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Public benefit

From: domainremoved <John>
Date: Mon, 13 Apr 2015 08:13:55 -0700

Dear Council Members -
I'm not able to attend the study session on public benefit scheduled for April
14. Following are my thoughts for your consideration.

I do not quite agree with the sentiment expressed in the staff report
suggesting there is a need to define public benefit outcomes in sharp terms.
The reason is that nearly all public benefit outcomes will necessarily involve
the scale and type of project, neighboring development, community or area
needs and developer capabilities (e.g. to themselves build a benefits project
vs. funding it). There is no one size that fits all.

  I can see a three basic steps involved in all public benefit negotiations:

  1. Robust estimation of the development benefit, in dollars, using standard
discounted net present value measures. Such estimation should include ranges
to allow for uncertainties, e.g. future interest rates, economic strength,
etc. 'Point' estimates should be avoided as suggesting false precision.
Sometimes this is called a 'pro forma' but only needs to be accurate enough
for the negotiation process. Land and building costs are likely always
2. Benchmark comparisons to revenue streams associated with existing
developments. Revenue streams such as hotel TOT or existing development
agreements (possibly ones from other cities) can be compared to the proposed
project by scaling square footage or other parameters, with consideration of
project type (residential, mixed use, office etc.).

  Steps like these two should give: 1) a reasonable dollar value range
estimate of the added development; and 2) comparisons to available benefit
valuations scaled to the proposed project. Most if not all developers will be
able to carry out such steps on their own. The city would likely use an
economic/financial consultant familiar with development in our area and future

 3. From here, a great deal can happen in terms of negotiation with the city.

   - A project may in itself have intrinsic benefits such that any further
negotiated benefit is not needed. For example, a project with considerable
rental housing and retail, compared to office space, plus hotel and attractive
public spaces might be judged in this way. A hotel alone with a strong TOT
revenue stream might be seen as not requiring anything in addition Or, a
project which is "just barely" into the public benefit parameter zone might be
judged to require no additional benefit.
  - On the other hand, a project like an all-office development, might be
judged not to provide any special public value outside of replacing old stock.
In that case, the valuation described above would come into play as a starting
point for negotiations. Some in the city might expect nothing less than an
equivalent TOT revenue stream, based on additional square footage. Others
might see this as a suitable maximum equivalent and starting point, given
expected development in neighboring areas. These are policy value judgments on
which residents can have differing perspectives.
  - As another example, a development might be able to design into its project
features, such as additional parking, which could be used for dedicated city
purposes, e.g. downtown employee parking. In that case, the builder might be
able to create extra spaces at less than market prices, with the negotiated
public benefit value taking account of that, including whatever contractual
agreement is designed (e.g. daytime use only, 24/7 use, etc.) Depending on the
added development value, further negotiation may or may not be needed to "make
up" any significant difference with what can be built out and the valuation
exercise estimate.

  - There may be projects whose negotiated benefit amount is best treated as a
one-time payment, comparable to the in-lieu housing fees used today. Examples
might be smaller projects going into the public benefit zone for which a
project "bank account" exists, e.g. one for parking garage development. That
would have already to be put in place by the city, along with prior agreement
of such a city goal. Some public benefit projects may be included a ongoing
updated list (bike paths, intersection improvements, public space amenities,
etc.) which might be useful to address a variety of "price points" or
construction timelines. There may need to be ongoing council
monitoring/updating of such a list, perhaps for different areas of town.

 - Different parts of town may imply different benefit choices. The draft
revised General Plan includes a possible grocery and pharmacy and an improved
Dumbarton corridor. Those might be funded by single developers, jointly by
multiple developers, and/or combined with a city role. The latter might want
finance their portion through an instrument such as a bond. Some residents
also might judge a grocery, for example, to simply be a neighbohood necessity,
and so an inappropriate choice in benefit negotiation. These are additional
policy judgments which require deliberation by city residents and council

   I'm sure there is more to be presented discussed at the study session, but
I hope you see why I would not frame our situation as needing a sharp
"definition" of public benefit. I think it would be useful to characterize
scenarios such as these, clarify the options and process, get started with
specific projects, and for the council to look at setting specific priorities,
e.g. downtown parking or intersection improvments. Developers should be made
aware of all this and encouraged to bring forward projects for discussion.
Again not quite in agreement with the staff report, I don't think we really
yet have much of a "process" for this interesting and involved activity.

 John Kadvany / Menlo Park Planning Commissioner

Received on Mon Apr 13 2015 - 08:10:17 PDT

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