Up next: Jay Paul | September 13, 2013 | Palo Alto Weekly | Palo Alto Online |


Palo Alto Weekly

Spectrum - September 13, 2013

Up next: Jay Paul

Massive office proposal is the first test of new city pledge to determine value of zoning exceptions given to developers

A development the size of Palo Alto Square built behind the large AOL building at Park Boulevard and Page Mill Road?

Hard as it may be to picture, that is what developer Jay Paul is proposing in what would likely be the largest commercial office development ever built in Palo Alto outside the Stanford Research Park since Palo Alto Square was developed more than 40 years ago.

The proposal, for two four-story office buildings totaling 311,000 square feet, would be about 50 percent larger than the current AOL building, which would remain. By comparison, the Palo Alto Square complex, with two 10-story and three smaller buildings, totals about 320,000 square feet and is estimated to be occupied by about 1,300 employees, according to city staff.

Another way of gauging the size of this proposal is to realize that this single project would exceed the roughly 250,000 square feet of new commercial development that has been built in all of downtown Palo Alto over the last 27 years.

And if the mere size of this project and the potential traffic impacts aren't enough, consider the fact that under the current zoning, no additional development on that parcel is allowed. None. It was maxed-out when the current AOL building (previously occupied by Agilent) was developed.

If the zoning doesn't allow it, how is this proposal even under consideration?

As with virtually all new commercial development these days in Palo Alto, the Jay Paul Company is hoping to win approval of a special "planned community" (PC) zone, a method by which developers bargain with the city over what "public benefits" they provide in exchange for City Council making an exception to the zoning restrictions. With this development, as proposed, resulting in more than twice the allowable square footage on the parcel than permitted by the zoning, it would (by far) be the largest and most valuable zoning exception ever granted by the city.

So what does Jay Paul propose to provide in the way of a public benefit in exchange for receiving these extraordinary development rights?

The company is offering to build the city a new 44,000 square-foot public-safety building on a parcel it owns across Park Boulevard from the proposed office development (and right next door to another yet-to-be built but already approved office building.)

City Manager Jim Keene pledged last year during the ill-fated consideration of John Arrillaga's audacious proposal for 27 University Ave. to begin commissioning independent economic analyses for all future "planned community" proposals, and on Monday night the City Council will review and discuss the first such effort — a six-page report from Applied Development Economics of Walnut Creek. As stated in the accompanying staff memo, "The purpose of this review is to quantify the private gain/increased value associated with the land use changes requested under the PC zone ..."

We hope this analysis is neither the final report nor the model for doing these studies in the future.

Instead of estimating the value to the developer of the proposed zoning exception, it attempts to construct a financial projection showing the developer's return on investment on the entire project, including the construction costs of the proposed public benefit (the public-safety building) to determine if the return is adequate and comparable to what developers generally seek in a development project. This approach has it backwards and skips the step of quantifying the direct financial benefits of the zoning exception. It muddles the analysis by incorporating the costs of the proposed public benefit rather than simply comparing the value to the developer of getting no zoning exception to the value with the zoning exception.

More importantly, the analysis fails entirely to address the fact that the developer can currently build nothing on the site under the zoning, and the fact that the land costs are already paid and accounted for through the initial development of the existing building. The analysis allocates more than $33 million in land costs to the new development when in fact there is no land cost associated with the proposed development at all. The land is effectively free, and the owner should not be able to double-dip and receive a return again on its investment in the land.

Finally, the economic analysis uses a number of questionable assumptions based on what seems like a lack of familiarity with the Palo Alto commercial real-estate market. It assumes an office lease rate of $5.40 per square foot by relying on very general market reviews by others rather than citing actual rents being paid for first-class office space in the immediate area, and it simply takes regional averages in estimating the value of the project once completed. That's not good enough.

Monday's Council discussion is billed as a "check-in" point for the Jay Paul proposal and was to have included a traffic study that has now been put off until early next year due to being deemed inadequate by staff. We suspect that the traffic analysis will all but kill this proposal anyway.

