HomeMy WebLinkAbout0373.094\
July 7. 1994
TIlE HO~ORABLE CITY COUNCIL
Pa.lo Alto, California
G
&poPTION OJ TUg PRAFT ECOHOMICAESQUBCgS PL~
KemberB of the, Council:
Report in BrW
9
On November 23, 1993, the city Council referred the draft Economic
Resources Plan (ERP) to Policy and Servicas and Finance committees
for report back to the City Council. Reports and minutes of the
February 10, 1994 Policy and Services committee and May 10, 1994
Finance Cornmi ttee meetingfJ. on the draft Econordic Resources Plan are
attached.
The policy and Seryice~ committee discussed the various issues
raised by the draft Economic Resources Plan, but no action was
taken. Subsequently, the Finance committee. voted unanimously in
support of the Economic Resources Plan 'With the caveat that it
neither implied nor precluded the use of any zoninq changes nor
financial assistance to develop:rnent proposals generated by ERP
efforts.
In this report staff has addressed the issues and concerns rai~ed
by both cOlll'mittees, arJd recommends that City Council approve the
Economic Resources Plan, and also direct staff to return with an
i~plamentation plan by October, 1994.
Policy tmplic.Jtions of l?RL.
At the. Pplic'y and ,ser.vices Committee meeting on the Economic
Resources Plan a riumbe~ of questions were asked by ~embe~6 of the
Committee regarding the policy implications of ERP, the role of the
City Council in providing policy direction to staff in the
execution of the Plan l how ERP has worked to date, and how ERP is
to be integrated organizationally if adopted. A discussion of each
ot these points follows.
1) Potential policy implications of. Economic Resources Planning
could be minimal or great gepending upon the nature and
political sensitivity of the issue to be addressed. For
exarnple J preparation of promotional materials on the City
would presumably not generate the keen public interest
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anticipZIItQd of a proposal to redevelop an existing
neighborhood shopping area or to construct a new hotel with
conterenoinq facilities in Palo Alto. If either of the latter
,-,are to occur, it would necessitate solicitation of City
Council po:llcy direction probably on nUJI"lorous occasions prior
to inplernsntation. Approval in concept of the Economic
Rf)SQut'ces Plan 19 not viewed as license to staff to work
"outsid .. " existinq City policie.s, particularly on land
use/development issues.
The role of the City counoil in providing direction to staff
ill i~pleA.nting ERP is very important. Approval of the Plan
IJD;plios agreement from City council that those areas of
econo:mic activity identified in the Plan should he pursued
further. en all ~ajor issues, additional communication with
City council will be forthcoming prior to any action other
than "fact-finding" activities. For exarO-ple, if the Plan were
to be adopted with the direction noted on page 18, II C.
Hotels/Hotela included, Btatt 'Would follow with a detailed
report identifying the issues related to hotel development and
expansion, discussion of zonlnq and financing itllpediments to
now hotel ('onstruc:tion, snd a recommended "road-mapll for
future action that add~esses other on-going activities, such
as the Compreh0nsive Plan update. Several communicoI'!tiorl forma
are. available to do that, including information8-l memos to
City Council, the newly adopted preliminary review process,
and city Council study sessions.
Economic Resources Planninq has been an informal, li:rt!ited, but
on-qoinq operation (or nearly three years. Many questions at
both the Policy and Ser~ices and Financo Committee meetings
focused on how tRP worKs, and 'What makes it different than
40thg llhuain8ss as usual" within the city. Pour specific
exa~pl.s uy heip to illustrate this approach -the initiation
of a Hldtown Market Analysis; the facilitation of tho Genencor
bio-science firm to the Kodak site within the stanford
Research Park; the rehabilitation of the 1000 vacant European
Health Spa buildinq~ and the preparation of a communications
utility rBport to the City' council. All of thes~ projectB
have had active Economic ReHour~es involvement at an early
stage.
h. Midtown Market Analysis
The serious vacancies within the Midto~n Shopping Center
prompted severa'\ me!llbers of City Cotincil to il1quire as to·
what could be dono to help put Midtown back on its feet
as A viable neiqhborhood retail center. ERP staff
initiated contact with property owners and commercial
brokers to determine the impediments to building reuse t
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and salos tax data vau compiled to verify downward sales
trends _within the center. A property OWner and merchants
.. ooting WAS hold with ".lObors ot city Council and the
Cha~er ot Conmorce in ~tteridance, ~nd economic data was
presented validatinq the'numerous concerns raised. The
traditional issues of traf.fic J pedestrian s.afoty,
sidewalk ~aintQnance and parking lot use wers also
discUB~HlId, but the economic considerations. of Midtown
revitali •• tlon was the prl~.ry toeus of that ~oetin9.
An outC-oJll9 of that enct 6\.lb9~quent moetinga. 'Was the
proposal to prepare a market analysis (a consent item on
this ogGnda) {or the Hidtown area to oxplore tho kinds of
inveot=ent necessary to r~-Q8tablish Midtown 8S a
successful retail cantor. ~hile the study h~s not yet
beQn conducted (on~ therefore tho verdict is not yet in
on its Bucceso) -the Hi~town issue incorpot".sItes many of
the olements of aconoDic planninq strategy advocated in
'ERP -sollcit.,.tion of substantial input frQl'l those who
have investr.::ent in Hldtoyn , such as property ownar.o and
~erche.ntst and IrQ!1 those who are knowllJdg-9able in
concerci 1'1 1 leasing end l1G-ighborhood .retail development
crforts. A ~ore tradition~l appr.oach may have generated
~ physical developltent plan with substantial residential
involvor.:ent 'Within the area t but without t.'hn knowledge of
the economic underpinnings necessary to accomplish the
plan 's gOft10.
D...-GeDQD02.L~1,,!r.ti9D'8 l'.l.~n~>L IS".t!QIt-H.1lliln
~t~nfQrd R~~~
ERP involvement \"ith Genencor to occupy the ten acre
)(od~l< site within the Stanford Research. Park embodied
classic ticonor:dc develope-ont efforts. Canencor solicited
proposals fronl severAl stnteB to locate a new R&D
ta6i11tYJ and the St~te of California Trade and Commerce
~9sncy was instruDental in bringing tho company to Palo
Alto for initial discussion9 of the Kodak site. Several
M'etings W4re held 'With City staft t membors of City
Counoil, Ch~Mb~r of Co~erce representatives, Stanford
La.,ds Man,a.g6J1l0nt repr~sQntatives ftod Genoncor executives
to di6CUsS the co~u~itY'6 receptivity to re-use of that
Bite for bio-scienco R&D purposes. Cenencor's unique·
type 0:: bio-science 1nd~lstry~ the res~arch and
de.veloprn.ont of industrial enzymoSj was soen as highly
cONpatible to other R&D efforts within the Park and to
the t1nivor-e.ity's medical re-st'arch efforts. Also
discussed ware City 20ninq and building-requirements,
traffiC issues rolated to tha Park, hazardous materials
permittillg procosses, the high cost of hotJsinq in Palo
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Alto, etc. The foous of the meetings, how6ver, was to
facilitate and coordinate Gar.encor'B ~elocation effortst
rather th~n to present the requl.atory requlrslents of
each d~p8rtment on a c&6a~by~ca8e basis.
Whath~r Genencor's decision to locate in Palo hlto wus
<lirectlj' affected hy tho.e "aorta will nover bo tully
known. We do know that Cenencor "'''''0 pleA6sd by the
city' B positive reception to th~!r proposal. Ttlls ida"e
represented a minimal lOl'll! of {)Jllployment recrultl!2ent; the:
proposed use was to occupy an uKistinq vacant 1ndu~trial
site, and no discretionary zonin9 entitle~onts were
necessary to accommodatti them. in Bu~~ary, tho city and
the state of calIfornia and the Cha~~r of COmBercQ and
stanford Vniversity put their bost collectivo fcat
forward to help attract an excallont industry to A long~
vacant site in the Stanford Resoarch Park.
An ERP approach was used to actively identity ~ potential
user for the long vacant Europc.cn Health spa building.
Placed as a high priority ERP ite~, outr~ach vas ~ado to
the listing agent lind others in the cO!'U!>9!.'cial broker inq
indu~t:t'y to det.ax-mine ...... hat the impedimonta '\:Ic:r~ to sale
or lease of the property (and they "'.oro fOUhd to bo
substantial). All noted the unr~alistic 8sx!n9 price on
the building; zc-ninq iT!lpediments Iolh!ch liJO'lited office
uses; tho unsllitability of tho site tor rota11 co'!wercial
purposes; the non-co!l:lplyinq buildinq statue, 'Which
pt'e.cluded redevelopmont of -the property to, its proaEint
size; and the nwnerous code requirements incuJt,bent with
rohabilitation of the exIsting structuro. An oath"ated
value of the propnrty W6~ deterainod basad on sales or
other El Camino Real cO!M!srcial properties, l!Ind staff
ihitiated calls to the ovnQ~S in Deerfield, H1chig~n to
discuss tho City's receptlvlt~ in wOtkinq with the
owners' representatlves to facilitate to-,use of the Bite.
While it has not been an altogether easy process, tht'!:
building is presently beir.q re-constructed tor uge as a
l~cal insurance Office.
Os Communications Utillty
As an offshoot of the discussions with Digital t:quipIllent
Corporation's conduit leasing program for a dO\oJnto'Jn
fiber optic communications system, ERP st8ft initiated
meetings with the stanford Resear~h Park Forum to
determine what industry communication needs may be in the
future, and What role the city of Palo Alto might play In
providing them. An in--house "Communications Visioning U
nd hoc committee, comprised of lJtilitie9 1 Inforna.tion
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Rellources, Library ServicEls, Public Works and £RP, lias
formed within City Hall to explor~ the issues related to
the communications industry. ERP staff retained an
intern from the Haas center for Public policy at stani'ord
to assist in drafting tho May 19, 1994 repol·t to the City
Council suggesting further exploration of the
communications utility concept, and the report 1s
currently schedule.d for Utilities Advisory CO!!Uaission
review at their July and August meetings.
Tho role of ERP in the communications utility issue is
one of idea "incubation", linkaqe to the business
couunity with technical expertise on th.a issues, and
providing tho support staffing to other departments to
draft the initial report to City Council. While
continuation of the pl.'oject rest,s els~wherc, solicitation
of businG$s community input on any proposals generated
from these efforts will be facilitated by Economic
Resources Planning.
The most frequently asked que~tion reqardinC} Economic Resourcos
Planning is how it is to be implemented; what role will it plny
both inside the organi2'.ation and 'Within the co:rn:roun1ty at largs?
'..rhe ,success of Economic Resources Plannillg, should the Plan be
adopted, if; largely dependent upon those organizational decisions
taken to implement the Plan. In the absence of Plan 8doption, the
Manager of Economic Reaources Planning has functioned soroewhat as
an in-house consultant to both City staff and the businoss
community -issues of concern to the Chamber of Commerce and
individual businesses and commercial property o ..... ners are brought to
the City, staff's attention by the Manager of ERP, just as City
issues pertinel)t to Palo Alto's business community are brought to
affected outside parties. Information flow alone, however, is
insufficient to implement the. Plan. ERP i3 not an integl'lIted
function within thQ city organization J and no permanent staff
allocation'has been made to the program.
ERP is interdepa~tm,~ntal, and staff support from many other
departments i6 egsential to the Plan's implementation. That need
for suppert will compete with other departmental priorities. Host
importantly, integration with other departmental functions requires
a level of involvement that goes well .beyond the! "dialogue" stage
ERP is presently engaged in. Upon approval of the Plan J it is
staff's intent to return to city council with a comprGhensive
recommendation on both t.he SUbstantive priorities of ERP proposals
and an implementation strategy for the Plan. Staff did not develop
such a strategy because the strategy depends on the type of ERP
adopted by Council. For example, a less aggressive plan requires
different staffing and strategy than a more aggressive plan.
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R.aoM·n4ation
staff reco"",ends thAt the City Council approve the Economic
Resources Plan l including tho Proposals I-V articulated
on PII.g8B 17 through 19 of the November, 1993 draft document I
BUmmarized as follows:
I. Initiation of a tl8usiness Outreach. Program".
II~ Institution of a "Business Re.tention PrograTll't.
III. Development of a program that would expedite City
processes tor businesses desiring to expand within the
City, and tor targeted new businesses wishing to locate
in Palo Alto.
IV. Actively participate in regional economic strategic
offorts.
V. Consider, on a selective basis, the use of economi.o
development tools utilized across the state and nation to
accomplia~ specific economic goals.
Respectfully submitted,
/1;/} l ~l ,.J /h/.l:i'-?!/
OL JANSEN ::' ~?J .. ~iC Resources Planning
FLifj·
C ty Manager
ttachments: Exhibit "A": Survey of Other California cities'
CHR:373:94
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Economic Development Programs
Exhibit "Bl'" and IIB2H: Revenues to City by
Comparative Use
May 5, 1994 Staff Report (CHR:269:94)
Excerpt of Minutes 'of May 10 1 1994 Finance Committee
Heeting
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ThA April/May 1994 issue of CalJfornia Business Magazine published
a ·Oirectory of Economic Development Incentives in the State's 100
LllIrgost Business cit1-es ll 'Which is attached as part of Exhibit A.
In conjunction with tho city's on-going organizational review, the
city Auditor's office cOlllpiled i.\ list of "Benchmark Cities"
co.pareble to Palo j\lto~, The list included Berkeley, Mountain
Viev, santa Cru~, and sunnyvale from the San Francisco Bay Area;
IrvinD, P~~adena, santa Barb~ra, and santa Monica from"Southern
Cd Uornia I and the clUe. of Bellevue (WA) , Boulder (CO), and
~ViB (CA).
~ong" the speciftl oconol!'lic development incEmtive!:l that Berkeley
has, are: bus1ness loan programs, facade--improvement loans,
e~ployt!3ent J."ecruUr:u:mt assistance, and permitting assistance.
Mountain View has a one-stop dov-elopMant service center, fast track
plarminq anu permitting (within 5 days} _ a downtown revitalization
pl"09raD, an~ businoss support consortium. Irvine has a one-stop
pot"nit ceut<tr .and job training, i~l addition to an established
Q):lbudaman, industriilll revolving honds, environmental assistance,
t,rip-reduction ordln~nco, and child cltr-e a~sistance. Pasadena's
entorpI"isc: zone incentives include: tax credits, business financing
pr09r.!ll!:l9, fast tr.!l('k pCC':litting_ job development J property
:e.atchincj, and fee waivers. Santa Barbara offers lion-traditional
flnanoing, fast-track por-mittlng, employee training funds/progcams,
~=all business developl:Iont coordination, and business mltrketlng
packltqes. santa Monica offers permit coordination, joint Chamber
of CQmmarco-/City liaison assistanco proqram, Small Businail:li3
Dav-elopmont Centf)r advocacy and technical assistan,ce to busines&..
oth~r incentives populAr-with Californian cities are: technical
r-ot'er.onCG ass.1st~nce, job gEinorator proqrams, business seminars,
~xp~nsion/reloc~tion assistance, housing discounts, financial
incentives for loc.ftl hiring, new jobs tax credits; commercial rehab
loans, co~merclal rent subsidios, utility and property tax rebatc~,
enterprise zones, revolving loan fund, small-business loan fund and
development ~e~ter; locational information to quality companics r
site seleotion ~ss1Bt8nce, seismic lt~d rehab loan programs,
Business AttraotlQn Xncentive Program, Consolidated Active
Retention Effort, incubator, entrepreneurial partnership program,
retail 6ales-tax incentive program, labor-cost reduction program,
building par~it/plan check fee rebates, property tax reimbursement
tor ~nufacturing, neighborhood revitalization program, land/lease
~rite-downs, and freQ a~chitectural design services.
