In a bid to ease traffic congestion and pay for needed transportation projects, Palo Alto is preparing to significantly increase its traffic-impact fees for new developments.
Seeking to add some teeth to the city's traffic-management program, the City Council is considering charging developers a one-time fee of $8,093 for every net new car trip that their building would produce during the evening rush hour. The fee would apply to developments in every part of the city and would replace the current system, which includes four different fees.
The proposed fee, which the City Council's Finance Committee discussed and unanimously endorsed Tuesday night, would be among the highest in the region, according to city staff and consultants. Mountain View and San Jose each charge somewhat higher traffic-impact fees for commercial developments, but in each case the fees only apply to developments in specific areas of the city.
Today, Palo Alto has one citywide fee of $3,575 for each evening peak-hour car trip the development generates and three other fees that apply to specific parts of the city. The highest total fee is charged in Stanford Research Park, where in addition to the citywide fee, developers have to pay $12.42 per square foot for new projects. Similarly, projects in the San Antonio/West Bayshore area and along the Charleston-Arastradero corridor are assessed fees of $2.56 and $0.38 per square foot, respectively.
In each case, the fees are used to pay for transportation projects in the area where the construction is occurring.
Under the new program, the three area-specific fees will be replaced with a single citywide fee (in the case of Charleston-Arastradero, the current fee would end once the city completes its long-planned road improvements).
The $8,083-per-trip fee was derived from a "nexus" study that was recently completed by the consulting firm Hexagon. The study considered the impact of new Palo Alto developments on traffic between now and 2030, the estimated the costs of transportation projects that would ease the added congestion, and the "fair share" that new developments would have to contribute.
The expected city growth in the nexus study is based on Palo Alto's recently updated Comprehensive Plan, which calls for between 3,545 and 4,420 new housing units and between 9,850 and 11,500 new jobs. Hexagon estimated that 2,855 net new car trips would be generated as a result during the peak afternoon commute hours, a figure that would comprise about 5.7 percent of citywide traffic in 2030.
Because the new fee would be commensurate with the traffic that new buildings create, the developments would be expected to pay for about 5.7 percent of the city's share of new transportation projects, or roughly $23 million.
The higher fee is aligned with the city Comprehensive Plan's broad goal of getting commuters to switch from cars to public transit, bicycles and other modes of transportation. Among the most significant new programs in the Comprehensive Plan is a policy requiring all new developments that generate 100 or more peak-hour trips to adopt "transportation demand management" (TDM) plans for reducing traffic congestion.
Specific targets for traffic reduction vary by area of the city. Developments in downtown, where public transportation is plentiful, would be required to reduce car trips by 50 percent of the total that would otherwise be produced, while those in the California Avenue area would need to shrink their projected number of trips by 35 percent. In the Stanford Research Park and along El Camino Real, the trip-reduction goal is 30 percent. Everywhere else, it's 20 percent.
The Comprehensive Plan policy also requires developers to monitor the success of their TDM plans, submit annual reports to the city and pay a fine if they don't meet the targets.
But even if developers succeed in getting their tenants to take alternative forms of transportation, most will still see their fees rise. Jane Clayton, a consultant with Hexagon, estimated that the fee for a 50,000-square-foot office building in the California Avenue area would rise from the current level of about $175,175 to $396,067. A multifamily housing development with 80 units on El Camino Real would be charged $282,905 under the new fee structure instead of the current $125,125, Clayton estimated.
In some cases, however, the fee would become lower. Because Stanford Research Park projects would no longer have to pay a separate fee based on square footage, their overall assessments would decrease. Clayton estimated that replacing a 100,000-square-foot research-and-development building with a 200,000-square-foot office development would generate $824,466 in traffic-impact fees, down from the current level of $1.2 million.
Once collected, the money would be earmarked for projects on the city's $955-million wish list of needed transportation improvements, which includes about $600 million for separating the Caltrain tracks from local roads. The new study assumes that the city's share for funding these wish-list projects will be about $405 million, including $250 million for reconfiguring the railroad intersections.
Other projects that would be funded by the new fees include bike boulevards, new traffic signals on El Camino Real and Embarcadero Road, road improvements at Page Mill Road intersections, an "enhanced bikeway" along San Antonio Road and reconstruction of the Caltrain undercrossing at California Avenue.
To date, transportation-impact fees -- two of which were adopted in the 1980s, the others which were adopted in 2005 and 2007 -- have generated about $11 million for transportation projects, with $4.5 million coming from the Stanford Research Park, according to a report from the city's Department of Planning and Community Environment.
Though members of the Finance Committee acknowledged that the fees will only pay for a small fraction of the city's transportation needs, they supported the change to a single fee -- which is expected to both bring in more funding and simplify the process of assessing and collecting fees.
"Administering one citywide fee is a lot simpler than four overlapping fees," Planning Director Hillary Gitelman said.
City Councilman Greg Tanaka said he was concerned that the new citywide fee could create problems for small projects in south Palo Alto, where property owners often don't have the resources that downtown firms enjoy. But Chief Transportation Official Joshuah Mello noted that downtown projects will have to face stiffer traffic-reduction targets and will have to spend significant sums to get their tenants out of cars and into using other modes of transit.
"The TDM demands would be fairly stringent," Mello said. "The money they'd spend on TDM would be close to what they'd spend to pay that (traffic-impact fee) for that trip."
The committee also agreed to make a few exemptions to the new citywide fee. Retailers would be required to pay 50 percent of the fee, while affordable-housing projects and day care establishments would be exempted entirely.