EAST PALO ALTO
CITY COUNCIL
STAFF REPORT
DATE: May 17, 2022
TO: Honorable Mayor and Members of the City Council
VIA: Patrick Heisinger, Interim City Manager
BY: Amy Chen, Community & Economic Development Director Elena Lee, Planning Manager
SUBJECT: Ravenswood Business District Specific Plan – Community Benefits and Associated Policies/Programs
Recommendation
That the City Council Provide direction and feedback on:
· Recommended priorities for community benefits from new development in the RBD / 4 Corners Specific Plan area.
· Proposed policies and mechanisms comprising a framework to achieve community benefits desired by the community.
Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:
Priority No. 2: Enhance Economic Vitality
Priority No. 3: Increase Organizational Effectiveness and Efficiency Priority No. 6: Create a Healthy and Safe Community
Background
Since late 2020, the City of East Palo Alto has been working on an update to the Ravenswood/Four Corners TOD Specific Plan. The purpose of the update is to analyze the impacts of allowing an increase amount of office development and housing in the RBD, develop a framework for obtaining community benefits from new development, and ensure that the new development creates a “complete neighborhood” in East Palo Alto.
To date, City staff and the consultant team have met with the City Council on five occasions to receive feedback on critical topics for the amendment to the Specific Plan. Major decisions made during this time included approving of urban design objectives for the RBD, identifying two potential increases in office development to either 2.82 million square feet of office space or 3.35 million square feet of office space, and increasing the number of housing units allowed to either 1,350 units or 1,600 units. This is an increase in the total amount of office development and housing currently analyzed in the 2013 Specific Plan EIR (which was 1.4 million square feet of office/R&D space and 835 dwelling units). However, the amount analyzed is below the total sum of the development applications for the RBD, which totals close to 4.2 million square feet of office space. In addition, the City Council directed City staff identify the community’s ideas for potential benefits through a broad-based engagement process. Further, since the amount of development being analyzed is less than the total amount of development proposed, a methodology for how to allocate the office square footage will need to be developed and communicated to prospective developers.
As a result, the purpose of this staff report is the following:
• Provide an update on the results of community engagement efforts. • Describe and receive feedback on the community’s priorities for the specific types of benefits that should result from development in the Plan area. • Describe and receive feedback on the proposed components of a framework to achieve community benefits identified by the community and the City Council.
The staff report begins with an overview of the difference between requirements for all new development in the RBD and “community benefits,” which are in addition to the baseline requirements. Following this, the report provides an overview of community engagement activities that have occurred since the February 1, 2022, City Council Study Session, including the community’s priorities for community benefits and other outcomes the community would like to achieve as a result of new development, including an increase in affordable housing, ongoing benefits from new development, and increased opportunities for homeownership and local businesses. Finally, the report describes several proposed mechanisms that comprise a community benefits framework, intended to ensure the timely delivery of specific benefits desired by the community to residents of East Palo Alto.
City staff notes that the environmental review process related to this Specific Plan Update has begun, with the release of the NOP (Notification of Preparation) on April 15th, 2022. Public comments were accepted for thirty days, through May 16th, 2022, and a scoping meeting on the NOP was held with the Planning Commission on May 10th, 2022. Staff will present the summary recommendations from this Planning Commission session to Council on June 7th, 2022 as an informational item.
Analysis
Distinguishing between Requirements versus Community Benefits It is important to distinguish between baseline City requirements for all new development and any community benefits that are in addition to baseline requirements. As was presented at the September 28, 2021, City Council meeting, East Palo Alto has several requirements for new development that address many of the concerns of community members and include the following:
• Inclusionary housing ordinance which required 20% of all new housing units must be affordable (targeted at a mix of 35-50-60% AMI households). • A one-time Commercial Linkage Impact Fee that would produce $33.5 million under Scenario 1 (2.82 million square feet of office space) or $40 million for Scenario 2 (3.35 million square feet of office space)
• Annual Measure HH Taxes (Minimum of 35% towards affordable housing). This would produce the following:
• Scenario 1: $2.5 million annually (subsidizes 275+ units over 10 yrs) • Scenario 2: $3 million annually (subsidizes 325+ units over 10 yrs) • Annual Measure HH Taxes for “job training”. This would produce between $4 million and $4.6 million per year.
