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Bay Area Backlash On High-Tech Boom
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Source: San Francisco Chronicle

Bay Area Backlash On High-Tech Boom Dot-coms viewed as threat to lifestyle

Angelica Pence, Chronicle Staff Writer

Monday, October 23, 2000

A growing number of Bay Area cities are closing ranks in a simmering battle against dot-coms that have swarmed into once-sleepy downtowns.

``Our downtown is being eaten up by startups. Silicon Valley is here, in a big, big way,'' said Redwood City planner Charles Jany.

Never mind the seemingly endless stream of tax revenue and new jobs pumped out by dot-coms, chipmakers and computer firms throughout Silicon Valley. These days, city planners say, the daily congestion, skyrocketing housing costs and dwindling parking spaces that have become synonymous with the high-tech boom are too big a price to pay.

Palo Alto is the latest to take action, enacting an emergency ordinance banning companies from setting up shop in street-level retail spaces. San Francisco, Redwood City, San Mateo and Menlo Park likewise are closing the door to high-tech startups and their corporate counterparts taking over vacant spaces once occupied by largely blue-collar shops and restaurants forced out by rent increases.

Redwood City -- home to software giant Oracle, Internet service provider Excite@Home and the music swapper Napster -- recently imposed a 45-day moratorium on most new office development so it can diagnose its growing pains.

Tonight City Council members will decide whether to extend the controversial ordinance, which places strict limits on industrial development for as long as six months. The council first passed the ruling on Sept. 11 prohibiting office developments on parcels of 10,000 square feet or larger in most areas. Parking requirements were also tightened and new ground-floor offices completely suspended. Since then, at least one would-be tenant opted to move elsewhere.

But the dot-com backlash is far from limited to the Peninsula. The industry, which has been a major contributor to the booming economy for a decade, has pushed a construction boom and has also ushered in gentrification. Rising rent and mounting ``e-victions'' are driving out not just mom-and-pop corner stores, but lower- and middle-income families, artists, nonprofit groups and small businesses.

In San Francisco, two propositions on the Nov. 7 ballot to varying degrees would curb tech growth in the Mission District, Potrero Hill, Bayview-Hunters Point and South of Market. According to the San Francisco Rent Board, citywide housing evictions have doubled since the Internet boom began in 1996. Last year, 2,761 tenants lost their homes, compared with 1,354 in 1996. Over the past two years, rent has jumped fivefold and residential vacancies are less than 1 percent.

Dot-com overload is also rampant throughout Silicon Valley.

In San Jose, protesters are preparing to a battle against networking giant Cisco Systems, which plans to build a $1.3 billion, 20,000-worker complex. Menlo Park, San Carlos and San Mateo have all recently enacted or are considering moratoriums to limit high-tech development. In San Mateo, City Council members voted last week to extend a recently enacted moratorium to April 17. Between now and then, planners hope to come up with ways to lure more retail to the downtown.

``As office space becomes more scarce, we're seeing more and more dot-commers moving in,'' the city's senior planner Ronald Nunekawa said of San Mateo County's 2 percent office vacancy rate. ``We need to come up with some sort of long- term policies that maintain the character of our downtown.''

The e-commerce firm @TheMoment slipped through before the city's moratorium. Today, it is busy moving into what used to be a women's clothing store on Fourth Avenue. Judd Green, a longtime apparel merchant, was forced from the site after 16 years when the landlord increased the rent from $100,000 to $260,000 a year.

San Mateo's annual rental space has jumped from $12 a square foot to $84, a record for the city of 94,000. Palo Alto leads the Peninsula in rental prices, charging $144 per square foot. Redwood City charges as much as $93 per square foot.

They may be taking over parking spaces and outbidding other businesses, tech advocates say, but computer-related business are revamping neighborhoods, like East Palo Alto and downtown San Mateo, long in need of face-lifts. ``The people we bring into downtown and the presence that we have is far superior than having an empty retail space,'' @TheMoment's President Dave Frye said of its 60 employees. ``Our employees start early and work late. We're definitely patronizing the local business community.''

Much like law firms or insurance companies, dot-coms make for clean industry, said longtime community designer Bruce Liedstrand, who is credited with much of downtown Mountain View's revival.

``If you do it right, those dot-commers need to go to lunch, shop on their break or after work,'' Liedstrand said. ``They need office supply places, coffee shops and other nontechnology-related business to patronize.''

Still, even beyond the Bay Area's downtowns, some residents have had their fill of the high-tech revolution.

On the southern edge of Palo Alto, residents last week scored a victory over an Internet company after protesting about noise and fumes they feared would disrupt their suburban calm. Paix.net had hoped to open an Internet exchange facility off Highway 101, equipped with at least one 20,000- gallon diesel storage fuel tank for an on-site emergency generator. The city granted Paix.net permission to locate on the site, but the company withdrew its application last Wednesday.

City Planning Commissioner Pat Burt said it was his understanding that the shift took place because residents filed an appeal and because the company's needs changed. Paix.net officials were not available for comment.

``We didn't want the diesel fumes in the air or the noise,'' said one resident, Margaret Hager, who had joined in the petition protest and attended a hearing on the matter. ``It would have been in my neighbor's back kitchen window.''

The question remains, however, whether other, less bustling downtowns can afford to be so choosy about their tenants. Indeed, it can be difficult for cities to turn down easy tax revenue.

In nearby Santa Clara, home to Yahoo and Intel, office workers outnumber employed residents about 2 to 1. Still, about 95 percent of the city's real estate tax revenue comes from its commercial base. In downtown Redwood City, meantime, numerous storefronts have sat vacant for months, sometimes years.

``We're not shutting the door on Internet companies,'' said Deborah Nelson, Redwood City's community development coordinator. ``We just want to direct where it goes.''

Increasingly, that direction is across the bay, to cities like Tracy, where commerce leaders are conducting aggressive recruiting campaigns directed at the high-tech industry. Indeed, moratoriums on the Peninsula are welcome news for cities in the East Bay and South Bay, where office parks are multiplying and vacant office space is plentiful.

``It's absolutely mind-blowing to us that some cities don't want dot-coms and other computer companies,'' said Tracy City Manager Fred Diaz. ``Our door is wide open. Come on over.''

E-mail Angelica Pence at [email protected].

�2000 San Francisco Chronicle, Page A17

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