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By Douglas Moran

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About this blog: Real power doesn't reside with those who make the final decision, but with those who decide what qualifies as the viable choices. I stumbled across this insight as a teenager (in the 1960s). As a grad student, I belonged to an org...  (More)

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Development Cap: Size, what to count, and why

Uploaded: Nov 1, 2015
On Monday, Council will be discussing the update of Land Use Element of the Comprehensive Plan to provide guidance to the Citizens Advisory Committee (Agenda). The development cap is expected to be a significant part of this discussion because it underlies many of the other issues. The size of the cap was determined in the mid-1990s and is part of the current Comprehensive Plan (CompPlan) that was officially adopted in 1998.

That cap was 3.25M sq. ft. of additional non-residential development, which has been exceeded. However, City Staff says that less than half that--1.5M--has been used. Why the difference? Staff has decided that 2.3M sq. ft. of development doesn't count toward the cap, although no one I have talked to knows how this exemption came about. Staff terms this development "non-monitored" and it includes the Stanford Medical Center (built and pending), Palo Alto Medical Foundation, VA Hospital...

Putting aside the issue of the legitimacy of this category, the question is whether it is desirable. Square footage was not what was intended to be allocated, but rather was intended as a proxy.(foot#1) Non-residential square footage was used as a proxy for jobs, which in turn are a measure/proxy for impacts on the community, such as housing and road needs, with housing being both a need and a proxy for other needs, such as schools, parks, and other community facilities. So do the jobs in these "non-monitored" developments have any less impact on the community than other types of jobs?

Once you recognize the cap as a proxy, the next questions that should be asked are whether it is still a good proxy, and whether the details need to be updated. The size of the cap was decided upon in the early 1990s--before the beginning of the DotCom Boom/Bubble--and its assumptions may be based on data from years before that.(foot#2) In the intervening decades, the space per employee has shrunk: For example, in the mid-1990s the assumption was for a software development company using cubicles to need 250 sq. ft. per employee. When Facebook moved from University Avenue to the Stanford Research Park in 2009, its initial employee density was one per 92 sq. ft.(foot#3) Part of the reduced space per employee is employers packing them in more tightly, but there have also been reductions in space requirements. For example, companies used to require large computer rooms for file servers, but these have largely disappeared: (1) More data is stored on individual computers (massive increase in disk capacity), (2) more data is stored in the Cloud, (3) the few on-site servers that are still needed are much smaller. Similarly for photocopiers and computer printers. And when was the last time you saw a large bank of FAX machines.

My saying that square footage was intended to be a proxy for jobs is an oversimplification. For example, hospitals and medical centers have far fewer jobs per sq. ft. than a software development company. However, with patients coming and going, and delivery of supplies, they may produce more vehicle trips than a software company in the same size space. Similarly for retail. I suspect that the champions for vehicle trips per square foot of building are gas stations, followed by fast food restaurants, especially ones with a drive-thru window. Because of shift in the mix of various categories, and shifts within a category, square footage is at best a rough approximation of what you are trying to use it for as a proxy. But choosing the appropriate values for this proxy involves finding comparable situations to provide relevant statistics. Caution: City Hall is infamous for using national averages in defiance of extensive local experience.

Consequently, even though we may be only somewhat exceeding the cap in terms of square footage, we may have greatly exceeded it in terms of what that metric was intended to control. Because hitting the cap has sneaked up on us, there hasn't been the data collection and discussion needed to discuss what should be in the updated CompPlan.

Even if we are only close to reaching the cap, there are a host of questions I don't think have been addressed. For example, when does a proposed project "vest" its rights to that amount of the cap? A controversial, one-time decision was made relative to annual caps for several areas(foot#4) but no principled, long-range discussion has happened. If a project gets to reserve rights too early in the process only to be delayed or cancelled by the developer, then other worthy projects are blocked from proceeding in the interim. But if vesting happens too late in the process, there can be other projects well along in the approval process that can be blocked for years before cap space becomes available.

TDRs (Transferable Development Rights) pose a related problem. A TDR allows a developer to build a specified amount beyond the allowable zoning, and can be transferred between properties and can be sold to other developers. Some TDRs are subsidies to building owners (for example, for seismic upgrades) and some are "Zoning for Sale"--City Hall getting off-budget funding for favored projects. When and where TDRs will be used is even more unpredictable than projects in the approval pipeline. While TDRs may sound good in theory, they are too easy to game in practice.(foot#5)

If Palo Alto is at the cap (now or future), how do we avoid developers gaming the system to get space for their projects. For example, we have seen developer create "blight" (Alma Village and 195 Page Mill) to successfully "encourage" Council to give them zoning changes. Could we see developers tearing down a building in the middle of a business district in order to open up space under the cap to be using in a project of theirs elsewhere?

