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A state push to more than double Bay Area’s housing production in the next eight years is stoking opposition in Palo Alto, with some City Council members characterizing the new goals as unrealistic, unachievable and largely unfunded.
The city is still waiting to see how many housing units it will have to plan for in the next of the Regional Housing Needs Allocation cycle, which will stretch from 2023 to 2031. But city leaders know the number will be significantly higher than in the past.
The state has recently determined that the Bay Area needs to plan for 441,176 units over the eight-year period. Now, it’s up to two regional agencies, the Metropolitan Transportation Commission and Association of Bay Area Governments, to determine how many housing units each Bay Area county should be required to plan for in each income category.
Under any scenario, Palo Alto would have to aim significantly higher on housing. If the regional agencies choose to base the new allocations on the 2019 numbers (and assumes population growth of 16%), Palo Alto would need to plan for 4,475 new housing units between 2023 and 2031.
That’s more than double the 1,988-unit allocation that the city is trying to meet in the current eight-year cycle. So far, Palo Alto has issued 554 building permits, the vast majority of them in the “moderate” or “above moderate” income categories.
Other factors, which are meant to promote equity and encourage housing near jobs and transit, could make Palo Alto’s housing allocations even higher. For example, a methodology that prioritizes a link between jobs and transportation would raise Palo Alto’s allocation by about 24%, requiring it to plan for 6,532 new units (ABAG’s Housing Methodology Committee is scheduled to discuss various strategies for allocating housing units at its Aug. 13 meeting).
In addition to advancing the housing-allocation process, the two regional planning agencies are also now developing a long-range planning document called Plan Bay Area 2050 for the nine Bay Area counties. Staff from Palo Alto’s Planning and Development Services Department estimates that under some of the proposed growth strategies in Plan Bay Area 2050, the city would have to plan for between 11,000 and 15,000 housing units over the next eight-year cycle. Planning staff noted in a new report that an expectation that the city would increase its housing supply by 55% over the next eight years is “clearly unattainable.”
The council agreed on Monday that just about any target beyond the 2019 baseline would be impossible to meet, though members clashed over how to express their oppositions. Some blasted the entire allocation process, while others lauded its goals and acknowledged the need to be more aggressive on hosing. Ultimately, a four-member majority of Mayor Adrian Fine and council members Alison Cormack, Liz Kniss and Greg Tanaka endorsed a letter that urged the Housing Methodology Committee to use the 2019 allocation (with 16% projected growth) to determine the next housing targets.
A three-member minority of Vice Mayor Tom DuBois and council members Eric Filseth and Lydia Kou argued that the allocation process is inherently flawed and that the regional agencies should come up with a new model with lower housing obligations for cities that are proactively limiting job growth.
All seven council members acknowledged that just about any option that ABAG will present would be extremely difficult, if not impossible, for the city to meet. The city has been consistently falling well short of the council’s goal to build 300 units per year, despite a series of zone changes that council members had approved since 2018 to streamline the approval process and to offer incentives to affordable-housing developers.
The letter that the council approved by a 4-3 vote argued that any approach that goes beyond the 2019 “baseline” would effectively set up cities for dramatic failure. The regional growth plan requires “significant economic investment and an extraordinary amount of regional policy collaboration to implement its vision.”
“Building a methodology today that is actionable over the next eight years and relies on an idealized model depicting a regional housing distribution thirty years from now ignores the reality that the infrastructure, funding and local regulatory framework is simply not yet present to achieve this goal,” the letter states.
Signed by City Manager Ed Shikada, the letter also notes that the city recognizes its role in stimulating more housing, particularly “more equitable and inclusive housing for all.”
“At the same time, Palo Alto cannot reasonably be expected to increase its housing supply by more than 50% over the next eight years, as would be required under some early modeling results that use the Draft Blueprint as a baseline,” the letter states.
DuBois, Filseth and Kou, who make up the council’s slow-growth wing, suggested that the regional model is inherently flawed and unduly burdensome on west Santa Clara County, the area that the regional agencies project to see the heaviest growth in jobs and housing. All three argued that regional agencies should develop a new model that considers job restrictions as a factor in allocating housing units. Because Palo Alto has an annual cap on office development in three main commercial areas (as well as a citywide cap on nonresidential growth), its housing obligations would be lowered under such a model.
“We need to get our arms around this jobs thing as well, if we’re ever going to get out from under this rock, especially the affordable-housing rock, without doing unnatural things that create more demand for it than actual supply,” Filseth said. “We’ve got to get that idea more socialized in the world. I think it’s an important one, and I don’t understand why we wouldn’t take this opportunity to take a little leadership on that, because I think most Palo Altans support it.”
Before the Monday meeting, DuBois, Kou and Filseth co-authored an alternate letter urging the Housing Methodology Committee to consider “upper limits on allocation” based on job-growth limits in communities that “proactively seek to address their jobs/housing imbalance.”
“Balancing jobs-housing growth at the City level is an important and realistically-achievable first step towards regional sustainability,” their letter stated.
DuBois suggested that the new housing targets will be “pretty unattainable” and, as such, represent a “clear threat to charter cities.” That’s because cities that fall well short of the regional targets will become subject to the provisions of Senate Bill 35, which requires them to approve residential developments through a streamlined process.
