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With tax revenues plunging and businesses struggling to stay afloat, Palo Alto’s elected leaders agree that they will need plenty of help to reverse the trend and restore prosperity.
There is little consensus, however, on what exactly should be done. Some, including Palo Alto City Council members Lydia Kou and Greer Stone, argued during a June 1 discussion that the city needs to hire a dedicated economic coordinator to steer its recovery. The council majority, including council members Alison Cormack and Eric Filseth, supported a more cautious approach: hiring a consultant to develop an economic strategy — a document that would inform the city’s decision on hiring an economic manager.
Council member Greg Tanaka, for his part, suggested at the time that the city reconsider some of its existing restrictions, including a citywide prohibition on big-box stores like Costco and Walmart.
The debate has only grown in urgency since June, with a new analysis showing sales tax receipts falling more precipitously in Palo Alto than in other area jurisdiction. The report from Avenu Insights & Analytics, indicated that Palo Alto sales-tax revenues dropped by 27.3% between the fourth quarter of 2019 and the fourth quarter of 2020, far exceeding the decrease of 7.2% statewide. The pain was particularly acute in the hard-hit commercial areas of downtown, El Camino Real and Midtown, where sales tax receipts dropped by more than 40% over this period.
A recent survey conducted by the city underscores the variety of challenges facing local businesses. Of the 65 businesses that responded to the survey, 67.7% cited the difficulty of retaining or hiring employees as one of their top three challenges. Also scoring high in the rankings of challenges were the high cost of supplies (40%); a lack of resource for marketing and promotions (38.5%); and the need to pay deferred or increased rent (30.8%).
When business owners were asked to name the top three resources that would be most helpful, 53.8% respondents chose “finding employees,” while 38.4% said “access to capital.” The next two most popular answers were “assistance with marketing and promotions” (24.65) and “assistance with city, county, state and federal regulations (21.5%), according to a new report from the Administrative Services Department.
The council will review these survey results on Monday as part of a broader discussion of next steps. Council members will also consider a staff recommendation to hire an economic coordinator, a position that will cost between $245,000 and $290,000, according to the department.
To date, the council has been tentative to make the new hire. During the June 1 meeting, Filseth suggested that the council needs to be “very careful and methodical about who we bring into the organization” and declined to support a motion from Kou and Stone to move ahead with recruitment for the new position (the motion died by a 3-4 vote, with Vice Mayor Pat Burt joining Kou and Stone). Cormack also advocated for a more cautious approach.
“It’s not that I don’t think we should have someone on staff,” Cormack said. “It’s that we don’t have the ongoing money today and that I’m not sure what level to hire at.”
Some of Palo Alto’s economic problems had preceded the pandemic and are expected to stretch well into the future. Fry’s Electronics, once one of Palo Alto’s top revenue generators, officially left in December 2019, leaving a glaring vacancy at 340 Portage Ave. CineArts, a popular movie theater in Palo Alto Square, narrowly averted closure five years ago, only to leave Palo Alto Square during the pandemic. And the owners of Town & Country Village, which saw its vacancy rate climb above 20% during the pandemic, argued that broad retail trends — namely, a shift toward online shopping — have as much to do with the recent downturn as the recent health restrictions.
At the same time, the recent shift to remote working has had a profoundly negative effect on business in Palo Alto, a city known for its high number of jobs. During the June 1 discussion of economic development, Charlie Weidanz, CEO of the Palo Alto Chamber of Commerce, urged the council to explore as part of its effort what the “next phase of hybrid workforce” will look like.
“We may not see the 85,000-plus workers that come in, so how do retail, hospitality, restaurants and hotels succeed with a possible reduced daytime population? What are the issues around zoning and permitting that are restrictive to some of the businesses to be successful?” Weidanz said.
‘What are the issues around zoning and permitting that are restrictive to some of the businesses to be successful?’
Charlie Weidanz, CEO, Palo Alto Chamber of Commerce
If hired, the city’s new economic development coordinator will be charged with assisting businesses with matters such as permits, grant applications and compliance with health orders. They will also be charged with tracking vacancies in commercial districts and with maintaining business contact information. Other functions could include facilitating stakeholder meetings with the business community and providing “conflict resolution” between businesses and the city’s Building and Fire departments.
