Publication Date: Wednesday, August 25, 2004
Hitting pay dirt
Hitting pay dirt
(August 25, 2004) City may reap financial benefits from rehabbing historic buildings
by Jocelyn Dong
Restoring historic buildings to their former splendor can be costly, but the City of Palo Alto may have figured out a way to do it for less.
The idea? Give historic buildings certain rights -- including the right to build beyond their zoning limits -- and then let them sell those rights to the highest bidder to be used elsewhere in the city.
The result: The historic-building owner has cash with which to rehabilitate the old structure. The rights could be worth millions of dollars.
The idea is not a new one. The city already has an incentive program in place for historic buildings located downtown. What's new is that the city is hoping to award those rights to its own historic buildings throughout the city, including the Roth Building, Children's Library, Sea Scout building, Gamble House and others.
The city would reap millions of dollars to be used for restoration, leaving strapped city coffers available to fund other city needs.
Planning and Transportation Commissioner Karen Holman and local developer Jim Baer came up with the idea. Both are involved in rehabilitating the historic Roth Building near downtown Palo Alto, which is the future home for the Palo Alto History Museum. The Roth Building is owned by the city and is expected to be leased to the museum.
"Cities are kind of, unfortunately, known for not maintaining their infrastructure (including historic buildings)," Holman said. The proposed program is "a great way for city-owned public buildings to be restored for the public benefit and at much-reduced cost to the city."
Last week, the city's Historic Resources Board reviewed and approved of the idea, which will be reviewed by the Planning and Transportation Commission and the City Council this fall.
Approving a program that encourages historic preservation and generates millions of dollars for the city may seem like a slam-dunk, but the council will have to weigh additional factors.
Developers who buy the city's rights to additional square footage will only be allowed to use them in the downtown area. If the city were to sell the rights for all 10 city historic buildings currently eligible for the program, 33,000 square feet could be added to the downtown area. With greater development could come the typical drawbacks: Traffic and parking woes.
This technique of giving rights that are sellable is called a "transfer of development rights" program. Such programs exist across the country, mostly as incentives to accomplish things such as preserving open space, upgrading seismic safety and restoring historic buildings. San Francisco has a similar program; Mountain View has been considering one.
Palo Alto's program has been used only a handful of times in the past seven years since it was written into the city's ordinance. For one recent project, the rights for two historic buildings -- 611 and 625 Emerson Street -- were given to the property at 200 Hamilton Ave.
With the new rights, the Hamilton building was allowed to exceed its size limit. Today, a new three-story, 26,600-square-foot building houses A.G. Ferrari Foods, among other businesses.
As for the two historic buildings, both have been restored. The one at 611 Emerson currently houses Vivre Fitness and Wellness. It is notable for being local architect Birge Clark's oldest surviving commercial design in Palo Alto, said Dennis Backlund, the city's historic preservation planner.
The other building, at 625 Emerson, is an early example of an apartment house in Palo Alto, Backlund said.
In other situations, an historic property has been rehabilitated -- such as the Peninsula Creamery Dairy Store & Grill -- but the bonus square-footage rights have apparently not yet been sold, according to Backlund.
Nationwide, transfer-of-development-rights programs have occasionally drawn criticism for "making money out of thin air," according to John Bredin, an attorney who served as a research fellow with the American Planning Association. Namely, the program confers rights that make money based on zoning restrictions that the jurisdiction has imposed.
But most programs seem to have withstood court challenges, Bredin's research showed.
The fact that few developers have used Palo Alto's transfer program so far doesn't mean that no one will want to buy historic buildings' rights in the future, some community members said. There are a number of benefits to the developers, starting with the ability to construct a building that is larger than zoning currently allows.
Another benefit is that the extra square feet given to the new project are exempt from parking requirements. Normally, when a building is constructed, it must provide a parking space for every 200 square feet built, or pay $50,000 for each space it doesn't provide.
Finally, a developer who buys the rights to additional square footage from a historic building is adding area to his or her project, but bypassing lengthy city approval processes that usually come with exceeding size limits, Backlund said.
Senior staff writer Jocelyn Dong can be reached at jdong@paweekly.com.
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