Council to revisit Downtown Commercial Cap

Would enforcing the Cap help us get more housing downtown?

February 8, 2019, by Palo Alto Matters

Downtown commercial growth
Since 2005, the city has approved from 220,000 to 230,000 square feet of downtown commercial space as compared to only 65,000 square feet added in the previous fifteen years.

The City Council is poised to repeal the Downtown Commercial Cap in Monday, February 11 with potentially major impacts on commercial and housing development downtown. Many Palo Altans don’t know about the Downtown Commercial Cap or understandably confuse it with Palo Alto’s other commercial caps. So we thought it was time to get you up to speed on how the Downtown Cap fits into the big picture of land use management in the city. Read on or scroll down to learn why the Downtown Cap is suddenly a big deal and where our public officials stand on it.

With the profit margin for commercial space well above that for most housing, the right combination of commercial controls and housing incentives could be key to tilting our jobs/housing imbalance.

COMMERCIAL DEVELOPMENT CAPS

Having struggled for several decades with an outsized jobs to housing ratio and the negative local impacts it creates, the city over the years has created three major limitations on commercial (jobs producing) development:

  • City-wide Cumulative Cap:  Imposes an 850,000 square foot limit on the total amount of office and research-and-development growth in the city by the year 2030 (excluding medical offices in the vicinity of Stanford Medical Center). The City-wide Cap was reduced from 1.7 million new square feet in response to a citizens initiative in the summer of 2018. The lower Cap equates to an annual average of about 57,000 new square feet of office/R&D.
  • Annual Limit: Regulates the pace of office/R&D growth in the California Avenue, downtown, and El Camino Real areas by limiting project approvals to 50,000 square feet of office/R&D development in a single year. The Annual Limit does, however, permit unused square footage to be rolled over and added to the subsequent year’s allowable growth and includes some exemptions. 
  • Downtown Commercial Cap: A cumulative limit on the total amount of new commercial development specifically in the downtown district. This Downtown Cap applies to all new non-residential development (e.g., office, R&D, hotel, retail, etc.). Once 350,000 square feet of new commercial development has been approved (relative to a May 1986 baseline), a one-year moratorium is imposed, preventing new downtown commercial floor area for one year while the city undertakes study and implementation of appropriate new regulations to manage downtown land use and its impacts. 

HOUSING DEVELOPMENT INCENTIVES

The city recently created substantial new incentives designed to make housing development more economically attractive and feasible. In addition to new Affordable and Workforce Housing Overlays, the newly approved Housing Ordinance makes major changes throughout the zoning code, including the downtown district, that convey millions of dollars worth of value by reducing development standards for parking, density, size, and the like for both new and existing residential and mixed-use projects. 

However, private economic incentives continue to strongly favor office over housing development downtown (higher rents per square foot offer greater return on investment for developers/owners). The city’s recent Downtown Development Evaluation Residential Capacity and Feasibility Analysis (October 2017) concluded that “the strength of competing uses (specifically for office space)” is one of the primary barriers to significant residential development in downtown Palo Alto. Indeed, the city itself speculated in a recent staff report that the new Housing Ordinance “is not likely to persuade a land owner redeveloping their property to build residential housing instead of commercial.”

WHY THE URGENCY AROUND THE DOWNTOWN CAP?

The goal of controlling commercial growth embodied in the 33-year old Downtown Commercial Cap ordinance is about to become real. City staff estimates that only about 18,000 square feet of commercial growth remains allowable under the Cap. Once that 18,000 square feet are consumed, the moratorium will kick in, preventing any new non-residential development downtown for one year (or more if extended), while appropriate new policies are designed and implemented. That means the proposed conversion of the President Hotel Apartments to a hotel, which given its size “would puncture the cap,” must wait, as must other new office, retail, or other commercial projects. On the other hand, allowing little or no commercial expansion downtown, even temporarily, could encourage developers to switch to housing, especially given the new housing incentives.

