November 19 Newsletter

In this issue:

  • Guest Commentary:  New proposal may worsen parking but not help housing. By Jeff Levinsky, Co-chair, Palo Alto Neighborhoods (PAN) Zoning Committee
  • Looking Ahead:  Prospects improve for new owners of President Hotel Apartments – conversion to hotel use looks increasingly likely. Far-reaching Housing Ordinance moves to City Council. City may help oversized downtown buildings add roof-top decks. City moves toward long-term outsourcing of Rinconada Pool.
  • Calendar of Notable Upcoming Action

After a fairly quiet election season on the city policy front, the final month of the legislative year is packed with council action and community meetings. City Council will dive into the lame duck session with big land use decisions, including:

  • a  proposed housing ordinance that would loosen development standards and parking requirements throughout the zoning code (November 26);
  • repeal or revision of the two laws that currently stand in the way of converting the 75-unit President Hotel Apartments to a boutique hotel (December 3);

In addition, council will consider a 5-year operating and revenue sharing agreement to outsource management of the Rinconada pool (November 26) and a final agreement and approval of facility funding for Pets in Need to take over the Animal Shelter (November 26). Check our calendar page or scroll down for other notable upcoming action.

Meanwhile, two important community outreach events are set for the last week of November:

Grade separations:  As the Rail Committee turns its focus to south Palo Alto, the city will host a community meeting on November 28 (6 to 8 pm, Mitchell Park Community Center) to discuss alternatives being considered for separating the road from the railway at the Meadow and Charleston Road crossings. For additional information about grade separations, explore the city’s Connecting Palo Alto website.

Stanford Expansion:  Santa Clara County will host a community listening session on November 29 (6:30 pm, City Hall) to get public input about community benefits that should be considered in negotiating a development agreement with Stanford to add 2.3 million square feet of academic space. Unlike the regular General Use Permit application process, development agreements are voluntary contracts that can result in the applicant providing community benefits outside of the regulatory process in exchange for the public agency agreeing to “freeze” the development standards applicable to the project for the term of the agreement.

It is important that County staff and the Supervisors hear your ideas and suggestions on the range and type of issues that should be considered for inclusion in the Development Agreement, prior to entering discussions with Stanford University. The PAUSD School Board passed a resolution last week seeking inclusion of school impact mitigations in a possible development agreement with Stanford.

Guest Commentary

Building massing in context for 40 foot high, 1.5 FAR project on El Camino Real
Building massing in context for a 40 foot high, 1.5 FAR project at 3720 El Camino Real

Trickle-Down Housing Proposal May Make Parking Far Worse

By Jeff Levinsky, Co-Chair Palo Alto Neighborhoods (PAN) Zoning Committee

Just months after Mayor Kniss declared traffic problems were “greatly exaggerated,” city staff admit a proposed major zoning overhaul aimed at stimulating housing construction may actually not generate any.  Disturbingly, the housing proposal could make parking even worse for many Palo Alto neighborhoods.

The proposed parking changes are a major part of an overhaul of city zoning laws to be discussed and possibly adopted by the City Council on Monday, November 26.  Although advertised as addressing the city’s housing issues, the proposal doesn’t indicate how much housing, if any, these changes will produce.  Staff repeatedly caution that the proposed changes may not alter the incentives for developers who prefer commercial construction, citing where even tripling the amount of residential housing that can be built on a site “is not likelyto persuade a land owner redeveloping their property to build residential housing instead of commercial.”  For that, staff say different reforms may be needed, such as decreasing how much office space can be built.  Perhaps most telling, the proposal includes no economic analysis showing that the proposed parking reductions and other changes would stimulate housing development or that construction cost savings would be passed on to residents as lower rents or purchase prices.  Rents also reflect land and operating costs, and land prices go up when construction costs go down.  So the net benefit from reduced parking to tenants and home buyers may be minimal.

Despite little expectation that the new ordinance will stimulate housing production, the proposal does convey substantial and lucrative entitlements to potential developers. Many zoning changes in the proposal were suggested at 16 meetings the City conducted, primarily with architects and developers, in early 2018.  The City held no similar meetings with residents or their advocates.   Not surprisingly, the proposal offers little insight or evaluation of community impacts.

