Silicon Valley Cities Shut Door to New Tech Firms

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Monday September 25 7:44 PM ET Silicon Valley Cities Shut Door to New Tech Firms

By Andrea Orr

PALO ALTO, Calif. (Reuters) - It sounds a little bit like biting the hand that feeds them, but a growing number of cities in Silicon Valley have started exploring ways to keep out new high-tech companies.

Never mind all the new jobs and tax revenue generated by dot-coms, computer firms and chip makers crowding the area.

City planners say it may be no compensation for the traffic jams, the massive buildings that have replaced green meadows and the skyrocketing housing costs that seem to follow when a high-paying employer like Intel Corp. (NasdaqNM:INTC - news) or Yahoo! Inc. (NasdaqNM:YHOO - news) moves into the neighborhood.

Redwood City, Calif., home of software maker Oracle Corp. (NasdaqNM:ORCL - news), the Internet service provider ExciteAtHome Corp (NasdaqNM:ATHM - news) and controversial music swapping software maker Napster, recently imposed a 45-day moratorium on certain new development so it could consider ways to manage the growth.

Although high-tech encroachment is nothing new to Redwood City, it says the recent dot-com arrivals have created more problems for residential neighborhoods and overall city aesthetics.

``The buildings have just gotten so big, so massive, that we decided we need more control,'' said the city's chief planner, Tom Passanisi. After approving some three million square feet of new commercial property in the past three years, the city needs to consider better zoning controls, he said.

Most other cities between San Francisco and San Jose face a similar quandary. The San Jose Mercury News reported Monday that the city of Palo Alto is reviewing all its zoning laws while neighboring Menlo Park is considering an outright moratorium on new office development in some areas.

One big problem with the influx of dot-com companies is that they have started occupying spaces intended for retail or manufacturing operations. The Internet businesses are typically more labor intensive than the shops and factories they replace and employee parking spills over into residential neighborhoods.

Locals have also complained that new office construction is occurring at the expense of badly needed residential housing, driving prices up so far that only a few locals can afford to buy property.

Redwood City says that while it does not oppose all new development, it could impose restrictions, for instance that new employers provide incentives for their workers to carpool.

Nearby Santa Clara, home to Intel and Yahoo, says it is trying to balance the needs of businesses and residents, although business often wins out.

``The reality is that residential properties are more of a drain on the city than commercial properties,'' says one of the city's planners. ``The high-tech companies bring in most of the tax revenue.''

In fact, while office workers in Santa Clara outnumber employed residents about two-to-one, the city says some 95 percent of its real estate tax revenue comes from its commercial base.

``Some things have to be dealt with,'' said the Santa Clara planner, who cited a strain on the city's electricity capacity and a shortage of affordable housing that has become so severe that local schools have started building apartments for teachers on school property.

``But we are actually fairly pro-growth.''

-- K (infosurf@yahoo.com), September 25, 2000


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