In May of last year, Palo Alto's utility workers arrived at the Animal Services Center site on East Bayshore Road to move a giant container filled with emergency-response supplies but found an unexpected sight: a fleet of Hondas occupying the city-owned lot and blocking access to the container in question.
The cars belonged to Anderson Honda, an Embarcadero Road dealership that has been coveting the shelter land for well over a decade. The site's location at 3281 East Bayshore Road, south of Oregon Expressway and immediately adjacent to U.S. Highway 101, makes for ideal visibility for an auto dealership, a fact that has not been lost on Palo Alto officials. Every few years, a proposal has surfaced to move the animal shelter and make its land available to car dealers. Anderson Honda has invariably been at the center of these talks.
The council held a study session on the topic in 2006, and in May 2008, when a worsening economic climate placed new pressures on dealerships to secure freeway-friendly locations, then-City Manager Frank Benest told the council that John Anderson, who owns Anderson Honda, "is under incredible pressure from Honda to get freeway frontage."
"Unless we find a way to do that, we are going to lose Anderson," Benest told the council at the time.
The land swap Benest and others had envisioned -- Honda's property for the animal shelter's -- never materialized, as residents and council members struggled to reach a consensus about a plan that would place a dealership and possibly a billboard next to the Baylands. Some, like Benest, maintained that the city should do what it can to promote economic vitality and help local dealerships, which are a major source of sales taxes. Others balked at any talk of allowing more human activity near the Baylands, even in the largely industrial city-owned parcel next to the highway.
But while the plan to create a cluster of dealerships never really advanced, it never really died either. Neither did Anderson's interest in the site.
City staff again explored the idea of a land swap as part of its 2011 assessment of the city's infrastructure. A specially appointed Infrastructure Blue Ribbon Commission in its report highlighted sales-tax revenues as an "important component of the city's financial stability."
"The city recognizes a need to pursue economic-development strategies that enhance the benefits for businesses to locate in Palo Alto and, for that reason, has begun to consider the creation of an auto-dealer cluster along East Bayshore Road," the report states.
Though the current council hasn't really explored the topic, the idea came up last October when officials considered approving funds for a study of the sprawling Municipal Services Center immediately next to the animal shelter. The $250,000 study would consider "options for relocating City functions, personnel, and equipment currently operating out of the Municipal Services Center (MSC) and Animal Services Center (ASC), and then repurposing the sites to produce longterm economic benefits for the city."
At the time, council members Karen Holman and Greg Schmid both expressed concerns about the study and the potential effect on the animal shelter, prompting staff to defer the item to a meeting the following month.
"The consideration of moving those facilities and locating those that will bring revenues to city, such as auto dealerships, has been at the front of discussion for a few years," Holman said at the Oct. 20 meeting, in stating her dissent. "When those projects came forward before, it seemed like it really was not a financial advantage to the city."
When the proposed study resurfaced on Nov. 4, the council voted unanimously not to proceed with it at the time. The $250,000 was placed into the city's Infrastructure Reserve, with the intent of revisiting the appropriation request in 2015.
But even though a land swap is not currently in the works and the stretch along Highway 101 in Palo Alto remains billboard-free, Anderson Honda has quietly moved onto a peripheral portion of the animal-services property -- and it did so without a peep of public debate.
Last April, John Anderson reached out to the city about leasing an L-shaped portion of the animal shelter parking lot and using it for car storage. About a month later, a licensing agreement was in place, with Anderson paying the city $5,400 a month to store cars at the lot, which was previously used by the Utilities Department and the city's Office of Emergency Services.
The city's agreement with Anderson Honda was never discussed by the council or publicly disclosed until December, when it was mentioned in City Manager James Keene's annual report on the city's leases of public sites.
Documents obtained by the Weekly through the Public Records Act paint a picture that is quite different from the one Benest painted in 2008, when the land-swap proposal was framed as a way to keep an important revenue generator from leaving the city during a time of economic stress. Last April, the dealership was facing a different problem: rising sales and not enough space to fit all of its cars.
"Our business is booming right now, and it looks like we may need more storage soon," John Anderson wrote on April 3 to Thomas Fehrenbach, the city's economic development manager. "Is there any place we could store cars in the back of the Corp yard?"
