A proposal to charge Palo Alto developers new fees to fund public-safety and government facilities ran into a wall of opposition Monday night when City Council members blasted the methodology used to come up with the new revenue source and demanded a fresh analysis.
The council has been discussing since this spring the creation of a new type of development-impact fee earmarked specifically toward new government and public-safety facilities, most notably a new police building and a new Municipal Service Center, projects that bear estimated price tags of $57 million and $60 million, respectively. The new fees would be added to the list of existing development-impact fees that are pegged toward services such as parks, libraries and transportation improvements.
The council's Finance Committee discussed in May the level of this fee and ultimately voted 3-1, with Karen Holman dissenting, to set the fee at 75 percent of the allowed maximum. The fee levels were informed by a study that the city commissioned from David Taug & Associates, a firm that analyzed the city's list of needs and calculated the amount that the city should charge for residential and non-residential developments to pay for the items on the list. Holman questioned the study's assumptions about Palo Alto's jobs numbers and argued that the proposed fees would place an unfair burden on residential developments. She called for fees that split the cost 50-50, rather than the proposed formula where residential developments pay 60 percent and non-residential pay 40 percent.
Her opposition notwithstanding, the full council was initially scheduled to consider adopting the fees in May. But the discussion got pushed forward time and time again because of other pressing items, the council's recess and staff vacations. When the council finally got to discuss it Monday night, it was one night before the Election Day, where residents were asked to support a ballot measure that would raise the hotel-tax rate to help pay for a police building and other infrastructure items.
The awkwardness of the timing wasn't lost on the council. Several council members, particularly Larry Klein and Greg Scharff, argued that the city already has an identified source for the police building and this undermined the justification for the new fees; the council's recently adopted funding plan for infrastructure also includes revenue sources to pay for the new facility even if the hotel-tax increase fails. Scharff criticized the process for bringing this process forward and called it a "transparency issue."
"I don't understand how we can have identified a source of revenue, tell the pub that we have identified a source of revenue and they say here that we don't," Scharff said. "I just don't get it."
Klein took it a step further and, acknowledging his "grouchy mood," said he was extremely disappointed in the months of delays in bringing the item to the council.
"It's very close to, 'The dog ate my homework.'" Klein said.
He also said he was as disappointed in this item as he's been with any that has come before the council.
"We've gotten ourselves into a ridiculous quandary on this and I'm really unhappy with where we are and how we got there," Klein said.
Other council members remained focused on the numbers, specifically the consultant's assumption about the number of employees in Palo Alto. In considering things like parking requirements, the city generally assumes there to be four employees for 1,000 square feet of commercial development (many believe that this number is too small given the changing nature of office use and the tendency of startups to have open layouts and tables full of employees with laptops). The consultant's study assumed three employees per 1,000 square feet.
Holman said she can't understand why the city uses one set of numbers for parking and another to calculate the new fees. Councilmen Pat Burt and Marc Berman, who serve on the Finance Committee with Holman and Vice Mayor Liz Kniss, then made a motion to send the item back to the committee for another review and more revisions before it returns to the council. The council unanimously agreed to do that.