But it is crucial that the city get the economic analysis right, since it will become the model for how future development proposals are handled. With trust in the staff and council's ability to critically evaluate new development proposals running low in the community right now, we urge the Council to insist on a better and more comprehensive economic analysis of this, and future, projects.


Posted by Brian, a resident of Evergreen Park
on Sep 13, 2013 at 10:50 am

Another Palo Alto Square! I have lived near it for 27 years and always thought it was out of place. It doesn't really add much to the community surrounding it. It his proposal similar to the development that occurred in the Whisky Gulch area with the hotel that was supposed to create a vibrant community. I don't think that ever occurred. I wouldn't expect much more from this development.

Posted by palo alto parent, a resident of Embarcadero Oaks/Leland
on Sep 13, 2013 at 10:59 am

What is on the land now? Parking?

Posted by Resident, a resident of Old Palo Alto
on Sep 13, 2013 at 11:00 am

Yes, it's all parking currently.

Posted by Wondering?, a resident of Another Palo Alto neighborhood
on Sep 13, 2013 at 11:00 am

Let's see .. wasn't it less than a year ago that the Planning Department stood up and told the Council that we could downsize California Avenue because there was no significant building expected in that area?

Wonder if anyone in the Planning Department was aware of this project about that time? If so .. what do they have to say for themselves? Or should we just expect that City of Palo Alto Planners don't have any obligation to tell the truth .. so they don't?

Posted by Judith , a resident of Leland Manor/Garland Drive
on Sep 13, 2013 at 11:02 am

If the citizens would pass a bond to build the police building ourselves, it wouldn't be held hostage to the developer's PC request.

Posted by bruce, a resident of Crescent Park
on Sep 13, 2013 at 11:09 am

well written and very true about the land price/value. the incremental land cost for the proposed buildings is zero. furthermore, if you apply the rule of thumb that says you need four parking spaces per thousand square feet of rentable building area, you would need almost 1,300 parking spaces. I'm sure Jay Paul will argue that because they are so clos the train station, they will need far less parking.......

Posted by Just us sardines, a resident of Green Acres
on Sep 13, 2013 at 11:54 am

Are they including the affordable housing we will need to shoehorn in to comply with ABAG when this goes up? Meaning, shoehorn in our residential areas, which will easily happen if the City sneaks in the financing scheme being tried at Maybell under the guise of affordable housing - more than 50% of the property going to high-density market-rate housing, packing the affordable housing on the rest of the parcel grossly above any height and density limits of the existing zoning (and used to justify the market-rate portion) — any residential neighborhood can be densified with such a scheme, especially since developments like these will only make the call for dense developments more urgent.

Stop the zoning exceptions! If City council allows something like this, we should start a recall...

Posted by Holy Smokes, a resident of Midtown
on Sep 13, 2013 at 12:04 pm

Good heavens! Run this guy out of town ASAP!!!

Posted by Silly, a resident of Embarcadero Oaks/Leland
on Sep 13, 2013 at 12:33 pm

Pretty soon we're going to have to go Mountain View or Menlo Park to cross El Camino. Embarcadero and University are already disasters.

Posted by palymom, a resident of Downtown North
on Sep 13, 2013 at 12:40 pm

Stop all the flippin' building!!!! Why turn our town into San Jose? Developers go awayyyyy!

Posted by Resident, a resident of Evergreen Park
on Sep 13, 2013 at 3:10 pm

What value will this development bring to the nearby neighborhood. I don't see any other than increased traffic, and police car syringe, if the safety building is built. We are asking the city to propose the parking and traffic solutions before any future project is approved!

Posted by Neighbor, a resident of Barron Park
on Sep 13, 2013 at 3:22 pm

Why not tax us the residents of Palo Alto to build the public safety building? If the council goes along with this development, because of its supposed public benefit, then we are essentially prostituting ourselves to get money. In return we will have nightmarish traffic and parking problems and all else that comes with hyper-dense development.

