Palo Alto commercial builders will have to pay significantly more to support the city’s affordable housing projects after city council voted Monday night to increase the city’s “impact fees”.
In a vote reminiscent of one of the council’s deepest political divisions over the past decade, the council voted 5-2 to increase the city’s impact fee for commercial and research projects and development from the current level of $ 39.50 per square foot to $ 68.50 per square foot.
Proponents of change have argued that change is needed to cope with the impacts of commercial growth on the region’s housing stock, especially when it comes to affordable housing. Board member Eric Filseth, who led the charge on the fee hike, suggested that Silicon Valley has fabulously benefited from the tech boom while failing to make the kinds of housing and transportation investments that are needed. to ensure long-term prosperity. Requiring tech companies to contribute more to affordable housing is one way to address this problem, he argued.
“If we’re going to do this in a long-term sustainable way… then we and all the peer cities need to get out of kick-it-down-the-road mode and get into a mode where if we build something, we ‘be clear about it. real impacts and we have a regular process in place to fund them, ”Filseth said.
The debate is far from new. In 2016, city council voted to dramatically increase impact fees for affordable housing, but its decision was overturned in 2017 by a slim majority of the newly elected council. Instead of increasing the fee from $ 20.37 to $ 60 per square foot, as was originally proposed, council voted 5 to 4 to set the fee at $ 35 per square foot (it has since been increased to $ 39.50).
Filseth, Mayor Tom DuBois and council member Lydia Kou were all in the minority in the 2017 vote and all had supported the return to the higher amount. They pointed to Santa Clara County, which passed a $ 68.50 fee for affordable housing when the supervisory board reviewed Stanford University’s plans to expand college space and argued that it was time to reconsider the matter.
In June, Filseth and Kou submitted a memo from colleagues who advocated for a fee hike and cited the various projects that have benefited from the city’s affordable housing fund, including the preservation of Buena Vista Mobile Home Park and Wilton Court, a 58-apartment complex for low-income families and people with disabilities under construction.
“Since the demand for housing, including affordable housing for low- and moderate-income residents, is driven primarily by job growth, it makes sense to fund affordable housing subsidies from that growth in employment, through business development impact fees that reflect that impact, ”the memo states.
Not everyone is convinced that the new fees are a good thing. Charlie Weidanz, CEO of the Palo Alto Chamber of Commerce, suggested that the fee proposal, coupled with the city’s existing caps on business development and its exploration of a new business tax, would hamper the business community in the city.
“And if businesses quit or downsize as a result of these tax measures, the city will not only lose tax revenue, but also restaurants and hotels that depend on income generated by employees and business travelers will be significantly affected. “Weidanz said.
Stanford University has also expressed concerns about the higher rate. Jean McCown, associate vice president of government affairs, noted in a letter that most neighboring towns have much lower affordable housing impact fees, typically between $ 15 and $ 30 per square foot. Redwood City has a fee of $ 20, while Menlo Park has a fee of $ 18.
“Significantly higher fees are likely to discourage the types of businesses that would be desirable to have in Palo Alto, such as capital intensive businesses in various areas of research and development that contribute to a stable economic ecosystem.” McCown wrote. “We are concerned that the increased fees will translate into less investment and partnerships in Palo Alto.”
Board member Greg Tanaka, who was part of the 2017 majority that reversed board action in 2016, shared his concerns. He pointed to Tesla’s recent decision to move its headquarters to Austin and suggested that the city’s startup culture is suffering.
“I think it’s a real wake-up call that innovation is leaving our city and it’s not something that comes naturally,” Tanaka said. “By making it more and more difficult to do business in our city, we will lose this innovation.
“Some might think Palo Alto will always be the most desirable place and that just isn’t true.”
While board member Alison Cormack joined him in his dissent, the rest of the board backed the higher fees, which are based on a linkage study the city recently commissioned from its consultant, Strategic Economics. Deputy Mayor Pat Burt recalled the council’s debate on fees in 2016 and 2017 and argued that by reversing the higher fee increase, the majority of council had hampered the city’s ability to support housing affordable.
“Millions of dollars for affordable housing have been lost due to the overthrow of what was then described as a ‘pro-development’ council majority which took office in 2017 and cost our community huge sums to fund. affordable housing, ”said Burt. “I’m happy that this council… is committed to helping fund this affordable housing the way it needs to be.”