The Palo Alto City Council convened last night to hold a study session of the Environmental Impact Report (EIR), Fiscal Impact Analysis and Development Agreement for the proposed expansion of the Stanford University Medical Center (SUMC).

The four-hour meeting initiated what will be a long review process within the city on the expansion. SUMC includes the Stanford Hospital & Clinics, Lucile Packard Children’s Hospital and the Hoover Pavilion administrative buildings. The $3.5 billion project proposes a net 1.31 million-square-foot expansion of the hospitals.

The main concerns raised about the project involved housing and transportation for the 2,200 new employees at the hospital and additional patients. In addition, much talk revolved around fiscal impacts of the project for Palo Alto and the possibility of revenue guarantees on Stanford’s part.

The meeting began with a discussion on the timeline for the city approval process. The policy is set to finish review by December 2010. This ambitious date was lauded by council members, who also raised concern about possible points of slippage.

“We’re moving forward in expeditious manner but also obviously a very thorough manner,” said Palo Alto Mayor Patrick Burt. “That will be a challenge for us.”

Three presentations were made: one on the EIR, one on the two fiscal analyses and one on the preliminary city proposal of a development agreement.

Environmental Impact Review (EIR)

The EIR, presented by Rod Jeung of PBS&J Consultants, summarized the impacts of the project on the current environment. The main impacts would include increasing housing to reduce transportation congestion to the hospital. In addition, 71 protected trees are threatened by the hospital expansion, along with a historic stone building. The report also identified areas for mitigation to improve outcomes.

PBS&J drafted seven different alternatives to Stanford’s proposal. Two involved little change, save for a request that hospitals comply with the state’s seismic safety standards. Another two involved what Jeung termed “right-sizing,” or reduced intensity interventions. A tree-preservation alternative proposed to eliminate construction on Kaplan Lawn and a historical preservation alternative aimed to protect the stone building.

Finally, the village concept alternative looked at ways to reduce greenhouse gases by decreasing transport through increased public transportation and nearby housing development. This option sparked the most discussion within the council.

The EIR committee determined that the least-impact option that best meets objectives was the “right-sizing” Reduced Intensity Alternative A, which addresses state mandates.

Fiscal Analysis

Next, the council was briefed on the two different fiscal analyses of the expansion project. One was given by CBRE Consulting, contracted through SUMC, the other by Applied Development Economics (ADE), commissioned by the city.

CBRE’s report projected $7.6 million in surplus revenue to the city. The taxes and fees generated would potentially offset the anticipated costs of municipal services to the projects over the next 30 years.

ADE on the other hand, had a much higher estimate of costs, and therefore found a $1.1 million deficit to the city. However, as noted in the meeting, both analyses did not include inflation. When ADE added in inflation as higher for costs than benefits, they found an even larger deficit. Debate ensued as to the role of inflation in the analysis.

Development Agreement

Palo Alto also outlined a development agreement counter offer to Stanford’s proposal, which, if approved, would supplement the Stanford offer rather than replace it.Stanford’s current proposal involves re-zoning the area from a public facilities zone into a special hospital zone for the project. There was concern that this zoning change would allow for projects in the future without the same degree of review they go through today. However, the council also recognized the increased efficiency of this possibility.

The main issues of the development agreement were the GO Pass initiative and revenue guarantees to make the project cost-neutral. The GO Pass would require Stanford to give the transit pass to all the employees to reduce vehicle traffic.

The parties should look at “very, very aggressive trip reduction,” said Heyward Robinson, a councilman visiting from Menlo Park.

In addition, the revenue-neutral measure would require Stanford to give Palo Alto a sum to offset any revenue losses found to accrue over time. If the project became fiscally negative for the city, Stanford would offer a sum to offset the cost.

The agreement asks for increased school fees to cover additional students in the school district. It also requests $30 million to fund citywide infrastructure.