The Maybell project is a smaller scale close cousin of Jay Paul's project. They want to build densely packed market rate houses in order to finance the adjacent senior rental building. When we ask them to build less of these skinny tall houses, PAHC says they need the money.

So essentially we are transforming any empty piece of land left in Palo Alto to an unsightly and dense behemoth in order to make money. And keep the developers happy, too.

Posted by Craig Laughton, a resident of College Terrace
on Sep 13, 2013 at 3:31 pm

>Why not tax us the residents of Palo Alto to build the public safety building?

As long as we get rid of frivolous positions in PA, like the sustainability officer, I agree with you. In fact, I wouldn't mind having it in my own back yard (College Terrace, where the current JJ&F block is ...about to be torn down).

Posted by echognomics, a resident of Community Center
on Sep 13, 2013 at 4:22 pm

I'm curious whether a clever econ professor could figure out an equivalent auction price value on the zone change independant of land, project, or developer. Why did we start with a cost analysis for this specific project? It seems like poor framing - the real value is the price sustained by the MOST profitable possible user of land. If we could, hypothetically, separate the zoning change from the lot, and treat it as an option, then auction these options to the highest bidder.

We might find that this user Jay Paul is not the highest value purchaser of such an option...

Posted by Elizabeth, a resident of Crescent Park
on Sep 13, 2013 at 6:16 pm

Was developer, Jay Paul, just going to build the "skin" for the new police building? Sort of like Arrillaga wanting to just build the "skin" for the theater at his proposed gigantic development at 27 University? The developers aren't going to pay for the interiors of the buildings! We don't need these sleeze developers. They aren't doing us any favors with their "public benefits." They are just trying to pull the wool over our eyes. Our city council is in so far over their heads they don't know how to properly evaluate the consequences of these massive developments. The council is incompetent and naïve. Incompetence and special interests are dooming this city.

Posted by bick, a resident of University South
on Sep 13, 2013 at 9:08 pm

Palo Alto absolutely needs a new public-safety building centrally located. If a developer is willing to pay the $50 million price tag, they should be commended. My take is the parking lots in question should be zoned for commercial development already.

Posted by Bob, a resident of College Terrace
on Sep 13, 2013 at 9:19 pm

The worst thing about the Paul proposal is the very poor street access to and from the development. Now there's often a long backup when cars on Park Blvd try to use the on ramp to east bound Oregon. And the access from Page Mill Rd. to Park Blvd. is one way.

I actually live on Sheridan, and there is no parking available on any adjacent street during the day. What a mess if hundreds more people in cars come to work on Park Blvd. and look for parking or ingress and egress from the area. And yes, people will drive their cars to work since nearby public transportation is almost non-existent.

Posted by resident, a resident of Another Palo Alto neighborhood
on Sep 13, 2013 at 10:47 pm

This Jay Paul "package" is the most absurd thing I have ever
seen. The fact that the City is even wasting time and money studying and seriously entertaining this proposal is quite a statement on our City in itself. Palo Alto has truly hit rock bottom. The other PC's were just the warmup for this.

Posted by Elaine, a resident of Ventura
on Sep 13, 2013 at 10:53 pm

Bob, I couldn't agree with you more about the poor street access in the area right now, before any of these buildings are in place. How can this be a good spot for a police building, when the police will be stuck in traffic and unable to get onto Oregon? Also, Park Blvd. is a designated bike boulevard. If the police building and the enormous building go in, we'll have gridlock for cars and an (even more) unsafe situation for bicyclists. (There is already too much traffic on the street for it to be a very safe route.)

Posted by Rich, a resident of Ventura
on Sep 14, 2013 at 12:29 am

Top Reasons This Project Should NOT Be Approved By City Council:

1. An additional 311,000 square feet will result 1,200 cars coming to the Page Mill Road and Park Blvd. area will bring traffic on Page Mill Road and Oregon Expressway to a dead standstill coming from 280 and coming from 101. Coming from 101 traffic already backs up to Waverley every morning. Coming from 280, traffic already backs up to Hanover.

