I won't disagree with your ideas in general because I just don't know.
But in the case of Palo Alto, this isn't true. Parking is just hard enough to find that people generally do walk once parked. And there aren't enough people in downtown to keep it alive without the outsiders.
I've never been to Palo Alto, but I'm going to guess that it is another town that goes to bed early. Busy during business hours and sporting events (and other large venus that bring in people), dead otherwise. People already downtown for work stay downtown for lunch, but they do all their non-lunch activities elsewhere if possible. (using the court house is only possible downtown...)
Palo Alto is oddly not one of them. I don't know why PA is so unusual, but it is. Might be the safety. Might be the disposable income. Might be the lack of mainstream-style shopping and dining areas.
Palo Alto is a town where Millionaires complain about being treated like undesirables, because they don't make as much money as the vast numbers of people who have hundreds of millions of dollars, or billions.
And so the "just millionaires" become the new downtrodden and homeless. At least, in their own minds.
But in the case of Palo Alto, this isn't true. Parking is just hard enough to find that people generally do walk once parked. And there aren't enough people in downtown to keep it alive without the outsiders.