Loading...
The URL can be used to link to this page
Your browser does not support the video tag.
Home
My WebLink
About
2016-09-26 City Council Agenda Packet
City Council 1 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. September 26, 2016 Special Meeting Council Chambers 5:30 PM Agenda posted according to PAMC Section 2.04.070. Supporting materials are available in the Council Chambers on the Thursday 10 days preceding the meeting. PUBLIC COMMENT Members of the public may speak to agendized items; up to three minutes per speaker, to be determined by the presiding officer. If you wish to address the Council on any issue that is on this agenda, please complete a speaker request card located on the table at the entrance to the Council Chambers, and deliver it to the City Clerk prior to discussion of the item. You are not required to give your name on the speaker card in order to speak to the Council, but it is very helpful. TIME ESTIMATES Time estimates are provided as part of the Council's effort to manage its time at Council meetings. Listed times are estimates only and are subject to change at any time, including while the meeting is in progress. The Council reserves the right to use more or less time on any item, to change the order of items and/or to continue items to another meeting. Particular items may be heard before or after the time estimated on the agenda. This may occur in order to best manage the time at a meeting or to adapt to the participation of the public. To ensure participation in a particular item, we suggest arriving at the beginning of the meeting and remaining until the item is called. HEARINGS REQUIRED BY LAW Applicants and/or appellants may have up to ten minutes at the outset of the public discussion to make their remarks and up to three minutes for concluding remarks after other members of the public have spoken. Call to Order Special Orders of the Day 5:30-5:45 PM 1.Proclamation Honoring Cybersecurity Awareness Month 2.Proclamation Honoring The Christmas Bureau's 60th Anniversary Agenda Changes, Additions and Deletions City Manager Comments 5:45-5:55 PM Oral Communications 5:55-6:10 PM Members of the public may speak to any item NOT on the agenda. Council reserves the right to limit the duration of Oral Communications period to 30 minutes. Minutes Approval 6:10-6:15 PM 3.Approval of Action Minutes for the September 12, 2016 Council Meeting REVISED 2 September 26, 2016 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. Consent Calendar 6:15-6:20 PM Items will be voted on in one motion unless removed from the calendar by three Council Members. 4.Approval of the Termination of a Funding Agreement With the City of East Palo Alto for the East Palo Alto Shuttle Route at the Request of the City of East Palo Alto; Approval of an Exemption Under Section 15301 of the California Environmental Quality Act Guidelines; and Approval of a Budget Amendment to the General Fund 5.Approval and Authorization for the City Manager or his Designee to Execute two Energy Efficiency Program Contract Amendments: (1) Amendment Number 3 to a Contract With BASE Energy, Inc. for the Administration of the Third-Party Non-Residential new Construction Program Contract Number C11141002 Extending the Term for two Additional Years; and (2) Amendment Number 1 to Eagle Systems International, Inc. DBA Synergy Companies Contract Number C15159125 for the Multifamily Residence Plus Program Increasing Compensation by $500,000 From $450,000 to a Total Not-to-Exceed Amount of $950,000 6.Approval of Change Order Number One to Contract Number S16159273 With Penhall Company for Concrete Saw Cutting Services to Extend the Contract Time to Three Years (2015-2018) and to Increase the Total Not-to-Exceed Amount From $168,705 to $506,115 Over Three Years; and Finding That Approval of the Contract’s Change Order is Categorically Exempt From California Environmental Quality Act Review Under Section 15301(c) of the CEQA Guidelines 7.Approval of a Contract Amendment With Global Learning Solution Inc. to Extend the Term Through June 30, 2017 and add $125,000 for a Total Not-to-Exceed Amount of $375,000 for the Support of Human Resources SAP Modules and Business Processes Improvements Action Items Include: Reports of Committees/Commissions, Ordinances and Resolutions, Public Hearings, Reports of Officials, Unfinished Business and Council Matters. 6:20-7:45 PM 8.Direction to Expand Community Use of Upcoming Space at Cubberley Community Center Following Foothill College's Planned Move and Approval of Exemption under California Environmental Quality Act 7:45-9:00 PM 9.Review and Direction Regarding Interpretation of Planned Community (PC) Ordinances Governing Three of the Four City Parking Garages Proposed for Rooftop Solar Installations at 445 Bryant Street, 520 Webster Street, and 275 Cambridge Avenue and Regarding the 3 September 26, 2016 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. Architectural Review Procedure for the Three PC Zoned Garages and the Fourth Parking Garage at 475 Cambridge Which is Zoned Public Facilities (PF), Including a Finding That the Project is Exempt From Review Under the California Environmental Quality Act (CEQA) 9:00-10:30 PM 10. Policy and Services Committee Recommends Adoption of an Ordinance Amending the City’s Minimum Wage Ordinance to Align With the Santa Clara Cities Association Recommendation to Increase the Minimum Wage to $15 per Hour in Three Steps: $12 on 1/1/2017; $13.50 on 1/1/2018, $15.00 on 1/1/2019, and a CPI Increase After 2019 Indexed to the Bay Area CPI With a 5 Percent Cap and no Exemption 10:30-10:45 PM 11. PUBLIC HEARING: Adoption of a Resolution Confirming the Code Enforcement Abatement Report and Ordering Cost of Abatement to be a Special Assessment on the Properties Located at 220 Matadero Avenue and 18 Roosevelt Circle Inter-Governmental Legislative Affairs Council Member Questions, Comments and Announcements Members of the public may not speak to the item(s) Adjournment AMERICANS WITH DISABILITY ACT (ADA) Persons with disabilities who require auxiliary aids or services in using City facilities, services or programs or who would like information on the City’s compliance with the Americans with Disabilities Act (ADA) of 1990, may contact (650) 329-2550 (Voice) 24 hours in advance. 4 September 26, 2016 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. Additional Information Council/Standing Committee Meetings Sp. City Council Meeting- Board and Commission Int. September 27, 2016 Joint Recycled Water Committee Meeting September 27, 2016 Schedule of Meetings Schedule of Meetings Tentative Agenda Tentative Agenda Informational Report City of Palo Alto's Energy Risk Management Report for the Second and Third Quarters of Fiscal Year 2016 Conflict of Interest Code Biennial Notice Public Letters to Council Set 1 City of Palo Alto (ID # 7266) City Council Staff Report Report Type: Special Orders of the Day Meeting Date: 9/26/2016 City of Palo Alto Page 1 Summary Title: Cybersecurity Awareness Month Proclamation Title: Proclamation Honoring Cybersecurity Awareness Month From: City Manager Lead Department: City Clerk Attachments: Attachment A: Cybersecurity Awareness Month Proclamation (DOCX) Proclamation CYBERSECURITY AWARENESS MONTH WHEREAS, the City of Palo Alto recognizes it plays a vital role in identifying, protecting and responding to cyber threats that may have a significant impact on security and privacy; and WHEREAS, critical infrastructure sectors are increasingly reliant on information systems to support financial services, energy, telecommunications, utilities, health care and emergency response systems; and WHEREAS, the “Stop.Think.Connect.™” Campaign was designated as the National Public Awareness Campaign, implemented through a coalition of private companies, nonprofit and government organizations and academic institutions aimed at increasing the understanding of cyber threats and empowering the American public to be safer and more secure online; and WHEREAS, in support of the Cybersecurity Framework, and to better assist businesses and government entities in addressing cyber threats, the Center for Internet Security/Multi-State ISAC, the Council on CyberSecurity, the Governors’ Homeland Security Advisors Council and public and private sector entities have developed a campaign to promote good cyber hygiene through actionable guidance for government and businesses, and to promote innovation, strengthen cybersecurity investment and enhance resilience across all sectors; and WHEREAS, maintaining the security of cyberspace is a shared responsibility in which each of us has a critical role to play by being aware of computer security essentials that will improve the security of the City of Palo Alto’s information infrastructure and the economy; and WHEREAS, the President of the United States of America, the U.S. Department of Homeland Security (www.dhs.gov/cyber) and the National Cybersecurity Alliance (www.staysafeonline.org) have declared October as National Cybersecurity Awareness Month, where all citizens are encouraged to visit the “Stop.Think.Connect.” Campaign website (https://www.dhs.gov/stopthinkconnect) and put that knowledge into practice in their homes, schools, workplaces and businesses. NOW, THEREFORE, I, Patrick Burt, Mayor of the City of Palo Alto, on behalf of the City Council do hereby proclaim that the City of Palo Alto officially supports National Cybersecurity Awareness Month and the National Public Awareness Campaign “Stop.Think.Connect.™” Presented: September 26, 2016 ______________________________ Patrick Burt Mayor City of Palo Alto (ID # 7299) City Council Staff Report Report Type: Special Orders of the Day Meeting Date: 9/26/2016 City of Palo Alto Page 1 Summary Title: Christmas Bureau Proclamation Title: Proclamation Honoring Christmas Bureau's 60th Anniversary From: City Manager Lead Department: City Clerk Attachments: Attachment A: Proclamation Honoring The Christmas Bureau of Palo Alto (DOCX) Proclamation THE CHRISTMAS BUREAU OF PALO ALTO WHEREAS, The Christmas Bureau of Palo Alto is a non-sectarian non-profit agency formed 60 years ago by social service workers and nurses in Palo Alto schools who saw the unmet needs of children in the community and were determined to do something about it; and WHEREAS, The Christmas Bureau of Palo Alto celebrates its 60th birthday this year and has grown from serving 138 families to over 1,364 households, totaling 2,840 individuals; and WHEREAS, The Christmas Bureau is a volunteer run agency with 98 percent of all donations going directly toward neighbors in need; and WHEREAS, The Christmas Bureau of Palo Alto continues to address the needs of low-income families, seniors, adults and homeless individuals by providing them with monetary gifts during the holiday season; and WHEREAS, The Christmas Bureau of Palo Alto received the Tall Tree Award for “Outstanding Non-profit Organization” in 2007 and is continually recognized for its important work in the community; and WHEREAS, The Christmas Bureau of Palo Alto is supported by hundreds of individuals and community groups who believe in its mission and join in the yearly campaign to donate funds toward persons in need. NOW, THEREFORE, I, PATRICK BURT, Mayor of the City of Palo Alto, on behalf of the City Council, do hereby salute The Christmas Bureau of Palo Alto for its work in building a caring community and wishes the organization another successful 60 years of bringing cheer toward those in need during the holiday season. Presented: September 26, 2016 ______________________________ Patrick Burt Mayor CITY OF PALO ALTO OFFICE OF THE CITY CLERK September 26, 2016 The Honorable City Council Attention: Finance Committee Palo Alto, California Approval of Action Minutes for the September 12, 2016 Council Meeting Staff is requesting Council review and approve the attached Action Minutes. ATTACHMENTS: Attachment A: 09-12-16 DRAFT Action Minutes (DOC) Department Head: Beth Minor, City Clerk Page 2 CITY OF PALO ALTO CITY COUNCIL DRAFT ACTION MINUTES Page 1 of 7 Special Meeting September 12, 2016 The City Council of the City of Palo Alto met on this date in the Council Chambers at 5:04 P.M. Present: Berman, Burt, DuBois arrived at 5:20 P.M., Filseth, Holman, Kniss, Scharff, Schmid arrived at 5:10 P.M., Wolbach Absent: Closed Session 1. CONFERENCE WITH REAL PROPERTY NEGOTIATORS, CALIFORNIA Property: U.S. Post Office, 380 Hamilton Avenue, Palo Alto 94301 Agency Negotiators: James Keene Negotiating Parties: City of Palo Alto and United States Post Office Under Negotiation: Purchase and Lease: Price and Terms of Payment. MOTION: Vice Mayor Scharff moved, seconded by Council Member Kniss to go into Closed Session. MOTION PASSED: 7-0 DuBois, Schmid absent Council went into Closed Session at 5:05 P.M. Council returned from Closed Session at 6:30 P.M. Mayor Burt announced no reportable action. Study Session 2. 2755 El Camino Real (16PLN-00234): Request by Windy Hills Property Ventures for a Prescreening of Their Proposal to Re-zone the Subject Property at the Corner of El Camino Real and Page Mill Road From Public Facility (PF) to Another Zoning District That Would Allow DRAFT ACTION MINUTES Page 2 of 7 City Council Meeting Draft Action Minutes: 9/12/16 Development of a Building With Approximately 60 Small Dwelling Units and 45 Parking Spaces. Council took a break from 9:02 P.M. to 9:07 P.M. Agenda Changes, Additions and Deletions None. Consent Calendar MOTION: Vice Mayor Scharff moved, seconded by Council Member Berman to approve Agenda Item Numbers 3-5. 3. Approval of Amendment Number 3 to Contract Number C14153010 With Arnold Mammarella Architecture and Consulting to add $190,001 for a Total Not-to-Exceed Amount of $975,000 for a Three Year Contract Supporting Planning Review of Individual Review Applications. 4. Approval of a Budget Amendment in the Residential Housing Fund for the Rehabilitation of 110-130 El Dorado Avenue Consistent With Prior Loan Approval and Approval of an Exemption Under Section 15301 of the California Environmental Quality Act Guidelines. 5. Authorize the Acquisition of the Below Market Rate (BMR) Unit Located at 4250 El Camino Way, Unit A310 From Wells Fargo Bank for the Purpose of Preservation for the Amount of $190,000 Plus Closing Costs and Approve a Budget Amendment in the Below Market Rate Emergency Fund and Approval of an Exemption Under Section 15326 of the California Environmental Quality Act Guidelines. MOTION PASSED: 9-0 Action Items 6. PUBLIC HEARING: Adoption of a Resolution Adopting the Professorville Historic District Design Guidelines. The Guidelines Will be Used by the Historic Resources Board (HRB) and City Staff When Reviewing Development Applications to Evaluate the Compatibility of Proposed Changes With the Historic Character of Professorville. The HRB Recommends Council Approval of the Guidelines. The Project is DRAFT ACTION MINUTES Page 3 of 7 City Council Meeting Draft Action Minutes: 9/12/16 Exempt From the Provisions of CEQA per Class 8 Categorical Exemption, Which Applies to Actions Taken by Regulatory Agencies, as Authorized by State or Local Ordinance, to Assure the Maintenance, Restoration, Enhancement, or Protection of the Environment Where the Regulatory Process Involves Procedures for Protection of the Environment. Public Hearing opened at 10:05 P.M. Public Hearing closed at 10:24 P.M. MOTION: Council Member Holman moved, seconded by Council Member Kniss to continue this Item to a date uncertain. SUBSTITUTE MOTION: Vice Mayor Scharff moved, seconded by Council Member Wolbach to adopt a Resolution adopting the Professorville Historic District Design Guidelines as included in the Staff Report and direct Staff to return with suggested revisions at a future date. SUBSTITUTE MOTION FAILED: 4-5 Berman, Burt, Scharff, Wolbach yes MOTION PASSED: 9-0 7. PUBLIC HEARING: Adoption of an Ordinance Approving Revisions to the Number and Wording of the Architectural Review Findings in Palo Alto Municipal Code Chapter 18.76 and Approval of an Exemption Under Sections 15061 and 15305 of the California Environmental Quality Act Guidelines. The Planning and Transportation Commission Recommended Council Approval of the Ordinance. Public Hearing opened and closed without public comment at 11:38 P.M. MOTION: Vice Mayor Scharff moved, seconded by Council Member Burt to adopt an Ordinance modifying the Architectural Review Approval Findings including the following changes: A. Replace Finding Number 5 with the April 11, 2016 Council directed language for Finding Number 5, “the landscape design compliments and enhances the building design and its surroundings, is appropriate to the site’s functions, and utilizes, to the extent practical, indigenous DRAFT ACTION MINUTES Page 4 of 7 City Council Meeting Draft Action Minutes: 9/12/16 drought-resistant plant material capable of providing desirable habitat and that can be appropriately maintained;” and B. Remove from Finding Number 2(b), “local.” INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion Part A, “adding ‘regional’ after ‘to the extent practical.’” INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion, “add to Finding 2(d), ‘mass’ after ‘transitions in scale.’” (New Part C) AMENDMENT: Council Member Holman moved, seconded by Council Member Schmid to add to the Motion, “add to Finding 2(c), “and in urban areas, establishes design linkages with surrounding existing buildings so that the visual unity of the street is maintained at a minimum by: i. The rhythmic pattern of the street established by the general width of the buildings and the spacing between them; and ii. The sizes, proportions, and orientations of windows, bays, and doorways; and iii. The location and treatment of entryways where applicable. AMENDMENT TO THE AMENDMENT: Council Member Holman moved, seconded by Council Member XX to remove Part iii of the Amendment and replace in the Amendment, “urban areas” with “the Downtown urban core, California Avenue core, and El Camino Real.” AMENDMENT TO THE AMENDMENT RESTATED AND INCORPORATED INTO THE AMENDMENT WITH THE CONSENT OF THE MAKER AND SECONDER to remove Part iii of the Amendment and replace in the Amendment, “urban areas” with “the Downtown business district and the California Avenue business district.” INCORPORATED INTO THE AMENDMENT WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Amendment, “Direct Staff to return with proposed boundary definitions for the Downtown business district and the California Avenue business district. DRAFT ACTION MINUTES Page 5 of 7 City Council Meeting Draft Action Minutes: 9/12/16 AMENDMENT TO THE AMENDMENT: Council Member Filseth moved, seconded by Council Member XX to add to the Amendment, “remove from Finding Number 2(d), ‘and land use designations.’” AMENDMENT TO THE AMENDMENT WITHDRAWN BY THE MAKER MOTION RESTATED: Vice Mayor Scharff moved, seconded by Council Member Burt to adopt an Ordinance modifying the Architectural Review Approval Findings including the following changes: A. Replace Finding Number 5 with the April 11, 2016 Council directed language for Finding Number 5, “the landscape design compliments and enhances the building design and its surroundings, is appropriate to the site’s functions, and utilizes, to the extent practical, regional indigenous drought-resistant plant material capable of providing desirable habitat and that can be appropriately maintained;” and B. Remove from Finding Number 2(b), “local;” and C. Add to Finding 2(d), “mass” after “transitions in scale.” AMENDMENT RESTATED: Council Member Holman moved, seconded by Council Member Schmid to: A. Add to the Motion, “add to Finding 2(c), ‘and in the Downtown business district and the California Avenue business district, establishes design linkages with surrounding existing buildings so that the visual unity of the street is maintained at a minimum by: a. The rhythmic pattern of the street established by the general width of the buildings and the spacing between them; b. The sizes, proportions, and orientations of windows, bays, and doorways;’” and B. Direct Staff to return with proposed boundary definitions for the Downtown business district and the California Avenue business district. SUBSTITUTE MOTION: Mayor Burt moved, seconded by Vice Mayor Scharff to continue the Motion as Amended, the Amendment as Amended, and this Item to a date uncertain. DRAFT ACTION MINUTES Page 6 of 7 City Council Meeting Draft Action Minutes: 9/12/16 SUBSTITUTE MOTION PASSED: 9-0 8. Approval of the Recommended City Position for the 2016 League of California Cities Resolution. MOTION: Council Member Kniss moved, seconded by Council Member Berman to authorize the City’s Voting Delegate to vote on the one (1) resolution to be considered at the annual League of California Cities (LOCC) conference to be held in Long Beach, CA from October 5-7, 2016 and approve the general guidance provided below. MOTION PASSED: 8-1 Scharff no Inter-Governmental Legislative Affairs None. Council Member Questions, Comments and Announcements Council Member Berman reported that he and several Council Members attended a peace walk this past Sunday, September 11. The walk began at Congregation Etz Chayim and Spark Church. Several hundred people were in attendance. Council Member Holman reported that she also attended the peace walk. She noted that she and many others stayed outside due to the large crowd. She reported Police Chief Dennis Burns’ presence at the peace walk. She requested Staff prepare a summary of State Ballot Propositions scheduled for the November 8, 2016 Election for Council to consider potential support or opposition any Propositions. Council Member Wolbach requested Staff include local Ballot Measures to allow Council to consider where it would like to support or oppose any Measures. He expressed particular interest in Measure A, Santa Clara County Affordable Housing Bond. Mayor Burt requested Staff contact Santa Clara County to ensure they are seeking local government support for Measure A. He also attended the peace walk. He reported his attendance and that of Council Members Holman and Kniss on Friday night at the Pacific Art League’s 90th Anniversary Reception. The Reception was well attended. He also attended DRAFT ACTION MINUTES Page 7 of 7 City Council Meeting Draft Action Minutes: 9/12/16 the third annual Palo Alto Community Health Fair on Saturday. The City has been a sponsor of the Health Fair for the last two years. Council Members Holman and Kniss also attended the Health Fair. He suggested an Objective 8, “cultivate strong partnerships with community partners” be added to the City’s Heathy Cities, Healthy Community Initiative. Adjournment: The meeting was adjourned at 12:29 A.M. City of Palo Alto (ID # 7170) City Council Staff Report Report Type: Consent Calendar Meeting Date: 9/26/2016 City of Palo Alto Page 1 Summary Title: Termination of East Palo Alto funding agreement for shuttle Title: Approval of the Termination of a Funding Agreement With the City of East Palo Alto for the East Palo Alto Shuttle Route at the Request of the City of East Palo Alto, Approve an Exemption Under Section 15301 of the California Environmental Quality Act Guidelines and Approval of a Budget Amendment to the General Fund From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that Council authorize the City Manager or his designee to terminate the funding agreement with the City of East Palo Alto for the operation of the East Palo Alto shuttle route at the request of the City of East Palo Alto, approve an exemption under 15301 of the California Environmental Quality Act, and amend the Fiscal year 2017 Budget Appropriation for the General Fund in the Planning and Community Environment Department by: a. Decreasing the revenue estimate for East Palo Alto shuttle route operations by $161,400; and b. Decreasing the expenditure appropriation for East Palo Alto shuttle route operations by $161,400. Executive Summary The City and the City of East Palo Alto have an agreement that was executed in July 2014, under which East Palo Alto agreed to provide $669,519 for the operation of the East Palo Alto Shuttle Route until June 2017. On July 21, 2016, staff received a request from City of East Palo Alto to terminate the funding agreement between the two cities and terminate the operation of East Palo Alto shuttle route (attachment A). Apparently, the City of East Palo Alto will be served by a new Samtrans bus route effective in September, and they would like to reprogram funds that were supporting the shuttle service. Background & Discussion In January 2014, the City of East Palo Alto approached the City requesting a partnership to City of Palo Alto Page 2 introduce a shuttle route to connect the Woodland Avenue neighborhood in East Palo Alto with Downtown Palo Alto. Staff from the City of East Palo Alto developed the East Palo Alto shuttle route. As the City was preparing a Request for Proposal (RFP) for operations of the Crosstown shuttle route, East Palo Alto staff requested the inclusion of operations for this new East Palo Alto shuttle route. In June 2014, the City Council approved a three-year contract with MV Transportation to operate the Crosstown and the East Palo Alto routes until June 30, 2017 and also approved a funding agreement with the City of East Palo Alto. Under the terms of the agreement, the City of East Palo Alto pays 100 percent of the East Palo Alto operational cost until June 30, 2017. The funding agreement between the two cities has a term of three years and is set to expire in June 2017. However, this Agreement can be terminated by mutual written consent and terms acceptable to both cities. City of East Palo Alto requested termination of the agreement and has accepted the terms of the termination as shown in Attachment B. The East Palo Alto route is operated by MV Transportation and managed by the City. The City has provided a notice to MV Transportation that it wishes to terminate the operations of the East Palo Alto route beginning on September 30, 2016. The City’s contract with MV Transportation allows the City to increase, reduce or modify shuttle services as the City may find necessary. An amendment to the contract is not required to terminate routes, but the City must provide a 30-day written notice. Termination of this route will not affect the Crosstown and Embarcadero routes. Timeline The last day of operation for East Palo Alto route will be September 30, 2016. Samtrans route 280 will incorporate the area currently served by the East Palo Alto route beginning September 8, 2016. Resource Impact The Planning and Community Environment Department Fiscal Year 2017 Adopted Operating Budget includes $645,772 for the Palo Alto Free Shuttle Program which provides sufficient funding to continue services for the Crosstown and Embarcadero routes until June 30, 2017 and the East Palo Alto route until September 30, 2016. With the termination of the agreement between the City of Palo Alto and the City of East Palo Alto, there will be a decrease in revenue from City of East Palo Alto in the amount of $161,400. Staff is requesting approval of a budget amendment to recognize a $161,400 decrease in revenue from the City of East Palo Alto and a corresponding decrease to transportation contracts in the Planning and Community Environment Department’s Fiscal Year 2017 Operating Budget. Policy Implications While the cancellation of this route is not consistent with the Comprehensuive Plan polices and programs listed below, this is a temporary setback necessitated by the withdrawal of funds by City of Palo Alto Page 3 East Palo Alto. The City will conitinue to work to expand the Palo Alto Free Shuttle system and finalize the expansion study that is currently underway. Policy T-4: Provide local transit in Palo Alto. Program T13: Establish a jitney bus system similar to Stanford University’s Marguerite Shuttle. Program T-37: Provide safe, convenient pedestrian, bicycle, and shuttle connections between the Stanford Shopping Center and Medical Center areas and future housing along the Sand Hill Road corridor, the University Avenue Multi-modal Tran-sit Station, Downtown Palo Alto, and other primary destinations. Environmental Review This termination is exempt from environmental review under 15301(operation of existing facility) of the California Environmental Quality Act Guidelines. Attachments: Attachment A: Notice of Service Cancellation for EPA Shuttle route (PDF) Attachment B: Agreement to terminate EPA shuttle route and funding agreement (PDF) City of Palo Alto (ID # 7192) City Council Staff Report Report Type: Consent Calendar Meeting Date: 9/26/2016 City of Palo Alto Page 1 Summary Title: Contract Amendments for Two Energy Efficiency Programs Title: Approval and Authorization for the City Manager or his Designee to Execute two Energy Efficiency Program Contract Amendments: (1) Amendment No. 3 to a Contract with BASE Energy, Inc. for the Administration of the Third-Party Non-Residential new Construction Program Contract Number C11141002 Extending the Term for two Additional Years; and (2) Amendment No. 1 to Eagle Systems International, Inc. DBA Synergy Companies Contract Number C15159125 for the Multifamily Residence Plus Program Increasing Compensation by $500,000 From $450,000 to a Total Not- to-Exceed Amount of $950,000 From: City Manager Lead Department: Utilities Recommendation Staff recommends that Council approve and authorize the City Manager, or his designee, to execute the following two Utilities Energy Efficiency Program contract amendments: 1. Amendment Three to the BASE Energy, Inc. Contract (C11141002)for the Business New Construction program to extend the contract term for up to two additional years from an expiration date of December 31, 2016 until the end of December 31, 2018 and to clarify language in the agreement, including that related to incentive payments, but with no change in the not-to-exceed amount of the contract; and 2. Amendment One to the Eagle Systems International, Inc. DBA Synergy Companies Contract (C15159125) for the Multifamily Residence Plus+ Program increasing compensation by $500,000 from $450,000 to a total revised not-to-exceed amount of $950,000 for the contract, and adding a pre-inspection step for the City to the customer enrollment process. Staff also recommends that Council find that its approval of these two Contract Amendments: (1) does not meet the definition of a project pursuant to Section 21065 of the California Public Resources Code, thus no environmental review under the California Environmental Quality Act City of Palo Alto Page 2 (CEQA) is required; and (2) the work performed by consultants and staff in connection with these programs is categorically exempt from CEQA pursuant to section 15301 of Title 14 of the California Code of Regulations. Executive Summary BASE Energy Inc. (“BASE”) is the City of Palo Alto Utilities (“CPAU’) third-party contractor for the Business New Construction program. BASE works with business customers to find energy efficiency (“EE”) opportunities during the design and construction phase of new non-residential building projects, the ideal time to find savings before a customer commits to major new capital expenses. BASE is engaged with a major key account customer on a new large health care facility that is currently under construction. Staff expects the project will yield significant energy savings. This facility is scheduled for completion by the end of calendar year 2018. Due to the size and scope of this project and the value of the expected savings, the term of the current contract with BASE needs to be extended in order to capture these savings and reward customers for their EE efforts. Although this amendment clarifies language related to aspects of the incentive payment structure, there is no increase in the total not-to-exceed compensation for the vendor recommended as part of this term extension. Eagle Systems International, Inc. DBA Synergy Companies (“Synergy”) is the third-party contractor for the Multifamily Residence Plus+ Program which provides a no-cost, direct installation, EE program for an underserved customer group: multifamily residences with 4 or more units. The program has been extremely successful with demand far-exceeding initial expectations. The proposed contract amendment increases compensation by $500,000 to allow Synergy to continue to provide direct installation, no-cost energy efficiency services to this customer group. Background The original contract with BASE was approved by Council on May 16, 2011 (Staff Report 1538) for a period of three years. Council approved Amendment One on April 8, 2013 (Staff Report 3565) to extend the contract for an additional two years. On June 30, 2016, the contract was administratively extended (as allowed by Municipal Code 2.30.290) by six months to December 31, 2016. The total compensation not-to-exceed amount for the Term of the Agreement does not exceed $360,000. The original contract with Synergy for Multifamily Residence Plus+ was approved by Council on May 8, 2015 (Staff Report 5707) for a period of three years and not to exceed cost of $450,000. The current contract expires on June 30, 2018. Discussion BASE Contract for the Business New Construction Program City of Palo Alto Page 3 The most cost-effective time to make significant energy efficiency investments for a facility is during the design, construction or major retrofit phases. In order to capture these opportunities, BASE completes a detailed engineering and economic feasibility study of the plans for the building design. The study recommends efficiency measures, scheduling and equipment. The estimated savings as well as the incremental installation cost of the measures are coupled with an incentive for customers to select high efficiency equipment. After the construction is complete, BASE verifies that the efficiency measures were installed as recommended and presents the final energy and water savings to CPAU. The customer is then paid incentives for the energy savings and BASE receives a performance payment. The proposed Amendment No. 3 is to allow time for the completion of the large health care facility for which significant energy savings are expected—estimated to exceed four megawatt- hours. Staff proposes extending the contract with BASE until the end of 2018 when the facility is expected to be completed to reward the customer for their EE efforts. The proposed amendment also clarifies the incentive payment terms, but does not increase the overall not- to-exceed compensation for BASE. A summary and history of the BASE contract is provided below. TOTAL Not-to- Exceed Amount Compensation Increase End of Term (Total Term) Original Contract (July 1 ,2011) Staff Report 1538 $201,390 n/a June 30, 2014 (3 years) Amendment No. 1 (April 8, 2013) Staff Report 3565 $360,000 $158,610 June 30, 2016 (5 years) Amendment No. 2 (July 1, 2016) Administrative 6-mo extension $360,000 $0 December 31, 2016 (5 ½ years) Amendment No. 3 (Proposed) $360,000 $0 December 31, 2018 (7 ½ years) Synergy contract for the Multifamily Residence Plus+ Program The Multifamily Residence Plus+ Program was launched on May 1, 2015. The goal of this program is to offer direct-install EE measures to multifamily residences with 4 or more units including hospices, care centers, rehab facilities, and select small and medium commercial properties; this is a customer group which has been under-served and hard to reach for Utility EE programs. The majority of the work this past year has been focused on adding insulation and installing lighting upgrades to many of the older apartment buildings in Palo Alto. As a result, the program installed over 100,000 square feet of attic insulation, approximately 1,000 LED lights and upgraded over 700 flourescent tube lights. The program targeted lighting upgrades to locations where lights are on 24 hours per day such as parking gargages, elevators and hallways. City of Palo Alto Page 4 With the advancement of lighting technology, customers are very receptive to have Synergy upgrade their lights from compact fluorescent bulbs to LEDs, which use less energy and provide a brighter and warmer light. For CPAU, offering this upgrade is now possible as the price of LED’s has decreased significantly in the last few years and the quality of the LED’s has greatly improved. This is CPAU’s first program focused on multifamily residences and staff’s initial forecasts of program activity have proven to be quite conservative. After spending the initial $150,000 allocated to the first year of the contract (of the total not-to-exceed amount $450,000), in May of 2016 staff encumbered another $150,000 from the 2nd year of the contract to complete some large projects. Synergy has identified a number of larger multifamily facilities which are eager to participate in this program. By increasing compensation as proposed with Amendment No. 1, CPAU is expected to achieve conservative energy savings of close to 1,000,000 kWh and 92,000 therms for the term of the contract. The additional $500,000 will enable CPAU to continue to provide direct installation, no-cost energy efficiency services to more facilities, resulting in energy savings numbers which can help us with the Georgetown University Energy Prize competition which concludes at the end of 2016. The contract amendment also adds a new provision for pre-inspection to provide extra oversight of each project. A summary and history of the Synergy contract is provided below: TOTAL Not-to- Exceed Amount Compensation Increase End of Term (Total Term) Original Contract (July 1 ,2015) Staff Report 5707 $450,000 n/a June 30, 2018 (3 years, and 1 month) Amendment No. 1 (Proposed) $950,000 $500,000 June 30, 2018 (3 years, and 1 month) Yearly program energy saving target & budget for the Synergy contract: Fiscal Year Budget Annual Savings kWh kW Therms FY 2016 (Actual) $183,464 188,444 194.4 17,812 FY 2017 (Projected) $500,000 513,575 529.8 48,543 FY 2018 (Projected) $266,536 273,771 282.4 25,877 Total (FY2016-FY2018) $950,000 975,790 1,007 92,232 Resource Impacts Funding of $500,000 for year two of the Synergy contract is available in the FY 2017 Demand Side Management budgets in the electric, water and natural gas operating funds. Funding for contract year three is contingent upon appropriation and approval of funds for FY 2018. City of Palo Alto Page 5 Policy Impacts The recommendation is consistent with Council policy and supports the Council-approved electric, water and natural gas efficiency goals. In addition, this program supports the City’s interest in affordable housing by improving the efficiency, safety and comfort of existing multifamily developments. Staff will ensure that affordable developments are notified of the program to take advantage of its benefits. Environmental Review Approval of the two Contract Amendments recommended in this staff report does not meet the definition of a project pursuant to Section 21065 of the California Public Resources Code, thus no environmental review under the California Environmental Quality Act (CEQA) is required and the work performed by consultants and staff in connection with these programs is categorically exempt from CEQA pursuant to section 15301 of Title 14 of the California Code of Regulations. Attachments: Attachment 1 - Amendment No. 3 to a Contract with BASE Energy, Inc.Contract C11141002 (PDF) Attachment 2 - Amendment No. 1 to Eagle Systems International, Inc. DBA Synergy Companies (Synergy) Contract C15159125 (PDF) ATTACHMENT 1 Third Amendment C11141002 Business New Construction Program 1 of 10 Revision April 28, 2014 AMENDMENT NO. THREE TO CONTRACT NO. C11141002 BETWEEN THE CITY OF PALO ALTO AND BASE ENERGY, INC. This Amendment No. Three (“Third Amendment”) to Contract No. C11141002 (“Contract”) is entered into ________________, 2016 (“Amendment Effective Date”), by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and BASE ENERGY, INC., a California corporation, located at 5 Third Street, Suite 630, San Francisco, CA 94103 (“CONSULTANT”). The Parties are collectively referred to herein as “Parties” (each individually referred to herein as “Party” and collectively as the “Parties”). R E C I T A L S A. The Contract was entered into between the parties for the Consultant to provide third-party energy efficiency programs the City’s Utilities Department B. The Parties now desire to extend the Term of the Contract by two years from its current expiration date of December 31, 2016 to December 31, 2018. C. The Parties now also desire to clarify the Contract’s incentive payment terms, without otherwise modifying the overall not-to-exceed amount under the Contract. D. In order to accomplish these purposes, the Parties now wish to amend the Contract. NOW, THEREFORE, in consideration of the covenants, terms, conditions, and provisions of this Third Amendment, the Parties agree: SECTION 1. Section 2. TERM is hereby amended to read as follows: “SECTION 2. TERM. The term of this Agreement shall be from the date of its full execution through December 31, 2018 unless terminated earlier pursuant to Section 19 of this Agreement.” SECTION 2. Section 13. PROJECT MANAGEMENT is hereby amended to read as follows: “SECTION 13. PROJECT MANAGEMENT. CONSULTANT will assign Ahmad Ganji as the project supervisor to have supervisory responsibility for the performance, progress, and execution of the Services to represent CONSULTANT during the day-to-day work on the Project. If circumstances cause the substitution of the project director, project coordinator, or any other key personnel for any reason, the appointment of a substitute project director and the assignment of any key new or replacement personnel will be subject to the prior written approval of CITY’s project DocuSign Envelope ID: 7992EEA0-9707-46F0-A95E-19F351517E4C ATTACHMENT 1 Third Amendment C11141002 Business New Construction Program 2 of 10 Revision April 28, 2014 manager. CONSULTANT, at CITY’s request, shall promptly remove personnel who CITY finds do not perform the Services in an acceptable manner, are uncooperative, or present a threat to the adequate or timely completion of the Project or a threat to the safety of persons or property. CITY’s project manager is Bruce Lesch , Manager, Utility Program Services, or his designee, Utilities Department, 250 Hamilton Ave, Palo Alto, CA 94303. The project manager will be CONSULTANT’s point of contact with respect to performance, progress and execution of the Services. CITY may designate an alternate project manager from time to time.” SECTION 3. The following exhibits to the Contractor is/are hereby amended to read as set forth in the attachment(s) to this Third Amendment, which are incorporated in full and supersede prior versions of the exhibits by this reference: a. Exhibit “A” entitled “SCOPE OF WORK”. b. Exhibit “B” entitled “SCHEDULE OF PERFORMANCE”. c. Exhibit “C” entitled “COMPENSATION”. SECTION 4. Except as herein modified, all other provisions of the Contract, including any exhibits and subsequent amendments thereto, shall remain in full force and effect. IN WITNESS WHEREOF, the Parties have by their duly authorized representatives executed this Third Amendment as of the Amendment Effective Date. CITY OF PALO ALTO ____________________________ City Manager APPROVED AS TO FORM: _____________________________ Senior Deputy City Attorney BASE ENERGY, INC. By:___________________________ Name:_________________________ Title:________________________ By:___________________________ Name:_________________________ Title:________________________ Attachments: DocuSign Envelope ID: 7992EEA0-9707-46F0-A95E-19F351517E4C Principal Ahmad R. Ganji Sandra Chow BASE Energy, Inc. Secretary ATTACHMENT 1 Third Amendment C11141002 Business New Construction Program 3 of 10 Revision April 28, 2014 EXHIBIT “A”: SCOPE OF SERVICES EXHIBIT “B”: SCHEDULE OF PERFORMANCE EXHIBIT “C”: COMPENSATION DocuSign Envelope ID: 7992EEA0-9707-46F0-A95E-19F351517E4C ATTACHMENT 1 Third Amendment C11141002 Business New Construction Program 4 of 10 Revision April 28, 2014 EXHIBIT “A” SCOPE OF SERVICES CONSULTANT agrees to deliver the Business New Construction Program (BNC) (sometimes referred to as the “PROGRAM”) to non-residential customers