Business districts and the caps
When you look carefully at the arguments that Palo Alto needs to provide more and more office space, it typically the intersection of large established companies wanting the prestige of a Palo Alto presence, and of elements of the Palo Alto elite wanting the prestige of more high profile companies locating here. Many people are just beginning to realize is how much this has distorted our business districts. Business districts, as opposed to industrial parks, are regarded as predominately a collection of small business that support the community and each other. For example, the retail stores use a local accountant and insurance firm. Employees in those service companies are customers for retail stores and other service companies. This concentration of different services and types of retail make the business district a destination and resource for nearby residents. A certain amount of other types of commercial companies, such as software development, provide additional customers for the primary businesses in the district.

During the DotCom Boom, City Hall resisted protecting the various business districts, with University Avenue being the hardest hit by conversion to offices. Even now, City Hall refuses to enforce existing rules for a building only one block away. I live in southern Palo Alto and like many of my neighbors, I rarely go to the University Ave district--the large number of office workers have transformed the business mix into one oriented toward them and away from the community.

A problem facing University Ave, and potentially California Ave, is domination by small numbers of large, elite companies. First, the economy of those districts becomes too closely tied to the fortunes of those companies, as demonstrated during the two recent recessions (the DotCom bust and 2008). Second, if those companies grow too large and move out, as Google and Facebook did, it can hit the remaining businesses very hard. Palantir is the next iteration of this problem. Third, elite companies drive up the rents because they can pay more for their offices. Palo Alto claims it wants to support small, innovative startups, but its policies focus on the prestige companies. Elite companies can also pay above-market wages (as several acknowledge doing) which then encourages higher-end restaurants and retail, pushing out stores that serve a broader community.

The first step to getting good answers is to figure out what are the important questions.


1. Proxy metric, historical example: During World War 2, the US rationed gasoline despite having abundant supplies--what needed to be rationed was tire wear because its material (rubber) was in short supply, but its consumption rate was largely invisible to the driver, whereas gasoline usage was both highly visible and tracked in small increments.

2. The CompPlan was in development for several years in the early 1990s, and its approval was delayed for several years by City Councils that didn't regard it as a priority.

3. "Residents nervous over Facebook move", Palo Alto Online, 2009-03-13.

4. "Palo Alto puts a cap on office development: Divisive law seeks to pace commercial growth downtown, around California Avenue and along El Camino Real", Palo Alto Online, 2015-09-22.

5. Yogi Berra: "In theory there is no difference between theory and practice. In practice there is."

An abbreviated index by topic and chronologically is available.

The Guidelines for comments on this blog are different from those on Town Square Forums. I am attempting to foster more civility and substantive comments by deleting violations of the guidelines.

I am particular strict about misrepresenting what others have said (me or other commenters). If I judge your comment as likely to provoke a response of "That is not what was said", don't be surprised to have it deleted. My primary goal is to avoid unnecessary and undesirable back-and-forth, but such misrepresentations also indicate that the author is unwilling/unable to participate in a meaningful, respectful conversation on the topic.

If you behave like a Troll, don't waste your time protesting when you get treated like one.
What is it worth to you?


Posted by What Future, a resident of Fairmeadow,
on Nov 1, 2015 at 8:51 am

Really thought provoking article. What you are really describing is what kind of future do we want for PA?

I agree the intent was to have a cap as a proxy for growth and growth impacts. I believe past councils explicitly exempted developments from the cap, so The official total is where it is. But its a bit like boiling lobsters, we are now seeing the impacts of those decisions and have an opportunity to decide if the water it too hot. Can our infrastructure handle it and what do we want the City to look like? I believe we have allowed too much nonresidential developoment particularly if you include Stanford, which we should.

I'd like to see our new Comp Plan prevernt expanded nonresidential development, in favor of allowing time and space for some residential catch up. We need housing.

Posted by Marie, a resident of Midtown,
on Nov 1, 2015 at 10:18 am

Marie is a registered user.

With the large imbalance of workers to residents, I think Palo Alto needs to focus its incentives on building new housing, preferably moderate to low income housing. There should be no downzoning for market rate housing that does not include a significant low to moderate income component. I can see no reason to change zoning to enable multimillion dollar 2000 square foot dwelling units with little or no yard or green space, including stack and pack housing like Alma Village, that does nothing to increase housing for middle income people, and much to degrade the living experience for the rest of us.