In particular, the negative impacts on parking and neighborhoods may be substantial.  The proposal would allow a building with both retail and residences to provide no parking for 1,500 square feet of the retail portion.  For a 1,500 square foot restaurant in most zones across town, this eliminates the current need to provide 25 parking spaces (the proposal erroneously claims just 18).  Imagine a block with just three such restaurants: it would have 75 missing parking spaces, easily pushing that many cars to park in front of residences on side streets, as happens now with the underparked Sundance Mining Company and Hong Kong Restaurant on El Camino.  The proposal isn’t specific as to which 1,500 square feet in a building gets the exemption, so it can go to whichever retail use needs the most parking spaces.

Although the proposal claims this exemption will incentivize housing production, existing buildings are eligible too, freeing them to take existing parking away from customers and lease the spaces to nearby future office projects, which then can save money by building less parking onsite. So the proposal will make money for retail owners and office developers while harming neighborhoods and creating no housing.

The proposal will also reduce parking requirements for apartment buildings and condominiums below what’s needed and put more cars on the street.   For example, the Midtown Court Apartments behind CVS has 31 one-bedroom and 15 two-bedroom units.  The proposal will require a building like it to provide 61 parking spaces, although it can likely have that lowered to 49 if it adopts a transportation management program.  To help see if that would be enough, the City commissioned a study by Fehr & Peers Associates (see page 42) of just nine apartment buildings, selected by staff, out of thousands of parcels that have or could have multi-unit buildings.  The study may have undercounted cars, because it only checked each building twice, didn’t have a good methodology to determine which cars on nearby streets belonged to residents and their guests, and surveyed only a few residents about their parking habits.   Even with these shortcomings, the study found that Midtown Court had 59 cars parked at peak night hours, meaning that the proposed parking requirements of 49 to 61 spaces will not likely suffice for such buildings.  Meanwhile, rising housing demand is forcing more residents to share apartments, upping the parking needs per unit, so new parking requirements should be higher than just current needs.

The proposal will like create parking shortages for senior housing and affordable housing as well.   For example, a building like the 57 unit Sheridan Apartments for seniors near California Avenue will have to provide 43 parking spaces.  That’s considerably below the 54 parking spaces the building actually uses, according to the Fehr & Peers study plus street parking permits purchased by residents.  The 45 unit Colorado Park Apartments affordable housing complex near Greer Park will have to provide 71 spaces (or only 40 spaces, if the building were in a mixed-use zone), which seems too few given that Fehr & Peers reported it needed 68 spaces and that likely underreported peak needs.

As with the retail parking, the proposed reductions in apartment and condominium parking requirements will apply to existing buildings as well, even though that creates no new housing.  Rather, it creates an incentive for existing apartments to try to earn more money, such as by converting parking spaces no-longer required into storage areas and charging tenants extra for those.  Reducing parking at existing buildings will in turn force more tenants to park on the street and we could see more overflow into neighborhoods as happens already around the Newell Bridge and Edgewood Plaza from East Palo Alto renters unable to find nearby parking.

Normally, such major proposals to reduce parking would be much studied and discussed.  However, city staff claim “no substantially greater or more severe impacts are anticipated” beyond what was already studied for the Comprehensive Plan, the overall city plan adopted in 2017.  But that plan and its Environmental Impact Report never considered what would happen if dozens of additional cars tried to park on blocks near retail and multi-unit residences.   Although the city is currently allowing a pilot project of high–density, underparked small units at the former VTA parking lot at the corner of El Camino and Oregon Expressway, we have yet to see if that actually lowers construction costs, rents, and parking needs.  Why make changes city-wide before having the results of the test the Council agreed to?

The proposal has many other shortcomings.  It generally reduces on-site open space requirements for multi-unit housing, even for high-end units, putting more pressure on our public parks, which already fall short of Federal guidelines for open space per resident.  The proposal includes a Housing Incentive Program heralded as a way to discourage developers from using the state’s SB 35 law but the state’s law only applies when at least half of the proposed units are affordable, the project is 2/3 housing, and construction workers are paid union wages, while the city’s alternative has no such requirements and could be used for luxury condominiums atop an office building.  The proposal also relaxes the 50 foot height limit in certain cases, despite a strong history of community support to maintain it.