Whatever the council does on Monday night will have prompt and lasting impact. They could repeal the Downtown Cap, rendering meaningless its longtime promise of controlling downtown commercial growth on the eve of fulfillment. They could retain the Cap and hold downtown commercial development static while the city figures out whether and/or how to accommodate more commercial growth. Or they could direct staff to return with a proposal to revise the Cap to prioritize current community needs and preferences such as enabling additional commercial growth only for local-serving retail and services. Whichever way they go, it could largely determine how much new housing gets built.

HOW WE GOT HERE

The city passed the Downtown Commercial Cap ordinance in 1986 due to widespread concern about negative community impacts from unfettered downtown commercial growth. The 350,000 square foot limit allows about 10 percent growth beyond the total downtown commercial square footage existing as of 1986. That Downtown Cap was later embedded in the city’s 1998 Comprehensive Plan and updated in the zoning code in 2006.

Consistent with the law, once cumulative approvals of new non-residential floor area reached 235,000 square feet, the city commissioned a study in 2013 to reevaluate the limit. The Downtown Development Study was to be completed in two-phases: a data collection and projection analysis Phase I, and a policy analysis Phase II to formulate appropriate response strategies. Phase I was completed and shared with City Council and the Planning and Transportation Commission in 2014 and 2015.

According to Monday night’s staff report however, work on the policy analysis Phase II was stayed in January 2017 when a slim 5-4 majority led by Cory Wolbach and Greg Scharff voted to eliminate the Downtown Cap from the city’s updated Comprehensive Plan. Without the benefit of the planned Phase II analysis, both council members and the community at large were denied the opportunity to consider informed policy alternatives.

Although no longer in the Comprehensive Plan, the city’s broad guiding policy framework, the Downtown Cap remains a city ordinance. Last summer, just as the controversy over the President Hotel was heating up, city staff brought a proposal to repeal the ordinance to the Planning and Transportation Commission. Staff interpreted City Council’s January 2017 action as signaling intent also to repeal the longstanding, underlying ordinance. Nonetheless, the PTC voted 4-0-1 against recommending repeal, primarily on the grounds that it seemed inconsistent with the city’s push to promote housing downtown and the groundswell of community support for the citizens initiative seeking to reduce office growth citywide. Now the fate of the Downtown Cap ordinance will return to council with Monday’s vote.

PRO OR CON?

Arguments against the Downtown Cap

Those seeking to repeal the Downtown Cap argue that the cap is too blunt an instrument. They contend that downtown’s transit resources make it a good place for commercial growth and that the City-wide Cumulative Cap together with the Annual Limit in the California Avenue, downtown and El Camino Real areas make the Downtown Commercial Cap unnecessary.

Arguments for the Downtown Cap

Supporters of the Downtown Cap counter that the concerns leading to its original enactment have been borne out, with significant downtown commercial growth exacerbating the jobs/housing imbalance, creating major traffic and parking problems, and contributing to spiking rents by squeezing out housing. Because the Citywide Cap and Annual Limit allow average annual office space to expand more and faster than the historic average, they assert that those tools are insufficient to slow commercial growth. Finally, they argue that enforcing the cap offers the best promise for actually getting needed, and vigorously prioritized, new housing downtown. If the Downtown Cap is repealed, the economic incentives favoring office growth will persist.

WHO STANDS WHERE?

Councilmembers Fine, Kniss, and Tanaka all voted to eliminate the Downtown Cap from the Comprehensive Plan in 2017 and Councilmembers Dubois, Filseth, and Kou voted to retain it. If those returning councilmembers maintain their position as to repeal of the Downtown Cap ordinance, that leaves newly elected Councilmember Alison Cormack as the swing vote. At a public debate during the campaign, she “didn’t see any reason to remove the Cap,” but cautioned that there may be details she didn’t know or wasn’t privy to. More recently, she has indicated in meetings with residents that her view of the issues has changed.