“I think failure to meet those numbers is going to mean override of local land use,” DuBois said. “And control of local land use is really one of the reasons we have local governments. It’s the idea that local representation can understand the local conditions best.”
DuBois wondered on Monday whether the city should “willingly participate in a process where we’re set up to fail, and that’s leading us to relinquishing our rights as a city.” Kou agreed and suggested that in establishing aggressive housing goals for Santa Clara County, the regional agencies have failed to consider recent trends, including the shift by employees to telecommuting and the disruptions in transportation services.
While DuBois characterized the regional allocation as an “unfunded mandate,” Fine countered that the state directives are necessary to prod cities such as Palo Alto to do better on housing.
“I think our community and, specifically, this council has never missed an opportunity to miss an opportunity on housing,” Fine said. “We have shown an unwillingness to solve this problem locally, using the local control we have to actually build new market rate housing and affordable housing.
“Of course, we as a city don’t build it, but we create conditions by which home builders do it, and we failed at that. In my opinion, that’s why we actually need regional and state guidance on planning. Otherwise, cities like ours are going to wilt on the vine.”
Cormack and Kniss similarly favored a more cooperative and less adversarial approach. As Kou and DuBois pushed for the city to consider legal options or lobbying strategies to modify or delay the allocation process, Cormack suggested that the city is “not an island” and that it will have to “operate beyond our borders in ways that perhaps we hadn’t had to before.”
The full council agreed that identifying funding for affordable housing will be a major barrier. While Filseth and DuBois pointed to the funding gap for below-market-rate housing as evidence for why the regional plan is unrealistic, Kniss suggested that the city can generate local funding for housing by approving commercial projects.
“Most cities fund their affordable housing through building offices. Unless we find another way in our city of raising money to go for affordable housing, we are going to be stuck where we are right now,” Kniss said.
Editor’s note: This article incorrectly stated the time range for the upcoming Regional Housing Needs Allocation cycle. Palo Alto Online regrets the error.
The reason we have a housing imbalance is that we have too many jobs and not enough housing.
Kniss says the only way to pay for housing is to build more office – but doesn’t she (and her colleagues) understand that exacerbates the jobs/housing imbalance?! You can never build enough housing if you keep adding office space. It’s simple Math!
You have to BOTH limit office building AND build housing – but you need to subsidize housing costs. Affordable housing isn’t just built by increasing developer fees (which “pro-growth” council members have opposed – despite claiming they want more housing) – it is also funded through taxes – like the business tax aimed at large companies -which again, the “pro-growth” councilmembers like Tanaka, Fine and Kniss opposed.
You can’t say you want more housing and then vote against funding any of the ways to pay for that housing. Land prices are simply too steep – subsidies are needed.
Tanaka is up for re-election – if you actually want housing – then you should NOT vote for Tanaka – he’s all talk and no substance on this issue.
Ironically, those that are considered “slow growth” are actually the ones who are willing to increase developer fees and tax big business to get the housing built.
I heard two of the smartest, most informative extended comments ever at last nights Palo Alto city council meeting. Councilmembers DuBois and Filseth provided an overview of the history of ABAG and its role in housing development here and the region, how affordable housing gets built and doesn’t, the astounding flaws in Plan Bay Area and the ABAG housing numbers, and how it all just doesn’t add up other than to set us up to fail from the get-go.
The plan is for our housing stock of 27K units to increase by up to 55%. At 2.2 persons per unit as is the calculation, our population goes from 65 K to 97,700. Land for schools, parks, infrastructure, services? Unaddressed, unfunded, unattainable and unsupportable as shown by current facts. ABAG and the Plan makes things worse not better.
The response by Tanaka, Cormack, Kniss and Fine, once they took their earplugs out? Just plow on oblivously as if facts don’t matter. Fine was so rude and angry toward other Councilmembers – it is embarrassing to our City. Kniss admonished us for not building more offices to finance housing – she somehow missed all the meetings, discussions, articles and a ballot measure to limit office development that increases the insatiable demand for more housing which is why we capped it. Is this lame duck behavior? I hope not as we have months left of it.
I urge all Palo Altans to watch the video of this part of the meeting once it is posted – it is an excellent turtorial based on rationality and fact.
Reading the report it noted that housing should be near transportation. We just had that discussion concerning Caltrain and approval of the tax to keep it running. The fact that the three counties could barely get their act together on that key point shows me how we keep isolating factors that are suppose to be supporting the whole system.
We already know that there are forces that are single-minded in housing to the exclusion of funding for the education system. If we add housing then we add children. Those are combined factors that need to be discussed. The factors that are driving this whole housing issue must also determine how funding for the transportation and education systems needs to be incorporated into the whole subject and addressed.
If the housing people cannot wrap the whole topic then sue them for lack of authority concerning how the funds are utilized. We are allowing ourselves to be dictated to by incompetent people who are taking taxpayer money to be incompetent.
As to all of those single minded housing people out there who is paying for your ticket to ride. Your ticket can be cancelled.
The article here focuses primarily on local RHND targets, but most of Tom’s and my remarks last night actually had very little to do with Palo Alto per se; we’re probably going to get whatever targets we get. The item on the agenda last night was about Palo Alto input to the regional process, and we mostly talked about the region.