Remember “trickle-down economics?”  It’s the claim that delivering substantial financial benefits to those at the highest income levels eventually stimulates overall economic growth and yields commensurate benefits to the rest of society.   As tried by Reagan in the 1980s, Republican Governor Brownback in Kansas in 2012, and congressional Republicans and Trump in 2017, trickle-down economics is largely considered a failure.   The housing proposal coming to Council is Palo Alto’s own version of trickle-down economics, offering numerous cost-savings and benefits for developers but no guarantee that more housing will be built or rents reduced.  It cloaks giveaways to a small favored group as if these will help the general public, who then get little benefit but are saddled with long-term impacts.  It’s the wrong approach.

You can help.  Email the Council at and local newspapers.  Please also attend if possible the November 26 Council Meeting, where this item is on the agenda for 7:15 pm. In your own words, urge the Council and public to:

  • Not approve the proposed ordinance
  • Insist on meaningful housing reform, such as allowing future office construction only when sufficient new housing is built as well, or taking away commercial entitlements.
  • Offer incentives only for new housing, not to existing buildings
  • Require a proper Environmental Impact Study, including of parking and open space reductions
  • Acknowledge current parking shortages and not make them worse
  • Don’t create more loopholes and developer giveaways
  • Wait for the VTA project results to see if increasing density and reducing parking succeed in lowering housing costs

Looking Ahead

City may help oversized downtown buildings add roof-top decks

On November 19, council will vote on a developer-initiated proposal to amend the zoning code, allowing downtown buildings that exceed current development standards to add extra floor area to create access to rooftop decks. Requested by the local development firm Thoits Brothers, the zoning change would apply to all buildings in the community subdistrict of the Downtown Commercial District zone that currently exceed the 50′ height limit and are located at least 150 feet from a residential zone (seven buildings in total).

Concurrently, council is being asked to approve a Conditional Use Permit for a 2,660 square foot roof-top deck at Thoits’ five story building at 285 Hamilton Avenue (across the street from City Hall). The roof deck would be for the exclusive use of ground floor tenant HOUZZ. Because it would not be open to the public, city staff expects that the roof deck will not generate additional car trips or parking demands. Amplified sound will be allowed, but only if not audible beyond the site boundaries. 

The Planning and Transportation Commission voted 4-2 (Lauing and Summa dissenting) to recommend approval, but according to staff the PTC did not strongly support the zoning changes, citing concerns about using zoning to benefit of a specific project by tying it to such a small subset of eligible buildings. Staff’s response was to offer council an alternative that would grant the extra footage not only to oversized buildings that exceed the height limit, but also those that exceed allowable floor areas, regardless of height. Public comment at the PTC questioned the rationale behind changing the zoning code to worsen the impacts of buildings that are already bigger than city policy allows.

Far-reaching Housing Ordinance moves to City Council

Largely under the radar, city staff and the Planning and Transportation Commission have been working since April 2018 on an overhaul of the city zoning code to create a variety of incentives for new housing construction. The result is a Housing Ordinance that will go to City Council for adoption on November 26. 

Staff describe the proposal as a “modest step” aimed toward shifting redevelopment interests to housing, but suggest throughout the staff report that the new incentives are likely insufficient to alter developers’ preference for commercial projects. Instead, they say decreasing office floor area or significantly greater increases in standards for height limits and Floor Area Ratio (the ratio of usable floor area in a building to the square footage of the lot) may be required to move the needle in favor of housing. Whether this “modest” proposal succeeds or not, any neighborhood impacts it creates will have lasting effect. Not surprisingly, as shown by the guest commentary above, residents will likely beg the question whether the return on investment is worth the risk.

Unfortunately, that may be difficult to evaluate. The proposed ordinance is technical and complex, stretching across many sections of the zoning code. While the staff analysis describes how proposed changes can benefit housing development, there is little explanation or assessment of the trade-offs for the community. Furthermore, due to multiple council recusals, the council discussion risks being more convoluted than clarifying.  Palo Alto would well benefit (and council may build stronger community support) from a layman’s explanation of what the various policy changes are and what they will mean for regular folks.

Major provisions include:

  • Reduces parking requirements, including for downtown and California Avenue retail in mixed use projects.

