economic Analysis which
included a market review of condominium sales within the SOFA II market area.
Development Costs for Floor Area Bonus Portion
Hard Costs
Construction Costs
Parking Costs
Sub Total
$630,000
$782,000
Soft Costs
Architecture and Engineering $58,650
Defect Liability Insurance $39,100
Impact Fees $44,086
BMR $147,656
Building/Permitting/Impact Fess $3,719
Construction Loan (d)$66,494
Interim Taxes $6,850
Development Overhead/Other (f)$34,457
Contingency 59~
Sub Total $460,164
Floor Area Bonus Development Costs $1,242,164
Development Feasibility
Sales Revenue $1,968,750
Total Sales Revenue $1,968,750
Less Units Sa~s Expenses
Brokerage and Marketing Expenses
To~lOpera~ngExpenses ($98,438)
Net Income
Gross Profit from Floor Area Bonus
Less Developer Incentive (h)
Remaining Available for Public Benefit
Remaining Available Per Bonus Sq. Ft.
h)
$1,870,313
$628,149
($186,325)
L $441,824
$112
Developer incentive is assumed to be the developer profit
threshold (14 percent of total costs).
Sources: SOFA II Economic Analysis, Oct. 4, 2002; City of Palo Alto, Planning, 2003; BAE, 2003.
Table 3: Floor Area Bonus Economic Analysis, FAR 1.3 to FAR 1.5, Small Site
Pro Forma Assumption: This static pro forma only analyzes the Floor Area Bonus portion of the project as it is assumed that the base project (the project
before the Floor Area Bonus) is economically feasible. The Floor Area Bonus only acts as an additional builder’s incentive to the project and is not essential
to the base project’s economic feasability. Thus, the Floor Area Bonus pro forma does not include land cost.
Major Assumptions Pro Forma Analysis
Floor Area Bonus Program Number Unit
Lot Size 10,500 Lot Sq. Ft.
Bonus Square Feet 2,100 Bldg. Sq. Ft.
Total Bonus Units 2 Units
Average Unit Size 1,050 Sq. Ft. Per Unit
Parking Spaces Required 4 Spaces (a)
Incremental Development Costs Assumptions
Hard Costs
Construction Hard Costs (b)
Partially Submerged Podium Parking (c)
Price Per Unit Unit
$160 /Bldg. Sq. Ft.
$19,000 /Space
Soft Costs
Architecture and Engineering 7.5% of Hard Costs
Defect Liability Insurance 5% of Hard Costs
Impact Fees $!1,162 /Unit
BMR In-Lieu Fee 7.5% of Appraised Value
Plumbing, Electrical, Building Fees $982 /Unit
Construction Loan (d)7.5% Interest
Interim Property Taxes (e)1.2% of Soft & Hard Cost
Development Overhead/Other (f)3% of Total Costs
Contingency 5% of Total Costs
Developer Profit Assumptions
Assumed Necessary Development Incentive 15% of Total Costs
Sales Revenue
Price Per Square Foot (g)$500 /Bldg. Sq. Ft.
Pdce Per Unit $525,000 /Market Rate Unit
Unit Sale Expenses
Brokerage and Marketing Expenses 5% of Potential Revenue
Notes:
a) Assumes partially submerged podium parking.
b) Assumes wood frame high-quality construction, skylight, wood floors and full
kitchen appliances. See Appendix S for a full unit detail.
c) Assumes 400 square feet per space. This only includes hard costs.
d) Assumes a 0.6 drawdown factor, 18 month construction period,
0.75 loan to value ratio, and 1.5 percentage point loan fee.
e) Assumes the property would be assessed halfway through construction.
f) Overhead/developer fee/other is percentage of total costs except contingency.
g) The price per square foot is based on the SOFA II Economic Analysis which
included a market review of condominium sales within the SOFA 11 market area.
