HomeMy WebLinkAboutStaff Report 3431
City of Palo Alto (ID # 3431)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 1/14/2013
City of Palo Alto Page 1
Summary Title: Office of Economic Development Policy
Title: Policy and Services Committee Recommendation to Approve a Policy
for the Office of Economic Development
From: City Manager
Lead Department: City Manager
Recommendation
The Policy and Services Committee and Staff recommend that Council adopt the attached Policy
for the Office of Economic Development (Attachment 1).
Background
In March 2011, the Economic Development Manager presented a draft Economic Development
Strategic Plan to the Policy & Services Committee for discussion and direction. After returning
in June 2011 with updates, staff met with Policy & Services again in October of 2011 and
presented a draft of two separate documents: a Council Policy for Economic Development, and
a Staff Action Plan relating to the policy. In response to Committee Member comments, staff
returned in November of 2011 with a further revision to these two documents.
The Staff Action Plan identified strategic areas of focus that align with the goals of the Economic
Development Policy. While staff action plans aren’t typically referred to Committee/ Council for
review, staff believed that at that stage of early policy formulation the Staff Action Plan served
as an indicator of staff’s interpretation of the City’s goals for Economic Development and would
help the Committee/ Council indicate whether or not we were “on track”. After further
dialogue, the Committee asked staff to include Committee Member’s comments and return for
further discussion of the Policy.
City of Palo Alto Page 2
Staff returned to the Policy and Services committee again in October 2012 with an updated
draft of an Economic Development policy. The Committee directed staff to make final
revisions to the policy, including changing the name to The Policy of the Office of Economic
Development, and incorporating comments from the Committee Members.
Minutes of the 10-23-12 meeting are included (Attachment 2). Additional background
documents and minutes are available online using the following link:
http://www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?BlobID=31584
Discussion
The purpose of the Council policy is to state the goals and the guiding principles of the Office of
Economic Development for the City and to provide the policy framework to ensure
that the City’s limited resources are applied in the most effective manner.
Resource Impact
None
Attachments:
Attachment 1: Econ Dev Policy Draft 1-14-13 (DOCX)
Attachment 2: P&S Excerpt Minutes 10-23-12 (PDF)
Purpose
This Council policy sets forth the goals and guiding principles for the City of Palo Alto’s Office of
Economic Development.
Policy Goal Statement for the Office of Economic Development
It is the Policy of the City to create an environment that attracts, retains, and encourages growth of
businesses aligned with Palo Alto values that:
1) provide revenues through sales, transient occupancy and property taxes, and other revenue
streams to support the delivery of services and infrastructure for the City; and/or
2) are innovative companies and enterprises with a special focus on technology or the services
associated with technology, or other innovation based endeavors.
Further, it is the Policy of the City that all such businesses should be operated in a manner that is:
1) consistent with the City’s sustainability goals and practices; and are
2) consistent with the livability and residential quality of our community.
The City government economic development strategy and practices will be guided by:
Perspective and Guiding Principles
1. Key City staff resources should focus on attracting and retaining businesses aligned with Palo Alto
values while providing needed revenue to the City.
2. Sustainability and economic development can be complimentary, mutually reinforcing, and value
generating. Sustainability and Economic Development go hand-in-hand in Palo Alto.
3. Innovation and creativity are essential components of the city’s “brand” and fostering business that
reflect that spirit maintains Palo Alto’s attractiveness and appeal.
4. At the same time, Palo Alto’s economy is sustained through a diverse mix of existing and emerging
industries and services.
5. Local-serving businesses are an integral part of the character and livability of Palo Alto.
6. Small businesses and emerging start-ups have an important role in the creation of jobs and
economic growth.
City of Palo Alto
Office of Economic Development
Policy
December
January 2013
7. Collaborative efforts are essential to fostering innovation with an economic impact, especially with
creative economic engines like Stanford University and Stanford Medical Center and Lucille Packard
Children’s Hospital.
Discussion
The City of Palo Alto has a reputation as a world leader in technology and innovation and is a major
employment center for the Bay Area. Thousands of companies are located here, delivering a wide range
of products and services, from technology and its associated enterprises to community-serving
businesses. Through the payment of various taxes, many of these companies directly contribute to City
revenues and the delivery of needed services and infrastructure in our city. There are also numerous
secondary and tertiary financial benefits as well (i.e. transient occupancy tax (TOT) generated from
business trips, sales tax generated from business lunches, etc.). Our primary economic development
goal is focused on supporting and attracting the businesses that support and grow our tax base, with an
understanding that City values and policies help shape our economic development strategy and practice.