At the grassroots level, Palo Alto Neighborhoods (PAN) recently issued a call to action in support of keeping the Downtown Commercial Cap. 

If you have an opinion regarding repeal or retention of the Downtown Commercial Cap ordinance, or suggestions for a “third way,” be sure to share it with City Council. You can email the full council at city.council@cityofpaloalto.org or attend the City Council meeting on Monday, February 11 to speak or support others on the issue. The Downtown Cap item is scheduled for discussion beginning at 8:45 pm.

SB-50 targets high quality school districts in renewed effort to limit local control over housing

Palo Alto Matters – December 8, 2018

Following the defeat of SB-827 in the 2018 legislative session, State Senator Scott Weiner circled the wagons and returned this month with a new proposal, SB-50, that adds some protections for existing rental housing sites and temporarily preserves local control for “sensitive communities” that are particularly vulnerable to displacement pressures. At the same time, however, SB-50 reaches far beyond the “transit-rich corridors” targeted for state mandates under SB-827.

SB-50 would require local governments to grant housing developers an “equitable communities incentive” not only for housing projects within a half mile of a major transit stop (rail station or ferry terminal) or a quarter mile of a stop on a high quality bus corridor, but also ANYWHERE that housing is allowed in an area deemed “job-rich” based on indicators such as “proximity to jobs, high area median income relative to the relevant region, and high-quality public schools.”  

At a minimum, the equitable communities incentive must include waivers of parking requirements greater than 0.5 spots per unit and any maximum density controls, as well as up to three additional incentives and concessions available under the existing State Density Bonus law. Those additional concessions include such things as increased height, site coverage, and Floor Area Ratio limits; reduced side- and rear- setback requirements; and reduced daylight plane requirements. 

Projects that are also close to transit and include a minimum, unspecified percentage of affordable units are then entitled to additional waivers as follows:

  • Within 1/2 mile, but more than 1/4 mile from a major transit stop: no height limits less than 45 feet, no Floor Area Ratio limits less than 2.5, and no parking requirements.
  • Within 1/4 mile of a major transit stop: no height limits less than 55 feet, no FAR limit less than 3.25, and no parking requirements.

The new, greater unit densities enabled by the waivers will form the baseline for calculating available additional concessions under the State Density Bonus law. 

SB-50 has only just been introduced and is likely to undergo some amendment before coming to a vote. However, if passed in its current form it would likely apply to all residential, mixed use, and commercial zones in Palo Alto, including every single-family neighborhood. Council members have already begun to weigh in with differing perspectives. On one hand Councilmember Adrian Fine expressed general support, saying “we need the state to step in … [l]ocal councils and the idolatry around local control are not going to solve our housing issues.” In contrast, Councilmember Eric Filseth said the bill was “horrible for voters” because it ignores that addressing the housing crisis depends on paying for all the infrastructure necessary to sustain regional growth. SB-50 “skips all that.” Whether City Council will take a position on SB-50 remains to be seen.

SB-827 height overlay map

“Transit rich” housing. Sounds good, right? Is this what you expected?

State Senator Scott Weiner (D-11th District), the author of last year’s “By-right Housing” law, (SB-35), has a pair of new “go-big” proposals. Designed to incentivize construction of dense, multi-family housing near transit, SB-827 would “up zone” all parcels, statewide, within 1/2 mile of a major transit stop or within 1/4 mile of a high quality transit corridor. Residential development projects in those “transit rich” areas would receive a “transit-rich housing bonus” exempting them from local rules regarding density, parking, floor area limits and design standards. Height limits would be set between 45 feet and 85 feet, depending on location. SB-827 does not specify any affordability requirements or minimum residential component.

Following on the heels of new State penalties for failure to meet regional housing allocations (RHNA), Senator Weiner’s second proposal, SB-828, would effectively double the RHNA requirements for all local jurisdictions, requiring that they “plan and accommodate for 200 percent of the local housing allocation for every income category in its housing element.”