Development Costs for Floor Area Bonus Portion
Hard Costs
Construction Costs
Parking Costs
Sub Total
Soft Costs
Architecture and Engineering
Defect Liability Insurance
Impact Fees
BMR
Building/Permitting/Impact Fess
Construction Loan (d)
Interim Taxes
Development Overhead/Other (f)
Contingency
Sub Total
$336,000
$412,000
$30,900
$20,600
$22,324
$78,75O
$1,964
$35,033
$3,609
$18,155
$31 167
$242,503
Floor Area Bonus Development Costs
Development Feasibility
Sales Revenue
Total Sales Revenue
Less Units Sales Expenses
Brokerage and Marketing Expenses
Total Operating Expenses
$654,503
$1,050,000
$1,050,000
($52,50o)
Net Income
Gross Profit from Floor Area Bonus
Less Developer Incentive (h)
Remaining Available for Public Benefit
Remaining Available Per Bonus Sq. Ft.
$997,500
$342,997
($98,175)
$244,822
$117
h)Developer incentive is assumed to be the developer profit
threshold (14 percent of total costs).
Sources: SOFA II Economic Analysis, Oct. 4, 2002; City of Palo Alto, Planning, 2003; BAE, 2003.
Table 4: Floor Area Bonus Economic Analysis, FAR 1.3 to FAR 1.5, Large Site
Pro Forma Assumption: This static pro forma only analyzes the Floor Area Bonus portion of the project as it is assumed that the base project (the project
before the Floor Area Bonus) is economically feasible. The Floor Area Bonus only acts as an additional builder’s incentive to the project and is not essential
to the base project’s economic feasability. Thus, the Floor Area Bonus pro forma does not include land cost.
Ma,ior Assumptions
Floor Area Bonus Program Number Uni_._.~t
Lot Size 28,250 Lot Sq. Ft.
Bonus Square Feet 5,250 Bldg. Sq. Ft.
Total Bonus Units 5 Units
Average Unit Size 1,050 Sq. Ft. Per Unit
Parking Spaces Required 10 Spaces (a)
Incremental Development Costs Assumptions
Hard Costs
Construction Hard Costs (b)
Partially Submerged Podium Parking (c)
Price Per Unit Unit
$160 /Bldg. Sq. Ft.
$19,000 /Space
Soft Costs
Architecture and Engineering 7.5% of Hard Costs
Defect Liability Insurance 5% of Hard Costs
Impact Fees $11,162 /Unit
BMR In-Lieu Fee 7.5% of Appraised Value
Plumbing, Electrical, Building Fees $982 /Unit
Construction Loan (d)7.5% Interest
lntedm Property Taxes (e)1.2% of Soft & Hard Cost
Development Overhead/Other (f)3% of Total Costs
Contingency 5% of Total Costs
Developer Profit Assumptions
Assumed Necessary Development Incentive 15% of Total Costs
Sales Revenue
Pdce Per Square Foot (g)$500 /Bldg. Sq. Ft.
Price Per Unit $525,000 /Market Rate Unit
Unit Sale Expenses
Brokerage and Marketing Expenses 5% of Potential Revenue
Notes:
a) Assumes partially submerged podium parking.
b) Assumes wood frame high-quality construction, skylight, wood floors and full
kitchen appliances. See Appendix S for a full unit detail.
c) Assumes 400 square feet per space. This only includes hard costs.
d) Assumes a 0.6 drawdown factor, 18 month construction period,
0.75 loan to value ratio, and 1.5 percentage point loan fee.
e) Assumes the property would be assessed halfway through construction.
f) Overhead/developer fee/other is percentage of total costs except contingency.
g) The price per square foot is based on the SOFA II Economic Analysis which
included a market review of condominium sales within the SOFA II market area.
Pro Forrna Anal~/sis
Development Costs for Floor Area Bonus Portion
Hard Costs
Construction Costs
Parking Costs
Sub Total
$840,000
$1,030,000
Soft Costs
Architecture and Engineering $77,250
Defect Liability Insurance $51,500
Impact Fees $55,810
BMR $196,875
Building/Permitting/Impact Fess $4,911
Construction Loan (d)$87,583
Interim Taxes $9,024
Development Overhead/Other (f)$45,389
Contingency ~_~
Sub Total $606,257
Floor Area Bonus Development Costs $1,636,257
Development Feasibility
Sales Revenue $2,625,000
Total Sales Revenue $2,625,000
Less Units Sales Expenses
Brokerage and Marketing Expenses
Total Operating Expenses
Netlncome
Gross Profit from Floor Area Bonus
Less Developer Incentive (h)
Remaining Available for Public Benefit
Remaining Available Per Bonus Sq. Ft.