  • Streamlines review process, eliminating review by the Planning Commission and City Council (except on appeal).
  • Increases residential Floor Area Ratio standards in commercial zones by a factor of two to three.

  • Allows roof decks to qualify for up to 75% of the usable open space requirement for the multi-family residential portion of downtown projects, up to 60% for California Avenue or El Camino Real projects.
  • Eliminates residential density standards (units per acre) in commercial mixed-use districts; In multi-family zones, maximum density is raised and minimum densities are established; Existing overly dense residential rental projects can retain excess density upon redevelopment.
  • Exempts 100% affordable housing projects from retail preservation requirements except in the Ground Floor and Retail combining districts.
  • Sets a maximum average unit size of 1,500 square feet downtown.

In addition, the Housing Ordinance proposes a new Housing Incentive Program to offer waivers that provide a local alternative to the State Density Bonus law (which entitles projects that include affordable housing to extra square footage). The HIP waivers would allow for more extra floor area than the State Density Bonus, but would retain an opportunity for architectural review.

City moves toward long-term outsourcing of Rinconada Pool.

City staff is asking City Council on November 26 to approve a five-year, revenue sharing contract to outsource management of Rinconada Pool to Team Sheeper, a professional third party aquatics service provider. Team Sheeper took over management of programs and operations at the pool in 2017 under a one-year contract. Despite early public concern about outsourcing the pool, staff reports that it has heard favorable response from the community about moving towards this contracted aquatic services model and 2018 public outreach efforts showed generally positive support for Team Sheeper’s management of the pool.

However, ongoing conflict regarding safety compliance by Rinconada Masters Swim team, which subcontracts to operate the Masters Swim program, has resulted in an “incompatible working relationship” according to staff. If Team Sheeper is awarded the long term contract, Rinconada Masters team will not be offered a subcontract to oversee masters programming. Team Sheeper has committed to offer a masters program that will serve both current and future masters swimmers at nearly the same times currently offered and with similar or reduced pricing.

The revenue sharing terms allow Team Sheeper to collect all customer payments, across all programs, and remit gross revenues of as much as 12% to the City of Palo Alto, depending on total revenue collected.

Council to reconsider two city ordinances that stand in the way of converting downtown’s President Hotel Apartments into a boutique hotel.

On December 3, City Council may seal the fate of the 75-housing units that have long occupied the President Hotel on University Avenue. This past summer, AJ Capital announced that it had purchased the President Hotel Apartments with the intention to convert the building into a boutique hotel. Every residential tenant in that tight knit community received notice of eviction and the city faced the loss of 75 small, naturally affordable housing units in the heart of downtown. Palo Altans citywide joined President Hotel residents in seeking help from the city to preserve the housing and soften the impacts on displaced tenants.

Renter Assistance

City staff concluded that AJ Capital was within its rights to evict the tenants, but that some renter protections could be achieved through city action. Council moved quickly to enact an urgency ordinance, as well as a permanent ordinance, setting standards for relocation assistance that must be provided to renters evicted from multi-family housing projects of 50 units or more, including the President Hotel Apartments.

Zoning code protections

As for housing preservation, staff determined that zoning rules regarding grandfathered use and facilities preclude conversion of the oversized and under-parked, long-time residential building to a primarily non-residential use – unless it is brought into compliance with current development standards regarding height, floor area, density, parking, etc. In addition, it appears that conversion of such a sizable building to hotel use could exceed the city’s Downtown Cumulative Non-Residential Development Cap. Under the Downtown Cap ordinance, exceeding the limit would trigger a one-year moratorium on all non-residential development downtown while the city considers alternate strategies to manage commercial growth and its impacts.

In January 2017, a narrow council majority voted to eliminate the Downtown Cap from the Comprehensive Plan. However, no action was taken to repeal the Downtown Cap ordinance until late July 2018, (shortly after the public was made aware of AJ Capital’s intentions for the President Hotel Apartments), when staff presented the Planning and Transportation Commission with a recommendation to repeal the Downtown Cap ordinance. The PTC rejected the recommendation, on a 4-0-1 vote (Alchek abstaining, Guardias and Riggs absent), arguing that repeal would run counter to the priorities of encouraging more housing and protecting residential neighborhoods from the traffic and parking impacts of too much commercial development.

