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Home My WebLink About0447.091• I > --.. ~ October 17 I 199.1 THE HONoRABLE CITY COUNCIL Palo ~ltc, California Attention: Finance committee ECONOMIC OOTLOOJ: COKMli"'l"E'!' MEETING OF SEPTEMBER 20, 199.1 Members of the council: This is an informational report; no council action is necessary. ~rt in Brief" The Economic Outlook Committee (EOC) was formed in 1988 by the Finance Director to provide insight on issues in the local economy tl1at might affect the city's budget" and to create a fo:'"UlIl far business leaders to provide feedback on City s€:!"wices. The EOC is comprised ot City staff members and business leaders from the local communi tYa The Committee meets quarterly to discllss topics of economic concern to local government and businesses. Attached are minutes of the latest EOC meeting. The Finance Committee has requested that minutes from EOC meetings be aqendized as an informational item, as a part of the Committee's priority of economic outreach. Topics covered at the September meet.ing included economic resou'["c~s planning overvie\i, Stanford Shopping Center uPdate , and political trends and economic development. R~espect(f!UllY SUbm~:ed, -..-'! (--' ..-> .' -... -~-L C,-V t..,../ ~ Y HARRISON --I Di,r. ctor O.'fr ,7'MCe ,! Iq; /~/~ / JtJNE FLEMING / I f A,ssistant city If'anager 1..-". CMR:447::il I r , -------... ECONOXIC OUTLOOK COMMITTEE XI NOTES September 20, 19~1 Attendees: David Longbine, Edie Dorosin, Charles Keenan, Andy Doty, Ray Sly, Marcel Cohen, Andy Coe~ Walter Freeman, Diane Healey, George Zimmerma~, Emily Harrison, Carol Jansen, Mike Cobb. EconomIc Resources Plannin.,g. OVe.;-viev Emi ly introduced Carol Jansen, Chief Planning Official for the Ci ty, 'W:t'4V is investigating economic resources planning in Palo Alto. In talking w-ith members of the cOIlU!lunity and business leaders, there 'Was consensus that traditional "economic develop mentK is wholly unsuitable tor Palo Alto. Ms. Jansen identified the main issue for the 1990'S as being the fact that dollars are being taken away from the city. community reaction in Palo Alto indicates that the area ot traditional economic development is mc~tly seen as incompatible with the City'S goals. Ms. Jansen is heading up the ne~ in-house committee. Department re~resentatives from the City ~ill consider long-term scenarios to help give a framework to decision-making in the budget process. This fits \tI'ell -w-ith the Finance COIn1!'littee's current project on defining appropriate service levels. An information report will be presented to the City council in October outlining plans and goals for economic resources plar.ninq. Ken Schreiber 'Will be presentil'l,g his and Ms. Harrison's Stanford Researc~ Park Study to the Policy and Services committee in Cctobe~, as well. Carol hopes to go to Council in January 1992 with an action plan. George Zimmerman's Land Use Revenue Ana lysis Project 'Will go to the Planning Com mission and then to council d~ring that same time p~riod. Ms. Jansen sought input from the group as to how-best she could solicit input from the members of the c01!U!lunity. Chop Kee?J.an suggested Carol might learn more about Stanford Research Park and the businesses located there by attending a forum the Chamber of Commerce instituted where subjects of mutual interest. to businesses in the Park are discussed. 8.tanford. Bhopping cent~.:t;.~.c!J&te David Longbine spoke regarding Stanford Shopping CeI'1_ter's $3.24 million contribution in sales taxes to Palo Alto's economy last year. He stated that the Center's goal is to increase sales, the t.otal volume of which 'Was $350 million last year. He explained the importance of the t.enant mix in leasing wit.h respect to the CMR:447:91 1 ,. -----.., communi ty's high income character, as la'ell as a ... ·arefll:.SS of the needs of a ~ell-educated clientele. The retail industry u~es sales per square foot (psf) as a measurement of success. The Center currentlj averages $440 psf for small shops and about $24Q pst for department stores, .... hile the national average is $185 psf. An attempt will be made to increase sales both by adjusting th~ tenant .mix and by -repositioning-in ter:ns of ma:=-ket strategY4 The follo'Wing marketing areas with percentagE'.s of total sales were p~esented from a market penetration analysis by the Center: Palo Alto, Menlo Park, Atherton, Woodside~ portol~, Los Altos, north Mt. Viev Redwood City to San Mateo South Mountain View to Saratoga The rest of the Bay Area Outside of the Bay Area 34\ 15\ 12% 18\ 100% From 1987, the center lost 5 percent in its primary market area. Mr. Longbine stated that Palo Alto's 12 percent retail sales growth between 1987 and 1990 is extre~ely lo~ considering a State retail sales growth of 29 percent, Santa Clara County's growth of 25 percent, and San Mateo County's 22 percent. The Center's sales qre~ 16 percent, confirming that Palo Alto and the Center's growth lagged Significantly. Mr. Longbine showed a sales productivity chart which is used to identify 'ltieak performers in the 'Center by colors "'hot" (red, orange) for good performers, "'cool-(blue, green) for weaker performers. The distribution of reds in all areas of the center indicates there are no .jeak areas. Attempts are and ... .'111 be made to recapture leases in the blue areas. The 1992 marke-c:ing strategy loIill focus on the primary and secondary north areas, and promote the high quality