There is little consensus, however, on what exactly should be done. Some people, including Palo Alto City Council members Lydia Kou and Greer Stone, argued during a June 1 discussion that the city needs to hire a dedicated economic coordinator to steer its recovery. The council majority, including council members Alison Cormack and Eric Filseth, supported a more cautious approach: hiring a consultant to develop an economic strategy — a document that would inform the city's decision on hiring an economic manager.
Council member Greg Tanaka, for his part, suggested at the time that the city reconsider some of its existing restrictions, including a citywide prohibition on big-box stores like Costco and Walmart.
The debate has only grown in urgency since June, with a new analysis showing sales-tax receipts falling more precipitously in Palo Alto than in other area jurisdictions. The report from Avenu Insights & Analytics indicated that Palo Alto sales-tax revenues dropped by 27.3% between the fourth quarter of 2019 and the fourth quarter of 2020, far exceeding the decrease of 7.2% statewide. The pain was particularly acute in the hard-hit commercial areas of downtown, El Camino Real and Midtown, where sales tax receipts dropped by more than 40% over this period.
A recent survey conducted by the city underscores the variety of challenges facing local businesses. Of the 65 businesses that responded to the survey, 67.7% cited the difficulty of retaining or hiring employees as one of their top three challenges. Also scoring high in the rankings of challenges were the high cost of supplies (40%); a lack of resources for marketing and promotions (38.5%); and the need to pay deferred or increased rent (30.8%).
When business owners were asked to name the top three resources that would be most helpful, 53.8% respondents chose "finding employees," while 38.4% said "access to capital." The next two most popular answers were "assistance with marketing and promotions" (24.65%) and "assistance with city, county, state and federal regulations (21.5%), according to a new report from the Administrative Services Department.
The council will review these survey results on Monday as part of a broader discussion of next steps. Council members will also consider a staff recommendation to hire an economic coordinator, a position that will cost between $245,000 and $290,000, according to the department.
To date, the council has been tentative about making the new hire. During the June 1 meeting, Filseth suggested that the council needs to be "very careful and methodical about who we bring into the organization" and declined to support a motion from Kou and Stone to move ahead with recruitment for the new position (the motion died by a 3-4 vote, with Vice Mayor Pat Burt joining Kou and Stone). Cormack also advocated for a more cautious approach.
"It's not that I don't think we should have someone on staff," Cormack said. "It's that we don't have the ongoing money today and that I'm not sure what level to hire at."
Some of Palo Alto's economic problems preceded the pandemic and are expected to stretch well into the future. Fry's Electronics, once one of Palo Alto's top revenue generators, left in December 2019, leaving a glaring vacancy at 340 Portage Ave. CineArts, a popular movie theater in Palo Alto Square, narrowly averted closure five years ago, only to leave Palo Alto Square during the pandemic. And the owners of Town & Country Village, whose vacancy rate climb above 20% during the pandemic, argued that broad retail trends — namely, a shift toward online shopping — have as much to do with the recent downturn as the pandemic health restrictions.
At the same time, the shift to remote working has had a profoundly negative effect on businesses in Palo Alto, a city known for its high number of jobs. During the June 1 discussion of economic development, Charlie Weidanz, CEO of the Palo Alto Chamber of Commerce, urged the council to explore as part of its effort what the "next phase of hybrid workforce" will look like.
"We may not see the 85,000-plus workers that come in, so how do retail, hospitality, restaurants and hotels succeed with a possible reduced daytime population? What are the issues around zoning and permitting that are restrictive to some of the businesses to be successful?" Weidanz said.
If hired, the city's new economic development coordinator would be charged with assisting businesses with matters such as permits, grant applications and compliance with health orders. The staff member would also be charged with tracking vacancies in commercial districts and with maintaining business contact information. Other functions could include facilitating stakeholder meetings with the business community and providing "conflict resolution" between businesses and the city's Building and Fire departments.
Some current and former council members believe the hiring of an economic development coordinator is long overdue. Former Mayor Karen Holman, a longtime proponent of adding the position, urged the council in June to move ahead with the hire. Most neighboring cities, she said, have dedicated staff that help recruit businesses, track trends and help facilitate "place making" in commercial areas.
"We have here a history of hearing that some business or other is leaving — often hearing too late to do anything about it, even if the skills existed in the city's toolbox," Holman said. "Often reasons are hearsay, not an analysis of market changes, personal decision or rent issues and the like."
But while Burt, Kou and Stone all supported hiring someone to take charge of the city's economic strategy, they fell one vote shy of advancing the proposal. The council then voted 6-1, with Stone dissenting, to commission an analysis of Palo Alto's business shifts and strategies to address the pandemic, bolster local hotels and bolster revenues.
Kou, who made the motion to hire an economic manager, said the city should not "leave it to chance and to market forces to dictate what we're going to have here as an economic plan for Palo Alto." Stone argued that even if the city moves ahead with a consultant study, it will still need to have someone at City Hall to enact the study's recommendations.
"No matter how good these strategies may be ... if we then don't have city staff with the expertise to be able to implement them, then what's the point?" Stone asked.