served by the City of Palo Alto Utilities (“Palo Alto” or “CITY”) in accordance with the specifications set forth in this Exhibit “A”. TASK 1 - PROGRAM MARKETING Task 1.1 Customer Recruitment Task 1.2 Project Development TASK 2 - PROGRAM IMPLEMENTATION Task 2.1 Project Feasibility Study Task 2.2 Process Program Application Task 2.3 Technical Assistance Task 2.4 Project Implementation Verification Task 2.5 Conflict Resolution TASK 3 - PROGRAM ADMINISTRATION Task 3.1 Meetings and Communications with City of Palo Alto Task 3.2 Program Set-Up Task 3.3 Progress Reporting Task 3.4 Invoicing Task 3.5 Develop Program Documentation Task 3.6 Program Closure A description of the tasks and sub-tasks follows. TASK 1 - PROGRAM MARKETING The initial marketing objectives will include promoting program awareness and recruiting customers into the program. As the program progresses, the marketing objectives will slightly shift towards maximizing the number of identified projects that get implemented. To successfully complete this task, work will be subdivided into the following subtasks: Task 1.1 Customer Recruitment Various program marketing materials will be developed and/or purchased to help promote program awareness and recruit customers. Initial marketing materials that will be developed include: marketing plan, program website, brochure, case studies, and presentations. These materials will be disseminated by attending workshops, organizing informational workshops, mail-ins, and through the program website. Initial program marketing activities will be targeted to: o Architects and Design Engineers: In conjunction with the City of Palo Alto, BASE will organize workshops targeted to architects and design engineers to promote the program and explain how we can collaborate to better serve the customer. DocuSign Envelope ID: 7992EEA0-9707-46F0-A95E-19F351517E4C ATTACHMENT 1 Third Amendment C11141002 Business New Construction Program 5 of 10 Revision April 28, 2014 o City of Palo Alto Personnel: In conjunction with the City of Palo Alto BASE will organize workshops targeted to the City’s Permitting Department to promote the program and explore ways in which the program can be incorporated (on a voluntary basis) into the new business permitting process. o City of Palo Alto Utility Customers: Existing City of Palo Alto Utility customers will be contacted directly or through their Utility Account Representatives to ensure that customers seeking to construct new buildings/facilities or those who seek to expand existing system capacity can do so in an energy, water, and cost efficient manner. Task 1.2 Project Development Potential program customers will be pre-screened through a short phone interview to ensure that the customer is seeking help under the correct energy efficiency program. If our program is not right for the customer, BASE staff will redirect the customer to other City of Palo Alto program that could best serve their needs. After completing the phone interview, BASE will schedule a project kick off meeting with the customer (owner and/or design engineer) to: 1) explain the program participation process and 2) collect needed information to identify the potential energy and water efficiency opportunities. Once the information is collected and analyzed, BASE staff will develop a Technical Memorandum identifying the potential energy and water efficiency opportunities and provide the customer/designer with preliminary water, energy, demand, and cost savings as well as expected incentive amount. The Technical Memorandum will be presented and discussed with the customer. TASK 2 - PROGRAM IMPLEMENTATION After reviewing the Technical Memorandum the customer will decide on the energy and water efficiency opportunities to implement. The selected measures will become the basis for developing and processing the Program Application. To successfully complete this task, work will be subdivided into the following sub-tasks: Task 2.1 Project Feasibility Study A detailed engineering and economic feasibility study will be developed for the customer. The study will describe operation of the designed systems and equipment considered, establish energy and water consumption baselines, estimate the proposed energy and water consumption and energy and water savings, estimate the expected incremental measure cost, and estimate the potential financial incentive for implementing the recommended upgrades. The feasibility study will help the customer to further assess the economics of the proposed projects and at the same time serve as a basis to more accurately document projected savings. Task 2.2 Process Program Application Along with the Project Feasibility Study BASE staff will prepare a signature- ready Program Application. The Program Application will commit BASE to reserve the estimated incentive amount and commit the customer to implement DocuSign Envelope ID: 7992EEA0-9707-46F0-A95E-19F351517E4C ATTACHMENT 1 Third Amendment C11141002 Business New Construction Program 6 of 10 Revision April 28, 2014 the selected projects. Task 2.3 Technical Assistance While the customer moves forward with the project BASE staff will assist the customer with any technical questions regarding the recommended projects. BASE staff will work with the customer’s system designers, contractors, and/or equipment vendors to ensure installed projects operate as intended. Task 2.4 Project Implementation Verification After proposed projects are implemented and operational the customer will notify BASE of project completion. BASE will schedule a site visit with the customer to inspect the installed project. BASE staff will notify the customer of any deficiencies in implementation and recommended modifications (if needed). Once the implementation verification is approved, BASE will develop a Verification Report to document installed energy savings. Task 2.5 Conflict Resolution BASE recognizes that specific issues may arise from time to time. BASE will develop procedures for dealing with potential conflicts between BASE-Customer. In addition to developing procedures, BASE will record any outstanding issues and methods of resolution in a Conflict Resolution Log and submitted to the City Program Manager in a quarterly basis. TASK 3 - PROGRAM ADMINISTRATION Program administration tasks include all activities related to setting up the program, processing incentives, and satisfying reporting requirements and procedures set by the City. To successfully meet City needs, program administration will be divided into the following sub-tasks: Task 3.1 Meetings and Communications with City of Palo Alto A successful energy efficiency program implementation requires close collaboration between the program sponsor (City of Palo Alto Utilities) and program administrator (BASE). Most communication will be done through email or phone conversations, with in-person meetings scheduled on an as needed basis. Task 3.2 Program Set-Up In this task, BASE staff will attend meetings with the City for further training, familiarity with the City of Palo Alto Utility Organization, and develop all the necessary program documents such as: Program and Procedures Manual, Quality Control Plan, Conflict Resolution Plan, Invoicing Template, and Program Forms. Task 3.3 Progress Reporting BASE staff will develop monthly, quarterly, and annual reporting templates that satisfy City of Palo Alto reporting requirements. These reports will be developed and submitted within the timeframe specified by the City of Palo Alto. DocuSign Envelope ID: 7992EEA0-9707-46F0-A95E-19F351517E4C ATTACHMENT 1 Third Amendment C11141002 Business New Construction Program 7 of 10 Revision April 28, 2014 Task 3.4 Invoicing BASE will submit a monthly invoice to the City of Palo Alto for program accomplishments and installations performed in the preceding calendar month. Monthly invoices and supporting documents will be submitted on a schedule specified by the City of Palo Alto. All submissions will adhere to City requirements. Task 3.5 Develop Program Documentation On an as needed basis, BASE staff will develop new program documentation or modify existing program documents to ensure that documents are up to date with new program developments. New program documents may include: new program forms, expanding the portfolio of energy efficiency projects considered under the program, etc. Task 3.6 Program Closure Program activities will start ramping down by October 2018, to ensure all customers can be fully served by the end of the program cycle (December 31, 2018). Prior to the ramp down date, BASE staff will ensure that all services are complete, projects and measures are installed, and all incentives are processed by BASE staff to assure that they can be paid by December 31, 2018. Program closure announcements will be made to the City and posted on the program website to alert program customers. DocuSign Envelope ID: 7992EEA0-9707-46F0-A95E-19F351517E4C ATTACHMENT 1 Third Amendment C11141002 Business New Construction Program 8 of 10 Revision April 28, 2014 EXHIBIT “B” SCHEDULE OF PERFORMANCE CONSULTANT shall perform the Services so as to complete each milestone within the number of days/weeks specified below. The time to complete each milestone may be increased or decreased by mutual written agreement of the project managers for CONSULTANT and CITY so long as all work is completed within the term of the Agreement. CONSULTANT shall provide a detailed schedule of work consistent with the schedule below within 2 weeks of receipt of the notice to proceed. Program work plan and timeline will continue as in Contract No. C11141002, with the understanding that the program must be completed by December 31, 2018, including the completion of one large efficiency project (estimated savings over 4 million kWh, underway as of September 1, 2016). Smaller projects currently in progress are scheduled to be and must be completed prior to December 31, 2018. As of September 1, 2016, no new projects may be accepted under this program. Task Timing (Due Date) TASK 1 - PROGRAM MARKETING Task 1.1 Ongoing over Term of Agreement Task 1.2 One week after all needed customer information is collected TASK 2 - PROGRAM IMPLEMENTATION Task 2.1 After interested customer located One month after all needed customer information is collected Task 2.2 After customer approves study Program Application will be delivered to the customer in conjunction with the Project Feasibility Study Task 2.3 After customer approves study Task 2.4 One week after completing a successful verification inspection Task 2.5 Ongoing over Term of Agreement TASK 3 - PROGRAM ADMINISTRATION Task 3.1 Monthly - Ongoing over Term of Agreement Task 3.2 One month after contract award Task 3.3 Monthly - Ongoing over Term of Agreement Task 3.4 Monthly - Ongoing over Term of Agreement Task 3.5 Monthly - Ongoing over Term of Agreement (on an as needed basis) Task 3.6 Prior to December 31, 2018 DocuSign Envelope ID: 7992EEA0-9707-46F0-A95E-19F351517E4C ATTACHMENT 1 Third Amendment C11141002 Business New Construction Program 9 of 10 Revision April 28, 2014 EXHIBIT “C” COMPENSATION The CITY agrees to compensate the CONSULTANT for professional services performed in accordance with the terms and conditions of this Agreement, and as set forth in the budget schedule below. Compensation shall be calculated based on the hourly rate schedule attached as in the budget schedule below and up to the not to exceed budget amount for each task set forth below. As set forth in Table 1, the compensation to be paid to CONSULTANT under this Agreement for all services described in Exhibit “A” (“Basic Services”) shall not exceed a total of three hundred and sixty thousand dollars ($360,000). Total compensation will be sixty-seven thousand, one hundred and thirty dollars ($67,130) per year for Fiscal Year (FY) 2012, 2013, and 2014 of the Agreement. Starting in FY2015 compensation will be increased. For FY2015 and FY2016 compensation shall not exceed $79,305 per year.. CITY in its sole discretion reserves the right to modify the annual compensation limits and task limits, with CITY’s advance written approval, as long as the maximum total compensation not to exceed amount for the Term of the Agreement does not exceed $360,000. CONSULTANT agrees to complete all Services within this amount. Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth in this Agreement shall be at no cost to CITY. CONSULTANT shall perform the tasks and categories of work as outlined and budgeted below. The CITY’s Project Manager may approve in writing the transfer of budget amounts between any of the tasks or categories listed below provided the total compensation for Basic Services. Table 1 Annual Program Budget: Fiscal Year (FY) July 1st – June 30th Budget 1st Year FY12 $67,130 2nd Year FY13 $67,130 3rd Year FY14 $67,130 4th Year FY15 $79,305 5th Year FY16 $79,305 6th Year FY17 $0 7th Year FY18 $0 Total (FY12-FY18) $360,000 DocuSign Envelope ID: 7992EEA0-9707-46F0-A95E-19F351517E4C ATTACHMENT 1 Third Amendment C11141002 Business New Construction Program 10 of 10 Revision April 28, 2014 Table 2 Program Budget: Task Labor/Performance Category Rate Not-to- Exceed Amount % of Contract Task 1 Program Marketing Time and Material Program Manager $165/hour $42,500 12% Assistant Program Manager $130/hour Lead Engineer $130/hour Task 2 Program Implementation Performance Payment* Electrical $0.0454/kWh $292,250 81% Natural Gas $0.5000/therm Water $0.0033/gal Task 3 Program Administration Time and Material Program Manager $165/hour $25,250 7% Assistant Program Manager $130/hour NOT TO EXCEED AMOUNT $360,000 100% Notes: *For Task 2, Consultant is compensated using performance payments. Notwithstanding payment schedules set forth in section 5 of the Contract or Task 3.4 of Exhibit “A”, performance payments are calculated and paid in accordance with the schedule set forth below: Amount: Consultant finds energy savings in buildings in the design and new construction phase. City incentive payments to Consultant are as set forth in Table 2, Task 2. Schedule: Audit: 25% of the performance payment estimated in the customer’s project feasibility study is paid at the time that the report is presented to the customer and the customer signs an agreement to complete the work. Final / Verification: 75% of the performance payment estimated in the customer’s project feasibility study be paid at the time that the report is presented to the customer and the customer signs an agreement to complete the work. Maximum Total Compensation NOT TO EXCEED AMOUNT for Term of the Agreement = $360,000 DocuSign Envelope ID: 7992EEA0-9707-46F0-A95E-19F351517E4C Certificate Of Completion Envelope Id: 7992EEA0970746F0A95E19F351517E4C Status: Completed Subject: Please DocuSign this document: BASE Energy Amendment No 3 (9-12-16).pdf Source Envelope: Document Pages: 10 Signatures: 2 Envelope Originator: Certificate Pages: 2 Initials: 0 Kevin Carley AutoNav: Enabled EnvelopeId Stamping: Enabled Time Zone: (UTC-08:00) Pacific Time (US & Canada) 250 Hamilton Ave Palo Alto , CA 94301 kevin.carley@cityofpaloalto.org IP Address: 199.33.32.254 Record Tracking Status: Original 9/12/2016 12:54:00 PM Holder: Kevin Carley kevin.carley@cityofpaloalto.org Location: DocuSign Signer Events Signature Timestamp Ahmad R. Ganji arg@baseco.com Principal Security Level: Email, Account Authentication (None)Using IP Address: 23.124.72.169 Sent: 9/12/2016 12:57:40 PM Resent: 9/13/2016 7:55:23 AM Viewed: 9/13/2016 10:28:58 AM Signed: 9/13/2016 10:38:41 AM Electronic Record and Signature Disclosure: Not Offered via DocuSign ID: Sandra Chow schow@baseco.com BASE Energy, Inc. Secretary Security Level: Email, Account Authentication (None)Using IP Address: 23.124.72.169 Sent: 9/12/2016 12:57:40 PM Resent: 9/13/2016 7:55:23 AM Viewed: 9/13/2016 10:08:16 AM Signed: 9/13/2016 10:41:11 AM Electronic Record and Signature Disclosure: Not Offered via DocuSign ID: In Person Signer Events Signature Timestamp Editor Delivery Events Status Timestamp Agent Delivery Events Status Timestamp Intermediary Delivery Events Status Timestamp Certified Delivery Events Status Timestamp Carbon Copy Events Status Timestamp Bruce Lesch Bruce.Lesch@CityofPaloAlto.org Manager Util Mkt Svcs, Utilities City of Palo Alto Security Level: Email, Account Authentication (None) Sent: 9/13/2016 10:41:12 AM Electronic Record and Signature Disclosure: Not Offered via DocuSign ID: Carbon Copy Events Status Timestamp Carolynn Bissett carolynn.bissett@cityofpaloalto.org Contracts Administrator City of Palo Alto Security Level: Email, Account Authentication (None) Sent: 9/13/2016 10:41:12 AM Electronic Record and Signature Disclosure: Not Offered via DocuSign ID: joshua wallace joshua.wallace@cityofpaloalto.org Security Level: Email, Account Authentication (None) Sent: 9/13/2016 10:41:12 AM Electronic Record and Signature Disclosure: Not Offered via DocuSign ID: Kevin Carley kevin.carley@cityofpaloalto.org Util Acct Rep City of Palo Alto Security Level: Email, Account Authentication (None) Sent: 9/13/2016 10:41:12 AM Resent: 9/13/2016 10:41:16 AM Viewed: 9/15/2016 7:54:17 AM Electronic Record and Signature Disclosure: Not Offered via DocuSign ID: Marites Ward Marites.Ward@CityofPaloAlto.org Administrative Assistant City of Palo Alto Security Level: Email, Account Authentication (None) Sent: 9/13/2016 10:41:12 AM Electronic Record and Signature Disclosure: Not Offered via DocuSign ID: Rebecca Duchon Rebecca.Duchon@CityofPaloAlto.org Admin Assoc II City of Palo Alto Security Level: Email, Account Authentication (None) Sent: 9/13/2016 10:41:12 AM Electronic Record and Signature Disclosure: Not Offered via DocuSign ID: Notary Events Timestamp Envelope Summary Events Status Timestamps Envelope Sent Hashed/Encrypted 9/13/2016 10:41:12 AM Certified Delivered Security Checked 9/13/2016 10:41:12 AM Signing Complete Security Checked 9/13/2016 10:41:12 AM Completed Security Checked 9/13/2016 10:41:12 AM ATTACHMENT 2 First Amendment C15159125 Multifamily Residence Plus+ Program 1 of 13 Revision April 28, 2014 AMENDMENT NO. ONE TO CONTRACT NO. C15159125 BETWEEN THE CITY OF PALO ALTO AND EAGLE SYSTEMS INTERNATIONAL, INC. DBA SYNERGY COMPANIES This Amendment No. One (“First Amendment”) to Contract No. C15159125 (“Contract”) is entered into __________________, 2016 (“Amendment Effective Date”), by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and EAGLE SYSTEMS INTERNATIONAL, INC. DBA SYNERGY COMPANIES, a California corporation, located at 28436 Satellite Street, Hayward, CA 94545 (“CONSULTANT”) (each individually referred to herein as “Party” and collectively as the “Parties”). R E C I T A L S A. The Contract dated effective June 1, 2015 was entered into between the parties for Consultant to administer, manager and deliver a direct install energy savings program in connection with the Project (“Services”). B. The Parties now desire to increase the current “Not to Exceed Amount” by Five-Hundred Thousand ($500,000), from Four Hundred and Fifty Thousand Dollars to a new total Not to Exceed Amount of Nine Hundred and Fifty Thousand Dollars ($950,000) over the three year and one month Term of the Contract. C. The Parties also now desire to add a pre-inspection step for the City to the customer enrollment process. D. In order to accomplish these purposes, the Parties wish to amend the Contract. NOW, THEREFORE, in consideration of the covenants, terms, conditions, and provisions of this Amendment, the Parties agree: SECTION 1. Section 4. NOT TO EXCEED COMPENSATION is hereby amended to read as follows: “SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be paid to CONSULTANT for performance of the Services described in Exhibit “A” (Basic Services) shall not exceed Nine Hundred and Fifty Thousand Dollars ($950,000). No Additional Services or Reimbursable Expenses are contemplated as part of this Agreement. The applicable rates and schedule of payment are set out in Table “C-1”, entitled “Multifamily Residence Plus+ Program Eligible Measure Cost Per Unit” which is included in Exhibit “C” entitled “COMPENSATION” and made part of this Agreement. Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth herein shall be at no cost to CITY.” DocuSign Envelope ID: D54BFBA0-ACE5-4D74-9EE7-0D12E8D748C1 ATTACHMENT 2 First Amendment C15159125 Multifamily Residence Plus+ Program 2 of 13 Revision April 28, 2014 SECTION 2. Section 13. PROJECT MANAGEMENT is hereby amended to read as follows: “SECTION 13. PROJECT MANAGEMENT. CONSULTANT will assign Jim Amos as the project supervisor to have supervisory responsibility for the performance, progress, and execution of the Services to represent CONSULTANT during the day-to-day work on the Project. If circumstances cause the substitution of the project director, project coordinator, or any other key personnel for any reason, the appointment of a substitute project director and the assignment of any key new or replacement personnel will be subject to the prior written approval of CITY’s project manager. CONSULTANT, at CITY’s request, shall promptly remove personnel who CITY finds do not perform the Services in an acceptable manner, are uncooperative, or present a threat to the adequate or timely completion of the Project or a threat to the safety of persons or property. CITY’s project manager is Bruce Lesch, Manager, Utility Program Services, or his designee, Utilities Department, at 250 Hamilton Ave, Palo Alto, CA 94303. The project manager will be CONSULTANT’s point of contact with respect to performance, progress and execution of the Services. CITY may designate an alternate project manager from time to time.” SECTION 3. The following exhibit(s) to the Contract are hereby amended to read as set forth in the attachment(s) to this First Amendment, which are incorporated in full by this reference: a. Exhibit “A” entitled “SCOPE OF SERVICES”. b. Exhibit “B” entitled “SCHEDULE OF PERFORMANCE”. c. Exhibit “C” entitled “COMPENSATION”.” SECTION 4. Except as herein modified, all other provisions of the Contract, including any exhibits and subsequent amendments thereto, shall remain in full force and effect. DocuSign Envelope ID: D54BFBA0-ACE5-4D74-9EE7-0D12E8D748C1 ATTACHMENT 2 First Amendment C15159125 Multifamily Residence Plus+ Program 3 of 13 Revision April 28, 2014 IN WITNESS WHEREOF, the parties have by their duly authorized representatives executed this First Amendment as of the Amendment Effective Date. CITY OF PALO ALTO ____________________________ City Manager APPROVED AS TO FORM: _____________________________ Senior Deputy City Attorney EAGLE SYSTEMS INTERNATIONAL, INC. DBA SYNERGY COMPANIES By:___________________________ Name:________________________ Title:_________________________ By:___________________________ Name:________________________ Title:_________________________ Attachments: EXHIBIT “A”: SCOPE OF SERVICES EXHIBIT “B”: SCHEDULE OF PERFORMANCE EXHIBIT “C”: COMPENSATION DocuSign Envelope ID: D54BFBA0-ACE5-4D74-9EE7-0D12E8D748C1 CFO russell jacobsen Steven Shallenberger President ATTACHMENT 2 First Amendment C15159125 Multifamily Residence Plus+ Program 4 of 13 Revision April 28, 2014 EXHIBIT “A” SCOPE OF SERVICES CONSULTANT agrees to deliver the Multifamily Residence Plus+ Program (sometimes referred to as the “PROGRAM”) to multifamily residences with 4+ units, including hospices, care centers, rehab facilities, and select small and medium commercial properties for the City of Palo Alto Utilities department (“Palo Alto” or “CITY”) in accordance with the specifications set forth in this Exhibit “A”. OVERVIEW This Multifamily Residence Plus+ Program is designed to provide direct installation of energy efficiency (EE) measures at no-cost to targeted customers. The PROGRAM serves Palo Alto’s hard to reach multifamily residences, 4 + units that include apartments, hospices, care centers and rehab facilities. In addition to the specific project components identified in Section B – “Program Implementation and Delivery” of this Exhibit “A”, CONSULTANT will develop and implement a Marketing Plan, Quality Assurance Plan, and Staffing Plan. Target Customers/Markets CONSULTANT’s primary targets for the PROGRAM are residences with 4 or more units, include 4 + apartments, hospices, care centers, rehab facilities, and select small and medium commercial properties in CITY in accordance with the specifications set forth in this Exhibit “A”. Marketing Plan CONSULTANT will carefully develop marketing and outreach plans. CONSULTANT will utilize marketing strategies to garner high levels of responses and participation, including marketing directly to targeted customers segments via in-person visits by CONSULTANT’s associates and technicians. Additionally, CONSULTANT will develop relationships with home owner associations. Quality Assurance Plan CONSULTANT will maintain a Project Manager that monitors the work performed by each technician to verify the correct installation of work, to ensure that work is completed in compliance with CITY requirements, and to coordinate with the owner, property manager and maintenance teams, where applicable. CONSULTANT’s Project Manager will evaluate 100% of the work that is completed and report to CITY regarding the same. CONSULTANT will contact property managers/owners and business managers/owners after work is completed to determine satisfaction and to gain other pertinent information about the work completed. CONSULTANT agrees to maintain an in-house inspection team that physically inspects 100% of all jobs completed by each technician. DocuSign Envelope ID: D54BFBA0-ACE5-4D74-9EE7-0D12E8D748C1 ATTACHMENT 2 First Amendment C15159125 Multifamily Residence Plus+ Program 5 of 13 Revision April 28, 2014 Program Staffing Plan CONSULTANT agrees to staff the PROGRAM in accordance with the Staffing Plan set forth in Table A-1. CONSULTANT shall notify CITY concerning proposed changes to the staffing plan, and all such changes require the prior written consent of CITY. CITY reserves the right to (i) request CONSULTANT conduct criminal background checks to City’s satisfaction on all CONSULTANT’s staff, contractors or agents that may enter customer property, and (ii) require that any staff, contractor or agent of CONSULTANT that fails the background check shall not be permitted to enter any customer premises. Without limiting Section 16 (Indemnity) of the Agreement, CONSULTANT agrees and understands it is responsible for all costs and damages associated with any theft, vandalism, damage or criminal acts involving or committed by CONSULTANT staff, contractors or agents involving a customer or customer premises. Table A-1 PROGRAM Staffing Plan Staffing Direct Labor Responsibilities % of Total Hours Dave Clark, CEO Administration, Marketing, Production 2 % Steve Shallenberger, President Administration, Marketing, Production, EM&V 2 % David Shallenberger, Engineer Quality Assurance 3% Jim Amos, Program Manager Administration, Marketing, Production, EM&V 8% Russ Jacobson, Controller Administration, EM&V 5 % Dave Millward, Outreach & Business Development Property Owner/ Manager Liaison 30 % Office Staff Administrative 2 % Customer Service & Scheduling Staff Administration 2 % Receptionist & Admin. Staff Administration 1 % Data Entry & Scheduling Staff Administration 5 % Quality Assurance Manager Production and EM&V 8 % Direct Marketing Manager Marketing, Surveys, Reporting 2 % Crew Chiefs & Technicians Installation of measures and customer service 30% TOTAL 100% a) PROGRAM IMPLEMENTATION AND DELIVERY The following outlines a summary of the PROGRAM design and implementation: DocuSign Envelope ID: D54BFBA0-ACE5-4D74-9EE7-0D12E8D748C1 ATTACHMENT 2 First Amendment C15159125 Multifamily Residence Plus+ Program 6 of 13 Revision April 28, 2014 Task 1 –Program Ramp-up Task 1.1 Program Kick-off Meeting: CONSULTANT will lead a PROGRAM kick-off meeting with CITY’s Program Manager and other CITY staff, as necessary in order to discuss project logistics, marketing coordination, evaluation, monitoring and verification coordination, invoicing and reporting requirements, scope of work, any contractual issues, and to explore new technologies to enhance energy savings. Task 1.2 Program Data, Invoicing, and Reporting Training: CONSULTANT will train its team and personnel on reporting systems. CONSULTANT agrees to participate in training to learn how to submit monthly reports into CITY’s tracking system as needed. Task 1.3 Schedule of Activities: CONSULTANT will finalize the schedule of activities that provide a monthly work plan and implementation timeline and submit such plan to CITY, for evaluation of the work plan and timeline. Task 1.4 Marketing Plan: CONSULTANT will finalize a detailed marketing plan (“Marketing Plan”) which will include a discussion of all necessary PROGRAM marketing materials directly involved with PROGRAM implementation or for general customer information. Task 1.5 Marketing Materials: CONSULTANT will submit to CITY’s Program Manager all marketing collateral materials, as outlined in the Marketing Plan. CONSULTANT will obtain CITY authorization prior to any distribution, circulation, or publication of all such materials. Task 1.6 Invoice and Reporting Tools: CONSULTANT will submit to CITY a sample of all the reporting tools (i.e., flat files, monthly narrative, quarterly reporting, etc.) that are required, as further outlined herein, including under Task 5 - Invoicing and Reporting for Completed Jobs. Task 2 –Program Launch Task 2.1 Implement Marketing Campaign: CONSULTANT will execute the planned marketing campaign based on the proposed marketing plan. All marketing activities will be coordinated with CITY’s Program Manager. Task 3 – Enroll Customers (pre-commitment stage) Task 3.0 Pre-Inspection/Pre-Approval: CONSULTANT will submit a detailed estimate of proposed project. CITY will review and may conduct a Pre-Inspection to review scope of work for each project. Task 3.1 Program Agreement: CONSULTANT will implement the Marketing Plan and utilize the marketing materials created to enroll customers. Customer enrollment occurs when CONSULTANT executes a “Program Agreement” with the customer to receive preliminary program services. DocuSign Envelope ID: D54BFBA0-ACE5-4D74-9EE7-0D12E8D748C1 ATTACHMENT 2 First Amendment C15159125 Multifamily Residence Plus+ Program 7 of 13 Revision April 28, 2014 Task 3.2 Optimize other EE Programs for customer benefit: CONSULTANT will coordinate with CITY to leverage CONSULTANT interactions with participating small and medium sized businesses in order to promote CITY's other energy efficiency, demand response, renewable and water program offerings. Task 4 – Install EE Measures (commitment stage) Task 4.1 Project Installation: CONSULTANT will deliver energy savings to customers through the installation of energy efficient hardware, upgrades, and services. Task 4.2 Inspections: CONSULTANT will inspect and verify (per specification) that all installed measures/projects in the PROGRAM are properly installed. CONSULTANT will have a Project Manager that supervises installations and work completed at each site. This individual will inspect 100% of its jobs as technicians are completing their work. When the work is complete, CITY’s Program Manager will review work completed with the customer and have the customer sign off that the work is acceptable and satisfactory. Task 5 – Invoicing and Reporting Task 5.1 In addition to the invoicing and other requirements set forth in the Agreement, CONSULTANT will send in monthly report and annual reports to CITY. CONSULTANT shall also provide CITY with the following documentation: a. Narrative Report, in alignment with format as prescribed by CITY; b. Spreadsheet report with budget and energy savings; c. Program information in a format compatible with CITY’s tracking database; d. Beginning on a date set by CITY’s Program Manager, CONSULTANT will input PROGRAM information into CITY’s tracking system (if applicable). CITY in its sole discretion may determine that entries in the tracking system are a substitute for the monthly reports required under Task 5.1; e. Such other information reasonably requested by CITY. Task 5.2 CONSULTANT will evaluate PROGRAM progress with each monthly report. Task 5.3 CONSULTANT agrees to work with CITY to respond to federal, state or local data requests or reporting requirements. Task 5.4 Only energy savings that are incremental to the minimum energy savings mandated by Title 20 and Title 24 can be counted towards PROGRAM savings. To that end, the California Municipal Utility Association Technical Reference Manual (TRM), as the same may be amended from time to time, should be used as the reference source for determining annual energy savings. If a PROGRAM measure is not covered by the TRM, the CONSULTANT shall provide, to CITY’s satisfaction, the estimated energy savings and work paper(s) or reference source documenting the savings estimation methodology. DocuSign Envelope ID: D54BFBA0-ACE5-4D74-9EE7-0D12E8D748C1 ATTACHMENT 2 First Amendment C15159125 Multifamily Residence Plus+ Program 8 of 13 Revision April 28, 2014 At its discretion, CITY holds the right to request updated energy savings calculations. Additionally, for projects that involve lighting retrofit installations at nonresidential customer sites, CONSULTANT shall estimate the energy savings using the “TRM Non-Residential lighting energy savings calculator”, or other similar calculators that incorporate the Title 24 and Title 20 baseline for estimating energy savings. If the latter is preferred, CONSULTANT will need to demonstrate, to CITY’s satisfaction, that the energy savings calculation methodologies and the resultant savings from the TRM energy savings calculator and the CONSULTANT-preferred calculator are equivalent. At CITY’s discretion, CONSULTANT may work with CITY’s EM&V consultant(s) to develop a plan that accurately validates PROGRAM outcomes. Task 6 – Customer Service Task 6.1 CONSULTANT will address and resolve all customer issues discovered through either survey feedback or other means of customer contact. CONSULTANT will pursue continuous improvements to promote complete customer satisfaction. Customer feedback issues will be tracked by CONSULTANT using the monthly reports, as well as a completed complaint form filled out by CONSULTANT. CITY retains the right to separately survey PROGRAM participants. If any issues cannot be resolved to the satisfaction of the customer by CONSULTANT within five (5) days, CONSULTANT shall immediately provide CITY with a detailed description of any such complaint, which will include the name and contact information of the customer and any other information requested by CITY. CONSULTANT will provide a one year warranty to customers for all measures from the date of installation. Task 7 – Program Ramp-Down and Shutdown Task 7.1 Program Ramp-down: The CONSULTANT will complete and fully resolve all outstanding jobs in progress and any customer complaints. Task 8 – Submit Final Program Report Task 8.1 CONSULTANT will submit a final report which includes a narrative with an overview of the PROGRAM and a workbook report with budget and energy savings performance from the Program. The narrative will also contain a report on quality assurance information. The final report will include PROGRAM achievements, challenges, goals, lessons learned, and program improvements. DocuSign Envelope ID: D54BFBA0-ACE5-4D74-9EE7-0D12E8D748C1 ATTACHMENT 2 First Amendment C15159125 Multifamily Residence Plus+ Program 9 of 13 Revision April 28, 2014 Task 8.2 CONSULTANT agrees to deliver the final report within 30 days of the end of the Term as such date may be extended at the sole discretion of CITY. CONSULTANT will maintain electronic copies of invoices as is required by CITY. DocuSign Envelope ID: D54BFBA0-ACE5-4D74-9EE7-0D12E8D748C1 ATTACHMENT 2 First Amendment C15159125 Multifamily Residence Plus+ Program 10 of 13 Revision April 28, 2014 EXHIBIT “B” SCHEDULE OF PERFORMANCE CONSULTANT shall perform the Services so as to complete each milestone within the number of days/weeks specified below. The time to complete each milestone may be increased or decreased by mutual written agreement of the project managers for CONSULTANT and CITY so long as all work is completed within the term of the Agreement. CONSULTANT shall provide a detailed schedule of work consistent with the schedule below within 2 weeks of receipt of the notice to proceed. Task Timing (Due Date) Task 1 –PROGRAM RAMP-UP Task 1.1 Within 15 days of contract execution date Task 1.2 Within 15 days of contract execution date Task 1.3 Within 30 days of contract execution date Task 1.4 Within 30 days of contract execution date and Ongoing Task 1.5 Within 30 days of contract execution date and Ongoing Task 1.6 Within 30 days of contract execution date and Ongoing Task 2 –PROGRAM LAUNCH Task 2.1 Ongoing over Term of Agreement Task 3 – ENROLL CUSTOMERS (PRE-COMMITMENT STAGE) Task 3.0 Ongoing over Term of Agreement Task 3.1 Ongoing over Term of Agreement Task 3.2 Ongoing over Term of Agreement Task 4 – INSTALL EE MEASURES (COMMITMENT STAGE) Task 4.1 Ongoing over Term of Agreement Task 4.2 Ongoing over Term of Agreement Task 5 – INVOICING AND REPORTING Task 5.1 15th of each month Task 5.2 15th of each month Task 5.3 Ongoing over Term of Agreement Task 5.4 Ongoing over Term of Agreement TASK 6 – CUSTOMER SERVICE Task 6.1 Ongoing over Term of Agreement Task 7 – RAMP-DOWN AND SHUTDOWN PROGRAM Task 7.1 Ongoing through June 30, 2018 Task 8 – SUBMIT FINAL PROGRAM REPORT Task 8.1 As requested by CITY Program manager Task 8.2. Prior to June 30, 2018 DocuSign Envelope ID: D54BFBA0-ACE5-4D74-9EE7-0D12E8D748C1 ATTACHMENT 2 First Amendment C15159125 Multifamily Residence Plus+ Program 11 of 13 Revision April 28, 2014 EXHIBIT “C” COMPENSATION CITY agrees to compensate the CONSULTANT for professional services performed in accordance with the terms and conditions of this Agreement, and as set forth in this Exhibit C. The compensation to be paid to CONSULTANT under this Agreement for all services described in Exhibit “A” (“Basic Services”) shall not exceed a total of nine hundred fifty thousand dollars ($950,000). As set forth in Table 1 below, CONSULTANT compensation shall not exceed one hundred and eighty four thousand five hundred dollars ($184,500) for FY2016 of the Agreement (note that FY 2016 amount includes one month (June 2015) from FY 2015). For FY2017 compensation shall not exceed five hundred thousand dollars ($500,000). For FY2018 compensation shall not exceedtwo hundred sixty six thousand five hundred thirty six dollars ($266,536). CITY in its sole discretion reserves the right to modify the annual compensation limit, with CITY’s advance written approval, as long as the maximum total compensation not to exceed amount for the Term of the Agreement does not exceed nine hundred and fifty thousand dollars ($950,000). CONSULTANT agrees to complete all Services within this amount. Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth in this Agreement shall be at no cost to CITY. CITY will compensate CONSULTANT using a fixed-unit pricing structure. CITY will compensate CONSULTANT a fixed price (the Cost per Unit) per Eligible Measure installed and approved by CITY as set forth in Table C-1. The Cost per Unit for each Eligible Measure set forth in Table C-1 includes all of CONSULTANT’s costs, including, without limitation, administrative costs, marketing/outreach costs, and direct implementation (materials and labor) costs. It is CITY’s expectation that approximately 85% of CONSULTANT’s costs be related to direct implementation costs (materials and labor) with approximately 15% reserved for marketing/outreach costs and administrative costs respectively. Maximum Total Compensation NOT TO EXCEED AMOUNT For Term of the Agreement = $950,000 Table 1 PROGRAM Energy Saving Target & Budget Fiscal Year (FY) July 1st – June 30th Budget Annual Gross kWh kW Therms Year 1* FY16 $183,464 188,444 194.4 17,811.8 Year 2 FY17 $500,000 513,575 529.8 48,543 Year 3 FY18 $266,536 273,771 282.4 25,877 Total (FY16-FY18) $950,000 975,790 1,007 92,232 Note: *Year 1 includes one additional month from FY2015 (June 2015) preparing for the contract to launch DocuSign Envelope ID: D54BFBA0-ACE5-4D74-9EE7-0D12E8D748C1 ATTACHMENT 2 First Amendment C15159125 Multifamily Residence Plus+ Program 12 of 13 Revision April 28, 2014 CITY, in its sole discretion by providing written notice to CONSULTANT retains the right to add, delete, modify or limit the Eligible Measures, Cost per Unit, maximum number of individual Eligible Measures per customer or per year or other characteristics set forth in this Table C-1, installed by CONSULTANT. Table C-1 Multifamily Residence Plus+ Program Eligible Measure Cost Per Unit Summary # Description of EE Measure Unit of Measure Cost per Unit TRC Annual Savings Per Unit Source for Savings Assumptions (Name and Year of Publication) EUL* (Years) Effective Period (Year) kWh kW therm 1 Attic Insulation R-12 to Standard R-38 Sq.Ft. $1.05 2.71 0.5 0.000 0.2 CMUA TRM 2016 20 6/1/15 - 6/30/18 2 Attic Insulation R-0 to Standard R-38 Sq.Ft. $1.25 2.28 0.5 0.000 0.2 CMUA TRM 2016 20 6/1/15 - 6/30/18 3 Occupancy Sensors Unit $79.00 1.31 144.1 0.045 0.0 DEER 2014 8 6/1/15 - 6/30/18 4 Tier 2 Advanced Power Strip (APS) Unit $118.00 1.79 212.0 0.002 0.0 CMUA TRM 2016 12 6/1/15 - 6/30/18 5 LED 10-13 W replacing 50 W halogen downlight (Exterior) Unit $28.00 2.02 48.0 0.000 0.0 CMUA TRM 2016 15 6/1/15 - 6/30/18 6 LED 10-13 W replacing 50 W halogen downlight (Interior) Unit $28.00 0.93 22.0 0.002 0.0 CMUA TRM 2016 15 6/1/15 - 6/30/18 7 LED 19-21 W replacing 90 W halogen downlight (Exterior) Unit $36.00 2.85 87.0 0.000 0.0 CMUA TRM 2016 15 6/1/15 - 6/30/18 8 LED 19-21 W replacing 90 W halogen downlight (Interior) Unit $36.00 1.28 39.0 0.004 0.0 CMUA TRM 2016 15 6/1/15 - 6/30/18 9 LED A Type 10W replacing 60W Incandescent Unit $16.50 4.57 64.0 0.010 0.0 CMUA TRM 2016 15 6/1/15 - 6/30/18 10 LED A Type 8W replacing 40W Incandescent Unit $14.00 4.04 48.0 0.008 0.0 CMUA TRM 2016 15 6/1/15 - 6/30/18 11 LED 7 W replacing 50 W MR16 (Exterior) Unit $33.00 1.93 54.0 0.000 0.0 CMUA TRM 2016 15 6/1/15 - 6/30/18 12 Open Sign LED - Office Unit $265.00 3.92 843.0 0.225 0.0 CMUA TRM 2016 16 6/1/15 - 6/30/18 13 Open Sign LED - Retail Unit $265.00 4.14 889.0 0.214 0.0 CMUA TRM 2016 16 6/1/15 - 6/30/18 14 LED Exit Sign - One Sided Unit $57.00 3.94 191.8 0.028 -1.1 CMUA TRM 2016 16 6/1/15 - 6/30/18 15 LED Exit Sign - Two Sided Unit $57.00 6.42 313.0 0.045 -1.8 CMUA TRM 2016 16 6/1/15 - 6/30/18 16 Vending machine controller Unit $213.00 3.61 1612.0 0.000 0.0 CMUA TRM 2016 5 6/1/15 - 6/30/16 17 T8 28W replacing T8 32W 4F4L Lamp $56.22 2.08 245.0 0.380 0.0 CMUA TRM 2016 5 6/1/15 - 6/30/16 18 T8 28W replacing T8 32W 4F3L Lamp $46.02 1.90 183.0 0.285 0.0 CMUA TRM 2016 5 6/1/15 - 6/30/16 19 T8 28W replacing T8 32W 4F2L Lamp $36.02 1.61 122.0 0.190 0.0 CMUA TRM 2016 5 6/1/15 - 6/30/16 20 T8 28W replacing T8 32W 4F1L Lamp $28.72 1.01 61.0 0.095 0.0 CMUA TRM 2016 5 6/1/15 - 6/30/16 21 T8 28W replacing T8 32W 8F2L Lamp $38.92 1.91 156.0 0.225 0.0 CMUA TRM 2016 5 6/1/15 - 6/30/16 22 T8 28W replacing T8 32W 8F1L Lamp $32.15 1.60 108.0 0.120 0.0 CMUA TRM 2016 5 6/1/15 - 6/30/16 23 T8 Delamp 1-lamp - Corridors, stairs, etc. Lamp $27.00 1.46 82.8 0.025 0.0 CMUA TRM 2016 5 6/1/15 - 6/30/16 24 T8 Delamp 1-lamp - Kitchen, Food Prep Lamp $27.00 2.48 140.6 0.027 0.0 CMUA TRM 2016 5 6/1/15 - 6/30/16 25 T8 Delamp 1-lamp - Office space <250 sf Lamp $27.00 1.40 79.1 0.024 0.0 CMUA TRM 2016 5 6/1/15 - 6/30/16 26 T8 Delamp 1-lamp - Office space >250 sf Lamp $27.00 1.40 79.1 0.024 0.0 CMUA TRM 2016 5 6/1/15 - 6/30/16 27 T8 Delamp 1-lamp - Office space < 1,000 sf Lamp $27.00 1.40 79.1 0.024 0.0 CMUA TRM 2016 5 6/1/15 - 6/30/16 28 T8 Delamp 1-lamp - Tenant lease space Lamp $27.00 1.79 101.3 0.024 0.0 CMUA TRM 2016 5 6/1/15 - 6/30/16 29 T8 Delamp 1-lamp - Waiting area Lamp $27.00 1.44 81.8 0.025 0.0 CMUA TRM 2016 5 6/1/15 - 6/30/16 30 Hot Water Sensor Circulation Pump Pump $1,650.00 7.15 1206.0 0.000 1458.0 SCG Workpaper 2014 10 6/1/15 - 6/30/18 31 VFD Pool Pump Retrofit (MF Complexes) Unit $2,400.00 2.01 5586.0 0.360 0.0 Cal TF Workpaper 2014 10 6/1/15 - 6/30/18 32 LED 30W Wall Pack replacing 150W fixture Unit $240.00 2.02 559.0 0.027 0.0 CMUA TRM 2016 10 6/1/15 - 6/30/18 DocuSign Envelope ID: D54BFBA0-ACE5-4D74-9EE7-0D12E8D748C1 ATTACHMENT 2 First Amendment C15159125 Multifamily Residence Plus+ Program 13 of 13 Revision April 28, 2014 Table C-1 (Continued from Page 12) # Description of EE Measure Unit of Measure Cost per Unit TRC Annual Savings Per Unit Source for Savings Assumptions (Name and Year of Publication) EUL* (Years) Effective Period (Year) kWh kW therm 33 LED 60W Wall Pack replacing 250W fixture Unit $290.00 2.54 852.0 0.041 0.0 CMUA TRM 2016 10 6/1/15 - 6/30/18 34 7W LED replacing 23W CFL (1.5 hrs. per day) low usage Bulb $14.00 0.8 8.1 0.001 0.0 CMUA TRM 2016 15 7/1/16 - 6/30/18 35 7W LED replacing 23W CFL (3.4 hrs. per day) med usage Bulb $14.00 1.8 19.8 0.001 0 CMUA TRM 2016 15 7/1/16 - 6/30/18 36 7W LED replacing 23W CFL (11.4 hrs. per day) high usage Bulb $14.00 6.2 65.9 0.001 0 CMUA TRM 2016 15 7/1/16 - 6/30/18 37 7W LED replacing 18W CFL (1.5 hrs. per day) low usage Bulb $14.00 0.5 5.6 0.001 0 CMUA TRM 2016 15 7/1/16 - 6/30/18 38 7W LED replacing 18W CFL (3.4 hrs. per day) med usage Bulb $14.00 1.3 13.6 0.001 0 CMUA TRM 2016 15 7/1/16 - 6/30/18 39 7W LED replacing 18W CFL (11.4 hrs. per day) high usage Bulb $14.00 4.2 45.3 0.001 0 CMUA TRM 2016 15 7/1/16 - 6/30/18 40 9W LED replacing 23W CFL (1.5 hrs. per day) low usage Bulb $16.50 0.6 7.1 0.001 0 CMUA TRM 2016 15 7/1/16 - 6/30/18 41 9W LED replacing 23W CFL (3.4 hrs. per day) med usage Bulb $16.50 1.4 17.3 0.001 0 CMUA TRM 2016 15 7/1/16 - 6/30/18 42 9W LED replacing 23W CFL (11.4 hrs. per day) high usage Bulb $16.50 4.6 57.7 0.001 0 CMUA TRM 2016 15 7/1/16 - 6/30/18 43 11W LED replacing 23W R30 CFL (11.4 hrs. per day) high usage Bulb $28.00 2.3 49.4 0.001 0 CMUA TRM 2016 15 7/1/16 - 6/30/18 44 T8 to LED 1- bulb (11.4 hrs. per day) high usage Fixture $58.00 1.43 74.0 0.004 -0.4 CMUA TRM 2016 15 7/1/16 - 6/30/18 45 T8 to LED 2- bulb (11.4 hrs. per day) high usage Fixture $74.00 2.25 148.5 0.007 -0.8 CMUA TRM 2016 15 7/1/16 - 6/30/18 46 T8 to LED 3- bulb (11.4 hrs. per day) high usage Fixture $92.00 2.71 222.0 0.012 -1.2 CMUA TRM 2016 15 7/1/16 - 6/30/18 47 T8 to LED 4 - bulb (11.4 hrs. per day) high usage Fixture $109.00 3.06 297.0 0.014 -1.6 CMUA TRM 2016 15 7/1/16 - 6/30/18 48 T8 to LED 1- bulb (5.2 hrs. per day) med usage Fixture $58.00 0.65 33.7 0.004 -0.2 CMUA TRM 2016 15 7/1/16 - 6/30/18 49 T8 to LED 2- bulb (5.2 hrs. per day) med usage Fixture $74.00 1.02 67.4 0.007 -0.4 CMUA TRM 2016 15 7/1/16 - 6/30/18 50 T8 to LED 3- bulb (5.2 hrs. per day) med usage Fixture $92.00 1.24 101.2 0.011 -0.5 CMUA TRM 2016 15 7/1/16 - 6/30/18 51 T8 to LED 4 - bulb (5.2 hrs. per day) med usage Fixture $109.00 1.39 134.9 0.014 -0.7 CMUA TRM 2016 15 7/1/16 - 6/30/18 52 T8 to LED 1- bulb with ballast switch out (11.4 hrs. per day) high usage Fixture $89.00 1.16 91.7 0.004 -0.5 CMUA TRM 2016 15 7/1/16 - 6/30/18 53 T8 to LED 2- bulb with ballast switch out (11.4 hrs. per day) high usage Fixture $99.00 2.08 183.5 0.009 -1.0 CMUA TRM 2016 15 7/1/16 - 6/30/18 54 T8 to LED 3- bulb with ballast switch out (11.4 hrs. per day) high usage Fixture $109.00 2.83 275.2 0.001 -1.5 CMUA TRM 2016 15 7/1/16 - 6/30/18 55 T8 to LED 4 - bulb with ballast switch out (11.4 hrs. per day) high usage Fixture $119.00 3.47 366.9 0.018 -1.9 CMUA TRM 2016 15 7/1/16 - 6/30/18 56 T8 to LED 1- bulb with ballast switch out (5.2 hrs. per day) med usage Fixture $89.00 0.53 41.7 0.004 -0.2 CMUA TRM 2016 15 7/1/16 - 6/30/18 57 T8 to LED 2- bulb with ballast switch out (5.2 hrs. per day) med usage Fixture $99.00 0.95 83.3 0.009 -0.4 CMUA TRM 2016 15 7/1/16 - 6/30/18 58 T8 to LED 3- bulb with ballast switch out (5.2 hrs. per day) med usage Fixture $109.00 1.29 125.0 0.013 -0.7 CMUA TRM 2016 15 7/1/16 - 6/30/18 59 T8 to LED 4 - bulb with ballast switch out (5.2 hrs. per day) med usage Fixture $119.00 1.57 166.6 0.018 -0.9 CMUA TRM 2016 15 7/1/16 - 6/30/18 60 T12 to LED 1- bulb with ballast (11.4 hrs. per day) high usage Fixture $89.00 1.05 83.0 0.004 -0.4 CMUA TRM 2016 15 7/1/16 - 6/30/18 61 T12 to LED 2- bulb with ballast (11.4 hrs. per day) high usage Fixture $99.00 1.88 166.0 0.008 -0.9 CMUA TRM 2016 15 7/1/16 - 6/30/18 62 T12 to LED 3- bulb with ballast (11.4 hrs. per day) high usage Fixture $109.00 2.57 249.0 0.012 -1.3 CMUA TRM 2016 15 7/1/16 - 6/30/18 63 T12 to LED 4- bulb with ballast (11.4 hrs. per day) high usage Fixture $119.00 3.13 332.0 0.016 -1.8 CMUA TRM 2016 15 7/1/16 - 6/30/18 64 T12 to LED 1- bulb with ballast (5.2 hrs. per day) med usage Fixture $89.00 0.48 37.7 0.004 -0.2 CMUA TRM 2016 15 7/1/16 - 6/30/18 65 T12 to LED 2- bulb with ballast (5.2 hrs. per day) med usage Fixture $99.00 0.86 75.4 0.008 -0.4 CMUA TRM 2016 15 7/1/16 - 6/30/18 66 T12 to LED 3- bulb with ballast (5.2 hrs. per day) med usage Fixture $109.00 1.17 113.1 0.012 -0.6 CMUA TRM 2016 15 7/1/16 - 6/30/18 67 T12 to LED 4- bulb with ballast (5.2 hrs. per day) med usage Fixture $119.00 1.42 150.7 0.016 -0.8 CMUA TRM 2016 15 7/1/16 - 6/30/18 Notes: * Estimated Useful Life (EUL) Source for Savings Assumptions: California Municipal Utilities Association (CMUA) Technical Reference Manual (TRM): CMUA TRM 2016 Database for Energy Efficient Resources (DEER): DEER 2014 Southern California Gas (SCG): SCG Workpaper 2014 California Technical Forum (Cal TF): Cal TF Workpaper 2014 DocuSign Envelope ID: D54BFBA0-ACE5-4D74-9EE7-0D12E8D748C1 Certificate Of Completion Envelope Id: D54BFBA0ACE54D749EE70D12E8D748C1 Status: Completed Subject: Please DocuSign this document: Eagle-Synergy Amendment No 1 (9-12-16).pdf Source Envelope: Document Pages: 13 Signatures: 2 Envelope Originator: Certificate Pages: 2 Initials: 0 Kevin Carley AutoNav: Enabled EnvelopeId Stamping: Enabled Time Zone: (UTC-08:00) Pacific Time (US & Canada) 250 Hamilton Ave Palo Alto , CA 94301 kevin.carley@cityofpaloalto.org IP Address: 199.33.32.254 Record Tracking Status: Original 9/12/2016 1:22:51 PM Holder: Kevin Carley kevin.carley@cityofpaloalto.org Location: DocuSign Signer Events Signature Timestamp russell jacobsen russell.jacobsen@synergycompanies.org CFO Security Level: Email, Account Authentication (None)Using IP Address: 12.176.88.243 Sent: 9/12/2016 1:30:05 PM Viewed: 9/12/2016 4:06:27 PM Signed: 9/12/2016 4:07:40 PM Electronic Record and Signature Disclosure: Not Offered via DocuSign ID: Steven Shallenberger steveshallenberger@gmail.com President Security Level: Email, Account Authentication (None)Using IP Address: 73.20.60.200 Signed using mobile Sent: 9/12/2016 1:30:04 PM Viewed: 9/12/2016 1:36:17 PM Signed: 9/12/2016 1:39:23 PM Electronic Record and Signature Disclosure: Not Offered via DocuSign ID: In Person Signer Events Signature Timestamp Editor Delivery Events Status Timestamp Agent Delivery Events Status Timestamp Intermediary Delivery Events Status Timestamp Certified Delivery Events Status Timestamp Carbon Copy Events Status Timestamp Bruce Lesch Bruce.Lesch@CityofPaloAlto.org Manager Util Mkt Svcs, Utilities City of Palo Alto Security Level: Email, Account Authentication (None) Sent: 9/12/2016 4:07:41 PM Electronic Record and Signature Disclosure: Not Offered via DocuSign ID: Carbon Copy Events Status Timestamp Carolynn Bissett carolynn.bissett@cityofpaloalto.org Contracts Administrator City of Palo Alto Security Level: Email, Account Authentication (None) Sent: 9/12/2016 4:07:41 PM Electronic Record and Signature Disclosure: Not Offered via DocuSign ID: Hiromi Kelty Hiromi.Kelty@CityofPaloAlto.org Test Security Level: Email, Account Authentication (None) Sent: 9/12/2016 4:07:41 PM Electronic Record and Signature Disclosure: Not Offered via DocuSign ID: Kevin Carley kevin.carley@cityofpaloalto.org Util Acct Rep City of Palo Alto Security Level: Email, Account Authentication (None) Sent: 9/12/2016 4:07:41 PM Resent: 9/12/2016 4:07:44 PM Viewed: 9/15/2016 7:56:42 AM Electronic Record and Signature Disclosure: Not Offered via DocuSign ID: Marites Ward Marites.Ward@CityofPaloAlto.org Administrative Assistant City of Palo Alto Security Level: Email, Account Authentication (None) Sent: 9/12/2016 4:07:41 PM Electronic Record and Signature Disclosure: Not Offered via DocuSign ID: Rebecca Duchon Rebecca.Duchon@CityofPaloAlto.org Admin Assoc II City of Palo Alto Security Level: Email, Account Authentication (None) Sent: 9/12/2016 4:07:41 PM Electronic Record and Signature Disclosure: Not Offered via DocuSign ID: Notary Events Timestamp Envelope Summary Events Status Timestamps Envelope Sent Hashed/Encrypted 9/12/2016 4:07:41 PM Certified Delivered Security Checked 9/12/2016 4:07:41 PM Signing Complete Security Checked 9/12/2016 4:07:41 PM Completed Security Checked 9/12/2016 4:07:41 PM City of Palo Alto (ID # 7226) City Council Staff Report Report Type: Consent Calendar Meeting Date: 9/26/2016 City of Palo Alto Page 1 Summary Title: Concrete Cutting Construction Services Contract Amendment Title: Approval of Change Order Number One to Contract Number S16159273 With Penhall Company for Concrete Saw Cutting Services to Extend the Contract Time to Three Years (2015-2018) and to Increase the Total Not-to- Exceed Amount From $168,705 to $506,115 Over Three Years; and Finding That Approval of the Contract’s Change Order is Categorically Exempt from California Environmental Quality Act Review Under Section 15301(c) of the CEQA Guidelines From: City Manager Lead Department: Utilities Recommendation Staff recommends that Council approve and authorize the City Manager or his designee to execute Change Order Number 1 (Exhibit 1) to Contract S16159273 with Penhall Company (“Penhall”) for concrete saw cutting services to extend the term of the contract to three years from execution, with an expiration date of October 15, 2018 and increase the not-to-exceed amount from a total of $168,705 to $506,115 over the three year term. Staff also recommends that Council find that its approval of Change Order No. 1 is categorically exempt from the California Environmental Quality Act (CEQA) under CEQA Guidelines 15301(c) (operation, repair, maintenance of existing facilities). Background The Utilities Operations Department manages maintenance and operation of the gas and water distribution systems and the wastewater collection system. Daily operation and maintenance occurs in support of these utility systems, which requires cutting into the pavement in order to access the underground utilities. Due to the specialized skills, equipment and need for saw cutting services to support the utility operation; the City has been contracting saw cutting services on an as-needed basis for over 20 years. Penhall is currently providing this specialized area of concrete saw cutting construction services to the City. Penhall is responsible for providing labor, equipment, materials, traffic control, concrete removal, and other services required for saw cutting work. City of Palo Alto Page 2 Bidding and Selection Process On June 11, 2015 IFB 159273 was issued for On Call Saw Cutting Services. Three vendors responded to the Invitation for Bids: Bayline Construction Inc., Nichols Concrete Cutting and Penhall Company. 2015 bid results are shown in Table 1: Table 1 Nichols Concrete Cutting $1,164,423 Penhall Company $517,647 Bayline Construction Bid incomplete After a thorough review of the three submitted bids Penhall Company was determined to be the lowest responsible bidder. Discussion On August 10, 2015 the City entered into a contract (S16159273) with Penhall Company to provide saw cutting services for one year for a total not to exceed amount of $168,705. The initial invitation for bids contemplated the potential for the additional two year term that staff is recommending as part of this report. Over the course of the past eleven months Penhall Company has performed according to the contract terms. Penhall has responded promptly to staff’s requests for service and has executed the service to staff’s satisfaction. Staff is recommending that Council approve and authorize the City Manager to execute Change Order No. 1 to extend this contract for an additional two years through October 15, 2018 for a total not to exceed amount of $506,115. The Contract Sum for years two and three will be at the same annual $168,705 cost as the City has in place now under the Contract. Resource Impact Funding of $168,705 for year two of saw cutting services is available in the FY17 Utility Operating and Infrastructure budgets. Funding for contract year three is contingent upon appropriation and approval of funds for FY 2018. Policy Implications Authorization of this contract Change Order does not represent any change to existing policy. Environmental Review Council’s approval of this Change Order to extend the contract time and contract sum for saw cutting services is categorically exempt from the California Environmental Quality Act (CEQA) under CEQA Guidelines 15301(c) (operation, repair, maintenance of existing facilities), thus no environmental analysis is required. City of Palo Alto Page 3 Attachments: Attachment A: Contract_S16159273_Penhall (PDF) Exhibit 1 Contract Change Order (PDF) Invitation for Bid (IFB) Package 1 Rev. April 20, 2015 CONSTRUCTION CONTRACT CONSTRUCTION CONTRACT Contract No. S16159273 City of Palo Alto Project: “Saw Cutting 2015” DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 ATTACHMENT A Invitation for Bid (IFB) Package 2 Rev. April 20, 2015 CONSTRUCTION CONTRACT CONSTRUCTION CONTRACT TABLE OF CONTENTS SECTION 1 INCORPORATION OF RECITALS AND DEFINITIONS…………………………………….…………..6 1.1 Recitals…………………………………………………………………………………………………………………….6 1.2 Definitions……………………………………………………………………………………………………………….6 SECTION 2 THE PROJECT………………………………………………………………………………………………………...6 SECTION 3 THE CONTRACT DOCUMENTS………………………………………………………………………………..7 3.1 List of Documents…………………………………………………………………………………………….........7 3.2 Order of Precedence……………………………………………………………………………………………......7 SECTION 4 CONTRACTOR’S DUTY…………………………………………………………………………………………..8 4.1 Contractor's Duties…………………………………………………………………………………………………..8 SECTION 5 PROJECT TEAM……………………………………………………………………………………………………..8 5.1 Contractor's Co-operation………………………………………………………………………………………..8 SECTION 6 TIME OF COMPLETION…………………………………………………………………………………….......8 6.1 Time Is of Essence…………………………………………………………………………………………………….8 6.2 Commencement of Work…………………………………………………………………………………………8 6.3 Contract Time…………………………………………………………………………………………………………..8 6.4 Liquidated Damages…………………………………………………………………………………………………8 6.4.1 Other Remedies……………………………………………………………………………………………………..9 6.5 Adjustments to Contract Time………………………………………………………………………………….9 SECTION 7 COMPENSATION TO CONTRACTOR……………………………………………………………………….9 7.1 Contract Sum……………………………………………………………………………………………………………9 7.2 Full Compensation……………………………………………………………………………………………………9 SECTION 8 STANDARD OF CARE……………………………………………………………………………………………..9 8.1 Standard of Care…………………………………………………………………………………..…………………9 SECTION 9 INDEMNIFICATION…………………………………………………………………………………………..…10 9.1 Hold Harmless……………………………………………………………………………………………………….10 9.2 Survival…………………………………………………………………………………………………………………10 SECTION 10 NON-DISCRIMINATION……..………………………………………………………………………………10 10.1 Municipal Code Requirement…………….………………………………..……………………………….10 SECTION 11 INSURANCE AND BONDS.…………………………………………………………………………………10 DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 Invitation for Bid (IFB) Package 3 Rev. April 20, 2015 CONSTRUCTION CONTRACT 11.1 Evidence of Coverage…………………………………………………………………………………………..10 SECTION 12 PROHIBITION AGAINST RANSFERS………………………………………………………………….…11 12.1 Assignment………………………………………………………………………………………………………….11 12.2 Assignment by Law.………………………………………………………………………………………………11 SECTION 13 NOTICES …………………………………………………………………………………………………………….11 13.1 Method of Notice …………………………………………………………………………………………………11 13.2 Notice Recipents ………………………………………………………………………………………………….11 13.3 Change of Address……………………………………………………………………………………………….12 SECTION 14 DEFAULT…………………………………………………………………………………………………………...12 14.1 Notice of Default………………………………………………………………………………………………….12 14.2 Opportunity to Cure Default…………………………………………………………………………………12 SECTION 15 CITY'S RIGHTS AND REMEDIES…………………………………………………………………………..13 15.1 Remedies Upon Default……………………………………………………………………………………….13 15.1.1 Delete Certain Services…………………………………………………………………………………….13 15.1.2 Perform and Withhold……………………………………………………………………………………..13 15.1.3 Suspend The Construction Contract…………………………………………………………………13 15.1.4 Terminate the Construction Contract for Default………………………………………………13 15.1.5 Invoke the Performance Bond………………………………………………………………………….13 15.1.6 Additional Provisions……………………………………………………………………………………….13 15.2 Delays by Sureties……………………………………………………………………………………………….13 15.3 Damages to City…………………………………………………………………………………………………..14 15.3.1 For Contractor's Default…………………………………………………………………………………..14 15.3.2 Compensation for Losses…………………………………………………………………………………14 15.4 Suspension by City……………………………………………………………………………………………….14 15.4.1 Suspension for Convenience……………………………………………………………………………..14 15.4.2 Suspension for Cause………………………………………………………………………………………..14 15.5 Termination Without Cause…………………………………………………………………………………14 15.5.1 Compensation………………………………………………………………………………………………….15 15.5.2 Subcontractors………………………………………………………………………………………………..15 15.6 Contractor’s Duties Upon Termination………………………………………………………………...15 SECTION 16 CONTRACTOR'S RIGHTS AND REMEDIES……………………………………………………………16 16.1 Contractor’s Remedies……………………………………..………………………………..………………….16 DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 Invitation for Bid (IFB) Package 4 Rev. April 20, 2015 CONSTRUCTION CONTRACT 16.1.1 For Work Stoppage……………………………………………………………………………………………16 16.1.2 For City's Non-Payment…………………………………………………………………………………….16 16.2 Damages to Contractor………………………………………………………………………………………..16 SECTION 17 ACCOUNTING RECORDS………………………………………………………………………………….…16 17.1 Financial Management and City Access………………………………………………………………..16 17.2 Compliance with City Requests…………………………………………………………………………….17 SECTION 18 INDEPENDENT PARTIES……………………………………………………………………………………..17 18.1 Status of Parties……………………………………………………………………………………………………17 SECTION 19 NUISANCE……………………………………………………………………………………………………….…17 19.1 Nuisance Prohibited……………………………………………………………………………………………..17 SECTION 20 PERMITS AND LICENSES…………………………………………………………………………………….17 20.1 Payment of Fees…………………………………………………………………………………………………..17 SECTION 21 WAIVER…………………………………………………………………………………………………………….17 21.1 Waiver………………………………………………………………………………………………………………….17 SECTION 22 GOVERNING LAW AND VENUE; COMPLIANCE WITH LAWS……………………………….18 22.1 Governing Law…………………………………………………………………………………………………….18 22.2 Compliance with Laws…………………………………………………………………………………………18 SECTION 23 COMPLETE AGREEMENT……………………………………………………………………………………18 23.1 Integration………………………………………………………………………………………………………….18 SECTION 24 SURVIVAL OF CONTRACT…………………………………………………………………………………..18 24.1 Survival of Provisions……………………………………………………………………………………………18 SECTION 25 PREVAILING WAGES………………………………………………………………………………………….18 SECTION 26 NON-APPROPRIATION……………………………………………………………………………………….19 26.1 Appropriation………………………………………………………………………………………………………19 SECTION 27 AUTHORITY……………………………………………………………………………………………………….19 27.1 Representation of Parties…………………………………………………………………………………….19 SECTION 28 COUNTERPARTS………………………………………………………………………………………………..19 28.1 Multiple Counterparts………………………………………………………………………………………….19 SECTION 29 SEVERABILITY……………………………………………………………………………………………………19 29.1 Severability………………………………………………………………………………………………………….19 SECTION 30 STATUTORY AND REGULATORY REFERENCES …………………………………………………..19 30.1 Amendments of Laws…………………………………………………………………………………………..19 DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 Invitation for Bid (IFB) Package 5 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 31 WORKERS’ COMPENSATION CERTIFICATION………………………………………………….….19 31.1 Workers Compensation…………………………………………………………………………………….19 SECTION 32 DIR REGISTRATION AND OTHER SB 854 REQUIREMENTS………………………………..…20 32.1 General Notice to Contractor…………………………………………………………………………….20 32.2 Labor Code section 1771.1(a)…………………………………………………………………………….20 32.3 DIR Registration Required…………………………………………………………………………………20 32.4 Posting of Job Site Notices…………………………………………………………………………………20 32.5 Payroll Records…………………………………………………………………………………………………20 DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 Invitation for Bid (IFB) Package 6 Rev. April 20, 2015 CONSTRUCTION CONTRACT CONSTRUCTION CONTRACT THIS CONSTRUCTION CONTRACT entered into on August 10, 2015 (“Execution Date”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation ("City"), and PENHALL COMPANY ("Contractor"), is made with reference to the following: R E C I T A L S: A. City is a municipal corporation duly organized and validly existing under the laws of the State of California with the power to carry on its business as it is now being conducted under the statutes of the State of California and the Charter of City. B. Contractor is a corporation duly organized and in good standing in the State of California, Contractor’s License Number 568673, DIR number 1000000860. Contractor represents that it is duly licensed by the State of California and has the background, knowledge, experience and expertise to perform the obligations set forth in this Construction Contract. C. On June 11, 2015, City issued an Invitation for Bids (IFB) to contractors for the “Saw Cutting 2015” (“Project”). In response to the IFB, Contractor submitted a Bid. D. City and Contractor desire to enter into this Construction Contract for the Project, and other services as identified in the Contract Documents for the Project upon the following terms and conditions. NOW THEREFORE, in consideration of the mutual promises and undertakings hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is mutually agreed by and between the undersigned parties as follows: SECTION 1 INCORPORATION OF RECITALS AND DEFINITIONS. 1.1 Recitals. All of the recitals are incorporated herein by reference. 1.2 Definitions. Capitalized terms shall have the meanings set forth in this Construction Contract and/or in the General Conditions. If there is a conflict between the definitions in this Construction Contract and in the General Conditions, the definitions in this Construction Contract shall prevail. SECTION 2 THE PROJECT. The Project is to provide on-call saw cutting services throughout Palo Alto at various locations. ("Project"). DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 Invitation for Bid (IFB) Package 7 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 3 THE CONTRACT DOCUMENTS. 3.1 List of Documents. The Contract Documents (sometimes collectively referred to as “Agreement” or “Bid Documents”) consist of the following documents which are on file with the Purchasing Division and are hereby incorporated by reference. 1) Change Orders 2) Field Orders 3) Contract 4) Bidding Addenda 5) Special Provisions 6) General Conditions 7) Project Plans and Drawings 8) Technical Specifications 9) Instructions to Bidders 10) Invitation for Bids 11) Contractor's Bid/Non-Collusion Affidavit 12) Reports listed in the Contract Documents 13) Public Works Department’s Standard Drawings and Specifications (most current version at time of Bid) 14) Utilities Department’s Water, Gas, Wastewater, Electric Utilities Standards (most current version at time of Bid) 15) City of Palo Alto Traffic Control Requirements 16) City of Palo Alto Truck Route Map and Regulations 17) Notice Inviting Pre-Qualification Statements, Pre-Qualification Statement, and Pre- Qualification Checklist (if applicable) 18) Performance and Payment Bonds 3.2 Order of Precedence. For the purposes of construing, interpreting and resolving inconsistencies between and among the provisions of this Contract, the Contract Documents shall have the order of precedence as set forth in the preceding section. If a claimed inconsistency cannot be resolved through the order of precedence, the City shall have the sole power to decide which document or provision shall govern as may be in the best interests of the City. DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 Invitation for Bid (IFB) Package 8 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 4 CONTRACTOR’S DUTY. 4.1 Contractor’s Duties Contractor agrees to perform all of the Work required for the Project, as specified in the Contract Documents, all of which are fully incorporated herein. Contractor shall provide, furnish, and supply all things necessary and incidental for the timely performance and completion of the Work, including, but not limited to, provision of all necessary labor, materials, equipment, transportation, and utilities, unless otherwise specified in the Contract Documents. Contractor also agrees to use its best efforts to complete the Work in a professional and expeditious manner and to meet or exceed the performance standards required by the Contract Documents. SECTION 5 PROJECT TEAM. 5.1 Contractor’s Co-operation. In addition to Contractor, City has retained, or may retain, consultants and contractors to provide professional and technical consultation for the design and construction of the Project. The Contract requires that Contractor operate efficiently, effectively and cooperatively with City as well as all other members of the Project Team and other contractors retained by City to construct other portions of the Project. SECTION 6 TIME OF COMPLETION. 6.1 Time Is of Essence. Time is of the essence with respect to all time limits set forth in the Contract Documents. 6.2 Commencement of Work. Contractor shall commence the Work on the date specified in City’s Notice to Proceed. 6.3 Contract Time. Work hereunder shall begin on the date specified on the City’s Notice to Proceed and shall be completed within ninety calendar days (90) after the commencement date specified in City’s Notice to Proceed. By executing this Construction Contract, Contractor expressly waives any claim for delayed early completion. 6.4 Liquidated Damages. Pursuant to Government Code Section 53069.85, if Contractor fails to achieve Substantial Completion of the entire Work within the Contract Time, including any approved extensions thereto, City may assess liquidated damages on a daily basis for each day of Unexcused Delay in achieving Substantial Completion, based on the amount of five hundred dollars ($500) per day, or as otherwise specified in the Special Provisions. Liquidated damages may also be separately assessed for failure to meet milestones specified elsewhere in the Contract Documents, regardless of impact on the time for achieving Substantial Completion. The assessment of liquidated damages is not a penalty but considered to be a reasonable estimate of the amount of damages City will suffer by delay in completion of the Work. The City is entitled to setoff the amount of liquidated damages assessed against any payments otherwise due to Contractor, including, but not limited to, setoff against release of retention. If the total amount of liquidated damages assessed exceeds the amount of unreleased retention, City is entitled to recover the balance from DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 Invitation for Bid (IFB) Package 9 Rev. April 20, 2015 CONSTRUCTION CONTRACT Contractor or its sureties. Occupancy or use of the Project in whole or in part prior to Substantial Completion, shall not operate as a waiver of City’s right to assess liquidated damages. 6.4.1 Other Remedies. City is entitled to any and all available legal and equitable remedies City may have where City’s Losses are caused by any reason other than Contractor’s failure to achieve Substantial Completion of the entire Work within the Contract Time. 6.5 Adjustments to Contract Time. The Contract Time may only be adjusted for time extensions approved by City and memorialized in a Change Order approved in accordance with the requirements of the Contract Documents. SECTION 7 COMPENSATION TO CONTRACTOR. 7.1 Contract Sum. Contractor shall be compensated for satisfactory completion of the Work in compliance with the Contract Documents in the Contract Sum of One Hundred Sixty-Eight Thousand Seven Hundred Five Dollars ($168,705.00). 7.2 Full Compensation. The Contract Sum shall be full compensation to Contractor for all Work provided by Contractor and, except as otherwise expressly permitted by the terms of the Contract Documents, shall cover all Losses arising out of the nature of the Work or from the acts of the elements or any unforeseen difficulties or obstructions which may arise or be encountered in performance of the Work until its Acceptance by City, all risks connected with the Work, and any and all expenses incurred due to suspension or discontinuance of the Work, except as expressly provided herein. The Contract Sum may only be adjusted for Change Orders approved in accordance with the requirements of the Contract Documents. SECTION 8 STANDARD OF CARE. 8.1 Standard of Care. Contractor agrees that the Work shall be performed by qualified, experienced and well-supervised personnel. All services performed in connection with this Construction Contract shall be performed in a manner consistent with the standard of care under California law applicable to those who specialize in providing such services for projects of the type, scope and complexity of the Project. DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 Invitation for Bid (IFB) Package 10 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 9 INDEMNIFICATION. 9.1 Hold Harmless. To the fullest extent allowed by law, Contractor will defend, indemnify, and hold harmless City, its City Council, boards and commissions, officers, agents, employees, representatives and volunteers (hereinafter individually referred to as an “Indemnitee” and collectively referred to as "Indemnitees"), through legal counsel acceptable to City, from and against any and liability, loss, damage, claims, expenses (including, without limitation, attorney fees, expert witness fees, paralegal fees, and fees and costs of litigation or arbitration) (collectively, “Liability”) of every nature arising out of or in connection with the acts or omissions of Contractor, its employees, Subcontractors, representatives, or agents, in performing the Work or its failure to comply with any of its obligations under the Contract, except such Liability caused by the active negligence, sole negligence, or willful misconduct of an Indemnitee. Contractor shall pay City for any costs City incurs to enforce this provision. Except as provided in Section 9.2 below, nothing in the Contract Documents shall be construed to give rise to any implied right of indemnity in favor of Contractor against City or any other Indemnitee. Pursuant to Public Contract Code Section 9201, City shall timely notify Contractor upon receipt of any third-party claim relating to the Contract. 9.2 Survival. The provisions of Section 9 shall survive the termination of this Construction Contract. SECTION 10 NON-DISCRIMINATION. 10.1 Municipal Code Requirement. As set forth in Palo Alto Municipal Code section 2.30.510, Contractor certifies that in the performance of this Agreement, it shall not discriminate in the employment of any person because of the race, skin color, gender, age, religion, disability, national origin, ancestry, sexual orientation, housing status, marital status, familial status, weight or height of such person. Contractor acknowledges that it has read and understands the provisions of Section 2.30.510 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and will comply with all requirements of Section 2.30.510 pertaining to nondiscrimination in employment. SECTION 11 INSURANCE AND BONDS. 11.1 Evidence of coverage. Within ten (10) business days following issuance of the Notice of Award, Contractor shall provide City with evidence that it has obtained insurance and shall submit Performance and Payment Bonds satisfying all requirements in Article 11 of the General Conditions. DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 Invitation for Bid (IFB) Package 11 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 12 PROHIBITION AGAINST TRANSFERS. 12.1 Assignment. City is entering into this Construction Contract in reliance upon the stated experience and qualifications of the Contractor and its Subcontractors set forth in Contractor’s Bid. Accordingly, Contractor shall not assign, hypothecate or transfer this Construction Contract or any interest therein directly or indirectly, by operation of law or otherwise without the prior written consent of City. Any assignment, hypothecation or transfer without said consent shall be null and void, and shall be deemed a substantial breach of contract and grounds for default in addition to any other legal or equitable remedy available to the City. 12.2 Assignment by Law. The sale, assignment, transfer or other disposition of any of the issued and outstanding capital stock of Contractor or of any general partner or joint venturer or syndicate member of Contractor, if the Contractor is a partnership or joint venture or syndicate or co-tenancy shall result in changing the control of Contractor, shall be construed as an assignment of this Construction Contract. Control means more than fifty percent (50%) of the voting power of the corporation or other entity. SECTION 13 NOTICES. 13.1 Method of Notice. All notices, demands, requests or approvals to be given under this Construction Contract shall be given in writing and shall be deemed served on the earlier of the following: (i) On the date delivered if delivered personally; (ii) On the third business day after the deposit thereof in the United States mail, postage prepaid, and addressed as hereinafter provided; (iii) On the date sent if sent by facsimile transmission; (iv) On the date sent if delivered by electronic mail; or (v) On the date it is accepted or rejected if sent by certified mail. 13.2 Notice to Recipients. All notices, demands or requests (including, without limitation, Change Order Requests and Claims) from Contractor to City shall include the Project name and the number of this Construction Contract and shall be addressed to City at: To City: City of Palo Alto City Clerk 250 Hamilton Avenue P.O. Box 10250 Palo Alto, CA 94303 Copy to: City of Palo Alto Public Works Administration 250 Hamilton Avenue Palo Alto, CA 94301 Attn: OR DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 Invitation for Bid (IFB) Package 12 Rev. April 20, 2015 CONSTRUCTION CONTRACT City of Palo Alto Utilities Operations 250 Hamilton Avenue Palo Alto, CA 94301 Attn: Jon Abendschein In addition, copies of all Claims by Contractor under this Construction Contract shall be provided to the following: Palo Alto City Attorney’s Office 250 Hamilton Avenue P.O. Box 10250 Palo Alto, California 94303 All Claims shall be delivered personally or sent by certified mail. All notices, demands, requests or approvals from City to Contractor shall be addressed to: Penhall Company 1801 Penhall Way Anaheim, CA 92801 Attn: Jeffrey W. Long/ CEO 13.3 Change of Address. In advance of any change of address, Contractor shall notify City of the change of address in writing. Each party may, by written notice only, add, delete or replace any individuals to whom and addresses to which notice shall be provided. SECTION 14 DEFAULT. 14.1 Notice of Default. In the event that City determines, in its sole discretion, that Contractor has failed or refused to perform any of the obligations set forth in the Contract Documents, or is in breach of any provision of the Contract Documents, City may give written notice of default to Contractor in the manner specified for the giving of notices in the Construction Contract, with a copy to Contractor’s performance bond surety. 14.2 Opportunity to Cure Default. Except for emergencies, Contractor shall cure any default in performance of its obligations under the Contract Documents within two (2) Days (or such shorter time as City may reasonably require) after receipt of written notice. However, if the breach cannot be reasonably cured within such time, Contractor will commence to cure the breach within two (2) Days (or such shorter time as City may reasonably require) and will diligently and continuously prosecute such cure to completion within a reasonable time, which shall in no event be later than ten (10) Days after receipt of such written notice. DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 Invitation for Bid (IFB) Package 13 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 15 CITY'S RIGHTS AND REMEDIES. 15.1 Remedies Upon Default. If Contractor fails to cure any default of this Construction Contract within the time period set forth above in Section 14, then City may pursue any remedies available under law or equity, including, without limitation, the following: 15.1.1 Delete Certain Services. City may, without terminating the Construction Contract, delete certain portions of the Work, reserving to itself all rights to Losses related thereto. 15.1.2 Perform and Withhold. City may, without terminating the Construction Contract, engage others to perform the Work or portion of the Work that has not been adequately performed by Contractor and withhold the cost thereof to City from future payments to Contractor, reserving to itself all rights to Losses related thereto. 15.1.3 Suspend The Construction Contract. City may, without terminating the Construction Contract and reserving to itself all rights to Losses related thereto, suspend all or any portion of this Construction Contract for as long a period of time as City determines, in its sole discretion, appropriate, in which event City shall have no obligation to adjust the Contract Sum or Contract Time, and shall have no liability to Contractor for damages if City directs Contractor to resume Work. 15.1.4 Terminate the Construction Contract for Default. City shall have the right to terminate this Construction Contract, in whole or in part, upon the failure of Contractor to promptly cure any default as required by Section 14. City’s election to terminate the Construction Contract for default shall be communicated by giving Contractor a written notice of termination in the manner specified for the giving of notices in the Construction Contract. Any notice of termination given to Contractor by City shall be effective immediately, unless otherwise provided therein. 15.1.5 Invoke the Performance Bond. City may, with or without terminating the Construction Contract and reserving to itself all rights to Losses related thereto, exercise its rights under the Performance Bond. 15.1.6 Additional Provisions. All of City’s rights and remedies under this Construction Contract are cumulative, and shall be in addition to those rights and remedies available in law or in equity. Designation in the Contract Documents of certain breaches as material shall not waive the City’s authority to designate other breaches as material nor limit City’s right to terminate the Construction Contract, or prevent the City from terminating the Agreement for breaches that are not material. City’s determination of whether there has been noncompliance with the Construction Contract so as to warrant exercise by City of its rights and remedies for default under the Construction Contract, shall be binding on all parties. No termination or action taken by City after such termination shall prejudice any other rights or remedies of City provided by law or equity or by the Contract Documents upon such termination; and City may proceed against Contractor to recover all liquidated damages and Losses suffered by City. 15.2 Delays by Sureties. Time being of the essence in the performance of the Work, if Contractor’s surety fails to arrange for completion of the Work in accordance with the Performance Bond, within seven (7) calendar days from the date of the notice of termination, Contractor’s surety shall be deemed to have waived its right to complete the Work under the Contract, and City may immediately make arrangements for the completion of the Work through use of its own forces, by hiring a replacement contractor, or by any other means that City determines advisable under the circumstances. Contractor and its surety shall be jointly and severally DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 Invitation for Bid (IFB) Package 14 Rev. April 20, 2015 CONSTRUCTION CONTRACT liable for any additional cost incurred by City to complete the Work following termination. In addition, City shall have the right to use any materials, supplies, and equipment belonging to Contractor and located at the Worksite for the purposes of completing the remaining Work. 15.3 Damages to City. 15.3.1 For Contractor's Default. City will be entitled to recovery of all Losses under law or equity in the event of Contractor’s default under the Contract Documents. 15.3.2 Compensation for Losses. In the event that City's Losses arise from Contractor’s default under the Contract Documents, City shall be entitled to deduct the cost of such Losses from monies otherwise payable to Contractor. If the Losses incurred by City exceed the amount payable, Contractor shall be liable to City for the difference and shall promptly remit same to City. 15.4 Suspension by City 15.4.1 Suspension for Convenience. City may, at any time and from time to time, without cause, order Contractor, in writing, to suspend, delay, or interrupt the Work in whole or in part for such period of time, up to an aggregate of fifty percent (50%) of the Contract Time. The order shall be specifically identified as a Suspension Order by City. Upon receipt of a Suspension Order, Contractor shall, at City’s expense, comply with the order and take all reasonable steps to minimize costs allocable to the Work covered by the Suspension Order. During the Suspension or extension of the Suspension, if any, City shall either cancel the Suspension Order or, by Change Order, delete the Work covered by the Suspension Order. If a Suspension Order is canceled or expires, Contractor shall resume and continue with the Work. A Change Order will be issued to cover any adjustments of the Contract Sum or the Contract Time necessarily caused by such suspension. A Suspension Order shall not be the exclusive method for City to stop the Work. 15.4.2 Suspension for Cause. In addition to all other remedies available to City, if Contractor fails to perform or correct work in accordance with the Contract Documents, City may immediately order the Work, or any portion thereof, suspended until the cause for the suspension has been eliminated to City’s satisfaction. Contractor shall not be entitled to an increase in Contract Time or Contract Price for a suspension occasioned by Contractor’s failure to comply with the Contract Documents. City’s right to suspend the Work shall not give rise to a duty to suspend the Work, and City’s failure to suspend the Work shall not constitute a defense to Contractor’s failure to comply with the requirements of the Contract Documents. 15.5 Termination Without Cause. City may, at its sole discretion and without cause, terminate this Construction Contract in part or in whole upon written notice to Contractor. Upon receipt of such notice, Contractor shall, at City’s expense, comply with the notice and take all reasonable steps to minimize costs to close out and demobilize. The compensation allowed under this Paragraph 15.5 shall be the Contractor’s sole and exclusive compensation for such termination and Contractor waives any claim for other compensation or Losses, including, but not limited to, loss of anticipated profits, loss of revenue, lost opportunity, or other consequential, direct, indirect or incidental damages of any kind resulting from termination without cause. Termination pursuant to this provision does not relieve Contractor or its sureties from any of their obligations for Losses arising from or related to the Work performed by Contractor. DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 Invitation for Bid (IFB) Package 15 Rev. April 20, 2015 CONSTRUCTION CONTRACT 15.5.1 Compensation. Following such termination and within forty-five (45) Days after receipt of a billing from Contractor seeking payment of sums authorized by this Paragraph 15.5.1, City shall pay the following to Contractor as Contractor’s sole compensation for performance of the Work : .1 For Work Performed. The amount of the Contract Sum allocable to the portion of the Work properly performed by Contractor as of the date of termination, less sums previously paid to Contractor. .2 For Close-out Costs. Reasonable costs of Contractor and its Subcontractors: (i) Demobilizing and (ii) Administering the close-out of its participation in the Project (including, without limitation, all billing and accounting functions, not including attorney or expert fees) for a period of no longer than thirty (30) Days after receipt of the notice of termination. .3 For Fabricated Items. Previously unpaid cost of any items delivered to the Project Site which were fabricated for subsequent incorporation in the Work. .4 Profit Allowance. An allowance for profit calculated as four percent (4%) of the sum of the above items, provided Contractor can prove a likelihood that it would have made a profit if the Construction Contract had not been terminated. 