Hospitals are currently excluded from the fee, instituted in 1984, that developers must pay to provide affordable housing for the jobs their projects generate.
And though only two council members voting Monday agreed with the current policy — Council members Bern Beecham and Judy Kleinberg — the exemption will stand because it required five votes to change.
Vice Mayor Larry Klein and Councilwoman Dena Mossar were in Washington, D.C., at a National League of Cities conference and Councilwoman LaDoris Cordell had to recuse herself because she works at Stanford.
City Manager Frank Benest insisted repeatedly the question was pure public policy — should hospitals, despite their sizable staffs, be excluded from the development fee?
His answer is a firm "no."
"About a year ago I became aware that hospitals were exempt from the (fee)," Benest said. "I was very concerned because hospitals create substantial demand for affordable housing."
His concern was amplified because Palo Alto's only two hospitals, Stanford Hospital and Lucile Packard Children's Hospitals, are planning major expansions, proposed to add 1.3 million square feet to the facilities.
To figure out just how much affordable housing that medical facilities would have to build or pay for, the city — at the urging of Stanford, which asked for fresh figures — hired consultant Kate Funk of Keyser Marston Associates to do the calculations.
Funk found the need for 28 lower cost residences per 100,000 square feet of medical building in Palo Alto. She derived that figure by linking the number of employees generated by a hospital or medical building, per square foot, with the number of workers per residence, the average income of medical workers, the cost of housing in Palo Alto, and the number of employees who might commute.
And the cost of developing that housing, per square foot, is $58.29 per square foot of hospital.
So Stanford would actually be getting a deal paying a city-required development fee of only $16.01, city staff suggested. And instead of a set number, that figure could be increased during negotiations.
But Beecham disagreed, calling the charge a "super burden." Beecham said the place to ensure Stanford compensates for its housing demand was via the environmental review process and development agreement — not an ostensibly generic ordinance exempting hospitals from the fee.
Stanford representatives Jean McCown, director of community relations, and Mark Tortorich, vice president of facilities for Stanford Hospital, agreed and emphasized Stanford's hospitals' substantial societal benefit.
"We also appreciate and acknowledge that housing and particularly affordable housing is going to be one of the issues discussed (during negotiations)," McCown said. But the amount of housing, or compensatory fees, should be decided during the discussions, she said.
Her comments were echoed by Kleinberg, who cited the "enormously cutting edge services" the hospitals provide, both to those with money and to those without. The hospital expansion plans will need to account for housing, but the amount can be decided in the environmental review process, she said.
But Councilman Jack Morton and others pointed out a development fee would empower the staff to enter negotiations with Stanford equipped with their tools of choice.
Several people mentioned the hospital's profit, size and wealthy clientele as justifications for denying the exemption.
Just before the vote, Mayor Yoriko Kishimoto gave Stanford officials a hint of her expectations while praising the center for its contributions to the community.
"We're really talking about forming almost a new neighborhood . . . and we really need Stanford's help identifying where that neighborhood is going to go," Kishimoto said.
In other business:
The council did not take up the proposed rezoning of the Mayflower Motel, Summerwinds Nursery, an office building at 4151 Middlefield Road or the Palo Alto Bowl because city staff failed to notify neighbors of the properties about the changes, planning director Steve Emslie said. The council will discuss the rezones, proposed to increase the city's stock of commercial properties, on April 3.
Parks in Palo Alto will soon see the first improvements due to development impact fees created in 2002, following council approval of a project list and spending criteria.
The Stanford/Palo Alto Community Playing Fields, construction of a play structure in Heritage Park, and the completion of Greer Park top the list of projects. Other plans include replacing grass with synthetic turf at El Camino Park, Greer Park and Cubberley Community Center, lighting the Cubberley tennis courts, and adding restrooms at Seale and Eleanor Pardee parks and Cubberley.
The combined cost of the projects will be about $2.8 million.
The council codified a temporary ordinance that required two residences on a single lot in the "RMD" and "R-2" zones to be owned by the same entity. The goal is to prevent second units from being sold and properties subdivided. The RMD zone allows for two units on a single lot in multi-family residential districts, while the R-2 zone allows for two units on a single lot in single-family districts. The measure was approved on a 7-0 vote, with Mossar and Klein absent.
More details about the parks discussion can be found online at www.PaloAltoOnline.com.