• Local Hire for full-time jobs (stated target is 320% local hire) • One time impact fees for Public Facilities (between $11 million and $12.5 million) • One time impact fees for Parks and Trails (between $6.3 million and $7 million) • One time impact fees for Transportation (between $25 million and $30 million) • One time impact fees for Water & Storm Drainage improvements including improved water pressure between $36 million and $40 million)
Additionally, for the RBD, the City has made it clear that major infrastructure improvements are expected to be paid by the new development. For this reason, the community benefits framework will consider improvements related to infrastructure and sea level rise as part of the baseline requirements, with the understanding that greater infrastructure costs reduce the amount of subsidy available for community benefits.
Finally, the new development would result in a significant increase in annual fiscal benefits from through property taxes. The new development is estimated to generate a surplus of between $14.2 million and $16.4 million annually.
Any benefits provided beyond the above requirements are considered “community benefits”.
These are provided through a negotiated development approval process which will be established in the updated Plan. Since the approval of additional office development is a discretionary act by the City Council, the City may ask for any benefits it wishes to achieve.
The potential community benefits from the new development are the subject of the community engagement that occurred in early 2022 and are discussed below. 2022 Community Engagement – Community Priorities
Since the beginning of the Specific Plan update process, the City and Raimi + Associates held multiple events to understand the community’s perspective on development in the RBD. These engagement efforts - which included community workshops in April and September of 2021, meetings with community organizations, and online surveys – identified numerous potential community benefits that could be produced from development. The process also identified several concerns about additional development in the RBD.
Between February and April of 2022, the City and Raimi + Associates held a series of community engagement efforts focused on the identification and prioritization of community benefits. The engagement activities included:
• An online community workshop on March 23, 2022
• 3 “pop-up” workshops throughout the City of East Palo Alto • An online survey
This phase of engagement organized specific community benefits into 2 categories – community benefits that require money to implement and community benefits that require physical space. Through the various activities listed above, the project team asked participants to complete budgeting exercises to indicate how space and money should be used in the RBD.
These two exercises presented a budget of points that needed to be allocated across a dozen or so benefits. In addition to the formal exercises, staff collected feedback through free responses and comments made during breakout groups and at popup events.
The following is a summary of the highest priority community benefits identified by the community, organized by space and money. Summaries of the events can be found as attachments to this staff report.
Table 1: Priorities for Benefits, for Space
Strong Support • Subsidized space for local entrepreneurs • Affordable housing units
• Public parks and trails
• Local restaurants
• Subsidized space for local community use
Moderate
Support
• Expanded ecological areas
• Larger housing units
• Grocery store
• PDR/light industrial space
• Youth Center
• Commercial kitchen
• Outdoor sports fields
Less Support • New City Hall/government center
• Senior Center
• Other
Table 2: Priorities for Benefits, for Money
Strong Support • Workforce/job training
• Home ownership funds/programs
• Local businesses/startups
• 35% AMI housing
• Funding for schools (*)
Moderate
Support
• Wetland restoration
• Public recreational amenities
• 50% AMI housing
• Trees and beautification
• Citywide congestion relief projects
• Citywide bicycle/pedestrian projects
• Exceeding local hire requirements
Less Support • Neighborhood traffic calming
• 1-time donations to community groups
• Regional transportation projects
• Other
(*) not in original voting matrix
In addition to the voting on specific items, several themes emerged from the engagement activities that form the basis of staff’s recommendations on the community benefits framework discussed later in this staff report. The themes identified are:
• Ensure significant benefits are associated with new development and there is “transparency” in the financial benefits provided to developers and obtained by the community. The community felt that if additional development is allowed, the community should receive direct and long-term benefits from the development. Further, the community wanted to understand the benefit that is being provided to the developers to build more office in EPA and then ensure that the City and its residents benefit from the increased value given to the developers.
• Ensure the most important values/priorities identified by the community are achieved.