15.5.2 Subcontractors. Contractor shall include provisions in all of its subcontracts, purchase orders and other contracts permitting termination for convenience by Contractor on terms that are consistent with this Construction Contract and that afford no greater rights of recovery against Contractor than are afforded to Contractor against City under this Section. 15.6 Contractor’s Duties Upon Termination. Upon receipt of a notice of termination for default or for convenience, Contractor shall, unless the notice directs otherwise, do the following: (i) Immediately discontinue the Work to the extent specified in the notice; (ii) Place no further orders or subcontracts for materials, equipment, services or facilities, except as may be necessary for completion of such portion of the Work that is not discontinued; (iii) Provide to City a description in writing, no later than fifteen (15) days after receipt of the notice of termination, of all subcontracts, purchase orders and contracts that are outstanding, including, without limitation, the terms of the original price, any changes, payments, balance owing, the status of the portion of the Work covered and a copy of the subcontract, purchase order or contract and any written changes, amendments or modifications thereto, together with such other information as City may determine necessary in order to decide whether to accept assignment of or request Contractor to terminate the subcontract, purchase order or contract; (iv) Promptly assign to City those subcontracts, purchase orders or contracts, or portions thereof, that City elects to accept by assignment and cancel, on the most favorable terms reasonably possible, all subcontracts, purchase orders or contracts, or portions thereof, that City does not elect to accept by assignment; and (v) Thereafter do only such Work as may be necessary to preserve and protect Work already in progress and to protect materials, plants, and equipment on the Project Site or in transit thereto. Upon termination, whether for cause or for convenience, the provisions of the Contract Documents remain in effect as to any Claim, indemnity obligation, warranties, guarantees, DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 Invitation for Bid (IFB) Package 16 Rev. April 20, 2015 CONSTRUCTION CONTRACT submittals of as-built drawings, instructions, or manuals, or other such rights and obligations arising prior to the termination date. SECTION 16 CONTRACTOR'S RIGHTS AND REMEDIES. 16.1 Contractor’s Remedies. Contractor may terminate this Construction Contract only upon the occurrence of one of the following: 16.1.1 For Work Stoppage. The Work is stopped for sixty (60) consecutive Days, through no act or fault of Contractor, any Subcontractor, or any employee or agent of Contractor or any Subcontractor, due to issuance of an order of a court or other public authority other than City having jurisdiction or due to an act of government, such as a declaration of a national emergency making material unavailable. This provision shall not apply to any work stoppage resulting from the City’s issuance of a suspension notice issued either for cause or for convenience. 16.1.2 For City's Non-Payment. If City does not make pay Contractor undisputed sums within ninety (90) Days after receipt of notice from Contractor, Contractor may terminate the Construction Contract (30) days following a second notice to City of Contractor’s intention to terminate the Construction Contract. 16.2 Damages to Contractor. In the event of termination for cause by Contractor, City shall pay Contractor the sums provided for in Paragraph 15.5.1 above. Contractor agrees to accept such sums as its sole and exclusive compensation and agrees to waive any claim for other compensation or Losses, including, but not limited to, loss of anticipated profits, loss of revenue, lost opportunity, or other consequential, direct, indirect and incidental damages, of any kind. SECTION 17 ACCOUNTING RECORDS. 17.1 Financial Management and City Access. Contractor shall keep full and detailed accounts and exercise such controls as may be necessary for proper financial management under this Construction Contract in accordance with generally accepted accounting principles and practices. City and City's accountants during normal business hours, may inspect, audit and copy Contractor's records, books, estimates, take-offs, cost reports, ledgers, schedules, correspondence, instructions, drawings, receipts, subcontracts, purchase orders, vouchers, memoranda and other data relating to this Project. Contractor shall retain these documents for a period of three (3) years after the later of (i) Final Payment or (ii) final resolution of all Contract Disputes and other disputes, or (iii) for such longer period as may be required by law. DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 Invitation for Bid (IFB) Package 17 Rev. April 20, 2015 CONSTRUCTION CONTRACT 17.2 Compliance with City Requests. Contractor's compliance with any request by City pursuant to this Section 17 shall be a condition precedent to filing or maintenance of any legal action or proceeding by Contractor against City and to Contractor's right to receive further payments under the Contract Documents. City many enforce Contractor’s obligation to provide access to City of its business and other records referred to in Section 17.1 for inspection or copying by issuance of a writ or a provisional or permanent mandatory injunction by a court of competent jurisdiction based on affidavits submitted to such court, without the necessity of oral testimony. SECTION 18 INDEPENDENT PARTIES. 18.1 Status of parties. Each party is acting in its independent capacity and not as agents, employees, partners, or joint ventures’ of the other party. City, its officers or employees shall have no control over the conduct of Contractor or its respective agents, employees, subconsultants, or subcontractors, except as herein set forth. SECTION 19 NUISANCE. 19.1 Nuisance Prohibited. Contractor shall not maintain, commit, nor permit the maintenance or commission of any nuisance in connection in the performance of services under this Construction Contract. SECTION 20 PERMITS AND LICENSES. 20.1 Payment of Fees. Except as otherwise provided in the Special Provisions and Technical Specifications, The Contractor shall provide, procure and pay for all licenses, permits, and fees, required by the City or other government jurisdictions or agencies necessary to carry out and complete the Work. Payment of all costs and expenses for such licenses, permits, and fees shall be included in one or more Bid items. No other compensation shall be paid to the Contractor for these items or for delays caused by non-City inspectors or conditions set forth in the licenses or permits issued by other agencies. SECTION 21 WAIVER. 21.1 Waiver. A waiver by either party of any breach of any term, covenant, or condition contained herein shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant, or condition contained herein, whether of the same or a different character. DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 Invitation for Bid (IFB) Package 18 Rev. April 20, 2015 CONSTRUCTION CONTRACT SECTION 22 GOVERNING LAW AND VENUE; COMPLIANCE WITH LAWS. 22.1 Governing Law. This Construction Contract shall be construed in accordance with and governed by the laws of the State of California, and venue shall be in a court of competent jurisdiction in the County of Santa Clara, and no other place. 22.2 Compliance with Laws. Contractor shall comply with all applicable federal and California laws and city laws, including, without limitation, ordinances and resolutions, in the performance of work under this Construction Contract. SECTION 23 COMPLETE AGREEMENT. 23.1 Integration. This Agreement represents the entire and integrated agreement between the parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This Agreement may be amended only by a written instrument, which is signed by the parties. SECTION 24 SURVIVAL OF CONTRACT. 24.1 Survival of Provisions. The provisions of the Construction Contract which by their nature survive termination of the Construction Contract or Final Completion, including, without limitation, all warranties, indemnities, payment obligations, and City’s right to audit Contractor’s books and records, shall remain in full force and effect after Final Completion or any termination of the Construction Contract. SECTION 25 PREVAILING WAGES. Contractor is required to pay general prevailing wages as defined in Subchapter 3, Title 8 of the California Code of Regulations and Section 16000 et seq. and Section 1773.1 of the California Labor Code. Pursuant to the provisions of Section 1773 of the Labor Code of the State of California, the City Council has obtained the general prevailing rate of per diem wages and the general rate for holiday and overtime work in this locality for each craft, classification, or type of worker needed to execute the contract for this Project from the Director of the Department of Industrial Relations (“DIR”). Copies of these rates may be obtained at the Purchasing Division’s office of the City of Palo Alto. Contractor shall provide a copy of prevailing wage rates to any staff or subcontractor hired, and shall pay the adopted prevailing wage rates as a minimum. Contractor shall comply with the provisions of all sections, including, but not limited to, Sections 1775, 1776, 1777.5, 1782, 1810, and 1813, of the Labor Code pertaining to prevailing wages. SECTION 26 NON-APPROPRIATION. 26.1 Appropriations. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that the City does not appropriate funds for the following fiscal year for this event, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 Invitation for Bid (IFB) Package 19 Rev. April 20, 2015 CONSTRUCTION CONTRACT for this Construction Contract are no longer available. This section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Agreement. SECTION 27 AUTHORITY. 27.1 Representation of Parties. The individuals executing this Agreement represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities. SECTION 28 COUNTERPARTS 28.1 Multiple Counterparts. This Agreement may be signed in multiple counterparts, which shall, when executed by all the parties, constitute a single binding agreement. SECTION 29 SEVERABILITY. 29.1 Severability. In case a provision of this Construction Contract is held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not be affected. SECTION 30 STATUTORY AND REGULATORY REFERENCES. 30.1 Amendments to Laws. With respect to any amendments to any statutes or regulations referenced in these Contract Documents, the reference is deemed to be the version in effect on the date that the Contract was awarded by City, unless otherwise required by law. SECTION 31 WORKERS’ COMPENSATION CERTIFICATION. 31.1 Workers Compensation. Pursuant to Labor Code Section 1861, by signing this Contract, Contractor certifies as follows: “I am aware of the provisions of Section 3700 of the Labor Code which require every employer to be insured against liability for workers’ compensation or to undertake self-insurance in accordance with the provisions of that code, and I will comply with such provisions before commencing the performance of the Work on this Contract.” SECTION 32 DIR REGISTRATION AND OTHER SB 854 REQUIREMENTS. 32.1 General Notice to Contractor. City requires Contractor and its listed subcontractors to comply with the requirements of SB 854. 32.2 Labor Code section 1771.1(a) City provides notice to Contractor of the requirements of California Labor Code section 1771.1(a), which reads: DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 Invitation for Bid (IFB) Package 20 Rev. April 20, 2015 CONSTRUCTION CONTRACT “A contractor or subcontractor shall not be qualified to bid on, be listed in a bid proposal, subject to the requirements of Section 4104 of the Public Contract Code, or engage in the performance of any contract for public work, as defined in this chapter, unless currently registered and qualified to perform public work pursuant to Section 1725.5. It is not a violation of this section for an unregistered contractor to submit a bid that is authorized by Section 7029.1 of the Business and Professions Code or Section 10164 or 20103.5 of the Public Contract Code, provided the contactor is registered to perform public work pursuant to Section 1725.5 at the time the contract is awarded.” 32.3 DIR Registration Required. City will not accept a bid proposal from or enter into this Construction Contract with Contractor without proof that Contractor and its listed subcontractors are registered with the California Department of Industrial Relations (“DIR”) to perform public work, subject to limited exceptions. 32.4 Posting of Job Site Notices. City gives notice to Contractor and its listed subcontractors that Contractor is required to post all job site notices prescribed by law or regulation and Contractor is subject to SB 854-compliance monitoring and enforcement by DIR. 32.5 Payroll Records. City requires Contractor and its listed subcontractors to comply with the requirements of Labor Code section 1776, including: (i) Keep accurate payroll records, showing the name, address, social security number, work classification, straight time and overtime hours worked each day and week, and the actual per diem wages paid to each journeyman, apprentice, worker, or other employee employed by, respectively, Contractor and its listed subcontractors, in connection with the Project. (ii) The payroll records shall be verified as true and correct and shall be certified and made available for inspection at all reasonable hours at the principal office of Contractor and its listed subcontractors, respectively. (iii) At the request of City, acting by its project manager, Contractor and its listed subcontractors shall make the certified payroll records available for inspection or furnished upon request to the project manager within ten (10) days of receipt of City’s request. City requests Contractor and its listed subcontractors to submit the certified payroll records at the end of each week during the Project. (iv) If the certified payroll records are not produced to the project manager within the 10-day period, then Contractor and its listed subcontractors shall be subject to a penalty of one hundred dollars ($100.00) per calendar day, or portion thereof, for each worker, and City shall withhold the sum total of penalties from DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 Invitation for Bid (IFB) Package 21 Rev. April 20, 2015 CONSTRUCTION CONTRACT the progress payment(s) then due and payable to Contractor. This provision supplements the provisions of Section 15 hereof. (v) Inform the project manager of the location of contractor’s and its listed subcontractors’ payroll records (street address, city and county) at the commencement of the Project, and also provide notice to the project manager within five (5) business days of any change of location of those payroll records. IN WITNESS WHEREOF, the parties have caused this Construction Contract to be executed the date and year first above written. CITY OF PALO ALTO ____________________________ City Manager or Designee APPROVED AS TO FORM: ____________________________ Senior Deputy City Attorney PENHALL COMPANY By:___________________________ Name:________________________ Title:__________________________ Date: _________________________ DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 10/6/2015 Sean Butler VP Operations DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 DocuSign Envelope ID: BE1049D7-DD44-4EBC-B66B-2FDDD0C7DEF6 Certificate Of Completion Envelope Number: BE1049D7DD444EBCB66B2FDDD0C7DEF6 Status: Completed Subject: Please DocuSign: S16159273.SawCut.OneYear.B1.pdf Source Envelope: Document Pages: 36 Signatures: 3 Envelope Originator: Certificate Pages: 2 Initials: 0 Carolynn Bissett AutoNav: Enabled EnvelopeId Stamping: Enabled 250 Hamilton Ave Palo Alto , CA 94301 carolynn.bissett@cityofpaloalto.org IP Address: 199.33.32.254 Record Tracking Status: Original 9/24/2015 4:12:20 PM PT Holder: Carolynn Bissett carolynn.bissett@cityofpaloalto.org Location: DocuSign Signer Events Signature Timestamp Sean Butler sbutler@penhall.com VP Operations Security Level: Email, Account Authentication (None)Using IP Address: 63.234.17.170 Sent: 9/24/2015 4:20:59 PM PT Resent: 9/28/2015 3:15:40 PM PT Viewed: 9/28/2015 3:52:42 PM PT Signed: 10/6/2015 1:58:30 PM PT Electronic Record and Signature Disclosure: Not Offered ID: Jessica Mullan jessica.mullan@cityofpaloalto.org Jessica.Mullan@CityofPaloAlto.org City of Palo Alto Security Level: Email, Account Authentication (None) Using IP Address: 199.33.32.254 Sent: 10/6/2015 1:58:32 PM PT Viewed: 10/7/2015 8:41:51 PM PT Signed: 10/7/2015 8:47:35 PM PT Electronic Record and Signature Disclosure: Not Offered ID: Ed Shikada ed.shikada@cityofpaloalto.org ACM City of Palo Alto Security Level: Email, Account Authentication (None) Using IP Address: 199.33.32.254 Sent: 10/7/2015 8:47:38 PM PT Viewed: 10/8/2015 7:39:03 AM PT Signed: 10/15/2015 1:14:15 PM PT Electronic Record and Signature Disclosure: Not Offered ID: In Person Signer Events Signature Timestamp Editor Delivery Events Status Timestamp Agent Delivery Events Status Timestamp Intermediary Delivery Events Status Timestamp Certified Delivery Events Status Timestamp Carbon Copy Events Status Timestamp Carbon Copy Events Status Timestamp Jon Abendschein jon.abendschein@cityofpaltoalto.org Security Level: Email, Account Authentication (None) Sent: 10/15/2015 1:14:18 PM PT Electronic Record and Signature Disclosure: Not Offered ID: Josh Heath jheath@penhall.com Security Level: Email, Account Authentication (None) Sent: 10/15/2015 1:14:19 PM PT Viewed: 10/15/2015 2:18:02 PM PT Electronic Record and Signature Disclosure: Not Offered ID: Notary Events Timestamp Envelope Summary Events Status Timestamps Envelope Sent Hashed/Encrypted 10/15/2015 1:14:19 PM PT Certified Delivered Security Checked 10/15/2015 1:14:19 PM PT Signing Complete Security Checked 10/15/2015 1:14:19 PM PT Completed Security Checked 10/15/2015 1:14:19 PM PT Contract Change Order City of Palo Alto Department: Contract Number: APPENDIX B – CONTRACT CHANGE ORDER PAGE 1 OF 3 EXHIBIT 1 Contract Change Order Form Project Title: Saw Cutting 2015 Project Number: Contract Number: S16159273 Date: 9/6/16 Contractor: Penhall Company Change Order Number: 01 Description of Change Order Extend term for 2 additional years. Background Information: The regular operation and maintenance of the water, gas and wastewater utility systems requires cutting into the pavement in order to access the underground utilities. Penhall is currently providing this specialized area of concrete saw cutting construction services to the City. Penhall is responsible for providing labor, equipment, materials, traffic control, concrete removal, and other services required for saw cutting work. Over the course of this contract Penhall Company has performed according to the contract terms. This change order is to extend the contract term for 2 years (for a total of 3 years) and to increase the contract amount from $168,705 for one year to a total not to exceed amount of $506,115 for three years. Change Order Justification: Penhall Company has performed according to the contract terms and extending the contract for 2 additional years provides continuity and assures costs remain fixed. Description of Work to be Performed: Penhall is responsible for providing labor, equipment, materials, traffic control, concrete removal, and other services required for saw cutting work. Incorporates Field Order Number(s): Cost Time This change order will: Not change cost Increase cost by $ 337,410 Decrease cost by $_______________ This change order will: Not change time Increase time by 2 additional years or 730 days Decrease time by _________ days The date of completion as of this change order is 10/15/2018. Note G/L account number (s) here (see G/L #’s below): EXHIBIT 1 PAGE 2 OF 3 APPENDIX B –CONTRACT CHANGE ORDER Basis for change in cost: Unit price(s) Lump sum Cost plus ______% Other:_______________ Contract Change Order Form - continued The undersigned Contractor approves this Change Order as to the changes, if any, in the contract price specified for each Line Item and as to the extension of time allowed, if any, for completion of the entire work on account of each Line Item, and agrees to furnish all labor and materials and perform all work necessary to complete any additional work specified therein, for the consideration stated therein. It is understood that the time and cost adjustments set forth in this Change Order include full compensation for any impacts or delays associated with the Line Items addressed in this Change Order. Accepted for Contractor: Accepted for City of Palo Alto: By: By: Title: Title: Date: Date: Contract Change Order City of Palo Alto Department: Contract Number: APPENDIX B – CONTRACT CHANGE ORDER PAGE 3 OF 3 Summary of Amounts Payable Under Contract (For Internal Purposes Only) Amount of Original Contract $168,705 1681168 Net affect of all Change Orders $337,410 Revised Contract Total: $506,115 Compare to: Original Contract Amount: $168,705 Add: Contingency, if any: $0 Total Authorized Funding: $168,705 Change orders shall not be initiated for Council-approved contracts if the revised contract total exceeds the total authorized funding amount. Document Preparation By : Althea J. Carter Title : Utilities Project Coordinator Date : 9/6/2016 City Approval By : Title : Date : City of Palo Alto (ID # 7181) City Council Staff Report Report Type: Consent Calendar Meeting Date: 9/26/2016 City of Palo Alto Page 1 Summary Title: Approval of Contract Amendment with Global Learning Solutions Title: Approval of a Contract Amendment With Global Learning Solution Inc. to Extend the Term Through June 30, 2017 and $125,000 for a Total Not-to- Exceed Amount of $375,000 for the Support of Human Resources SAP Modules and Business Processes Improvements From: City Manager Lead Department: Human Resources Recommendation Staff recommends that City Council approve a Contract amendment extending and adding $125,000 to the existing contract C15159245 between the City of Palo Alto and Global Learning Solutions Inc. for a total amount not to exceed of $375,000 through June 30, 2017. Background On June 29 2015, City Council approved contract with Global Learning Solutions (C15159245) to allow the Human Resources Department to increase staff knowledge and skills and continue improving department processes for SAP, the City’s Enterprise Resources Planning (ERP) software. (CMR ID #5921) Additional Funding for this activity was approved in June 2016 as part of the Fiscal Year 2017 budget. Discussion During Fiscal Year 2016, through the work of the consultant provided by the Global Learning Solutions, the department completed a thorough assessment of SAP processes and work flows. This included workshops with staff in Human Resources and the Administrative Services Department, Payroll and SAP functional teams. Through the assessment, the consultant was able to re-design and develop new business processes eliminating redundant or inefficient steps. SAP, in use at the City since 2003, is highly configurable with processes integrated via interlinked configuration rules in various modules. But the software requires a high degree of City of Palo Alto Page 2 specialized expertise to provide effective ongoing maintenance and support. Human Resources staff are responsible for accurately entering, maintaining and sharing the data with other City departments as well as external partners such as CalPERS. The value of continuing the SAP enhancement work is that it will improve operations, reduce the risk of error, increase staff effectiveness, and allow for interdepartmental and interagency data sharing. As of June 2016, the City along with technical guidance from Global Learning Solution’s consultation has accomplished the following: 1. Reengineered and mapped HR SAP data points to increase accuracy and efficient data entries. (Completed) 2. Redesigned HR SAP personnel actions to streamline to improve accuracy and timelines of information and reduce data entry error and allow enhanced drill-down analytical capabilities on the actions. (Completed) 3. Successfully configured SAP to allow and administer “Active” Open Enrollment in 2015 for 960 employees on Employee Self-Service thus reducing manual entries and reducing errors. (Completed) 4. Introduced and drafted an interface between SAP and CALPERS (Completed) 5. Currently assisting the City with SAP systems architecture and troubleshooting for 2017 Open enrollment. (Complete) 6. Participated as the SAP technical expert in Form Creation as HR is getting ready to launch a “smart” digitized Personnel Action Form approval process which will lead to efficient processing. (In-progress – estimate time of completion 10/10/2016) 7. Design and complete configuration new hire and life event enrollment in SAP HR ESS. (In-progress – estimate time of completion 10/10/2016) 8. If needed, update documentation SAP HR rules for ERP RFP project. (In-progress – estimate time of completion 10/10/2016) Looking forward, through services and expertise provided by Global Learning Solution, HR looks to finalize projects that are currently in progress and improve efficient business practices that will reduce errors, cut administrative costs and enable staff to concentrate on core HR functions. Additionally, the IT Department’s SAP Steering Committee is currently developing its strategic plan for the ERP system. Implementation of this contract is aligned with the committee’s work and will provide the City with additional data and documentation for a more informed ERP strategic plan. Resource Impact As part of the adopted 2017 budget, $125,000 was approved for this effort. Attachments: Attachment A: C15159245 Global Learning Solutions Amendment No. 1 (PDF) 1 Revision July 20, 2016 AMENDMENT NO. 1 TO CONTRACT NO. C15159245 BETWEEN THE CITY OF PALO ALTO AND GLOBAL LEARNING SOLUTIONS INC. This Amendment No. 1 to Contract No. C15159245 (“Contract”) is entered into September 5, 2016, by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and GLOBAL LEARNING SOLUTIONS INC., a California corporation, located at 319 Harvard Common, Fremont, California, 94539 ("CONSULTANT"). R E C I T A L S A. The Contract was entered into between the parties for the provision of design and implement of the SAP interface for the Human Resources Department. B City intends to extend the term and increase the compensation by $125,000.00 from $250,000.00 to $375,000.00 for additional services as specified in EXHIBIT “A” Scope of Services. C. The parties wish to amend the Contract. NOW, THEREFORE, in consideration of the covenants, terms, conditions, and provisions of this Amendment, the parties agree: SECTION 1. Section 2 TERM is hereby amended to read as follows: “SECTION 2. TERM. The term of this Agreement shall be from the date of its full execution through June, 30, 2017 unless terminated earlier pursuant to Section 19 of this Agreement.” SECTION 2. Section 4 COMPENSATION is hereby amended to read as follows: “SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be paid to CONSULTANT for performance of the Services described in Exhibit “A”, including both payment for professional services and reimbursable expenses, shall not exceed Three Hundred Seventy Five Thousand Dollars ($375,000.00). The applicable rates and schedule of payment are set out at Exhibit “C-1”, entitled “HOURLY RATE SCHEDULE,” which is attached to and made a part of this Agreement. Additional Services, if any, shall be authorized in accordance with and subject to the provisions of Exhibit “C”. CONSULTANT shall not receive any compensation for Additional Services performed without the prior written authorization of CITY. Additional Services shall mean any work that is determined by CITY to be necessary for the proper completion of the Project, but which is not included within the Scope of Services described at Exhibit “A”.” DocuSign Envelope ID: AF8015DE-5A83-4394-BC18-B4D035F1A209 2 Revision July 20, 2016 SECTION 3. The following exhibit(s) to the Contract is/are hereby amended to read as set forth in the attachment(s) to this Amendment, which are incorporated in full by this refer- ence: a. Exhibit “A” entitled “SCOPE OF SERVICE”. b. Exhibit “C” entitled “COMPENSATION”. c. Exhibit “B” entitled “SCHEDULE OF PERFORMACE” SECTION 4. Except as herein modified, all other provisions of the Contract, including any exhibits and subsequent amendments thereto, shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have by their duly authorized representatives executed this Agreement on the date first above written. CITY OF PALO ALTO APPROVED AS TO FORM: GLOBAL LEARNING SOLUTIONS INC. Attachments: EXHIBIT "A": SCOPE OF SERVICE EXHIBIT "C": COMPENSATION EXHIBIT “B”: SCHEDULE OF PERFORMACE DocuSign Envelope ID: AF8015DE-5A83-4394-BC18-B4D035F1A209 Director Finance Vinita Bhutoria 3 Revision July 20, 2016 EXHIBIT “A” SCOPE OF SERVICES CONSULTANT shall perform following tasks (contingent on priorities established): Design the NeoGov Onboarding to SAP HR interface, including designing NeoGov interface to automate new hires, rehires, transfers, promotions into SAP Implement updated process requirements, including any changes to position control entry how to create and archive job classifications, salary grades, title changes, etc. Streamline CalPERS health enrollment and create SAP interface to eliminate entry duplication and create data dictionary or data index Complete business process re-engineering workshops for MSS enhancement, create workflows and forms, then configure, test, train Write specifications for ESS enhancements , including Benefits New Hire enrollment , Open Enrollment , life events enrollment and participation overview; enabling employees to complete address change online, update bank Information; and configure, test and train Create various reports as needed such as how to audit CalPERS medical invoice for active employees compared to employee medical plan data in SAP and automate delivery and create audit tool; download data to create salary schedules and other compensation reports and automate employment verification data Recommend industry best practice knowledge and experience Each task order with CONSULTANT will be reviewed by PSO project manager and SAP PMO, providing supporting documentation such as task scope; objectives, resource planning, and schedule. CONSULTANT shall accept and adhere to EXHIBIT “E”, SOFTWARE AS A SERVICE SECURITY AND PRIVACY TERMS AND CONDITIONS CONSULTANT shall accept and adhere to EXHIBIT “F”, INFORMATION PRIVACY POLICY AMENDMENT NO. 1 Create an efficient interface between SAP and CALPERS data transfer and updates DocuSign Envelope ID: AF8015DE-5A83-4394-BC18-B4D035F1A209 4 Revision July 20, 2016 EXHIBIT “B” SCHEDULE OF PERFORMANCE CONSULTANT shall perform the Services so as to complete each milestone within the number of days/weeks specified below. The time to complete each milestone may be increased or decreased by mutual written agreement of the project managers for CONSULTANT and CITY so long as all work is completed within the term of the Agreement. CONSULTANT shall provide a detailed schedule of work consistent with the schedule below within 2 weeks of receipt of the notice to proceed. Milestones Completed No. of Days/Weeks From NTP 1. Design the NeoGov Onboarding to TBD SAP HR interface 2. Implement updated process requirements TBD 3. Streamline CalPERS health enrollment and TBD create SAP interface 4. Complete business process re-engineering TBD workshops for MSS enhancement 5. Write specifications for ESS enhancements TBD 6. Create various reports as needed TBD AMENDMENT NO. 1 7. Create an efficient interface between SAP and CALPERS TBD data transfer and updates. DocuSign Envelope ID: AF8015DE-5A83-4394-BC18-B4D035F1A209 5 Revision July 20, 2016 EXHIBIT “C” COMPENSATION The CITY agrees to compensate the CONSULTANT for professional services performed in accordance with the terms and conditions of this Agreement based on the hourly rate schedule attached as Exhibit C-1. The compensation to be paid to CONSULTANT under this Agreement for all services, additional services, and reimbursable expenses shall not exceed the amount(s) stated in Section 4 of this Agreement. CONSULTANT agrees to complete all Services and Additional Services, including reimbursable expenses, within this/these amount(s). Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth in this Agreement shall be at no cost to the CITY. REIMBURSABLE EXPENSES The administrative, overhead, secretarial time or secretarial overtime, word processing, photocopying, in-house printing, insurance and other ordinary business expenses are included within the scope of payment for services and are not reimbursable expenses. CITY shall reimburse CONSULTANT for the following reimbursable expenses at cost. Expenses for which CONSULTANT shall be reimbursed are: NONE All requests for payment of expenses shall be accompanied by appropriate backup information. Any expense shall be approved in advance by the CITY’s project manager. ADDITIONAL SERVICES The CONSULTANT shall provide additional services only by advanced, written authorization from the CITY. The CONSULTANT, at the CITY’s project manager’s request, shall submit a detailed written proposal including a description of the scope of services, schedule, level of effort, and CONSULTANT’s proposed maximum compensation, including reimbursable expenses, for such services based on the rates set forth in Exhibit C-1. The additional services scope, schedule and maximum compensation shall be negotiated and agreed to in writing by the CITY’s Project Manager and CONSULTANT prior to commencement of the services. Payment for additional services is subject to all requirements and restrictions in this Agreement. DocuSign Envelope ID: AF8015DE-5A83-4394-BC18-B4D035F1A209 City of Palo Alto (ID # 7177) City Council Staff Report Report Type: Action Items Meeting Date: 9/26/2016 City of Palo Alto Page 1 Summary Title: Foothill College Upcoming Vacant Space at Cubberley Community Center Title: Direction to Expand Community Use of Upcoming Space at Cubberley Community Center Following Foothill College's Planned Move and Approval of Exemption under California Environmental Quality Act From: City Manager Lead Department: Administrative Services RECOMMENDATION: Staff recommends that Council: 1. Authorize staff to amend the 1991 Cubberley Master Plan to provide for additional uses in Buildings A, B, C, D, I, J, K and P currently occupied by Foothill Community College (educational use) and apply for necessary planning entitlements to allow additional community oriented uses; 2. Authorize the City Manager to accept a lease rate of $1.00 per square foot for Avenidas to occupy up to 10,000 square feet at Cubberley to operate a temporary senior center during the renovations at 455 Bryant Street; and 3. Adopt a finding that these actions are exempt from the California Environmental Quality Act (CEQA) under Section 15301 of the CEQA Guidelines. EXECUTIVE SUMMARY In September 2016, Foothill Community College will leave the Cubberley Community Center and cease paying $1.09 million annually ($91,245 monthly) to the City’s General Fund. This presents the City with considerable space to rent and a financial shortfall to remedy. Relevant to this situation is the December 2014 agreement negotiated between the City and the Palo Alto Unified School District (PAUSD). City staff has been taking steps to lease the upcoming vacant space of approximately 39,000 square feet of exclusive and 18,485 square feet of non- exclusive space that has been occupied by Foothill College. A Request for Proposal (RFP) has been issued and various marketing steps have been taken to advertise the space. Presently responses from interested parties have been received and evaluated. Staff is in the process of notifying the selected proposers and finalizing negotiation to execute leases. City of Palo Alto Page 2 The space used by the Foothill College at Cubberley is designated as educational according to a master plan that was developed in 1991, and updated in 1996 (Attachment A). Staff is requesting to expand the uses of the space to accommodate educational, non-profit, child care, music, theater, dance and other public benefit organizations in order to create more flexibility and allow more users to move into various spaces. Furthermore, Council is asked to approve occupancy of up to 10,000 square feet of vacant space at Cubberley by Avenidas during the upcoming rehabilitation of 455 Bryant street for $1.00 per square foot which is $0.31 lower than the minimum nonprofit rent being negotiated for comparable space. BACKGROUND In 2013, Foothill College notified the City of plans to relocate its Cubberley campus to Moffet Field. Earlier this year, Foothill College formally notified the City that it will vacate all of its space at the Cubberley Community College (Cubberley) by the end of September 2016. Foothill College’s departure leaves a General Fund lease revenue gap of $1.09 million annually ($91,245 monthly). The vacated space consists of approximately 39,675 square feet that was exclusively used by Foothill College and 18,484 square feet that Foothill College shared with other occupants. A listing of Foothill College square footage and uses can be found in Attachment B. The space occupied is designated as educational per the existing Cubberley Master Plan. Table 1 below effective July 1, 2016 illustrates the lease revenue Foothill College paid each month for exclusive use of 39,675 square feet of building space. The RFP mentioned above was limited to the same 39,675 square feet formerly occupied by Foothill College. Table 1 Type Space Square Feet Revenue (Monthly) Avg. Rate Per Square Feet Exclusive Class Rooms, I & P Building 39,675 $74,006 $1.87 Non Exclusive Gym & Pavilion & Locker/shower 18,484 $17,239 $0.93 Total Revenue $91,245 There is an extensive history behind the City’s operation of the Cubberley site and the evolving lease agreements with the Palo Alto Unified School District (PAUSD) since 1989. Cubberley occupies a 35-acre site. The City owns 8 acres in the northeast corner of the site and PAUSD owns the remaining 27 acres. In December 2014, a new lease agreement, “Lease and Child Care Agreement between the City of Palo Alto and the Palo Alto Unified School District”, (CMR: 5297) was signed between the City and PAUSD. The current lease runs through December 2019. During the lease discussions the intent of Foothill College to vacate its space at Cubberley was known and provisions were adopted to clarify the consequences of this event, particularly in terms of the City’s General Fund losing $1.09 million in annual rent. According to Amendment Three (Attachment C) of the Cubberley lease with PAUSD it was agreed that when Foothill College moved all, or a significant part of their operation out of Cubberley, the City and PAUSD would split the lost revenue on an equal basis (50/50) if the City City of Palo Alto Page 3 took all necessary and appropriate steps to market the vacant Foothills space but was unable to find qualified subtenants. Generally, parties have agreed that when Foothill College moves all or a significant part of their operations from Cubberley the shared revenue loss or gain would be processed by either decreasing or increasing the City’s lease payments to PAUSD. Another provision in the agreement was that the City could elect to use Foothill College’s vacated space for its own operations and/or sublease to other, outside entities. If the City elects to use available space for its own operational activities and thereby generates no rent, PAUSD would not be responsible for paying lost revenue for this occupied space for potential lease adjustment scenarios. A Request for Proposal (RFP) was issued to the public over the summer season, to fill the significant amount of Foothill College space and to offset the revenue impact, with a variety of advertisements and marketing measures, to identify potential occupants. The Cubberley complex, zoned as a public facility, has been and continues to be a critical resource for tenants providing a variety of valued community services. Beyond Foothill College, the site houses, for example, artists, child care facilities, dance and music studios, Friends of the Palo Alto Library (FOPAL), and educational programs (Attachment D). As evidenced by the current rate structure where non-profit entities currently pay a minimum of $1.31 per square foot and for-profit entities with a public purpose pay a minimum of $2.00 per square foot. Cubberley activities and programs are restricted to organizations delivering public benefits. According to the agreement with PAUSD, when Foothill College departs at the end of September 2016, the City will have 30 days to provide PAUSD with verifiable documentation on the amount of revenue lost from Foothill College, the status of the vacated property, potential uses and occupants, and other information. As required per the tenements of the agreement with PAUSD, any new leases between the City and new subtenants cannot extend beyond the end date of the City’s current lease, December 2019. DISCUSSION The City received 28 RFP responses to lease former Foothill College leased space. The RFP allowed proposers to provide 1st, 2nd and 3rd choices for space assignments. Organizations offering a variety of services responded including dance, fitness, afterschool enrichment, and local non-profit offices among others. The Municipal Code authorizes the City Manager to award leases not to exceed five years at Cubberley. In connection with the RFP, Staff developed a set of criteria to evaluate the proposals based on public benefit, number of residents served, proposed lease rate, application completeness, and clarity of the proposals. At present the City is in the process of awarding 17 organizations space at Cubberley. The organizations and a brief description of the services they provide are included in Attachment E. It appears that staff will be able to accommodate a majority of the proposers whose applications were responsive to the RFP. City of Palo Alto Page 4 While staff is still in the process of completing the lease agreements we feel confident that the monthly lease revenue anticipated will collectively be between $67,000 and $77,000 per month ($804,000 to $924,000 annually) for the exclusive use space formerly leased by Foothill College. All non-profit organizations being awarded leased space at Cubberley will pay the minimum, $1.31 per square foot or above, with one exception Avenidas, discussed below. All for-profit organizations being awarded leased space at Cubberley will pay the minimum, $2.00 per square foot or above. The lease agreements are still tentative and discussions with new tenants about rates and specific space allocation are ongoing and expected to be completed in October. Regarding Avenidas, the City received an RFP response from Avenidas to use approximately 10,000 