2. An additional 311,000 square feet will result in 1200 cars departing every afternoon from the site. Half will pass through the Page Mill Road and El Camino Real intersection while the other half will will head towards 101 on Oregon Expressway. Many drivers seeking traffic relief will clog Park Blvd. and California Avenue. The intersection at Park Blvd. and Page Mill (already at a terrible state) will cease to work.

3. A public Safety Building costing $67,000,000 ($49M shell cost + $18M of interior improvements = $67M total project cost)) is a RIDICULOUS amount of money for a 44,500 square foot building. This amounts to $1,500/square foot.

4. If anyone thinks the traffic on Park Blvd., Page Mill, El Camino and Oregon is dense now, what happens when Hobach's apartment project is completed, Sobrato's mixed use redevelopment of the 75-acre Fry's site is completed and the two new projects near the corner of Page Mill and El Camino are completed. There is a finite amount of development that the road infrastructure can accommodate. Why should Jay Paul use up all of the infrastructure capacity?

5. What is the point of having zoning and planning regulations if developers can totally ignore them? This site is already 100% built out. If Jay Paul overpaid for this site thinking he was going to come out ahead by building more building area, it is not our City's burden to allow Paul to make a profit.

6. Combining a privately owed 600-car parking on the same site as the Public Safety Building is a poor idea. The only improvements on the Public Safety Building site should be the Public Safety Building and it's required parking.

Posted by @PAFreePree, a resident of Midtown
on Sep 14, 2013 at 8:36 am

I'm wonder how much of this Op-ed was censored by the editors who constitutionally remain anonymous given their history.

"Accordingly, an author's decision to remain anonymous, like other decisions concerning omissions or additions to the content of publications, is an aspect of the freedom of speech protected by the First Amendment. (McIntyre v. Ohio Elections Com's (1995) 514 U.S. 334, 341-342:accord, Watchtower Bible and Tract Society of New York, Inc. v. Village of Stratton (2002) 536 U.S.150."

Posted by Tim, a resident of Downtown North
on Sep 14, 2013 at 8:50 am

Build it!

Posted by Stop these monstrous developments, a resident of Meadow Park
on Sep 14, 2013 at 10:11 am

Stop building these huge buildings for the profit of the developer, which squeeze every inch they can selfishly squeeze onto the area!

Posted by Poor in PA, a resident of College Terrace
on Sep 14, 2013 at 10:17 am

No more bonds or taxes. Not everyone in Palo Alto is rich. We have given and given (schools, libraries, water system, etc.). We can't afford to pay more.

Posted by Silly, a resident of Embarcadero Oaks/Leland
on Sep 14, 2013 at 11:33 am

Enough. Embarcadero is already such a disaster that people are making their own lanes. I almost got wiped out the other day trying to turn from Middlefield onto Embarcadero because some FOOL decided he was entitled to create his very own personal turn lane.

How GREEN are our traffic backups? Is the city going to give us Our Traffic Fumes Are Green lawn signs?

Posted by Rich, a resident of Ventura
on Sep 14, 2013 at 11:48 pm

The City's economic analysis was done on the basis that the developer holds the project and never sells it. If the developer instead sells the project after leasing it, the results are quite different.

Using the same average rental rate of $5.40/square foot x 311,000 square foot equals monthly rental nome of $1,679,000 or $20,152,800 per year. Using a cap rate of 6%, the project would sell for approximately $335,880,000. After deducting the goal cost to construct the project (the City's consultant shows these costs at approximately $225,000,000), the developer would net a profit of $110,000,000.

This developer will make a killing and leave Palo Alto a traffic mess that will endure forever!

Do not support this project.

Posted by Elaine, a resident of Ventura
on Sep 15, 2013 at 10:40 am

Make your voice heard!

There is a meeting tomorrow night (Mon., Sept. 16) at 7 PM at the Council Chambers in the Civic Center (250 Hamilton Ave, First Floor) to discuss this issue.