Everything ultimately flows downhill from job growth. The fundamental challenge the Bay Area faces is we want three things at once:
1. To put new jobs in the already job-densest, most expensive parts of the Bay Area, especially SF and central Santa Clara County. Companies want to expand where they already are.
2. To put new housing, including below-median-income (BMI) housing, close to new jobs, in order to minimize commutes, greenhouse gas emissions, and geographic inequity. This is extra important, because per RHND, 57% of the new housing need is for BMI housing.
3. Not to have to make massive investments in Affordable Housing; money is scarce as always, especially public money.
All three make sense. The problem is, as Tom and I argued last night, the Bay Area has now become so dense and congested that we can’t get all three at once anymore. We can get any two, but all three together has become impossible.
The default right now is that the region basically accepts #1 and #3, so #2 is the one that gets dropped. The result is what we all see: wealth, but also extreme housing costs in the job-rich areas, a shortage of transportation in the expensive areas (because it’s expensive to build it there), long commutes, congestion, displacement, high carbon emissions, and other social ills. You cannot have all three, you must choose two. And if you pretend you can have all three and therefore don’t choose, then you get the status quo. Tom’s and my (and Greg Schmid’s) argument was the region should consider prioritizing #2 over #1.
In my opinion some of MTC’s work on Plan Bay Area 2050 has been excellent. They made a very serious attempt to calculate the price tag, which is crucial to everything. They recognize and acknowledge that zoning strategies affect only market-rate housing, and affordable housing requires major subsidies.
But the plan costs $214B and still can’t hit its targets, I believe fundamentally because it still tries to have all three goals above at once. Early on, a minority contingent argued for reconsidering the axiom (#1) that new jobs must be concentrated in the already-most-expensive West Bay; and that alternate scenarios which distributed the job growth more equitably in the region, and especially to relatively more housing-rich areas in the East and South Bay deserved consideration. It’s less expensive to add jobs where housing is plentiful, than to add it where job-density has driven land and construction costs to extremes. But not all MTC’s stakeholders liked that idea, and it wasn’t adopted.
So Tom and my primary call last night was for Plan Bay Area to consider adding such an “alternate job-growth geography” scenario to the Plan, and yes for ABAG to also consider commercial development approvals in thinking about its allocations. Add a new job, add a new housing unit (Plan Bay Area 2050 actually recommends a 1:1 ratio).
Plan Bay Area 2050 costs $214 billion and still increases commute distances, greenhouse emissions, housing unaffordability, cars on the road and geographic inequity, and some of its targets are clearly impossible. MTC themselves acknowledge that that all that’s achievable is “progress,” not full solutions. Fair enough – it’s a hard problem, and as a region we’ve underinvested in housing and transportation for years. But given the price tag and the likely results, Bay Area residents deserve to see what an alternate scenario looks like too, one that intelligently reconsiders the geography of job growth.
I think it’s good that Adrian is moving on.
Leadership should create policy that helps the 50,000 people who already live here, not the people who want to live here.
Why don’t the real estate investors try to make EPA or Milpitas more desirable.
Palo Alto is built out (unless we cancel the Castilleja Conditional Use Permit and build 50 or more homes there, including BMR).
ABAG are lobbyists for a special interest, the builders. Resist!
The lead of the story is incorrect. “A push by regional planners to more than double Bay Area’s housing production in the next eight years is stoking opposition in Palo Alto, with some City Council members characterizing the new goals as unrealistic, unachievable and largely unfunded.”
The RHNA process is a 60 year state of California requirement on cities. ABAG, the ‘regional planners’, act as local government’s venue to engage in the process. ‘Regional planners’ are not doubling housing requirements. Under the direction of state law, the California Department of
Housing and Community Development issued the housing numbers. The goal of ABAG is to create a flexible regional overlay on what would otherwise be a direct allocation of housing requirements on local government.
The so-called “slow-growth wings” are trying to take advantage of neighbors. They refuse to build more houses so that house owners enjoy the price rise from the scarcity. In the meantime, they only pay one-tenth of property tax of new built houses.
DuBois, Filseth and Kou. You should be ashamed of yourselves.
ABAG’s conflation of jobs and housing — and Kniss’s point that we need more offices to support more housing — are absurd and self-serving. What about all those wealthy communities with few or no offices? They’re totally exempt from ABAG’s housing requirements and MTC’s requirements that residents pay the commuting expenses of the commuters.
Why aren’t the companies that insist on expanding here paying for THEIR workers to be housed and for their commuting expenses?? I guess they’re too busy lobbying against paying business taxes or paying their H1B visa contractors a living wage while they oust full-time employees with benefits?
Shame on the Gang of 4 for voting to make our congestion worse. It helps me clarify my vote in November and in the future.
Eric, thanks for your response and clarification.
Ray, why aren’t you equally furious with the businesses benefiting from Prop 13? They “live” longer than most residents and are much, much richer!
“It’s less expensive to add jobs where housing is plentiful” – Eric Filseth
So sad that Mr. Filseth’s deep insight and clarity into the Bay Area’s growth was overruled by the desire of the council majority for maximum densification at all costs.