I also think the greatest demand for low-to-moderate income housing is for rentals. Any density bonuses or TDR's should include a required low-to-moderate income rental component and not available to be used for penthouses for visiting corporate managers. Below market rate sales of homes tie people down to a future of no significant increase in equity, thus discouraging even normal upkeep of the property.

Public benefits should be narrowly defined, with the greatest emphasis on more than required parking to help makeup for the current parking deficit. More of the permit parking should be changed from underutilized monthly parking permits to cheaper daily permits, with a special rate for lower income retail employees.

I would also support diverting some of the 1% charge for public art to the acquisition of additional parks and open space, which is far more needed than screwy statues. How many donated public art sculptures are sitting in storage somewhere while we continue to commission more 3rd rate sculptures? Let's use what we've got, and invest in what we need - more public space and playgrounds. A play structure can be artistic, as can anew walking path. How about allocating some of the public art money to opening and beautifying paths along our creeks (and protecting the nearest neighbors), now used only by utility maintenance?

The Palo Alto City Council has a great deal of power to shape the future. I hope they will do so taking the desires of the voters in mind, rather than developers and AirBnb. Please plan for the future, not just today.

Posted by Observer, a resident of University South,
on Nov 1, 2015 at 10:47 am

As this blog post points out, for all the controversy, the "office cap" failed to limit office development at all in Stanford Research Park. I agree with the other commenters - why should Stanford get a pass? Probably because our city council members were afraid of the biggest developer of them all and the biggest companies of them all.

This is our opportunity to discourage non-residential development in SRP, which will just encourage more cars, and instead encourage Stanford to put in more housing that will help them house the workers already there. While we are at it, let's require Stanford to show that they are reducing traffic from their buildings, rather than just "encourage" it as Council did. We all know how effective "encouraging" developers is, unless it's backed up with real threats. The pseudo-cap on office didn't even try to impose consequences on Stanford if it didn't reduce more of the traffic it's causing.

The Council could tell Stanford that, if it wants to build more office buildings, it should tear down some of its existing ones and put housing and retail in their place.

Posted by Cheryl Lilienstein, a resident of Barron Park,
on Nov 1, 2015 at 11:04 am

Thank you Doug for the concept of development cap as proxy for quality of life choices.
And thank you for uncovering the fact that we have already exceeded the cap as envisioned by our predecessors.

People working for prestige companies and self-appointed "innovators" have started a call "middle housing." The transition between high rise and single family homes.

Middle housing was invented centuries ago. Middle housing exists here already. Some clusters were built by famous architects.

And in some cases they were wiped out by mansions. The middle housing that was heartbreakingly bulldozed was unfortunately replaced by more expensive, less affordable housing, and unless demand cools off permanently, there's no decline in pricing foreseen.

Still, some still exist. Small lovely condo buildings ARE here, scattered in our community. And high density housing WAS built--the Mark, Tan Plaza, etc-- and thankfully that model was eliminated by our zoning regulations because people didn't-- and still don't -- want Palo Alto to become an expensive urban environment clogged with cars and pollution in which tall buildings block air, sunlight, and create more traffic.

Here's an innovative idea for "innovators" who want to build high density "communities": try San Jose.

The fact that young people who live in SF "don't want to be in SJ" because "nobody lives there" is a good reason for young and ambitious "innovators" to develop it.

I recall that my mom --who grew up in Brooklyn-- didn't want to live in SF because her opinion was that "nobody lives in San Francisco." And now look at it. So if making a great urban environment is the goal of some who want to invent an innovative culture in a place with better weather, and jobs, San Jose is still a great opportunity.

Meanwhile, back at the ranch, here in Palo Alto a CITY WIDE office space development cap is a good proxy for choosing a quality of life that sustains THIS community as livable and lovable.

Posted by Curmudgeon, a resident of Downtown North,
on Nov 1, 2015 at 1:12 pm

"Here's an innovative idea for "innovators" who want to build high density "communities": try San Jose."

But they don't WANT San Jose. They WANT Palo Alto. That is the focus of our problem.

Posted by Douglas Moran, a Palo Alto Online blogger,
on Nov 1, 2015 at 1:31 pm

Douglas Moran is a registered user.

> "But they don't WANT San Jose. They WANT Palo Alto. That is the focus of our problem."