The following day, Fehrenbach replied that there "might be space in the Animal Services lot." A few days later, he put Anderson in touch with Hamid Ghaemmaghami, who runs the city's Real Estate Division. On May 2, Anderson, who signs his emails John "BigDog" Anderson, wrote to Ghaemmaghami that he would "love to grab that Animal Services lot for two months if I could." On May 6, Fehrenbach emailed Ghaemmaghami to "follow up with this important request."
"If you could get rolling on this, I know John would appreciate it!" Fehrenbach said.
Later that day, Anderson sent his own email to Ghaemmaghami, saying, "Sorry to rush you, but we need to start parking there asap." Within days, the agreement was in place and Honda moved the fleet south to its new station near the animal shelter. Unlike a formal lease, this was a "license agreement" that functioned on a month-to-month basis and gave each party the right to cancel the agreement with a 30-day notice, Ghaemmaghami told the Weekly. Under the terms, Anderson paid the city 40 cents per square foot, the lot's appraised value. For the 13,500-square-foot site, this came out to $5,400 a month.
The arrangement was made at the city-staff level, without council or public input, and the timing seemed to surprise even some city employees. In early May, Nathan Rainey from the city's Office of Emergency Services was preparing to move a 20-foot long container stored at the animal-shelter site and requested assistance from other departments with lifting the container. On May 12, the day before the container was to be moved, Rainey received an email from Russ Kamiyama, a manager in the Utilities Department.
"I happened to stroll over to the Animal Shelter, and I noticed that Anderson Honda has already begun to park their cars, and the container in question is buried," Kamiyama wrote.
City officials quickly reached out to Anderson Honda and the company agreed to move its cars later that afternoon. In response to a Weekly inquiry, Rainey said the container included emergency supplies and equipment "tailored to large field operations or a large disaster, which are not routine in Palo Alto." He emphasized that there was no risk to public safety as a result of the cars and noted that since the incident the city has "repositioned some of the equipment from that container to be more mobile and accessible."
Though Anderson initially requested leasing the land for two months, the Anderson fleet has remained on the shelter property ever since. This week, about 30 Hondas were parked there.
John Anderson did not respond to a request for comment, but in an interview with the Weekly, both Fehrenbach and Ghaemmaghami said that there is nothing unusual or improper about the city's agreement with the dealership. City policy gives City Manager James Keene the right to lease land for up to three years without approval from the council (at Cubberley Community Center, the terms are five years). The rules did not require staff to notify the council and, accordingly, no one on staff did so, even when the topic of the Animal Services Center came up during last fall's discussion of the Municipal Services Center study. When asked whether this agreement should have been disclosed more publicly, Fehrenbach noted that the animal shelter was listed on LoopNet, a website for commercial sites available for rental.
"Hamid marketed this through public real estate channels, so it was sitting out there as a potential situation," Fehrenbach told the Weekly. "We took the opportunity of Anderson needing some short-term parking space."
But unless one takes time to go through the city's LoopNet listings, the fleet of Hondas sitting next to the animal shelter could raise an eyebrow or two. Both Holman and Councilman Greg Scharff were surprised Wednesday when the Weekly asked them if they knew about Anderson Honda's use of the lot. Neither was aware of that fact.
Ghaemmaghami also noted that in reaching the license agreement, the city did not play favorites with Anderson Honda. The rental rate was based on the site's appraised value. Furthermore, this was an opportunity to support a local business, Ghaemmaghami said.
"They are part of the community, too," he said. "They bring in sales tax, they hire people and they're good citizens for the community."
Keene told the Weekly that the ongoing agreement with Anderson in no way implies that the city has any larger or more permanent plans for the animal-shelter property. The idea of having a cluster of dealerships in the Baylands is "ancient history," he said.
"Our sense was that any idea about Anderson Honda going there permanently was just not an option at all," Keene said. "This was just about parking some cars in a place where we've had a history of parking vehicles, both for Utilities and Emergency Services."
Keene also noted that, as a month-to-month license from which the city can get out any time, the arrangement is sensible and low-risk, as well as one that provides a "small revenue stream to the city." If the council were to ask staff to move the cars, that would happen.
Keene also noted that the city's recent projects near the Baylands make it increasingly unlikely that the chronically percolating idea of a land swap with a commercial entity will ever resurface.
"I just think that the efforts we've made with the early closure of the landfill, the planning and design we're doing now on the Highway 101 pedestrian-and-bike bridge and the general sensitivity about land around the Baylands and in the whole area really argues for us moving as much as possible (away) from an industrial presence there."