($131,250)
($131,250)
$2,493,760
$857,493
($245,439)
$612,054
$117
h)Developer incentive is assumed to be the developer profit
threshold (14 percent of total costs).
Sources: SOFA II Economic Analysis, Oct. 4, 2002; City of Palo Alto, Planning, 2003; BAE, 2003.
Public Benefit Costs Calculation
As stated earlier, Public Benefit is def’med as converting a market rate residential unit to a BMR
unit affordable to a moderate-income household, leasing space to non-profit organization,
leasing space to a child care provider, and/or building and reserving public parking. BAE
calculated the Public Benefit by estimating (1) the difference between the market rate price and
the BMR price, (2) the difference between a commercial market rate lease and the average lease
rate for a non-profit organization, and (3) the costs to build parking. The following explains
BAE’s methodolog2¢ for estimating the Public Benefit costs.
BMlt Public Benefit Costs. BAE calculated the Public Benefit costs of converting a market
rate unit to a BMR unit as the difference between the market rate price of a 1,250 square foot
unit and the BMR price for a three bedroom-two bathroom unit as determined by the City of
Palo Alto’s Planning and Community Environment Department’s Housing Division.4
According to the Housing Division, the moderate-income BMR unit price is $387,250. Based
on the SOFA II Economic Analysis, the market rate price for condominiums within the SOFA II
market area is approximately $500 per square foot of living area. Accordingly, the estimated
value for 1,250 square foot unit is $625,000. Therefore, the cost to convert a market rate unit is
the difference between the market rate price and the BMR price. As shown in Table 5, the
difference is approximately $238,000. Thus, the Public Benefit cost is $238,000 per market rate
unit converted to BMR.
Parking (Partially Submerged Podium Parking, Fully Underground Parking). BAE used
parking construction cost estimates generated from the SOFA II Economic Analysis. As shown
in Table 5, the average construction cost for partially submerged parking is $25,000 per space,
excluding land costs. In addition, the average construction costs for fully underground parking
is $38,000 per space, excluding land costs. Thus, the Public Benefit cost to provide public
parking is $25,000 per partially submerged parking space and $38,000 per fully underground
space.
Commercial Space Leased to Non-Profit Organization or Child Care Provider. Similar to
calculating the Public Benefit cost of converting a market rate unit into a BMR unit, the Public
Benefit cost of leasing to a non-profit organization or child care provider is the market value of
a commercial lease minus the below market value of a non-profit lease. In 2001, the City of
Palo Alto surveyed a number of local non-profit organizations, including child care providers. 5
Those surveyed were asked to provide their current lease terms. On average, the lease terms
tend to be less than market rates for commercial space in Palo Alto. According to the Palo Alto
Non-profit Survey Report, the average lease rate for non-profit organizations and child care
providers was $2.35 per month, full service.° BAE then compared the average lease amounts to
4 BAE used a 1,250 square foot unit size because the City plans to require an average unit size of t,250
square feet of living area or less within the SOFA II area.
Palo Alto Non-profit Survey Report, City of Palo Alto, Planning Division, 2001.
~ BAE assumes full service lease terms because the survey asked what the respondent pays for its space.
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prevailing commercial rates in the SOFA II area as surveyed and reported in the SOFA II
Economic Analysis. As shown in Table 5, the estimated capitalized value of a market rate
commercial lease is approximately $450 per square foot compared to an estimated value of
approximately $250 per square foot for a below market non-profit organization or child care
lease. Thus, the net Public Benefit from leasing space to a non-profit organization or to a child
care provider at rates typically charged to these types of tenants is approximately $200 per
square foot.
