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.