Sarah Holder is a staff writer at CityLab covering local policy, affordable housing, labor, and technology.
San Jose’s mayor says he wants the deal to be the ultimate foil to Amazon’s HQ2 process. Will the community agree?
San Jose Mayor Sam Liccardo wants to make one thing abundantly clear: His negotiations with Google have looked nothing like Amazon’s deal with its new headquarters host cities, which offered a combined $3 billion in tax breaks to harpoon it.
When Google expressed interest in building a new, sprawling tech campus in downtown San Jose for the first time in early 2017, Liccardo says, the city didn’t offer the company any tax incentives in exchange for its business. “More importantly,” he added in a Medium post, “Google never asked for a dime.” Instead, Google was drawn to the region for its plan to develop Diridon Station, an ambitious transit center that will eventually connect seven lines, including high-speed rail, BART, Caltrain, and VTA. “Google was smart enough to figure out where the puck was going on the ice, and to skate to it,” Liccardo told CityLab.
Years after those initial talks, the deal for a San Jose Google Village is getting closer to closing. According to a Memorandum of Understanding between San Jose and the company, Google has agreed to pay the city $111 million in exchange for more than a dozen downtown parcels that cover 10.5 acres of land, with the option of buying 11 additional acres in the future. On December 4, San Jose’s city council will take its first vote on the sale.
If green-lit, the company’s entrance will fundamentally alter the Silicon Valley city’s landscape, adding 15,000 to 20,000 Google jobs; growing the city’s downtown workforce by an estimated 65 percent; and bound to create “a lot more of everything,” as Scott Knies, executive director of of the San Jose Downtown Association, put it to the Mercury News. To ease the transition, the city and the company are working out the details of what they expect will be a robust community benefits agreement, meant to hold Google to building affordable housing near transit, and supporting the city’s existing workforce and infrastructure.
“Amazon is not unique,” says Liccardo. “Foxconn extracted billions from [Wisconsin]; Tesla got billions out of Nevada, this is not new.” But, he says, those deals represent the past far more than the future. “What I hope that we have shown is that cities can chart a different course.”
The deal’s positioning as an antidote to the flashy Hunger Games-style competition that led Amazon to Long Island City and Northern Virginia is not without merit, as even some tech development skeptics agree. “I have been really impressed at Google’s response and their commitment to the process,” said Teresa Alvarado, San Jose director of SPUR, a Bay Area nonprofit focused on equitable urban planning. “They have shown up, they’ve been consistent, they’ve had people there responding to questions, they’ve been open to feedback—and I’ve seen them incorporate some of the feedback in their plans.”
But the agreement hasn’t been immune to criticism. While Google won’t get outright public subsidies, as Liccardo noted, the company will benefit as much as the community from Diridon Station, which will cost taxpayers $10 billion. While San Jose is already home to almost half of Google’s Mountain View employees—“It’s not like this is suddenly a brave new world for San Jose,” Liccardo said—serving as a bedroom community for tech workers has already strained the region’s affordability, with the median housing price nearing $1 million this year. A ballot initiative known as Measure V, which would have put $450 million towards funding affordable housing in the city, failed in the midterms.
And, while surveys have shown strong community support for the development (about two-thirds of those surveyed by the Silicon Valley Leadership Group in September approved of the transit village), two non-profits have sued the city for signing non-disclosure agreements (NDAs) with Google.
The Memorandum of Understanding and other land sale documents were released last month, disclosing the deal price and other basic parameters of the agreement, meaning the public already knows far more than residents in Long Island City and Northern Virginia ever knew about the Amazon deal before it was announced. But the plaintiffs say that the NDA ensures that more detailed communications about the deal between the city and the company have not been made public. The plaintiffs hope to force their release through a court order, arguing that “San Jose’s municipal code … restricts officials from entering into contracts without council approval, and violate state law barring agencies from letting outside parties control disclosures to the public,” according to an account of the filing in Bloomberg. Richard Doyle, an attorney for San Jose, contends the NDAs are no longer in effect, but that “to the extent documents have not been released, it was based on a deliberative process privilege during real property negotiations.”
Still, “it raises questions about who is actually negotiating this deal,” says Jeffrey Buchanan, the policy director of Working Partnerships USA, one of the non-profits involved in the lawsuit. “Why is the public not a part of conversations, and what does this mean for the future of public land sales in California?” (Google says it has spent more than 150 hours holding more than 30 meetings with several community groups and local organizations over the last year.)