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114-8-3-2.oe~
701-648--«44
10'-643·H~
619-955-~~
61ff2-45-12-"J
~134--5a316
209-13H419
51()9-H-581?
510-2$6-3,."-00
SU!·814-S417
'''is-81'~6!o
114S9&:).)11
114-J;13-4M4
31()l).ISang.
31()S45o-6l24
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IlH.IBIT IID1"
COHPl\I\1ITIVIl RIIV~tI1JB AW\l.l(BIB BY
CITr or PALO ALTO
Per square Foot
Sourcos of Office R&D Retail
City Revenue --Pro ert Tax $0.17 $0.30 $0.2"5
sales Tax "_n/a n/a $3.00
Utility Tax $0.09 $0.4~ $0.09
TOT -"Ia nla n/" -.
Vehicle n/a n/a nJ!}._ -_.----------
Total E'stif:'.latod
Annual Taxes $0.26 $0.76 $3.34
MotrnPTIO.NS {with no,", construction: ovor.l.ll)
OF7%CB
XJIND \lSB
Per
Hotel
$138.07
$136.88
$0.11
$2,737.50
nla
$3, 0l2. 55
* Utility Usors' 'l'ax is $0.09 por square foot.
unit
llouse
$420.00
n/a
$120.00
n/.
$100~
$640.00
.. Calculations do rwt include .additional revenues from
e.roploy,umt t L e~ rotbiil sales, eatirtg and drinkinq, hotel use,
Ol' J';'osidential real ostAte transactions.
• Property vftlue 1s 30Bumed to be $140 por square foot.
RE8B~Cn , DEVELOPMENT
• Utility users' Tax ia $0.46 per square foot.
• Land cODt ot $2.40 and dovelopnent cost of $250 por squar~
toot is ~9sumed.
RETIIIL
• Vti11ty Usars' T.~ ia $0.09 per squaro foot, * Avcrag. SAle. are approxim.tely SlOO/sq. ft.
• Land coot of $90 along \lith devolop ... nt coot of $120 is
assu1II'Cd.
HOTEL
• T.t;xes troll a sln9le. l'OOJ'Q of. a 350 room hotel 'With conference
taoilities, on A 6 acr6 site.
• Room rent at • CIa •• A hotel is $lOO/niqht.
• Sale. TAX is 5' of TOT (at 75' occupanoy) .
• Utility Veers' Tax is $l.10/sq. ft.
• De:velopr..ent cost. of $150 per square foot and land cost of
$15 t OOO per roo~ key is Rssumed.
IIOUSB
• Average townhOUDO in Palo Alto costs $350,000.
• l\nnual utility Users' tax Is $120 per condo.
• Annual l'.:l:otor vehicle in-lieu and qasoline tax is $50/head
and there are two residents per townhouse.
PIlOPEIl'l''t TAX
• The county collects 1\ of property value in tftK of which the
City receives approximately 12'.
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eXHIBIT uJi2!!
COKPARATIVS RBVENOB ANALYSIS BY ~ USE
CITY OP PALO JUil'O
Sources of
City Revenue House Office R,O Retail
Property Tax $6,300 $4,400 $5,200 $6'2~
Sales Tax n/a "/a nfa $45,000
Utility Tal< $1,800 $1.500 $7,800 $1,400
TO'1' nfa .... 2Y· n/a n/a
Vehicle $1,500 n/~ r·n /a n/a
Total E8till!ated
Annual Taxes $9,600 $5,900 $13,000 .$53,300
Hotel __
$6,~22...-
$6.8008
$4,~OO
$116,000
n/a
$155,000
Asaux:r'rIONB ('With neW' (~onstruction overall on a onO .... dcre site)
lI.Ol1SB * There are 15 Townh¢u50o/Acre. * Average townhouse in Palo Alto costs $350,000. * Annual Utility Users l Tax Is $llO per condo. * Annual l'llotor vehicle in-lhs:u and gBsoline t.a)( is $50/head
and there a~e two residents por townho~s&.
OFFICE
* Utility Ueers' Tax is $0.09 per square foot.
... Calculations do not. inclu~8 addltional r4)venUEl~ tr.oll
employment, i.e. rotail sales, 88tlng ~nd drinking, hotel uso,
or residential real estate tr8n~~ctions.
Ie Property vallis is assumed to bo $140 per SQU8l'O foot. * .4 far implies 17,000 sq. ft. of office apace.
RESEARCH , DEVELOPK!NT * utility Users' Tax is $0.46 per square foot. * Land cost of $2440 and development cost of $2S0 per squ8r$
foot is assumed. * .40 FAR implies 17 1 000 sq.ft. of" built area.
RETAIl. * UtiUty Users' Tax i8 $0.09 per squ.re toot.
• Average .ales are approximately $300/sq. ft.
• Land cost" of $90 and developtumt cost of $120 are 611su"iqed. * .35 FAR implies 15,000 sq.ft. ~f retail sp.ce on the site.
HOTEL
... A 350 room· hotel with conforonce facilities, on a 6 acre site. * Room rent at a Class A hotel is $IOO/night.
. • Sale. Tal< is 5\ of TOT (at 75\ occupancy),
• Utility U.ers' Tax is $1.10/sq. ft.
• Development cost of $150 pOl' square toot and lend cost of
$15,000 per room k~y is assumed.
PROPER'I'Y 'i'AX * The county coll£Jcts 1% of property value in ta)( of' which tho
city recoives approxJ.J'Ilately 12\.
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Mal' 5, 1994
THE JlONORABLE CITY COUNCIL
PALO ALTO, CALIFORNIA
Attention: Finance Co~mittee
Draft Eoonomic Resouroe. Plen
Members of. the Council:
Report ill_lld1t
On November 23, 1993 the city Council referred the draft Economic
Resources Plan to I-''Jlicy and Services .and Finance committees for
report back to City counciL Report and mitlutes of the february
15, 1994 policy and Services committee meeting on the draft
Economic Resources Plan are attached. The purpose of this rne~o is
to present some of the possihle economic and fiscal considerations
of the Plan's recommendations fOl' Finance committee discussion.
The qaals and objectives of the draft Economic Resources Plan a;'-'9
stated on page 15 of the draft Plan. They are as fDllows:
To identify long-term economic trends p~rtinent to Palo Alto,
and to establish stronger working relationships with tho
.business community to maximi2!o the positive effects of such
trends on the City.
To develop an economic frameworK for city Council decision
:making; one that incorporates the economic future of the City
as an integral part of the information package upon which
council and other Boards and Commissions' decision are based.
fro revisit past policies affecting the business and
development community to determine their relevance to the
issues facing us in the upcoming d~cade, and re-desi9n where
necessary.
To establish an internal "markat p2rspective ll on issues,
task~, special assignments, studies, and day-to-day
(\operations; incorporate economic analyses of City functions
and greater receptivity toward new ways of doing business
within the City organization.
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In essenoe, the goals and objectives of the draft Plan advocQte a
way of doing business; one that requires the city to. be sen,sitive
to all of the communityls needs, including the business community;
and to be p~oactive in accomplishing our long range economic and
fiscal goals. It is staff's opinion that the proposals contained
in 'the. Draft Plan tire consistent with the city council/s high
prioritization of tho City's economic future. Key to City Council
support of any ERP program is consensus on the city's long term
fiscal objectives, and an understanding of how ERP can be "played
out" to accomplish those objectives.
CA.. Study Analy •••
An area of considerable concern to all of the City's residents and
many within our business community relates to the eventual land use
changes that will occur within Palo Alto 9ver the next few years.
It is staff's opinion that regd&dless of any City change in zoning
provisions there will be substantial physical change within some
areas of Palo Alto, perhaps most notably within the City's
neiqhborhood cOlM1orcial centers and along the £1 Camino Real. Those
chanqes are and will continue to occur for many reasons; age of
structurelJ:; us:o obsolescence; ou,tside competition; retail consumer
preferences; property o'Wner transfers; fluctuating property values;
and a relatively tight financing environment for commercial
development. An illustrative example of substantial change that
will occur in the near dO'f\'rntown area is the proposed _movement of
the Palo Alto Medical Cl inic to the Urban Lane area, which will
likely result in dramatic physical and land use changes within the
new and present PAMP locations.
In an effort to illustrate the possible fiscal effects of
redevelopment and/or reuse of existing sites within the City, staff
has identified five key parcels within the comnunity that are
likely to redevelop within the next few years: the Hyatt Cabana
hotel Site! Ricky's Hyatt site; the Stanford University owned Page
Hill/ECR property; the Town and Country Shopping center i and
existing Kodak site on Page Mill Road in Stanford Research Park.
A description of these sites, current use and city revenue stream,
and potential redevelopment scenarios are shown on the attached
EKhibit A. A common characteristic of these properties is that 11111
are o'Wlled by a single entity, which will (acilitate naturally
occuring development or redevelopment. Issues related to each
proparty(s) are sumrnari~ed as follows!
1) The Hyatt Cabana Hotel is located Oft a 10 acre site at the
southerly end of the City. The Hotel closed in July of 1993,
an action taken by the Hyatt corporation to minimize losses
associated with the operation of its two major hotels in Palo
Alto. At the time of closure, both the Rickey'S Uyatt and
Hyatt Cabana were experiencing continued decline in occupancy
rates. The Hyatt Cabana was closed based on a number of
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factors; estimated cost of soismic upgrade of the main
building; the smaller number Qf rooms (200 in the Hyatt Cabana
versus 350 in Rickey's Hyatt) which results in a higher
opora.tional c'ost. per room for smaller ful1~service hotels; and
the potential redevelopment of ,the Hyatt Cabana site for
reBida'ntial purposes. Tho site is presently designated on the
. Comprohensive plan for COJl'll!lercial service, and is zoned
Pltmnod CQM\Jnlty tor hotel use only. Present discussions
with thQ developer of the prop-!!rty. the Housing Group, an
aftil late of the Hyatt corporation, suggest a proposal for
~ppro~l~ately 108 single family hOMes and townhouses will be
tQrthco"lnq. city .taf! has consistently supported
rede.velopll1ont ot the site for residential use, inclUding
highor density residential.
The proposed radovelopment of the HYdtt Cabana represents an
\lnprec-edonted change 1n uso of an existing ten acre commercial
site in the City from commercial to very low density
(approxl~Ately ten units per acre) residential. More
importantly, the propose;l i8 elective on the part of the
property owners, end it is based largely on economic
cQnsiderfttions. continued hotel opel"ation 'Wa.s no longer
dus~ed profitable 1n th~t location, financing for nev hotel
dov.alopment was virtually non-cxist{l;nt, residential re~use was
supported .by City poliCies, and the value of residential land
for "for-sa leu housing in that location dramatically exceeded
its value for any other commercial purposos. A comparison of
the t"oVonUD streaD to the City from the Hyatt Cabana at the
time of closure and projected revenueR under residential
roch:welopment 49.8UllIptions (first year) is shown on Exhibit.
IIA."
~icke.y'a lJyatt s!to co:p.\pr.ises approxim1'lltely 16 acres at tho
intersection ot Charleston and El camino Real. It is a 350
roolk full service hotel with restaurant and conterencing
tAcilities and ancIll1ary retail uses. The hotel has been in
op&ration in Palo Alto for over 40 yeara. While cOGmetically
nalntalned to Hyatt standards, the overall facilities and room
sizes are not to lS90's specifications. The site is
compl;ehonsively Planned and zoned for service commercial llSOS,
with hotel as .!!Ii permitted use. In addition to a very tight
hotol finanCing market, the City's Hotel Overlay zone applied
to the property sUb •• qu<>nt to cOlllpletion of the 1986 City-wide
Land Use lind Transportation study will not permit
reh3bilitaticn or redevolopment of the site for hotel
purposes. FAR lImitations within the overlay Zone are
substantIally below industry standards for new hotel
developm.ent,' including the lower profile executive suite hotel
lines as the Residence Inn, Marriott Courtyard, or Stanford
court lIotel located in Menlo Par);;. Existing revenues t,o the
city froll! the Rickey's Hyatt site are sho'Wn on Exhibit "A.II
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Discussions 'WIth the lIyatt Corporat:!Qn indicate a current
desire to oporate Ricky's Hyatt 8& a full servico hotel in
Palo Alto. 0\1-9 to aqe or structures and drtll'aatically changed
morl<et n.eds In the hot"l industry. since its initial
construction, however, and the highly desireable location of
this. property tor othor cOJ:l",srcio!\l purposes, redovelopment of
the Rickey's Hyatt sito is inevitable. PreBent ~onlnCJ on the
property would p.ormlt l\ W'ide r4Jl9o ot cOMer-cial uses vlth
~lnie41 disoretionary review prOC8S8GS; only toning
administrator use perltlt aud/or Architl:\ctural Review Board
app't'oval is requirBd tor such widely vClryinq uses liS
automotive service, retail cOJl'mlJrcial, or aultiple family
residential ot up to 30 units pur aore. In etott's opinion,
flIany ot the por;aLtted \lsos within the sDrvice connercial zone
could result in undorutilhation of the prop~rty (such as ell
sin'll" tully de.elopJlCnt) or In U60S potentially unpalatable
to &urrounding residences.
We h~ve chosen t~o possible r~d6velop~ont sC9n~rio& for the
Rickey'G lIyatt site. ScenariQ I repreaents a mixed use
project with 61W)16 i.ftl:lily hO-C9a along Hilxia 'WAY, with the
rerna1nil19 prop.s:rty allocated toward cQI::.1IunltYMb,.,sed retail use
(such as grocory, ph~r:aac¥, and other noighool'hood goods and
servicesJ,. and", 150 I"ooer exe:cLlt.i.v.(! suite hot~l. sconario I!
sugg~llts t\ ~orR r~sidentlal ",ixod use project, with bot.h
single family ho~es and to\,(nhousos,. t\ 150 room oxecutive suite
hotol, lind a sal!llle:r specialty retail development at the
ChflrlostonJEl C4rJ1ino Roa} intersection.