square feet for a temporary senior center, while Avenidas renovates the City owned building at 455 Bryant Street, which Avenidas leases from the City to provide senior services. The RFP listed $1.31 as the minimum rate for nonprofit organizations which is more than Avenidas believes they can manage. Avenidas initially offered to pay $0.75 per square foot and after further discussion with City staff increased their offer to $1.00 per square foot. Furthermore, Avenidas would only need and pay for the 10,000 square feet during their construction period, currently estimated to begin in Fall 2017, and anticipated to be complete in Spring 2019 (18 months). Allowing Avenidas to use Cubberley lets Avenidas continue to offer the many senior programs and services it currently provides at the 455 Bryant Street during the renovations. Staff is requesting that Council make the policy decision of whether Avenidas should be allowed to pay $1.00 per square foot which is $0.31 below the minimum established in the RFP for non- profit organizations. Staff recommends accepting the $1.00 per square foot proposal from Avenidas as they are an important city partner providing critical services to seniors in Palo Alto. Moreover, Avenidas is raising more than $13 million dollars to renovate and expand the City owned building at 455 Bryant Street. Lastly, even with this discount for Avenidas, the 17 organizations that will lease Foothill College’s vacated space will generate substantial lease revenue that will get close to covering if not fully cover the loss of Foothill College lease revenue to the City. The City will be renting the suite that is designated for the Avenidas use at Cubberley on an hourly basis until Avenidas’ planned move in fall of 2017. The Junior Museum and Zoo (JMZ) may also benefit from temporary use of the Cubberley space while their facility is rebuilt. Staff has preliminarily identified the Cubberley Auditorium (the same auditorium used to temporarily house the Mitchell Park Library during its rebuild) as a possible location for a temporary space for JMZ. The Auditorium does not currently generate a high level of rental income and as such, would not be a costly site to utilize for the temporary JMZ. Staff intends to return to Council this fall with an update on the plans for the JMZ. At that time we will have more information about JMZ’s needs for a temporary facility as well as renovation needs for the Auditorium once JMZ moves out. City of Palo Alto Page 5 As previously illustrated in Table 1, Foothill College used 18,484 square feet on a non-exclusive hourly basis and paid $17,239 per month. Staff anticipates that other local groups will rent these spaces (Gym A, Pavilion and Locker rooms and showers) with sufficient frequency to maintain this level of revenue generation. This is an initial projection. Staff will have more reliable revenue projections after hourly rentals occur for several months. Cubberley Master Plan In 1991, City Council approved the adoption of the Cubberley Master Plan (CMR: 249:91) and in 1996 the plan was amended (CMR:335:96, Attachment F) to provide more flexibility in leasing the A, K, L, and V buildings. When the City became the master tenant at Cubberley by entering into a lease with PAUSD, Foothill College was already operating its campus at this location. The space designation for all of the buildings that were being used by Foothill College (except building A) was Education. The Master Plan was designed to create a community center at Cubberley which would accommodate the needs of the public and create a sense of community. Proposed uses were grouped into neighborhoods according to similarity of use and facilities. The buildings that were being used by Foothill College were designated in the “Education” category since Foothill College was already operating at Cubberley when the City entered into a lease with PAUSD. Staff recommends that Council approve an expansion of the potential uses for the Foothill College vacated areas to include different types of activities such as: child care, music, theater, dance, educational and other non-profit programs. Table 2 Building Current Designated Uses Proposed Expansion of Uses A Admin & Hourly Education/Nonprofit/Community Organization/Recreation/Childcare B Education Nonprofit/Community Organization/Recreation/Childcare C Education Nonprofit/Community Organization/Recreation/Childcare D Education Nonprofit/Community Organization/Recreation/Childcare I Education Nonprofit/Community Organization/Recreation/Childcare J Education Nonprofit/Community Organization/Recreation/Childcare K Education Nonprofit/Community Organization/Arts/Recreation/Childcare P Education Nonprofit/Community Organization/Arts/Recreation/Childcare The departure of Foothill College presents opportunities and challenges for the City. Opportunities include the addition of new tenants who can provide new and different services to the community. Foothill College departing has also afforded current tenants the chance to expand and/or grow their business creating potential to increase program size and the services provided. Traditionally, the City has housed tenants at Cubberley that cannot afford market rents, but whose services are deemed advantageous to the public and merit subsidization. Per the Cubberley Master Plan and prior policy direction this practice is expected to continue. City of Palo Alto Page 6 Replacing the $1.09 million annual lease revenue from Foothill College will be a major challenge for the City’s General Fund but one that staff is working hard to mitigate. In the FY 2017 Adopted Budget, it was assumed that Foothill College rent would be paid through September 2016; the City would receive lease revenues equivalent to Foothill College rental income from other entities for three months; and that the General Fund would absorb a $500,000 loss. Staff is optimistic that we can complete lease negotiations in a timely manner to realize more than three months of leased revenue this fiscal year. Staff is in the process of negotiation of new leases with seventeen (17) potential new tenants for the vacant space at the Cubberley. In summary, staff is seeking Council direction on the staff recommendation to allow Avenidas to pay a discounted rate of $1.00 for use of up to 10,000 square feet of Cubberley space during the renovation of 455 Bryant Street, and concur with staff’s proposal to lease space to organizations who provide other public benefit programs and services in addition to education in buildings A, B, C, D, J, and K which has historically been limited solely to education programs and services per the 1991 Cubberley Master Plan. To accomplish this expanded use by community organizations, the City will have to amend the Cubberley Master Plan. RESOURCE IMPACT In Fiscal Year 2017 the Adopted Budget General Fund will realize three months of rent from Foothill College, and assume a $500,000 loss of rent due to Foothill College departure from Cubberley. Pending the outcome of the current lease agreements, Staff estimates that In FY 2017, the budget shortfall should not exceed $100,000. Staff is in the process of creating new lease agreements between the City and awardees of the RFP. We anticipate realizing more than three months of lease revenue as adopted in the FY 2017 budget. Precisely how much additional revenue the City will realize is predicated on completing the lease agreements including terms and conditionals for when the lease term will begin and end. Based on the responses to the RFP and our negotiations with the selected organizations and City’s agreement with PAUSD, staff is projecting the following shortfall of rent revenue for the Foothill College vacant space at the Cubberley. The City and PAUSD will share in the shortfall or surplus of rent revenue over $100,000. The total shortfall for fiscal year 2017 is estimated to be $147,960 which results in a net loss to the City of $73,980. For Fiscal year 2018 and 2019 staff is projecting no shortfall in anticipated lease revenue. Fiscal Year Projected Shortfall 2017 $73,980.00 2018 $0.00* 2019 $0.00* *Projected shortfall assumes Avenidas is leasing the second floor of building I at Cubberley POLICY IMPLICATIONS Policy direction for the use of Cubberley space has been established by prior Council actions. A policy change is required should Council direct staff to investigate usage of the Cubberley site by for-profit entities that do not provide community or public services. City of Palo Alto Page 7 ENVIRONMENTAL REVIEW Entering into lease agreements for existing facilities is exempt from the California Environmental Quality Act (CEQA) under Section 15301 (leasing of existing facilities). It is expected that the overall users at Cubberley will decrease slightly as compared to the historic use of the space by Foothill College. Attachments: Attachment A: Cubberley Designated Uses (PDF) Attachment B: Foothill College Space at Cubberley (DOCX) Attachment C: CubberleyLeaseAmendment No.3 December 2014 (PDF) Attachment D: Cubberley General Tenants 2016 (DOCX) Attachement E: Draft Awardees (DOCX) Attachment F: CMR 335:96 (PDF) ond Drive Fairfield Court Ferne Fe r n e A v e San Antonio Avenue Nita Avenu Shasta Drive Mackay Drive Di ablo Court Scripps Avenue Scripps C ourt Nelson Drive Tioga Court kside Drive mond Drive Drive Dake Avenue Ferne A venue San Antonio Court C h r i s topher Court Ca l cat e r r a P lace ElyPlace AdobePlaceNelson C ourt Byron St r e e tKeats CourtMiddlefieldRoad Duncan Place ourt Duncan Place ace Charlesto nRoad S a n A n t o n io A CharlestonCt Cha SeminoleW Sutherland Drive Nelson Drive ElCapitanPlace venue Briarwood Way AvenueMaplewood Pl Ma ckay D rive This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. Legend Cubberly - PAUSD Owned Cubberley - City Owned abc Cubberley Buildings/Structures City Jurisdictional Limits 0'400' Cu b b e r l e y C o m m u n i t y C e n t e r wi t h 20 1 3 A e r i a l P h o t o s CITY O F PALO A L TO IN C O R P ORAT E D C ALIFOR N IA P a l o A l t oT h e C i t y o f A P RIL 1 6 1894 The City of Palo Alto assumes no responsibility for any errors. ©1989 to 2016 City of Palo AltoRRivera, 2016-08-15 17:41:14Cubberley 20160815 (\\cc-maps\gis$\gis\admin\Personal\RRivera.mdb) Gym A VU FH H F E D C B A T1 T2 S GymBP L K J I M2 THEATREM3 M4 MP AUDITORIUM PAVILION Mo n t r o s e A v e n u e Building Current Designated Uses A Hourly, Administrative Offices, Education B, C, D, I, J, P Education E, F, U Visual Arts FH, H, T1 Non Profit, Community Organizations Gym, Pavilion Athletics K Education, Childcare, Non Profit, & Community Organizations L1, L2 Music, Theatre, Dance, Education, Arts, Non Profit & Community Organizations L3, L5 Dance, Theater, Arts, Music M Theatre MP - Auditorium Recreation S, T2 Childcare V Music, Theatre, Dance, Education, Childcare, Non Profit & Community Organizations ATTACHMENT A ATTACHMENT B Ownership Building/Space Footage Rent Rate Type PAUSD B 4,340 $1.87 Exclusive CPA C 4,400 $1.87 Exclusive CPA D-3-5-6-7- 2,880 $1.87 Exclusive CPA J Wing 7,633 $1.87 Exclusive CPA P – Occupied by Reach 14 reserve parking 3,000 $1.87 Exclusive PAUSD A 3 – 4/closets 1,680 $1.87 Exclusive PAUSD I – Administration Bldg. 12,540 $1.87 Exclusive PAUSD G 5 - Weight room 1,658 $1.87 Exclusive PAUSD G9- Office 345 Exclusive PAUSD Aerospace room 196 $1.87 Exclusive PAUSD Pavilion Office 570 $1.87 Exclusive PAUSD Pavilion 11,700 $0.93 Part time non- exclusive PAUSD Gym-A 5,500 $0.93 Part time non- exclusive PAUSD Pavilion Locker shower room 1,220 $0.93 Part time non- exclusive ATTACHMENT C ATTACHMENT C ATTACHMENT C ATTACHMENT C ATTACHMENT C ATTACHMENT C ATTACHMENT C ATTACHMENT C ATTACHMENT D Cubberley General Tenants Unit Number Square Footage Use ACME Education L1 3,910 Education ACME Education FH 1,000 Education CA Law Revision D2 800 Education Children's Preschool S, T1, T2* 8,772 Child care Dance Action L3 3,130 Dance Dance Connection L5A, K5 3,060 Dance Friends of Palo Alto Library H2, H3, H4A 2,496 Community based non-profit Good Neighbor Montessori K3, K4 3,010 Education Hua Kuang Chinese Reading Room H4B 672 Non-profit- community organization Melody Academy of Music K6 800 Education PASHPI Stevenson House Parking area N/A Month-to-Month, Parking only Zohar School of Dance L4 3,740 Dance Artists (twenty two) E, F, and U 15,465 Visual Arts Attachment E Cubberley Community Center – RFP for new tenants to lease former Foothill College space Cubberley RFP – Draft Awardees Reach - A non-profit organization that serves stroke survivors from Palo Alto and the mid- peninsula. Reach is a unique program that offers rehabilitation serves and an extremely low cost. Genius Kids - Genius Kids is an independent Accelerated Learning Center founded on the philosophy “Never 2 Little 2 Learn”; based on the simple belief that every child is a “genius” and as educators and parents, it is our responsibility to awaken the “inner genius” in each child. Imagination School - provide progressive education to children as a nonprofit K-8 school by fostering in-depth learning, inspiring creativity, cultivating critical thinking, social emotional learning, collaboration and communication skills to realize every student’s potential. Melody Music - Provides classical and contemporary music education and service for Palo Alto community. Acme Education - provides academic enrichment and Chinese culture and language classes. Acme builds a partnership of children, teachers, and families, and is dedicated to joyful discovery of each child’s innate character, capability, and potential. Cardiac Therapy - A non-profit organization that provides cardiac rehabilitation services to people in the mid-peninsula. Cardiac Therapy is the only non-hospital based cardiac rehabilitation program in the mid-peninsula. Silicon Valley Karate- a non-profit organization that teaches karate and self-defense for all ages and skill levels in the community. Art in Action – A non-profit organization that provides a comprehensive visual arts education program. Ranger Taekwondo - Ranger Taekwondo teaches martial arts and self-defense classes to children and adult. Curriculum is based on the Ranger inspired values, where students will incorporate discipline, training, and mental fitness to better themselves in body and mind. Brainvyne - Brainvyne has two arms – a non-profit foundation that provides equal access to all children for STEAM education through scholarships and subsidies for classes; and an operational arm that runs camps, classes and other programs. The foundation receives funding from the operational arm as well as from donations, with a singular mission of serving less fortunate families in the local community and the broader bay area. California Pops – a non-profit organization that provides popular orchestral music presentations (in the style of the Boston Pops) and performance opportunities for qualified orchestral instrument players of all ages. Attachment E Cubberley Community Center – RFP for new tenants to lease former Foothill College space Living Wisdom – a non-profit educational program that focuses on a curriculum that provides children with a balanced education for academic success and important life skills. Palo Alto Humane society – a non-profit organization that provides the following animal services; Spay/neuter and veterinary bill assistance; bilingual animal care education; animal welfare advocacy (Helpline; community partnerships with Library, PAUSD, YMCA, Scouts, local businesses, May Fete, Lytton Gardens, Veterans Administration; animal shelter consulting with City; advising City Council on animal issues). Dance Connection – Provides dances classes for different ages and abilities and creates a space for students--children, teens, and adults to have a creative space and outlet to balance everyday stresses. Art in living- A non-profit Foundation that offers yoga, breathing and meditation programs that have been proved to decrease stress, improve well-being and emotional resilience. Ivy Education – provides 1 on 1 and small group tutoring for students K-12 Chinese for Christ Church – a church program that exist to serve and reach the un-churched Chinese of Palo Alto so that they may know Jesus and joyfully worship God. The program desires to be “a church not for ourselves.” The highest importance is the needs of those outside our church, so focus on the community. Avenidas – Works in partnership with the City of Palo Alto to provide services for seniors. Avenidas will provide programs at Cubberley while their facility is under renovation. Palo Alto Soccer Club – Provides world class youth development services to over 1,000 youth players in the City of Palo Alto. ATTACHMENT F ATTACHMENT F ATTACHMENT F ATTACHMENT F ATTACHMENT F City of Palo Alto (ID # 7213) City Council Staff Report Report Type: Action Items Meeting Date: 9/26/2016 City of Palo Alto Page 1 Summary Title: City Garages Solar Projects Title: Review and Direction Regarding Interpretation of Planned Community (PC) Ordinances Governing Three of the Four City Parking Garages Proposed for Rooftop Solar Installations at 445 Bryant Street, 520 Webster Street, and 275 Cambridge Avenue and Regarding the Architectural Review Procedure for the Three PC Zoned Garages and the Fourth Parking Garage at 475 Cambridge Which is Zoned Public Facilities (PF), Including a Finding that the Project is Exempt from Review Under the California Environmental Quality Act (CEQA) From: City Manager Lead Department: Planning and Community Environment Recommendation: Staff recommends that the City Council make the following determinations with regard to three of the four City-owned garages proposed for installation of rooftop solar panels: 1. The installation of structural canopies to support solar panels will be consistent with the Planned Community (PC) Ordinances and approved development plans for three City garages located at 445 Bryant Street, 520 Webster Street, and 275 Cambridge, such that no amendments are needed to these PC ordinances, and 2. The PC Ordinances for 445 Bryant Street and 520 Webster Street do not need to be modified to allow structural canopies to exceed the 50 foot high limit. The fourth City-owned garage proposed for installation of rooftop solar panels at 475 Cambridge Avenue is zoned Public Facilities (PF) which allows “all facilities owned or leased, and operated or used by the City of Palo Alto...” and thus does not require a determination by the City Council. However, staff recommends that the City Council also concur that: 3. The proposed support structures for the photovoltaic panels at all four sites may be considered “minor” projects subject to staff level Architectural Review in accordance with Palo Alto Municipal Code (PAMC) Section 18.76.020. City of Palo Alto Page 2 Staff also recommends that the City Council find that: 4. The recommended actions are exempt from review under the California Environmental Quality Act (CEQA) because Section 21080.35 of the California Public Resources Code specifies that CEQA does not apply to the installation of a solar energy system on the roof of an existing building or at an existing parking lot; and because the installation of EV Chargers is categorically exempt pursuant to CEQA Guidelines Section 15303 (construction and location of limited numbers of new, small facilities and structures) and CEQA Guidelines Section 15301 (existing facilities). Executive Summary: The requested action asks the City Council to interpret previously adopted ordinances, balancing sustainability and design review objectives. The Clean Local Energy Accessible Now (Palo Alto CLEAN) program is part of the City’s effort to enhance the electric utility’s supply reliability by providing 3MW of local solar generation through long-term feed-in tariff agreements. This complements other local solar programs such as net energy metering. Following an RFP process and lease negotiation, Council approved (on consent calendar) a 25-year lease agreement with Komuna Palo Alto LLC to install photo- voltaic panels, electric vehicle (EV) charging systems and infrastructure for additional future EV charging systems on four City-owned public parking garages. Since the execution of the lease, the City has secured a grant in the amount of $240,000 to provide 40 future EV chargers leveraging the electrical infrastructure to be installed under the terms of the lease. As envisioned in the lease, Komuna submitted applications to the CLEAN program, and CLEAN program power purchase agreements were executed for each of the four garages in March 2016. Consistent with the lease agreement, Komuna has filed applications for architecture review and has concurrently filed applications for building permits. Two of the affected garages are located downtown (520 Webster Street and 445 Bryant Street) and are zoned Planned Community (PC). The installations on those garages would exceed the 50 foot height limit. The two other affected garages are located in the California Avenue shopping district; one garage site is zoned PC and the other garage site is zoned Public Facility (PF). The applicant’s project descriptions and the three operable PC ordinances are attached to this report. Staff is seeking Council’s agreement that the proposed structural canopies supporting the solar panels are consistent with the PC Ordinances for the three properties identified above and that the equipment may extend above the 50 foot height limit. Staff is also seeking the Council’s concurrence that minor, staff level, architectural review is appropriate for all four pending rooftop solar projects. Background: The timeline of events for these projects is as follows: City of Palo Alto Page 3 An RFP was released on March 25, 2014 to solicit proposals for installation of solar canopies and electric vehicle chargers on City garages. The RFP noted that proposed facilities were subject to review by the Architectural Review Board and that design enhancement exceptions might be required where applicable 50 feet height limits were exceeded. Council approved the lease agreement with Komuna on January 25, 2016; the staff report viewable at: http://www.cityofpaloalto.org/civicax/filebank/documents/50612. Bay Area Air Quality Management District approved the City’s $240,000 Charge! Grant application was approved in May 2016 to provide a total of 40 new Level 2 electric vehicle chargers on the four garages. The new chargers will utilize electrical infrastructure that will be installed by Komuna under the terms of its lease. Applications for design review were submitted as follows: o 445 Bryant Street on June 7, 2016 o 520 Webster and 475 Cambridge on July 15, 2016 o 275 Cambridge on August 8, 2016. Council Approved Lease The Council-approved, 25-year lease agreement (Attachment A) with Komuna Palo Alto LLC is for annual lease payments of $20,000 by Komuna to the City (i.e. $5,000 per garage) to: (1) construct and operate solar photovoltaic (PV) systems on four garages, with participation in the Palo Alto Clean Local Energy Accessible Now (CLEAN) program; and (2) install three double-headed Level 2 Electric Vehicle (EV) Chargers and electrical infrastructure to support an additional 20 future Level 2 EV Chargers in each of the four garages. Based on the City Council’s earlier direction, the lease income will be directed to the Utilities Electric Fund to offset the cost of the CLEAN program. Installations of solar PV systems and EV chargers and infrastructure are proposed on garages at locations noted below. The staff report at the above link contained the below paragraph regarding planning entitlements: “Design/Planning Review. According to terms and conditions of the Lease Agreement, Komuna is responsible for obtaining all approvals and permits as part of the planning entitlement and building permit process. In discussions with Planning staff it is anticipated that the solar installations will require architectural review. The one percent for art requirement was discussed during RFP development and staff determined the requirement did not apply to this project as it is electrical equipment on top of a building.” The lease was executed on February 8, 2016_ and requires Komuna to complete installation of the PV systems and EV chargers and infrastructure by March 28, 2017 If the length of the permitting process makes this schedule infeasible, staff may return to Council with an appropriate amendment to the lease. City of Palo Alto Page 4 Planned Community Zone Uses Three of the project sites are zoned Planned Community (PC). Ordinances for each of the PC properties are attached as Attachments D, E and F. Pursuant to PAMC Chapter 18.38, a PC amendment would be required for any use not listed as permitted or conditionally permitted or for significant modifications to the approved development plan. This raises the question whether the proposed facilities constitute a new use or a significant modification to the earlier approval. The PC District regulations are attached (Attachment H). The PC ordinances associated with these existing garages were established decades ago and did not appear to anticipate the subject request to construct solar panels on the rooftop. While the solar panels are permitted by state law, the request to construct the supporting structures is subject to design review. The support structures must also be consistent with the applicable PC ordinances. The development plans approved with the subject PC ordinances establish building heights of approximately 50 feet for the structures at 520 Webster and 445 Bryant. The proposed solar support structures on those two downtown sites would exceed the height approved in the original development plan, and would exceed the City’s 50-foot height limit. those two downtown garages The proposed solar support structures on the two Cambridge sites would not exceed the height limit. Staff is seeking Council’s determination that the proposed structural supports are consistent with the previously approved PC ordinances and associated development plans. In other words, staff is seeking the City Council’s agreement that the addition of the support structures for solar panels does not constitute a new land use in conflict with the PC ordinances, and that the structures are akin to other building features, such as chimneys, elevator equipment, exhaust fans, cooling towers, and antennas, which the City’s Municipal Code states may exceed the height limit by up to 15 feet. While the proposed rooftop structures are noticeably larger than the building features described above in that they cover all or most of the parking structure top floors, this exception combined with the city’s interest in advancing solar energy opportunities provide a path forward to determine the proposals consistent with the PC ordinances. If amendments to the PC ordinances are required, at least three hearings would be required before the City Council and Planning and Transportation Commission, which would take about six months to complete. Such an amendment is a cost recovery application and it is anticipated that Komuna Palo Alto LLC would be expected to pay this fee. Staff understands that the additional costs and time could jeopardize the project. Public Facility Zone Permitted Uses 475 Cambridge Avenue is zoned Public Facilities (PF). The city’s zoning code (PAMC Section 18.28.040) allows as a permitted use “All facilities owned or leased, and operated or used, by the City of Palo Alto....” Staff has not identified any concerns with the use of property associated with this application. The use is permitted in the PF zone and the structure would be below 50 feet. City of Palo Alto Page 5 Minor Architectural Review PAMC 18.76.020 item (2) requires Board level Architectural Review for: new construction that requires one or more variances or use permits and in the judgment of the Director will have a significant effect upon the aesthetic character of the city or surrounding area, any minor project that the Director determines will significantly alter the character or appearance of a building or site. The requested solar installation projects can be considered minor under PAMC 18.76.020 item (3)(E)(ii), ‘Minor changes to a previously approved PC district development plan,’ only if the PCE Director (or Council) determines these changes are minor. Under Section 18.76.020 (3)(E), the term ‘minor’ is defined as “a change that is of little visual significance and does not materially alter the appearance of previously approved improvements, is not proposed for the use of the land in question, and does not alter the character of the structure involved. If the cumulative effect of multiple minor changes would result in a major change, a new application for Architectural Review approval of a major project, PC or other applicable approval is required.” The solar panels are not subject to design review, only the support structures, consistent with state law. Staff anticipates reviewing and processing all of the architectural review applications as ‘minor’ projects. A request for hearing can be made for minor projects approved by the Director, which would be reviewed by the Architectural Review Board; a decision following ARB can be appealed to Council. Staff is seeking the City Council’s concurrence that the subject applications can be processed consistent with the process for “minor” architectural review. The electronic plan sets are found on ‘Building Eye’ available via the City’s website at https://paloalto.buildingeye.com/planning 275 Cambridge Avenue (PC-4127) Before/After Images: City of Palo Alto Page 6 Existing Proposed 275 Cambridge, Section: 475 Cambridge (not a PC) Before/After Images: 475 Cambridge, a Section: City of Palo Alto Page 7 520 Webster Street (PC-3499) Before/After Images (from Cowper then Webster): 520 Webster Street, a Section: 445 Bryant Street (PC-4611) Before/After Images (from Florence then Bryant): City of Palo Alto Page 8 445 Bryant Street, a Section: Policy Implications: The Council report of January 25, 2016 (MT 6535) noted, ‘Entering into a new lease agreement is consistent with policies and programs in the Comprehensive Plan promoting smart energy development and City and private sector collaboration for effective development of alternative clean and sustainable energy programs.” If the projects do not advance, the City will miss an City of Palo Alto Page 9 opportunity to obtain 1.3 MW toward its Palo Alto CLEAN program goal of supplying 3 MW of its electric portfolio with local solar generation to enhance supply reliability. Since inception of Palo Alto CLEAN in 2012, only one other application has been received – a 129 kW project also developed by Komuna. The question before the Council this evening relates to the compatibility of this policy objective (sustainable energy) as implemented, with other policy objectives related to context based design and neighborhood character. Resource Impact: There are no significant fiscal or budget impacts associated with recommended action. However, if there is direction to proceed with PC Ordinance amendments, there is some concern that the project may not be able to meet its timing commitments, which may result in termination of the lease agreement with the vendor. If the lease is terminated, funding by the capital fund, estimated at approximately $300,000 for the electrical infrastructure improvements would be required if the City wished to continue to pursue the grant funding received for the EV charger installation. Environmental Review: No environmental review process is required for code interpretations. Approval of the Lease Agreement did not require review under the California Environmental Quality Act: (1) for the solar PV facilities, because section 21080.35 of the California Public Resources Code specifies that CEQA does not apply to the installation of a solar energy system on the roof of an existing building or at an existing parking lot; and (2) for the installation of EV Chargers, which is categorically exempt pursuant to CEQA Guidelines section 15303 (construction and location of limited numbers of new, small facilities and structures) and CEQA Guidelines section 15301 (existing facilities). Attachments: Attachment A - Komuna Lease Agreement (PDF) Attachment B: Merged Project Descriptions (DOCX) Attachment C: Project Plans (Councilmembers Only) (DOCX) Attachment D: 520 Webster Ordinance PC 3499 (PDF) Attachment E: 445 Bryant Ordinance PC4611 (PDF) Attachment F: 275 Cambridge Ordinance PC4127 (PDF) Attachment G: AR findings Ordinance for Council Review 9 12 19 (PDF) Attachment H: Planned Community Chapter 18.38 (PDF) Attachment I: 3 PC Garages "As Builts" (PDF) Attachment J: PAMC Chapter 18.80 Zoning Adjustments (PDF) City of Palo Alto (ID # 6535) City Council Staff Report Report Type: Consent Calendar Meeting Date: 1/25/2016 City of Palo Alto Page 1 Summary Title: Lease Agreement with Komuna Energy Title: Approve and Authorize the City Manager or His Designee to Execute a 25-year Lease Agreement with Annual Lease Payments of $20,000 between the City and Komuna Palo Alto LLC Covering Four City-Owned Parking Structures for: (1) Construction and Operation of Solar Photovoltaic Systems, with the Potential to be a Palo Alto Clean Local Energy Accessible Now (CLEAN) Program Participant; and (2) Installation of City-Owned Electric Vehicle Chargers and Infrastructure. From: City Manager Lead Department: Public Works Recommendation Staff recommends that Council: Approve and Authorize the City Manager or his designee to execute a 25- year Lease Agreement (Attachment A) between the City of Palo Alto and Komuna Palo Alto LLC (Komuna) with an annual lease payment of $20,000 covering portions of four city-owned parking structures located at 445 Bryant Street, 520 Webster Street, 475 Cambridge Avenue and 275 Cambridge Avenue in order for Komuna to: (1) Construct and operate solar photovoltaic (PV) systems, with the potential to be a Palo Alto CLEAN Program applicant; and (2) install City-owned Electric Vehicle (EV) Chargers and infrastructure; and Delegate authority to the City Manager or his designee to execute on behalf of the City, any documents that are ministerial in nature or are otherwise necessary to administer the Lease Agreement that are consistent with the Palo Alto Municipal Code and City Council approved policies. City of Palo Alto Page 2 Background On March 25, 2014, the Public Works Department issued a Request for Proposals (RFP) for the installation and operation of solar PV facilities at one or more of the five city-owned parking structures. These solar PV facilities will provide local solar electric power generation that will be purchased by the City and contribute to its renewable portfolio needs. In addition, the RFP was structured to solicit proposals from vendors that would be eligible for participation in the Council- approved Palo Alto CLEAN Program. The Palo Alto CLEAN program offers payment for the electricity generated from Palo Alto solar PV installations where the electricity is not used on site, but is sold to City of Palo Alto Utilities (CPAU) under the Palo Alto CLEAN Program Power Purchase Agreement (CLEAN PPA). The CLEAN PPA establishes a fixed price per unit of electricity delivered to the Palo Alto electric grid over a 20- or 25-year term. The current CLEAN Program rate is 16.5¢/kWh over the term of the CLEAN PPA. In May 2015, Council considered recommendations from the Finance Committee (Staff Report 5849) to reduce the CLEAN Program price for solar resources (from 16.5¢/kWh to 10.3¢/kWh or 10.4 ¢/kWh, depending on contract term length). Council was informed that such a reduction could have implications for this project. On May 27, 2015, Council voted, amongst other things, to continue the CLEAN program for solar at the cost of 16.5 ¢/kWh for 3 MW as previously approved by the Council; and to direct lease income on City owned garages from the CLEAN program to Utilities to offset costs of the program to electric ratepayers (Staff report 5849; Action Minutes). One important consideration in Council’s decision to maintain the contract rate of $0.165/kWh for solar resources, rather than reducing it to the avoided cost level as the Finance Committee advocated, was the expectation that the Public Works Department would soon be executing the Lease Agreement now being presented to Council for Komuna to develop a group of solar facilities (totaling about 1.3 MW of capacity) atop several downtown parking garages that would participate in the CLEAN program. Staff from Community Services, Planning and Community Environment, Public Works, Utilities and Administrative Services Real Estate Division worked to review City of Palo Alto Page 3 city-owned sites for their suitability for PV installation based on solar access, property access, future redevelopment plans and historical status. Staff concluded the parking garages have good potential for one of the first Palo Alto CLEAN projects on city-owned sites. The solar installations would provide shade to the top floor of each garage. The non-profit organization, Clean Coalition, was engaged to draft an RFP to solicit proposals for installing PV systems on the city- owned garages. The five City-owned parking structures listed below were originally included in the RFP to be considered for the PV installation: Lot R – 528 High Street Lot S/L – 445 Bryant Street Cowper/Webster – 520 Webster Street Cambridge – 475 Cambridge Avenue Ted Thompson – 275 Cambridge Avenue The RFP requested proposals to install PV systems at up to five of the city-owned parking structures and an option to propose the installation of EV chargers at each location as well. On June 3, 2014, three proposals were received from Pristine Sun, THINKnrg (now Komuna) and AltaM Energy. Proposals were reviewed by staff from Public Works, ASD and Utilities Departments as well as consultants from Clean Coalition. The proposals were evaluated by quantitative and qualitative factors including PV system design and aesthetics, PV system output and the financial terms of the lease agreement. All three companies were interviewed and Pristine Sun was unanimously selected based on their substantial lease payment, strong project team and history with PV projects. The other two proposals included a significantly reduced lease payment. Negotiations began with Prisitine Sun in early 2015. However, City and Pristine Sun were unable to structure an agreement. The City ceased negotiations with Pristine Sun and ultimately rejected the vendor’s proposal in June 2015 (Staff Report 5876). Discussion In July 2015, staff began negotiations with Komuna (formally THINKnrg). Komuna was rated second in the RFP responses, mainly due to the reduced rent payment City of Palo Alto Page 4 compared to the first proposer. The City was able to negotiate a higher rent payment than previously proposed with a 25-year, rather than 20-year, PPA term and solar installations on only four of the five parking garage rooftops. No PV systems will be installed at Lot R parking garage located at 528 High Street due to the high cost to develop that particular parking structure. Once the Lease is approved, Komuna will have site control, which is required in order to submit an application for the CLEAN Program. At that point, Komuna will apply to the CLEAN Program to process a PPA. The estimated design size of the generating facility is 1.3 MW, or 43 percent of the CLEAN program capacity. The final system size is contingent upon approval of Building Permit/Plan Check review. Summary of Key Lease Terms Lease Term 25 years, no option to extend Solar Project Size 1.3 MW, approximately 43% of the CLEAN Program’s capacity Location 4 (rather than the original 5) City Garages located in downtown Palo Alto and near California Avenue Rental Payments $20,000 annually for all four garages, $5,000 per garage. No payment escalator Buyout Option Available at years 10, 15, 20 and 25 for fair market value Security $25,000 in more conventional security deposit that can be used for failure to pay rent, clean property; and Completion assurance (e.g. bond, letter of credit) at estimated cost of construction, that City is authorized to draw on to guarantee performance of all covenants and conditions. Parking Impacts and Mitigation Komuna starts paying rent at when the construction commences, continuing through operational period. If construction is delayed, in addition, liquidated damages apply on a lump sum basis, per garage and range from $632-$1,820 per garage, per day. Komuna compensates City for permanent loss of parking – which cannot exceed two spaces lost per garage – at the City’s in lieu fee in effect at the time. EV Chargers City to own, operate; prevailing wage requirement included City of Palo Alto Page 5 Developer to construct six total EV chargers (3 dual head chargers) in three garages; install wiring for additional twenty chargers (ten dual head chargers) in all four garages Next Steps If Lease Agreement approved, Komuna will have site control and be eligible to apply for CLEAN Program Lease Payments and Electric Vehicle Chargers The Lease Agreement includes a total annual payment of $20,000 for the four parking garages, or $5,000 per garage. Based on the City Council’s direction, the lease income will be directed to the Utilities Electric Fund to offset the cost of the CLEAN program. (Staff report 5849; Action Minutes) This will reduce the amount by which the CLEAN program rate exceeds the current avoided cost of solar electricity. The current CLEAN program rate is 16.5 ¢/kWh. Successful applicants to the CLEAN Program secure this higher rate for the term of their project, even if Council later reduces the rate. The avoided cost of solar electricity, which is falling, is discussed in more detail in Staff Report 5849. Although the lease terms include lower rent than was discussed during negotiations with the first proposer, the Lease requires installation of 18 new Level 2 EV chargers (3 dual head chargers in three garages) and electrical infrastructure to support an additional 80 future new Level 2 chargers (ten dual head in all four garages). These chargers will be owned, operated and maintained by the City. The EV chargers and infrastructure, as well as the generating facilities, provide value and notable benefits to the City, beyond rental revenue alone. It is difficult to lease or use the area above the top floor in a parking garage. Here, lease of the parking garages enables the City to use that area for which it would otherwise not have a use, while simultaneously improving upon them in several ways. The solar array provides shade amenities to the top level of the parking garages, which benefit the parking district. In addition, there is community value associated with having more EV chargers and installation of infrastructure for even more in the future available in the City. Though use of EV chargers is currently free, the Policy and Services Committee is expected to soon consider options for changing the City of Palo Alto Page 6 City’s current policy of free use of EV chargers. Changes to EV charging policy may result in additional revenues to the City related to the Lease. In addition, the Lease is consistent with the City’s policy goals of developing local solar generation facilities. Buyout and System Ownership Komuna would install and maintain the generating facilities for a term beginning with the Lease execution and ending twenty-five years after commencement of commercial operation of all the generating facilities. At the end of the twenty- five year term, Komuna is required to remove the generating facilities and restore the parking structure to the original condition. Komuna is required to post a $25K security deposit which covers failure to pay rent, to repair damages caused by Komuna’s acts or omissions, or expenses to clean the property upon end of the term. In addition, Komuna must post security based on the estimated cost of construction or $3.05 per watt. The City can draw on this completion assurance to guarantee Komuna’s full performance of all Lease obligations. The City has the option to buy-out one or more of the generating facilities at the 10, 15, 20 or 25 year anniversary date. If the City