Significant contributors to our position as a major employment center are our great local schools, access
to talented people from institutions such as Stanford University, Stanford Medical Center and Lucille
Packard Children’s Hospital; strong neighborhoods (many with historic qualities), with quality executive
housing; access to transit; a temperate climate; a beautiful tree canopy and access to parks and open
space; a diverse and highly educated populace; interesting and walk-able business districts; City
ownership of the suite of utilities including fiber optics; strong cultural amenities including community
services, performance and visual arts; and good government.
But the City government and the services it provides face numerous challenges. The disconnect between
economic growth and local government tax structure limits the revenue yield that could be available to
the City and fiscal challenges at the state/federal level continue to put cities at risk. City revenues in
California are restricted by law and cities lack flexibility, full home rule, and some taxing authority to
raise municipal revenues in an economy such as ours (no income tax, sales taxes on services, etc.).
A number of other factors which impact our community must be considered as part of the City’s
economic development strategy. These include: managing growing employment demand at the right
scale and pace; increasing access to public transit and enhancing its effectiveness; limited availability of
commercial properties; affordable housing; City infrastructure; traffic and parking congestion;
transitioning to low a carbon economy; population growth anticipated in young families and seniors into
the next decade; and maintaining high quality schools. These challenges require balancing economic
development goals and community values.
The City’s limited Economic Development staff is taking a more proactive role in supporting the
attraction of new business to Palo Alto, while helping to retain and grow existing enterprises. Staff focus
is on understanding and meeting the needs of revenue-generating companies (i.e. retail, hotel, business-
to-business, etc.) that help to fund vital city services. Also, by serving as an advocate with other City
departments such as the Development Services, Planning, Fire, and Utilities, Economic Development
staff will work to facilitate the appropriate growth of companies in Palo Alto by helping make
development and location processes as transparent and predictable as possible.
Our Economic Development approach also champions the innovative spirit of our businesses and
community to ensure Palo Alto maintains its leadership position as a global center for innovation and an
attractive place to launch new ideas and businesses. Some companies in the “innovation” space may
provide little direct revenue benefit (i.e. taxable sales, etc.) to the City’s general fund. Nonetheless, on
the “soft side”, maintaining the City’s brand as a place where people’s creative ideas can become world-
renowned businesses keeps small city Palo Alto a globally competitive city, with indirect revenue
benefits and economic, social, and community multipliers of real value.
Policy and Services Committee
MINUTES
1
Special Meeting
Tuesday, October 23, 2012
ROLL CALL
Chairperson Holman called the meeting to order at 6:11 P.M. in the Council
Chambers, 250 Hamilton Avenue, Palo Alto, California.
Present: Holman (Chair), Espinosa, Klein, Schmid
Absent:
ORAL COMMUNICATIONS
None
AGENDA ITEMS
1. Recommendation on Economic Development Policy and Input on
Outreach and Development Process for Update of Comprehensive Plan
Business and Economics Element
James Keene, City Manager hoped the Policy and Services Committee
(Committee) would provide direction for Staff to proceed with the Business
and Economics Element of the Comprehensive Plan. He asked the
Committee to allow him to provide a redraft of the item reflecting the
content directives offered by the Committee. If the rewrite was acceptable,
it could then be forwarded to the Council. If the rewrite was not acceptable,
the Committee could place it on their Agenda for further discussion. He
wanted the Committee to focus on establishing Policies and Guiding
Principles and to articulate an Economic Development Policy.
Thomas Fehrenbach, Economic Development Manager reported the
Committee had two documents for consideration: the Policy document and
the Comprehensive Plan update. The Policy document reflected Palo Alto's
assets and the economic development challenge demonstrated Staff's focus
on revenue generation and retention and Palo Alto's long-term identity as a
place of innovation. He invited the Committee's feedback regarding Guiding
Principles in particular. A subcommittee of the Planning and Transportation
MINUTES
2 October 23, 2012
Commission (P&TC) and Staff were engaging stakeholders and the
community regarding an update of the Business and Economics Element of
the Comprehensive Plan. He asked the Committee to provide input on
questions for the strategy and outreach questionnaire and thoughts on the
process for updating the Business Element.
Chair Holman noted questions remained from the prior meeting and
requested responses. The first question was the relationship between
Economic Development Policy and Staff's update of the Comprehensive Plan.
