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Council majority forgot to negotiate for public

Original post made by HorseTrader on Oct 24, 2006

Monies paid by the developer to the city, schools, fire district, etc in the forms of "impact fees" and "mitigation" costs are called "exactions". These are nothing more than legally enforceable reimbursements to public service providers for costs they will incur to provide public services to the project. Exactions are not paid until after the project is built.

"Exactions" are not "Public Benefits" though project proponents like to make it seem as if reimbursing tax payers for public costs is a genuine act of generosity.

"Public Benefit" is a planning term of Art that has several meanings, depending on context, that are different than the lay meaning.

Menlo Park was not legally required to generously upzone the project from 18.5 units/acre to 50 units/acre. Two similar downtown projects, Beltramos and Menlo Square, were approved or built recently with conforming housing components of 18.5 units per acre, so the upzoning was not even required to attract development, it was purely gratuitous.

According to a senior planner, the net density of the Derry project is 50 units per acre. The zoning code previously allow 18.5 units acre. Therefore about 60% of the 135 Derry condo units (about 80 units) were enabled by the city council's generous upzoning.

At $800k per condo (the prices were published on the developer's web site) City Council generosity added a whopping $64M in project revenues. (80 units @ $800k).

Now Menlo Park can either add $64M in revenue to the project for nothing, or they can negotiate to get something substantial in return. Recently Stanford built two soccer fields for Palo Alto worth about $4M in exchange for transferable development rights that were no more dense than those given to Derry.

Finally the 1% to 2% of project cost figure was a recommendation of a subcommittee of Menlo Park council members that included Lee Duboc and Andy Cohen. When council "forgot" to adopt this recommendation, Andy Cohen wisely said he wouldn't support the upzoning, but Duboc, Winkler, Jellins, and Fergusson gave it away for free, though Fergusson put up a fight.

Asking for something in return for adding $64M project revenues is not "extortion," but asking for NOTHING in return for adding $64M in project revenues is just naive.

And forgetting to cut a deal supported by a bi-partisan subcommittee of council *BEFORE* approving the project is simply unbelievable.

Comments (8)

Posted by 20 questions, a resident of Menlo Park: Felton Gables
on Oct 25, 2006 at 1:33 am

Horse Trader: Do you think Proposition 90 will play a role here? After Nov. 7, if Proposition 90 passes, will the city have to pay the property owner $64 million for "downzoning" the property by reversing the zoning ordinances under the threat of a referendum?

Or, if the referendum passes, would that be considered a "downzoning" for which the property owner must be compensated under Prop 90?

How about the adjoining property at 1300 El Camino Real? The general plan and zoning language were changed to allow density on that site equal to the Derry site. Although 1300 technically wasn't rezoned, I understand, because the zoning map was not changed, could the propoerty owner have a claim under Proposition 90, which would require a government agency to compensate a property owner for any action that reduces the market value of a property, unless that act is justified by public health and safety.


Posted by HorseTrader, a resident of Menlo Park: The Willows
on Oct 25, 2006 at 9:09 am

The "upzonings" are not yet entitled.

The laws enabling the entitlement were challenged within the legal time limit of 30 days after enactment. If devlopement rights were legally "entitled" then "taking" them could result in a "takings" suit.

1300 is not yet entitled either, as far as I now.

If the referendum passes, (the laws are not enacted) then no vesting takes place. No vesting, no takings.

Prop 90 really deals with another power, "eminent domain." Prop 90 restricts and regulates government use of eminent domain.

Web Link

In general, I cannot say what effect Prop 90 might have on other takings claims that are not related to an eminent domain, but I do know that the Supreme Court has consistently found that government has no obligation to preserve market value. It must preserve "some use" of the property, it cannot effectively zone away *all* uses, but it is not obligated to preserve those uses which would fetch highest market values.


Posted by 20 questions, a resident of Menlo Park: Felton Gables
on Oct 25, 2006 at 10:58 am

Horse Trader:
Thanks. You make some good points about the referendum.
Everyone should be clear about this: Prop 90 goes well beyond eminent domain. See Almanac story:
Web Link
Also, Prop 90, as a constitutional amendment, may override Supreme Court decisions about government liability for actions that reduce the market value of property.


Posted by VoteSmart, a resident of Menlo Park: Allied Arts/Stanford Park
on Oct 25, 2006 at 3:35 pm

Don't be naive -- why would a millionaire East Coast real estate tycoon be pouring his own money into this initiative if all he wanted to do was protect poor, innocent home owners from nasty government thugs trying to take away their homes?

Prop. 90 sells itself by telling people it will protect their homes from eminent domain, but it's really a giant, Hummer-size loophole for preventing any government land use decisions, including decisions that protect the environment, or even decisions that will protect homeowner's property values.

If it were just about eminent domain, Prop. 90 would address real estate. Instead, it protects "private property" a broad term that includes business interests, development rights, you name it.


Posted by HorseTrader, a resident of Menlo Park: The Willows
on Oct 26, 2006 at 5:57 pm

20 Questions you are right:

I hadn't paid too much attention to 90 but it apparently extends way beyond limiting the eminent domain power, and may contain provisions to guarantee market value.

You may be seeing a discussion of the impacts of 90 on the Derry referendum in the local papers soon.


Posted by WatchOutForProp90, a resident of Menlo Park: Stanford Hills
on Oct 27, 2006 at 4:17 pm

Those of you not familiar with prop 90 should become familiar with it. Its scope and power extends well beyond trying to regulate cities ability to acquire private land through eminent domain.

Beware and read up on this truly bad idea.


Posted by Tasty Freeze, a resident of Menlo Park: Felton Gables
on Oct 30, 2006 at 9:28 pm

Thanks for the clearing up the difference between public benefits and exactions. I've heard so much from both sides it was hard to make heads of tail of the different claims.


Posted by Frozen Out, a resident of Menlo Park: Stanford Hills
on Nov 6, 2006 at 6:29 pm

I agree that Prop 90 is very bad for cities, and I too recommend a "no" vote on 90.


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