City considers new tax to bring back downtown

Daily Post Correspondent

Discussions of how to boost retail in Palo Alto have produced what may be a surprising idea from some city officials: tax office space that is sitting vacant.

The idea came up during a meeting of the city’s Planning and Transportation Commission on April 24 to talk about retail revitalization strategies.

“There is this idea that one of the reasons to have … more housing downtown is that it provides more customers for retail,” said commission member Allen Akin. “But in fact you could achieve a better result more quickly, because it requires less physical redevelopment, by simply encouraging more occupancy of offices that already exist.”

A commission subcommittee has proposed a study of vacancy taxes for the downtown and California Avenue areas.

“Do not limit to retail vacancies; that might create incentives to eliminate retail,” the proposal states.

The commission is expected to discuss retail strategies during at least one additional meeting before finalizing its recommendations to City Council.

In the mid-2010s, demand for Palo Alto office space was red hot. Concerns about the rapid growth prompted council in 2015 to pass a 50,000-square-foot a year limit on construction of office and research-and-development space in downtown, California Avenue, and El Camino Real.

Council also passed a retail preservation ordinance in 2015 to restrict the conversion of ground-floor storefronts into offices.

But following the pandemic, vacancies in downtown Palo Alto are the highest they’ve been in more than 25 years, hitting 15% in the first quarter of this year, the Post reported last month.

John Shenk of Thoits Bros., a property management and commercial real estate firm based in downtown Palo Alto, told the planning commission Wednesday that as much as 80% of retailers’ business came from the city’s daytime population of office workers before the impacts of the pandemic were felt.

“What is the city doing to roll out the red carpet for office employees to come back, to repopulate?” Shenk said. “We have a lot of restrictions on office. And we ought to be cognizant of those when we’re trying to support our retailers.”

As part of its retail strategies, the commission is looking at relaxing the retail preservation ordinance to allow a wider range of uses in ground-floor storefronts on side streets, for example.
Another idea is to offer incentives, such as a sales tax break, to attract certain types of businesses.

And for retail along El Camino Real and San Antonio Road, the commission talked about concentrating shops in “nodes” rather than having them dispersed along those thoroughfares.
“Rather than the current retail protection ordinance, which sort of says everything along El Camino that’s retail must stay retail, maybe we want to focus on certain areas and then concentrate that so there’s actually kind of a node that makes it a place that’s desirable to visit,” commission member Bryna Chang said.

The commission also debated whether the city should drop its ban on chain stores on California Avenue. Retail chain stores are not allowed there; nor are chain restaurants with more than 10 locations. The subcommittee noted that Coupa Cafe has nine locations, Il Fornaio has about 18, and McDonald’s has around 14,000 restaurants in the U.S.

A preliminary recommendation calls for dropping the chain store ban on California Avenue and increasing the size of restaurant chains allowed there to 50 locations. Restaurants that are part of larger chains could apply for a city permit to operate on California Avenue, under the proposal.

Chang said the city could quickly implement the proposals regarding chain stores and restaurants.

“It might immediately make some of our vacant retail spaces more attractive,” she said.


  1. “And for retail along El Camino Real and San Antonio Road, the commission talked about concentrating shops in “nodes” rather than having them dispersed along those thoroughfares.”

    Is that before or after existing retail gets destroyed when parking is banned on El Camino to make way for bike lanes?

    This city can’t leave well enough alone. Where are the local Palo Alto equivalents of the small business folks who revitalized the downtowns of Los Altos and Menlo Park BECAUSE they knew their communities and TALKED to their patrons to see what they wanted, what would fly and then went ahead and did it without government intervention or taxpayer dollars.

    They created First Fridays, rounded up bands and got people downtown and the Wedsnesday Market. It took Palo Alto a ridiculously long time — YEARS — to try to copy First Fridays with the help of the PA resident who created First Fridays in Los Altos.

    What did Palo Alto do? They spent MILLIONS of OUR dollars on at least three separate retail consulting firms with no local knowledge who couldn’t find the Palo Alto small business leaders with a map and flashlight!

    Did they ever bother to talk to residents about what we need and want? Of course not.

  2. I would appreciate if the city re-opened California Avenue to cars and parking. The city should also clean up the homeless issue in front of the church on College Ave. Also lobbying or doing something to repave El Camino to reduce all the potholes. El Camino feels like driving through a third world country.

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