Withdrawing plans for a major expansion of Stanford Shopping Center is a final decision, according to Stanford University spokesperson Jean McCown.
But Stanford officials Thursday indicated the university came to the decision after careful long-term evaluation of how the university overall will expand in the future.
McCown, Stanford director of community relations, said the university faces limits in terms of traffic and other impacts of adding buildings under its county general-use permit. Officials felt they needed to be sure that Stanford's academic priorities are put foremost, she said.
Its first priority, at this point, is the massive renovation of its medical center: the Lucile Packard Children's Hospital and Stanford Hospitals and Clinics.
"It is unfortunate we have had to take this step, especially given the effort, time and dollars invested by all parties," Stanford Vice President Robert Reidy said in a letter delivered Tuesday to Palo Alto officials.
Stanford Shopping Center's owner/manager, Simon Property Group of Indianapolis, Ind., said Thursday it is "very, very disappointed" but respects the decision of Stanford, which owns the land under the mall.
"It's our feeling that it's important to expand the Stanford Shopping Center to be competitive with the expansion of other shopping centers in the area," Simon spokesperson Les Morris said.
Palo Alto City Manager James Keene also expressed disappointment at the application withdrawal and said city officials consider the success of the shopping center key to the health of the city.
"Protecting the center from any economic decline due to increased regional competition is vital to maintain the City's financial health and the city services our community expects," he stated in a press release Tuesday.
Keene had previously stressed the potential financial benefits of the shopping-center expansion and called the shopping center "a critical sales-tax generator for the city."
The withdrawal of expansion application means the city will not receive the millions in sales- and hotel-tax revenues it planned on reaping from the mall project. City staff has estimated that the new retail space would have brought in about $1.6 million in annual sales-tax revenues, while a hotel would have given the city $1.1 million in revenues.
The city was also planning to collect about $9 million in impact fees from Stanford for the shopping-center expansion, money that would be used to mitigate the project's impacts on local schools.
A recent city report stated that Palo Alto is expecting a 10.4 percent drop in sales taxes -- or $2.3 million out of a total estimated $22.1 million -- for the current fiscal year, which ends June 30.
The mall application had been officially crawling through the city's approval process since August 2007. Throughout, discussion between the city and Stanford focused on the university's responsibility to help limit negative housing and traffic impacts from the two expansion projects. Stanford in particular expressed concern over the city's request that it provide 594 units of housing for the expanded workforce.
Former Palo Alto City Councilman Bern Beecham, a strong proponent of the mall-expansion project, said the city's expectations of Stanford -- in helping offset increases in traffic and housing needs -- were too high.
"I think it's nuts," said Beecham, who approached Simon Property Group in 2005 with then-councilmember Judy Kleinberg. Palo Alto has "driven this source of revenue out of the city. The city is now faced with having to increase the tax rate.
"To me, this is a real black eye for the city process," he said.
The council's goal when he and Kleinberg broached talks with Simon Property Group was to increase the city's sales-tax revenues by 20 percent. He and Kleinberg asked that a hotel be included at the mall, since it would generate revenue through the transient-occupancy tax, he said.
"I'm sad, but I'm not surprised. From what I've heard in council chambers, many council members view the expansion as a burden to the city. They demanded Stanford provide housing for shopping-center employees. There's not a city in the country besides Palo Alto that puts that kind of a burden on a shopping-center revenue producer," he said.
When talks first started, Stanford officials were concerned that expanding the shopping center would complicate the approval process for the hospital expansion, he added.
"Apparently, they came to the conclusion that the complications are simply too severe," he said.
Keene rebuffed the notion that the city has created confusion during the approval process for the two redevelopment projects.
"We should remember ... that it was Stanford that requested that the Environmental Impact Report for both the hospital and shopping center be processed together," Keene said.
"Changing course after the environmental document is nearly completed may have the unintended consequence of complicating the process. We hope not; the City is committed to assisting Stanford in meeting its State-imposed seismic deadlines (to retrofit the medical center)," Keene stated in a press release.
Mayor Peter Drekmeier argued that the additional sales tax may not have covered the long-term costs to the city, which might have needed to provide affordable housing for the shopping mall workforce and mitigate the traffic increases.
"Obviously, having a couple of million extra dollars in the general fund is a huge benefit to the city," Drekmeier said. "But some issues that did come up were that the shopping center would create almost 500 low-wage jobs and the question was: Where would those people be housed? And how would they be commuting to the shopping center?"
Stanford's withdrawal is bittersweet for downtown merchants, according to Paula Sandas, CEO of the Palo Alto Chamber of Commerce.
On the one hand, fear that an expanded shopping center could wick away business from downtown stores is now moot; but many are disappointed that the city is missing an opportunity to develop a connection between the shopping center, downtown and the transit hub, she said.
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