On the agenda: review the preliminary economic analysis report for a Planned Community Rezoning to accommodate 1)Four-story office development at 395 Page Mill Rd. and 2)Three-story public safety building with attached six-level parking structure at 3045 Park Blvd.

For additional information, contact Jodie Gerhardt at 329-2575 or at jodie.gerhard@cityofpaloalto.org. You can also review the project page at Web Link

Posted by Frustrated neighbor, a resident of Barron Park
on Sep 15, 2013 at 3:10 pm

This development has it backwards. The reason ABAG is shoving densification down our throats a la Maybell is that we have too many jobs in Palo Alto. Instead of building new office space, we should be converting existing office space into residential units, ideally with many below market rate units. Maybe we need to convert Stanford Square into housing too. If we can eliminate enough jobs, we'll get the jobs vs. housing ratio back into balance, and ABAG off our backs.

If Jay Paul's proposed 300,000 sq-ft were for housing, it could accommodate 150-300 new residences. That would at least be a step toward restoring jobs-vs-housing balance.

Yes, I'm being satirical, and no, I don't have any great new ideas how break the cycle of madness:
1) developer says: "lets build more offices" and then
2) ABAG says: "with all those jobs, we need a lot more housing"
This leads us in 20 years to being a bigger and even more congested city. Is this what we want? The only clear way to control this cycle is to hold the line on office building.

Do not support this project.

Posted by resident, a resident of Another Palo Alto neighborhood
on Sep 15, 2013 at 6:37 pm

@frustrated neighbor
You have it right. What is also "backwards" is the Lytton Gateway
under construction. It should be converted into a garage which is
what it looks like. Only as a garage to help alleviate the parking
shortage could you possibly justify this monstrous structure which
belongs in an office park someplace.

Posted by Kate, a resident of Duveneck/St. Francis
on Sep 15, 2013 at 10:13 pm

Are there any intelligent, thoughtful civic-minded "Palo Altans for Palo Altans" residents who will run for City Council and get this bunch run out of town? Can we have very strong rules on experience and qualifications for the Architectural Review Board and the Planning Commission? Ties to developers should be publicly listed. So should professional experience in the field. Palo Alto is being 'sold to the highest bidder' '. Menlo Park is getting it also. The massive Arrillaga project finally woke up a sleeping city. Something good came of that.

Posted by Rich, a resident of Ventura
on Sep 15, 2013 at 10:29 pm

Would City Council allow a developer to do the same deal in downtown Palo Alto?
No; too much density and too many traffic/parking issues.

How about at Town and Country?
No; too much density and too many traffic/parking issues.

How about at California Avenue?
No; too much density and too many traffic/parking issues.

Clearly, the city regards the Park Blvd. site neighborhood as a throw away neighborhood. Note: same project density and similar traffic/parking issues.

Posted by resident, a resident of Another Palo Alto neighborhood
on Sep 15, 2013 at 11:13 pm

The City Council wants more office space anywhere it can get it
in Palo Alto, especially Downtown, in high profile buildings. The
Council derives psychic benefit from this, since in their minds
this makes Palo Alto a bigger player on the world stage and they
then feel more powerful, more important.The developers of course
ride this for the money.The staff tags along and tries to expedite
the process anyway they can.Planning, zoning, design review are
thrown out the window, and traffic congestion,parking overflow into neighborhoods,environmental degradation, are all acceptable impacts to serve the main goal. Developers are kings. Residents are obstacles and need to me managed with promises of more studies and
told to change their behavior and cut down the number of auto trips,
use bicycles, walk, not park on the street in front of their homes.

Posted by palo alto resident, a resident of Another Palo Alto neighborhood
on Sep 16, 2013 at 11:56 am

Deny the proposal and build a parking garage instead. Run the shuttle from there to Downtown, its any easy walk to lots of businesses too.

Posted by JoAnn, a resident of Ventura
on Sep 16, 2013 at 12:30 pm

It isn't about traffic, density, city planning or what's good for the city or larger area. It's about clout. Downtown etc have it and we scum in south Palo Alto don't. That's why these projects get shoved on us and we can't get a discount grocery store.

