Fiscal Impacts of Gateway Mixed-Use Development

Menlo Park, CA

BAE conducted a detailed analysis of Menlo Park Gateway for the City of Menlo Park to assess the full range of fiscal impacts associated with a major mixed-use project located adjacent to Highway 101. The proposed project will include 700,000 square feet of high-rise office space and a 235 room full service hotel with health club, restaurants, and ancillary retail. This highly visible project will be the first urban scale development to receive approvals in a portion of city not previously densely developed. The project had also raised community concerns regarding its potential impact on City finances and municipal services. Both project sponsors and opponents had prepared fiscal impact analyses with different methodologies and findings.

BAE was engaged by the City to prepare a fully vetted, technically accurate analysis to estimate all fiscal revenues, service costs, and other impacts. The analysis evaluated these impacts on the City’s budget, as well as on special districts including flood control and schools. BAE's analysis used a marginal cost approach, calibrating new costs to existing service capacity. The analysis also considered factors beyond direct fiscal impacts, including: impact of the office building tenant mix on generation of business-to-business sales taxes; the viability of controlling tenant mix to increase such receipts; the induced housing demand from new office employment and the resulting demand on local schools; and the extent to which development of the site, located in an older industrial park, will induce redevelopment of other properties. BAE worked with an advisory committee containing both project proponents and opponents to review our methodology, research, and findings. Subsequently, BAE presented the findings of its fiscal impact analysis to Planning Commission and City Council, with all parties accepting the report’s findings that the project would generate significant net fiscal benefits to the City, resolving this issue as a concern in the community.