Already, “you have thousands of janitors, cafeteria workers, and shuttle bus workers that don’t make enough to live in the Valley,” says Buchanan. “They live 2 hours away; they live in garages, and sleep in their cars.” Berlin just rejected a 32,000 square foot Google campus, citing similar fears of gentrification and displacement.
And it’s not just high housing prices opponents dread: Silicon Valley Rising, another non-profit that advocates for inclusive tech development, along with Buchanan, have called for an end to Google’s hiring of subcontractors with poor wages and benefits; and would want Google to commit both to local hiring in San Jose, and to “responsible contracting standards.”
But Liccardo believes Google could be part of the key to solving some of San Jose’s existing problems, and that the city can hold them to playing that role. “San Jose has the worst jobs-housing balance of any city in the country, even though we’re in the middle of Silicon Valley,” he says. “The tendency for those cities has been to add multi-million square foot campuses, and not to add more housing.” That’s meant San Jose, one of the few Silicon Valley cities without a tech campus to call its own already, has absorbed the brunt of the commuters. It’s the “only major U.S. city that has a higher population at night than it does during the day,” according to CNBC.
To ensure housing supply adapts to the growing demand, the city council says it will push the company to agree that 25 percent of the housing built near the Diridon Station be affordable, and rent-restricted. Liccardo says the council is also considering imposing a commercial linkage fee for all businesses in the downtown corridor, which would be used for affordable housing development, too. “They seem to agree in concept to that notion,” he said. “Obviously, we have to agree on the price.”
In the Memorandum of Understanding, the city also alludes to further community benefits, which will be calculated based on perks San Jose gives to Google via city entitlements and land use titles: Allowing the company to maximize building heights, for example, could translate into funding for San Jose’s youth tech training programs. In other words, if the city is asked to give more to Google, Google would have a reciprocal obligation to give more to the city.
And though the city and state have committed to funding Diridon Station without any Google money, the fate of the project rests solidly on Google’s planned expansion, said Liccardo and several others CityLab spoke to.
“Without a big anchor like Google it would be a matter of trying to piece [funding] together, with much less momentum, parcel by parcel and business by business,” said Jason Baker, the vice president of transportation, housing & community development for the Silicon Valley Leadership Group. “There couldn’t be a better place to put this urban village.”
When it’s finished, 600 trains are expected to travel through the station, transporting 140,000 people a day. Google has expressed interest in being involved with the design of the station itself, says Liccardo, which has been described aspirationally as the “Grand Central of the West.”
Concentrating growth around transit nodes like this is a “win-win-win,” Alvarado says: It will help relieve congestion and traffic, help the state meet significant climate goals, and could create more office cultures dependent on transit, not automobiles. “If we can draw some of those folks that have a reverse commute, and connect them with transit services, it gives people a lot more mobility and job options,” she said. “It’s a total game changer.”
Working Partnership’s Buchanan agrees that the transit center will be transformative—and it will likely increase the value of the land surrounding it exponentially in the next decade. But that means San Jose should be holding out for more much more than $111 million for the land, he says.
Google will pay $237.50 per square foot for the land, according to the Memorandum of Understanding, which Liccardo writes is “2.5 times more than what some neighboring properties were appraised at just a year ago.” But Google just paid $1 billion to expand its Mountain View campus; and $2.4 billion to buy out the Chelsea Market building, home to its office in New York.
“The dollar value sounds high, but there will be a lot of costs for the city to restore buildings it’s selling,” said Buchanan. Among other properties, the city is selling its fire training center to Google for up to $42.9 million, and the company will then lease it back to the city for zero dollars for three years, while the city tries to find another plot of land. “After the three-year period, if the City still needs the land for a Fire Training Center and Google is not yet ready to proceed with the development, then Google and the City could negotiate a new lease for the property,” said a spokesperson for the mayor’s office in an email.
It’s parsing details like this that might make the city council vote this week contentious, though many expect the sale to go through smoothly. After the purchase agreement comes the negotiations over community benefits, and then an estimated decade of gradual growth if the full package goes through.
“There are advocates in our community that simply believe more tech is evil because it contributes to higher housing costs,” Liccardo says. “I understand and appreciate the amount of pain that people are suffering right now. But it’s a little like saying food is bad for the body because it causes obesity. What we need is balance, not to starve the body.”
Correction: A quote in the article originally stated that Foxconn extracted incentives from Minnesota; it was Wisconsin.