Neither redevolop~&nt Bcena't'io shown on Exhibit "AU is
projecteci to genE'lrate first yoar re\(~nUe8 to the City equal to
the current revenue strOBl\:! trom RickY'B Hyatt~ Neither,
howevor, is substantially bolow present re:venues of a full
service hotel, and tho future qroyth potential of both
ra.dl)veloplftont 8C8ntu:ios 1e potentitlll1y greater. That is
particularly 80 tor· Scen!!lrio I, which 'allows: for a viable
retail centor on the site, and therefore greater sales tax
revenue growth to the City in the future. Hore iJDpot'tantly,
the ~i2e of the property and ~ixGd UB6 d8velop~ant potential
reprosents one of the few QPportunitle,9 in ,thb city for
r~ta11, hounlng, and hotel services of this kind ..
3) 'l'he 6 _1 acro site at the corner of E1 Camino Real and Page
Kill Ro~d 1s located at. the entrance of the Stanfol'd Research
Park. In the late 1970"8 1 tho City 'zonod the site, which
comprises the for~e, M&yfield school and environs, for high
density multipl~ fa",Uy use. Both City staff and stanford
University lends manag&llent staff believe the site to be
inappropriate tor residential use~ due to its proximity to
~ajor R & 0 and manufacturing uses within the Park, its high
Park visibility/high traffic volume intersection locat.ion
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(renderinq it lecs desireable or suitable for residential
use), and the emerging issues Burroundlnq underground ~ater
contamination within the intersection areD. In addition, the
Palo Alto Chamber of Commerce EconoAic Vitality Task Force has
identified the recruitment of a full service hot~l anrl
conference facility to the city as a top priority, and have
indicated that the Paqe Kill/£CR location 1s the prim.ry
loclttion for such a first class hotel and cOIlCel'cnc.1l1q center.
Finally, the City's position within the peninK"la hotel ".r"at
is soft; we have seen the re~er.t closure of the 200 roo:m Hya-tt
Cabana facility; and the eventual rodavel,opllent o~ the Palo
Alto Hyatt site for other uses could result in a 550 rooa
reduction in the City's Hyatt hotel services. Convers3tlons
with the Stanford Research Park For"m and oth&r mo~b8r8 ot the
Chamber of Commerce, experts in hotel develop~ent, and
exfsting lloteliers indicate thllt the repercussions to thCt
City, pnrticularly from a service perspective, Qt no nev hotel
de.velopment in Palo Alto is substantial. Aho iUl.portant. to
the City, revenue prOjections frOl!l our hotel/l"lotol industry
hav6 been flat for the last several ye~r8, not accountln9 for
inflation. Consequently, the alternative scenerios chosen for
the paqe Mill/ECR intersection are the existing C011lpl'ehehOive
Planned multiple family deBiqn~tion (condom1nitl1"l$J at 40
units/per ac.t'G:l or 8. 350 room full service hotol vith 20,000
square feot of conferencinq facilitIes. Exhibit MA"
indicates the revenue qeneration ditfarence between thn two
alternati.ves.
4) Town and Count:l.'y Shopping center is an existing CompJ:'lOhenslve
Planned anct: zoned 13.1 acre cotnTh~rcial center-located at tho.
intersection of Hl camino Real and E'mbarcadero Road. The ·io .... n
, country center-is family owned and Qperatod; several other
like centers are located in tho: Peninsula/San .)"OSO area.
Retail outlets in the Centar are community based; however,
sales per square foot performance of the center' is well below
even national averages of centers of its kind. Thi& may be
due tQ a combination of factors, including Gxisting tenan~
composition and owner/operator le"sin9 practices, City FAR
caps on expansion (.35 versus .40 in otha:r cs zonas) I and
perceived aversion in Palo Alto 1n genoral to the recrultYient
of "chain" outlets.
Town and Country Shopping Center represents a unique retail
niche. within the City that is cODUnunity serving in nature.
Eventua,l l'edevelopment of the site, whon it OCCUt's, could be
tailored toward similiar community needs. Sales per squ~re
foot, and therefore city sharo of sales tax projections, could
be enhanced under a redevelopment scenario for a neW community
serving retail cOJlUllercial center. Such a center would only bp.
slightly larger in square footage than the existing
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structures, as the presently zoned .35 FAR was used for
projection of buildable area. Given city parking reatrictions
and CUr1:'ent retail pal'kinq requirements, this is not an
unreasonable. assumption for a largor commercial site, and
therefore the snme assumptions were used for both the Rickey's
Hyatt tetail redevelopment scenario and Town and country
center. Such assumptions underscore the economic and private
sector dr.tven nature of develQPlllont proposals that cannot be
ignored by cities, either now or in the future.
The last site chosan for illust,rative purposes is th.e
currently vacant Kodak eitf', within stanford Research Park,
anticipated to be redevtiloped for use as a major research and
development operation of an east coast based bio-Gcience firm.
J<ey tactors to any potential revenue analysis of change of use
within .the stanford Research Park is tho understanding of
historic trends, ,the tax structure of the State of California,
and the relationship of future park development/reuse to
reqional, nQtional and global economic trends in general~ The
City's Stanford Resear~h Park Study, conducted in 1991,
pointed out the evolutionary aspects of park development: from
tho early R , 0 use3 in engineering and computer scioncf1s to
the addition of bio~science R , D; the movement toward
mannfacturing and corporate office uses, and the last feW'
years' retail sales tax revenue decline within the Stanford
Research Park.
All of these trends point toward socio-economic changes, many of
which are beyond the control of the City of Palo Alto -the
prestige ot' location Bod conCOMitant increase in lend value
associated with SRP location; a dwindling lahor pool and higher
housinq costs for Palo Alto and manufacturing operations than in
other areas of the country or overseas; lack of land availability
within the Park for expansion; changing purchasing patterns for
both individual and cQrporate consumers; and finally, state tax
legislation, which. in essence de-values property taxes and enhances
the i~portance of sales tax revenues to local jurisdictions. Given
these trends, and stanford University's strategic plan recognition
of the importance of strenghtening the nexus betwe~n the
University's research activities and R&D firms within the park~
traditional revenue sources to the City from ~RP users may continue
to decline. Nonetheless, redevelopment of any park site,
particularly one currently vacant, represents a possible seven fold
increase .1n direct revenues to the City, as shown on Exhibit uA. tl
Not noted are the "indirect-" benefits of. having the a new bio
scienco indlJstry within the community.. such as its
interrelationship with ths.Su/Medical c~nter bio~science community
as ::s whole arid the "spin"'offll'economic benefits to be derived from an estimated 250 new employees within the Park, many of whom may
live and shop in Palo Alto.
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UP in agtion
The manner in which an ERP approach to issues can be effectively
used by the City hae baen exhibited in sever-al recent. projects.
They are ~s follows:
1) As noted in development scenario number 5 above, a major bio
science firm is 8Kpected to announce its intention to locate a ~tate"'.of-the".ert R' & D facility on the former Kodak site
within Stanford Research P~rk. The firm's selection of this
site culminat&d .,. nation-wide search, and 'Was based on a
numbor of locational, institutional, and socio-econoMic
fa,ctors pertinent to its operation and employee needs. With
the: State of Ca.l~fornia Trade and Com.rn.erce Agency in the leael,
the city ot Palo Alto and Stanford Univ2rsity collaborated in
an exclusiva response to a request for proposal by the firm to
identify_koy environmental and financial issues pertinent to
the fir-n.'s saleetion crite.ria. In addition, the Chamber of
COJ;\lt!:orce provided st~on9 support for the ract'uitment of a new
bio~sci6llce firm to the community. In the ~rocess of
responding to the RFP, which required over one-hundred hours
of City staff tim9 alone (and several departmentls input) r we
have developed a llroodel ll response t:> future bio-science
industries looking at Palo Alto locations. Most. importantly,
the City gave a strong message to industry and other public
secter/Stanford participants that our attitude toward new
business in palo Alto is one of openness and receptivitY4
~at does that moan in terms of direct. revonueB Co the City?
Direct revenues may not be extraordinary, but the indirect or
!180ft" benefits of re-use of an existing vacant site within
the Park could be Bubstantial. Due to Palo -Alto's long ten\
jobs-housing imbalance, the City has not been seen as
receptivo. in recent years to new employment opportunities,
That is partially based on traditional expectations that "new l1
employment meant "newt! office square footage, and therefore
"ne"'U traffic; hence, environmental and neighborhood
degradatior.. Those expectations may not apply in the future,
due to recessionary employment characteristics; economic
defense adjustlllent within the Silicon valley in gen6'ral;
competitive' land costs within the park; very competitive
housing-costs (tor peninsula locations in gene.ral, and Palo
Alto in particular), and cOJru1lunJcation options, for work-at
hOl'lle alternatives. All of thesa factors, and perhaps fl1any
others, throw into question the traditional assumptions
rolated to land use controls and the potential economic and
fiscal effects the community subscribed to in times past.
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The varsity Theater proposal recently considered by the City
Council represented an excellent case in point of looking at
an ie-sue from 4 perspeotive of ordinance int.ent, as opposed to
"eeting the letter of tho law, While still in proce.s, the
Council made A unDn!t;ous detondnatlon that the option to
alloy an app11cation to convert the oxistinq Varsity Theater
to re.tail use-'Was 'Within the intent of the City's Downtown
Re9ulatiohS, an~ should not be subject to a Planned community
tone process requiring "co.lMlunity blilnefit" beyond that of the
6Qi~~i~ and historic upqrado already prescribed in the
ordinance.
~i9ital Equip~.nt' Corporation'. request to assist in a
cOlU3unicatiollo link. of its downto\o:n buildings eventually led
to n Coun~il approved t1bex-optic8 instnllation aqreo.ment 'With
Oi9itlll. The 4g,reelllent allowed for installation of city-owned
fiber that could pal'#it use by Palo Alto or any authorized
entity tor tutllro cOl':'m:onicat1ons use, Hore importantly, the
City recognitad the iaportAnce of Digital Equipm~nt
Con>orAtlon'p prGsence in Palo Alto in general and the
do .... nto ... n apnciiic .... tly. Cost BlIlJings to Digital over
CO't'l.:raercial fiber carriers 'WDr~ SUbstantial, primarily because
the Cit}' had in-place conduit ""'lth space availability. In
rccOCjnitlon or the City's ufforts J Digital EquipInt'-nt
Corporation I)!fered to do 8, domonstration project to connect
Plllo Alto to Interuat. While not yet completely on-lille, the
potGntial econoft'lic, fiscal, tlind community service.
repa:rcussions of City lnte:tnot use are extraordinary, and
staft and others are in thn process of evaluating such
opportbn·ltiElG. In tho. l'le"nth,e, the City's experience on this
and Dthor c()~\1tlicati()h lr;sues has spa'Wned considerable
illtornal <llecussion, and flIany provocativo <;:onservations 'With
.other private, sector eXp&rt6 in the nrea of cotnmunications,
inoluding repreuentat!v8s of SlIIart Va.lley Group, Sun
H.lcroaysteJ!l;,9, lind Hewlett Packard Corporation. The May 23,
1994 cIty Council a9(>:nda includo9 Q Btatf report to City
Council to. consider it; te~oibility study on various options for
.. City owned and op.r~tod cOllllllunlc.tlons utility sy"tem in
PalQ 1Ilto,
.) In re~oqnltion of the economic factors affecting tha current
Kidto,,"h Shopplnq center, the City council authorized the
preparation of a consulttlint prepared market analysis of the
MIdtown neiqhborhood cOI\l.B.ercial araa. The RFP has been
prepar~d and sent to sclected consultants I and a committce of
business re:prosontatives, neiqhborhood intet~(lsts, effected
property owners, retail experts and conunercial brokers has
been for~ed to evaluate the consultant proposals, Inquiries
to ERP staff on available properties within the Midtown area
have been BUbstAntial since the Council's action on March 28,
1994. Whilc' no lease or sale arrangements have rnater.ialized j
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it Is apparent that the: signal ot Cit.y council r_cc.optiv1ty to
assisting Mldt~wn in its revitalization efforts has t-een
instrumental in renewed colMterci.al interest in the Midtown.
area~
5) The on-gOing l"E1Construction of the torm~r European Health spa
building .at the corner of PlIr:k Boulevard and £1 Camino Real is
ft, riirect result of council 86si8ted, 2RP &ftort9~ comro~rcial
brOKors' interests in ~~rKetin9 the'buildtn9 were stepped up;
out-of-state property owners ""era contacted by city ERP
staff to relay City int.rest in rehabilitation or
redevelopment of the site; end city support (or off lc-e use
beyond that permi ••• bl" by tho eN zoning re90lations WaS
facilitated" While the project is stIll underway, there has
been overwhelming community Bentl~6nl expressed in Cavor or
the building rehabilitation ahd its planned reuse for oS
community-based insurance aqency~
This report is not intended to invoke his-tor lctlll d lscussiol1a of tho:
"fiscalization H of zonil19 issues~ but rather to rn .... k.e the follo\ling
points,
Physical redevelopment and usa chancJ6s_ will occur, regardless
of the City's role or lack theraot. The lftr9~r question 1s
whether the City wishes. to play ill pro-active, as opposed to
the l!\ore traditional ro-active role, in thoat Change:; ftl1d,
8ec~ndly, whether we wish to craft those changes 1n a way that
is community sensitive vhile positively affectin9 the City's
long term fiscal pict.ure.
Naturally occurinq redeve:lop:1lent can be: good pal" so,
regardless of whether any other physical changes occur, such
as increased building masso' sqUAre footagQ, haiqnt; etc. such
redevelopment brings property values and i~provement
assessments into the tiDes, and often results in far lI:Or-e
uSE:able structures for retail cO'Merclal or offl'C.Q purposes
than presently exists.
The policy and flacal implications of implementing the ERP
program are sUbstential. No assurances C8n bo qiven that
revenue sensitive land use d~.cision8 by the City will result
. in increased dollars to the City's fiscal coffers. It is
increasingly obvious, howover, that other deciSions, such as
PUC regulations on gas and electric private purchasos, and
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equity transfers into the Clty'B qener~l fund, fro~ utilities,
will likely nogatively effect the City's future fiscol
position. An estimated $l.OM reduction ,to the City's genaral
fund is anticipated in the 1994-5 budget from such equity
transfers alone.
There is no tlwritten in stonel! prescription for inlplementing
economio resources planning. The program requires etr6ng City
Counoil support and involvement in the ittlplo:mentation of the Plan's'
goals and program obj6ctives, and constant policy solioitfttion by
staff on selected issues. Finally, the nexus b:etween Economic
Resources Planninq and'the City's future fiscal position Is cloar,
and needs to be systematically incorporated in the Council
decision-making process.
staff recom!ti~nds that the Finance Cort\J:'littee endorse the
recommendations of the Draft Economic Resources Plan located on
pages 17-19 as summar.izied below:
3.
Initiation of a "BUsiness outreach Programll •
Institute
assistance
City.
a business retention proqran with targeted
to major revenue-generating areas and uses in the
Dovelop a program that would help e){pedito the city process
for those existinq businesses desiring to expand within the
community, and for targeted new businesses wishing to locato
in Palo Alto.
4. Activ'ely participate in regional economic strategic efforts.
5. Consider, on a selectiVe basis, the use of tradi tiona1
econcimic devfi!!lopment tools utilized across th~ state and
nation to accomplish specific economic goals.