But they don't want Palo Alto either, except the name. They openly and frequently express utter contempt for most of the people living here and for their lifestyle. They want to reshape Palo Alto in their image, everyone else be damned.

Posted by Sunshine, a resident of Barron Park,
on Nov 1, 2015 at 2:32 pm

There are many very nice areas in San Jose.
Remember: you can't always get what you want.
There are many reasons for this and some of them are extremely good and valid.
Yes, the commute from San Jose to Palo Alto is very difficult, unless you take the train.
If you still don't want San Jose, try Mountain View, or Redwood City, or East Palo Alto or East Menlo Park, or somewhere in the east Bay. There is an excellent fast train from theEast Bay to This area as well as an e press bus.
Most of us who are here now worked in Palo Alto, but could not afford to live here. We saved our money and decided to choose less space or a "fixer" house.
Do not expect us to move out because you want our good schools. Often time spent by parents to mentor and help educate students is better than a fancy school.
I know, I spent the first 10 years of school in a very poor and poor performing district. Books at home and reading to your children goes a long way.

Posted by Curmudgeon, a resident of Downtown North,
on Nov 1, 2015 at 5:41 pm

"But they don't want Palo Alto either, except the name. They openly and frequently express utter contempt for most of the people living here and for their lifestyle. They want to reshape Palo Alto in their image, everyone else be damned."

It's the ZIP mystique stampede, alright. PAF sees an opportunity to make a quick bunch of money for investors by catering to their edifice wants--while the fad lasts. Hence the desperation to get moving. FOMO Rules!

Hope our residentialist line holds at the CC.

Posted by Resident, a resident of Another Palo Alto neighborhood,
on Nov 1, 2015 at 6:23 pm

[[Deleted by blogger: nothing more than a snarky quip.]]

Posted by Resident, a resident of Another Palo Alto neighborhood,
on Nov 1, 2015 at 7:07 pm

I'll skip the analogy then: it’s human to have unrealistic expectations, especially where difficult problems with complicated tradeoffs are concerned, particularly if many of those impacts are out in the future instead of immediate.

Many work and housing issues fall into this category, just because those things are such an important part of our lives. But that's also why they're so hard -- because they're important to EVERYBODY, and there are a lot of us.

Posted by Vigilant Electorate, a resident of Barron Park,
on Nov 3, 2015 at 9:01 am

Vigilant Electorate is a registered user.

Palo Alto is economically, culturally and environmentally unique. There is no place else in the world like it. Each generation since the post war boom has faced the same challenges to protect it from various groups that want to destroy it for selfish minority interests or profit.

Building up is the same and paving out. Densifying will not help but it will destroy the current sense of community and quality of life. Think, discuss, consider various points of view but by all means vote. It is our turn to step up and save Palo Alto or it will be lost.

Posted by Jane, a resident of College Terrace,
on Nov 7, 2015 at 1:18 pm

Thank you Doug for nailing the problem, and I hope our council members read it.

When it was revealed at Monday night's council meeting that certain areas of Palo Alto had been exempted from the commercial development cap in the last comprehensive plan (L-8) it was quite shocking. As was the strong opposition from our director of Planning and Transport, Hillary Gitelman, backed up by the city manager, James Keene, that the status quo must be continued going forward. In other words, the exempted areas must continue to be exempted.

As justification for her strong resistance and push back, and in doing so very revealing, it appeared that Ms. Gitelman argued that because her department had been excluding the L-8 exempted areas in their data collection and analysis to date, changing that to include these previously exempted areas going forward would render their previous work irrelevant.

But how can the council make meaningful decisions going forward when the data presented by the Planning Department excludes about half the commercial development within the city boundaries?

Posted by Intel burry, a resident of Meadow Park,
on Dec 7, 2015 at 11:44 am

On many of your postings you parrot the same comment over and over-- that "they" openly and frequently express contempt for most of the people Living here and for their
Lifestyle. Who is this " they"? When did they make these comments? How many people made these supposed comments? Sounds to me like you are either engaging In an ad hominem attack or painting with a very broad brush

Posted by Douglas Moran, a Palo Alto Online blogger,
on Dec 14, 2015 at 12:12 pm

Douglas Moran is a registered user.

RE: Intel burry

That comment apparently refers to posting such as my immediately previous blog entry Housing Policy: It's community, not generational. On that posting, if you do "Find" on either "contempt" or "styles of living", you will find a paragraph that names four individuals, what they said and when. So tell me that commenter "Intel burry" wasn't maliciously making false representations and accusations.

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