These are listed in the tables above. In addition, through the engagement efforts, the top priorities for community benefits are:
o Affordable housing. The community has defined this concept expansively as support for both a) funding for new and existing home ownership and antidisplacement programs, and b) a mix of new deed-restricted rental housing targeted primarily at 35 to 60% AMI households. Both of these approaches are needed to allow current residents to stay rooted in the City over the long-term and attract residents who left EPA back to the city. New income-restricted apartments built by developers provide a source of low-cost housing that matches actual East Palo Alto incomes, with a range up to 60% AMI to serve returning college graduates and others looking for broader housing choice in the City. Secondly, promoting home ownership is critical to neighborhood and community preservation. This could be accomplished through funding from major projects to enable use of federal programs (such as WISH, AHEAD, or the Home Loan Bank) and to support City programs (such as the Second Unit fund, first time Homebuyer program, and future programs such as for duplex/fourplex lot splits).
o Jobs training and education. The community understands a successful economic future is based around upward mobility for residents and gaining access to a mix of middle- and higher-income skilled jobs. Residents are looking for a consistent upskilling pipeline with elements such as resource centers to equip community members to take advantage of coming opportunities, afterschool classes for children, mentors/training for young adults, internships for high schoolers, then finally leading to subsidized or free incubator spaces for local start-ups/digital entrepreneurs.
o Funding for schools. Residents felt that some funding must go towards improving the schools in the community, and one proposal was to earmark money for specific organizations that fund educational opportunities. o Attainable jobs. In addition to job training and education to reach higher-skilled professions, the community desires access to more immediate job opportunities (a mix of lower- and middle-income jobs that do not require college degrees).
This goal could be achieved through a combination of funding and space for local retailers or merchants, trades schools/vocational education, support jobs and ancillary services related to office and R&D jobs, inclusion of ground-floor flex space in developments, and continued light industrial uses in the area. o Subsidized space and funding for local community businesses, organizations, and individuals. There is strong support for both money and space to be reserved for use by residents and businesses of the EPA community, including but not limited to: existing or displaced small businesses, local co-working space, commercial kitchen space, non-profit space, community events/programs, local sports leagues, local artists, and fabrication/makerspaces. Residents largely indicated that they preferred that subsidized or free space be prioritized for community use rather than use by the local City government. There were recommendations to exclude a new city hall and library from the community benefits since these do not directly benefit residents and businesses and since these can be constructed using the increase in fiscal revenues from the new development.
• Allow the community to be involved in the decision-making process about community benefits. The community would like some input over which benefits are funded by the development, rather than leaving the decision to the City Council. • Expand the opportunities for “ownership” as a result of the development. The community felt that expanding opportunities for local ownership, including both home ownership and business ownership by residents, was critical. • Ensure that benefits are sustainable for the long-term. Many community members expressed the view that since impacts continue into the future, benefits should as well.
Thus, the community wanted to identify mechanisms to ensure ongoing benefits for the community and have a mechanism for the community to participate in which benefits are funded.
• Create a link between new housing units and office space. The new development will intensify the demand for housing in East Palo Alto. Thus, the allocation of office space should be tied to the production of housing.
These themes form the basis for staff’s recommendations on the “community benefits framework” and the related methodology for allocating office/R&D square feet between potential development projects which is discussed below.
Community Benefits Framework
This Specific Plan update was initiated since more development was proposed in the Plan area than originally anticipated, which offered the City a chance to leverage this interest for maximum community benefits. Council asked staff to create a framework for community benefits as part of the update process. Subsequently, once Council established there would be less development capacity than the total amount proposed by major applicants (on November 18, 2021), it was clear that a methodology to allocate this limited square footage would need to be created. To achieve both objectives, staff proposes that the updated Specific Plan directly tie the provision of prioritized community benefits to the future allocation of office/R&D square footage. Therefore, potential approaches to square footage allocation will be analyzed first (with a recommendation to pursue discretionary approaches), and then additional benefits “prerequisites” and “policies/programs” will be discussed.
The proposed Community Benefits Framework is composed of the following components, each of which is detailed below:
Prerequisites. Require all development projects to meet the existing requirements that apply to new office/R&D development in the RBD, including all of the requirements listed above (e.g., Measure HH, impact fees, etc.) plus any additional requirements approved by the City Council through the Specific Plan update process. Several potential prerequisites are discussed below.
Financial Transparency. Staff is recommending that the City add a requirement for major office/R&D projects to conduct consistent and clear financial analyses in order to: a) confirm the value of proposed community benefits, and b) determine whether proposed benefits are adequate relative to the development rights granted to ensure that the community is benefiting sufficiently from any square foot allocation.