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R •• pectfully submitted,
Ch1P(fJ a~ A"_ )
CAROL L. JAN~V-~V
Manaqer, Economic Resources
';""~
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Attachment
co: Sandy Aikens, Chair, CPAC
Will Beckett, Chair, CPAC
()
&fIlVfd '1(1) .S+yOjht~
BERNARD M. STROJNY
Assistant City Manaqer
Susan FrarlK, Chamber of Commerce
CUrtis Feeny, Stanford Land Management
Dan Azark, Hyatt Corporation
Ownor, Town alld country Villaqe
Palo Alto Medical Foundation
Planning Commission
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EXCEH,PT FllOM P,?{) • SERVICES COMMITTEE MIrES OF FEBRUARY ]5, ]994
.. L I;conomig Resources..£lAn
£cono'mlc Resources Planning Hanager Carol Jansen said the staff
l'"eport {CHR:l56:94) provi~ed what staff viewed as the highlights of
iTAplElnumtat!on of t.he E"conomic Resources Plan (ERP). The'"evolutiofl
of the ERP WbS pertinent to the City's econcrnic future:~s a.whD~e .
. The ERP had been undertaken in order to put into poller, perspective
what a ):lO[,.fJ agqresslve econolnic approach to decision making inside
the C:ity ,",ould be. The ERP spoke about substantive issues 03:S wall
as ho~ the city should conduct itself. It was important for the
Poli¢y and Slitv.ices-(P&S} committee to provide Council and staff
its thouqhts about how important the ERP was and how much weight it
should. bo qiven. There were implic~tions tor both the manner in
vhich council :made a decision and organizational considerations
because ot shifts which would b~ required in terms of resources and
directions in 'order to ifl'lplement. 'foe E'RP represented a change in
the "' • .,.y in which the ci ty would conduct business. Some of the
positive l.'.es'ults of the ERP were inroads into the information
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high"'ay notwork;----rI leasing" a9):"(j(~ment witt" DIgital Equlpment
corporation and Internet, etc. Tho formal announcement of a major
bioscienc-e firms relocation to the stanford Research park would
clearly reflect the ditfol"oncc in the 'Way the city CQlldlicted
business; i.e~1 1n its response to the Request for Proposal (RFP)
in concert with stanford University and the State of California
which represented an enOrMOUS ~mount of statf work. It woulQ be
very valuable to tuture inquiries. The City had conducted ~8ny
internal discussions rB9,"rdincJ ho ... · to handle cartain toning issues
in the City. St~ff had 1dentlfiod rtsott spot" ~reas, i,e., the
hotel industry, where zonll><} interpl~y~d with existing hotel
industry, and how to tacilitate new hotel development, if so
deBiX'.fId. The .stafting and brg,aniziltional issues wore dependent
upon Council 'decisions; if Council wanted ~uch ~tco~plished, there
were more luplications~
Assistant city Han&ger Bernie Str<>jny sold councn hod already
received the ERP, and the public h",d already spok.en about the
issue. The ERP ~ontained f~vo conponents as part of the
recoMondat.ion and vns thO' focus of tho staft recoMendation In
terns of hoy statf vie"'od proceeding. In terr..s of P&:S cOMitt.ee
attention, stnff sO\,l,qht reActioh to tho overall plan.
Council Me~ber Mcco .... n thought the policy il"plications were mi.66illg
fro~ the ERP. She understood 1(5, Jansen's rcf<:lrence to the
acquisition of the ne .... bioschmce f irh, but the iJ::lplications of
doing business in the new rr.ethod "'ere missing. An implication
'Would be it Ule only r8~son the nel-! ncthod "'orkcd WlIS that the City
had to agree to gi\'e double the Floor "'roll Ratio {FAR). She 'Was
interested in Ms. Jansen1s sen~~ ot tho policy implic~tion5, 6.9.,
the comparisons and Gonsequenc6s of o8.ch. The ;ERP did not develop
ideas far enouCJh or provide tho lInalylice.l piece to assist councl1
to know whether or not to pUr~Y8 a certain pnth.
Ms. Jansen referred to page 18 C£RP) ""hich dealt with hotels and
motel£i. A nUr.1ber. of cirCUmstances rO-'\'eale<l a problem in Palo
Alto's hotel industry. HOk'ever. the:t"a W&xe two hotel issues whic:h
directly re13tod to zonin~. Onp. involved the existing ~otel stock
along £1 camino Real cotllpr lsed.of two .. to-three stot"y facilities. no
conference accollUlodations, no e.ating O.t; drlhking fllcilities, along
the f1motepl $tyle~ Tt"!e other was the hotol with substantial oatinq
and drinking facilities, 10 to .,3 stories, c;onfer&nce
accommodations, etc., Which requirEd, very different z.oning. A
single zone whlch might be: highly discr-etioni/!ll:'Y would not attract
a new hotel in Palo Alto in a tin8ncing ~arkot which w~s down in a
community with a pattern of having a great deal of discretion in
its zoning process. In order to facilitate the one, others had to
be provided up front, i. e~, :zoning use and expectatiQns would
include a development plan and approv.(I,l process at the
Architectural Review Board (ARB), P.lanninq Commission, and Coul1cil
level. 1-. gtlaranteed use 'JOuld e:-:ist along with a plan ur.der the
discretionary review process. It was olle ... ·ay of approaching an
issue which the City ""tlnted to faCilitate:. A very dittcr~nt method
ot dealing \Idth the Jl',otel industry along r.l Camino Real ... ·ould be to
recogniz.e the fact that there was more appropriately a "motel
overlay zonet! whiCh could accor.ll!lodate such faci 1 ities wi thi.:lut. the
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expectation of s8thinq which mi9ht bo tenC:or:i9S in a single
family development ~rea.
Council Member McCown said Ms • .:Jansen had Anostly described .a set of
potential tools which could be used once a decision had been made
about an underlying qoal the City wanted to achieve. l! there so~e
policy goal boo.us. of the potential benefit which outlloi9he<l the
negatives, pur-suing some kind of major hotel use, the underlying
goal had to be present and the policy implications of tho goal had
to be clear. There would be other rosults it a policy decislon
were made, e.q., smaller uses put out of existonce, The tool ot
providing certail'lty and encoura9'ement woUld be a latel" pIece. MuCh
of the ERP included tools, but the underlying sot of policy goals
and objectives had not been dealt with.
Ms. Jansen asked whether council Member HCCo'Jn, saw the issue of
hoteJ.s and lIlotels addressed in the ERP.
Council Metlber Mccown said the policy i~plications 1.'Cl."O not
addr't!'ssed, e.9., consequences were not laid out,
Ms. Jansen said page 18 'ERP) read, t'work with -existing hoteliers,
major employers and conSUltants conversant -wit:h hotel issl.Je~, to
identity long-term hotel needs within thC'l cOI~~unity. Resolve
issues impeding retention of existing hotels~ and explore expansion
of existing hotels, where feasible. II
Council Me~ber Mccown said the st~te~ent indicated policy
implication~ but ~id not provide the consequences of adopting it as
a course of action.
Ms. Jansen said if Council directed City staff to look at tho hotel
industry and agreed in prinCiple it was wOL-thwhil~, each would be
a ,subset of a net,..' report which would addr-ess the issues in qreatel'
detail. . Staff attempted to highlight iSSU6.s~ Each issue ..... ould
receive a full report it Coun~il EO directed.
Hal Mickelson, representing the Chamher ot co~~erce,
167 creenmeadow, said the Chamber endorsed the points of view
expl'essed in several pieces ot literature by Hs~ Jansen and -Hr.
Strojny I the Board of Realtors, and tot'mer council Kember-Hike
cobb~ Council was bednq called upon to !!',<tke a fundamental change
in ,the way it viewed the City's busIness and the way it instructed
its staff to view the Cityjs business. If the city'~ econonic
resources were to be taken seriously I.md looked at the -reVenue
neads of City government, consideration had to be qivon to the
economic and revenue impacts of individual decisions betore the
City. city staff should not be placed In the straiqht jacket of an
Economic Impact Study with all of the procedut"al consequences of an
Environmental Im9act Report ,ErR) ev{>~~ tiMe a d-acision was before
Council, but it made sense to look at the reVenue and economic
impacts of a proposed dec~sion before it ""as made. The proponents
of the plan were asking Council to instruct staff to make it a
focus of its work, reports, information for decision rn~kers, etc.,
to determine the exact revenue and economic impacts" Regarding
hotels, the abstract question was whether the City needed a quality
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conference hotel Q,m ""hich endless debates Qld ensue about the
desirability as an abstract measure. The bottom line was the
revenue which could be expected from hotel use, e.94, payrolls to
local residents, sales to local businesses. Oecision makers nceded
to make such a decision. Without numbers, one ~as merely another
person with an opinion. The numbers should reflect impacts on
economic activity and revenue for the city in each decision council
made. 1he corollary was that city staff should be instructed to
benchma~k with private industry in the kind of market orientation
and evaluation tools used in evaluating city activities. Indl,lst.r.y
had been called upon to do more with less, re·4 engineer its
processes, control costs, and enhancing quality and customer
satisfaction t.hrough private market kinds of tools. W911-run
cities(-. including Palo Alto, weI'e looking at the tools.
Steve Player, repres'anting the Cha:rcl:ler of COMeree , J.874 Guinda,
said there 'Was an increased level of cooperation between the public
and private sectors and a :movement toward public and private
partnerships. 1'he Chamber was forming its own economic development
task force to consider ways to maintain the viability of the
economic cOIfJmmity, standing closely with the City in
i~plementation of ideas which I~ight be forthcoming. A commitment
from Council end the City would be necessary to implement the ERP.
He had been closely involved with Ms. Jansen and the city on the
Internet and World Cup Soccer issues. The c~ntinued partnership
between the two sectors was a very positive direction. Th~ ERP ~as
veJ':y positive and one which the Chamber fully supported.
Alisa Fong, Palo Alto Board of Rt!altors, 6).0 cowper Street,
endorsed the ERP. Great.er communication between the bUsiness
sector and the city would be mutually beneficial. Realtors were in
the husiness of housing and played a part il1 City revenues at every
home transaction, increasing property tax revenue through
reassessment of full market value of every house sold. Home sales
also stimulated the business economy by creating horne improvement
sales, etc. Barriers to home ownership in Palo Alto were
trem~ndous, averaging $450,000 which. although mostly due to market
forces such as land cost, realtors hoped the city would be mindful
of and not seek to increase or produce new barriers, thus
preventing home ownership in Palo Alto. The Palo Alto Board of
Realtors (PABR) supported the ERP and looked forward to helping the
City promqte .a strong business and real estate environment to
. provide funds to support services Palo Alto had come to enjoy~
council Member Andersen asked whethe·t' Ms. Fong sugg€sted Council
should increase the housing stock.
Ms. Fong said not necessal"ily~
Council MernbE!l" Ander-sen did not understand
promote families t.1.Qving into thE' <" . .:;ca if the
additional increase in value to real estate.
the supply I ti1e pricing of real estate would
more difficult t.o pu·rchase housing.
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how the City could
ERP also created a~
Without increasing
increase, making it
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Hs. Fong said thl:!-.I pABR 's ~position on the Eht" in general was t.o
support the points outlined. She was not prepared to make comments
about the hou~ing stock and how it played into the ERP. The PABn
thouqht an outreacn to the bUsiness community would help-provide
for services for which people came to Palo Alto.
Denny petrosian, 4-4:3 Ventura Avenue, asked :for an immediate
response to her· written comments {on file with the City Clerk's
Office). If there were wrong assumptions in the ERP, it should be
cleaned up prior to submittal to Council. The Gruen & Gruen report
was a flimsy basis for some of the statements in the ERP. There
wore general concepts which should be focused on with respect to
zoning. Page ~B (ERP). section II.O., spoke about land available
for J:llni"malls, but the only land available was land currently
.2On&d for multi-family housing. Relocation ot auto repair iilto a
rdnt ... mall taade space for toys for the rich at the expense of
housing for firefighters and other valued public servants. The
concept Which should be considered was whi!ther livability of the
city ehould be sacrificed for revenue. If the Ci tj' 20ned for
something in particular, it did not mean the city would Gecu~e the
business tor wh.ich it was zoned. A piece of land could be set
aside: tor hotel development and remain \.'ac~nt for ten years. In a
soft and volliltile economj', there was no guarantee the City ""ould
gat what it \>"anted. She took strong exception to comments that
Palo Alto was business unfriendly. There were some business
interests which would create the issue out of thin air for their
own lldv~ntaqe or expaf1Sioll. rt. was not helpful to discuss. issues
in generali cases needed to be made for particular goals, such as,
hotels. If a conference center were so necessary, she queried why
one had not already been developed in the stanford Research Park.
Rather than removing valuable hOlJsing land, it should be locatnd in
an area h'here it was most n2eded. If tremendous resources were
placed in staffing, ~aterialsJ RFPs, etc., the City might enc~urage
business into Palo Alto, but business in specific would occur. A
gonoral program to attz.'act business could "result in spinning wheels
without an economy to support it. The City needed to seriously
consider the economy and be willing to t"espond appropriately.
Council Member McCown asked staff what outcome and response were
naeded trom the P&S committee.
Ms.· ~ansen said both the P&S and Finance Committees would comment.
Her intention \<las return to COllneil with det~iled responses to all
cOJUmittoe comments. Anything the P&S Committee wanted staff to do
which would assist ccuncil in making decisions about the ERP, would
be helpful.
council Member Andersen thought there had been tonal differences
from council to encourage staff to proceed \-lith the effort.
Several Council Members had attempted to indicate what they
recogni2ed in balancing the issues of business I residential,
environmental, et.c" wherein conditions had changed. The business
cornr.Hlnity was more sympathetic and had changed its own approach,
i.e~, there was probably not a more progressive Chamber of Commerce
than Palo Alto's with regard to many of the issues surrounding the
community. Council neEded to give a clear message that the city
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could not (;Ont1rO· to conduct business 8S q had in the pa~t.
Susinesses previou$ly lined up to be in Palo Alto, but the ~arket
had changed dr.,matically, ftS reflected in the ERP .. It was tlme. to
deterJ!l"ino to whl\t extent the City would lJo assert1.ve or proactlve
Sn an effort to retain ex.1stin9 and encourage ne'H businesses.
Former council Member Cobb was correct in his assessment that the
Citr had to rec<>9nize that "uch of the benefit the community
der ved frol'3 the current tax base was directly a result of
businesses in the City ",hich could not be t3ke l l for granted. In
so~e rcspects J it n~t only h~d been taken for granted but also had
cqn¢otlod SQDO of tho problens, i.e., hot recognizing or dealing
v1th the .issue 0.( intl"astructure as effectively as it could have.