Ultimately it's about money and someone making scads of it. When is the last time the people's voice was heard in Congress? They listen to their paymasters, which is why we never get an end to wars, the flood of guns and easy access to same, raising taxes on the 1% etc. Same thing here on a smaller scale. Good luck taking back your democracy in the face of all the money.

Posted by palo alto resident, a resident of Another Palo Alto neighborhood
on Sep 16, 2013 at 2:06 pm

@JoAnn - this proposed development really isn't in south Palo Alto, its on Page Mill. But yes, its all about making money for Jay Paul.

Posted by senior longtime resident, a resident of Green Acres
on Sep 16, 2013 at 3:51 pm

PC rezoning in Palo Alto for building dense properties requested by developers who will make a great deal of money has become a very divisive issue. Palo Altans know that our City Council is not responsive to the residents and favor the developers. That was made all too clear with the rezoning of the Maybell project. But now we've made a successful effort to try to get our City Council to pay attention to us. We got almost twice the number of signatures on the petitions to get the referendum on the ballot! We are up against a formidable opponant. PAHC has hired a professional consulting firm from San Franciscoto to run their campaign. They obviously have big bucks. PAHC and our City Council want you to believe that this Nov. 5th election is about senior housing and trying to make you think that we neighbors in Barron Park and Green Acres are against it. THAT IS NOT TRUE! We oppose the PC rezoning because of the density of senior affordable apartments that are to be financed by developers building 2 and 3 story houses that are totally our of character with our neighborhood. We do not oppose senior affordable apartments that can be built within the giidelines of the original zoning. This elections is about REZONING and only that issue.!

We urge voters in Palo Alto to vote NO ON MEASURE D on Nov. 5th. We need the support of all residents who oppose PC rezoning for high density whether it be commercial or residentaial. Maybell is just the start in a residential neighborhood. Take a look at our websites, paloaltoville.com and votenoagainstd.com. Please join us in this important issue.

Posted by longtime resident, a resident of Another Palo Alto neighborhood
on Sep 16, 2013 at 5:15 pm

@ senior longtime resident,
Most people don't know the situation a 50-foot building when the pre-existing zoning allows only 30-feet, only 47 parking spots when the pre-existing zoning would require 104 (an no place for the extra cars to go except to take already limited spots from the park and orthopedically handicapped student "OH" wing of Juana Briones elementary school). More than half of the property going to a market-rate development that gets a privileged high-density rezone surrounded by R-1 residential neighborhood, in order to make the affordable side cheaper to build. The affordable side is only so grossly outside of existing zoning because of the financing scheme that makes it cheaper.

They could have done that at 801 Alma, too, but they didn't because it would have meant much taller highrises down there. It's inappropriate to do so at Maybell just to get a bargain on the costs, it's not like we can't make it work without it, as 801 Alma demonstrates. Anyone tempted to greenlight such a scheme will face it soon enough in their own residential neighborhood, as City Council indicated Maybell was the roll out of this scheme which is used in other communities, in Palo Alto.

Why are we in this cycle of jumping whenever developers say jump? Like people whose productive lives fall apart because they don't know how to manage the new, demanding flow of electronic input, City Councilmembers spend all their time on these shiny development projects instead of DOING THEIR JOBS FOR THE CITIZENS of this town

Posted by longtime resident, a resident of Another Palo Alto neighborhood
on Sep 16, 2013 at 5:16 pm

P.S. I posted as "Just us sardines" above. Didn't see that. Please don't delete my post for using multiple names.

Posted by Just us sardines, a resident of Green Acres
on Sep 16, 2013 at 5:23 pm

@ bick,
Why shouldn't we instead be taking the $40million in Stanford funds, and $2.1 million the City wants to use to make cosmetic improvements to Council Chambers, and the $8 million it wants to build a gym way out at the Baylands, etc ... and build the safety building with that instead, if it is so urgent?

Seems to me, given the egregious way they avoided studying the traffic safety at Maybell, the Council could use a reminder to put safety first.