exercises the buy-out option, the City will pay Komuna the fair market value of the generating facility or facilities as determined by a third party appraiser. Public Purpose Taking, Property Transfer and Default The City has the right to take any or all of the properties for any public purpose at any time during the term of the Lease. If the City takes a property for any public purpose, the City can choose between finding an alternative City-owned site which has substantially similar insolation and access to the grid as the existing property or paying a termination payment (Termination Payment). If the City finds a new site, the City will pay for the reasonable costs of removal and reinstallation, and will reimburse Komuna for any production revenues lost in excess of ten days. If the City does not locate an alternate site, the amount of the Termination Payment owed is set forth as a specific lump sum amount in Schedule 23.2 of Attachment A. The Termination Payment is different for each generating facility and decreases each year over the term. Schedule 23.2 of Attachment A describes the Termination Payment in detail, which is generally near $1MM for an individual facility in year 1 and decreases to between $45K to $81K in year 25. City of Palo Alto Page 7 The City also has the ability to transfer any or all of the properties at any time during the term. If the City is no longer the lessor on the property, the City would pay Komuna the Termination Payment, unless the new lessor has reasonably acceptable credit or the City provides reasonably acceptable credit support. The Lease also provides that if the City defaults under the Lease, then the City will pay a Termination Payment to Komuna. For a default to occur, the City would need to undergo a bankruptcy-type event or to materially breach a material term of the Lease after a 30-day cure period. An administrative or operational error or omission is not an event of default. If the Lease terminates and the City pays Komuna a Termination Payment, Komuna’s CLEAN PPA for that parking facility will also terminate. Construction Phasing/Loss of Parking The Lease Agreement estimates that it will take six weeks to construct the generating facility. Construction of the generating facilities may require Komuna to temporarily restrict access to all, or portions of the parking garages’ top floors during that time; however, the Lease Agreement anticipates that the parties will work together to mutually agree upon a construction schedule for the generating facilities. As part of that process the City will look to phase construction if necessary and mitigate potential parking impacts for instance, by constructing the facilities consecutively so that only one downtown and California Avenue garage may be under construction concurrently. Note that Komuna starts paying rent when generating facility construction commences, and continues to do so through the operational period. The lease does not charge Komuna a separate fee for the parking structure closure during the six-week construction period above and beyond those rent payments. In addition to working with Komuna to establish a mutually agreeable construction schedule, the Lease imposes penalties in the form of liquidated damages on Komuna if construction (and any related parking closures) extends beyond the initial six week construction estimate. If construction is delayed, Komuna must pay a penalty. After the six-week period, liquidated damages will be assessed at a fixed daily rate per garage calculated based on the number of impacted parking spaces multiplied by the maximum daily parking rate for each City of Palo Alto Page 8 garage. This liquidated damages amount ranges from $632.00 per day for the 475 Cambridge Garage to $1820.00 per day for the Bryant Garage, and is described in a table in the Lease. While Komuna anticipates no permanent loss of parking from the generating facility’s support infrastructure, the Lease Agreement allows for a maximum of two parking spaces to be permanently lost for each garage. In this instance, Komuna would pay parking elimination fees in the amount of parking in-lieu fee, which is currently $65,475 per space. In addition, Komuna will pay for parking not on the top floor at the then-posted daily parking rate. Design/Planning Review According to terms and conditions of the Lease Agreement, Komuna is responsible for obtaining all approvals and permits as part of the planning entitlement and building permit process. In discussions with Planning staff it is anticipated that the solar installations will require architectural review. The one percent for art requirement was discussed during RFP development and staff determined the requirement did not apply to this project as it is electrical equipment on top of a building. Resource Impact The PV facilities will be installed and maintained at Komuna’s expense. If the City owed a Termination Payment as the result of a public purpose taking or a sale or transfer of property to another entity, it is anticipated that payment of the Termination Payment would be a negotiated part of the underlying transaction. However, if that was not accomplished or in the case of a City default, a Termination Payment could be a General Fund expense. Komuna also intends to apply to the Palo Alto CLEAN program and expects to meet all requirements of that program and secure the existing CLEAN Program Rate of $0.165 kWh fixed over the 25-year term. No additional city funding will be used for this project. The annual $20,000 lease payment will be directed to the Utilities Electric Fund per Council direction. Additionally, Council consideration of the current policy on fees for EV charging may result in additional revenues. Policy Implications City of Palo Alto Page 9 Entering into a new lease agreement is consistent with policies and programs in the Comprehensive Plan promoting smart energy development and City and private sector collaboration for effective development of alternative clean and sustainable energy programs. Environmental Review Approval of the Lease Agreement does not require review under the California Environmental Quality Act: (1) for the solar PV facilities, because section 21080.35 of the California Public Resources Code specifies that CEQA does not apply to the installation of a solar energy system on the roof of an existing building or at an existing parking lot; and (2) for the installation of EV Chargers, which is categorically exempt pursuant to CEQA Guidelines section 15303 (construction and location of limited numbers of new, small facilities and structures) and CEQA Guidelines section 15301 (existing facilities). Attachments: Attachment A - Komuna Lease Agreement (PDF) Komuna Lease Agreement & Exhibits FINAL 1.14.2016 (PDF) 999019-eml LEASE AGREEMENT BETWEEN THE CITY OF PALO ALTO AND KOMUNA PALO ALTO LLC This lease agreement ("Lease") is made and entered into this _____ day of __________, 2016 (the “Effective Date”), by and between the CITY OF PALO ALTO, a California chartered municipal corporation ("City" or “Lessor”) and Komuna Palo Alto LLC, a Delaware limited liability company ("Lessee"). City and Lessee may be referred to individually as a “Party” or collectively as the “Parties.” RECITALS WHEREAS, City is the owner of four (4), multi-level parking facilities in Palo Alto, California, two (2) of which are near downtown Palo Alto and two (2) of which are near California Avenue; and WHEREAS, City desires to lease a portion of each of the four (4) parking facilities to Lessee for the purpose of installing, constructing, operating and maintaining a solar powered electric generating project to be owned, maintained and operated by Lessee for the Term of this Lease; and WHEREAS, City also desires and Lessee also has agreed to install three (3) electric vehicle chargers capable of charging six vehicles in each of three (3) of the four (4) parking facilities, and to install wire, conduit, switchgear and any electrical capacity upgrades necessary to support an additional ten (10) electric vehicle chargers capable of charging upon full installation twenty (20) vehicles in each of the four (4) parking facilities, which upon installation will be owned, maintained and operated by City; and WHEREAS, Lessee desires to lease portions of the parking facilities from City in order to install, construct, maintain and operate such solar powered electric generating project, and to gain the necessary access to install such electric vehicle chargers, conduit and switchgear; and WHEREAS, the leasehold rights granted to Lessee by the City in this Lease combine Ground Floor Area and Air Rights Parcels; and WHEREAS, the City desires to purchase from Lessee and Lessee desires to sell to the City the entire energy output of the Generating Facility pursuant to the terms and conditions of a Power Purchase Agreement for Eligible Renewable Energy Resource under the Palo Alto Clean Local Energy Accessible Now Program (the “CLEAN PPA”); and WHEREAS, following a competitive selection process consistent with the requirements of section 2.30 of the Palo Alto Municipal Code, the City Council authorized the City to enter into this Lease with Lessee on ____________, 2016. NOW, THEREFORE, in consideration of these Recitals and the following covenants, terms, and conditions, Lessee and City mutually agree as follows: LEASE PROVISIONS DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F Attachment A LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 2 Rev.: 1/29/15 1. INTERPRETATION; EXHIBITS. 1.1. Interpretation. 1.1.1. The captions of the various sections, paragraphs and subparagraphs of this Lease are for convenience only and shall not be considered or referred to in resolving questions of interpretation. 1.1.2. In construing or interpreting this Lease, the word "or" shall not be construed as exclusive and the word "including" shall not be limiting. 1.2. Recitals. The Recitals set forth above are true and correct and are hereby incorporated into this Lease as if fully set forth herein. 1.3. Exhibits. The following Exhibits are attached to and made part of this Lease as if fully set forth herein. Exhibit “A” – DEFINITIONS Exhibit “B” – DESCRIPTION OF SITE Exhibit “C” – DESCRIPTION OF PREMISES Exhibit “D” – IMPROVEMENTS Exhibit “E” – WORK SCHEDULE Exhibit “F” – MEMORANDUM OF LEASE Exhibit “G” – INSURANCE REQUIREMENTS Exhibit “H” - FORM OF CLEAN PPA Exhibit “I” - FORM OF CLEAN PPA INTERCONNECTION AGREEMENT Exhibit “J” - FORM OF LENDER CONSENT AND AGREEMENT 2. DEFINITIONS. Capitalized terms used in the Lease and not otherwise defined herein have the meanings set forth in Exhibit “A” (Definitions), which is attached to and made part of this Lease as if fully set forth herein. 3. LEASE. City hereby leases to Lessee, in accordance with the terms and conditions hereafter set forth, a bundle of rights consisting of Air Rights Parcels and Ground Floor Areas (both of which are described more specifically in Exhibit “C” (Description of Premises)) of the Property necessary to allow for the installation, maintenance, operation of the Generating Facility and installation of the EV Chargers and Infrastructure (which upon installation shall be owned, maintained and operated by City). Unless specifically provided in this Lease, Lessee accepts the Property “as-is” on the Effective Date of this Lease. 4. TERM, TERMINATION. 4.1. Term. 4.1.1. Definition. This Lease shall commence on the Effective Date and shall DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 3 Rev.: 1/29/15 remain in effect until, for each of the four (4) Properties: 4.1.1.1. The Operations Period has expired (the “Term”); or 4.1.1.2. The Lease has been terminated by either the City or Lessee in accordance with the terms of this Lease. 4.1.2. Fifty-Year Limit. Notwithstanding the provisions of this section, under no circumstances shall the Term of this Lease extend beyond fifty (50) years, consistent with section 7 of the City Charter. 4.2. Termination. The City, in its sole discretion, shall have the right to terminate this Lease as follows: 4.2.1. Public Purpose. If the City determines that it requires any individual, any combination or all parking garage facilities or portions thereof included in the Site at any time or multiple times during the Term for any public purpose as determined by City in its sole discretion, upon sixty (60) days prior written notice to Lessee, the City may in its sole discretion: 4.2.1.1. Find an alternative City owned replacement site or sites, that has or have substantially similar insolation and reasonably acceptable access to the utility grid (with appropriate upgrades or otherwise), that Lessee may use for the Generating Facility or Generating Facilities, as applicable; provided, however, that the City shall pay for the reasonable costs of removal, lost revenue from production (for any down time exceeding ten (10) days) and costs of reinstallation of the Generating Facility (including interconnection and utility related fees) or Generating Facilities from the existing Site to the new site (after which such new parking garage facility or facilities shall thereafter be referred to as the “Site”); provided further that Lessee shall use commercially reasonable efforts to remove and reinstall the Generating Facility or Generating Facilities without delay and endeavor to minimize lost production time; or 4.2.1.2. Terminate the Lease with respect to any individual or all parking garage facilities included in the Site and pay Lessee within sixty (60) days the termination value set forth on Schedule 23.2 attached hereto; provided that Lessor and Lessee each agree that termination of this Lease with respect to any individual or all parking garage facilities included in the Site shall cause a termination of the CLEAN PPA with respect to such individual or all parking garage facilities included in the Site. 4.2.2. Hazardous Materials. In the event that: 4.2.2.1. Any anticipated use of the Property by Lessee involves the generation or storage, use, treatment, disposal, or release of DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 4 Rev.: 1/29/15 Hazardous Materials; 4.2.2.2. Lessee has been required by any lender or governmental authority to take remedial action in connection with Hazardous Materials contaminating the Property, or the Site, if the contamination resulted from Lessee’s actions, omissions or use of the Property; or 4.2.2.3. Lessee is subject to an investigation or enforcement order issued by any governmental authority in connection with the release, use, disposal, or storage of a Hazardous Materials on the Property or Site. 4.2.3. Event of Default. City may terminate this Lease following an Event of Default in accordance with section 23 of this Lease. 4.3. Buyout Option for Generating Facilities. At certain points during the Term or at expiration of the Term, the City may elect a Buyout Option for any one, any combination, or all of the four (4) Generating Facilities: 4.3.1. Buyout Option Price for all Generating Facilities. On the tenth (10th), fifteenth (15th), twentieth (20th), and twenty-fifth (25th) anniversary of the earliest individual Generating Facility to achieve its Commercial Operation Date, the City has the option to purchase all four (4) Generating Facilities on the Properties at a price determined to be the fair market value of all four (4) Generating Facilities as of such anniversary date, as applicable, calculated according to Section 4.3.3.3. 4.3.2. Buyout Option for Individual Generating Facilities. The City may exercise its Buyout Option provided in Section 4.3.1 with respect to any individual Generating Facility, in its discretion. The Buyout Option price for each individual Generating Facility will be calculated by determining the fair market value of all four (4) Generating Facilities as of such anniversary date, as applicable, calculated according to Section 4.3.3.3. and multiplying such value by a fraction that is (A) the Generating Facility’s capacity as of the commencement of operations of that Generating Facility over (B) the total capacity of all such Generating Facilities on the date each commenced operations. 4.3.3. Exercise of Buyout Option; Notice; Fair Market Value. 4.3.3.1. For all four (4) Generating Facilities. If the City desires to exercise its Buyout Option for all four (4) Generating Facilities at once, City will, no later than six (6) months prior to the applicable anniversary date of the Generating Facility with the earliest Commercial Operation Date, notify Lessee of City’s election to exercise its Buyout Option for all four (4) Generating Facilities. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 5 Rev.: 1/29/15 4.3.3.2. For an individual Generating Facility. If the City desires to exercise this Buyout Option for an individual Generating Facility, City will, no later than six (6) months prior to the applicable anniversary date of the Commercial Operation Date for that Generating Facility, notify Lessee of City’s election to exercise its Buyout Option. 4.3.3.3. “Fair Market Value”. The “fair market value” of the Generating Facilities shall be determined by an independent, third party appraiser mutually agreed upon by Lessor and Lessee having substantial experience in the valuation of solar facilities similar to the Generating Facility or Generating Facilities, as applicable. If Lessor and Lessee are unable to agree, then each of Lessor and Lessee shall designate an appraiser who shall designate a third appraiser having substantial experience in the valuation of solar facilities similar to the Generating Facility or Generating Facilities, as applicable, to perform the fair market value appraisal. The reasonable costs of such fair market value appraisal shall be borne by Lessor. 4.4. Removal of Generating Facility. 4.4.1. Except where a Buyout Option is exercised with respect to the relevant Generating Facility, for any individual, or for all four (4) Properties as applicable, Lessee shall at its sole expense, remove the Generating Facility and all its associated equipment and materials completely and vacate the Property and restore the Property to its original conditions, within ninety (90) days of: 4.4.1.1. Upon expiration of the Term; or 4.4.1.2. Upon termination. 4.4.2. The Parties expect reasonable wear and tear; provided, however, that Lessee shall repair to the reasonable satisfaction of City any damage to the Property caused by the Generating Facility or its removal. 4.4.3. Before departure, Lessee shall return any of City’s keys or personal property to City in good, clean and sanitary condition, reasonable wear and tear excepted. 4.4.4. Lessee shall allow City to inspect the Property to verify the condition of the Property and its contents. At City’s request, Lessee agrees to participate in a walk-through inspection of the Property to verify the Property’s condition. 4.4.5. City shall provide Lessee with reasonable access to perform the necessary removal activities. 4.4.6. Upon City request, the usual and customary lighting, plumbing, utility and heating fixtures shall remain upon the Property upon termination or DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 6 Rev.: 1/29/15 expiration of this Lease. RENT. 4.5. Rent. Lessee agrees to pay Rent to the City during the Term of this Lease on the schedule and in the amounts set forth in this Lease. 4.5.1. Schedule. 4.5.1.1. Annual, Payable in Advance. Lessee agrees to pay City Rent in the amounts set forth in section 5.1.2.3. Rent shall be paid on an annual basis, in advance for the upcoming year on July (1st) of each year. 4.5.1.2. Proration. Rent due for any partial year hereunder shall be prorated. 4.5.2. Amount. 4.5.2.1. Definitions. 4.5.2.1.1. “Initial Period” means, for each individual Property, the period commencing on the Effective Date and continuing until the commencement date of the Construction Period. 4.5.2.1.2. “Construction Period” means, for each individual Property, the Scheduled Construction Period, plus the Delayed Construction Period, if any. 4.5.2.1.3. “Scheduled Construction Period” means the period commencing on the Construction Start Date for the Generating Facility identified in Exhibit “E” (Work Schedule) for the Property continuing through the date by which Lessee is set to achieve the Commercial Operation Date for the Generating Facility, according to Exhibit “E” (Work Schedule). 4.5.2.1.4. “Delayed Construction Period” means, for each individual Property, the period commencing the day following the date Lessee was due to achieve its Commercial Operation Date for the Generating Facility according to Exhibit “E” (Work Schedule) to this Lease continuing through the date Lessee takes to actually achieve its Commercial Operation Date for the Generating Facility. 4.5.2.1.5. “Operations Period” means, for each individual Property, the period commencing with the actual DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 7 Rev.: 1/29/15 Commercial Operation Date for the Generating Facility, continuing until the twenty-fifth (25th) anniversary of such Commercial Operation Date. 4.5.2.2. Initial Period Rent. The Rent during the Initial Period for all Properties is zero dollars ($0.00). 4.5.2.3. Construction Period Rent; Operations Period Rent. 4.5.2.3.1. Amount. The Rent during the Construction Period and the Operations Period is as set forth below: PROPERTY RENT Construction Period Operations Period (per year) PRO RATA SHARE OF TOTAL RENT AMOUNT 475 Cambridge Garage $5,000 25% 275 Cambridge Garage $5,000 25% Webster Garage $5,000 25% Bryant Garage $5.000 25% TOTAL RENT AMOUNT $20,000 100% 4.5.2.3.2. Calculation. The Rent during the Construction Period and the Operations Period for each individual Property is calculated based on that Property’s pro rata share of the Total Rent Amount. 4.5.2.4. Delayed Construction Period Penalties. In addition to Lessee’s obligation to pay Rent during Delayed Construction Period(s), if any, Lessee is also subject to Delay Liquidated Damages during the Delayed Construction Period, pursuant to section 6.2 of this Lease. 4.6. Rent Payment Procedures. 4.6.1. Rent shall be due and payable by Lessee promptly upon receipt of an invoice from City therefore and rent shall be delivered to City’s Revenue Collections Division, 250 Hamilton Avenue, PO Box 10250, Palo Alto, CA 94303. This designated place of payment may be changed at any time by City upon ten (10) days advanced written notice to Lessee. 4.6.2. Lessee agrees that acceptance of any late or incorrect Rent or other payment submitted by Lessee shall not constitute an acquiescence or waiver by City and shall not prevent City from enforcing section 5.4 (Late Charge) or any other remedy provided in this Lease. Rent payments shall be effective upon DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 8 Rev.: 1/29/15 receipt by City. 4.6.3. Acceptance of Rent shall not constitute approval of any unauthorized sublease or use, nor constitute a waiver of any non-monetary breach by Lessee. 4.6.4. City may apply any payment received from Lessee at any time against any obligation due and owing by Lessee under this Lease, regardless of any statement appearing on or referred to in any remittance from Lessee or any prior application of such payments. 4.7. Partial Payment. The receipt by City of a partial payment of any amount due to City endorsed as payment in full will be deemed to be a partial payment only. City may accept and deposit said check without prejudice to its right to recover the balance. Any endorsements or statements on the check or any letter accompanying the check shall not be deemed an accord and/or satisfaction. Lessee's obligation (without prior notice or demands) to pay Rent and all other amounts due hereunder shall be absolute and unconditional, and not subject to any abatement, set off, defense, recoupment or reduction. 4.8. Late Charge. 4.8.1. Lessee acknowledges late payment of Rent will cause City to incur costs not contemplated by this Lease, the exact amount of such costs being extremely difficult and impracticable to fix. Such costs include, without limitation, processing, accounting and late charges that may be imposed on City. 4.8.2. Therefore, if City does not receive any installment of Rent due from Lessee within ten (10) days after the date such Rent is due, Lessee shall pay to City an additional sum of five percent (5%) of the overdue Rent as a late charge. 4.8.3. The Parties agree this late charge represents a fair and reasonable estimate of the costs City will incur by reason of late payment of Rent by Lessee. 4.8.4. Acceptance of any late charge shall not constitute a waiver of any Lessee Event of Default with respect to the overdue amount, nor prevent City from exercising any of the other rights and remedies available to City. 5. PARKING FEES 5.1. Parking Elimination Fees. The Parties agree that if the installation, maintenance and/or operation of the Generating Facilities cause any permanent loss of use or reduction of up to two (2), but no more than two (2), parking spaces at each individual Site at any time during the Term, Lessee shall compensate Lessor for such loss of parking spaces in an amount equal to (a) the fee set forth under the heading, “Parking in lieu for the Downtown Assessment District,” on the municipal fee schedule entitled, “City of Palo Alto Development Impact Impacts,” in effect at the time such loss initially occurs (the “In-Lieu Parking Fee”), multiplied by (b) the number of permanently eliminated parking spaces (the “Parking Elimination Fees”). The In-Lieu Parking Fee is updated annually by DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 9 Rev.: 1/29/15 City. As of June 14, 2015, the In-Lieu Parking Fee is sixty five thousand, four hundred and seventy-five dollars ($65,475.00) per parking space. Lessee shall pay City any Parking Elimination Fees promptly after receipt of an invoice therefor. Notwithstanding any provision to the contrary, the installation, maintenance and/or operation of the Generating Facilities shall not cause a permanent loss of more than two (2) parking spaces per individual Site. 5.2. Delay Liquidated Damages. 5.2.1. In the event that Lessee enters the Delayed Construction Period, Lessee shall pay City the Delay Liquidated Damages as set forth in section 6.2.2. Lessee shall pay City such Delay Liquidated Damages every fourteen (14) days after receipt of an invoice therefor while in the Delayed Construction Period. 5.2.2. During the Delayed Construction Period, Lessee will be assessed Delay Liquidated Damages on a daily basis according to the table set forth immediately below. Such Delay Liquidated Damages shall be cumulative and apply to and across all Properties during a Delayed Construction Period. Property Daily Delay Liquidated Damages Per Property 475 Cambridge Garage $632.00 275 Cambridge Garage $768.00 Webster Garage $1400.00 Bryant Garage $1820.00 5.2.3. The Parties agree that the Delay Liquidated Damages set forth in section 6.2.2 are reasonable and represent a fair and genuine estimate of the damages that City will suffer if Lessee enters the Delayed Construction Period. The Parties acknowledge that it would be impracticable or extremely difficult to fix actual damages in such circumstances, and therefore they have deemed the Delay Liquidated Damages set forth above to be the amount of damage sustained by City upon the occurrence of such circumstances. 6. SECURITY DEPOSIT. 6.1. Amount. Lessee agrees to provide City with a Security Deposit of twenty-five thousand dollars ($25,000.00). DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 10 Rev.: 1/29/15 6.2. Use of Security Deposit. Within ten (10) days of the Effective Date of this Lease, Lessee shall deliver to City its Security Deposit. City may use these funds as are reasonably necessary to remedy any Lessee’s failure to pay Rent, to repair damages caused by Lessee’s acts or omissions, or expenses incurred to clean the Property upon termination of tenancy. 6.3. Reinstatement of Security Deposit. If any portion of the Security Deposit is used towards Rent or damages at City's sole discretion, Lessee agrees to reinstate the total Security Deposit upon receipt of ten (10) days written notice from City. 6.4. Return of Security Deposit. City agrees to provide the balance of Security Deposit, if any, to Lessee’s last known address within thirty (30) days of the completion of surrender and removal at all four (4) Properties. 7. USE OF PROPERTY. 7.1. Required Uses. Throughout the term of this Lease, Lessee shall provide the following uses, services and activities (“Required Uses”) at the Property: installation, operation and maintenance of the Generating Facility in Exhibit “D” (Improvements) of this Lease, and installation of EV Chargers and Infrastructure, also described in Exhibit “D” (Improvements) for City ownership. 7.2. Permitted Uses. Lessee may not use the Property for any purpose other than the Required Uses without City's prior written consent, which consent may be withheld in the City’s sole and absolute discretion. 7.3. Prohibited Uses. Lessee shall not use Property for any purpose not expressly permitted hereunder. 7.3.1. Lessee shall not create, cause, maintain or permit any nuisance or waste in, on, or about the Property, or permit or allow the Property to be used for any unlawful or immoral purpose. Lessee shall not do or permit to be done anything in any manner which unreasonably disturbs the users of the City Property or the occupants of neighboring property. Specifically, and without limiting the above, Lessee agrees not to cause any unreasonable odor, noise, vibration, power emission, or other item to emanate from the Property. 7.3.2. No materials or articles of any nature shall be stored outside upon any portion of the Properties. Lessee will not use Property in a manner that increases the risk of fire, cost of fire insurance or improvements thereon. 7.3.3. No unreasonable sign or placard shall be painted, inscribed or placed in or on said Property; and no tree or shrub thereon shall be destroyed or removed or other waste committed of said Property. 7.3.4. No bicycles, motorcycles, automobiles or other mechanical means of transportation shall be placed or stored anywhere on the Property except for the garage or driveway. No repair, overhaul or modification of any motor DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 11 Rev.: 1/29/15 vehicle shall take place on the Property or the street in front of said Property. 7.3.5. Lessee, at its own expense, shall keep the Property in as good condition as it was at the beginning of the terms hereof, except damage occasioned by ordinary wear and tear, and except damage to the publically accessible areas, roof, sidewalks and underground plumbing, which is not the fault of Lessee. 7.4. Condition and Use of Property. City makes no warranty or representation of any kind concerning the condition of the Property, or the fitness of the Property for the use intended by Lessee, and hereby disclaims any personal knowledge with respect thereto, it being expressly understood by the Parties that Lessee has personally inspected the Property, knows its condition, finds it fit for Lessee’s intended use, accepts it as is, and has ascertained that it can be used exclusively for the Required Uses, and any Permitted Uses authorized by City. 8. HAZARDOUS MATERIALS. 8.1. Use of Hazardous Materials Prohibited. Lessee shall not cause or permit any Hazardous Material (as defined in Exhibit “A” (Definitions)) to be brought upon, kept or used in or about the Property by Lessee, its agents, employees, contractors or invitees. 8.2. City’s Right to Perform Tests. At any time during the Term, City shall have the right to enter upon the Property in order to conduct tests of water, soil and other relevant media or substances to assess the environmental condition of the Property. 9. UTILITIES AND OPERATING EXPENSES. 9.1. Lessee shall fully and promptly pay for all expenses associated with Lessee’s use of the operation Property, including but not limited to the furnishing of gas, water, sewer, electricity, telephone service, garbage pickup and disposal, landscaping installation and maintenance, and other public utilities associated with the Required Uses or Permitted Uses by Lessee. 9.2. Subject to Lessee’s obligation to pay for such utilities service set forth in section 10.1 of this Lease, City shall furnish to the Properties reasonable quantities of gas, electricity, water, sewer and refuse collections services as required for Lessee’s and City’s continued use. However, if City is required to construct new, improved or additional installations in connection with utilities, including, without limitation, wiring, plumbing, conduits, transformers, and mains, resulting from the Required Use or Permitted Use by Lessee, Lessee shall pay to City the total cost of such new, improved or additional installations in the amounts and in accordance with any schedule set forth in the City’s Utilities Rules and Regulations, as the same may be amended from time to time. 10. TAXES. 10.1. Payment of Real Property Taxes. Lessee shall pay Lessee’s share of all Real Property Taxes that become due and payable to City on or before the later of ten (10) days prior to the delinquency thereof or three (3) days after the date on which Lessee receives a copy of the tax bill and notice of City’s determination hereunder. Lessee’s liability to pay Real DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 12 Rev.: 1/29/15 Property Taxes shall be prorated on the basis of a three hundred sixty-five (365) day year to account for any fraction or portion of a tax year included in the Lease term at the commencement or expiration or termination of the Lease. 10.2. Revenue and Taxation Code. Lessee specifically acknowledges it is familiar with section 107.6 of the California Revenue and Taxation Code. Lessee realizes that a possessory interest subject to property taxes may be created, agrees to pay any such tax, and hereby waives any rights Lessee may have under said California Revenue and Taxation Code section 107.6. 10.3. Personal Property Taxes. Lessee shall pay before delinquent, or if requested by City, reimburse City for, any and all taxes, fees, and assessments associated with the Property, the personal property contained on the Property and other taxes, fees, and assessments regarding any activities which take place at the Property. Lessee recognizes and understands in accepting this Lease that its interest therein may be subject to a possible possessory interest tax that City or County may impose on such interest and that such tax payment shall not reduce any rent due City hereunder and any such tax shall be the liability of and be paid by Lessee. 11. CONTRACTORS, CONSULTANTS; WORK HOURS 11.1. Contractors, Consultants. 11.1.1. Any contractor or consultant engaged by Lessee to install, construct, operate or maintain the Generating Facility or Generating Facilities, or to install the EV Chargers and Infrastructure must be properly licensed. 11.1.2. Lessee agrees to advise the City of any contractors or consultants involved in the installation or construction of the Improvements in advance of the commencement of the Construction Period for the Generating Facility or the installation and construction of EV Chargers and Infrastructure. 11.1.3. Lessee is responsible for the conduct of its contractors and consultants, and any subcontractors thereto, and City shall have no contractual relationship with any such contractors or consultants. 11.1.4. All Lessee’s contractors and consultants must carry public liability and property damage insurance, standard fire and extended coverage insurance, with vandalism and malicious mischief endorsements, during the period of construction consistent with requirements set forth in Section 27 (Insurance). Such insurance shall contain waiver of subrogation clauses in favor of City and Lessee in accordance with the Provisions of Exhibit “G” (Insurance Requirements). 11.2. Work Hours. 11.2.1. Except for emergency situations or unplanned outages, Lessee shall cause all installation, construction, maintenance or operations work to be performed as authorized by Lessee’s permit. All such work shall be in a manner that DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 13 Rev.: 1/29/15 minimizes interference with City and City’s employees, visitors, tenants, licensees and their customers to the extent commercially practicable. Lessee shall notify the Lease Administrator at least seventy two (72) hours in advance of such work, including where such activities could result in the loss of or limitation of access to the Site. Lessee shall schedule such activities in coordination with the City to minimize said loss or limitation of access to the Site. 11.2.2. Except as expressly set forth in Exhibit “E” (Work Schedule), the Property, and the Site shall remain open for business to during the Construction Period and the Operations Period. 11.2.3. As set forth in section 5 (Rent) and section 6 (Parking Fees) of this Lease, Lessee shall compensate the City for any loss of access, or exclusive use by Lessee, of common areas and associated parking spaces at the Site. If Lessee or any of its agents, suppliers or subcontractors parks any vehicles in parking spaces not on the top floor of any Site, Lessee shall compensate City for such temporary parking usage at the daily posted parking rate then in-effect for such Site during the Term. 12. OWNERSHIP OF IMPROVEMENTS. 12.1. Generating Facilities. Title to the Generating Facility placed on the Property by Lessee shall be held by Lessee during the Term, subject to City’s exercise of its Buyout Option. 12.1.1. In the event City exercises its Buyout Option, Lessee shall take whatever actions are necessary to transfer fee title ownership of the Generating Facility placed by Lessee on the Property to City, free and clear from any lien, or monetary or other encumbrances. 12.1.2. Should this Lease be terminated for any reason prior to the expiration of the Term, other than as a result of the City exercising its Buyout Option as provided for in section 4.3, all the Generating Facility placed by Lessee on the Property shall remain under the ownership of Lessee and shall be removed by Lessee in accordance with section 4.4 of this Lease. 12.1.3. City acknowledges and agrees that: 12.1.3.1. Notwithstanding that the Generating Facilities are a fixture on the Property, the City has no ownership interest in the Generating Facilities, other than as set forth in this Lease (Buyout Option) and Lessee is the exclusive owner and operator of the Generating Facilities; 12.1.3.2. The Generating Facilities, may not be sold, leased, assigned, mortgaged, pledged or otherwise alienated or encumbered (collectively, a “Transfer”) with the fee interest or leasehold rights to the Property by City; and DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 14 Rev.: 1/29/15 12.1.3.3. Nothing shall prevent or limit City’s right to Transfer the Property or the Site; provided, however that: 12.1.3.3.1. City agrees to give Lessee at least fifteen (15) days written notice prior to any Transfer of all or a portion of the Property or the Site identifying the transferee, the portion of the Property or the Site to be transferred and the proposed date of transfer; and 12.1.3.3.2. City agrees that this Lease and any right-of-way granted hereunder shall run with the Property and the Site and survive any Transfer of the Property or the Site; provided that if and solely if a Transfer of the Property by the City causes a change to the Lessor, this Lease shall terminate and the termination value on Schedule 23.2 for the applicable year for each Generating Facility shall be payable by Lessor and Lessor and Lessee hereby agree that the CLEAN PPA as to each Site or all Sites, as applicable, shall terminate, unless Lessee otherwise agrees that the new Lessor has acceptable credit quality, which agreement shall not be unreasonably withheld or Lessor provides reasonably acceptable credit support. 12.2. EV Chargers. 12.2.1. Lessor hereby grants Lessee the right to install and the right to locate the EV Chargers and Infrastructure, and Lessee hereby agrees to install the EV Chargers and Infrastructure. To the extent practicable, Lessee agrees to work with City to install the EV Chargers and Infrastructure near existing chargers or in alternate locations that have the potential to maximize construction, operational or other efficiencies for City as directed by City. 12.2.2. Upon completion of installation of EV Chargers and Infrastructure by Lessee: 12.2.2.1. Lessee has no ownership interest in the EV Chargers and Infrastructure, and City is the exclusive owner of the EV Chargers and Infrastructure. 12.2.2.2. Lessee shall take commercially reasonable actions as are necessary to transfer fee title ownership of the EV Chargers and Infrastructure placed by Lessee on the EV Chargers and Infrastructure to City, free and clear from any lien, or monetary or other encumbrances, along with the transfer of any applicable warranties, guarantees, interests or other contracts, held by Lessee to City. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 15 Rev.: 1/29/15 12.2.2.3. The EV Chargers and Infrastructure shall be powered by electricity provided by City at the City’s sole expense. 13. INSTALLATION AND CONSTRUCTION IMPROVEMENTS (GENERATING FACILITIES AND EV CHARGERS AND INFRASTRUCTURE) BY LESSEE. 13.1. Installation and Construction of Improvements. 13.1.1. City Consent. City hereby consents to the installation on the Property of the Improvements by Lessee, including the Generating Facilities and EV Chargers and Infrastructure, as shown in Exhibit “D” (Improvements). Lessee shall use commercially reasonable efforts to cause the installation and construction of such Improvements in accordance with the specifications set forth in Exhibit “D” (Improvements) and Exhibit “E” (Work Schedule) attached to this Lease. 13.1.2. Performance. Lessee shall be responsible for the installation of the Improvements, including all costs associated with the installation of the Improvements. Within thirty (30) days of the Effective Date, Lessee shall commence pre-installation activities relating to the Improvements, which shall include, without limitation and as applicable to the specific Improvement involved, using commercially reasonable efforts to: 13.1.2.1. Obtain financing for construction of the Improvements, if necessary; 13.1.2.2. Execute all contracts, and agreements required for the installation and operation of the Improvements, including, for the Generating Facility, the CLEAN PPA; 13.1.2.3. Execute all agreements required for Utility interconnection of the Generating Facility, including the CLEAN PPA Interconnection Agreement; and 13.1.2.4. Obtain, at no additional cost and expense to City, all Permits necessary for the installation and operation of the Improvements. Lessee is responsible for and City agrees to cooperate in Lessee’s seeking any and all Permits Lessee finds necessary or desirable for the installation of the Improvements. Lessee will carry out the activities set forth in this section in accordance with all applicable laws, rules, codes and ordinances and in such a manner as will not unreasonably interfere with City’s operation or maintenance of the Site as a parking facility. 13.1.3. Construction Standards. 13.1.3.1. Lessee shall in a good, efficient and workmanlike manner, cause to be designed, constructed, and installed within the Property, at DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 16 Rev.: 1/29/15 no cost to City, appropriate equipment, materials and services to adequately accommodate the Improvements and the Required Uses and Permitted Uses (if any) under this Lease. 13.1.3.2. Lessee shall prepare the plans and specifications for approval by the City’s Building Division and Planning & Community Development Divisions as required by the Palo Alto Municipal Code. 13.1.3.3. Lessee shall obtain approval of all such plans and specifications and shall cause the construction of all Improvements to be completed within twelve (12) months of the effective date set forth in the CLEAN PPA. 13.1.3.4. All design and construction performed by or on behalf of Lessee shall materially and substantially conform to the approved plans, specifications, construction and architectural standards approved by City and contained in Exhibit “D” (Improvements). 