SUMMER | January 10, 2014 | Palo Alto Weekly | Palo Alto Online |

Palo Alto Weekly

Cover Story - January 10, 2014


Key issue: City budget

Key action: Council likely to approve budget with added services, projects

Key question: Which deferred capital projects will get the city's backing?

Every now and then, Palo Altans suffering from development fatigue need a reminder that economic prosperity isn't all that horrible a thing. This year's budget season, which kicks off in May, promises to be particularly sunny on the economic front, with revenues growing at a rapid clip in every major tax category and council members opening their minds to new spending opportunities.

At the council's joint meeting with the Parks and Recreation Commission in early December, one member after another pitched capital projects for the city to pursue. Larry Klein, a dog owner, argued that it's high time the city address its shortage of dog parks. Pat Burt lobbied for revamping the Lucy Evans Baylands Interpretive Center. Greg Scharff advocated rebuilding the clubhouse at the soon-to-be-renovated Palo Alto Municipal Golf Course.

"Our revenues are increasing," Scharff said. "We're in a much better situation than we were before,

and some of these things may be very well worth doing.

There is a reason why council members are feeling so optimistic. In November, the financial results from the first quarter of fiscal year 2013 indicated the city is now in better financial shape than it was before the economic meltdown of 2008. The combination of benefit reforms for city workers and swelling tax revenues (sales-tax revenues alone jumped by 48 percent between the first quarters of 2012 and 2013) mean that the council will not be spending its spring and summer months wondering what programs to cut and which positions to trim.

City Manager James Keene noted in his "year in review" presentation this week that hotel occupancy has risen from 66 percent in 2010 to 85 percent in 2014, prompting a tax-revenue increase of 76 percent, or $5.2 million, between then and now.

Home-sales values, meanwhile, have risen from an average of $1.23 million in 2009 to $1.8 million in 2013, and property-transfer tax revenues (collected when property is bought and sold) have been growing by 19 percent a year since 2010.

Keene acknowledged in his presentation that the economic prosperity has brought plenty of problems, including parking and traffic congestion. These pressures, he said, are "as inevitable as the profits we reap as a city."

"There's some good news and some bad news, but they come from the same source," Keene said.

While the bad news is expected to dominate the council's time and energy, much of the good news will be obscured in the fine print of the fiscal year 2015 budget that the council will adopt this summer. Last year's offering showed the General Fund growing by 4.6 percent, or $7 million, from the prior year. With the economy still sizzling, this year's budget could see a similar leap.

Key issue: Development "recalibration"

Key action: Council to consider changes to planned-community zoning

Key question: Will the city reform its development process?

The very growth that is contributing to the city's financial prosperity is also bringing political headaches and raising thorny questions about planning and zoning. The council will spend much of 2014 hosting community meetings focusing on growth and development, with topics ranging from the city's Comprehensive Plan (its land-use bible), to a study of downtown that will assess its capacity for growth, to the downtown site known as 27 University Ave., where developer John Arrillaga had once hoped to build four skyscrapers and a theater.

The Arrillaga proposal is now effectively dead, even as the wave of anxiety among residents that it helped usher in continues to grow. In December 2012 — long before the 2013 uproar over the Maybell development, which led to last November's Measure D — residents mounted a protest against the Arrillaga proposal, a product of months of closed-door negotiations between city officials and the billionaire developer. The council, which had considered holding a special election on the Arrillaga concept, abandoned the plan and opted to arrange a series of public meetings to obtain a "community vision" for the site. More recently, city officials decided to fold the discussion of 27 University's vision into the broader conversation about downtown development.

At the same time, new Mayor Nancy Shepherd and her council colleagues will spend much of its summer considering reforms to the city's development process. Councilman Pat Burt on Dec. 2 stressed the need to "recalibrate things" and "re-establish our credibility with the community." This includes taking a stance against development proposals that go far beyond what the public would accept and "dialing back" commercial development. Shepherd concurred that it's important for the council to "recalibrate" how the council discusses development with the community.

This recalibration process, which began with a Dec. 2 discussion and is set to continue in February, should heat up in the summer, when election season begins. Among the most critical questions that the council will wrestle with is whether to reform the city's controversial "planned community" process, which allows developers to swap negotiated "public benefits" for zoning exemptions.

So far council members have showed little appetite for abolishing planned communities, though some revisions may be on their way. On Dec. 2, the council offered a range of opinions on growth, with Karen Holman saying she would support a moratorium on new development, Pat Burt advocating "moderate" growth, and Larry Klein rejecting any possible moratoriums and stressing the need to adjust to change. Gail Price also opposed a moratorium on development, noting that the prosperous city is in desperate need of affordable housing, particularly for seniors and young professionals.

"We can't just stop and shut the doors," Price said. "We need to keep moving."

Yet by late summer, with election season in full swing, the pressure to act will be considerable. The new group Palo Altans for Sensible Zoning, which includes the leaders of the "Vote Against D" campaign, has been adamant about the need to kill or reform PC zoning. As Cheryl Lilienstein, president of the new citizens group, told the council on Jan. 6.: "Those of us who worked very hard against the high-density rezone of our neighborhood want to see some city-wide results from that effort."

With new candidates joining the council-election race, crowds packing into the council chambers and disillusioned residents talking about recalling the existing council, the time may be politically ripe in late summer for the city to pivot from outreach meetings to meaningful reforms.

These reforms could take various shapes. After the 2013 election, Scharff said he would support limiting planned-community zones to areas outside neighborhoods. Burt argued that the council should be more forceful in immediately rejecting mega-projects such as ones proposed by Jay Paul Company and John Arrillaga, thereby restoring the council's credibility with the public. Another idea that was pitched by the Planning and Transportation Commission involves creating a menu of possible "public benefits" a developer could choose from in exchange for zoning exemptions — a reform that aims to make the zoning negotiations more predictable and less akin to late-night poker.

By the time the summer concludes, the council will have had plenty of time to consider these changes. And with the clock ticking toward Election Day, it may start implementing them.


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