City delves into economics of Jay Paul Co. proposal
Original post made on Sep 13, 2013
Read the full story here Web Link posted Friday, September 13, 2013, 12:10 PM
on Sep 14, 2013 at 11:51 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!
on Sep 15, 2013 at 7:32 pm
There are also a number of hard to define costs that the City would have to deal with, called externalities. These sorts of expenditures include the need for public safety head count, which includes fire suppression support.
Even though the building will add $200+M (probably) in terms of new property taxes, most of the new taxes will go to the PAUSD. The City will see only about 9% of any new taxes--$90K per $1M in asssessed value.
Given a building this size, there will doubtless be various calls for Staff services, which might not occur for a while.
There will no doubt be calls for more housing, both low-income, and market rate.
Companies leasing at this site that want their employees to use Caltrain Go-Passes will be transferring a significant portion of the cost of their employees transportatioh costs to the general public--via sales tax transfers to Caltrain.
It's not clear that there would be a direct demand for education services for employees of this building who do not live in Palo Alto, but there is always a possibility that future employees might try to illegally enroll their children into the PAUSD.
Some of these costs can be seen to exist, although they might be difficult to fully estimate at this time. If the City doesn't acknowledge these externalities, and make some accounting for them in their economic analysis--then this effort will not be of much value to the taxpayers as it could be.
on Sep 17, 2013 at 10:55 am
By this sort of process, we could economically justify murder, euthanasia, and prostitution.
Why doesn't City Council start with asking whether any of this is a good or bad idea? Thinking about our town as a whole, and maybe (I know it's so hard) listening to what residents want for their town? (Rhetorical question - they don't because they aren't looking for answers, only justifications to do what they want to do to us for their developer friends.)
The guide for whether it's a good idea should be the General Plan. But, oh, that's right -- City Council and staff cherry pick it to support whatever they want to do and ignore everything that doesn't, failing to look for consistency. Failing that, they sneak things into the general plan to give them permission (like rezoning Maybell, or densifying South Palo Alto).
I want a City Council made up of people from representative districts around town! And at the moment, anyone but these $&()^$s.