13.1.3.5. All work shall be performed in a manner that complies with all applicable governmental permits, laws, ordinances and regulations, and shall meet all other requirements contained in this Lease. 13.1.3.6. Lessee shall, and shall cause its contractors to, keep the Site reasonably clear of debris, waste, material and rubbish and to comply with reasonable safety procedures established by City for the conduct of business on the Site. 13.1.3.7. Lessee shall keep the Property free and clear of all claims and liens resulting from construction done by or for Lessee. 13.1.4. Cost of Improvements. Lessee shall pay all costs for construction done or caused to be done by Lessee on the Property as permitted or required by this Lease. Promptly after completion of construction, Lessee shall provide to the Lease Administrator a statement of the reasonable and actual costs of construction for the Improvements described in Exhibit “D”, which statement shall be certified as to accuracy and signed by Lessee under penalty of perjury. 13.1.5. Assurance of Completion. 13.1.5.1. For the Construction of the Improvements. The estimated construction cost of the Improvements set forth in Exhibit “D” to be constructed by Lessee is $3.05 per Watt. Within thirty (30) days of the Effective Date of this Lease, Lessee shall furnish to the Lease Administrator evidence that assures City that sufficient monies are available to Lessee to complete the construction of the Improvements. The amount of such assurance shall be at DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 17 Rev.: 1/29/15 least the estimated construction cost. Evidence of such assurance shall take one of the forms set out below and City is authorized to draw on such assurances to guarantee Lessee’s full and faithful performance of all of the terms, covenants, and conditions of this Lease: 13.1.5.1.1. Completion Bond; 13.1.5.1.2. Performance bond, labor and material bonds, supplied by Lessee’s contractor or contractors, provided the bonds are issued jointly to Lessee and City; 13.1.5.1.3. Irrevocable letter of credit from a financial institution; or 13.1.5.1.4. Any combination of the above. 13.1.5.2. Additional Construction or Alteration. Prior to commencement of any construction or alteration expected to cost more than ten thousand dollars ($10,000.00), Lessee shall furnish the Lease Administrator evidence that assures City that sufficient monies will be available to Lessee to complete the proposed work. Such assurance may be in the form identified in section 14.1.5.1.1 to section 14.1.5.1.4 of this Lease. 13.1.5.3. All bonds and letters of credit must be issued by a company qualified to do business in the State of California and be acceptable to the Lease Administrator. All bonds and letters of credit shall be in a form acceptable to the Lease Administrator, and shall insure faithful and full observance and performance by Lessee of all of the terms, conditions, covenants, and agreements relating to the construction of Improvements or other alterations in accordance with this Lease. 13.1.6. Certificate of Inspection. Upon completion of construction of any building, the Generating Facilities and the EV Chargers and Infrastructure, Lessee shall submit to the Lease Administrator a Certificate of Inspection, verifying that the construction was completed in conformance with Title 20 of the California Code of Regulations for residential construction, or in conformance with Title 24 of the California Code of Regulations for non-residential construction. 13.1.7. As Built Plans. Lessee shall provide the Lease Administrator with a complete set of reproducible “as built plans” reflecting actual construction within or upon the Property upon completion of any: (i) new construction; (ii) structural alterations; or (iii) non-structural alterations costing more than twenty-five thousand dollars ($25,000.00), which shall include, by way of clarification but not of limitation, the Generating Facilities and the EV DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 18 Rev.: 1/29/15 Chargers and Infrastructure. 14. MAINTENANCE AND OPERATION OF GENERATING FACILITIES BY LESSEE 14.1. Maintenance. 14.1.1. City Responsibilities. 14.1.1.1. Site. City shall be responsible for the maintenance and repair of the overall Site, other than the Generating Facility, including main support systems not exclusively serving the Lessee’s facilities, such as electrical system repair, painting, structural repairs, and all maintenance of landscaped areas. 14.1.1.2. EV Chargers and Infrastructure. City shall be responsible for maintenance of all EV Chargers and Infrastructure, which are to be solely owned by City following Lessee’s installation. 14.1.1.3. Common Areas. City shall maintain or cause to be maintained, including repair and replacement as necessary, all Common Areas serving the Property. 14.1.2. Lessee Responsibilities. Lessee shall maintain, at Lessee’s expense, all Generating Facilities, including all related equipment, furnishings and trade fixtures upon the Property in a safe, clean, wholesome, and sanitary condition required for the maintenance and operation of a first-class business of the type to be conducted pursuant to this Lease. Lessee agrees to promptly (and in no case later than within thirty (30) days written notice from City) paint, clean, and abate graffiti, to the complete satisfaction of City, and in compliance with all applicable laws, throughout the term of this Lease. 14.1.3. Waiver of Civil Code. Lessee expressly waives the benefit of any statute now or hereinafter in effect, including the provisions of sections 1941 and 1942 of the Civil Code of California, which would otherwise afford Lessee the right to make repairs at City’s expense or to terminate this Lease because of City’s failure to keep Property in good order, condition and repair. Lessee further agrees that if and when any repairs, alterations, additions or betterments shall be made by Lessee as required by this paragraph, Lessee shall promptly pay for all labor done or materials furnished and shall keep the Property free and clear of any lien or encumbrance of any kind whatsoever. If Lessee fails to make any repairs or perform any maintenance work for which Lessee is responsible within a reasonable time (as determined by the City in the City’s sole discretion) after demand by the City, City shall have the right, but not the obligation, to make the repairs at Lessee’s expense; within ten (10) days of receipt of a bill, Lessee shall reimburse City for the cost of such repairs, including a fifteen percent (15%) administrative overhead fee. The making of such repairs or performance of maintenance by City shall in no event be construed as a waiver of the duty of Lessee to make repairs or perform maintenance as provided in this section. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 19 Rev.: 1/29/15 14.2. Operation. 14.2.1. Generating Facility. 14.2.1.1. Lessee shall be solely responsible for operation and maintenance of the Generating Facility (subject, however, to the obligations and responsibilities of City herein). Lessee’s obligation shall include, without limitation, the obligation to promptly make or pay (as determined by City) for any repairs to the Property or to the Site to the extent directly caused by Lessee, its employees, agents, contractors or subcontractors. 14.2.1.2. Lessee shall bear all risk of loss with respect to the Generating Facility, except: 14.2.1.2.1. As set forth elsewhere in this Lease; or 14.2.1.2.2. For actions or negligence by the City or it agents and employees. 14.2.1.3. Lessee shall operate the Generating Facilities so as to keep such Generating Facilities in good operating condition and repair, in compliance with all applicable laws, and in accordance with generally accepted practices of the electric industry, in general, and the solar generation industry in particular. 14.2.2. EV Chargers and Infrastructure. City shall be responsible for operation of all EV Chargers and Infrastructure, which are to be solely owned by City following Lessee’s installation. 15. RELOCATION 15.1. City may request to move the Generating Facility on either a temporary or permanent basis to another location on the Site or to another site owned by City. 15.2. For any such relocation that is required due to Site work or another purpose unrelated to the Generating Facility, the City is responsible for all associated reasonable costs of removal and reinstallation and must proceed diligently. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 20 Rev.: 1/29/15 16. ALTERATIONS BY LESSEE Lessee shall not make any alterations or modifications to the Property without obtaining the prior written consent of the Lease Administrator. Lessee may, at any time and at its sole expense, install and place business fixtures and equipment within the Property provided such fixtures and installation have been reviewed and approved by the Lease Administrator. 17. REPRESENTATIONS AND WARRANTIES; COVENANTS 17.1. Representations and Warranties. On the Effective Date, each Party represents and warrants to the other Party that: 17.1.1. It is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation; 17.1.2. The execution, delivery and performance of this Lease is within its powers, have been duly authorized by all necessary action and do not violate any of the terms and conditions in its governing documents, any contracts to which it is a party or any law, rule, regulation, order or the like applicable to it; 17.1.3. This Lease and each other document executed and delivered in accordance with this Lease constitutes its legally valid and binding obligation enforceable against it in accordance with its terms; 17.1.4. It is not bankrupt and there are no proceedings pending or being contemplated by it or, to its knowledge, threatened against it which would result in it being or becoming bankrupt; 17.1.5. There is not pending or, to its knowledge, threatened against it or any of its affiliates, if any, any legal proceedings that could materially adversely affect its ability to perform its obligations under this Lease; and 17.1.6. It is acting for its own account, has made its own independent decision to enter into this Lease and as to whether this Lease is appropriate or proper for it based upon its own judgment, is not relying upon the advice or recommendations of the other Party in so doing, and is capable of assessing the merits of, and understands and accepts, the terms, conditions and risks of this Lease. 17.2. Covenants. Each Party covenants that, during the Term: 17.2.1. It shall continue to be duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation; 17.2.2. It shall maintain (or obtain from time to time as required, including through renewal, as applicable) all regulatory authorizations necessary for it to legally perform its obligations under this Lease; and 17.2.3. It shall perform its obligations under this Lease in a manner that does not DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 21 Rev.: 1/29/15 violate any of the terms and conditions in its governing documents, any contracts to which it is a party or any law, rule, regulation, order or the like applicable to it. 18. HOLD HARMLESS, INDEMNIFICATION. 18.1. General Indemnification. Lessee agrees to protect, defend (with counsel acceptable to City), hold harmless and indemnify City, its City Council, commissions, officers, agents, volunteers, and employees from and against any claim, injury, liability, loss, cost, penalties, forfeiture, and/or expense and/or damage, however same may be caused, including all costs and reasonable attorney's fees in providing a defense to any claim arising therefrom for which City shall become legally liable arising from Lessee’s or its contractors, consultants, agents or assigns negligent, reckless, or wrongful acts, errors, or omissions with respect to or in any way connected with this Lease together with reasonable attorneys' fees and all costs and expenses reasonably incurred by City in negotiating, settling, defending or otherwise protecting against such claims. This indemnity shall be in addition to the Hazardous Materials Indemnity and Indemnity for claims arising out of construction contained in this Lease and shall survive shall survive the expiration of or early termination of the Lease Term. 18.2. Indemnity for Claims Arising Out of Construction. Lessee agrees to protect, defend (with counsel acceptable to City), hold harmless and indemnify City, its City Council, commissions, officers, agents, volunteers, and employees from and against any claim, injury, liability, loss, cost, penalties, forfeiture, and/or expense or damage arising out of work performed on the Property by Lessee or its contractors, consultants, agents or assigns, together with reasonable attorneys' fees and all costs and expenses reasonably incurred by City in negotiating, settling, defending or otherwise protecting against such claims. 18.3. Hazardous Materials Indemnity. Lessee shall protect, defend (with counsel acceptable to City), hold harmless, and indemnify the City, its City Council, commissions, officers, agents, volunteers, and employees harmless from and against any and all claims, injuries, liabilities, costs, penalties, forfeitures, losses, and/or expenses or damages, including without limitation, diminution in value of the Property or Site, damages for the loss or restriction on use of the rentable or usable space or of any amenity of the Property or Site, damages arising from any adverse impact or marketing of the Property or Site and sums paid in settlement of claims, response costs, cleanup costs, site assessment costs, attorneys’ fees, consultant and expert fees, judgments, administrative rulings or orders, fines, costs of death of or injury to any person, or damage to any property whatsoever (including, without limitation, groundwater, sewer systems, and atmosphere), arising from, caused, or resulting, either prior to or during the Lease Term, in whole or in part, directly or indirectly, by the presence or discharge in, on, under, or about the Property by Lessee, Lessee’s agents, employees, licensees, or invitees or at Lessee’s direction, of Hazardous Material, or by Lessee’s failure to comply with any law applicable to the use, storage or disposal of Hazardous Materials, whether knowingly or by strict liability. For purposes of the indemnity provided herein, any acts or omissions of Lessee or its employees, agents, customers, sublessees, assignees, contractors, or subcontractors of Lessee (whether or not they are negligent, intentional, willful or unlawful) shall be strictly attributable to Lessee. Lessee’s indemnification obligations shall include, without DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 22 Rev.: 1/29/15 limitation, and whether foreseeable or unforeseeable, all costs of any required or necessary Hazardous Materials management plan, investigation, repairs, cleanup or detoxification or decontamination of the Property or Site, and the presence and implementation of any closure, remedial action or other required plans, and shall survive the expiration of or early termination of the Lease Term. 18.4. Waiver of Claims. Lessee waives any claims against City for injury to Lessee’s business or any loss of income therefrom, for damage to Lessee’s property, or for injury or death of any person in or about the Property, from any cause whatsoever, except to the extent caused by City’s active negligence or willful misconduct. 18.5. Notice. Lessee shall give City immediate notice of any claim or liability indemnified against under this Lease. 19. FORCE MAJEURE, DAMAGE AND DESTRUCTION. 19.1. Nontermination and Nonabatement. Except as provided herein, no destruction or damage to the Property by fire, windstorm or other casualty, whether insured or uninsured, shall entitle Lessee to terminate this Lease. City and Lessee waive the provisions of any statutes which relate to termination of a lease when leased property is destroyed and agree that such event shall be governed by the terms of this Lease. 19.2. Force Majeure. Force Majeure shall excuse the performance by Lessee for a period equal to the prevention, delay, or stoppage, except the obligations imposed with regard to Rent to be paid by Lessee pursuant to this Lease. 19.3. Restoration of Property by Lessee. 19.3.1. Destruction Due to Risk Covered by Insurance. If, during the term, the Property is totally or partially destroyed from a risk covered by the insurance described in Section 27 (Insurance), rendering the Property totally or partially inaccessible or unusable, Lessee shall restore the Property to substantially the same condition as it was in immediately before destruction (“Restoration”), whether or not the insurance proceeds are sufficient to cover the actual cost of Restoration. Such destruction shall not terminate this Lease. If the laws existing at that time do not permit the Restoration, either party can terminate this Lease immediately by giving notice to the other Party. 19.3.1.1. Minor Loss. If, during the term of this Lease, the Property is destroyed from a risk covered by the insurance described in Section 27 (Insurance), and the total amount of loss does not exceed twenty thousand dollars ($20,000.00), Lessee shall make the loss adjustment with the insurance company insuring the loss. The proceeds shall be paid directly to Lessee for the sole purpose of making the Restoration of the Property in accordance with this Lease. 19.3.1.2. Major Loss-Insurance Trustee. If, during the term of this Lease, DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 23 Rev.: 1/29/15 the Property is destroyed from a risk covered by the insurance described in Section 27 (Insurance), and the total amount of loss exceeds twenty thousand dollars ($20,000.00), Lessee shall make the loss adjustment with the insurance company insuring the loss and on receipt of the proceeds shall immediately pay them to an institutional lender or title company as may be jointly selected by the Parties ("the Insurance Trustee"). 19.3.2. Destruction Due to Risk Not Covered by Insurance. If, during the term, the Property is totally or partially destroyed from a risk covered by the insurance described in Section 27 (Insurance), rendering the Property totally or partially inaccessible or unusable, Lessee shall engage in Restoration of the Property, whether or not the insurance proceeds are sufficient to cover the actual cost of restoration. Such destruction shall not terminate this Lease. If the laws existing at that time do not permit the Restoration, either Party can terminate this Lease immediately by giving notice to the other Party. 19.3.2.1. If the cost of Restoration exceeds ten percent (10%) of the then replacement value of the Property totally or partially destroyed, Lessee can elect to terminate this Lease by giving notice to City within sixty (60) days after determining the restoration cost and replacement value. If Lessee elects to terminate this Lease, City, within thirty (30) days after receiving Lessee's notice to terminate, can elect to pay to Lessee, at the time City notifies Lessee of its election, the difference between ten percent (10%) of the replacement value of the Property and the actual cost of Restoration, in which case Lessee shall restore the Property. On City's making its election to contribute, each Party shall deposit immediately the amount of its contribution with such institutional lender or title company as may be jointly selected by the Insurance Trustee. If the destruction does not exceed ten percent (10%) of the then replacement value of the Property, Lessee shall immediately deposit the cost of restoration with the Insurance Trustee as provided in Exhibit “G” (Insurance). This Lease shall terminate if Lessee elects to terminate this Lease and City does not elect to contribute toward the cost of Restoration as provided in this section. 19.3.2.2. If the Property is destroyed from a risk not covered by the insurance described in Section 27 (Insurance), and Lessee has the obligation to engage in Restoration of the Property as provided in section 20.3.2 of this Lease, both Parties shall deposit with the Insurance Trustee their respective contributions toward the cost of Restoration. All sums deposited with the Insurance Trustee shall be held for the following purposes and the Insurance Trustee shall have the following powers and duties: 19.3.2.2.1. The sums shall be paid in installments by the DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 24 Rev.: 1/29/15 Insurance Trustee to the contractor retained by Lessee as construction progresses, for payment of the cost of Restoration. 19.3.2.2.2. A ten percent (10%) retention fund shall be established that will be paid to the contractor on completion of Restoration, payment of all costs, expiration of all applicable lien periods, and proof that the Property is free of all mechanics' liens and lienable claims. 19.3.2.2.3. Payments shall be made on presentation of certificates or vouchers from the architect or engineer retained by Lessee showing the amount due. If the Insurance Trustee, in its reasonable discretion, determines that the certificates or vouchers are being improperly approved by the architect or engineer retained by Lessee, the Insurance Trustee shall have the right to appoint an architect or an engineer to supervise construction and to make payments on certificates or vouchers approved by the architect or engineer retained by the Insurance Trustee. The reasonable expenses and charges of the architect or engineer retained by the Insurance Trustee shall be paid by the insurance trustee out of the trust fund. Both Parties shall promptly execute all documents and perform all acts reasonably required by the Insurance Trustee to perform its obligations under this section. 19.3.2.2.4. If the sums held by the Insurance Trustee are not sufficient to pay the actual cost of Restoration, Lessee shall deposit the amount of the deficiency with the Insurance Trustee within fifteen (15) days after request by the Insurance Trustee indicating the amount of the deficiency. Any undisbursed funds after compliance with the provisions of this section shall be delivered to City to the extent of City's contribution to the fund, and the balance, if any, shall be paid to Lessee. All actual costs and charges of the Insurance Trustee shall be paid by Lessee. 19.3.2.3. If the Insurance Trustee resigns or for any reason is unwilling to act or continue to act, City shall substitute a new trustee in the place of the designated Insurance Trustee. The new trustee must be an institutional lender or title company. 19.3.3. Procedure for Restoring the Property. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 25 Rev.: 1/29/15 19.3.3.1. When Lessee is obligated to engage in Restoration of the Property or a portion of the Property, within sixty (60) days Lessee at its cost shall prepare final plans, specifications, and working drawings complying with applicable laws that will be necessary for restoration of the Property. The plans, specifications, and working drawings must be approved by City. City shall have thirty (30) days after receipt of the plans and specifications and working drawings to either approve or disapprove the plans, specifications, and working drawings and return them to Lessee. If City disapproves the plans, specifications, and working drawings, City shall notify Lessee of its objections and City's proposed solution to each objection. Lessee acknowledges that the plans, specifications, and working drawings shall be subject to approval of the appropriate governmental authorities and that they will be prepared in such a manner as to obtain that approval. 19.3.3.2. The Restoration shall be accomplished as follows: 19.3.3.2.1. Lessee shall complete the Restoration within sixty (60) working days after final plans and specifications and working drawings have been approved by the appropriate governmental authorities and all required Permits have been obtained (subject to a reasonable extension for delays resulting from causes beyond Lessee's reasonable control). 19.3.3.2.2. Lessee shall retain a licensed contractor that is bondable. The contractor shall be required to carry public liability and property damage insurance, standard fire and extended coverage insurance, with vandalism and malicious mischief endorsements, during the period of construction consistent with requirements set forth in Section 27 (Insurance). Such insurance shall contain waiver of subrogation clauses in favor of City and Lessee in accordance with the Provisions of Exhibit “G” (Insurance Requirements). 19.3.3.2.3. Lessee shall notify City of the date of commencement of the Restoration at least ten (10) days before commencement of the Restoration to enable City to post and record notices of non- responsibility. The contractor retained by Lessee shall not commence construction until a completion bond and a labor and materials bond have been delivered to City to insure completion of the construction. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 26 Rev.: 1/29/15 19.3.3.3. Lessee shall accomplish the restoration in a manner that will cause the least inconvenience, annoyance, and disruption at the Property. 19.3.3.4. On completion of the Restoration Lessee shall immediately record a notice of completion in Santa Clara County. 19.3.3.5. The Restoration shall not be commenced until sums sufficient to cover the cost of Restoration are placed with the Insurance Trustee as provided in section 20.3.1.2 of this Lease. 20. SIGNS. Lessee shall not place, construct, maintain, or allow any signs upon the Property without prior written consent of City. 21. ASSIGNMENT AND SUBLETTING. 21.1. City's Consent Required. 21.1.1. No Assignment Without Consent. 21.1.1.1. Lessee shall neither assign this lease, nor any interest therein, and shall neither sublet nor encumber the Property or any part thereof, nor any right or privilege appurtenant thereto, nor allow or permit any other person(s) to occupy or use the Property, or any portion thereof, without the prior written consent of City. 21.1.1.2. Any assignment, subletting, encumbrances, occupation, or use contrary to the provisions of this Lease shall be void and shall constitute breach of this Lease. City may assign any of its rights hereunder without notice to Lessee. 21.1.1.3. At City’s request, Lessee shall promptly deliver financial statements, information and other evidence satisfactory to City regarding any proposed assignment or change of control under this Section 22.1. 21.1.2. Consent. 21.1.2.1. Any direct or indirect change of control of Lessee (whether voluntary or by operation of law) shall be deemed an assignment and shall require the prior written consent of City which may be withheld in its sole discretion. 21.1.2.2. Lessee shall be permitted to assign this Lease as collateral for any financing or refinancing of the Generating Facilities with the prior written consent of Lessor, which consent shall not be DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 27 Rev.: 1/29/15 unreasonably withheld, conditioned or delayed. If Lessor gives its consent, such consent shall be in a form substantially similar to the form of “Lender Consent and Agreement” attached hereto as Exhibit “J”. 21.1.3. No Consent Subject to Creditworthiness Test. Notwithstanding the foregoing, no Consent and Agreement shall be required for: 21.1.3.1. Any assignment or transfer of this Lease by the Lessee to an affiliate of the Lessee, provided that such affiliate’s creditworthiness is equal to or better than that of Lessee, as reasonably determined by Lessor; or 21.1.3.2. Any assignment or transfer of this Lease by the Lessee to a person succeeding to all or substantially all of the assets of Lessee, provided that such person’s creditworthiness is equal to or greater than that of Lessee, as reasonably determined by the Lessor. 21.1.4. Assignment. 21.1.4.1. Written notification of any assignment or transfer of this Lease shall be given to the Lessor. 21.1.4.2. This Lease shall be binding upon any permitted assignee or successor of Lessee. 21.1.4.3. Consent by City to one assignment, subletting, occupation or use by another person shall not be deemed to be consent to any subsequent assignment, subletting, occupation or use by another person. 21.1.4.4. No assignment, subletting, or encumbrance by Lessee shall release it from or in any way alter any of Lessee's obligations under this Lease. 21.2. Hazardous Materials. Without limiting City’s authority to withhold its consent in other circumstances, it shall not be unreasonable for City to withhold its consent to an assignment or sublet to a proposed assignee or sublessee if: 21.2.1. Any anticipated use of the Property by any proposed assignee or sublessee involves the generation or storage, use, treatment, disposal, or release of Hazardous Material in any manner or for any purpose; 21.2.2. The proposed assignee or sublessees has been required by any prior landlord, lender, or governmental authority to take remedial action in connection with Hazardous Material contamination at a property, if the contamination resulted from such assignee or sublessee’s action, omission or other use of the property in question; or, DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 28 Rev.: 1/29/15 21.2.3. The proposed assignee or sublessee is subject to an enforcement order issued by any governmental authority in connection with the release, use, disposal or storage of a Hazardous Material. 21.3. No Release of Lessee. No subletting or assignment as approved by City shall release Lessee of Lessee’s obligation or alter the primary liability of Lessee to pay Rent and to perform all other obligations by Lessee hereunder. The acceptance of Rent by City from any other person shall not be deemed to be a waiver by City of any provision hereof. In the event of default by any assignee of Lessee or any successor of Lessee in the performance of any of the terms hereof, City may proceed directly against Lessee without the necessity of exhausting remedies against said assignee. 22. EVENT OF DEFAULT; REMEDIES. 22.1. Event of Default. The occurrence of any one or more of the following events shall constitute a material default, or breach of this Lease by Lessee (“Lessee Event of Default”): 22.1.1. Abandonment. Abandonment of the Property by Lessee as defined by California Civil Code section 1951.3; 22.1.2. Failure to Pay Rent; Other Payments. Failure by Lessee to make any payment of Rent or any other payment (including, without limitation Parking Fees, if any) required to be made by Lessee hereunder, as provided in this Lease, where such failure continues for a period of ten (10) business days after City provides Lessee with written notice thereof. In the event City serves Lessee with a Notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer statutes (“Notice to Pay Rent or Quit”), such Notice to Pay Rent or Quit shall also constitute the notice required by this subparagraph; 22.1.3. Failure to Satisfy Lease Obligations. Failure by Lessee to observe or perform any of the Representations, Warranties or Covenants set forth in section 18 of this Lease or any of the material covenants, conditions or provisions of this Lease in any material respect where such failure shall continue for a period of thirty (30) days after City provides Lessee with written notice thereof; provided, however, that if the nature of Lessee’s failure is such that more than thirty (30) days are reasonably required for its cure, then a Lessee Event of Default shall not have occurred if Lessee demonstrates to City’s reasonable satisfaction that it has commenced such cure within said thirty (30) day period and thereafter diligently prosecutes such cure to completion. Notwithstanding the foregoing, a Lessee Event of Default shall not occur under this section 23.1.3 if the failure to observe or perform any of the Representations, Warranties or Covenants set forth in Section 18 of this Lease or any of the material covenants, conditions or provisions of this Lease in any material respect is caused by an error or omission of an administrative or operational nature. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 29 Rev.: 1/29/15 22.1.4. Assignment to Creditors; Debtor Status; Bankruptcy and Seizure. 22.1.4.1. Making, by Lessee, of any general arrangement or assignment for the benefit of creditors; 22.1.4.2. Becoming a “Debtor” as defined in 11 U.S.C. §101, as the same may be amended from time to time, (unless, in the case of a petition filed against Lessee, the same is dismissed within sixty (60) days); 22.1.4.3. The appointment of a bankruptcy trustee or receiver to take possession of all or substantially all of Lessee’s assets located at or on the Property or of Lessee’s interest in this Lease where possession is not restored to Lessee within thirty (30) days; or the attachment, execution or other judicial seizure of all or substantially all of Lessee’s assets located at or on the Property or of Lessee’s interest in this Lease, where such seizure is not discharged within thirty (30) days. 22.1.5. Construction of Generating Facility. Failure, by Lessee to diligently pursue construction of the Generating Facility, including where the Delayed Construction Schedule Period results in loss or limited access to the Property or the Site that lasts more than ninety (90) days. Such time period may be extended by City, in its sole discretion, in writing prior to expiration the ninety (90) day period. 22.1.6. Failure to Achieve Commercial Operation Date. Failure by Lessee to complete construction of all Generating Facilities within 12 months of the effective date set forth in the CLEAN PPA. 22.2. Lessor Event of Default; Remedies of Lessee. The occurrence of any one or more of the following events shall constitute a material default, or breach of this Lease by Lessor (“Lessor Event of Default”): 22.2.1. Failure to Satisfy Lease Obligations. Failure by Lessor to observe or perform any of the Representations, Warranties or Covenants set forth in section 18 of this Lease or any of the material covenants, conditions or provisions of this Lease in any material respect where such failure shall continue for a period of thirty (30) days after Lessee provides City with written notice thereof; provided, however, that if the nature of Lessor’s failure is such that more than thirty (30) days are reasonably required for its cure, then a Lessor Event of Default shall not have occurred if Lessor demonstrates to Lessee’s reasonable satisfaction that it has commenced such cure within said thirty (30) day period and thereafter diligently prosecutes such cure to completion. Notwithstanding the foregoing, a Lessor Event of Default shall not occur under this section 23.2.1 if the failure to observe or perform any of the Representations, Warranties or Covenants set forth in Section 18 of this Lease or any of the material covenants, conditions or provisions of this Lease in any material respect is caused by an error or omission of an administrative DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 30 Rev.: 1/29/15 or operational nature. 22.2.2. Assignment to Creditors; Debtor Status; Bankruptcy and Seizure. 22.2.2.1. Making, by Lessor, of any general arrangement or assignment for the benefit of creditors; 22.2.2.2. Becoming a “Debtor” as defined in 11 U.S.C. §101, as the same may be amended from time to time, (unless, in the case of a petition filed against Lessor, the same is dismissed within sixty (60) days); 22.2.2.3. The appointment of a bankruptcy trustee or receiver to take possession of all or substantially all of Lessor’s assets located at or on the Property or of Lessor’s interest in this Lease where possession is not restored to Lessor within thirty (30) days; or the attachment, execution or other judicial seizure of all or substantially all of Lessor’s assets located at or on the Property or of Lessor’s interest in this Lease, where such seizure is not discharged within thirty (30) days. 22.2.3. Lessee Remedies. In the event of any Lessor Event of Default under this Lease, this Lease and the CLEAN PPA shall terminate and Lessor shall pay within thirty (30) days the termination value specified on Schedule 23.2 for each of the Generating Facilities for the year corresponding with when a Lessor Event of Default occurs, plus any reasonable out of pocket expenses of Lessee. 22.3. Termination of CLEAN PPA. Any termination of the CLEAN PPA shall cause this Lease to terminate; provided, however, that in no such event shall the Lessor owe the Lessee the termination value specified on Schedule 23.2, other than as set forth in Sections 4.2.1.2, 13.1.3.3.2 and 23.2.3. 22.4. Remedies of City. In the event of any Lessee Event of Default, City may at any time thereafter, following any notice required by statute, and without limiting City in the exercise of any right or remedy which City may have by reason of such Event of Default or breach: 22.4.1. Termination. Terminate Lessee’s right to possession of the Property by any awful means, in which case this Lease shall terminate and Lessee shall immediately surrender possession of the Property, but not the Improvements, to City. In such event, City shall be entitled to recover from Lessee all damages incurred by City by reason of the Event of Default or breach, including but not limited to: 22.4.1.1. The cost of recovering possession of the Property and all Improvements constructed thereon; 22.4.1.2. Expenses of reletting, including necessary renovation and DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 31 Rev.: 1/29/15 alteration of the Property and the Improvements constructed thereon; 22.4.1.3. Reasonable attorneys’ fees; 22.4.1.4. The worth, at the time of the award of the unpaid Rent that had been earned at the time of termination of this Lease; and 22.4.1.5. The worth, at the time of award of the amount by which the unpaid Rent for the balance of the term after the time of such award exceeds the amount of such rental loss for the same period that Lessee proves could be reasonably avoided. 22.4.2. Continue Lease. Maintain Lessee’s right to possession, in which case this Lease shall continue in effect whether or not Lessee shall have abandoned the Property. In such event, City shall be entitled to enforce all of City’s rights and remedies under this Lease, including the right to recover Rent and other fees and payments as they become due hereunder. 22.4.3. Other Remedies. Pursue any other remedy now or hereafter available to City under the laws or judicial decisions of the State of California. City shall have all remedies provided by law and equity. 22.5. No Relief from Forfeiture After Event of Default. Lessee waives all rights of redemption or relief from forfeiture under California Code of Civil Procedure sections 1174 and 1179, and any other present or future law, in the event Lessee is evicted or City otherwise lawfully takes possession of the Property by reason of any Event of Default or breach of this Lease by Lessee. 22.6. Disposition of Abandoned Personal Property. If the Lessee fails to remove any personal property belonging to Lessee from the Property within forty-five (45) days after of the expiration or termination of this Lease, such personal property shall at the option of City be deemed to have been transferred to City. City shall have the right to remove and to dispose of such personal property without liability to Lessee or to any person claiming under Lessee, and the City shall have no need to account for such personal property. 23. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly provided herein, any amount due City when not paid when due shall bear interest at the lesser of ten percent (10%) per year or the maximum rate then allowable by law from the date due. 24. HOLDING OVER. If Lessee remains in possession of the Property or any part thereof after the expiration of the Term, including any Extension Term (if any), such occupancy shall be a tenancy from month-to-month with all the obligations of this Lease applicable to Lessee and at a monthly rental obligation of two (2) times the Operations Period Rent or, as applicable, the Extension Term Rent, in effect at the time of expiration. Nothing contained in this Lease shall give to Lessee the DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 32 Rev.: 1/29/15 right to occupy the Property after the expiration of the term, or upon an earlier termination for breach. 25. ACCESS. 25.1. For Lessee. 25.1.1. Ingress & Egress. City hereby grants to Lessee, for the Term as defined in Section 4.1, a non-exclusive right-of-way for vehicular and pedestrian ingress and egress to the Property or the Improvements to the extent required by Lessee and as mutually agreed upon by the Parties. 25.1.2. Access to Sunlight. Lessee shall not cause or permit any interference with the Generating Facility’s access to sunlight; as such access exists as of the Effective Date. 25.1.3. Exclusive Access. Lessee is granted no exclusive access to the Property. 25.2. For City 25.3. Primary Use as Parking Structure. Lessee acknowledges and agrees that the Site, including the Property, retains primary use as a public parking structure operated by the City or it’s assignee at City’s sole discretion and with associated public and operator access. 25.4. Access for Inspection. City and City’s agents shall have the right to open or enter Lessee facilities on the Property at reasonable times, upon not less than twenty-four (24) hours prior notice to Lessee, for the purpose of inspecting same, showing same to prospective City, lenders or lessees, and making such alterations, repairs, improvements, or additions to the Property as City may deem necessary. City may at any time place on or about the Property any ordinary “For Sale” signs and City may at any time during the last one hundred twenty (120) days of the Term hereof place on or about the Property any ordinary “For Lease” signs, all without rebate of Rent or other fees, or liability to Lessee. 25.5. Security Measures. City shall have the right to require a reasonable security system, device, operation, or plan be installed and implemented to protect the Property or the Improvements. Should City, in its sole discretion, require Lessee to install such a security system associated with access to the Lessee’s Improvements, Lessee agrees to bear the sole cost and expense of any security system, device, operation or plan and the installation and implementation thereof. Lessee shall obtain City’s prior approval before installing, implementing or changing any City approved security system, device, operation or plan. 25.6. New Locks. Lessee may install new locks on all exterior doors of the Lessee’s Improvements, including exclusive equipment and facilities. Lessee shall advise City of such action and shall provide City with keys to said locks. Upon termination, Lessee shall leave new locks that shall become the Property of City. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 33 Rev.: 1/29/15 26. INSURANCE. 26.1. Lessee's responsibility for the Property begins immediately upon delivery and Lessee, at its sole cost and expense, and at no cost to City, shall purchase and maintain in full force and effect during the entire term of this Lease insurance coverage in amounts and in a form acceptable to City as set forth in Exhibit “G” (Insurance Requirements) attached hereto and incorporated herein by reference. Said policies shall be maintained with respect to Lessee’s employees, if any, and all vehicles operated on the Property. The policies shall include the required endorsements, certificates of insurance and coverage verifications as described in Exhibit “G” (Insurance Requirements). Lessee also agrees to secure renter's liability insurance. 