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Palo Alto Online

Publication Date: Wednesday, July 02, 2003

Guest Opinion: The forgotten role of 'services' in the growth equation Guest Opinion: The forgotten role of 'services' in the growth equation (July 02, 2003)

by Doug Moran

Discussion of growth and development is often dominated by the persistent jobs-housing (im)balance.

While it may sometimes feel as if you have no life outside work, there is shopping, recreation, school and a world of other local activities.

Let's call these activities services, as they usually relate directly to services that make them possible. And they should be included with jobs and housing because the interactions of the three affects traffic and the city budgetary costs and revenues.

Past neglect of the importance of services has created not only a deficit, but has limited our alternatives for reversing that deficit. In current and upcoming battles over housing developments, you may hear this referred to in terms of the "carrying capacity" of a neighborhood.

A common fallacy equates traffic problems only with commutes.

But in the 1980s, urban planners began to realize that trips to local services were far more numerous than commute trips. Planners expect a "typical" housing unit to produce 6 to 10 trips per day. If this seems high, observe your neighbors. This revelation produced a philosophy of locating services much nearer to housing, thereby reducing auto traffic -- by shortening trips and by turning some into walking or bicycle trips.

Unfortunately, Palo Alto's previous Comprehensive Plan was developed under the old philosophy of separating residential and commercial areas. Many commercial properties adjacent to residential neighborhoods were rezoned for housing. By the time the current Comprehensive Plan was adopted (in 1999), much damage had been done.

"Neighborhood-serving retail" is of particular concern because it has been so hard hit.

Replacing a modest cluster of neighborhood-serving retail with housing can substantially increase traffic -- people in adjacent neighborhoods now must make trips across town or out-of-town for what used to be trips entirely within the neighborhood. For example, two prime neighborhood-serving retail locations on El Camino (just south of Los Robles) were replaced by 46 apartments. These served not just my neighborhood (roughly 1600 households) but several other adjoining neighborhoods.

The balance between jobs, housing and services also affects the City budget because the revenues from the different categories are out-of-sync with the costs. The state government sets the formula for the proportion of property taxes and sales taxes received by cities. The city receives only a small slice of property taxes (9 percent). For homes, this falls far short of paying for the city services that residents use.

Conversely, a city's share of sales tax far exceeds its cost to support merchants, and offsets the shortfall from property taxes. Breaking even requires that a city attracts its share of shoppers.

Commercial properties pay a declining proportion of property tax, shrinking from two-thirds of the total when Proposition 13 limits were enacted in 1978 to just one-third today. Non-retail businesses generate varying amounts of sales tax. In the mid-1990s, H-P and Sun moved sales offices from Palo Alto (to Cupertino and Mountain View, respectively) -- significantly reducing city revenues.

Part of Palo Alto's current revenue shortfall is due to its existing mix of retail. Regional destinations (Stanford Shopping Center and University Avenue) and business-serving retail are much more sensitive to downturns in the economy than are neighborhood-serving retail businesses. Restaurants are particularly hard hit: There are fewer employees to go out to lunch, and lunch is an easy place to economize.

The recent trend to usurp parts of neighborhood-serving retail centers for housing is disturbing. Retail businesses benefit from grouping with compatible stores: Witness the prevalence of downtowns, shopping centers and strip malls. Allowing shoppers to combine multiple trips into one not only saves shoppers time but also reduces traffic.

Combining housing with commercial uses, called "mixed use," is intended to make more efficient use common resources, such as parking, by combining land uses that have complementary patterns. For example, professional offices have peak parking needs of 10 a.m. to 5 p.m. weekdays and are a good match for housing; retail operations whose peaks come on evenings and weekends are not.

Battles over individual developments have become more intense because the different components have gotten so far out of balance, and there is so little available land left with which to remedy these problems. It is often not so much the individual project but its cumulative impact.

Because the state requires cities to redress their jobs-housing deficits, new offices -- by further increasing Palo Alto's housing deficit -- effectively require the city to rezone for higher-density housing. Neighborhood-serving retail is too often what gets preempted for new housing, because it has lower economic returns than other types of businesses.

Palo Alto has a large "legacy" problem in this area -- something we have inherited: The Stanford Research Park was built without a corresponding increase in housing supply. Recently, the number of employees in the park has increased as no-longer-needed laboratory space is converted into employee "office" cubicles, further increasing the housing deficit.

In addressing growth, and individual developments, it is crucial to remember the complex interplay of jobs, housing and services -- especially neighborhood-serving retail.

When those businesses are forced out of Palo Alto, it is a lose-lose situation: Palo Alto loses sales tax revenue and is stuck with worse traffic.

Doug Moran is president of the Barron Park Association. He can be e-mailed at [email protected]


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