In this election as in past elections; follow the money. Pro-development council members, Fine, Tanaka, Kniss and Cormack, received large and significant donations from Real Estate Associations and Developers. Balanced growth Council members, Dubois, Kou and Filseth, do not but are funded by residents. This is why the Pro-growth Council members put building above residents’ concerns.
Kniss still has an unsettled FPPC complaint against her 3+years after the 2016 election. How is that possible?
When voting this year don’t be fooled AGAIN by platitudes fro candidates; follow the money. See who received the large developer donations and ask yourself: Does this candidate really have my interests? Additional FPPC documents will be available end of September. Check them out them and see who they will be working for if elected.
Also Kniss, Scharff et all actually reduced developer fees on commercial developments. These fees would have been used for below market housing. Good to know how council members voted in the past.
If Ray lives in Professorville then he is a distinct beneficiary of the current system. Casting shame while benefiting is so obvious. Shame on Ray
“Unattainable’ or necessary? The answer is unattainable. It’s quite simple to figure out. BTW, great post by Tin Ear. I wonder sometimes what council members are listening to or watching on their monitors when these meetings are conducted, GregTanaka in particular. He always appears as if he’s watching or responding to something entirely non-related to what is going on in present time. Council decisions seem to have been made well in advance of any input from the community they were elected to represent.
Eric,
With respect, we have a jobs-housing imbalance because of City Council’s intentional tax and fiscal policies. Because Palo Alto refuses to tax large corporations or developers, you eliminate the attractiveness of existing state and federal incentives to build housing. That is an extremely expensive thing to give up, and it has resulted in our city being flooded with jobs.
It is irrational and impossible for you to seek help from the state in moving jobs elsewhere, while preserving the dysfunctional pro-business incentives that your policies create for developers and employers.
If Palo Alto enacted a robust business tax on our largest employers (not retail, restaurant or SMB), the city would have more than enough money for needed infrastructure and housing projects. And, if you required commercial developers to pay the costs of their projects, rather than constantly moving those costs to residents, then office production would not be so darn PROFITABLE here.
Your decision to continue to gut Palo Alto’s office of inspections and enforcement also has created the jobs imbalance you site. If Palo Alto actually enforced its own zoning laws, municipal code, and use permits, the city could bring in tens of millions of dollars a year in fines, fees, and penalties (San Francisco brings in more than a billion dollars in this way.) Castilleja alone (https://www.paloaltoonline.com/news/2020/07/30/to-get-ok-for-school-expansion-castilleja-proposes-plan-with-lesser-traffic-impacts – in comments) would generate millions of dollars a year in fines, according to their own signed contracts.
All of these policy decisions – decisions that you participated in – have turned our city into a place welcoming and generous to big business, but inhospitable to residents. Although I do not doubt that was not your or the Council’s intention, now that you are aware of the consequences, we must act to change that.
We must enact a business tax on our largest corporations as soon as possible. We must rezone commercial to residential, and allow housing, not just office buildings, to have multiple floors. We must enforce our largest code and CUP violators, and collect those fines. We must require the companies that grew rich in part by their consumption of our city services without paying at all for those services — like Palantir — finally to pay their fare share.
Otherwise, the city will continue to be what your council’s policies have made it.
Rebecca,
The office growth boom in Palo Alto happened before Eric Filseth was elected and folks like Liz Kniss, Greg Scharff, etc… played a big role in that. Trying to blame it on Eric is an attempt to rewrite history. In fact, one of Eric & Tom’s first actions was to pass an office cap. The reason why an office tax was deferred is because we are in a pandemic where employers are taking a big hit and so now is not the ideal time to pass it, although I’m sure once the pandemic passes and things recover, you’ll find folks like Eric, Tom, Burt & Lydia very supportive. Similarly the council acted responsibly to trim the budget and while its easy to point at the things that were cut and say you would not cut them its much harder to say what you would cut instead. I do think rezoning from office to housing is a good idea but its easier said than done and has huge financial implications for the property holders, follow-up lawsuits, etc… so needs to be done with careful thought to minimize the impact on the effected property holders. In general, I find you have a lot to say but are not always that well informed or thoughtful.
@ Rebecca Eisenberg ….. I don’t know of anyone that wants us to be like San Francisco in any way, shape or form.
By sensibly rezoning the City owned PF zones, the parking lots all around the two downtowns to permit housing, all of the Filseth/ Dubois objections are solved: private developers (probably NFP’s) with the opportunity of long term leases ( income to the city) rather than exorbitant land purchase prices will build mixed income housing with a negotiated percentage of BMI units; attract the tenants needed for the local employers who want to expand in place; retain and perhaps add to the existing parking (still owned and controlled by the city); rent to tenants without private cars (no additional greenhouse gas and close to public transportation); use less public money only for partial rent subsidies (if available); add to and benefit from the viability of the commercial downtown; fill in the unattractive gaps in the urban fabric; and help Palo Alto ward off the State or County housing auditors. A win, win!
The pandemic has made office and retail space less valuable. Shopping malls are looking at converting big box stores to Amazon warehouses.
Landlords will look more favorably on housing going forward. And converting some commercial land to housing will help shore up the value of the remaining commercial space.
@Rebecca Eisenberg, yes, of course big businesses should be taxed.
