After two years of sluggish commercial growth, the Palo Alto City Council moved Tuesday to loosen the city's cap on office development so as to give builders more flexibility.
The City Council largely agreed that the city's cap on office and research-and-development projects has been largely successful -- for some, a little too much so. Adopted in October 2015, the cap applied to three prominent commercial areas -- downtown, the California Avenue business district and along El Camino Real -- and limited new development in these areas to 50,000 square feet per year.
To date, the cap has not been tested. In 2016, the city had three projects (a research-and-development project at 2747 Park Blvd. and mixed-use projects at 2585 and 3225 El Camino Real) in the areas covered by the cap that brought 40,863 square feet of new office space, well below the threshold. There have been zero projects so far this year.
Given that the aim of the cap was to meter or "pace" the rate of growth and address the traffic and parking impacts of new office projects, some council members saw these results as vindication for the ordinance.
Even those council members who are normally amenable to growth agreed that the cap should be retained well after the current interim ordinance expires in November. Thus, the council unanimously voted to extend the temporary ordinance until June and to ultimately replace it with a permanent law that would maintain both the 50,000-square-foot limit and the existing boundaries.
There were, however, some sharp disagreements when it comes to the details of the new permanent law. One change, which the council approved by a 5-4 vote, will allow builders to "roll over" unused square footage in years where there is little growth. This means that if the city gets 25,000 square feet of new office space in one year, it could allow 75,000 square feet in the subsequent year. Similarly, a year in which Palo Alto adds no new office space in the three designated areas could be followed by one in which the city approves projects totaling 100,000 square feet.
The change, which was championed by Mayor Greg Scharff, squeaked by with a 5-4 vote, with Vice Mayor Liz Kniss and Councilmen Adrian Fine, Greg Tanaka and Cory Wolbach all joining him. The four council members who lean toward slower-growth policies -- Tom DuBois, Eric Filseth, Karen Holman and Lydia Kou -- all opposed the change.
Scharff argued that the roll-over provision would still allow the city to meter its growth, while also giving builders more flexibility after slow years.
"Having the flexibility on that I think is really important for people ... so that we don't have these queues that get backed up after we go through a recession where you have no office space developed," Scharff said.
He also noted that allowing the roll over would effectively give developers a two-year window to get their projects through the planning pipeline, rather than forcing them to race to meet the annual deadline.
"We can blithely sit up here and say, 'It's OK if someone's project gets delayed,' but the cost to that person and the uncertainty involved is huge dollars," Scharff said.
But Holman called the rollover proposal "counterintuitive," because it would facilitate dramatic spikes in office developments in years following little or no growth. This, she said, is exactly what the ordinance is trying to forestall.
Filseth also opposed Scharff's idea and called his argument "by and large development-centric" rather than "resident-centric." DuBois and Kou also argued against the rollover provision, which nevertheless advanced by a single vote.
By the same 5-4 vote, the council scrapped a provision in the office-cap ordinance that required development projects to compete with each other for approval in years where growth in the three designated areas exceeds 50,000 square feet. The competition, often referred to as a "beauty contest," would have given preference to those projects that score highest on factors including sustainable design, mitigation of traffic impacts and public benefits such affordable housing.
Instead, the projects will now proceed toward approval on a first-come, first-served basis.
Kniss, who made the motion to eliminate the competition, argued that it's nearly impossible for the council to decide whether a proposed development is attractive or not.
"To somebody it will be absolutely gorgeous, to someone else it will be an unattractive elephant," Kniss said.
DuBois and Filseth both disagreed, with Filseth saying that removing the contest before it's ever been tested is "premature" and DuBois pointing out that the scoring system for proposed competition goes far beyond the buildings' appearances. The scoring system that was developed for the contest, he said, is "really about job growth and impacts on the city" and the idea behind it was to incentivize the types of developments that the community wants to see.
"By removing that, we're diluting the purpose of the ordinance," DuBois said.
On other issues, the council marched in lockstep. One issue on which there was widespread agreement is that Stanford Research Park should remain exempt from the office cap. While Kou initially proposed including the sprawling park in the capped area, she ultimately voted with the rest of the council to exclude it.
Tiffany Griego, the park's managing director, lobbied for the continued exemption and touted the park's recent efforts to reduce traffic through a host of "transportation-demand management" programs, including carpool incentives and shuttles.
"SRP employers are concerned because their business needs can evolve quickly, and when they do, companies must be able to grow within a clear, predictable and consistent set of parameters," Griego and Stanford Associate Vice President Jean McCown wrote in a letter. "Companies come to Stanford Research Park in Palo Alto because they believe the City will permit them to improve and expand their aging facilities (up to the maximum square footage allowed under zoning) in order to remain competitive in their respective industries."
While Griego asked the council Tuesday to keep the existing boundaries, Chamber of Commerce CEO Judy Kleinberg went further and argued that the office cap should be eliminated entirely. The building boom that the office cap was intended to temper is simply not there, she said.
"Office development did not reach the 50,000 number in either of the cap's two years of existence," Kleinberg said. "It's unclear if it was effective."
DuBois saw things differently. The whole point of the ordinance was to guard against "massive spikes of construction," he said.
"The fact that it hasn't been triggered isn't a knock against the ordinance," DuBois said. "I think it was part of the point of the ordinance."