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Table 5: Public Benefit Cost Calculation
BMR PUBLIC BENEFIT
BMR Public Benefit Cost Calculation
Market Rate Price Calculation
Average Unit Size
Price Per Square Foot
Market Rate Price (a)
1,250 sq. ft.
$500 sq. ft.
$625,000 /unit
BMR Price (b)
Net Public Benefit (c)
$387,250 /unit
$237,750 /unit
PARKING PUBLIC BENEFIT
Parking Public Benefit Cost Calculation (Partially/Submerged Podium Parking)
Average Underground Parking Space Size (h)420 sq. ft.
Average Hard Costs Per Square Foot (h)$45 sq. ft.
,.Average soft costs (as a percentage of hard costs) (i)30% of hard costs
Total Public Parking Benefit Costs (j) $25,000 /Space
Parking Public Benefit Cost Calculation (Underground Parking)
Average Underground Parking Space Size (h)
Average Hard Costs Per Square Foot (h)
Average Soft Costs (as a percentage of hard costs)
Total Public Parking Benefit Costs (j)
420 sq, ft.
$70 sq. ft.
30% ofha~ costs
$38,000 /Space
CHILD CARE AND NON PROFIT ORGANIZATION PUBLIC BENEFIT
Child Care and Non Profit Organization Public Benefit Cost Calculation
Market Rate Commercial Space
Commercial Lease Rate NNN (Market Rate) (d)
Less Vacancy
Less Operating Expenses
Net Lease Revenue
Capitalization Rate
Market Value Per Commercial Square Foot (e)
$3.50 /month
($0.18) /month
($0.34)/month
$2.99 /month
8%
$448
Child Care and Non Profit Organization Lease Rate (f)
Below Market Lease Rate Full Service (f)
Less Vacancy
Less Operating Expenses
Net Lease Revenue
Capitalization Rate
Child Care or Non Profit Lease Value Per Sq. Ft. (g)
Net Public Benefit (c)
$2.35 /month
($0.12)/month
($0.56)/month
$1.67 /month
8%
$251 /Sq. Ft.
$197 /Sq. Ft.
Notes:
(a) Market for sale prices are based on the SOFA II Economic Analysis, which estimated a sales price of $500 per square foot. Based on a unit
size of 1,250 square feet in living area. This is a three bedroom-two bathroom unit with two available parking spaces.
(b) BMR Prices were determined by the Housing Coordinator, Cathy Siegel in May of 2003. These are based on a three bedroom-two bathroom
unit.
(c) The net public benefit is the loss in potential revenue from converting a market rate unit into a BMR unit. The net public benefit cost of leasing
to a non prof’r~ or child care organization is the loss in potential lease revenue from the average lease rate as estimated in the Palo Alto Non Profit
Survey Report in 2001.
(d) The market lease rate is based on the SOFA II Economic Analyis, which included an estimate of prevailing lease rates for commercial space
within the SOFA II market area.
(e) The market value is the net monthly revenue annualized and divided by the capitalization rate.
(f) The average lease rate is according to average lease rates of non profit organizations from the City of Palo Alto Non Profit Survey Report. Operating
expenses for non prof’~ organizations and child care centers include building maintenance, property taxes, utilities, cleaning, and building insurance.
(g) The average child care lease rate is based on the Palo Alto Non Profit Survey Report of average surveyed commercial lease rates of child
care centers.
(h) Based on the SOFA II Economic Analysis which included researching parking construction costs.
(j) Totals are rounded to the nearest thousand.
Palo Alto Non Profit Survey Report, 2001 ; City of Palo Alto Housing Coordinator, 2003; BOMA Exchange Report, 2002; SOFA II Economic
Analysis, 2003; BAE, 2003.
Correlation Calculations and Recommended FAB Standards
The previous sections discussed BAE’s methodology and findings regarding the residual values
available for Public Benefit associated with granting a FAB, and the estimated costs of
providing the specified public benefits in exchange. This section discusses the correlation
between the residual values generated from FABs and the Public Benefit costs. As stated
earlier, BAE used the large site to determine this correlation because the FABs on a large site
add significantly more square feet and -in general- do not generate fractional correlations
between FAB amounts and associated Public Benefit amounts. Table 6 summarizes the
correlation calculations.
