Facing a climate of steady office growth and rising community angst, Palo Alto officials on Monday agreed to trudge ahead with a solution that has been galvanizing the local business community: an annual cap on new office space in the city's prime commercial areas.
After three long and exhausting meetings, the City Council on Monday directed staff to start putting together a new ordinance that would create an annual growth limit of 50,000 square feet for office and research-and-development space at University Avenue, California Avenue and El Camino Real. The elements of the new law would be brought back to the council in early May for review.
In deciding to go ahead with the annual office restriction, the council was at once unanimous and deeply ambivalent. Several council members had opposed an office cap in the past and continued to argue on Monday night that this solution would not make a dent in the city's ever-pressing issues of parking and traffic.
Councilmen Marc Berman and Cory Wolbach both argued at prior meetings that the cap would distract staff from transportation and parking initiatives. But on Monday, both grudgingly went along with the proposal cobbled together by Councilman Pat Burt a proposal that has less breadth but more urgency than the one on the table earlier this month.
Council members Greg Scharff and Liz Kniss both said they would not support a moratorium on office development, a more stringent step that some in the community have called for, but acquiesced to the cap, with Scharff lending his second to Burt's motion.
The ordinance that staff will be drafting would run until the updated Comprehensive Plan is adopted. The effort has been dragging since 2006 and is now set to conclude late next year.
The office limit of 50,000 square feet would apply to the three commercial areas around University Avenue, California Avenue and El Camino Real. To determine which developments would be approved, the council would rely on a scoring system that assesses proposals based on traffic and parking impacts, intensity of use and design criteria.
For the council's slow-growth proponents, the cap was an easy sell. Mayor Karen Holman, who made retaining retail and slowing down the pace of office development one of the focal points of her "State of the City" speech last month, backed the new cap. So did councilmen Eric Filseth, Tom DuBois and Vice Mayor Greg Schmid, who also make up the council's residentialist wing.
DuBois said he believes the "status quo is not working" and lamented the booming office construction, which he argued comes at the expense of housing and other types of developments.
"We have to strike a balance and have a diversity of land use," DuBois said.
While Berman and Filseth were on opposite sides of the debate earlier this month, each concluded that the proposal is heading in a reasonable direction. Even so, Berman wondered if this places too much burden on city staff.
"I just don't see how we're going to do this and do the Comprehensive Plan and do the efforts that we all agree will probably have a bigger impact on the issues that are frustrating our residents the most traffic and parking," Berman said. "Frankly, that's what at the end of the day I'm trying to accomplish."
While the geographical reach of the proposed cap isn't as broad as the citywide growth limit that the council had previously discussed, its impact would be more imminent. Rather than explore an annual cap in the context of revising the city's Comprehensive Plan, as had been previously discussed, the council on Monday signaled its intent to adopt the cap on an interim basis before that protracted planning effort is completed.
Burt, who crafted the proposal, acknowledged that the cap would not solve all of downtown's problems, but argued that it would work well with the various measures that the city is already pursuing, including a new Residential Parking Permit Program and a new nonprofit that manages downtown's traffic congestion. He argued that saving the exploration of a cap for later would simply encourage developers to submit their plans now.
"If we don't do it on an interim basis and say we're going to do it in the Comprehensive Plan, we'll create a land rush," Burt said. "We'll have development projects rush forward now, not to mention the very large number already in the pipeline."
The unanimous vote contrasted sharply with polarizing debate that characterized the council's prior discussion of the office cap.
At the March 2 council meeting, Schmid and Filseth both supported having staff explore a citywide cap between 10,000 and 40,000 square feet for new office and research-and-development space. The proposal fizzled with some council members outright opposing it and others saying they need more time to think about the topic.
The new proposal, which was adopted after much debate but with no dissent, specifically excludes Stanford Research Park, where opposition to a new cap has been particularly intense. The council pledged, however, to explore new Comprehensive Plan policies that would bind all developments in this bustling hub of corporate campuses to strong traffic-reduction measures.
The council's ambivalence mirrored a similar divergence in the community, where legions of neighborhood leaders and slow-growth "residentialists" clashed with local businesses and large employers over the subject of an office cap.
Proponents of the growth limit have consistently argued that the cap is needed to curb the city's parking and traffic problems, to get a better grip on the impacts of recent developments and bring some balance to a development climate that has become increasingly office-heavy.
