Business in Palo Alto: How Much Is Enough?
Thoughtful people understand the concept of enough. Even with "good" things, like eating or drinking, we admit without equivocation that sometimes less is better.
Most people like being able to work close to home, and to find the products and services we want near at hand. Many also think that business taxes provide net community benefit, more than offsetting the costs businesses impose. But how many jobs, products, services, and business tax dollars are enough? Beyond what point is additional business a liability rather than an asset?
In this report, I respond to these questions by examining how Palo Altans answered when asked what we want, and by analyzing past events, the current situation, and observable trends in Palo Alto and beyond. I conclude that to bring more business and commerce to Palo Alto will be detrimental to Palo Altans, and to people elsewhere.
Palo Alto's city council members are poised to approve a new comprehensive plan which permits, and in some ways promotes, additional business here. We can plan towards a better community by capping business floorspace at current levels, and "developing" this sector of our community by making qualitative changes, rather than by adding to it.
How much of what kinds of business and commerce do we want here, and why?
Palo Altans engage in commerce to secure goods and services and to earn income. Our overarching goal in both of these activities is to make our lives good. Let's take a look at how we're doing?
In the Comprehensive Plan Update Survey, six hundred residents were asked whether they wanted additional retail businesses. A clear majority said, "No." Fifty-five percent rejected additional convenience retail and personal service businesses. Three-quarters rejected bulk retail stores. Seventy-two percent rejected more specialty retail stores.
Palo Altans work close to home, and are paid well to do so. There are more than two jobs within the city for every resident member of the work force. More than two-thirds of Palo Altans work less than twenty minutes from home. Nearly two-fifths actually work within Palo Alto. Household and per capita incomes here are more than twice the county mean and median. Fewer than one in twenty residents lives below the poverty line.
When asked in the Comprehensive Plan Update Survey whether we needed more office development, more than three-quarters of us said, "No." More than two-thirds said, "No," to a new full-service hotel and conference center. By contrast, more than two-thirds called for more parks and open space. When asked, "Are there other land uses that you think are needed?" only one in ten respondents said, "commercial," and one in twenty-five replied, "industrial," making these two categories next to last and last, respectively.
But that's not all. Asked, "What do you like least about living in Palo Alto?" well over half of the respondents cited "cost of living and cost of housing," "traffic," "degradation of physical environment," and "problems related to growth and development." All of these are primarily attributable to business overdevelopment.
Some claim that residents are naive, and that we need more business here to generate tax revenues. I see four flaws in their reasoning:
Tax revenues from business are less than the costs of publicly-supported services to business plus the costs externalized by business. People with commercial interests here are more numerous than residents, making it difficult for residents to avoid losing more through externalities than we gain through taxes. Residents devote thousands of hours each year to fight against projects which will benefit others at our expense.
A local real estate professional estimated the cost of traffic to homeowners on University Avenue to be more than two million dollars per year. Evergreen Park residents bear two thousand dollars a day in externalized commercial parking costs alone. Yet per capita business-generated tax revenues in Palo Alto are less than five hundred dollars per year!
Disproportionate business here deprives others of a fair share of jobs, access to goods and services, and tax revenue. Palo Alto's per capita revenues are already one and one-half to four times those of comparable cities, and the lack of municipal services in nearby East Palo Alto has cost us millions of dollars directly and indirectly.
The current system of municipal finance is incompatible with efficient allocation of resource. The authors of "Bay Vision 2020" call fiscal zoning a mistake, and reform to defeat it essential. Planning Director Ken Schreiber has warned that such change is coming.
But perhaps the most important argument against adding business for tax reasons is that put forward in the Economic Future Study drafted by City of Palo Alto staff. The authors of this report see "no looming problems" with respect to municipal finance.
These compelling facts about employment, personal incomes, local self-determination, and Palo Alto's fiscal condition, these strong opinions about whether additional goods and services, employment opportunities, or tax revenues are needed, and these perceptions about what is least good about life in Palo Alto are a mandate to halt additional nonresidential construction in this city. They reflect an objectively measurable imbalance in land use here, and a widespread understanding of the negative consequences of that imbalance.
Precious little. During the past decade the value of commercial and industrial construction permitted in Palo Alto was nearly three-quarters of a billion dollars! And looking forward twenty years, the proposed comprehensive plan will encourage continuation of this trend.
In a CPAC Briefing Report, our city staff commented on how we arrived at our current predicament: "At the root of much of our current environmental crisis is the failure of our economic models…" If we internalize the full costs of more business here, we will see that it is a very bad bargain indeed. The proposed comprehensive plan reflects its authors' continuing failure to recognize the full costs of business activity. Instead, they have used the pretext of generating tax revenues to fund municipal services as an excuse for planning the continuing expansion of business and commerce, a course which will bring private gain at public expense.
That many people agree with this analysis is evident. Already individuals are taking their families and businesses away from the Peninsula, accepting lower dollar income to avoid the heavy negative externalities here and to reap the generous positive externalities of less densely settled places. With a steady stream of environmental legislation to limit externalities, lawmakers are accelerating the flight from dense settlement. Planners can repeat the mantra of "density" until they turn blue. Ordinary people see and feel the differences that density makes, and overwhelmingly reject it. "Rebuild L. A." has proven a difficult and unpopular task. Reinhabiting the countryside is the story of the booming Rockies and Northwest.
Here in Palo Alto, those who are less able or willing to divest their holdings are aiming to gain advantage through land use policies which will permit them to increase the burdens that they place on the rest of us. A comprehensive plan which encourages additional business construction is part of their strategy. If it is approved, our quality of life will continue to spiral downward as unmonetized costs rise faster than monetized benefits. The truth of this is evident in the histories of thousands of cities and towns more intensively built than our own.
I propose a single alteration to the draft comprehensive plan: change the mushy language which calls for "a variety of planning and regulatory tools, including growth limits, to ensure that business growth is compatible with the needs of Palo Alto neighborhoods" to "Allow no net increase in business and commercial floorspace or pavement in the Palo Alto planning area to ensure that business activity is compatible with the needs and desires of Palo Altans."
By this simple, readily understood, easily measured standard, we can ensure that future growth of business in our community will be qualitative, rather than quantitative. We allow for redevelopment, including relocation of facilities, and changes to the kinds of enterprise they contain, on the condition that any new construction be offset by an equal amount of demolition or conversion to noncommercial use. We take a huge step towards remedying the ills of business overdevelopment. We respect the will of the residents of Palo Alto. We set a positive example for other communities. And perhaps most importantly, we restructure our business to bring us into greater harmony with the laws of nature, and with our fellow humans who live elsewhere.
The end of growth in human population, human artifact, human-mediated matterenergy throughput, and monetization of human society lie in our future. We can adapt to these important changes by planning a more self-reliant community and contributing to others' ability to do so. If you think the proposal presented in this report is a means to further these ends, please support it.