Facebook’s Menlo Park Campus Won’t Mean Big Money for City
Submitted December 8, 2011, 12:32 AM
A fiscal impact study for the city of Menlo Park related to the new Facebook Inc. campus shows the massive project renders surprisingly little net financial benefit for the municipality’s main operating fund.
An 81-page report prepared by the Emeryville office of BAE Urban Economics estimates that the city and local school districts would take in more than $8.5 million in one-time development-impact fees, with more than $7 million of that going to the city and related utilities.
“What this type of analysis highlights, which is not unique to the project, is the unsustainable nature of the present fiscal environment for California cities, with continuing large increases in costs while revenue growth is constrained due to Proposition 13,” concludes the report, which was released late Dec. 7 as part of a larger environmental review.
Facebook Inc. is seeking city permission to develop a headquarters campus on two adjacent parcels that straddle the Bayfront Expressway at Willow Road. The two sites are connected by a tunnel beneath the expressway.
The larger site, or so-called East Campus, has eight existing buildings with more than a million square feet that the company is renovating. A portion of its staff already occupies one of the buildings, according to the report, and Facebook hopes to move its entire headquarters from Palo Alto to Menlo Park by the end of this year.
The West Campus, which the company proposes to redevelop, would bring an additional 440,000 square feet.
In total, Facebook wants to house 9,400 workers at the two sites and is asking the city’s permission to increase the allowable occupancy at the larger East Campus from a 3,600-employee cap in place today to accommodate approximately 6,600 workers.
Besides more than a million square feet of office space, the company is proposing more than 250,000 square feet of what the report labels “office-cafe” space and another 29,000 square feet of amenity and service space.
The abundance of on-site amenities, including facilities to prepare and serve free meals to workers, is one reason city sales-tax revenues are not higher, based on an assumption that Facebook intends to hire workers directly to prepare and serve food rather than contracting with a vendor, in which case the cost of meals would be taxable.
Facebook also does not generate business-to-business sales taxes in the pursuit of its daily enterprise. That contrasts with the former business at the East Campus, Sun Microsystems Inc. and then Oracle Inc., which sold software and hardware and “generated substantial business-to-business sales tax revenues for the city,” the report says.
City revenues also suffer because Menlo Park lacks high-quality hotel rooms where Facebook visitors might stay.
The report, a companion to a much larger environmental impact report, also grants insight into the cost of the improvements being incurred by Facebook as it seeks to create a home base. The total cost of tenant improvements for the existing East Campus is an estimated $59.4 million. The total construction value of the West Campus is projected to be $185 million including construction costs and costs for professional services such as architects and engineers.
Facebook already owns the West Campus but has a long-term lease for the East Campus. However, it has an option to buy the East Campus “at a future date,” the report says.