Opponents, which include Stanford University, HP, Google, Palantir and the Palo Alto Chamber of Commerce, have characterized the cap as a blunt tool that doesn't really address the real problems of traffic and parking.
Neither side disputes the fact that the city is going through a heavy office boom, which is bringing in traffic and sucking up parking spots at residential neighborhoods. While office space in Palo Alto had actually declined by about 2,800 square feet annually between 2001 and 2007, when office and industrial buildings were increasingly replaced with housing, the trend has turned around in a big way since then.
According to a report from the Department of Planning and Community Environment, the city has been adding about 67,000 square feet of office and research-and-development space annually since 2008.
Silicon Valley Association of REALTORS, a trade association representing real estate professionals in Santa Clara and San Mateo counties, argued in a letter to the council that constraining office development would come with a financial cost. Office developments, the letter states, come with impact fees that pay for parks, libraries, community centers, affordable housing and traffic congestion.
"Prior to capping office development, it is important that the City know it can financially afford to do so," Jessica Epstein, the association's government affairs director, wrote. "Cutting off these funds without carefully studying the ramifications could lead the City into the unfortunate position of needing to raise taxes on residents and businesses."
The group also voiced a concern that imposing a cap "would do nothing to alleviate the already crowded roads.
"If the goal of the Council is to reduce traffic and improve parking, then it should have an analysis done as to whether a cap would accomplish that goal," Epstein wrote.
Lockheed Martin redeveloped a 55,375-square-foot office and research-and-development building on its campus at Stanford Research Park. In its place, the company built a new two-story 85,959-square-foot facility that "much better serves our current and growing needs," the company's letter states.
"We have other buildings on our Palo Alto campus that we hope to repurpose should the need arise in the future," R. Marshall Case, Lockheed Martin's vice president for infrastructure services, wrote. "The contemplated office/R&D cap may make these plans impractical and serve as a disincentive to our investment in Palo Alto for the long-term."
Architects and developers also came out against the cap. Ken Hayes, a prominent architect whose modernist mixed-use developments have been sparking consternation among residents with traditional leanings, argued in a letter that a cap "is not the best solution and certainly one not befitting the innovative community of Palo Alto."
David Kleiman, the developer behind 636 Waverley St. and 240 Hamilton Ave. (both designed by Hayes), wrote in his own letter that the majority of the citizenry "do not want to stifle development in Palo Alto" through an office cap. He also pointed to the opposition from HP and Stanford.
"If a cap is imposed, property owners affected by the cap will sue the City to have it overturned, as a violation of their property rights," Kleiman wrote. "So from virtually all perspectives, except those of a vocal minority that incorrectly associate development with parking issue, this would be a monumentally poor decision."
John McNellis, the developer of Alma Village offered a different proposal: linking new office developments to residential construction, thereby ensuring that the city's jobs-housing imbalance doesn't get any worse.
McNellis, whose project includes both offices and apartments, concurred with the idea that the city's jobs/housing imbalance is "bad and will worsen with every new office building you approve." And while he didn't support a cap per se, he was the only developer to propose changes.
"While I would not impose an arbitrary cap on office space, but rather one based on addressing this critical problem affecting us, I would also not let myself be bullied by companies who threaten to move out of town."
Yet the majority of the speakers at the hearing were residents who supported a cap. Cheryl Lilienstein, president of the group Palo Altans for Sensible Zoning, couched her argument in a fable, with advocates of high-density growth playing the role of insatiable lions reproducing without hindrance and feeding themselves to the detriment of their terrain. They asked the council to restore balance to the ecosystem.
The College Terrace Residents Association also voiced support for a cap, which it argued will allow the city to "take stock of where we are going, and to consider carefully how we can preserve the quality of life for residents."
Its board president, Brent Barker, submitted a letter that argued that a cap would allow the city to "pause and take a look at the problems facing retail."
"Even if the cap proves temporary, it would provide some breathing room to explore solutions to the compounding problems created by the current boom in office development," Barker wrote. "Office space is growing fast, and high-density occupancy is growing even faster. The cumulative impact has been to outstrip the City's ability to cope with traffic, parking, and city services, and to further aggravate the jobs/housing imbalance."