on Jun 14, 2021

Google in San Jose: Yes, Public-Private Partnerships Can Deliver An Equitable Recovery

Written by Amitabh Barthakur, Judith Taylor, and Thomas Jansen
 
On May 25, the City of San Jose’s elected leaders unanimously approved a Google plan to build an 80-acre mixed use district between the city’s Diridon Station multi-modal hub and Downtown. The project began with a 2017 Google announcement of the project’s intent that was then discussed and negotiated by a diverse set of community leaders working with Google over the course of four years. By the terms of the resulting Development Agreement, what is now known as Downtown West will, when built out, include up to 7.3 million square feet of office, 4,000 homes, retail, hotels, community amenities, and up to 15 acres of parks and open space. It will bring more than 30,000 tech jobs to San Jose.
 
The approval incorporated an unprecedented community benefits agreement that will deliver a range of benefits. Silicon Valley Rising, a local campaign of labor, faith leaders, community-based organizations and workers, called the community benefits agreement negotiated for the project, “a new model for how tech should partner with … [a] … community to keep families housed, lift the quality of blue-collar jobs, and build lasting power in neighborhoods of color.”
 
The $200 million community benefits package, plus $250+ million in already-required contributions towards parks, affordable housing and transportation through already-established fees and requirements, includes:

• A $155 million Community Stabilization and Opportunity Fund the goal of which will be to advance equity and opportunity and prevent displacement. The fund will be overseen and allocated by a community and expert-led committee.
• 1,000 affordable units available to a range of incomes.
• An unusual $7.5 million in advance payments to support economic recovery, job readiness, and community stabilization initiatives, of which $3 million will be delivered this month for anti-displacement initiatives.
• A 30% local hire goal for construction and disadvantaged business procurement initiatives.

 
What lessons does the Downtown West deal offer for big tech, other major employers, city leadership, and community advocates as they consider their joint future dealings? Below we summarize our takeaways from the four years of support we provided the City of San Jose as its strategic advisor for the project.
 
Early activism sheds light on community priorities, which should, in turn, form the basis of community benefits negotiation. San Jose’s City leaders were pushed early and often by community and labor leaders to think cohesively about the impacts of the project. In addition to considerations of jobs and tax revenues, activists demanded that San Jose’s elected leadership consider possible negative project impacts on the city, its neighborhoods, and the region – geographies that are facing extraordinary challenges related to housing affordability, homelessness, and economic opportunities for populations of color. San Jose earnestly explored how the project could exacerbate these challenges and worked with Google and the community to design a project that would respond to these potential negative outcomes.
 
Community priorities were codified in a memorandum of understanding, which acted as a checklist for the success of the overall deal and Google’s commitments to address community needs. HR&A drafted development principles for the Diridon Station area, which were also incorporated into that early agreement. HR&A, in partnership with SkipStone, then helped the City negotiate specific terms of the Development Agreement to deliver on these priorities.
 
Engagement with a wide range of community stakeholders is critical, but following through by structuring a deal that puts community needs at the forefront is the most critical ingredient to building public trust in government. As of this writing, Downtown West has received unprecedented support from all corners of the community – neighborhood groups, housing advocates, labor groups, minority organizations, business groups and many others.
 
Facilitating a market-aligned development framework often has more value to private interests than conventional city incentives… and will garner more popular support. We helped the City of San Jose to evaluate and define its value proposition: of first and perhaps greatest value was the location of the site, which, because of significant public investment, was primed to become one of the largest transportation hubs in the region, providing access to a large regional talent pool. Second, the City agreed to co-design a streamlined regulatory structure for development of the district, which improved Google’s development economics by providing certainty, flexibility and density. These values created for Google through public investments in transportation infrastructure and regulatory actions allowed the City to justify a public benefits “ask.” No tax abatements, low-cost financing, or other conventional incentives were offered.
 
Resources need to be allocated for anti-displacement and affordable housing before the jobs arrive.
The City set a goal of ensuring that at least 25% of new housing in the district would be affordable to low- and moderate-income residents. The City took three steps to ensure that affordable housing would be in place before office development put pressure on existing housing stock:

• Established policies that support the creation of affordable housing: The City adopted an updated Inclusionary Housing ordinance and a new Commercial Linkage Fee prior to finalizing the Development Agreement with Google.
• Ensured development-ready land for affordable housing was available: We supported the City and Google to balance regulatory requirements and development economics to structure a deal in which Google will provide development-ready sites for 50% of the total affordable units to the City early in the project.
• Initiated anti-displacement strategies early: Google agreed to pay approximately $7.5 million of its community benefit contribution before commencing construction to generate additional resources for the City’s existing anti-displacement, community stabilization, and job-readiness programs; almost half will be delivered this month to support tenant needs as COVID-19 eviction moratoria expire.

The community can and should be given control over how community benefit resources will be deployed. Extensive community outreach pointed to two broadly-shared views:
 

• The community benefits package should support community stabilization and anti-displacement initiatives, as well as opportunity pathways for San Jose residents; and
• Community members, not Google or City staff, knew best how these resources should be deployed over time.

 
The community benefits agreement accordingly directs the majority of community benefit contributions to a new fund to support community priorities. Google’s contributions to the Community Stabilization and Opportunity Pathways fund are tied to the pace of its office development.
 
The fund’s governance structure will include establishment of a committee composed of community members with lived experience and service providers or local experts with subject matter expertise, who collectively will have sole authority to allocate funds. A third-party fund manager will support grantmaking efforts and seek to leverage external resources to magnify the impact of the fund. This approach was critical to gain community trust and support for the project.
 

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HR&A is proud to have supported the City of San Jose. Before the Downtown West community benefits agreement was concluded, the economic windfall associated with an influx of high-paying jobs would have been the only headline to announce such a project. The Downtown West project creates a new standard of success for development in Silicon Valley – one that maximizes positive benefits for both the economy and community and illustrates that the development process can by buoyed by understanding and delivering the priorities of the existing community.