BMR Units. In this case, BAE first determined the residual value per market rate unit for both
the 1.15 - 1.3 FAB and the 1.3 - 1.5 FAB. As shown in Table 6, the residual value is
approximately $110,000 per market rate unit when granting a 1.15 - 1.3 FAB and $122,000 per
market rate unit when granting a 1.3 - 1.5 FAB. BAE then divided these totals by the Public
Benefit costs to convert a market rate unit to a BMR unit ($237,750). The result is
approximately 0.46 BMR unit conversion for every one bonus market rate unit constructed
within the RT-35 zone and 0.51 BMR unit conversions for every one bonus market rate unit
construction ~vithin the RT-50 zone.
Recommended BM~ Standard. BAE recommends that the City of Palo Alto simplify the FAB
requirement to a single ratio in both the RT-35 and RT-50 zones. Thus, BAE recommends a
Public Benefit requirement of 0.5 BMR unit conversions for every bonus market rate unit
constructed.
Public Parking. For public parking, BAE divided the FAB residual value per 1,000 bonus
square feet by the Public Benefit cost per public parking space. The residual value per 1,000
bonus square feet is approximately $112,000 when granting a 1.15 - 1.3 FAB and $117,000
when granting a 1.3 - 1.5 FAB.
Partially Submerged Parking. The analysis shows the residual value generated from 1,000
bonus square feet can support approximately 4.5 partially submerged podium parking spaces in
the RT-35 zone and 4.7 in the RT-50 zone.
Fully Underground Parking. BAE estimates the residual value generated from 1,000 bonus
square feet can support approximately three underground parking spaces in the RT-35 zone and
3.1 in the RT-50 zone.
Recommended Public Parking Standard. Based on the calculations above, BAE recommends
granting a FAB contingent upon the builder providing 4.5 partially submerged parking spaces
per 1,000 bonus square feet and 3.0 fully underground parking spaces per 1,000 bonus square
feet within both the RT-35 and RT-50 zone.
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Lease to Non-profit Organization and/or Child Care Provider. As with the public parking
correlation calculation, BAE divided the residual value per 1,000 bonus square feet by the
Public Benefit cost per square foot for a below market lease to a non-profit organization and/or
a child care provider. Accordingly, the residual value per 1,000 bonus square feet can support a.
lease of approximately 570 square feet of space to a non-profit organization or child care
provider within the RT-35 zone. A FAB granted within RT-50 could support approximately a
590 square feet lease for every 1,000 bonus square feet.
Recommended Non-profit/Child Care Provider Lease Standard. For simplification purposes,
BAE recommends using a single standard for leasing space to a non-profit organization and/or a
child care provider in retum for a FAB within either the RT-35 or RT-50 zones. BAE
recommends rounding the standard down to 500 lease square feet of space for non-profit/child
care for every 1,000 bonus square feet granted.
Public Benefit Generated Based on Standard and FAB Conclusions
Using the small and large site prototypes, BAE estimated the amount of Public Benefit that
could be generated using the recommended standards discussed in the previous section. Table 7
summarizes the Public Benefit generation for the small and large sites.
Small sites will likely generate only a small amount of public benefit considering the bonus
represents a marginal increase in the total building square footage. Only 1,050 square feet of
space for lease to a non-profit or child care provider could be justified by a 1.3 - 1.5 FAB.
Larger sites will benefit more and therefore the large site example was used to calculate the
correlation between the public benefit and the FAB. The residual value generated from the
large site example within the RT-50 zone could support 16 fully underground public parking
spaces. The recommended standards can be adjusted based on fluctuating market conditions to
reflect differences in BMR subsidy and parking development costs. Furthermore, the City will
have the opportunity to revisit the development inputs and assumptions if few developers take
advantage of the FAB or if the FAB restrictions are set too low.
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Attachment E
SOFA II
Transition Setback
and
Daylight Plane