Tho City neede~ the ro&ources to ensut'e long-term infrastructure
needs .l(ere J:let. Council had taken mAj~r steps, but more was
nece$ft~x)·. "l'he basis ot th~ ERP was to generate revenue, but other
iS3UGS naeded consideration. Pl~nning and zoning efforts needed to
keep in ~ind how to retain conrnunity oervlces which could become
priced out 8S dr41:1al;ic shilts ""ere made. special zones could be
created so scr=e businosses, 'Which, 'Would not ma.ke it .1n .an
aggressive ~arxet, w~re hot lost. He was interested in e~plorinq
a hotel tonc J as it ","ould be a benefit to the coMUt'l\.tnity. In
lOOking _ftt (I nost appropriate site for a hotel, land currently
zoned {or housing would rc;!{Juire shutfling the pieces. He was
unccr:lto .. "t.able reducing tho City'g cOflJ'Oitrnel,t to existing housing
stock. Tl",ere wQuld be: nuch flexibility in land use over the corning
years: "'hiet. 'Would a 110 ... ' tor such reshuffling. The City needed to
work closel~' with the hotel coJ':"Ut)unity in terms of what was
r.larketablo, "hat \iorked, and IoIhat "".as effective. He had a hard
t.itle underst.andinq whether there \las a place 1n the city for
automob.ll(l doalersh.ips:.
Ms.. J.ansen said !!o~e citi~6 had handled automobile dealerships in
gradationsj e.g., rdni~IM'lls with three or tour dealerships which
were ~ore ettAlnabl~. It was i~portnnt to know where peoplo went,
and it Wllf> ir.lportant. to recognize deal~rships were undersized and
in poor locations. Deelershlps \.Ihich 'Were groupe:d together would
enhance' sal~s and gonerate revenue tor the City. Major lend use
decinio.ns whlch ·could l!.ccoruuodate dealerships grouped toget'ner
would· have to coco out of the Comprehensive Plan. It ~as possible
H the City thought it "AS a \iorth"hile activity to work with the
Co:tlprehcnsivQ Plrm or ~cono~ic development (}roup along with the
in f"ot"aat ion which needed to be garnered from the automobile
dealerships to deternino what should be done and how it could be
.chieved .. It l>lght not be .chicv~ble.
council Momber Andersen 'wi'dS concer.nod about the future of the
City's automobile dealerships and the market being creat~d, but he
was interosted in exploring the issue further. The City might not
ha,vQ the flexibility to create t.he type of tl1.arket approach
available in ot~cr cities. The city was not in a position to he
v.eryaggressive. Trl'lditionally, Palo Alto haC; attracted high value
businesses, but the nature of the businesses had changed to no
longer be labor intensive. One positive aspect was that the
busif\esses did (lot generate a lot of vehicular t.raffic. Recct1t
etC-orts suggested way~. in which the City could promote high value
business. He ~'as very contort.able 'With the City'S targeting the
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''',. il'd i . kinds of busineSSh,:i;';it thought ware appa:opr at-V ,an cons stent wlth
the polJ,cy direct:iotls Council rui9ht give and to communicate with
brokers and assist in efforts to establish such business~s in the
cOlUlunity, as it was in the City's interest to do so. lie di.d not
support one of the cOmRIents in the ERP concerning tax deterred
payments os the city "as not that. competitive. He IMS also
strongly opposed to the suggestion to use City funds fOl" financial
inducements to bring husinesses into the City.
Ms. Jansen asked whotl".er council H.erooor 1\ridersen ' S cOrn.nlont referred
to page 19 (BRP) section V.D_~ re9~rd1n9 "use of the City's credit
rating for loan -guarantees. II
CouncH HelUber Andersen replied ye,,_ The other section which de.lt
with the issue was on pag.·19 (£RP) Section V.F. He asked for an
""'ample of ""ctlon V.D. and tho effect it ,",QuId have on the city.
··;:<':'--·:';-':·::;'~~~'~-":·",:';~~~·~~~':.~:~id· -::~.~~ ~'_:~;~~pl~ :~'i'nvoiv~d "th"e .tact-that", "th"ere va's
. "essentially 'no hotel 'fi"ancinq"aval1ablo~ HBn)"citiC!s had bilCkcd
financing of hotels through A t-odovelop~ent agoncy or through loan
guarantees.. It JrJight not be necessary i.n PC110 Alto, but sOne
cities had used the TJethod, especially ""hen there was no cor.,.r;,crcial
financing available.
ccmncil Member Anciersen recoqnized $OI:1C of the cOncertis bllt ,,'dS not
interested in having the City involved 1n the hotel financing
business. The City faced sorw' rcal changes in tile M.:srket and
needed to be more aSF;ertive. There 'Were ~any support fI~t"'orx5 tor
businesses. It the City acted, rather than puttin9 it.$ head in the
sand} it rn1qht not have to prostrate itself.
council MOMber McCo'iol'n :refeJ!t'ed to pe.ge 9 (ERP) under the
Assumptions section. She ackn.owledged II pur-caption l..'hich ral1
through the ERP tmd acknowlodged SOtlC!' extant of the realit}"
however; there was a largo pieG'O which W'lIS ovel"stated not only in
the ERP hut also in other in~v09ue th1ny.i~. The porception ~as
that overregulation 'Was the source of gnorl!lOUs evil. At the top oJ!
page 9:, the ER~ stated 11, •• let)81 compliance And much 'great4r
emphases· on the regulatory, versus en~blin9 aspects of ,City
"qovernment, "have become more ihstrmnental .in .c.ity"adPl)inistration ,t;lf
.public .pol.icy." It was a quaIl tativ.e, "valco judgnent statement
which" she' did riot ·8dopt'.'~ "The second pbraqraph on the right, .side of.
page 9 (ERP) stated, liThe ability to take risks 1s ossential to
promoting economic an resourceS plan ... U which she noithel' accopted
nor-understood. She" also did nQt understand the statenent tha.t
innovation Which led to ta,ilure was not ",ell r.ec.eived In P310 Alto.
There was a tone or implication that decisions \o'hich had been r..ade
which were perceived to be regulatory in impact had a cOlnpletcly
nQgative cast, and only if fr~e fr()l'll the imposit.i.on of s'uch a
structure would the City succeed in the plan, wi.th Which she did
not agree. There we·,t"e concept.s in the plan which could be
implemented successfully with good due process. The reality ill
Palo Alto was that the due process or public process it had was
sometimes perceived as leg<'\l campI iance <I[\d a 11 the rest 'Was a
demand of the community which would not go a,,·ay. The Cat:'.e citizens
who elected council :nembet"s and ""E're ven' concer'ned about councils I
2/15/94 Pols: 21
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not taking head ~ the cO"ncerns of thea-n«Jlghborhoods 'Wer~ the
emplcyees of the businessmen dis(.:ussing the same constituency of
people. The perception was a nugative irop~ct on the ability to be
effective employers -lind business people, yet it "<I'as the employees
which who citizens of the community with the expectations of how it
was perceived. Page 10 (ERPJ revealed the same conci!pt when it
referred to the cap on the Stanford Shoppin9 Center. P.ge 11 (ERP)
read, nln particular / the last two decad~s of City r't19ulatory
legislation, iftcluding down-zoning, have contributed to an
finvironment which inhibits flexibility emd creativity.1I She
thought ntE\ny in the community would say the regulatory onvironment,
including down-zoning, had barely managed tQ maintain a tolerable
quality of life. D~ci3iol1s about down-zoJlinq Downtown, which
Imposell, a type of cap, still sa" people who thought it had /lot
achieved what /leeded to be achieved in light of i~pacts 0/1 traffic
on University Avenue. There was en over-emphasis with not enough
recognition of the origins of the cause of peoplels concern about
having control over the environmnnt. It 'Was a tone 'Which she did
not support. The ERP was good with only a couple of places with
questions or suggestions. The Business Outreach Concept on pago 17
(ERP) was excellent but should be broadened and more !nc}.usive,
i.84, Section 0 promoted lIa t.'egular City forun to promote
City/business community discussions on economic issues" to which
she would include neighborhood involvement. Relationships should
be built for a successful Midtown and could be a powerful L'CS(lUrce.
Section E spoke of the rtassignment of an expedit0r/facilitator on
all major projects within the City" but should be nol"e spec:ific as
to ~'hen, whether it applied to ~ny project, only projects
consistent wit.h zoning, how it all tit, etc. There had been
comments made during the public hearings on page 18 (ERP} in which
stanford Shopping Center and the Stanford Research Park wore
identified with various issues, California Avenue, nei'9hbornood
commercial areas, etc~ A question was raised 8S to 'Whether other
arc-as should be taken ill to consideration ~nd the relative priority.
Under the hotel/motel issue, her strongest interest 'Was how the
City could assist eXisting sites or h~tel uses to remain in the
community to become more successful. It was ~ higher priority than
attracting new hotels. In the entire Section IlIon page 18 (ERP)
regarding expediting the city process for businesses desiring to
expand, it was important in the eagerness to grow the economic base
that the city did not neglect e>.:istinq companies. Undor retail
uses on paqe 19 (ERP1, she asked how the City would know how to
solicit lIelectronics and home improvement sales operations and
various value-oriented 'boutique' outlets. II There was I.l
facilitator role the City could adopt, but at so~e point the narket
had mucn more to say, and it would be difficult for the City to
stay ahead of such trends. She was skeptical of the City 1 s
becoming too involved in such a path. The bottom of page 19 (£RP)
indicated forming a :C-2development agency, 'Which was questionable.
cities which had formed redevelopment agencies regretted the
decision and had been hurt more by the state budget take-aways
because of having redevelopment agencies. Legally, it was
extremely unlikely Palo Alto would qualify. She agreed with
questions raised by Council Heml:er Andersen about the direct
financial rolc, and she advocated proceeding with caution, A
comment had also been made in the I;RP concerning participation in
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reqional economic Jtrategfc efforts, which ~o.d' very good. It was
absolutely critical in thinkin9 about Palo Alto·s neighbors.
especially East Palo Alto, that the city take a leadership position
in how it worked on the issues in a cooperative manner and not get
into bidding wars over "ueh things as a costeo sj,te, etc. The City
had an qrsoter opportunity to for9a stronger relationships with its
neiqhbors than it ever had.
Chairperson Huber agreed with Council Member Andersenfs philosophy
on automobile dealerships regarding exploration and suitable sites.
Ue took, 'Words like fl$uitable ll ser-iously. He agreed with Council
Member r·l'cCok'n l s COMent on Section IV regarding regional economic
strategic efforts. It 'Was import'ant for the city to participate
whenever possible and provide leadership. Although it would not
~ean revenue for the City, it should be done because it was good
for the region and would benefit some of the less well-served
neiqhbors. The listed items under Section V on page 19 (8RP}
contained only two items in which the community would have an
interest--B and E. The other items did not have much chance in
Palo Alto at the current time. Overall, the city needed to pay
~ore attention to the economic side of what it did. In doing so,
nothing was given up or traditional interests overturned in
providing housing, reducin9 traffic, limiting development, etc.
For yeers l the City had functioned under-a J.aissz-t'aire basis l
business was good, and decisions did not make any difference. It
was no longer true. The city needed to be more active. but it did
!lot mean throwing housing zones out the Nindow. It jnade sense to
deal with businesses because it was not only a source of revenue
blJt also meant jobs for residents, ana H: provided numerous and
valuable services. One of his concerns involved llhere policyrnaker-s
came into the picture, .e.g., whether people would show up wanting
to place hotels in a particular place or whet.her something in
advance would be discussed to determine whether there was even
interest, I.e., if a Council Nembek." did not want biotech at
Stanford.
Ms. ~ansen said_biotech was a permitted use by zoning, so in times
past they would have sat down. Part of the play of doing the ERP
was to be very inclusive of policymakers. In the Midtown area, a
number of Council Members regularly had discussions with the
Midtown Merchants Association. There was an understanding from
staff's perspective that some Council .Members thought the City
sh.ould be qoing with Midtown at the current time, look ing at
cet"tain issues. It was one of the most effective methods of
involving policymakers outside the formal public hear-ing process.
Another method was to use information staff l"oeports to Council more
often, laying out some of the policy options available. It was one
of the avenues staff planned to take on the discretionary aspects
of zoning. council could then provide feedback, which was at a
conceptual level, rather than waiting for an applicant to bring in
a plan.
Council J.fernber McCown said the ERP descr ibed a new method of doing
business ¥"hich 'Was excellent for government involvement into the
business communit}'. At the same time, the City needed to be VAry
inclusive and encompassing of the whole community in proceeding
2/15/94 P&s: 23 I
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down the ERP r.Q The CIty .. hould not mov~head of the community
and lind no one was following the same path. Growth control
tleasures had been taken because the public/private partnerships had
been g'oinq ,on, but citizens ""ere not in 89reemsnt. The
Comprehensive Plan Advisory Committee (CPAC) process lola. ".veaHng
new ways of governan.ce. Citizens wanted more hands-on involvement
in decisions which affected the quality of life and "anted e "'or.e
active role, not'leaving it to council "~em.bers:. The two should not
run counter to one another. ForUIXIE· to discuss economic issues
should not only include .Midtown !nElrchonts but also the entire
cit henry Which cared much about the qudity of life in the
<:olU;un1ty. It lrIas not, and should not be, an 8dversarial
en\'ironment.,. The only way people know how to deal Idth potential
o~er,building in Downtown Polo Alto in 1985 was to place 8 lid on
it. It w •• probably not a good method in which to deal with the
bU$!nes&.cQMmonlty in the future. The smart way was to create qood
I:I:Gthoos. The cOlru'i:'lunity had to feel comfortable that it was getting
what it wanted by following a set of rules,
Counoil Me~bQr ~ndersen said Council and the business community
needed to be able to educate the community about ideas which had
been e~erqing. The dollar issues needed to be explored.
InclusivGne$s was a two-iII'ay street. Businesses should be able to
polnt out Gome of the realities with which the city had to deal.
Council needed not only to discuss the revenue needs, because it
did not alway~ sell well, but also to emphasize there were issues
other than sorvices ~hich needed to be provided.
2/15/~4 P&S: 24
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iUCX.EY'S HYATT
4219'E1 Clrn.irJc ~e:Jj
CWTt:cJt ~te
SC£NARIOr
Exotu.!.ive Suite Hotel
SiagIc F.am.i!y Homes
Rctzil Stores
Gtocety $f¢r'e
Other $tO(cs
Tobl
SCENARIO II
Executive Suite HO:el
Siagle FOlrnily HOlJle:;
Towohom«
Reb.~ Scores
Toul
PAGE Mll.U£L CAM.\NO
FDrmer ,V,lIylieJd School S!·t.c.
Curren: SUIl;
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High Dczity Ml.'ltip!e
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16
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TO'W:N' .& COUNTRy VlLLAGE
SSS E1 OupiDo R~J
Currect Center
Fw:t.Ice Cc:nLer
-STANFORD RESEARCH PARK
!J2S p~C<: Mill R<Md
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f'utU:rc Bio-xicrn::e RD 10
H:Y 1\ TT CABANA
4~O £1 CJmirro R.::z{
f-ol""rncr nowl .
Propo:;ed Rcsid.~!'Hi:l!