But given the pandemic, isn’t it high time for ABAG/MTC to REDUCE PA’s housing/office allotment to reflect the huge DECLINE in PA workers since big companies like Google and FaceBook have furloughed their workers until June 2021.
In fact, one of the the articles on Summer Streets and the proposed Covid “surcharge” cited the claimed it was justified because because the usual 150,000 PA commuters are now among the missing and hence no longer going out to lunch leaving the restaurants to depend on just us, the 66,000 residents.
Our economy has always been cyclical whether due to a pandemic or the latest tech crash. Maybe our “planners” shouldn’t be putting all their eggs in the jobs/offices/hotel basket where big developers just gobble up big parcels that house RESIDENT-SERVING businesses like hardware stores (Charleston Rd just over the border) and start protecting resident-serving businesses like The Milk Pail (yes, I know it was in Mountain View but the principle remains the same.
https://www.mercurynews.com/2020/05/18/buyers-scoop-mountain-view-property-ace-hardware-lease-rent-buy-deal-office-retail-develop-real-estate-tech/
DuBois said. “And control of local land use is really one of the reasons we have local governments. It’s the idea that local representation can understand the local conditions best.” This really sounds like an off color remark of a lighter shade. This is not how we won the South! When will the City Council begin to act in a “can do” leader rather than a whining “can’t do” caught with a three way hair ball. Vote them out ! Bring in inclusivity, equity and fairness for REAL solutions for REAL people.
Online name – my biggest point is that we have zero standing to fight over the formulae used to determine our housing requirements, given Palo Alto’s failure to produce a fraction of sufficient housing under any formula. Even under the City Council’s proposed numbers, they have failed. This fight is a deflection, and harms our relationship with an coalition that is extremely powerful politically. It is terrible strategy and will make enemies amongst people we need as friends.
More importantly:
I am SO pleased to hear that you agree that big business should be taxed!
Current City council members voted against taxation of big businesses 7-0.
We need change in Palo Alto!
The idea the the Council voted against a business tax 7-0 is completely untrue. Mrs. Eisenberg seems to lack they ability to recognize the complexity of some issues or just chooses to be untruthful and extreme.
A majority of countil voted 5-2 in favor of a business tax (Kniss and Tanaka voted against any tax in any form), and was in the process of determining what type of tax and how to structure it to apply to only our largest and wealthiest companies.
Palo Alto has a lot of highly profitable companies with relatively few employees like VCs, it has large companies like SAP and Palantir, and it has large medical providers like the Stanford Hospital and Palo Alto Medical Foundation, which fall under different rules. We were evaluating how to devise a fair and simple business tax given the makeup of our business community.
When the pandemic hit and it was clear that the business environment was going through a unique shock, Council wisely voted 7-0 to postpone the tax from this year’s ballot. I continue to support a business tax as I suspect do the majority of my colleagues.
During a campaign, people can disagree but lets get the facts right
@Rebecca Eisenberg, I doubt PA has “friends” in ABAG. When asked why Palo Alto should abide by ABAG’s obviously flawed guidelines and why we didn’t just ignore them and/or pull out, the city attorney replied, “Oh, they might sue us.”
I say bring it on. I’d like to see a test case of the non-elected bodies get to rule om growth for an entire area when we can’t even get it together to unite the area transit providers into one single group.
Yes, they’re “extremely powerful politically” but why should they be? Give them a good fight. No more YUMBYs fronting for the big developers and big tech who aren’t coming close to paying their share of the burdens they impose on the rest of us.
Tom –
Thank you for confirming that the City Council voted 7-0 against the business tax. You call it “delay” but when will be the next opportunity to put it on such an important ballot? In 4 years?
In “delaying” the big business tax until AFTER the recovery, you are ensuring that the entire recovery is paid for by individuals and small businesses.
I strongly believe that decision was harmful to our community. Your decision is putting the entire cost of recovery on the people and small businesses who are hurt most.
I believe that Palantir – that just filed to go public at a $20 billion valuation — and Tesla – that just made record quarterly profits — should pay for the recovery, rather than our struggling restaurants, and our families.
So I return to my statement – a statement you confirmed – that the City Council voted 7-0 against a business tax, and in so doing is requiring families, workers, small businesses, retail, and restaurants to pull us up from recovery without the assistance of one slim dime from Palantir, Tesla, HP, Varian, or the Venture Capital firms who we all know can afford to pay for the recovery much better than Mayfield Cafe, or a family struggling to make ends meet.
THAT is why we need a tax on big businesses now, not later. Your choice to “delay” will guarantee that by the time we are out of recovery, big business will have an even stronger presence in this town. That is the last thing that we need.
I hope I have explained myself better this time.
And I hope you will do whatever you can to ensure that big business will pay their fare share. I recognize that your heart is in the right place on this, and I look forward to working together to solve these avoidable problems.
Also, to clarify, no company is under “a different set of rules” automatically – it is the city council, a legislative body, that can and must propose those rules to the benefit of the community. Together, we can propose a business tax that exempts all companies under a certain revenue minimum – e.g. $500M – which will include VC firms (“big receipts tax”), as well as a tax based on number of employees over a minimum – e.g. 500 – which is well-tailored to address externalities like traffic (“large headcount tax”).
