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Palo Alto Weekly

News - June 22, 2012

East Palo Alto business district plan must 'get it right,' report says

Urban Land Institute offers guidance for the city's last, best commercial real estate project

by Sue Dremann

East Palo Alto's planned 4 Corners/Ravenswood Business District is the last area the city can develop to create jobs and revenue and improve the quality of life for its residents. And the city has to "get it right" because there is no other major commercial area to develop, a new study by the Washington, D.C.-based Urban Land Institute has found.

The city commissioned the 35-page study, which was released on June 12, as part of a review of its Specific Plan, a document intended to guide planning and development. The plan will be finalized and presented along with an Environmental Impact Report to the East Palo Alto City Council for adoption in July.

The 4 Corners/Ravenswood Business District plan calls for 835 residential units, 1.2 million square feet of office space, 351,820 square feet of research-and-development/industrial space, 112,400 square feet of retail, 61,000 square feet for community activities, 30 acres of parkland and 4.5 miles of trails.

The so-called development scenario was adopted by the council on March 1, 2011.

When implemented the plan could change East Palo Alto's appearance, attractiveness and usefulness to the community significantly, the study found. It envisions a walkable downtown along Bay Road starting at University Avenue and moving toward the baylands.

The city currently doesn't have a downtown, and the goal is to create a downtown area where the community can meet, eat and shop. Ground-floor development would have retail, with residences above. A park and community center would anchor the downtown in the area known as 4 Corners.

A major employment area would be developed in the area bounded by Bay Road, Pulgas Road and Weeks Street. Potential jobs — 4,851 of them — could help reduce the city's 17.5 percent unemployment rate. About half the new jobs would be suitable for people with no more than a high school diploma.

But there is no guarantee regarding how many jobs residents would get.

"It is impossible to know with any certainty how many East Palo Alto residents would be employed in the RBC/4Corners area. The order in which development will occur will vary depending on the market. ... Also, when unemployment is high many people accept jobs for which they are over qualified," the report noted.

The report also noted a discrepancy between a 2010 Bay Area Economics (BAE) market study and one done in 2009 for the Specific Plan.

The development-scenario study identified a projected net demand for office space at 1.2 million square feet. But the 2010 study found only a projected 201,650 square feet between 2010 and 2030.

The first market-demand study projected a 351,820-square-feet demand for industrial and research space, but the 2010 study identified that sector as stronger for East Palo Alto, estimating 609,425 square feet. Projected retail demand was triple in the 2010 study what it was in the 2009 report.

The Urban Land Institute study attributed the discrepancies to the way the Association of Bay Area Governments (ABAG) projects employment demand. The ABAG studies are highly accurate for larger, more established cities with multiple commercial areas, the report noted. But East Palo Alto is a relatively new city with radically changing land uses.

While having many pluses, including the redevelopment of Cooley Landing and an improving commercial real estate market, the project also faces significant challenges.

The 130 acres of parcels have 56 separate owners; 52 percent are smaller than 1 acre. The multitude of owners makes it exceedingly difficult to create a cohesive whole, since each landowner has a different timeline or expectation for development. Many are managing businesses on their properties, the report noted.

The area also lacks sufficient infrastructure and water supply. East Palo Alto already exceeds its annual San Francisco Public Utilities Commission (SFPUC) water allocation. The city receives approximately 80 percent of its water from SFPUC. The problem is citywide and affects all new major development. The city is exploring purchasing a water allocation, potential groundwater supply and conservation.

The area will require a $75 million investment in roadway, storm drain, sewer and other infrastructure, and the cost of additional water is not included in that sum, the report noted.

Elimination of the city's redevelopment agency has also significantly limited its ability to implement the plan. Prior to its demise due to state budget cuts, the redevelopment agency could have granted up to $12 million for infrastructure and community benefits. Agency funds provided the necessary local match for other public funding.

That loss "is magnified because every $1 in agency funds leveraged $2 to $5 in local, regional, state and federal funds," the report noted.

The study did not identify any specific potential financing sources, but it identified broad categories for potential funding and what the city should develop first to attract private investment.

Potential funding could include federal, state, regional and local funds and private resources, including an assessment district, a community-facilities district or impact fees. The city will work on an impact-fee study in the fall of 2012.

The report recommended three key strategies for the project:

* The first would be designing "place creating" improvements such as parks, Cooley Landing and open space in the next few years. These would create an attractive environment for investment and improve residents' quality of life.

* The second would design and complete road and infrastructure improvements along Bay Road. It is unlikely that private investors will invest millions in office or research and development projects with Bay Road in its current condition, the authors noted.

* The third recommendation suggests pursuing development on "catalyst" sites that are in optimal locations and have an attractive size that would attract private and public investment. The sites include the vacant site at Bay Road and University Avenue, the former Romic Environmental Technologies property and the Bay/Clark/Weeks/Pulgas block.

Although the redevelopment is a 25-year vision, the plan would be dependent on staffing, capital investments and the ability to attract public, private and philanthropic money. But significant improvements could occur in the next five to seven years — mainly in road and utility infrastructure and community facilities, parks and trails.

The city could expect an annual fiscal increase of $2.3 million from the project, the study found.

Staff Writer Sue Dremann can be emailed at sdremann@paweekly.com.