Some current and former council members believe the hiring of an economic development coordinator is long overdue. Former Mayor Karen Holman, a longtime proponent of adding the position, urged the council in June to move ahead with the hire. Most neighboring cities, she said, have dedicated staff that help recruit businesses, track trends and help facilitate “place making” in commercial areas.
“We have here a history of hearing that some business or other is leaving — often hearing too late to do anything about it, even if the skills existed in the city’s toolbox,” Holman said. “Often reasons are hearsay, not an analysis of market changes, personal decision or rent issues and the like.”
But while Burt, Kou and Stone all supported hiring someone to take charge of the city’s economic strategy, they fell one vote shy of advancing the proposal. The council then voted 6-1, with Stone dissenting, to commission an analysis of Palo Alto’s business shifts and strategies to address the pandemic, bolster local hotels and bolster revenues.
Kou, who made the motion to hire an economic manager, said the city should not “leave it to chance and to market forces to dictate what we’re going to have here as an economic plan for Palo Alto.” Stone argued that even if the city moves ahead with a consultant study, it will still need to have someone at City Hall to enact the study’s recommendations.
“No matter how good these strategies may be … if we then don’t have city staff with the expertise to be able to implement them, then what’s the point?” Stone asked.
A plan? Does the city mean like some economic planning? Maybe it should reduce costs (reduce labor costs!), reduce regulations, be more pro business, and generally get out of the way. And btw, no tax on businesses! How counterproductive is that? And don’t even think about additional taxes for residents! Hiring some new expensive person just means more city pension costs. Forget it. Allow medical offices to rent at town and country and reduce vacancies! Times have changed, reduce your bloated budget!
Losing Frye’s is a blow. Now we need to get a new tenant in Ciné Arts cinema. This movie thester is an important cultural asset to the community. Amazon and buying online harmed Frye’s. Yet the Stanford Mall is thriving and Town & Country is jumping. We do not need urgent care, botox etc. on the ground floor at T&C.
Do you really want to see ambulances rushing in while your eating a meal? Palo Alto Medical Foundation is next door. It makes no sense to upzone retail for Ellis’s T&C to permit medical services. The hire for economic advisor must be vetted and not represent the interests of the real estate developers downtown. Palo Alto is alone on the peninsula as a city with no business tax. Shameful. The CC will not tax small businesses but tax the big players including Visa and Amazon. My concern is the CM will hire an economic advisor who is in the pocket of real estate players in town.
1) Tax Tesla and other unicorns rather than extend the 50-year tax haven;
2) Hire Scott Amendola, who is playing three times this month for mayor Tom’s initiative, to play Weekly at Lytton Plaza;
Yes, big box stores are overdue and have been prior to the pandemic.
We have all been shopping in big box stores and online. Pandemic shopping has been for different items many of which are just not available in Palo Alto and had to be bought elsewhere. e.g. Summerwinds was unable to open and yet it is basically outside shopping and yet the same items were available in ACE Hardware and Home Depot – both outside Palo Alto.
Useful, affordable shopping has always had to be done outside and the pandemic made it more noticeable. With local retail forced to close not only did the businesses lose customers, the City lost tax revenue.
Getting CineArts up and running again would definitely help. Also anything recreational that causes us to spend time near at home doing something fun and then of course buying food nearby would help.
Palo Alto has not been helping residents in the way these two sectors have been managed. Now it is definitely time to get PA residents to spend our money near to home and bring more tax dollars into our own coffers rather than Mountain View or Menlo, or wherever.
“The council will review these survey results on Monday as part of a broader discussion of next steps. Council members will also consider a staff recommendation to hire an economic coordinator, a position that will cost between $245,000 and $290,000, according to the department.”