The second question was Staff's response of the direction from the City
Council regarding a Business Element of the Comprehensive Plan.
Mr. Fehrenbach stated at the prior meeting Staff proposed continuing the
update of the Comprehensive Plan which could drive some of the Economic
Development Policy. Tonight, Staff proposed considering the Comprehensive
Plan update and Policy in tandem.
Mr. Keene indicated there was nothing in the Staff program regarding a
major redraft involving complex outreach processes for the Business
Element of the Comprehensive Plan. An Economic Development Policy had
to align with language in the existing Comprehensive Plan Business Element.
Staff proposed a simple and general Economic Development Policy. In
discussions with the P&TC and the City Council, questions could arise that
would be broader or deeper than the proposed Policy language. In that
case, Staff would need to seek Council direction.
Council Member Klein agreed with the City Manager's approach to the
language of the document. The Economic Development Plan should 1) keep
and expand businesses that generate sales tax and transient occupancy tax
(TOT) revenues; 1a) keep and expand innovative technology companies; 2)
indicate all such business should be consistent with the City's sustainability
principles, and 3) indicate all such businesses should maintain the residential
quality of the community. Development of the Stanford Medical Center was a
potential driver, not the primary driver, of economic growth.
Council Member Schmid could not comment on alignment with the
Comprehensive Plan or its relevance because information regarding the old
Comprehensive Plan, the new Comprehensive Plan, and P&TC actions were
not included in the packet. The purpose of an Economic Development Plan
was to provide context for Council decisions regarding major development
projects. The goal of focusing on supporting and attracting businesses that
support and grow the City's tax base was a good foundation principle.
However, each major development project presented to the Council during
MINUTES
3 October 23, 2012
the last year generated less revenue for the City than five single family
residences would have. If the goal was to attract elements to grow the tax
base the City should approve projects to build single family residences rather
than offices. The linkage between successful businesses and a successful
City was the attraction of new families who paid property taxes and sales
taxes. The City should attract businesses that contribute to the quality of
life in the City. The Economic Development Plan did not discuss that aspect.
If his economic model was correct Staff should reach out to new residents to
learn what attracted them to the City. Discussions of business development
should center on benefits rather than problems. He inquired whether Staff
agreed with his economic model.
Mr. Keene felt those were good points. In many communities’ single family
residences cost more in services than they generated in taxes and offices
provided the revenue gain for cities.
Council Member Schmid recalled Staff's estimate that the total taxable
income from four floors of office and retail space would be between $70,000
and $90,000 annually. The 195 Project would provide total income to the
City of $68,000 annually. Fire and police services would exceed that
amount. From a revenue perspective large office projects did not pay for
the services they received.
Mr. Keene reported the Office of Economic Development had no direction or
goals. Mr. Fehrenbach proposed meeting with the Committee to articulate
his goals. He was prepared to discuss the focus for the Office of Economic
Development and not necessarily the other issues mentioned. If the
Committee wished to discuss the larger issues he needed to prepare a
different proposal and conversation.
Council Member Schmid explained that the introductory comments indicated
a discussion of the Comprehensive Plan and the business development part
of the Comprehensive Plan, which led to a discussion of how the Council
made decisions regarding business developments.
Mr. Keene wanted a policy formally established by the Council to guide
Staff's work in the Office of Economic Development. Staff wanted to ensure
the Policy language was reconciled with language in the Comprehensive
Plan. If larger issues emerged Staff would have to review the entire project.
Council Member Schmid raised important questions and they would be
considered in future discussions.
MINUTES
4 October 23, 2012
Council Member Espinosa agreed the Policy statement was simple and did
not disagree with Council Member Klein's suggested wording. He suggested
the Policy statement be moved to the beginning of the document. The Policy
Statement should provide clear goals and strategies and advocate a work
plan for the Office of Economic Development. The list of questions for
outreach was good and would provide helpful information. He suggested
outreach to new and existing businesses, small and large businesses, start-
up businesses, and business incubators.
Council Member Schmid inquired which statement Council Member Espinosa
suggested be moved.
Council Member Espinosa indicated the Economic Policy statement, whether
or not it included Council Member Klein's changes, should be stated at the
beginning of the document.
Council Member Klein felt it was a fallacy to think businesses moved to Palo
Alto and their employees followed. Mr. Fehrenbach's job was to keep
existing businesses happy and to bring new businesses into the City. The
discussion was an attempt to help him focus on the types of businesses to
recruit.