December 3 Action

Now, as council wraps up its lame duck session, it nonetheless appears poised not only to repeal the Downtown Cap ordinance, but also to amend the grandfathering rules that currently prevent conversion of the President Hotel Apartments (and possibly other nonconforming residential buildings) on December 3. No review by the Planning Commission was done, but the city seeks to bypass that requirement and pass the amendment on the grounds that quick action is necessary “to preserve the public health, safety, and welfare.”

Meanwhile, city staff has been in negotiations with AJ Capital, and the new owners offered remaining residents new lease agreements providing additional transition benefits until they leave. The new lease agreements are contingent on city action to change the zoning code in AJs favor by December 18 “so that it permits the conversion of a grandfathered non-conforming use or facility.” Tenants who accepted the new agreement may neither contest AJs application process nor take any other action that could hinder or delay the project.

Calendar of Notable Upcoming Action

November 19, 2018

Recycled Water Expansion: Council will hold a study session regarding expansion of the recycled water system and other water reuse opportunities. Beginning at 7:00 pm (City Hall). Click here for staff report.

Roof-top Decks Downtown: Council will vote to amend the zoning code to allow extra Floor Area to provide access to roof-top decks in the Commercial Downtown (Community) district and approve a conditional use permit for a 2,600 square foot roof top deck atop a commercial building at 285 University Avenue for the exclusive use of HOUZZ, the tenant currently occupying the 2nd through 5th floors of the building. Beginning at 8:30 pm (City Hall). Click here for staff report.

Utilities Smart Grid Plan: Council will vote to accept the Utilities Smart Grid Assessment and Utilities Technology Implementation Plan, including advanced metering infrastructure-based Smart Grid systems to serve electricity, water, and natural gas utility customers. Beginning at 9:30 pm (City Hall). Click here for staff report.

November 26, 2018

Housing Ordinance: City Council will consider amendments to the zoning code that would reduce development standards related to parking, Floor Area Ratios, height limits, unit size and density, usable open space, and retail preservation, in order to incentivize construction of more housing.  Beginning at 7:15 pm (City Hall).  Click here for staff report

Animal Shelter: Council will vote to approve an operating agreement with Pets in Need, interim capital improvements and budget amendments in the General Fund and Capital Improvement Funds for future operation of the Palo Alto Animal Shelter. Beginning at 9:00 pm (City Hall). Staff report will be available on November 20, 2018.

Rinconada Pool Outsourcing: City Council will vote on approval of a Five-Year Operating and Revenue Sharing Agreement with Team Sheeper to manage Rinconada Pool. Beginning at 10:00 pm (City Hall). Click here for staff report.

November 28, 2018

Rail Grade Separation: The City will host a community meeting to review grade separation alternatives for the Charleston Road and Meadow Road rail crossings. 6:00 pm – 8:00 pm (Mitchell Park Community Center, El Palo Alto Room).

November 29, 2018

Stanford GUP – Community Benefits: Santa Clara County staff and Supervisors Simitian and Chavez will host a Community Listening Meeting to hear from the public about the range and type of community benefits that should be considered in a negotiated Development Agreement regarding Stanford’s application for a General Use Permit for its proposed 2.3 million square foot academic expansion. Beginning at 6:30 pm (City Hall). Click here for more information.

December 3, 2018 (Tentative)

Downtown Office Cap: Council is tentatively scheduled to vote on repealing the Downtown Cumulative Cap on non-residential square footage. (TBD)

President Hotel: Council is tentatively scheduled to amend Section 18.18.120 of the zoning code, Grandfathered Use and Facilities, that formed the basis of the city’s conclusion that the President Hotel could not legally be converted from residential to hotel use. (TBD)

Commission Appointments: Council is tentatively scheduled to vote on new appointments for two seats on the Planning and Transportation Commission, three seats on the Architectural Review Board, and three seats on the Parks and Recreation Commission. (TBD)

December 10, 2018 – (Tentative)

Council is tentatively scheduled to consider

  • Next steps on the Roth Building (potential Palo Alto History Museum)
  • Airplane noise
  • Construction contract for California Avenue parking garage

City Council Winter Break: December 18, 2018 – January 7, 2019