A citizens group that promotes more housing and transportation options in Palo Alto has joined some of the city's largest high-tech companies in taking a stand against a proposal by the City Council to limit new office space.
In a five-page letter to the City Council, the group Palo Alto Forward has come out in opposition to a plan to set an annual cap on new office and research-and-development space, a proposal that the council is scheduled to consider March 2. The group, which includes on its steering committee planning commissioners Eric Rosenblum and Kate Downing, is arguing that the proposal would make local rents even higher and force employers to cram even more workers into existing offices.
The office cap, the letter argues, will "also continue to make Palo Alto a less viable location for both retail and other small businesses, by raising rents while depriving these businesses of customers."
The proposal to limit office growth by development or conversion of existing space has been fueled by years of complaints by residents about downtown's parking and traffic problems, as well as the recent trend of offices displacing long-standing shops and restaurants that cannot keep up with the rapidly rising rents.
Mayor Karen Holman highlighted this trend in her State of the City speech last week, noting that since 2008 the city has added 537,155 square feet of office and research-and-development space while losing 70,514 square feet of retail space. She cited recently departed businesses Jungle Copy, Zibbibo, University Art, Bargain Box and Cho's.
"We've all seen retail spaces converted to office and local businesses leaving Palo Alto for Los Altos, Redwood City and Menlo Park," Holman said.
She attributed this to market forces and noted that these forces "work much faster than does the government."
An annual cap on new office space, she said, is one of the solutions that the council is pursuing to address this problem.
Several of her council colleagues agree that office growth should be capped. At the council's Feb. 9 discussion of the topic, Vice Mayor Greg Schmid and Councilman Eric Filseth proposed moving ahead with the limit, though the rest of the council was loath to vote on any proposal until the topic is discussed further. At that meeting, Filseth made an argument that the "first rule of holes is that when you're in one, stop digging.
"I think it's pretty clear that for a majority of Palo Alto residents, we're at a point in time where the incremental benefits of more office expansion are outweighed by the incremental costs," Filseth said.
Yet the proposal has also attracted criticism from business groups, realtors, developers and Stanford University, which owns the sprawling network of corporate campuses west of El Camino Real known as Stanford Research Park.
On Feb. 9, several Stanford officials warned of unintended consequences, should the policy be pursued. Tiffany Griego, managing director for Stanford Research Park, submitted a letter that argued that an annual growth limit could have "significant detrimental impacts on the vitality of Stanford Research Park" and that it would compromise "our mutual ability to attract companies that create long-term economic stability on our city."
Software firm SAP argued in a letter that a limit "would have detrimental effects by eliminating the predictability and certainty around how projects are handled in the Stanford Research Park."
"Until now, we have understood how to work within the existing zoning in our efforts to modernize our Palo Alto facilities when we have undertaken such efforts," wrote Dwain Christensen, SAP's head of facilities for Bay Area Region.
"Flexibility is critical if SAP and our fellow Research Park companies are to remain competitive and thriving here in Palo Alto," Christensen wrote.
Hewlett-Packard Co., which is also based in Stanford Research Park, made a similar argument in its own letter, which categorically opposed a growth cap. The company is preparing to split into two separate firms in November. Currently, the plan is to have both Hewlett Packard Enterprises and HP Incorporated headquartered in Palo Alto, though the growth cap could limit the company's options for achieving this goal.
"Part of our separation-management team's duties are to review options for creating optimized headquarters facilities for both companies," wrote Lorin Alusic, HP's director for corporate affairs in the Western Region. "At this time, one of those options would be eliminated by the proposed growth limit. ... A limit of this magnitude would effectively eliminate Palo Alto as a headquarters location should additional office or R&D space be a necessity.
"We understand some of the concerns this proposal is seeking to mitigate, but a cap of this severity is too blunt of an instrument," the HP letter states. "We respectfully request that when the time comes, we would have the opportunity to propose expansion plans and have them evaluated on their own merits," within the confines of the city's Comprehensive Plan.
For Palo Alto, a restriction on office development is not a new idea, though this would mark the first time the city would limit growth on an annual basis. In 1986, the city set a cap for overall non-residential development downtown at 350,000 square feet. In 2012, the city hit the 235,000-square-foot mark, triggering a study that is now in its second phase. Once completed, the study will offer recommendations on managing downtown's growth.
The limit that the city is now considering would apply to the entire city and cap development somewhere in the range of 35,000 to 50,000 square feet annually. The objective, according to a report from the Department of Planning and Community Environment, is to "moderate the rate of non-residential development so as to reduce the rate of employment growth, reduce related impacts and allow for mitigation of residual impacts." The cap could also ensure that new developments meet "stringent requirements" related to planning and design.
The regulation could be modeled after those in San Francisco and Walnut Creek, which restrict new development by square footage, or Santa Monica, which limits the amount of traffic generated by the new office space. Another proposal on the table is to not have any cap but rather increase the cost of development so it supports new transportation and parking programs.
Palo Alto Forward is advocating for the lattermost approach. In its letter, the group is recommending that the council require new developments to meet goals for limiting the number of employees who drive to work solo and require development fees to be spent on programs that reduce traffic. The group is also recommending that current office tenants contribute financially in the form of a "modest fee on commute trips or square footage for existing buildings," along with a requirement that tenants use these fees to fund programs that reduce solo driving.
These proposals, the letter from Palo Alto Forward states, "strengthen the existing mechanisms that the city is relying on to address traffic and parking problems in the downtown area namely, the TMA (Transportation Management Association) and RPP (Residential Parking Permit) programs by encouraging participation for tenants of both new and existing buildings and providing funding."
"Under these proposals, the city will verifiably limit trips from new construction while requiring tenants of both new and existing buildings to fund trip-reduction measures," the letter states. "Fees comparable to the costs imposed by an office cap would raise enough money to make Caltrain rides free for all employees and build an entire fleet of Google‐quality commuter buses, bootstrapping a transition among all workers and residents in Palo Alto to less car‐dependent modes of transportation."