Seeking to raise money for popular community projects, Palo Alto officials are preparing to sell to local bidders the rights to build more than 10,000 square feet of development in exchange for nearly $4 million.
The City Council is preparing to approve on Monday night the sale of “transferable development rights” to three bidders: Thoits Bros., Sal Giovannotto and Villa Rosa. According to a new report from the Administrative Services Department, the sale will bring in $3.98 million in funding, of which $2.5 million will be used to help fund the city’s contribution toward the rehabilitation of the Avenidas building at 450 Bryant St.
The remainder will be used to foot the city’s share in the expansion and reconstruction of the Palo Alto Junior Museum and Zoo. While the project is relying primarily on private fundraising (the nonprofit Friends of the Junior Museum and Zoo has raised $25 million for the new zoo, with $15 million coming from the Peery family), the council agreed in May to up the public stake in the project.
To date, the council has committed about $5 million toward each of these two major projects, neither of which is included in its 2014 plan of infrastructure priorities.
While both projects are broadly popular, the city’s financing mechanism is less so. On Monday night, the council heard from dozens of residents about the city’s escalating traffic problems, which many attributed to commercial development. The sale of transferable development rights – which aims to encourage renovation and rehabilitation – effectively allows developers to build at a higher density than they otherwise would, albeit for a price.
The program is meant to encourage seismic upgrades and renovations of historic buildings by providing floor area bonuses for such projects. These bonuses can be transferred to new developments in the downtown area.
In this case, the TDRs were generated through the ongoing reconstruction of the Avenidas building and the completed upgrade of the College Terrace Library. The TDRs sold will allow the three developers a bonus of 11,866 square feet, collectively.
The largest share of the TDRs was purchased by Thoits Bros., the developer whose properties include 285 Hamilton Ave., the commercial building across from City Hall, and 500 University Ave. The company is set to receive 5,844 square feet of development rights, for which it is paying $2.07 million. Giovannotto is paying $1.32 million for 3,896 square feet of TDRs, while Villa Rosa paid $588,296 for 1,948 square feet.
While the council has consistently supported the two projects, not everyone favors the sale of TDRs as a financing mechanism. Vice Mayor Eric Filseth and Councilwoman Lydia Kou both dissented during the May vote that authorized the sale of TDRs from the two construction projects. Filseth characterized the sale of TDRs as “using zoning exceptions as currency.”
“If you want to buy something, you’ve got to find a way to pay for it with actual money,” Filseth said at that meeting.
For the council, the sale of TDRs fetched more cash than it had expected. In May, the council specified that the development rights be sold at a rate no lower than $275 per square foot, which they expected to bring in about $3.12 million. All three bids exceeded that rate, bringing the city’s profits to $3.98 million.
The council is scheduled to authorize the sale this Monday, Oct. 29, on its “consent calendar,” where a number of items are simultaneously approved without discussion.
This is just like the old “planned community” system – we are selling upgraded zoning. It should be illegal and is destroying the city.
Here we go again. Just say NO.
This is like ripping the boards out of your walls and floors and throwing them into a fire to heat your house. The only difference is, it is not their house, it is OUR house.
Specifically, where and how may these development rights be used? This sounds like a vague obligation that will come back to haunt us…and Council.
Bad precedent.
At some point we Palo Altans are going to have to foot the bill ourselves. IF we want (read also “need”) maintenance and improvements to our infrastructure – buildings, streets, parks, etc. then we have to have the money to pay for them. And (like it or not) we have a looming unfunded pension bill coming due if CalPers does not perform up to its productions. So what’s our source of money?
If we do not sell development rights, then what else do we have? Certainly lets NOT NOT NOT sell any land that we own (as the School District did many years ago). Land can never be gotten back. And it would only be developed anyway, forcing more pressure on out infrastructure.
So what to do?
Well, we can sell bonds for one. We did that back in the 50’s to pay for the City Hall, then did not do it again until the Library Bond in 2008 to build Mitchell Park and upgrade downtown and Rinconada. But we eventually have to pay off the bonds, plus interest. That money has to come from somewhere as well.
We can also tax. The Hotel Tax is one such method. And such a tax ‘conveniently’ makes someone else pay.
Or we could also tax ourselves. Yes, we could have a city income tax – everyone living in (and working in?) Palo Alto. That would at least add some self responsibility to our spending.
Give it a thought.
Crony Capitalism at work. How are buying TDR’s different than just bribing the City Government?
Another problem is council “selling” these TDR for way below their real market value. We have council member that would be happy to “sell” TDR for ten cents on the dollar which would make the “sale”… just another giveaway.
Apparently the Council was not listening Monday night when multiple residents said it is time to freeze commercial development.
Other residents specifically asked they stop granting zoning exceptions and TDRs are clearly in that category.
Enough is enough… or is it too much is too much?
Will it take torches and pitchforks to get Council’s attention?
The proceeds are being applied to where they are best needed. Seismic retrofitting and the renovation of older PA buildings serve the community’s best interests.
While I am in the gray on the expansion of the Junior Museum, the money for these projects have to come from somewhere.
The Thoits family is one of the oldest commercial developer/downtown property owners in Palo Alto. They go way back. Though they have made vast amounts of money through their various projects, this is capitalism (aka the American Way).
Better to have received money from a local developer rather than outside/overseas investors. The POTUS would obviously concur.
I am not familiar with developers Sal Giovannotto or Villa Rosa. Hopefully their projects will contribute to the overall enhancement of the Palo Alto community as a whole.
The vision…Make Palo Alto Great in terms of progressive and enlightened expansionism.
Financing mechanisms? Thanks Eric and Lydia for speaking out on that. It seems like the majority of CC members keep finding ways, other than taxing us residents directly, for paying for projects that benefit only, or primarily, us residents. Putting the burden on us who benefit the most would be unpopular and would cost votes at the polls. This TDR scheme looks good on the surface because it brings in money for things like these projects, but at a cost (not taxes) to our community. So many opportunities for abuse by developers once they’ve paid their fees. More employees coming into our town (I’ll venture most will be driving), higher density, more cars, worse traffic, added burden on parking, et al. The TOT is another example.
Oh, I know, the young dreamers think they have answers to all our problems, but the CC majority had ample opportunity to do something significant during the last 2 years and the results have been meager at best. They always make the excuse of the impediments/roadblocks in their way. Blame the other folks: NIMBY’s, residentialists, the PASZ bloc?…and all those other guys and gals on CC who really care about our residents, our neighborhoods, and are for real affordable housing for all, including very low and low income workers who serve us every day in very low paying jobs. But the majority is mostly interested in housing for tech level income folks, and in appeasing and coddling up to developers and real estate people. They are in denial, but just check the campaign contributions and you’ll learn a lot about who is supporting which candidates. Trust me, they don’t give large contributions without expecting something in return. The Eichler modernist real estate lady is an example, even though I can’t figure out what she is expecting in return.
It takes a true politician, by advertised occupation, to be brave enough to run for re-election based on accomplishments.
I do agree with Filseth and others (and yes, that even includes some of our current CC majority) re companies picking up the major part of the tab for new parking lots and street parking fees. The unbridled growth of offices and multitudes of tech workers coming into our town every day should not be a tax burden on us residents. Nobody currently on council can take the blame for what happened years ago to cause our current situation, but they could do a lot more to correct and mitigate those mistakes. So far they’ve seemed incapable or inept in doing that.
Isn’t Sal Giovannotto the developer that got zoning exemptions for making a court yard in the middle of one of his building, calling it a “public park”, and then renting out a three table restaurant space next to the “public park” to a restaurateur who filled the “public park” with heaters and 15-20 tables?