March 25, 2005

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Palo Alto Online

New push for auto row?

by Jocelyn Dong

Despite Palo Alto's attempts last fall to keep auto dealers happy, the city is still feeling pressure to hang on to its top sales-tax producers.

Magnussen's Toyota Palo Alto is the latest dealership to let the city know it is talking with another city -- in this case, Mountain View.

Palo Alto can hardly afford the loss of an auto dealership, since it faces a projected $5.2 million deficit this year. Tax revenues from car sales bring about $2 million for the city, according to reports. Two car dealerships have departed in recent years, leaving seven remaining in the city.

Bernie Magnussen, president of Magnussen's Toyota, said this week his dealership is looking for room to expand. Right now, the company leases a 2.5-acre corner at San Antonio and Middlefield roads, plus parcels totaling another 2 acres nearby.

Ideally, he said, he'd like five or six acres all in one place.

The dealership does more than $60 million worth of sales a year, Magnussen said. Given the right site, he thinks they could easily double that amount, to at least $130 million.

Planning Director Steve Emslie said he's been in "active conversation" with Toyota, to let them know what the city can offer.

Although Emslie was not willing to disclose specific incentives, officials have tossed around the idea of building an auto row along U.S. Highway 101 for years. Among the conditions dealers say they need are high visibility and traffic, and properties along West and East Bayshore roads could fit the bill.

Emslie acknowledged, "We've actively engaged in finding freeway or (other) visible locations." Approving the conditions to build an auto row could be done "fairly quickly."

Many of the office buildings along East and West Bayshore have significant vacancies since the dot-com bust. Possible locations include the stretch west of U.S. Highway 101 between Charleston Road and Colorado Avenue and east of the highway from Embarcadero Road to the city's municipal-services center.

Members of the city's Ad Hoc Retail Committee, tasked with brainstorming ways to keep and attract businesses to the community, are feeling a renewed sense of urgency over developing an auto row alongside the highway.

"We cannot afford to stand by idly and watch our dealership flee to Mountain View or Menlo Park," neighborhood leader Karen White wrote in an upcoming Weekly opinion piece. The city's future development is being planned now, and it's time to start envisioning an auto row, she said.

Ironically, rumors of car dealerships being wooed by other cities is nothing new,. They seem to pop up on a monthly basis, said Council member Bern Beecham, who heads up the retail committee. Even Magnussen acknowledged his dealership still has a six-year lease on the San Antonio Road property.

Yet, this latest rumor seems to have pushed some buttons in the city, perhaps because of the efforts already put into trying to please the dealerships. Last September the council approved new zoning regulations that allow for larger buildings, relaxed parking regulations and larger signage.

Unless the city were to offer up an auto center on its municipal-services property -- where public-works operations are located -- it will need to rely on the cooperation of private land owners to build an auto row.

One way could be through zoning, Beecham said. Nearly every zone in Palo Alto allows for housing, currently a highly profitable enterprise. To encourage land owners to keep the land for commercial use, however, the city might zone the land to prohibit housing.

Another tool would be a "transfer of development rights" program, which allows the city to confer additional square feet onto certain properties. Parcels along West or East Bayshore roads, for example, would receive the bonus square footage, then be allowed to sell those development rights for cash to other property owners in town.

White said that California and University avenues, near the train stations, could be ideal places to transfer the additional square footage.

The Retail Committee is expected to report on its recommendations this summer, possibly as early as June, Beecham said.

"We are in a competitive world. We must find a way to compete with every city up and down the Peninsula. We have to be better and smarter," Beecham said. But, he added, "we're limited by the cost of land."

Along those lines, Magnussen suggested the city allow dealerships to build up, and not out, given the scarcity of land. Dealers in metropolitan areas have showrooms two to five stories high, he said.

Senior Staff Writer Jocelyn Dong can be reached at jdong@paweekly.com.

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