Council Member Espinosa had talked with two business incubators who
wanted to work within the City but needed help. He referred them to Mr.
Fehrenbach, who assisted them and provided solutions. Both groups were
appreciative of Mr. Fehrenbach's guidance.
Chair Holman stated it was the Committee's responsibility to provide
direction and set expectations. Because she was unaware of the intention to
update the Comprehensive Plan Business Element she had concerns about
the process to engage the public regarding the update. Prior Comprehensive
Plan updates included broad outreach. She felt the update of the Business
Element would be included on a P&TC Agenda and asked for Staff's input.
The Policy's strong emphasis on innovation spaces and innovative companies
was the driver of Council Member Schmid's comments. The Policy lacked a
statement about providing an economic climate to encourage and support
local, independent businesses. Local, independent businesses enhanced a
community's individuality and drew residents to a community to shop. What
were not mentioned in the Policy were the types of services and businesses
reflective of the needs of the community. She felt they should be included.
Other topics she wanted included in the Policy were adjacency, a sustainable
environmental community, and a business registry. Knowing the kinds of
MINUTES
5 October 23, 2012
businesses located within the City was critical to understanding community
needs and the type of business that generated the most sales tax.
Mr. Keene indicated a discussion of economic development with the Council
would require more resources. To respond to the questions posed, he would
need to return with a different proposal.
Chair Holman clarified she was not asking for Staff to perform studies or
research. The topics were simply what she wanted incorporated into the
Policy document.
Mr. Keene could take liberties with Chair Holman's comments and include an
umbrella statement regarding specific revenue sources. Being known as a
headquarters capital or start-up capital had some value, although it did not
provide direct revenue. Staff was not in a position to define every aspect of
the Policy but wanted it as a guide with respect to the citizens' needs. He
would not ask Mr. Fehrenbach to work on mixed-use or adjacency issues
because those issues were not in his area. If the Council wanted to discuss
the larger economic issues he needed to provide the Committee with a
different proposal. The Committee could adopt some of the framework of
the Policy or he could return with a new plan and proposal. He needed
clarification from the Committee regarding the actions Staff needed to take.
Chair Holman explained a business registry would allow the Committee to
understand the types of businesses located within Palo Alto and the more
profitable businesses. She wanted the basic business plan to support
adjacencies in existing businesses in order to promote thriving retail areas.
These were statements she wanted included; they were not meant to create
additional work for Staff.
Council Member Schmid stated Mr. Keene wanted a Policy for the Office of
Economic Development. The prime goal and function of that office was to
facilitate relationships between the City and the business community by
providing information, fostering public-private partnerships, speeding the
Development Center process, and helping small businesses and foreign
visitors. That role would not set City policy, develop a new Comprehensive
Plan, or deal with zoning and such topics. The current discussion concerned
a Policy for the Office of Economic Development. All other topics were
appropriate for a different discussion at a different time. He asked if his
interpretation was correct.
MINUTES
6 October 23, 2012
Mr. Keene felt it was a useful way to divide the topics so the Committee
could proceed. Some functions of the Office of Economic Development
would reach beyond the office; however, for the current discussion, that was
a useful division.
Council Member Klein agreed with Council Member Schmid's suggestion. A
broader discussion would not be useful. The Committee's responsibility was
setting policy; the City Manager's responsibility was implementing policy.
He did not want the City involved in top-down economic planning.
Council Member Espinosa recalled Staff originally requested feedback on the
plan and suggested presenting a plan was no longer a goal for Staff. He
favored presenting the current Policy statement with changes made during
the discussion to the Council. He inquired about the Comprehensive Plan
discussion returning to the Committee, so Staff could receive information
and guidance.
Mr. Keene reported he could redraft the Policy, moving the Policy statement
to the beginning and including an umbrella statement to express intent. He
requested permission to submit the redraft on an exception basis.
Regarding the Comprehensive Plan, perhaps Staff could answer some Policy
questions through a Comprehensive Plan amendment process rather than a
complete revision of the Business Element. If the Council adopted a Policy
change or clarification, they would expect Staff to review the existing
Comprehensive Plan to ensure the Policy aligned. Staff was not requesting a
redraft of the Business Element. He suggested the Committee recommend
the Policy to the Council and discuss the Comprehensive Plan and larger
policies related to the Business Element and economic issues in a separate
forum. Staff wanted to ensure the Committee did not take an action that
conflicted with language in the Comprehensive Plan.