So what would SB-827 mean for Palo Alto? More than a third of the city’s built environment would be eligible for conversion to dense “housing developments” up to as much as 85 feet high: approximately 6,000 parcels (out of 18,050 total parcels in the city), including 3,694 parcels currently zoned for single family homes and 1,416 zoned for multi-family residential (which currently have height limits of 30 to 40 feet). As written, SB-827 appears to apply across all zoning categories.

Click the image below for a story map with multiple tabs analyzing the impacts of SB-827 on Palo Alto (created by AnimaDesigncourtesy of the Embarcadero Institute, 501(c)3).

The zoomable map shows the new maximum building heights in the areas impacted by the Weiner proposal. Yellow = maximum height of 45 feet, Orange = maximum height of 55 feet, and Red = maximum height of 85 feet. If the project is eligible for another state “density bonus,” heights could go up to 105 feet. On site parking, area wide, will be left entirely to the discretion of the developer.

What do 55 foot and 85 foot buildings look like?

It is widely agreed that passage of SB-827 would substantially curtail the decision-making powers of local government, but community advocates are lining up both for and against the bill. Many avid housing proponents see less local control as a good thing, but it does raise some thorny questions.

Will it disrupt carefully crafted area plans, such as SOFA I/II and the soon to kick off North Ventura Coordinated Area Plan or the local balance and distribution of schools, parks and other community facilities? How will it impact the local economy when all commercial uses within the transit-rich area have to compete with more highly entitled housing developments (akin to government incentives for office growth in recent years)? Will they have to move farther from transit? Will it promote displacement of low and moderate income residents from older, more affordable housing stock? What happens if transit routes change? Will it deter the creation of new transit routes? What will be the likely service demands and fiscal impacts on the City?

The City of Palo Alto announced its opposition to the bill in a letter signed by Mayor Kniss on February 13. The League of California Cities also opposes SB-827. On the other side of the debate, in an unusual departure from Mayor Kniss, Councilmember Adrian Fine plans to actively support the bill. The California YIMBY Tech Network recently gathered signatures from 130 tech leaders on a letter of support.

Whether SB-827 will move out of committee and forward to passage is still an open question. Let your local representatives know what you think about the bill: City Council, County Supervisor Joe Simitian, State Assemblymember Marc Berman, and State Senator Jerry Hill.

Assemblymember Berman will hold a community open house on February 22 from 4:00-6:00 pm at his District Office in Los Altos, and will join Menlo Park Mayor, Peter Ohtaki for a community coffee on February 26, 8:00-9:30 am in Menlo Park.

Palo Alto to challenge Edgewood Plaza ruling

Palo Alto Weekly – by Gennady Sheyner / January 30, 2018

City Council votes in a closed session to appeal ruling that favored Sand Hill Property Company

Palo Alto plans to appeal a December court ruling that invalidated the city’s fines against Sand Hill Property Company for failing to maintain an operational grocery store at the redeveloped Edgewood Plaza.

By a 7-2 vote, with Mayor Liz Kniss and Councilman Greg Tanaka dissenting, the council directed staff Monday night to appeal a Dec. 15 ruling by Santa Clara County Superior Court Judge Peter Kirwan, which effectively invalidated about $318,250 in fines that the city issued to Sand Hill last year.

In issuing its citations, the city had concluded that Sand Hill had violated the conditions of its “planned community” zone by not having an operational grocer at the plaza at 2080 Channing Ave.

Residents sound off on Stanford’s expansion

Questions linger over university’s ability to address growth impacts

Palo Alto Weekly – by Sarah Klearman / January 24, 2018

More than 200 residents of Palo Alto and surrounding communities attended a meeting on Stanford University’s proposed expansion Tuesday, with many citing traffic, parking, housing and foothills protection as their top concerns about the project.