The VCs in that example would be taxed on receipts, because they built their success with the benefit of their Palo Alto location, but would not be taxed for headcount, because their use of Palo Alto streets and parking is far less than, say, Palantir’s.
That is just one simplified approach, without the benefit of the planning department and community groups researching the matter so we have sufficient data on which to rely in proposing the best policies for the community.
When I looked through the public record for data on how many companies have their presence here, what were there revenues, and what is their headcount, all I could find in the record was an acknowledgement and apology that Palo Alto has not collected that data.
So I would say that the City Council currently is far from being able to propose a well-designed business tax that taxes only the largest companies with the most revenues and headcount. If my search of the record was correct, the City Council did not collect the data you need to collect.
That data collection needs to be expedited and prioritized. I hope we can work together on our shared goals of having our largest businesses pay their fair share.
Rebecca – you keep assuming that you will win a place on the PACC. Note to Rebecca – the more you speak the worse it gets. You are dictating to people who have spent a huge amount of time and energy in city issues. They are not paid to do that. However if you are an employee of the city then you have been paid to do something of a legal nature. What projects for the city – as an employee – have you worked on and successfully completed? If every one is fair game here than you – as an employee – are also fair game.
I have noted in this political time period people keep assigning blame with no recognition of how they participated in the outcome. The blame game has it’s consequences.
There are two intertwined issues regarding ABAG’s housing work that are being confused here. The first is the goal to produce lots of affordable housing throughout the Bay Area. As Councilmember Filseth pointed out here, this has nothing to do with land use decisions being made. It took $600K/unit in the early part of the decade (much of it from sources other than the city) to build 801 Alma. At today’s costs, it would be even more astronomical. The ABAG “goals” for affordable housing region are about as realistic as me saying my goal is to play basketball like Steph Curry.
The real purpose of the ABAG numbers is to assign projected areawide total housing units by municipality. Until the mid 1970s, this occurred naturally as developers responded to market forces. If you walk around the neighborhoods in downtown, you will see numerous apartment projects built in the 1950s and 60s in predominantly single family neighborhoods under this process.
Since then there’s been a statewide change where the building of new housing has faced hostility, both at the city council level and in the courts. Part of it this is due to the growing political power of residents relative to homebuilders, and part of it is due to the effects of Proposition 13, whereby elected officials and city staff fixated on fiscal zoning, subsidizing hotels, car dealerships, and shopping centers while resisting and taxing residential construction.
With housing costs growing far faster than incomes as a result, there’s been a recognition that the cost of housing and the long commutes resulting from that expense is the preeminent public issue in this region. While ABAG continues to publish its fantasy numbers regarding its wishes for affordable housing, city planners, major employers, and elected officials from communities getting the short end of the stick (such as East Bay communities whose residents must endure endless commutes to places like Palo Alto) are instead looking for ways to get market rate housing production up sharply.
There is no way under current policies that Palo Alto could produce anything close to the lowest ABAG target. You could argue that the majority of the Council that endorsed a letter to ABAG for that number was being hypocritical. However, the Filseth/DuBois alternative was basically saying “even though Palo Alto is an incredibly rich city by virtue of its massive jobs/labor force imbalance, we should be excused from adding significant housing because we’ve agreed not to add any more jobs.” For those of you who do not travel beyond our city limits, let me assure you this will not fly with our fellow citizens in the Bay Area.
SB 35 was a badly flawed bill that would have led to cramming multifamily units with insufficient parking immediately adjacent into single family neighborhoods. It didn’t pass but the impetus for it has not gone away. One planning director I know (not Palo Alto!) told me that every planner he knew supported the bill. There will be future bills that will pass and it’s likely that they will be more stringent and/or place financial penalties on cities that do not make a serious effort to allow housing.
There’s no way we will meet whatever ABAG number is given us. What we can do is to let other cities engaging in anti-housing policies become the target of regional, state, and federal (assuming the current polls are correct) action. Our lack of housing production is not the result forces beyond the city’s control. Yes, land prices are high here but so are rents and sales prices. Our dismal production of housing is entirely due to our hostility to market rate units being constructed and the enactment of what is effectively punitive taxation of those who would wish to provide it.
The single most important step we can take is to stop requiring market rate builders to subsidize the production of affordable housing. Remember that the cost of doing so at 801 Alma several years back was $600K/unit. If the city really wants owners of sites like Fry’s or Hansen Way to provide affordable units as well, pay them to do so as the need for such units hasn’t been caused by their proposed project. If you don’t want to do that, then use city funds for moderate and lower cost units elsewhere. The idea that we can have a free lunch by getting residential builders to provide it to the community gratis has to end.
As others here have suggested, an appropriate tax on office space would be a logical way to pay for subsidized housing. A reasonable number would be charging $100-200/sq. ft. for new construction and $1-2/Sq. ft. annually for existing space. This tax would not be because “these companies aren’t paying their fair share” (they actually subsidize us residents) but because it’s in the interests of the companies occupying these buildings to have housing built close to jobs for employees.