Council Member Klein moved adoption of Part A of Mr. Keene's comments.
Part B concerned the Comprehensive Plan, which had not been agendized.
Chair Holman inquired about the meaning of Part A.
Council Member Espinosa stated the Council would review the Office of
Economic Development Policy statement.
Council Member Klein indicated the statement would be revised by the City
Manager's Office and would contain as its lead the Policy statement listed on
page 2.
MINUTES
7 October 23, 2012
Council Member Espinosa added the Policy statement would incorporate
comments made by the Committee.
Mr. Keene indicated it was a matter of organizing and expressing clearly the
Policy document. The document provided a guidance that Staff did not
have, even though Staff was operating from the principles stated in the
Policy document.
Council Member Klein suggested naming the document the Policy of the
Office of Economic Development. Staff should provide the redraft to the
Committee in sufficient time for review and comment before discussion by
the Council; however, the redraft would not be agendized for a Committee
meeting.
Council Member Klein moved, seconded by Council Member Espinosa to: 1)
create a separate policy for the Economic Development Department and
economic development portion of the Comp Plan, 2) create a new “Policy of
the Economic Development Department”, 3) move the Policy Statement for
Economic Development from Page 2 to the beginning of the new policy.
Council Member Espinosa stated the goal of the document was to have all
involved parties working towards the same objective in terms of the end
results for the Office of Economic Development. He hoped the material
would provide focus and guidance for Mr. Fehrenbach.
Council Member Schmid supported the Motion because he believed it was
helpful in clarifying how the discussion could move the process forward. He
encouraged the City Manager to the process; context and strategy of
economic decision making that may include items such as Planned
Communities (PCs), public benefits, ground floor retail, mixed use,
Pedestrian Transit Oriented Development (PTOD), parking, and retail versus
office.
MOTION RESTATED: Direct Staff to: 1) revise the Economic Development
Plan and rename it- The Policy of the Office of Economic Development, 2)
P&S Members will review the updated policy prior to it going to full Council
for review, 3) the revised policy incorporates comments by P&S members, 4)
the policy statement for economic development- It is the Policy of the City to
create an environment that attracts new businesses, and retains and
encourages growth of existing businesses that provide revenues to support
the delivery of services and infrastructure for the City and/or; 2) ensure that
Palo Alto continues to be a global center of technology and innovation, is
moved to the front of the new policy document.
MINUTES
8 October 23, 2012
Mr. Keene felt the intent was to move the statement to the beginning;
however, Staff would be moving other parts as well.
Council Member Klein indicated the intent of the Motion was that Staff could
change the wording; however, the concept should be at the beginning of the
document.
MOTION PASSED: 4-0
Erik Nichol, Fire Chief introduced himself. He was from a special district in
Marin County that focused solely on fire and emergency services where he
progressed through the ranks. He used data to make solid decisions and
wanted to use data to predict risk and calls for service. He looked forward
to working with the Council.
2. Fire Utilization Study Recommendations Update
Pam Antil, Assistant City Manager noted the update was overdue; however,
the Policy and Services Committee (Committee) would be pleased with work
performed by the team.
Dennis Burns, Public Safety Director, recalled in 2010 the City contracted
with International City/County Management Association (ICMA) for the
Center for Public Safety Excellence and Tri Data to evaluate the Palo Alto
Fire Department. After six months of study the consultants provided 48
recommendations to improve the quality of the Palo Alto Fire Department.
At the beginning of 2012, a second study focused solely on Emergency
Medical Services (EMS) and provided 23 recommendations. Staff
consolidated the command and support Staff for the Police and Fire
Departments. With the elimination of shift-wide minimum staffing, the
Department could deploy Staff and resources based on available Staff. This
reduced overtime and removed from service at most one piece of apparatus
when absences fell below a certain number. Ian Hagerman, Senior
Management Analyst, developed a tool for Fire Department Command Staff
to use in monitoring response times for each shift and each station. The Fire
Department previously had a second medic for only 12 hours per day staffed
through overtime. By shifting personnel, the second ambulance was staffed
fulltime while increasing EMS revenue and reducing overtime. The
Department had accomplished a great deal in training and development.
Deputy Chief Capriles developed an annual training plan to prioritize training
for all positions within the Fire Department, developed task books for various
positions to ensure personnel met Department standards, and developed a