merchandise offered at Stanford Shopping Center and its position as 11 in the Bay Area4 The strategy will include utilizing nev ideas such as gift certificates, valet parking, increased community involvernen~. and merchant motivation seminars4 The Center intends to take a leadership role with dO\l{ntown Palo Alto, California Avenue and Town and Country Shopping Center businesses in informing the customer that more is offered here than any place in the Bay Area. Sales increases this year have been good: 16\ in June and 12% in July. The estimated sales for next year are $J70 ~illion, and $400 million in 1992-93 (depending on Emporium's status). CMR:447:S1 2 I , I ! -- . - When asked if a ·Lig box promo center" in East Palo Alto would hurt the Center's sales l Mr4 L~ngbine stated that San Ant~nio Shopping Cente~ ~ould probably be hurt more. Price Club and Costeo activity is more harmful to the Centerl s business because those .companies span all ir.come groups. Georq~ Zimmerman wondered if the Center possibly was not emphasiz ing diversity in tenant mix. Mr. Longbine did ~ot think so because the Center is a bette~ quality, moderate cost center~ It deals in goods for all income levels. The focus ~ill be to make the front of the Center a -better qualityft statement (e.g. Ralph Lauren). To expand growth, the tenant mix is being redefined and a program of more aggressive marketing instituted. Carol Jansen asked the time frame when the present strategy ~ould be accomplished and the space !)roblem would be primary. David indicated that at the end of 1992, all these programs will be in place and the Center ~ill be facing "land lock". An important consideration in future revem.:e esti mating is the status of the Emporium, as it does $27 million per year in sales. !f Emporium leaves l it could be up to 5 years before ano·ther anchor is obtained4 If the Emporium lease .. 'ere recaptured, he would prefer to replace it with smaller stores that generat~ more s~les per square foot. George Zimmerman asked 'Why the sales growth ... 'as less than some of the Cent~.&.·, s competitors', and David stated the fact that food facilities had great significance and are the pri~ary reason for increased salgs. Also, the maximum parking capacity of the Center has almost been reached. Ms. Harris-:m asked what the Center .. ould prefer the City's role to be in the effort to increase sales. Mr. Longbine 1 isted as possible items for a ~perfect 'World" scenario, the opportunity to close Arboretum and to expand in that space, the addition of parking decks, and the completion of Sand Hill for access. A ne~ anchor would need 150,000 to 2QO,OOO s.f. (250,nOO s.f. ideal). He indicated a definite need for another anchor; only Cnion Square has six anchors as the Center doe5 4 George Zimmerman clarified that the strength of a good shopping center 'is in having good anchors and commensurate smaller stores. Poli tiea~J;.n4s and Eoono::ai_1C Oevelopment Chop Keenan pointed out the significance of the fact that govern ments are all without funds and are attempting to mandate their shortfalls to other government agencies or private industrY4 Additionally~ regulatory agencies are in their ascendancy again, and higher tax rates are being imposed. Ho~ever, Mr4 Keenan did not think there would be double-digit inflation this year. There is an inadequate supply of housing in northern California, and transportation issues cause regionalism, .... hich may cause income CMR:447:91 3 , -, redistribution~ Higher taxes and the Proposit~on 13 -attack" (i.e., attempts by local governments to overturn Propositio~ 13) will have a significant effect on econcmic trends in the future. Tax policies ar.-:: increasingly more important in :business decisions. Hr. Keenan gave a visual presentation showing results of a San Jose Study regarding t.he possible developme.nt cf the Coyote. Va 11e1'. Concerns of the San ~ose community ~ere identified i~ the fol]o~inq a.reas: Even t.hough residents believe things are going in the right direction, there is concern about transportation systems and housing availability relative to their jobs. It is generally knovn and accepted that those two items are the greatest incentive for companies to move fro~ the Bay Area~ There is little satisfaction with the way government is dealing ~ith these issues. Other areas of expressed concern included the need for affordable sinqle family housing, better education, public transtrOrtation systems, preservation of the environment (especially the hills and open spaces). homelessne5s, and efficient government. Mr~ Reenan stated that Palo Alto needs to focus on the present business population and let them know that their location here is appreciated. He stated further that concerns about air quality will also change the way these companies can do business in the future, Mike Cobb summari~ed the presentation by pointing out that the poll showed that people .,ant a lot: of change, but they are not ""tlling to do what it takes to make the change. He pointed out further that evoents happening in Sacramento right nolo/' :may make these discoveries and strategies meaningless~ Next Meeting The m.eeting adjourned at 12:10 p.m. The next 'meeting vill be january lE, 10:00 a.~. to noon, Human Reso~rces Conference Room, 1st floor, City Hall. The agenda -will include Diane Healey speakinq on the Stanford Research Park Master Plan and the Land Use Reyenue Analysis Project by Gruen & Gruen. CMR:447!91 • •