Sin::;/"" Nmify H"mc),
T QW"rIOfnc$
10.03
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'or
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(~2.000
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75% 958,000
338,000
.---__ .:..""'"'-'-"-_-'--" __ """'-~'"".~_"C'"';''''_"··",9,."j;\!';~~h j.;':'S!),,_,·,,~Y''*t'-1:;:''~''l~'':·': · . ..r··;.'I,t~I~{ft1~,.,f'ft!lHO'::~11til1~.f,f~, •.
Co:;t o(
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Exhibit A
Tou'
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3. Economic Resou!:$.!es P!.2n
Council Member Wheeler had read the tllnutes from t.he Policy &
Services (P&S) Committee meeting of February 15, 1994 \ihen the
Economic Resources Plan (ERP) had been discussed. The manner in
which the meeting had been conducted involved a £rea-tlow discus-
5/10/94
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sion of issues imsed in 'the staff report "CC!iR:156:94) , without
motions or any rccommendatlon to Coun'cil..
Assistant City Manager Bernard M. Strojny said council had
originally received the st~ff draft ERP in Novenber 1993 and had
made preliminary couant., The ERP had been referred to both the
Finance and P&:S committees for further discll:<Jsion and comment. The
ERP called for five recommendations which were summarized in the
stoff report (CMR:269'94) and detailed on pages 17 to 19 of the
actual draft dc>cument. Staff proposed the Finance committe.
endorse the. recommendations contained in the staff report on page
10 (CKR:269,g4) ~nd move it ahead to Council for full consider
ation. In some cases, the P,"S ,Committee had experienced some
trouble grappling with the perceived abstract, nature of the ERP and
had hoped for more specific concrete intornaticn. staff had,
therefore, att.,.,pted to provide scenarios which would qive the
Fin~nce Committa. an ide. of how an EPP program Would operate in
the City and the kinds of iSBues, projects, and prog<ams which'
would be dealt with. The scenarios were hypothetical to a great
degree, but still provided a good idea as t.o possible scenarios 011
parcels and projects discussed.
Manager of Economic Resources Planning Carol Jansen said the
BcenarJos staff had provided to the Finance Committe.e were based on
five propel.,ties. The properties inclUded the existing Jiyatt Cabana
Hotel site, Rickyl s Hyatt sH:.e, tho Paqe Mill Road and El Camino
Real intersection which had formerly been the Hayfield school site,
the Town and country Shopping Center, and the currently vacant
Kodak site in the stanford Research Park (Park). staff hoped to
help the Finance Committee in looking at the fiscal and taxing
issues of land use decIsion making. The staff report (CMR:269:94)
was not to suggest anyone or all of the development scenarios was
one to-be embraced or not. It had a hypothetical tone, but the
scenarios· 'Which had been chosen were considered very real. A
developer was currently entertaining a proposal for the Hyatt
Cabana Hotel site. staff had also picked the sites because each
was singly-o"WJled and were likely to redevelop within the next three
to five-year time period. Other factors included obsolescence of
atructures and closure of tho Hyatt cabana. Ricky's Hyatt
cont1nu~d in operation; howev:e.r, it was unlikely to continu~ in its
present state over a long time period. The Page Mill/El camino
intersection ~as vacant and while no develoPQent was proposed on
the property, it was likely something would arise within the next
few years, particularly if some for.m of commercial were allowed on
the property. Stanford had consistontly maintained that it did Ilot
intend to build multiple family residences on the site. The
eXisting Town & Country Shopping center had been chosen because
other Town ~ country centers owned by the same property owner had
begun to redevelop. Many of the leases, if not all, in the Town
& Count.ry Shopping Center had a specific clause related to
redevelopment of the property I "Which allowed it to occur. The
Kodak site in the Park was currently proposed for a major reloca
tion of a bie-science firm headquartered in Rochester, New York,
which had a small taci lity in south San Francisco. .All had been
chonen to provide the Finance committee with an idea of the kinds
of first-year ~evenue streams. one with the Pr~perty Transfer Tax
5/10/94 FIll: 17
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. ,I :. ',' (PTT) ,and one without. The study did not take~the numbers out to
a five-to seven-year time period which wou.ld indicate. resale of
properties 1 etc. Residential sold more frequently than cOJllUlercial,
BO thero could be differences. However, it was instructive from a
first-cut basis in looking at what would occur if the City looked
at Bome of the fiscal aspects of redevelopment of property within
its boundaries and what it vould mean in terms of revenue stream.
'One G!%Iall error was found on EXhibit A in the staff report
(CMR:269;94) which had failed to take construction costs at Town &
country Shopping center into consideration of the property tax. It
increased the development scenario on the property. In the example
tor Ricky's Hyatt, the current estimated revenue stream of total
City taxes nat the PTT was approKimately $889,000 annually. The
development scenario included predominantly commercial/reta'il such
as grocery stores, pharmacies 1 and satellite stores of 125,000
square feet, 1ihich was the standard square footage in the industry,
singlo-family homes, and an executive suite hotel redeveloped on
the property. The first year revenue stroam 'Would be approximately
$639,000, not including PTT, whiCh would be a one time $175,000.
An executive suite hotel was described as heing comparable to the
Stanford Court Hotel or Residence Inn, fairly modest with no
conference or banqueting facilities. Scenario:2 in~lude.d an
exocutive suite hotel, singlo-family homes along Wilkie Way, ~own
hOFlBS, and 50,000 square feet of retail. The first. year revenue
stream without the PTT was $721,000. WhAlo Ricky's Hyatt, under
current condltions l generated substantially more dollar.s;., it had
be~n a flat revenue source and in some cases had been a declining
reven~e source for some timo4 With the redevelopment of the
propartYI with new sales and assessments to the property, the two
revenue streams would havlP-substantial potential for increases OV$r
the years, particularly in the area of the hotel and Transient
Occupancy Tax (TOT}. The numbers of rooms dropped dramatically,
but the price of the room increased substantially, which made a big
difference in t-erms of the revenue stream. The current Paqe
MilllEl Camino Real site was vacant so the only revenue from the
property was in the form of property taxes at $22 1 000 per year. Xf
~ ftClass A" hotel, described as a 35(1 room hotel facility with
20,000 square feet of conferencinq, was placed on the property the
first year estimated revenue stream, net ~rT# was OYer $1.8 million
'with first year PTT at $1.2 million. The proposed high density
",ultiple-family residential presently planned for the pJ:operty at
40 units per acr~ at a fairly high estimate for tne condominium
price per unit of $350,000, showed a first year revenue stream, net
PTT, of $148,000. The Class A hotel at $1 million compared with
residential at $148 1 000 for the first year. The current Town ,
Country Village Shopping Center was.~pproximately 160,000 square
feet with an estimated City tax revenue stream of approximately
$204,000. It had a very low sales performance, even by nation-wide
aver"ges. If it was rebuilt at the .35 floor area ratio (FAR)
presently allowed by zoning, which was probably as much as could
.tft on the property in terms of retail with normal parking
requirements, it meant a 204,000 square .foot center with an
esti~ated $741,000 in taxes. It was almost a three-fold increase
in taxes ~ithout any substantial physical change to the property.
Within the Park, the property taxes on the Kodak site were $7,000
per year. The future bio-science research and development (R&D)
5/10/9~ FIN: 18
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propoaill would bang In, including UUT whiel. was Bubstantial, net
PTT, $133,000 the first year. Xt did not bring in the same kind of
revenueo as ret.ail sales: however, a more sophisticated analysis
show.d the apinof! Qf •• ployces va. substantial. It did not take
into account the esthlated 250 presumably high-paid employees to be
10<)ated within the Park who would l'resWllably locate, buy homes 8,nd
ollop In Palo Alto. None of the factors had been plugged into the
reVenue analysis. There was no assu~ption the industry, nor most
R'D industries, would have any retail •• le. tax. Clearly it waa on
area ot decline in potential rovenues to the city which ,,"ould
ulthlately be a "ubstanUd one. The Hyatt Cabana oite was closed.
The-l.f'lct year'a ~evenues prior to closure 'Were $372,000 and the
proposed residential project of lOS units, 54 town homes, 54
Bill91e~tlllllly hOlies, and a ten-acre property, would bring in a
total ¢f $84,000 in v~r1ous taxes, predominantly property taxes,
vith a potential tor $244,000 in PTT. Staff had made a series of
a9suQptiono, which were highly conse""ative. staff did not want to
overstate the retQil salas t~x i6sues or taxinq issues in any way.
So~e ot the' fiq1Jros had boon received from members in the communi
ty, the coru:oorclal brokering industry, and the retail industry, in
order to obtain re~sonable gales tax figures on a pel' square foot
P,,'u;:is with different kinds of rcti\il. Many of the figures given
were substantially higher than figHrefi staff ultlmat.ely used at
$300 por sqtHu.'"e {(Jot.. Many of the more aggressive retailing! was
not in P.,lo AIt.o ooc(\use Qt a series of f.actors. If able to
Achieve it, there "Would be oubstal1tially higher sal~s per foot.
Staff had i!llso considered l:1any of its own eXisting retailers in the
cOQunity and used figut"cs which seemed within the range achieved.
'the jntention vas riot to add up the fiqurcs to determine whether
one sct'rnari() \las bettor than another. It. was intended to provide
the Pinence co~1ttee wit~ 8 batter picture of what thn fiscal and
t"ftxi.ng aspects 'Were of various land USE!' scenarios. It was only one
snaIl plece 9t what ERP was about. She would be unable to put 8
dollar figLJl"a to what 'having Internet 'Would 111ean to the City~ nor
"hat. ,.any efforts 1n tha l:RP "auld or would not bring to t.he city
in toras ot chang-es to the fi,ocal envirorunent. One. oxisting
irn:iuatry Vhich desperately needed assistance .from the City 'Was
automobile •• le.. It would be a substantial hit to Palo Alto if it
lost anyone or sevor81 of its existing automobile sales opera
tions. 'i'he City had actively worked with Lutz }'ord and an adjacent
property owner to resolve some property and easement issues to
enabl-e Lutz Ford to contihu(l to be an i"CIportant player in the
community. rt ""as t,ho single remaining domestic car f!ales
operation in Palo Alto and a very well-managed car service in the
City. Thore 'Were bany issues Which_were ERP-related which staff
could not place a dollar figure on, but ultimately were important
for Palo Alto to address.
Council Hepber Ro&onbaum asked vhether the inclusion of the PT~ was
normal in all new developments.
~s. Jansen said staff assumed the sale of property 'Would he
involved in any redevelopment, which was normally the case..
Council Member Rosenbaum thought the P'l"l' was computed on the basis
of tho land and .hew cOllstruction value~
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Ms. Jansen said it WQS basad on the cntiro exchange of proporty.
staff aBsumed any ono of th.~ properties would see a change ,in
o\fflership in 'conjunction with redc'Iclopl!lont, thorefore, tho P'.i."'t
would bo paid.
counoil Moru:.er RO!Jonbaum 'Wanted to review the .\.toms which had been
listed as EJUl actlona to determine thE: Yah',e of tho CIty's EconoMic
Resourc9s Office. He thought staff .... ·ould need to prepare a. set of
specific rocol8lllendation. "hich had policy content on Which council
would vote. The. first it.m had to do lIith tho Kodak facility.
Thoro had been implications in the newspapers sevoral months before
that the City had aided in tho process, H3. Janson had spoken of
100 ho ...... of staff time. He .sKed what had boen done fOl' tM
company and tho nature of Ms. Jansen's oftice's contribution Which
had made it somathin9 which mi9ht not hove occurred o~h.rvlse.
Ms. Jnnsen said the company had approached Governor Wilson's
California TL'dde &. COL'UCo-rco (C'TiC) office aSKing: tor as!;Iistance in
looking at a California location, not s~cific to Palo Alto~ and
one of the cities IHu:led was palo Alto. Sho had been contacted by
CTGC as to whether or not the city would be inter«sted in talkin9
with Genenco & Corporation (Gene nco) about responding to a Request
For Proposal (RFP)~ Although RfPs w~re co~on in tho corporate
world, the city hftd never responded t.o one. A series of q"lJostions
had been asked related to how the City processed plans, .envh·onmen
tal regulations, financial assistance, et-.c.. Staff began a, d{alogue
with stanford, Palo Alto's Chamber of Co~~orce (Chamber), CT & C,
members of council, and etaff to discuss a possible location in
Palo Alto, without any co~itment that Palo Alto would respond to
the Rf.'P. out of tho discussions, Genenc-o often rc~e;rke.d that it
had been pleasantly Durprised at the City's intorest and willinq~
ness to work with it to locate iil the eOc..!:unity. It had 'had qreat
reservations about Palo Alto bec~usn of tho previous reputation
that Palo Alto was unwilling to recruit new employment within its
community. Th.e state of California (state, e'xpressod intel'est to
P~lo Alto when it saw oenenco's_ int6rest and_C1&C had exclusively
responded to Geneneols RFP~ son."ethi-ng it -had naver dono for a
community. Tht:t state had .been willing to do so -because of the
unique set of circumstances 'Which put Palo Alto above other
cOmlQ.unities with whiCh Genenco had sp'oken. The Cl'&C had asked Palo
Alto if it lIould be wlllin9 to participate 1n the joint r6spon •••
All of the City's effort inside the or9anization had been coordi
nated by ERP and several other departaents had had heavy involve
ment in respondinq. A series of internal discussions had occurred
on Palo Alto's input on the propoaal. Hany' cOAAunities and states
were taking financial roles, but PalO'Alto had indicated "it would
not. Palo Alto indicated it ~ould be willing to consider nome of
its zoning rules to allow the additional 50,000 square feet for the
incubator and would be willing to work with other members of the
Park and Genenco to assist in the financing. She had continued to
work with members of Stanford and had had a series ot discussions
with people in the bio-science industry and C'J'&C. It 'Wa'S not
likely a lot of monoy "Was available for buil-ding such an incubator
facility in the Park, as it waG II vory expensive form 'lJ[ construc
tion and operation. The final leaSing agreement had not been
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signed with sta~ord; however,
that it would be.
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it wa.s staff's strong expectat1.on
council Me~r Rosenbaum thought the incubator project had gone
away, for a time.
Hs. Jansen said the incubator project had not gO:;'le away t but it was
hoped there would be pending Stat. Legislation which would provido
a better picture on th.e financing. Funds were not currontly
available. Another avenue needed to be investigated. Palo Alto
had one of the larqest venture capital communities 'in the country
on Sand Hill Road, which seemed the best place to consider the
vol"e of an incubator space and the kinds of contributions possible
financ 1. lly. -
Council Member Rosenbaum asked whether, without the tr.cubatOl
proje.ct, Genencq had still agree.d to come to Palo. Alta-under
existing rules and zoning and planning regulations.
Ms~ Jansen replied no. The project could proceEd under tho city's
existing zones.
Council Member RasenbaWll said mention had bean made about the
cityts willingness to consider additional square footage as a
change in 7.oning and raising or contributing money. He asked
whether Ms. Jansen had felt free to infoI'1'l a perspective locatee to
Palo Alto that the city might be wiUing to "hangs the "onlng
regulations.