Where do we start? Let me suggest action on three major projects:
1. Stanford is willing to build 1600 units on their campus, in locations that will have no impact on any of our neighborhoods. Let the Board of Supervisors know that they should support this with no conditions attached such as affordable housing. These units don’t count on the Palo Alto statistics but they will be the largest project in the Bay Area and show that we’re serious about approving major housing development in appropriate locations. For those of you who are concerned about the environment, building housing on a college campus where at least one occupant in every dwelling unit can walk or bike to work is an added plus.
2. The Hansen Way proposal by Sand Hill is approximately 190 units, 10% of which the city requires to be affordable. To make the numbers work they also want to build 52K sq. ft. of office space. The last thing we need is more than 200 additional jobs. Tell them that they can build 300 units, no subsidized units unless we’re willing to pay the subsidy and zero office space.
3.The Fry’s site has been zoned multifamily for over 20 years and has been included in our housing element as well. Sobrato knew this and contributed $100k to the North Ventura planning study only to learn that the city had no intention of allowing this property to be developed as promised to the landowner and to the state, which approved our housing element. They instead decided that the property was worth more to them as an 80 year old industrial building rented out to start ups as low cost office space than to be redeveloped under the city’s exactions. As in #2 above, let them build out the site without asking for them to subsidize housing for those who can’t pay market rates, and with appropriate design features to minimize impact on the residents who have lived near a long time multifamily zoned parcel.
My apologies to those of you who have had to wade through all this. However, I want to reemphasize that whichever letter we chose to send to ABAG was in the end irrelevant. What does matter is that we recognize the political and social reality that if we think we can dictate our response to a metropolitan wide housing and traffic problem by saying we will do what we darn well want to, that far worse choices will be imposed on us. We will have no one to blame for this but ourselves.
Rebecca – you are calling out representatives of the city who have invested a huge amount of time and effort – whether I agree with their views or not. Since you are a paid staff member then I assume that you participated in the legal evaluations of these projects as they were developing. You had to be part of the staff recommendations to the PACC members. So you know a lot that we are nor aware of – the various tug of words that resulted in the staff recommendations. But you do not want to talk about that. You have called people out on a public forum so public is what is required. You are calling out their records. You also have a record.
@Rebecca Eisenberg, you wrote, “The VCs in that example would be taxed on receipts, because they built their success with the benefit of their Palo Alto location, but would not be taxed for headcount, because their use of Palo Alto streets and parking is far less than, say, Palantir’s.
That is just one simplified approach, without the benefit of the planning department and community groups researching the matter so we have sufficient data on which to rely in proposing the best policies for the community.
When I looked through the public record for data on how many companies have their presence here, what were there revenues, and what is their headcount, all I could find in the record was an acknowledgement and apology that Palo Alto has not collected that data.”
Why in the world do you think the city of Palo Alto is capable of monitoring the receipts of VC firms etc. when they can’t even competently compile a database of the number of employees here? This has been a long-standing issue ever since the business tax was first discussed five?? years ago.
Their management information systems are so pathetic they can’t even track a record of past complaints for a given address even when a taxpayer like me gives them the months and years of past complaints!
Holding the city accountable for such ridiculous and costly failures might be a nice first step.
This is the usual boring discussion — simplistic arguments abound on all sides.
It’s incredible that such intelligent folks get caught up in labeling people as being on one side or the other. Pro-development vs. No growth. Policy, like life, is complex. To keep insisting on putting people into buckets is the same simplistic human approach to group people into racial groups. Into liberal vs. conservative.
Labels are used because it’s just an easy way to dismiss people who might have a different viewpoint. It’s the easy way out of having a discussion on merits. It’s cheap and useless.
As for this notion for subsidized housing – what a crappy idea. As my previous post that was rudely cut off by the systems here, all they do is squeeze out the middle class. Rich people can continue to pay elevated prices while low income folks get their BMRs. Middle class? They get booted to Manteca. You wonder why only “luxury” housing or offices gets built – it’s because the continuous addition of impact fees that make middle income housing not pencil out.
And, by the way, who gets to define who qualifies for a BMR? That’s about as subjective and arbitrary a decision you can get.
In addition, fees are not absorbed by developers. They get passed along to renters or buyers. Otherwise the project doesn’t move forward. For some reason, people refuse to understand how business works. Now maybe you understand why Sobrato doesn’t see housing as workable at the Fry’s site. You all demanding more and more fees and complex processes for approval, plus a substantial BMR allocation, makes it economically impossible.
But maybe that’s what you want. At least be honest with yourself. BMR demands are a tool used by people who want zero development to, guess what, stop development. Aaron Peskin is the king of this approach in San Francisco. And it seems that Lydia follows the same playbook.
As for big businesses not being taxed. Guess where that income taxes, uh, taxes? Income from employees who are paid by “big business.” Where does property tax come from? The employee salaries and stock options/RSUs paid by big business used to buy said housing and pay those taxes twice a year to Santa Clara County?
And guess what, they do provide housing. It’s just called part of their salary that pays for a mortgage.
There’s a connection between high salaries and high property prices when housing is constrained. It’s a vicious cycle that we continue to be a part of.
To bleat about “we need to tax big business” is simplistic economic analysis that ignores the other social and economic elements and contributions that a company makes.
It’s why there are dumb unintended consequences from taxes and laws that people shouldn’t be surprised by.