Jobs/Housing Linkage. Staff is recommending that the City create a new requirement to build/produce new housing based around a numerical linkage to office/R&D square footage.
Staff is proposing three elements of a linkage program:
1. Keeping the existing linkage fee ($12.81 per square foot, which can be satisfied through building affordable units on or off-site, donating land, converting existing housing to affordable units, or paying fees);
2. Adding a new job-housing linkage requirement that can only be satisfied by building/producing housing units on-site at a specific minimum ratio (with off-site units allowed for highly contaminated sites) and;
3. Counting additional production or support for housing beyond these requirements towards a project’s community benefits evaluation.
Office Allocation Methodology. There will be an allocation methodology to ensure that maximum community benefits are achieved in exchange for the allocation of office/R&D square footage based on an approach that promotes the benefits that the community has said are most important. (Note that regardless of the process, staff assumed the 2020 Bay Road project will move through the process first, since it was first to submit an application. The following methodologies would be based on the “residual” amount of office capacity after 2020 Bay Road’s approval process). There are generally three approaches to how the office square footage can be allocated. The first is based on a formula that divvies up the square footage between the four major projects based on either the amount originally proposed or the total development capacity for the project area. The second is a purely discretionary approach where projects compete for all of the office square footage. The third is a hybrid approach that allocates a minimum amount to each project and the remainder is through a discretionary process.
Discretionary Evaluation Criteria for Community Benefits. In order to ensure that the highest priority benefits are provided to the community with the development projects, the framework will include a set of explicit, ranked criteria to guide structured and consistent evaluations of project’s benefits by Council. The evaluation criteria will be either a point system that normalizes dollar value of benefits (X dollars, units, or square footage of community space = X points) or expected $ value of benefits contributions per square foot (by category). More points or higher $/square foot thresholds would be associated with the highest-priority benefits, ensuring that the community’s key priorities are delivered.
Development Reserve. City staff is proposing to reserve some of the development capacity for future, unknown projects. This would ensure that additional development or property owners could build office/R&D space in the RBD in the future. The proposed office/R&D “reserve” size is roughly 5% of the total development capacity.
Additional Framework Mechanisms. In addition to the above recommendations, City staff is exploring a few additional components for the community benefits framework that will achieve outcomes desired by the community. These include:
• Front-loading of Benefits. To combat fears about promised community benefits not materializing, the Specific Plan may require delivery or payment of some portion of total project community benefits before certificate of occupancy. • Ongoing Revenue Stream for Community Benefits. Staff is exploring a variety of mechanisms to create a revenue stream to fund community benefits over the time, not simply one-time donations during project approval. This could be accomplished by collecting funds from development projects to start a revolving loan fund, using a portion of the increase in City fiscal revenues to fund benefits on an ongoing basis, or collecting penalties for not meeting requirements (i.e., local hiring targets or TDM) to fund ongoing benefits.
• Community Entity to Guide Decision-Making on Benefits. During the engagement process, residents expressed a strong desire to be part of the decision-making process to determine which community benefits are funded now and over time. One recommendation is the develop an “Ad Hoc” committee comprised of representatives from local organizations to recommend benefit programs to the Council for final approval. Other approaches will also be considered.
Discussion Questions and Recommendations for Council
1. Benefits Priorities: Are these the right priorities? Does the City Council wish to amend or alter the prioritization of benefits we’ve developed with the community? - Staff recommends accepting the ranked list of community priorities as the input to the benefits framework for judging future project applications.
2. Community Benefits Framework: Are these the right components for the Plan framework? What is missing? Which ones do you have concerns about? - Staff recommends continuing to explore and expand these proposed policy approaches and returning to Council with more implementation details in July.
Fiscal Impact
There are no fiscal impacts associated with the items discussed in this staff report. Any final decision made regarding the financial mechanisms in the Specific Plan area may have fiscal impacts to the City, to be discussed at that time.
Public Notice
The public was provided notice by making the agenda and report available on the City’s website and on a bulletin board located at City Hall: 2415 University Avenue, East Palo Alto.
Environmental
The action being considered does not constitute a “Project” within the meaning of the California Environmental Quality Act (CEQA), pursuant to CEQA Guideline section 15378 (b)(5), in that it is a government administrative activity that will not result in direct or indirect changes in the environment.
Attachments
1. Summary of 2022 Community Outreach Activities related to the Plan Update