What an absurd amount of money! It doesn’t take a genius to figure out that replacing retail with offices — many with their own cafeterias– that pay nothing into the coffer will depress the economy. It doesn’t take a genius to take field trips to neighboring communities like Redwood City, Menlo Park and Los Altos to check out what they’re doing to keep their downtowns vibrant with PREDICTABLE regularly scheduled events that people can remember and attend.
It certainly isn’t rocket science to know we’re worse off than surrounding communities because of our ridiculous over-reliance on the commuters who outnumber us 4:1 and business travelers who aren’t traveling because they’re safely Zooming.
Past city councils and city “leaders” past and and present should be held to account for ther decisions. Evicting 85 President Hotel long-term residents who used to spend money downtown for a high-end under-parked hotel comes to mind as one of their worst decisions.
You can send that $250,000+ salary to my Swiss bank account and I’ll give you a break on our unfunded pension liabilities.
I am in favor of the City hiring an economic development manager, but not one with such a narrow portfolio. What is needed is someone to help guide the City more broadly to determine how to position Palo Alto vis-a-vis other nearby communities. What would make Palo Alto different from Stanford Shopping and Town & Country? How many restaurants and private gyms can Palo Alto support if we do not have 85K commuters going in to work? In other words, how do we make Palo Alto a great place for residents to live and shop in and a great place for others outside Palo Alto to make a trip for shopping or dining? I go to downtown Los Altos to shop all the time rather than California Ave (because there are few retail stores left on California Ave, having been driving out by the restaurants and gyms) and definitely downtown Palo Alto which is hard to find a place to park and know where to park given the street closure and which is dirty and not very pleasant. It is a place to get in and out of as fast as possible. Downtown Los Altos — small but diverse retail environment, easy parking, clean and spacious. Hands down the best choice right now.
What draws me to shop regularly at T & C and downtown Los Altos is their diverse and useful array of businesses and pleasant places to eat or have a cup of coffee. They are both kept clean and have ample parking. Midtown shopping center has great potential and perhaps it would attract more business interest if it would be cleaned up and maintained.
Big box stores make sense. Those stores were restricted in order to avoid traffic but without them here all Palo Alto residents get in their cars to drive to a big box store in a surrounding city. Hiring another high cost administrator makes no sense. In over 10 years serving on a Palo Alto volunteer committee I was appalled by the small portion of time actually spent by City administrators doing the critical work of their job. More than 50 -60% of their time is spent on wild proposals by the Council or preparing for meetings that are mainly “feel good” meetings for the citizens. Hire a consultant to give the City sound and specific action items to pursue to attract businesses that will benefit PA citizens.
And yet the city just sent a check of nearly a quarter million dollars to a small town, San Juan Lacheo, Mexico to offset OUR use of natural gas, and a total of 3.6 million since 2017 as reported by the Daily Post yesterday. The payments are funded through Palo Alto residents’ energy bills and will be used to pay for people who maintain the forest and supplies for schools. City resource manager Micah Babbitt said” the funds will go further in their local economy and we wanted to show our commitment.” Huh ?
This dire situation falls squarely on SCC Health Director Sarah Cody, and the SCC Board of Supervisors for following Cody’s orders. Under the direction of SCCounty Health Director Sarah Cody, beginning in March 2020, SCC pursued an agressive strategy of unnecessary, arbitrary, ineffectual business shutdowns for months and months, back and forth giving business owners whiplash, until businesses finally said enough and pushed back. In addition, SCC fined its already struggling businesses exponentially more than any other county! San Mateo took a completely different, and more reasonable approach, than SCC Health Dept under Health Director Cody. SCC fined businesses $5million!!! The next highest total from another county was $80k. SCC under Cody’s direction was essentially TRYING to put companies out of business, and they clearly succeeded.
The worst part is that facts show these arbitrary shutdowns created another public health emergency with people out of work, businesses shut down, employees losing salaries and healthcarAll while she remained comfortable in a county job, which ironically she was then given a raise for just doing the job she was hired to do! NEVER EVER EVER again should our county and city allow a Health Director to shut down schools and businesses like this while the laptop class sits pretty at home. The evidence is overwhelming that it was WRONG and Palo Alto will be digging itself out of this mess for YEARS that SCC Health Director Cody created unnecessarily. And who lost the most? Those who had the most to lose. SCCHD Cody business shutdowns were a travesty.