(I’m looking at you, AB5)
The City officially collects headcount information, in the form liked from here: https://www.cityofpaloalto.org/business/business_registry/default.asp
Looks like the form, which is supposed to be filed annually, does require headcount information:
http://revds.com/taxpayerpdfs/CA-GA-LA-KY-TX-forms/Palo%20Alto%20Business%20Forms/Palo%20Alto%20Business%20Registry%20Application%202020.pdf
The City could create a database of employee counts simply by feeding the entrees into the employee number boxes into a spreadsheet.
Most/all cities collect revenue figures with this form, but Palo Alto does not – a change for the future.
Nevertheless, for companies with publicly traded stock (or a planned IPO), revenue numbers can be obtained through SEC filings. Those filings also disclose headcount, so to determine a rough but fair estimate of taxable revenue derived from Palo Alto, the city can use this formula:
(#of Palo Alto employees) divided by (total employees) times (total reported revenue)
Many of these publicly traded companies with Palo Alto offices are doing as well or even *better* now than they were prior to the downturn — e.g. TSLA, AMZN, FB, GOOGL, MSFT — query why companies who have profited so much during this time, in part helped by Palo Alto city services, should not be paying *anything,* much less, their fair share?
In the Daily Post 13 August is a presentation on housing bills pursued by Weiner and Atkins – “Controversial housing bills moving ahead”. What they did not accomplish in their previous attempts is now being inserted into other upcoming bills in the legislative process. It is data rich, suggest that you pick up a copy and review the data. So housing as a topic is being pursued from various fronts. Hope that the city gets it’s status records up to date as they will be needed in any discussions at the city, county, and state level concerning what we are accomplishing in this city.
“Many of these publicly traded companies with Palo Alto offices are doing as well or even *better* now than they were prior to the downturn — e.g. TSLA, AMZN, FB, GOOGL, MSFT — query why companies who have profited so much during this time, in part helped by Palo Alto city services, should not be paying *anything,* much less, their fair share?”
Who gets to define what is “fair?” Given your postings here, I’m not sure I would agree with your definition of “fair.”
And tell me how would you “fairly” determine how much additionally they would pay Palo Alto? How can you with a straight face tell me how you would calculate a “fair” tax for a company that has the majority of their operations in Redmond or Mountain View, or does their manufacturing outside of Palo Alto? How do you determine what contribution the Palo Alto office gives to overall revenue? Employee count is a laughably rough estimate. What happens if the Palo Alto office is actually a money sink? Is Palo Alto willing to give money back for that?
Also, have you considered the fact that maybe there are Palo Alto residents that work for said companies that don’t work in the “Palo Alto” office? You taking money away from those residents? And wouldn’t you actually want them to work in the Palo Alto office because that would reduce traffic?
Yes, it’s not a simple “tax everyone because it’s fair” approach. You’re impacting other residents negatively, whether you intend to or not (“unintended consequences” again).
Let’s be transparent here.
Are you looking at revenue generation or just trying to drive employers out of Palo Alto?
I would suggest that Tom DuBois attacking Rebecca Eisenberg rather than finding a way to incorporate her formidable energy into leadership, the way Tom Jordan mentored him, illustrates the real estate industries awesome power to divide and conquer. Well played, Peery, Smith, Sobrato, Thoits, et al.
Let’s note that FB is a San Mateo County, Menlo Park centered company. That is their tax base.
Google is a Mountain View based company – that is their tax base.
Amazon is for this purpose a East PA based entity, San Mateo County, one of many divisions which support a corporate headquarters in another state.
Microsoft is based in the State of Washington with a division in Mountain View.
Tesla has a main office in PA but it’s main manufacturing facility is in Fremont. Their main personnel is located at that facility for tax purposes.
Why are we claiming some advantage for companies that do not have their headquarters or main CA population in this city? We cannot take claim for their companies and get that confused with any housing / work ratio. The ratio for work and housing needs to be located in the respective cities where they are located.
Seems that we need to update our company profiles for this city so that we are not
getting attributed with companies that we do not receive any benefit from. It looks like our ratios are faulty.
Reading the Real Estate Notifications in the papers major developers are buying up all of the commercial property in PA. SU is selling some of their buildings in the SRP area. The SSL site has just changed hands and they anticipate tearing down the old buildings on Fabian Way and building a new office park. WE keep arguing in circles but the actual action in process is that the buildings are changing hands and the new owners will wait out what ever plan they have to proceed. It is like the two angles here do not connect.
You can throw in Sobrato in that mix. The FRY’s site will require some authority to proceed and the city should be in the driver’s seat on that project. So do not approve any action that does not meet some of our requirements of the city to meet housing requirements. If Sobrato does not want to help meet those goals then they need to sell the property to someone who will. That is a legal action.
This is like a giant joke and Sobrato is in on it. The Cubberley site is sitting there and if the FRY’s site is developed as a commercial property then that sets up Cubberley as the fall back position to meet housing requirements. You can see that one coming a mile away. The only problem with that if you add more people you will have more children – and then require the Cubberley site as the additional school site.
I feel like this whole housing issue is being gamed and it is wasting all of our time doing it. The data base for this city needs to get totally current and in a form that can be updated as required and provided at meetings where that information is required. If you decide that the Cubberley site is off limits for housing as a starting point then that will clarify what other locations are available for additional housing.