Palo Alto to add fees for new developments | May 9, 2014 | Palo Alto Weekly | Palo Alto Online |

Palo Alto Weekly

News - May 9, 2014

Palo Alto to add fees for new developments

Council committee: How greatly does Palo Alto's work force burden municipal services?

by Gennady Sheyner

No one doubts that the City of Palo Alto spends more on public safety and City Hall services due to its ballooning daytime population of workers.

Yet the effort to recover costs for employees' use of city services is tricky, the City Council Finance Committee discovered Tuesday night. Accurate data about the city's work force is lacking, and committee members struggled to determine what share of these costs should be footed by whom.

Even as the committee voted 3-1, with Karen Holman dissenting, to adopt new fees that will be charged to developers of new buildings, members acknowledged that the fee formula they settled on will have to be further revised in the next year or two, as better data about the city's employees come in.

Already, the city charges impact fees on new developments to pay for future wear-and-tear on parks, roads, libraries and community centers and for other city services.

The impact fees that the committee signed off on Tuesday fall into two categories. One new fee would help the city pay for public-safety facilities (including, most notably, the planned $57 million public-safety building the city hopes to build in the coming years). The other falls under the broader category of "general government," which includes such things as information-technology upgrades and various infrastructure projects relating to city facilities. Under a formula produced by the city's consultant, David Taussig & Associates, new developments would pay for about 15 percent of these facilities' costs.

On Tuesday, the committee wrestled with a question that has been at the heart of most recent debates involving new developments: Are residents subsidizing the costs to the city brought on by new office buildings and their tenants, particularly downtown? That question has come up repeatedly during recent discussions over parking, with downtown residents complaining that their neighborhoods have become parking lots for employees.

For Holman, the committee's sole dissenter, the answer to the question is a resounding "yes." The fee formula proposed by city staff and accepted by the committee allocates about 40 percent of the costs of the impacts on city services to nonresidential developments and 60 percent to new residential developments. Holman argued that the split should be 50-50 and said she doesn't see the proposed formula as "fair."

"I think the residents in the community recognize from a variety of different factors that they are subsidizing in a number of ways the nonresidential development in the community," Holman said. "Not to diminish the value of nonresidential development, but everyone should be responsible for their fair share."

Her colleagues disagreed, though their support for the new formula was tepid at best. The city famously has no idea how many workers come to Palo Alto every day, though it is widely assumed that the city's population roughly triples during the daytime hours. The lack of data, which has stymied efforts to manage transportation demand downtown, prompted the council to support last week the creation of a new business registry that will collect employee information from Palo Alto companies. The online registry will be updated annually and will include a range of data, including on employees' commute habits.

Chairman Marc Berman, Pat Burt and Liz Kniss all voted to support the proposed fees, with the provision that they would undergo further revisions once job data is compiled.

"I don't think we have yet the data to conclude one way or another," Burt said.

Nathan Perez, vice president at David Taussig & Associates, described the process of structuring the fees as difficult, with "a bit of art" going into the science. One challenge is figuring out how much tenants in 1,000 square feet of nonresidential development consume of city services compared to residents of one housing unit. Then there's the question of determining how much different types of nonresidential development (offices, retail, industrial) should pay.

The proposal endorsed by the committee would tack on a fee — for each 1,000 square feet of a new nonresidential building — of $2,556 in the "commercial" category, $2,130 for "office/institutional" developments and $852 for industrial developments.

It would charge a fee of $4,566 for each new single-family home ($2,893 for public-safety facilities and $1,673 for general-government facilities) and $3,653 for each new multi-family unit ($2,314 for public safety and $1,339 for general government).

Though Burt supported the proposal, he vehemently rejected the consultant's assertion that the study relied on relatively good job data in coming up with the formula. He said he had "trouble proceeding under a premise that I think is not sound."

"We have had significant community and staff discussion about the great uncertainty over our jobs data from various sources," Burt told Perez. "If you somehow have really good jobs data, everyone in this town would love to hear it."

Kniss said that the formula can be revised in the future, when more information is available. But she rejected Holman's proposal to ease the burden on developers of new residential projects. Doing so would basically be saying, "We're not accepting the industry standard and instead we can make our own standards," she said, referring to industry guidelines on impact fees.

Staff Writer Gennady Sheyner can be emailed at


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