1-1s. Jansen said she personally did not. Xen schreiber had been
very involved in discussions al)d there h;tld beon many internal
discussionR about how, if the City was able to accommodate such 8
proposal, it could be accommodated. staff told any prospective
tenant that a Planned Conmunity (PC) zone WQS zoninq 'Which allowed
for stepping outGide of the zoning box. Staff thought it was the
only appropriate machanism 'Which would allow the construction of an
additional 50,000 square feet on the site. The criteria tor PC
zoning was that it be a public benefit. Staff considered an
incubhtor space which would allow for "baby" bio-science companies
to be,),in growing which would be of grent public henefit. Staff had
also indicate" t.hat it took a majority of Council to approve.
While staff, could assist in the review and ~pprcvC\l procoss,
ultimately it was council's 'vote.
Vice Mayor Sfmitian thought two neetings had involved. council
particip~tion, of whicn he was present at the second, since tho
desire was for the Mayor and Vice Hayor to be present to carry the
flag in the City's interest. Representations or promises had not
been'made either by staff on behalf of Councilor on the part of
the Mayor or Vice Mayor. The strategic path by Which some things
c'auld be accomplished, qiven the political will, had been descr ibed
for the people with enough clarity and specificity that the company
could begin to see there was a possibility of getting from point a
to b. The company could make its own judgments about whether or
not to pursue the path as described. It seel'lled to him, persona.lly,
th.e meeting covered things which he considered fairly elementary.
5/10/94 FHI: 21
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Howe.ver, it Ilad occ~1rred tci him that people from the company 'liould
consider his questions about the bUsiness W9re fairly elementary.
The laeetings allowed the opportunity for explanations of how the
company could operate in the ~ity's environment and an opportunity
for the city to understand exactly what the company proposed to do.
council Meaber Rosenbaum asked about Ms. Jan~en's comment concern
ing the possibility pf raising funds.
Ms. Jansen said her commonts were not from the city's perspective
but ih participating to help put together a group, including the
-Bay .Area Bia-Science qroup, stanford, people from the venture
capital community, and the State, to find a financing mechanism
which ",ight assist in ",.king the incubator a reality. It had never
be&n sU9gested or anticipated that the city would bf:! involved
financially.
Council Member Rosenbaum asked whetner Ms. Jansen thought such a
role trias proper for the City, and what.her there were other agencies
or venture capitalists anxious to invest in companies to which the
City could add something of value to the process of helping Genenco
raise the money.
Ms. Jansp.n replied yes. In working with the Chamber, there· was
llHlch value. It meant people. in the City were committed to working
with industry. ~he City normally reacted when it responded to an
applicat.ion. It was a different form of operation in that the city
worked pre.-application and it might never come to frllition.
Vice Mayor simitian asked whether the Finance committee needed to
take action on five recommendations.
Chairperson Wheeler replied yes.
Vice Mayor Simitian said there were policy implications in the five
items the Finance Committee had been asked to consider for action.
He understood the individual cases to be illustrative rather than
proposals and his lack of questiOlls about the scenarios was not an
implication that he. had a predisposition one way or the other. He
s~w the scenarios as a method of illustrating some of the princi
ples in the ERP, which he found useful.
Chairperson Wheeler agreed with Vlce .Mayor Simitian's appraisal of
the scenarios. The COl"ner of page Mill and El Camino Real "Was
currently zoned for high-densi ty, multiple-family hQusing.
Ms. Jansen's opening remarks indicatt!d there was one private land
owner who had indicated it would never construct housing on the
site. It raised a practical concern about the reaSQns for zoning
pieces of property certain ways ~hich went beyond the question of
how much money it could raise for the City or whether it was really
~hat the private land owner had decided to do with the property.
She asked whether Ms. Jansen had some idea of how, if council was
convinced a particular zoning on a particular piace of property was
really in the best interests of the community, the kind of
mechanisms which could be used to convince a property owne~ to do
what the policy makers thought waS the ~ight thing to do.
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KG~ Jansen said it was an economic issue to the property owner~
The City nchie.vcd something 'Which ran counter to economics to the
pr¢porty O'\ffler. It had been seen in exaDlples such as Fry I s
Electronics, where it was much more economic for the property owne~
to use the sdsting property in its pres~nt use than to build
residential. It might not be in 15 to 20 years, but it had clearly
been of econoBic advantage for tho Hyatt fa~ily to build residen
tial sit •• on the existing Hyatt Cabana site. The City had no
influence on the docision to come in with rssidential. The City
supported the decision because there were policio. in place which
supported housing in palo Alto and it was an appropriate aite. The
City encouraged higher density, but t.lle choico to do so was purdy
econo.ic. In California, single-family and lower-density llIultiple
ta.ily resid"nti81 provided the highest land value, at nearly twice
the vdue of retail. If the city wanted eome of the scenarios
found in th" statfreport (CHR,269,94), it would need to be very
clear that it had to happen, not tbat it was what could happen.
Hotel' and ret.zt;il land values were lOll, while residenti~l land
valufls wort} high, which could chango in a very short time period.
It ~~s difficult to know what would occur if the City chose to keep
"ultiple family residential at Page Mill and El Camino Real because
Stanford thought' it 'Was an inappropriate land use. There were
several staff ttombers vho agreed with the assessment. There were
nora appropriate land uscs at the intersection than multiple-family
residential. There ~ore other commercial needs, particularly for
hotel l\nd conferancillg facilities, particUlarly if the City had
lIin(lther hotel closure. HoweVer I it Would not occur if it ran
COl1pletely count~r to the economics on the property. The financing
aarket for hotels waa not good. There had been enough interest
eXpressed on the property for hotel purposes, Which was a hu~dle
thE> City could ovet'come.
Chairporson Wheeler said although it was a long process to change
the 2onil1C] at the corner of Page Hill and E1 camino Real, assWIlil1g
it occurred, she asked how Ms. 3ansen l s office would qo beyond the
question of zoning an~ the kind of mechanisms which would be used
a9 an incentive to the private sector to take over and do what the
City hac!. dotermined "s .. policy it wanted to have done at the
intersection.
Ks~ Jansen said the Ghamber's Economic Advisory Task Force had
foraed a subcommittee interested in achieving a hotel on the site.
r,1rst, the issue of housing had to be addressed for Council. It
....,ftS' imperative.
Chairperson Whp.:eler clarified it had to occur prior to the zoning.
Ms. Jansen replied yes~ It had been the subject of much internal
discussion. Mr. schreiber and she were jointly preparing a memo
for .Council which discussed the issue of ways to approach housing,
tentatively schedyled for the June 6, 1994 agenda as an informa
tional item. Ways Council could approach the housing issue
involved looking at housing opportunities 'Which had been overlooked
in the past and not really facilitated with incentives; or looking
at housing from a regional perspective. not just jurisdictional
boundary perspective l and the provision of low and moderate income
5/10/94 FHI, 23
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houeinq, which was a vary diffcront issue f~on looking at more new
houalnq. 1\11 of tho issues were part of a package tQ bring to
CouncIl. Ih tho first cut analysis, during the last couple of
decades P~lc ~lto had achieved as much if not ~ore actual housing
units by election of the property 0",,0< than by forced down-zoning.
By such election, property O'k'1lGrs h.nd actually elected to go
through the PC zono proc.... With an easy process, the city might
get ... ny things with the right kinde of financing. Step two, ttle
City n •• ded to look at the intersection trom the standpoint of and
what it ~.ant to. have a 350-roo= hotel, what it tould look like,
hOIl much parking would be required. It waG criticai In terms of
lIriting .. ~on .. wh1ct.specifically related to the property for hotel
development. The City had been unsuccessful in obtaining a hotel
or ~otel overlay zone because, rightfully, no one living behind an
existing hotel along £1 c~.!no ~eal should be able to expect an
"anything go •• " .11 out hot.l davelopaent. Staff did not antici
pate It happening. R[cky'. Hyatt would probablY nover be rodevel
oped to .. 350-rooll hot.l facility. Thn hotel industry would
probably choose another location and the kind of massing which
'Would come with a nev fncility and the other \'Ises 'Which would be
located on it would be acceptable to the surrounding neighborhoods.
The PAge Hill and 81 Ca~ino Real intersection had to be viewed as
a different :kind of sIte tor hotel devalQPlCent than would be
con Bide red elsewhere in the co~unity. The propp.rty needed to he
pre-zoned and packagE'1! for dev(tlop~cnt. The qenerali~cd massing,
ate" and t.he USCR, should be a knQwn corn.rncxHty in both Council and
the community's I'linds before it eVer went to developers tor
proposals. Onco it o<:<;urred, the dhJcretionan' aspect should be
one of approving the development pilln as opposed 1:.0 everything
beinq discretionary. All of tho specific questions about size,
eta., should be put to rest prior to taking out the package to the
development community as a whole. If stanford concurred, the City
'Was able to achieve it, and sOlnething could be done 'With Which
everyone vas comfortablo , developers would flock to th~ area, even
in a bad hotel financing ~9r~&t, bQcause it was Buch a wonderful
spot for such a facility. The City hod. real qap in hotel rooa
npaco. Which was the reason several hotels tro~ other communities
had joined th.e Chal:lber when World CUp Soccer had come to town
.b~fcau8e of the relatively free advertisirl9' It .... as a boost tor the
Chamber hut spoke volu.mes nbout the city1a. o'Wn hotel industry. The
situation would onll' be exacerbated in the futUre. The timing was
very critical. It would take t.'Jo years for the process .. so it. waG
a question-of when tQ otart ~nd hoW'. It vaB looking at the housing
issue in a difterent 'W'ay, to avoid gettin9 stuck on 78 zoning
decisions and not be able to-~OYe fOrYard.
Chairperson Wh.oelor said the conclusion of the staff report
(CMR:269:94) .i.ndicated the implo:dentation measures cont~ined many
ideas. She suspected Ms. SaMson vas nora fond of sone than others
and not all could be implomented, even if council endorsed all.
Yet. the saotion beforo tho Finance COIm:ittee appeared to be a
blanket endorsement to try any or all of the measures. She asked
how specific Gtrings could be tied around it.
Ms. Jansen said it was a quandary tor staff. There was no way the
Business Outreach Program (BOP) could be accomplished alone. It
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was not a matter of having ERP people doin9 ERP. It was somothing
which would involve every department in the city. Once "l:afe knew
how much Council wanted· to do and how far it wanted to qo, staft
could let council know how to do it.
Vice Mayor simitian was not prepared to support tho "pacific
development scenarios and Ms • .Jansen had indicated it was not
staff',a. intent. With t:espect to the fiv09 recolUlendations, he
intended to support the recomJDondati.on, barrin9 SQlilIe Ghocking
public testimony. He did not presume or balievs staff presumed
that if lie suppo~ted initiation ot a BOP it was 3 commitment that
he would support every element of the BOP d •• cribad or rererenced
in the ERP, nor was there an oxpectation that every elegent of a
proposed BOP WAS one which he would support. He undo"rstOO<l "taft
wanted to know whether the Flnance Co..",itte. w.nt<ld staff to
proceed with initiating a BOP, to which he vould respond in the
aff!l:1Ilative. He had not had qualms about ta>:ing a contury vie ... to
council on business davelopment issues reg4rdinq Fry's, hotvlth
standing his generalized support for business developncnt. £~ch
Council Member would make individual decisions about an issue as it
occurred. He was not reticetlt because of the tact he did not lI.gr:e.a
with every line in the ERP and he thought it ",.'\s not statf IS
expectation about what the Finance Com~ittec Yas actlnq on.
Ms. Jallsen agreed with Vice Mayor Si:oitian. staff would return
with a nlUch more detailed policy ar.alysis of what it meant lind the
kind of direction staff want.ed from counci 1 011 every key element in
tho ERP.
coullcil Member Rosenbaum appreciated What 'Was said but wantlltd to
defer giving approval until the spocific policy issues wh!~h had
either financing or planning implications wora provirjed. He
disagreed with Vice Hayor simltian In givln9 any sigolticant
approval to what was before the Finance Committee in its current
form.
Ms. Jansen had discuosed the Midtown Darket analyais with Council
Member Rosenbaum regarding how much was fact and how Jauch 'Was art ..
In a sense, the ERP "Was a cxeative exercise and not ()n~ -wh.ich oould
be written in stone and planned out for oternity. Much plannin9
"Was done in palo Alto •. Staff "Would tako, on 8 piecc-bY-~ioco basis
and "with priority setting, each of the issues and in a written tOrD
bring Council a scenario. It took ltluch discuss.ion \rdth members of
the business community but it had no~ yet been initiat~d_bec&usa
Council had not given the go-ahead. -There were lllany things which
had to be accomplished before the plans of action could be written
and it was probably best taken incrementally. She could take the
existing automobile industry and sit do~n with others involved to
discuss the industry concerns and loeational concerns, and como. up
with some good policy-related issues for Council to consider, but
she could not foretell what the issues would be until after it had
occur.l-ed.
Alice Fong, 610 cowper Street, representing the Palo Alto Board of
Realtors, supported the ERP. The ability of the City to provide
the level of services Palo Alto had come to expect was closely
5/10/94 FIll: 25
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linked to the perfonance of its local business community and
responsible for a si9nificant amount of funding used to support the
amenities whic~ ~ad brought a quality of life to Palo Alto. ~he
ERP recognized the linkage and the need to foster stronger .. orJdng
relationships with t~$ City and business community. It wa. hoped
a message would be sent, not only to the business community ,but the
commun~ty at larqe:, that the Finance committee supported the
initiatives and the F./U'.
Susan Frank, 325 Forest Avenue, representing the Chamber of
Commerce, encouraged tho Finance committee to support the five
recommendations and to move the process forward. The Chamber had
been supportive of the ERP since its inception. The Cha~ber
supported the ERP-typc analysis as it was a good beginning and one
way to look at the world. From the Chamber's vantage point, it
looked good. Economic plans suoh as the ERP were common and many
other cities used them~ It did not need to bc viewed as complex,
especially with the collaborat.ive effort of other agencies like the
Chamber 'Whl~h 'Would welcome the opportunity for public/private
partnerships as outlined in the plan. A perfect example of a
public/private partnership 'Would be the exploration of a hotel and
conference facility at the corner of Page Hill and £1 Camino Real.
The Chamber had already begun discussions on tne subject and thal'e
was a strong cowaitment on the part of the bUsiness com~unity to
develop the site for hotel and conference facilities. Th~ Chamber
wanted to be in llartnership with thE'. City in the development.
There were other recommendations before the Finance committee that
would involve the Chamber, which was ready, willing, and able to
step forward and be a part of it.
council Membor Rosenbaum said historically hotols provided
conference centers but no longer wanted the ~verhead cost of the
conference centers, often expecting the municipality to provide 8
conference center to fill the hotel. He asked what Ms. Frank had
in ~ind .. hen speaking of a conference center4
Ms. Frank said the Chamber,'s concern-was two-fold. In losing the
Hyatt, it had lost the larqest conference/ballroom facility for a
community event, leaving only the Ricky's Hyatt ~llroom which was
a site that was almost navel'" vacant. She could not qivEi a
definit,tve answer as to what the Chamber had in mind for a
conference center, nor how it would be financed. The group whicn
had been assembled as a Bubcommittee of the Chamber' S Economic
Vitality Task Force was committed to the concept of a convention
facility as part of a hotel at the·'·corner of Page Nill-and El
Camino Real. The community needed something which could he used
for. trade shows and larqe conferences and community events which
all communities used, including East Palo Alto ~nd Mountain View.