Speaking of our energy bills, so what’s happening to our refunds from the class action suits for the “overcharges” the city’s charged us for the last several years to the tune of $20,000,000 each and every year?? And the have the nerve to say we’re getting a 3.5% rate hike this year and 5% in each of the next 2 following years!
Our City Attorney says that’s fine because we obviously don’t object and even if we did, 11,000 of us would have to “show our commitment” by jumping through multiple hoops to even get our objections registered!
Shocker. Palo Alto Weekly: Are you ever going to reconsider your endorsements? These are the geniuses you encouraged readers to vote for, while we other candidates were “misguided” or “uninformed” when we claimed that the city cannot sustain without expanding its revenue bases by doing what all neighbor cities do and tax the largest businesses that cause the most traffic, contribute most to the housing crisis, and consume the most resources. Now, given your rejection of economic planning, Palo Alto City Council will resort to even more counterproductive “solutions” like bringing in big box superstores…. all to avoid asking Tesla, Alphabet, Facebook, and Palantir to pay the very same business taxes they pay in every city they have offices other than Palo Alto. Do you still think you judged this correctly?
Online name: Over the past six months, City Council has voted to spend approximately $100,000 more on lawyers to defend the lawsuit they already lost, and to delay the payment of the $12 million that the Court ruled that the City of Palo Alto owes us, the residents.
In other words: City Council is spending taxpayer money on its effort to deprive taxpayers of the $12 million that the City of Palo Alto illegally stole from us. What could be lower integrity than that?
Opening University to cars will not reverse an economic slump that is primarily due to pandemic changes in how we live our lives.
The economics that had office workers streaming into town five days a week, spending money at lunch time and in the evenings, is not happening and will not happen until or unless remote working ends.
The economics that had friends socializing after work at a bar or restaurant in a convenient to all location, does not happen when people are working at home and using UberEats for dinner.
The economics that had someone needing new clothes for a social event, an interview, a vacation will not be necessary until all those events return in person in the numbers that they were in before.
The economics that had a family who needed to replace bedlinen or towels with a trip to the big box store, or a list of school supplies, or gift for a baby or bridal showers, will not happen when it is just as easy to buy online and get delivery the next day.
Economically speaking, we were heading there anyway. The pandemic has rushed that. Some will never return to visiting brick and mortar stores ever.
The San Jose Mercury published article today about new shops and stores at Santana Row. An easy solution would be to copy the best practices in competing towns and cities. I vote strpngly for new shop at Santana…… Left Wings Bar…. what could be better than Korean chicken wings and beer?
How about making downtown actually inviting and enjoyable to civilized human beings, by removing the homeless living there? Or is that too much to ask, because the rights of homeless trump all other rights?
I don’t understand why city officials want to hire a new “economic coordinator” and/or an economic consultant to improve the city’s business climate. This sounds like work that should be done by existing staff of the Planning and Development department in coordination with other departments. City officials keep saying they don’t have enough money and need to cut services and staff, so really, what other option do they have? In the middle of a budget crisis, surely using existing staff is the most effective, cost-effective and efficient way to promote economic development in the city.
Does the City have data for vacancy rates at different commercial zones: Downtown, California Avenue, Town & Country, Stanford Shopping Center, El Camino, Mid-Town, etc.? Commercial land usage takes different forms: shops, restaurants, offices, medical/dental, services, etc. The temporary closure of commercial streets to auto traffic benefitted restaurants that could offer outdoor dining, whereas shops reported less patronage. But, how much of the lost shopping revenue was a shift to online? The online shift may not revert to the status quo ante, insofar as it offers genuine convenience and other advantages. Query how revenue decrease and vacancy increase where auto traffic was not reduced (e.g., Town & Country or El Camino) compare to Downtown and Cal. Ave.? This may reveal the extent of new online shopping preferences and suggest that re-engineering of Downtown and Cal. Ave. auto traffic would be a lasting benefit.