Shopping center expansion pullback 'final'

University blames 'confusion' over city process but admits long-term Stanford expansion was key in withdrawing plan

Withdrawing plans for a major expansion of Stanford Shopping Center is a final decision, according to Stanford University spokesperson Jean McCown.

Stanford University withdrew its application to the City of Palo Alto Tuesday to expand the Stanford Shopping Center by 240,000 square feet and add a 120-room hotel, saying the city has created "confusion and distraction" by lumping together the mall and the Stanford University Medical Center expansions.

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.


Like this comment
Posted by jim H.
a resident of Duveneck/St. Francis
on Apr 17, 2009 at 8:17 pm

[Portion removed by Palo Alto Online staff.]
Did Valley Fair and Santana Row build housing for their workers?? What about any of the other companies in Palo Alto that have "low-wage" workers? I'm sure Facebook, HP, and even the school district have many, many employees that can't afford to live in PA. It's ridiculous.

Like this comment
Posted by neighbor
a resident of another community
on Apr 17, 2009 at 10:56 pm

I appreciate these comments, and the others this week who have spoken out against the Stanford-bashers who have dominated this site in the past. At last, a return some balance on this PaloAltoOnline bulletin board.

Like this comment
Posted by Move forward
a resident of Greenmeadow
on Apr 21, 2009 at 11:17 am

Is it possible that Stanford actually decided to cut their luxury shopping center/hotel expansion because of a downturn in the economy? It is convenient to point blame for their about-face at the city in order to get people riled with the city. Developers have done this before when they decided to pull a project for economic reasons. Then they use this as leverage to get support for the remaining project. (Remember Hyatt? They pulled their hotel/housing project when the hotel market tanked after 9/11. The developer blamed their about-face on the city and got support for the current 100% housing project that was later approved.) Brilliant political move.

Personally, I always thought it made more sense to study the hospital and shopping center projects separately. It's a disappointing turn of events, but I think (if we HAVE to place blame)Stanford's choices are as much to blame as the city's and the economy is a variable no one has much control over.

Let's stop the blame game and move forward. I hope Stanford and the surrounding county thst is putting pressure on CPA and will benefit from this project will provide some tangible ($) support to mitigate impacts of the project...and yes... mitigating impacts IS something that other cities require.

The county should lend a hand mitigating hospital impacts. Why should CPA be required to mitigate ALL of the impacts when this facility serves the REGION? The aggregate costs of housing, schools, and transportation mitigations alone will be huge and our city budget CANNOT fund them. It is a practical impossiblity, so Stanford should get serious about how they ARE going to work with the city (and state and county) to collaboratively solve these very real problems that the expansion will create. Stop playing PR games.

It would be great if our local newspapers were doing more thoughtful, in-depth and balanced reporting rather than rewriting and redistributing Stanford's press releases. Some of the Weekly and Daily and Merc recent coverage almost perfectly echoes a presentation I heard given by a Stanford PR rep. Our local papers can do better. They have in the past.

Let's all put our best foot forward to make this project something that works as well as possible.

Like this comment
Posted by New to PA & curious
a resident of Another Palo Alto neighborhood
on Apr 21, 2009 at 11:34 am

I'm new to PA but yeah, I thought it was odd that a city would tell a company or business (and in this case a school) that they have to provide houses for their workers. Was this requirement the same for HP and the Wall Street Journal on Sandhill? How are they allowed to ask for this--some law passed when? And why? Do other cities in the Bay Area do this too?

Sorry, but further commenting on this topic has been closed.

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