Ms. Jansen said the City had previously used a hotel consultant and
Dan Azark, Vice President of Real Estate Oevelopbtent 'With the Hyatt
Corporation, who had indicated it was important that the con
ferencing facilities matched the hotel4 One example of one not
matched properly was the Hyatt Cabana wher~ the cost of keeping the
conference and ballroom facilities was much greater than the 200
rooms could support. There had to be a relationship between the
5/10/94 FIN: 26
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two 1 which was the i."eason 350 rooms had been chosen. It was a
commonly usad industry relationship. The revenues projected fram
th.e confat'flllcinq facilities 'Were half the revenues projected from
th" hot"l facilities.· The City would not see the difference
because it wa~ a servico and a non-taKable issue. The city would
only see TOT from room "rent and e~,tin9 and drinking taxes from a
hotel. It was quite lucrative if done properly.
Elsie Bagle, 1319 Bryant.street, had sat through hours and hours of
debate over one specific propos.l. Sho liked the idoa ot having a
c01llprehensive plan. It did not l:Ilean the .Finance committee was
locked into approving it, but the concept of what could be don. in
planning for the economic ·vitality was "ood. It was like the
chicken and the e99. If the Finance Committee had nothin" to react
to, projects \lould come along in piecemeal fashion. A :broad vie.w
should be taken ..
Vice Hayor simitian ftBked how long the ERP had been in proce.e.
Hs. Janssn indicated she had been working on the ERP for over two
and one~h~lf years •
HO'rION: Vice Hayor Simitian moved, seconded by Whoeler, that the
Finance committee recommend to the City council the approval of
staff's recommendations to: 1) initiate a Business Olltreach
program; 2) institute a bUsiness ret~mtion program with targetod
assistance to major revenu~-generating areas and uses in the City;
3) develop a program which would assist in expediting t,he City
prooess fo)':" existing businesses desiring to expand within the
community,. and for tarqeted new businesses wishing to locate in
Palo Altol 4) actively participate in regional economic strategic
efforts; and 5) consider J on a sele.ctive basis, the use of
traditional economic development tools utilized across the State
and nation to accomplish specific economic goals. The Finance
co~itteefs support was for the general program outline and was not
to be construed as a free reign to impleme~t every item in the
Economic Resources Plan relatad to the five items.
vice Hayor Simitian said it was ti~e to stop planning and time to
begin wor.king. He worried that as the economic situation in the
state of California and Palo Alto improved, interest and receptivi
ty among staff, Council, and the community to such activities would
dwindle. The City had received n slap in the faco by way of the
recession which had forced it to come to grIps with the fact that
ho ..... ever unique Palo Alto might think-it was as a community, it was
not immune to the impacts which had affected the rest of the state.
It was time to get on with the business of putting a plan in place.
It was. something Which was conceptual and could provide the
framework for real discussions about th~ individual components of
the program. 1£ the agenda was not moved forward, the opportunity
for meanillqful discussions about the component parts would not
occur. There were real businesses with real economic impacts in
the cOt:'lI1l.unity which needed to know where the City stood on the
issues and needed to know whether the city was willing to assist or
not. ay delaying for three years, the City was not only sending
the wrong messaga, but was beginning to he counter-productive. It
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w~s important to talk about what the £RP did not do. Palo Alto was
too u.ophisticated a cOlUlnunity to buy into such a shallleless
boostorism: and it 'Was not 'What had been suggested. The ERP did not
•• y zoning ~'9 tor sale or that the city would enter a bidding war
with goodiua bnd givo-always in which other communities had
enqaged, whioh wa$ a concern he sh~red with Council Member
RosenbaulQ. The ERP did not mean oconomics would drive every
decision, to which Chairperson Wheeler had spoken. It did not mean
do11ars and cents would supersede sound land use planning or
judgment, or put oth~r values aside. But it did acknowledge that
the thinqs which had made Palo Alto succossful and prosperouG in
the 197Qs and 19a08 were not tho Ba~e things which would make Palo
Alto prospo,ous in the 19906 .nd beyond. The only thing which the
City could be su~e of "as that tho 1990. w~re already very
different from tho 1910. and 1980s in terms of economic impact,
The City no.dod to begin to behave differentll' if it was to
continue to experience success. It was enlightened self-interest
th'at the city ... as baing aSKed to pursue, through the ERP. It
Doelled sel.f-ovident that it the city could c .. ,ke itself an attrac
tive connunity to businesses, it ,",ould be in a better position to
pic):: and choose 'Who it ,-,anted to court rather than just "letting
thJ;l: narket \/'ork," where the City ... ·ould get what came to it in spite
of itcalt. It, however, Palo Alto lMde itself an attractive and
npp.aaling location for businesses, it would begin to appeal to
businesses 'IIhich 'Would give the City :r~so\lrces, pzo-estige, attrac
tion for otho,; Gompatible businesses, etc. He had no qualms in
saying buslno~s dev~lop~ent rotention wns tremendously important,
but it had been "roug on the Fry's site. Each Council Member would
have viows about a sit~ or application. Council had had no problem
turning doYll tho Gruen & Gruen application. It had not been a
&Ound tlnDncial decision~ There Were other community concerns
Which would bo brought to the tore. What it meant was that Council
would be better infor~ed ~bout the economic consequences, and have
reAl chOices, rather than aiaply be handed what the market wanted
to. h~nd it. He enc.ouragEld his colleaques to move it along.
council would havo the oppo~tunity to have a real and meaningful
debate ·about what it would or would not do, rathor than making it
an ,intelle:ctul'I;l exercise \oIhile three years and opportunities passed
the City by. Once the economy turned around a little, the City
night be deluded into thin'<ing it no longer had to be as engaged
and act~.v~. It was not just about the elements of the program, but
the. perception in the business community which existed l!md was the
.oat difficult aapect with Which the city had to come to grips.
P8rcepti¢ns in the business community drove location decisions.
Part of the change in perception had .. to be real, and it needed to
be t<lanifested in the Building Department, Planning Department l etC4
The perception should be 'that the City cared, was engaged, and
~ovinq forward, net that atter three years i~ still needed to be
kicked around more.
Co~ncil Me~r Rosenbaum said it was ironic that he had supported
th.o Fry IS issue 'While he questioned the general ERP. He was
prepared to respond to specific issues, but he did not know what a
great many of the specific itfl'ms in the ERP meant and where it
would lead the city. 'J1he city had a regulatory framework. It had
a genex.-al plan and zoning that 'Went with it, which had led to a
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very' successful city. Ue 'Wanted to know wh'Jther there were
problems with zoning that inhibited dQ3iroblo develop~ent at the
former health spa on El camino Real, and what the city had dono to
0nable a project to be approved. He could not support the Dotion
because he did not underatOnd the i.plicationa of the entire plan.
H. vas prepared to go through each of the ite .. s. The proposed
1994-95-Budget contained a proposal tor an Economic Resources
position and assistant "t $150,000 per year'. Ho c<moidered the job
a service to bu~ineGs end property o~ers of the cObDunity, whero
a central porson would be eetablishod which did not formerly exist.
It w." of C]t'eat value to the co""unity and he ...... prepared to
respond to initiatives wllich would be suggested, whether some
fln.nc101 incent.ive, .oning change, plIrJ<ing regulations changes,
etc., b'.1t h. did not )-.nov what would be done if tho. P.RP was
approved. He did not .. ant to ~!sl.ad pvople by suggesting things
would happen just beca" •• ho voted tor the~. X~ waS not hiB
intention, based on hi. reading ot tho .. lnato. ot the PeS Comll.tt.o
meeting, thAt the Finance ,Coamittee ~ovld take ~ny action.
Chairperson Wheeler did not knov how hard to w()rk to get a
unanimous vote on tho issue. She thought the x.esponsfl fro:!:]
MG. Jansen had indicnt.ad tlJat, pr iQt" to il<!ple.:!?lenting any ot the
scenarios, she 'Would return to CO\lncil with specific action plans
and information before moving ahead.
Ms. Jansen said Chairperson ~hpol~r'8 8Dsess~ent ~aQ correct.
Chairperson Wheele .. thOught it would be better to be provided with
more inf.omation froll· Ms. Jansen on hoW any ot tho itoms liould be
implemented at the Council lovel rather than ha· ... lng Hon:e vague
discussion about individual ite~B at the Finance cOJat;Ditt66 leveL
Council Membor Rosonbaum said if thot was the F1nancB: ColtlJJittee'6
intent, .it would be fine. A general aotion suggesting support of
the. efforts ot the Kana9'sr of tcono:bic RO$ol.lrCGs Planninq to draft.
a set of specific proposals to addross tho issues Which ""ore
discussed in the ERP, could be supported. But he ~a9 not interost
ed in supporting .consideration on -tI 6.pecific basis ~s indicated on
pagQ 10 of the staff report (CKR,269:94), "the use of troditional
ecor,omic development tools utilized across. tho State ana nation, n
or "develop a program which would help expedite the city process
for existinq businesses desiring to expand within the cOmQunity,
and tarqeted new businesses 'Wishlnq to locate in Palo Alto." He
did not know what it ~eant and it would be -misleading to say it was
something he would support. He 'Wanted a more goneral motion.
Vice Mayo!:'" Simitian thought the tiv~_ items on paqe 10 of the staft
report (CMR:269:94), given all the. caveat$ about the lack of
specificity and the lack of commitment to any particular item, were
fairly general. Initiation of a tlusin('.ss outreach Program was
generaL "Business retention program 'With targeted assistance to
major revenue-generatinq areas H ~ould help businesses in tho City
and try to be attentiVe to businl2!sses which produced a lot of
money. He had trouble finding fault with it as a general concept.
It gave Council tho room to agt"ce on the concepts 'Which should be
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in such a plan without disagreeing on individual projects or
compol'lents ~
council Kamber Rosenbaum disagreed~ It was iNportant tor
lis. Jan •• n to be able to approach people with what she thought
council wauld do. It was very important for Council to maka BurO
Ms.' .. 'ansen understood exactly what it would do. Thete might not be
five CO,uncil Members willing to consider somethinq on a solective
basis. If that 'W~s the case, it was very lmport.ant tor Ms. Jansol'
to know; but simply passing the proposal as it .toO<! <lid not
provide that information.
Vice Hayor simitian was prepared to move each of the five recooaon
dations individually, allowing council Membor Rosenbaum'to vote on
each item with which he was comfortable.
Council Member Rosenbaum said it might help.
Chairperson Wheeler concurred with tIluch of what each of her
colleaques said. She did not have a big proble~ with elements of
the ERP itself which dealt with isslies outside chan9~s in zoning
and outside issues related to the City's financial participation in
wooing new business to the area. It left hol~a in her othervise
enthusiastic response to the ERP. She and Ms, Jansen had discuBscd
the ERP outside the Chambers. There were some questions, pnrhaps
because she had been around long enough and felt dotensive about
sone of the decisions """hich had been made during the early to mid-
19806 'When she had been on the Planning commission (PC). 'When she
had read. some of the assUUlptions underlying the ERP, sha took
exception to some of the comments about arcane zoning requl~tionEi
and slapping caps and lids on things, particularly in tho DO'WIltolffl,
especially in light of the fact most people considered the Downtown
area successful. What part, if ~ny, was played by the fact the PC
and Council at the tblB put some brakes on potential developmont
was open to some speculation. Somo of the restrictions had been
very qood for Downtown. Zoning restrictions in and of themselves
were not necessarily bad, nor did the ERP propose that the city
take all of the lids off zoning, allowing building to be overrun
'With shopping cent~rSt naw industrial plants, and supposed tftX
generatinq uses allover toYn. She firmly believed Council h~d
other factors in mind in maJr:ing its land use decisions which ... .ore
of at leaat equal if not More important than the tax dollars
generated as a result of the deciai>:>n. She hoped Council and
future Councils 'Would hold to it .. -There was .a need too-address
housing issues if the City rezoned sites which were currently
desiqnated housing' to a cOlmercial or industrial use. The City had
an obligation to f,ind other sites and other ways to replace the
lost housing potential. The ERP mentioned additional stimUlation
to industrial and commercial uses which. were revenue-generating fol'
the city. The City had sufficient land zoned for co~mer
cial/industrial purposes and the vast ~ajority of any increased
growth could be accommodated on already existing suitably zoned
land. She would strongly advise Council to stick with the policy,
while any exceptions to the policy should be taken very seriously
and very rarely. It was a very tricky issue to atte1llpt to Zolte or
rezone land for purposes ot revenue generatioTl, particularly given
5/10/94 FIN: 30
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both the economic and political cli".te in GaCraMento. There "ere t
bills in the Legislaturo which would, if enacted, make it much less
attractive for citios to attempt to attract useS for the purpose or
90neratlng sales tax because the salas taxes might well be
redistributed to couunities providing housing instead. On the
other hand, the packet. received from the lAague of california
Ci ties (LCC) contained a bill which would work in the ~Ippo.ite
direction, rowarding cities with some extra property tax revenue
for attracting and creating no ... amployment opportunities. other
101l9'-t6", interests of the community had to be kept in mind as tile
city did its zoning.
council Mambar Rosenbaum was willing to support the F.RP with the
understanding it did not imply any commitment to any zoning change
or .finanoial as'sistance to any proposed development.
MAKER A!I!> BRCOIIDBI! MUZO TO IIICORPORATB IIlTO !l'HB M(Y.L'ION a cave.t
which indicated. that support for the Economic Resources Plan
neith~r implied nor precluded the use of zoning changes or
financial assistance to any proposed development as part of allY
particular effort.
MOTION PASSED 3-0; Fazzino absent.
council Member Rosenbaum had requested at the council meeting
information about the revG:!",\le-generatinq potential of various types
nf deve.1opments. Ms. Jansen appeared to believe the information
provided at the Finance Committee answered the response, but he had
sought more generic information. He knew the answers but thought
it was not generally known how much generic retail use produced in
revenue to the city, property taxes associated with an office
building, etc. Staff could include assumptions such as $400 per
square foot was $4 per square foot in sales tax, etc. He wanted to
Sfle the information when the item r~turned to council.
Ms. Janson asked what specific uses council Member Rosenbaum wanted
to see.
council Member Rosenbaum said retail, hotel, office, and residen
tial.
Vice Mayor Simitian thought it was important to factor in property
tall': revenue derived from the PalO' Alto Unified School District
(PAUSD), given the 'fact it was a '·salf-financed basic aid district
where every incremental dollar went directly to t.he PAUSD. Sillce
the City 'Was caught up in funding the· ·PAUSD through the provisions
of the lease, if there were 'property tax benefits which accrued to
the PAUSO, it was worth noting and taking into consideration as
well as opposed to something more tenuous to the County, etc.
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