Hosted by Santa Clara County Supervisor Joe Simitian, the meeting focused on the Draft Environmental Impact Report (DEIR) for Stanford University’s General Use Permit (GUP). If approved by the county, the permit would allow Stanford to build 2.275 million square feet of academic space, in addition to 3,150 housing units and 40,000 square feet of child care centers by 2035.

How big should Stanford get? Palo Alto asks for permanent limit.

Palo Alto Daily Post – by Allison Levitsky / January 23, 2018

Palo Altans will have another opportunity at City Hall tonight (Jan. 23) to sound off on Stanford’s application to expand its academic facilities by nearly 2.3 million square feet.

Last night, Palo Alto City Council signed off on its final 35-page comment letter on Stanford’s Draft Environmental Impact Report, in which the city officially responds to the university’s request. That letter will be sent to the county, which has the authority to grant or deny Stanford’s application.

Council made a few notable changes to the letter last night, including a call to set a permanent limit on how much Stanford will ever be allowed to build, referred to as a maximum buildout.
The suggestion narrowly passed, with councilmen Greg Scharff, Greg Tanaka, Cory Wolbach and Adrian Fine opposing.

Menlo Park appeals Stanford project — will new med school building worsen Sand Hill Road traffic?

Palo Alto Daily Post – by Elaine Goodman / January 22, 2018

The city of Menlo Park’s attempt to block a Stanford development project that officials fear will worsen traffic on Sand Hill Road will be reviewed by the Santa Clara County Board of Supervisors tomorrow (Jan. 23).

The project is a four-story, 153,821-square-foot office building for medical school faculty that Stanford calls the Center for Academic Medicine. It would be built at the site of a 245-space parking lot at 453 Quarry Road. The building’s three-level underground parking garage would include 830 spaces, for an increase of 585 spaces. The building would also include a cafeteria and fitness center.

Menlo Park says that county planners haven’t taken into account the cumulative traffic impacts of the project in the Sand Hill Road vicinity in its analysis of the new proposal, including 1 million square feet of growth at Stanford Hospital and the recently approved Middle Plaza project at 500 El Camino in Menlo Park.

Supervisor Simitian proposes teacher housing in Palo Alto

Project would require ‘innovative’ partnerships with school districts, cities

Palo Alto Weekly – by Elena Kadvany / January 21, 2018

To help teachers cope with the increasingly high cost of living in the Bay Area, Santa Clara County Supervisor Joe Simitian is proposing the county partner with local school districts and cities to build a 60- to 120-unit affordable housing complex in Palo Alto.

The teacher housing would be built on a county-owned, 1.5-acre site at 231 Grant Ave. in Palo Alto, near the California Avenue Business District.

Meeting set for Tuesday on Stanford expansion

Public comment period winding down for university’s large-scale expansion plan

Palo Alto Weekly – by Gennady Sheyner / January 18, 2018

Santa Clara County Supervisor Joe Simitian will host a public meeting on Tuesday regarding Stanford University’s 2018 General Use Permit (GUP) application. As the public comment period is ending Feb. 2, the meeting will be one of the last opportunities for residents to make verbal public comments regarding the GUP.

If the permit is approved, the permit will allow Stanford University to build up to 2.275 million square feet in academic space, 3,150 housing units and 40,000 square feet of child care space and other supporting facilities between 2018 and 2035.

Should there be any limit on Stanford’s growth? How dense should campus become?

Palo Alto Daily Post – by Allison Levitsky / January 17, 2018

As Stanford seeks Santa Clara County leaders’ approval to build nearly 2.3 million square feet of new academic facilities, one question lingers. How much should the university be allowed to build on its campus? How high? How dense? How wide?

Because Stanford occupies an unincorporated part of the county, the Board of Supervisors signs off on all major expansions.

But the land isn’t subject to zoning limitations on density per parcel, so the county has been approving the university’s growth in increments. The county issued Stanford’s last General Use Permit, or GUP, in 2000, allowing for more than 2 million square feet of academic facilities and 3,018 housing units.