Almanac

News - July 16, 2014

City releases specific plan initiative analysis

Voter approval requirement has many ramifications.

by Sandy Brundage

There is plenty for Menlo Park residents to evaluate in the analysis of Save Menlo's downtown/El Camino Real specific plan initiative. The 150-page analysis was released July 10.

The initiative would restrict the amount of office space in any individual development to 100,000 square feet; limit total new office space to 240,820 square feet; and cap overall new, nonresidential development to 474,000 square feet within the specific plan's boundaries.

It would also redefine open space to mean only areas no higher than 4 feet off the ground, thereby preventing balconies from counting as open space.

Voters would have to approve any changes to the ordinance as well as any projects that would exceed the nonresidential development caps.

Lisa Wise Consulting completed the report on a $148,420 contract with the city to independently analyze what impact the initiative's changes would have on the city and future development. The company was selected on the basis that while it had experience with this type of work, it had never worked with the city of Menlo Park or with two major downtown property owners, Stanford University and Greenheart LLC.

One major theme of the report is that the initiative introduces uncertainty into the development process, but does not derail the prospects of new projects arriving in downtown Menlo Park.

A second major point is that the voter approval requirement presents some challenges.

Among key conclusions are:

• The changes could nudge future development away from office space toward other uses such as retail, but that could lead to more traffic. The consultant did not have time to complete a market analysis to forecast what uses would be most likely under the initiative's regulations.

• Restricting office space could give the city more leverage to negotiate public benefits, but also possibly increases the city's risk of litigation and reduces job growth.

• Property owners would still be able to maximize building density on their sites, but the new definition of open space would make that more difficult, even for residential projects.

• Future development could stop once the caps are reached because of the voter approval requirement, which makes investment riskier for developers and the specific plan area less attractive as a project site.

• Since the initiative would not directly reduce the residential buildout possible, the impact to schools and infrastructure remains the same as the specific plan's projections.

Jim Cogan, the city's economic development manager, said he was pleased with the work done by Lisa Wise Consulting and hopes it gives the council and voters "the information they need to feel like they are making an informed decision."

Development

The major change, according to the analysis, is the initiative's requirement for voter approval to either revise the ordinance or for projects that would exceed nonresidential development caps. The report states this would "create an open-ended political process" that makes investment riskier while making the specific plan area less attractive to developers. Also, the costs of paying for an election presents a greater obstacle for smaller landowners and developers.

Given that other nearby areas — including Mountain View, Redwood City and San Mateo — don't require voter approval, Menlo Park could see "a dampening or complete stoppage of future nonresidential development in the ECR/D Specific Plan area as developers invest elsewhere."

The initiative would impact two projects already in the development pipeline. Based on the office space limit per project, mixed-use proposals by Stanford University and Greenheart LLC "would likely be rendered infeasible" should the changes be implemented, according to the report.

Stanford, in partnership with developer John Arrillaga, wants to build a complex on the mostly vacant car lots along 300 to 500 El Camino Real. The 8.4-acre project would involve 199,500 square feet of office space, 10,000 square feet of retail, and up to 170 apartments.

The mixed-use complex initially contained medical offices and fewer apartments, but Stanford eliminated the medical offices after a series of discussions with city officials and Save Menlo representatives.

Greenheart's project would put 210,000 square feet of office space, 210,000 square feet of apartments, and 13,000 square feet of retail on the 7-acre site located at 1300 El Camino Real and Oak Grove Avenue.

By capping office space per project to 100,000 square feet, the initiative essentially cuts the amount allowed within those two mixed-use proposals by 50 percent.

One finer point emerged from the analysis: The initiative redefines office space. Whereas the specific plan expressly excludes banks and similar financial institutions from the category of business and professional office, the initiative includes them.

Why does this matter? According to the consultant's analysis, those types of development would count toward overall office space cap of 240,820 square feet.

The restrictions could have some benefit to Menlo Park: The analysis suggests that capping office space could boost the city's power to negotiate for greater public benefit, thanks to increased competition between developers. One caveat, though — Menlo Park currently has no mechanism to take advantage of that competition.

On the other hand, the restrictions "will likely carry with them a number of unintended consequences," the report concludes, including an increased risk of litigation for the city and a lack of clarity for developers, who may try to argue that their projects should not count as office space under the initiative's definition.

Traffic

Another potential outcome of restricting office space is that some development scenarios that generate more traffic could be favored over some that generate less.

Based on the report, retail could become a preferred type of use over office space, but retail generates more traffic. A hotel would lead to less.

Housing and open space

The analysis concludes that the new definition of open space could potentially lead to less open space, and falls short "of ensuring open space within four feet of ground level is situated in such a way that it would contribute to the pedestrian realm."

This is partly due to other competing requirements, such as the need to provide on-site parking within the same footprint as the required open space. In a domino effect, that could lead to less housing being built in zoning districts that require residential open space, as well as less private open space within the housing developments.

The next domino in the chain of analysis is housing costs: If all of the required on-site parking doesn't fit at ground level, that leaves underground or garages to pick up the remainder — and that drives up construction costs. The analysis suggests that then could lead to higher rents and less likelihood that developers will choose to include below-market-rate units.

Infrastructure and fiscal

The analysis concluded that the initiative would not affect infrastructure demands or fiscal impacts to the city, as compared with the specific plan, apart from a potential loss of revenue from reduced development.

Like the specific plan, the initiative would allow the maximum buildout of 680 residential units by 2030, meaning that the projected impact to schools would not change.

What next

The Menlo Park City Council was expected to vote July 15 on whether to place the initiative on the ballot for the November election or to adopt it, after reviewing the consultant's analysis. Check Almanacnews.com for updates.

Save Menlo has stated that the group wants the council to adopt the initiative, rather than putting it on the ballot. They face opposition from another grassroots group — Menlo Park Deserves Better — which has formed to fight the initiative.

More information

• Go to AlmanacNews.com for updates. This story was published prior to the Menlo Park City Council meeting on July 15, when the council was expected to vote on the initiative.

• Go to tinyurl.com/init715 to read the city-funded analysis.

• Submit a letter to the editor at letters@almanacnews.com. Please limit your letter to 300 words, include your phone number and home address, and write "letter for publication" in the subject line.

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