26.2. Lessee shall deposit with the Lease Administrator, on or before the effective date of this Lease, certificates of insurance necessary to satisfy City that the insurance provisions of this Lease have been complied with, and to keep such insurance in effect and the certificates therefore on deposit with City during the entire term of this Lease. Should Lessee not provide evidence of such required coverage at least three (3) days prior to the expiration of any existing insurance coverage, City may purchase such insurance, on behalf of and at the expense of Lessee to provide six months of coverage. 26.3. City shall retain the right at any time to review the coverage, form, and amount of the insurance required hereby. If, in the opinion of the City’s risk manager (or comparable official), the insurance provisions in this Lease do not provide adequate protection for City and for members of the public using the Property, the Lease Administrator may require Lessee to obtain insurance sufficient in coverage, form, and amount to provide adequate protection as determined by the City’s risk manager. City's requirements shall be reasonable and shall be designed to assure protection from and against the kind and extent of risk that exists at the time a change in insurance is required. 26.4. The Lease Administrator shall notify Lessee in writing of changes in the insurance requirements. If Lessee does not deposit copies of acceptable insurance policies with City incorporating such changes within sixty (60) days of receipt of such notice, or in the event Lessee fails to maintain in effect any required insurance coverage, Lessee shall be in default under this lease without further notice to Lessee. Such failure shall constitute a material breach and shall be grounds for immediate termination of this Lease at the option of City. 26.5. The procuring of such required policy or policies of insurance shall not be construed to limit Lessee’s liability hereunder nor to fulfill the indemnification provision and requirements of this Lease. Notwithstanding the policy or policies of insurance, Lessee shall be obligated for the full and total amount of any damage, injury, or loss caused by or connected with this Lease or with use or occupancy of the Property. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 34 Rev.: 1/29/15 27. RESERVATION OF AVIGATIONAL EASEMENT. City hereby reserves for the use and benefits of the public, a right of avigation over the Properties for the passage of aircraft landing at, taking off, or operating from the adjacent airport operated by the County of Santa Clara. Lessee releases the City from all liability for noise, vibration, and any other related nuisance. 28. EMINENT DOMAIN. 28.1. If all or any part of the Properties (or the building in which the Properties are located) is condemned by a public entity in the lawful exercise of its power of eminent domain, this Lease shall cease as to the part condemned. The date of such termination shall be the effective date of possession of the whole or part of the Properties by the condemning public entity. 28.2. If only a part is condemned and the condemnation of that part does not substantially impair the capacity of the remainder to be used for the purposes required by this Lease, Lessee shall continue to be bound by the terms, covenants, and conditions of this Lease. However, the then monthly rent shall be reduced in proportion to the diminution in value of the Properties. If the condemnation of a part of the Properties substantially impairs the capacity of the remainder to be used for the purposes required by this Lease, Lessee may: 28.2.1. Terminate this Lease and thereby be absolved of obligations under this Lease which have not accrued as of the date of possession by the condemning public entity; or 28.2.2. Continue to occupy the remaining Properties and thereby continue to be bound by the terms, covenants and conditions of this Lease. If Lessee elects to continue in possession of the remainder of the Properties, the monthly rent shall be reduced in proportion to the diminution in value of the Properties. 28.2.3. Lessee shall provide City with written notice advising City of Lessee’s choice within thirty (30) days of possession of the part condemned by the condemning public entity. 28.3. City shall be entitled to and shall receive all compensation related to the condemnation, except that Lessee shall be entitled to: 28.3.1. That portion of the compensation which represents the value for the remainder of the Lease term of any Lessee-constructed improvements taken by the condemning public entity, which amount shall not exceed the actual cost of such improvements reduced in proportion to the relationship of the remaining Lease term to the original Lease term, using a straight line approach; and 28.3.2. Any amount specifically designated as a moving allowance or as compensation for Lessee’s personal property. Lessee shall have no claim against the City the value of any unexpired term of this Lease. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 35 Rev.: 1/29/15 29. POST-ACQUISITION TENANCY. Lessee hereby acknowledges that Lessee was not an occupant of the Property at the time the Property was acquired by City. Lessee further understands and agrees that as a post-acquisition Lessee, Lessee is not eligible and furthermore waives all claims for relocation assistance and benefits under federal, state or local law. 30. DISPUTE RESOLUTION. 30.1. Unless otherwise mutually agreed to, any controversies between Lessee and City regarding the construction or application of this Lease, and claims arising out of this Lease or its breach shall be submitted to mediation within thirty (30) days of the written request of one Party after the service of that request on the other Party. 30.2. The Parties may agree on one mediator. If they cannot agree on one mediator, the Party demanding mediation shall request the Superior Court of Santa Clara County to appoint a mediator. The mediation meeting shall not exceed one day (eight (8) hours). The Parties may agree to extend the time allowed for mediation under this Lease. 30.3. The costs of mediation shall be borne by the Parties equally. 30.4. Mediation under this section is a condition precedent to filing an action in any court. In the event of litigation arising out of any dispute related to this Lease, the Parties shall each pay their respective attorney's fees, expert witness costs and cost of suit, regardless of the outcome of the litigation. 31. NON-LIABILITY OF OFFICIALS AND EMPLOYEES OF THE CITY. No official or employee of City shall be personally liable for any default or liability under this agreement. 32. NON-DISCRIMINATION 32.1. Non-discrimination in Lease Activities. Lessee agrees that in the performance of this Lease and in connection with all of the activities Lessee conducts on the Property, it shall not discriminate against any employee or person because of the race, skin color, gender, age, religion, disability, national origin, ancestry, sexual orientation, housing status, marital status, familial status, weight or height of such person. Lessee acknowledges that is familiar with the provisions set forth in Section 2.30.510 of the Palo Alto Municipal Code relating to nondiscrimination in employment and Section 9.73 of the Palo Alto Municipal Code relating to City policy against arbitrary discrimination. 32.2. Human Rights Policy. In connection with all activities that are conducted upon the Properties, Lessee agrees to accept and enforce the statements of policy set forth in Section 9.73.010 which provides: “It is the policy of the City of Palo Alto to affirm, support and protect the human rights of every person within its jurisdiction. These rights include, but are not limited to, equal economic, political, and educational opportunity; equal accommodations in all business establishments in the city; and equal service and DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 36 Rev.: 1/29/15 protection by all public agencies of the city.” 33. INDEPENDENT CONTRACTOR. It is agreed that Lessee shall act and be an independent contractor and not an agent nor employee of City. 34. CONFLICT OF INTEREST. 34.1. Lessee shall at all times avoid conflict of interest or appearance of conflict of interest in performance under this Lease. Lessee warrants and covenants that no official or employee of City nor any business entity in which any official or employee of City is interested: 34.1.1. Has been employed or retained to solicit or aid in the procuring of this agreement; or 34.1.2. Will be employed in the performance of this agreement without the divulgence of such fact to City. 34.2. In the event that City determines that the employment of any such official, employee or business entity is not compatible with such official's or employee's duties as an official or employee of City, Lessee upon request of City shall immediately terminate such employment. 34.3. Violation of this provision constitutes a serious breach of this Lease and City may terminate this Lease as a result of such violation. 35. MEMORANDUM OF LEASE.1 Following execution of this Lease, either party, at its sole expense, shall be entitled to record the Memorandum of Lease in the form attached hereto as Exhibit “F” (Memorandum of Lease) in the official records of Santa Clara County, which Memorandum shall be executed contemporaneously with this Lease. Upon termination or expiration of this Lease, Lessee shall execute and record a quitclaim deed as to its leasehold interest. 36. ESTOPPEL CERTIFICATE. Lessee shall, from time to time, upon at least thirty (30) days prior written notice from City, execute, acknowledge and deliver to City a statement in writing: 36.1. Certifying this Lease is unmodified and in full force and effect, or, if modified, stating the nature of the modification and certifying that the Lease, as modified, is in full force and effect, and the date to which the rental and other charges, if any, have been paid; and, 36.2. Acknowledging that there are not to Lessee’s knowledge, any defaults, or stating if any defaults are claimed, any statement may be relied upon by any prospective City or encumbrancer of the City Property. 1 NTD: Note to Palo Alto – Memo of Lease needs to be prepared. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 37 Rev.: 1/29/15 37. LIENS. Lessee agrees at its sole cost and expense to keep the Property free and clear of any and all claims, levies, liens, encumbrances or attachments. Notwithstanding the Generating Facility’s presence as a fixture on the site, Lessee shall not directly or indirectly cause, create, incur, assume or suffer to exist any mortgage, pledge, lien (including mechanics’, labor or materialman’s lien), charge, security interest, encumbrance or claim on or with respect to the Generating Facility or any interest therein. Lessee also shall pay promptly before a fine or penalty may attach to the Generating Facility any taxes, charges or fees of whatever type of any payments for which Lessee is responsible. 38. SECURITY. Lessee shall provide and take reasonable measures for security of the Improvements installed on the Property. 39. NOTICES. All notices to the Parties shall, unless otherwise requested in writing, be sent as follows: 39.1. To City: City of Palo Alto Attention: Hamid Ghaemmaghami 250 Hamilton Avenue Palo Alto, CA 94301 Phone: (650) 329-2264 Email: hamid.thaemmaghami@cityofpaloalto.org 39.2. To Lessee: Name: Zach Rubin Address: 329 Middlefield Rd Palo Alto, CA 94301 Phone: 650-847-1191 Email: zrubin@komunaenergy.com 39.3. All notices may be served on one Party by the other in person, by first class mail, or by certified mail whether or not said mailing is accepted the other Party. If notice is sent via facsimile, a signed, hard copy of the material shall also be mailed. The Business Day the facsimile was sent shall control the date notice was deemed given if there is a facsimile machine generated document on the date of transmission. A facsimile transmitted after 1:00 p.m. on a Friday shall be deemed to have been transmitted on the following Monday. These addresses shall also be used for service of process. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 38 Rev.: 1/29/15 40. TIME. Time shall be of the essence in this Lease. 41. AMENDMENTS. No alteration or variation of the terms of this Lease shall be valid unless made in writing and signed by the Parties to this Lease. 42. SIGNING AUTHORITY. If this Lease is not signed by all Lessees named herein, the person actually signing warrants that he/she has the authority to sign for the others. 43. SURRENDER OF LEASE NOT MERGER. The voluntary or other surrender of this Lease by Lessee, or a mutual cancellation thereof, shall not work a merger, and shall, at the option of City, terminate all or any existing subleases or subtenancies, or may, at the option of City, operate as an assignment of any and all such subleases or subtenancies. 44. INTEGRATED DOCUMENT. This Lease, including any Exhibits attached hereto, embodies the entire agreement between City and Lessee. No other understanding, agreements, conversations or otherwise, with any officer, agent or employee of City prior to execution of this Lease shall affect or modify any of the terms or obligations contained in any documents comprising this Lease. Any such verbal agreement shall be considered as unofficial information and in no way binding upon City. All agreements with City are subject to approval of the City Council before City shall be bound thereby. 45. WAIVER. Waiver by City of one or more conditions of performance, of an Event of Default, or of any breach of a condition under this Lease shall not be construed as a waiver of any other condition of performance or subsequent Events of Default or breaches. The subsequent acceptance by a Party of the performance of any obligation or duty by another Party shall not be deemed to be a waiver of any term or condition of this Lease. The exercise of any remedy, right, option or privilege hereunder by City shall not preclude City from exercising the same or any and all other remedies, rights, options and privileges hereunder and City's failure to exercise any remedy, right, option or privilege at law or equity, or otherwise which City may have, shall not be construed as a waiver. 46. SEVERABILITY CLAUSE. If any provision of this Lease is held to be illegal, invalid or unenforceable in full or in part, for any reason, then such provision shall be modified to the minimum extent necessary to make the provision legal, valid and enforceable, and the other provisions of this Lease shall not be affected thereby. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 39 Rev.: 1/29/15 47. NO CONSTRUCTION AGAINST DRAFTING PARTY The Parties agree that this Lease shall be fairly interpreted in accordance with its terms without any strict construction in favor of or against any other Party. 48. GOVERNING LAW. This Lease shall be governed and construed in accordance with the statutes and laws of the State of California. 49. VENUE. In the event that suit shall be brought by any Party to this Lease, the Parties agree that venue shall be exclusively vested in the state courts of the County of Santa Clara. 50. COMPLIANCE WITH LAWS. The Parties hereto shall comply with all applicable laws, ordinances, codes and regulations of the federal, state and local governments in the performance of their rights, duties and obligations under this Lease. 51. BROKERS. Each Party represents that is has not had dealings with any real estate broker, finder, or other person, with respect to this lease in any manner. Each Party shall indemnify and hold harmless the other Party from all damages resulting from any claims that may be asserted against the other Party by any broker, finder, or other person with whom such Party has or purportedly has dealt. 52. COUNTERPARTS Any number of counterparts of this Lease maybe executed and each shall have the same force and effect as the original. 53. NO THIRD PARTY BENEFICIARIES Nothing in this Lease shall provide any benefit to any third party or entitle any third party to any claim, cause of action, remedy or right of any kind, it being the intent of the Parties that this Lease shall not be construed as a third party beneficiary contract. 54. SURVIVAL Any provision of this Lease that expressly or by implication comes into or remains in full force following the termination or expiration of this Lease, including, without limitation section 19 (Hold Harmless/Indemnification) shall survive the termination or expiration of this Lease. 55. PREVAILING WAGE Lessee is required to pay general prevailing wages as defined in Subchapter 3, Title 8 of the California Code of Regulations and Section 16000 et seq. and Section 1773.1 of the California DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 40 Rev.: 1/29/15 Labor Code. Pursuant to the provisions of Section 1772 of the Labor Code of the State of California, the City Council has obtained the general prevailing rate of per diem wages and the general rate for holiday and overtime work in this locality for each craft, classification, or type of worker needed to execute this Lease from the Director of the Department of Industrial Relations (“DIR”). Copies of these rates may be obtained at the Purchasing Division’s office of the City of Palo Alto. Lessee shall provide a copy of prevailing wage rates to any staff or subcontractor hired, and shall pay the adopted prevailing wage rates at a minimum. Lessee shall comply with the provisions of all sections, including, but not limited to, Sections 1775, 1776, 1777.5, 1782, 1810, and 1813, of the Labor Code pertaining to prevailing wages. [SIGNATURES ON NEXT PAGE] DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page 41 Rev.: 1/29/15 IN WITNESS WHEREOF, the Parties have executed this Lease as of the Effective Date. CITY: LESSEE: CITY OF PALO ALTO KOMUNA PALO ALTO LLC By: _______________________ By: __________________________ City Manager Its: ___________________________ ATTEST: By: ________________________ City Clerk APPROVED AS TO FORM: By: ________________________ Senior Deputy City Attorney DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F Zach Rubin EXHIBITS LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page EX-1 Rev. 11/18/15 999020‐eml EXHIBIT “A” DEFINITIONS A-1. “275 Cambridge Garage” means the City’s parking garage facility located in Palo Alto, California at 275 Cambridge Avenue. A-2. “475 Cambridge Garage” means the City’s parking garage facility located in Palo Alto, California at 475 Cambridge Avenue. A-3. “Access Property” means a non-exclusive right-of-way for vehicular and pedestrian ingress and egress to the Premises to the extent required by Lessee to install, maintain, and operate the Generating Facilities, and to install the EV Chargers and Infrastructure, as mutually agreed upon by the Parties. A-4. “Air Rights Parcel” has the meaning set forth in Exhibit “C” (Description of Premises) attached to this Lease. A-5. “Bryant Garage” means the City’s parking garage facility located in Palo Alto, California at 445 Bryant Street. A-6. “Business Day” means any day other than Saturday, Sunday, or dates the City is closed for a federal, California, or City holiday. A-7. “City” means the City of Palo Alto, a California chartered Municipal Corporation and all successors and assigns. A-8. “CLEAN PPA” has the meaning set forth in the Recitals of this Lease. A-9. “CLEAN PPA Interconnection Agreement” means the Interconnection Agreement that Lessee must execute with City in connection with the CLEAN PPA. A-10. “CLEAN Program” means the Palo Alto Clean Local Energy Accessible Now Program. A-11. “Common Areas” means those areas of the Site other than the Improvements. A-12. “Commercial Operation Date” means the date on which Commercial Operation of the Generating Facility begins, as specified in Exhibit “E” (Work Schedule). A-13. “Construction Period” has the meaning set forth in section 5.1.2.1.2 of this Lease. A-14. “Construction Period Rent” has the meaning set forth in section 5.1.2.3 of this Lease. A-15. “Construction Start Date” means the date on which Lessee begins construction of the Generating Facility; or in the event that a contractor is constructing the Generating Facility on Lessee’s behalf, the date Lessee delivers to contractor the Notice to Proceed for the Generating Facility. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F EXHIBITS LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page EX-2 Rev. 11/18/15 999020‐eml A-16. “Debtor” has the meaning set forth in section 23.1.4.2 of this Lease. A-17. “Delay Liquidated Damages” has the meaning set forth in section 6.2.2 of this Lease. A-18. “Delayed Construction Period” has the meaning set forth in section 5.1.2.1.4 of this Lease. A-19. “Effective Date” has the meaning set forth in the Preamble to this Lease. A-20. “Electric Vehicle Chargers and Infrastructure” or “EV Chargers and Infrastructure” means three (3) Chargepoint brand electric vehicle chargers, or an equivalent acceptable to City in its sole discretion, each with two level 2 ports capable of charging six vehicles in each of the 275 Cambridge Garage, the 475 Cambridge Garage and the Bryant Garage; and installation of wire, conduit, switchgear and any electrical capacity upgrades necessary to support an additional ten (10) electric vehicle chargers capable of charging upon full installation twenty (20) vehicles in each of the 275 Cambridge Garage, the 475 Cambridge Garage, the Bryant Garage and the Webster Garage. A-21. “EV Chargers Construction Period” has the meaning set forth in Exhibit “E” (Work Schedule). A-22. “Force Majeure” means (a) natural phenomena, such as storms, hurricanes, floods, lightening and earthquakes; (b) explosions or fires arising from lightening or other causes unrelated to the acts or omissions of the Lessee; (c) acts of war or public disorders, civil disturbances, riots, insurrection, sabotage, epidemic, terrorist acts, or rebellion; and (d) acts of God. Force Majeure shall not include equipment failures or acts or omissions of Lessee’s agents, suppliers or subcontractors, except to the extent such acts or omissions arise from Force Majeure. Changes in prices for electricity or solar equipment shall not constitute Force Majeure. In the event any work performed by Lessee or Lessee’s contractors results in a strike, lockout, and/or labor dispute, such strike, lockout, and/or labor dispute shall not be considered Force Majeure. A-23. “Generating Facility” or “Generating Facilities” means, at times individually and others collectively, the four (4), integrated systems for the generation of electricity from solar energy with a capacity of 1.3MW to be installed, maintained, and operated by Lessee at the Property in accordance with the specifications set forth in Exhibit “D” (Improvements), consisting of, without limitation, photovoltaic panels and associated equipment including, without limitation, controls, meters, switches, connections, conduit, wires and connections, mounting substrates or supports, power inverters, metering and service equipment, and utility interconnections. A-24. “Ground Floor Area” has the meaning set forth in Exhibit “C” (Description of Premises) attached to this Lease. A-25. “Hazardous Materials” means Any toxic or hazardous substance, material or waste or any pollutant or contaminant, or infectious or radioactive material, including but not limited to, those substances, materials, or wastes regulated now or in the future under any of the following statutes or regulations and any and all of those substances included within the definitions of “hazardous substances”, “hazardous waste”, “hazardous chemical substance or mixture”, “imminently hazardous chemical substance or mixture,” “toxic substances,” “hazardous air pollutant”, “toxic DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F EXHIBITS LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page EX-3 Rev. 11/18/15 999020‐eml pollutant” or “solid waste” in the: CERCLA or Superfund as amended by SARA, 42 U.S.C. Sec. 9601 et seq., RCRA, 42 U.S.C. Sec. 6901 et seq., CWA., 33 U.S.C. Sec. 1251 et seq., CAA, 42 U.S.C. 78401 et seq., TSCA, 15 U.S.C. Sec. 2601 et seq., the Refuse Act of 1899, 33 U.S.C. Sec. 407, OSHA, 29 U.S.C. 651 et seq.; hazardous Materials Transportation Act, 49 U.S.C. Sec. 1801 et seq., USDOT Table (40 CFR Part 302 and amendments) or the EPA Table (40 CFR Part 302 and amendments), California Superfund, Cal. Health & Safety Code Sec. 25300 et seq., Cal. Hazardous Waste Control Act, Cal. Health & Safety Code Section 25100 et seq., Porter-Cologne Act, Cal. Water Code Sec. 13000 et seq., Hazardous Waste Disposal Land Use Law, Cal. Health & Safety Code Sec. 25220 et seq., Proposition 65, Cal. Health and Safety Code Sec. 25249.5 et seq., Hazardous Substances Underground Storage Tank Law, Cal. Health & Safety Code Sec. 25280 et seq., California Hazardous Substance Act, Cal. Health & Safety Code Sec. 28740 et seq., Air Resources Law, Cal. Health & Safety Code Sec. 39000 et seq., Hazardous Materials Release Response Plans and Inventory, Cal. Health & Safety Code Secs. 25500-25541, TCPA, Cal. Health and Safety Code Secs. 25208 et seq., and regulations promulgated pursuant to said laws or any replacement thereof, or as similar terms are defined in the federal, state and local laws, statutes, regulations, orders or rules; and any and all other substances, materials, and wastes which are, or in the future become, regulated under applicable local, state or federal law for the protection of health or the environment, or which are classified as hazardous or toxic substances, materials or wastes, pollutants or contaminants, as defined, listed or regulated by any federal, state or local law, regulation or order or by common law decision, including without limitation: Trichloroethylene, tetracholoethylene, perchloroethylene and other chlorinated solvents; any petroleum products or fractions thereof; Asbestos, Polychlorinated biphenyls; flammable explosives; urea formaldehyde; and radioactive materials and waste. A-26. “Improvements” means all physical construction by Lessee on the Site as described more particularly in Exhibit “D”, including the Generating Facility and EV Chargers and Infrastructure described therein. A-27. “In-Lieu Parking Fee” has the meaning set forth in section 6.1 of this Lease. A-28. “Initial Period” has the meaning set forth in section 5.1.2.1.1 of this Lease. A-29. “Initial Period Rent” has the meaning set forth in section 5.1.2.2 of this Lease. A-30. “Insurance Trustee” has the meaning set forth in section 20.3.1.2 of this Lease. A-31. “Lease” means this Lease Agreement between the City of Palo Alto and Komuna Palo Alto LLC, as the same may be amended from time to time. A-32. “Lease Administrator” means, for City the City Manager or his/her designee and, for Lessee Mr. Zach Rubin. A-33. “Lessee” means Komuna Palo Alto LLC, and any successors and assigns permitted pursuant to section 22 of this Lease. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F EXHIBITS LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page EX-4 Rev. 11/18/15 999020‐eml A-34. “Lessee Event of Default” has the meaning set forth in Section 23.1 of this Lease. A-35. “Lessor Event of Default” has the meaning set forth in Section 23.2 of this Lease. A-36. “Notice to Pay Rent or Quit” has the meaning set forth in section 23.1.2 of the Lease. A-37. “Operations Period” has the meaning set forth in section 5.1.2.1.5 of this Lease. A-38. “Operations Period Rent” has the meaning set forth in section 5.1.2.3 of this Lease. A-39. “Option Exercise Notice” has the meaning set forth in section 4.1.2.3 of this Lease. A-40. “Parking Elimination Fees” has the meaning set forth in Section 6.1 of this Lease. A-41. “Parking Fees” means, collectively, any one-time Parking Elimination Fees and any Delay Liquidated Damages. A-42. “Permits” means all federal, state, and City permits, licenses, certificates, approvals, variances and other entitlements necessary for the installation and operation of the Improvements. A-43. “Premises” means that portion of the Site(s), described more particularly in Exhibit “C” on which the Improvements (described more particularly in Exhibit “D”) shall be constructed, installed and maintained, including all installations or equipment required, as a condition of Lessee’s Permits, for the installation, operations and maintenance of the Improvements. A-44. “Property” or “Properties” means the Premises, described more specifically in Exhibit “C” and Access Property, collectively. A-45. “Real Property Taxes” means: A-45.1. All taxes, assessments, levies and other charges, general and special, foreseen and unforeseen, now or hereafter imposed by any governmental or quasi-governmental authority or special district having the direct or indirect power to tax or levy assessments, which are levied or assessed against or with respect to: A-45.1.1. Value, occupancy, use or possession of the Premises and/or the Improvements; A-45.1.2. Any improvements, fixtures, equipment and other real or personal property of Lessee that are an integral part of the Premises; or, A-45.1.3. Use of the Premises, Improvements public utilities or energy within the Premises. A-45.2. “Real Property Taxes” shall also mean all charges, levies or fees imposed by reason of environmental regulation or other governmental control of the premises and/or the DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F EXHIBITS LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page EX-5 Rev. 11/18/15 999020‐eml Improvements, new or altered excise, transaction, sales, privilege, assessment, or other taxes or charges now or hereafter imposed upon City as a result of this Lease, and all costs and fees (including attorneys’ fees) incurred by City in contesting any real property taxes and in negotiating with public authorities as to any real property taxes affecting the Premises. If any real property taxes are based upon property or rents unrelated to the Premises and/or the Improvements, then only that part of such tax that is fairly allocable to the Premises and/or the Improvements, as determined by City, on the basis of the assessor’s worksheets or other available information, shall be included within the meaning of the term “real property taxes.” A-46. “Rent” means, collectively, the Initial Period Rent, Construction Period Rent, and the Operations Period Rent. A-47. “Required Uses” has the meaning set forth in section 8.1 of this Lease. A-48. “Restoration” has the meaning set forth in section 20.3.1 of this Lease. A-49. “Scheduled Construction Period” has the meaning set forth in section 5.1.2.1.3 of this Lease. A-50. “Security Deposit” has the meaning set forth in section 7.1 of this Lease. A-51. “Site” means, collectively, the four (4) City parking garage facilities that are the subject of this Lease described more specifically in Exhibit “B” (Description of Site), including the 275 Cambridge Garage, the 475 Cambridge Garage, the Webster Garage, and the Bryant Garage. A-52. “Term” has the meaning set forth in section 4.1.1.1 of this Lease. A-53. “Total Rent Amount” means an annual amount of twenty thousand dollars ($20,000.00). A-54. “Transfer” has the meaning set forth in section 13.1.3.2 of this Lease. A-55. “Webster Garage” means the City’s parking garage facility located in Palo Alto, California at 520 Webster Street. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F EXHIBITS LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page EX-6 Rev. 11/18/15 999020‐eml EXHIBIT “B” DESCRIPTION OF SITE “Site” means, collectively, the four (4) City parking garage facilities that are the subject of this Lease, including the 275 Cambridge Garage, the 475 Cambridge Garage, the Webster Garage, and the Bryant Garage: SITE NAME SITE LOCATION 1 475 Cambridge Garage 475 Cambridge Avenue, Palo Alto, California 2 275 Cambridge Garage 275 Cambridge Avenue, Palo Alto, California 3 Webster Garage 520 Webster Street, Palo Alto, California 4 Bryant Garage 445 Bryant Street, Palo Alto, California DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F EXHIBITS LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page EX-7 Rev. 11/18/15 999020‐eml EXHIBIT “C” DESCRIPITION OF PREMISES “Premises” means, collectively, that portion of each of the Sites described herein on which the Generating Facility (described more particularly in Exhibit “D” (Improvements)) shall be constructed, installed and maintained, including all installations or equipment required, as a condition of Lessee’s Permits, for the installation, operations and maintenance of the Generating Facility: PREMISES NAME GROUND FLOOR AREA AIR RIGHTS PARCEL Ground floor area to allow for installation, operation and maintenance of Improvements, including the necessary support structures and equipment for the Generating Facility as reflected and described more fully in Exhibit “D” (Improvements) Rights to use the space at the designated distance above the Ground Floor Area of the top floor level at each Site to allow for installation, operation and maintenance of Generating Facilities, as reflected and described more fully in Exhibit “D” (Improvements) Loss of Parking Spaces NOT TO EXCEED TOP FLOOR LEVEL # AIR RIGHTS PARCEL SQ. FT. 1 475 Cambridge Garage 2 spaces 2 28,600 2 275 Cambridge Garage 2 spaces 2 27,500 3 Webster Garage 2 spaces 6 29,700 4 Bryant Garage 2 spaces 5, portion of 4 32,475 The term “Premises” shall also include any necessary Access Property to allow for Lessee’s (a) installation, construction, maintenance and operation of the Generating Facilities; and (b) construction and installation of the EV Chargers and Infrastructure described in Exhibit “D” (Improvements), which upon installation will be solely owned, operated and maintained by City. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F EXHIBITS LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page EX-8 Rev. 11/18/15 999020‐eml EXHIBIT “D” IMPROVEMENTS Lessee agrees to provide City with diagrams and detailed description of the Improvements, including the Generating Facilities and the EV Chargers and Infrastructure in accordance with the following schedule: 1. Initial diagrams/descriptions at the planning/entitlement stage; 2. Updated diagrams/descriptions at the plan check phase; and 3. Final diagrams within four (4) days of Lessee’s receipt of its Building Permit from City. Upon acceptance by City, each submission of such diagrams and descriptions from Lessee to City shall be incorporated into this lease, and supersede any prior submission. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F EXHIBITS LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page EX-9 Rev. 11/18/15 999020‐eml EXHIBIT “E” WORK SCHEDULE WORK SCHEDULE FOR GENERATING FACILITIES Within ten (10) days of City’s issuance of a building permit to Lessee, Lessee shall provide City with an updated version of the Work Schedule for Generating Facilities to be signed by both City and Lessee. The updated Work Schedule for Generating Facilities shall be substantially in the form of this Exhibit, mutually agreeable to City and Lessee, shall identify with specificity the start and end dates of the Scheduled Construction Period and areas of any Site to which the City will lose or have limited access over the course of the Scheduled Construction Period. Such updated Work Schedule shall supersede this Work Schedule for Generating Facilities SITE NAME SCHEDULED CONSTRUCTION PERIOD DESCRIPTION OF SITE AREAS WITH LOST OR LIMITED ACCESS Time period from Construction Start Date to Commercial Operation Date 1 475 Cambridge Garage 6 weeks Level 2 completely closed to third party and City pedestrian and vehicle traffic for duration of Scheduled Construction Period 2 275 Cambridge Garage 6 weeks Level 2 completely closed to third party and City pedestrian and vehicle traffic for duration of Scheduled Construction Period 3 Webster Garage 6 weeks Level 6 completely closed to third party and City pedestrian and vehicle traffic for duration of Scheduled Construction Period 4 Bryant Garage 6 weeks Level 5, and a portion of Level 4 completely closed to third party and City pedestrian and vehicle traffic for duration of Scheduled Construction Period CITY: LESSEE: CITY OF PALO ALTO KOMUNA PALO ALTO LLC By: _______________________ By: __________________________ City Manager Its: ___________________________ DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F Zach Rubin EXHIBITS LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page EX-10 Rev. 11/18/15 999020‐eml WORK SCHEDULE FOR EV CHARGERS AND INFRASTRUCTURE Within ten (10) days of City’s issuance of a building permit to Lessee, Lessee shall provide City with an updated version of the Work Schedule for EV Chargers and Infrastructure to be signed by both City and Lessee. The updated Work Schedule for EV Chargers and Infrastructure shall be substantially in the form of this Exhibit, shall be mutually agreeable to City and Lessee, shall identify with specificity the start and end dates of the EV Charger Construction Period, any areas of any Site to which the City will lose or have limited access over the course of the Scheduled Construction Period, any additional compensation (if any) due from Lessee to City for loss or limitation of access. Such updated Work Scheduled shall supersede this Work Schedule for EV Chargers and Infrastructure. SITE NAME EV CHARGER CONSTRUCTION PERIOD DESCRIPTION OF SITE AREAS WITH LOST OR LIMITED ACCESS Start and Completion Date for Lessee installation of EV Chargers and Infrastructure 1 475 Cambridge Garage 1 week 2 275 Cambridge Garage 1 week 3 Webster Garage 1 week 4 Bryant Garage 1 week CITY: LESSEE: CITY OF PALO ALTO KOMUNA PALO ALTO LLC By: _______________________ By: __________________________ City Manager Its: ___________________________ DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F Zach Rubin EXHIBITS LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page EX-11 Rev. 11/18/15 999020‐eml EXHIBIT “F” MEMORANDUM OF LEASE RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: [City of Palo Alto Administrative Services Department, Real Estate Division 250 Hamilton Avenue Palo Alto, CA 94303] MEMORANDUM OF LEASE This Memorandum of Lease (“Memorandum”) is entered into as of this ____ day of ___________, 2016, by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“Lessor”) and KOMUNA PALO ALTO LLC, a Delaware limited liability company ("Lessee"), with respect to that certain Lease Agreement dated ________________, 2016 (“Lease”), between Lessor and Lessee. Pursuant to the Lease, Lessor leases to Lessee and Lessee leases from Lessor a portion of each of the parking facilities known as the 275 Cambridge Garage, the 475 Cambridge Garage, the Bryant Garage and the Webster Garage, located in the City of Palo Alto, County of Santa Clara, California, for the purpose of installing constructing, operating and maintaining a solar powered electric generating facilities on each facility (the “Generating Facilities”) to be owned, maintained and operated by Lessee, all subject to the terms and conditions more fully set forth in the Lease. Pursuant to the Lease, Lessor leases to Lessee and Lessee leases from Lessor a portion of each of the parking facilities known as the 275 Cambridge Garage, the 475 Cambridge Garage and the Bryant Garage, located in the City of Palo Alto, County of Santa Clara, California, for the purpose of installing three (3) electric vehicle chargers capable of charging six vehicles, and a portion of each of the parking facilities known as the 275 Cambridge Garage, the 475 Cambridge Garage, the Bryant Garage and the Webster Garage, located in the City of Palo Alto, County of Santa Clara, California, for the purpose of installing wire, conduit, switchgear and any electrical capacity upgrades necessary to support an additional ten (10) electric vehicle chargers capable of charging upon full installation twenty (20) vehicles; all of which upon installation will be owned, maintained and operated by City; and all subject to the terms and conditions more fully set forth in the Lease. The Lease shall commence on ____________, and shall end on the date that is twenty-five (25) years after the commencement of commercial operation date of the all of the Generating Facilities. Pursuant to Section 4.3 of the Lease, Lessor has the right to purchase all Generating Facilities or one or DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F EXHIBITS LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page EX-12 Rev. 11/18/15 999020‐eml more individual Generating Facilities (“Buy-Out Option”) on the date that is ten (10), fifteen (15), twenty (20) and twenty-five (25) years after commencement of commercial operation of the Generating Facilities on the first parking facility. This Memorandum is solely for recording purposes and shall not be construed to alter, modify, amend or supplement the Lease, of which this is a memorandum. Lessor and Lessee desire to have this Memorandum recorded in the Official Records of Santa Clara County, California, in order to put interested parties on notice of the Buy-Out Option. In Witness Whereof, the parties hereto have executed this Memorandum on the day and year first written above. LESSOR: CITY OF PALO ALTO, a California chartered municipal corporation By: ____________________ Its: ____________________ ATTEST: By: ________________________ City Clerk APPROVED AS TO FORM: By: ________________________ Senior Deputy City Attorney LESSEE: KOMUNA PALO ALTO LLC, a Delaware limited liability company By: ____________________ Its: ____________________ DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F Zach Rubin EXHIBITS LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page EX-13 Rev. 11/18/15 999020‐eml STATE OF CALIFORNIA ) COUNTY OF SANTA CLARA ) On ________________, before me, ___________________, a notary public in and for said County, personally appeared _______________________________ who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under penalty of perjury under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. ________________________ DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F EXHIBITS LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page EX-14 Rev. 11/18/15 999020‐eml Exhibit A 475 Cambridge Garage 275 Cambridge Garage Webster Garage Bryant Garage DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F EXHIBITS LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page EX-15 Rev. 11/18/15 999020‐eml EXHIBIT “G” INSURANCE REQUIREMENTS STANDARD INSURANCE REQUIREMENTS Insurance Requirements for Lessee: Lessee shall purchase and maintain the insurance policies set forth below on all of its operations under this Lease at its sole cost and expense. Such policies shall be maintained for the full term of this Lease and the related warranty period (if applicable). For purposes of the insurance policies required under this Lease, the term "City" shall include the duly elected or appointed council members, commissioners, officers, agents, employees and volunteers of the City of Palo Alto, California, individually or collectively. Coverages (RL 28.1A) S Minimum Scope of Insurance Coverage shall be at least as broad as: 1) Insurance Services Office Commercial General Liability coverage (occurrence form CG 0001). 2) Insurance Services Office form number CA 0001 (Ed. 1/87) covering Automobile Liability, code 1 (any auto). 3) Workers' Compensation insurance as required by the State of California and Employer's Liability Insurance (for lessees with employees). 4) Property insurance against all risks of loss to any tenant improvements or betterments The policy or policies of insurance maintained by Lessee shall provide the following limits and coverages: POLICY MINIMUM LIMITS OF LIABILITY (1) Commercial General Liability $1,000,000 per each occurrence for bodily injury, personal injury and property damage (2) Automobile Liability $ 1,000,000 Combined Single Limit Including Owned, Hired and Non-Owned Automobiles (3) Workers’ Compensation Statutory Employers Liability $1,000,000 per accident for bodily injury or disease (4) Lessee’s Property Insurance DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F EXHIBITS LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page EX-16 Rev. 11/18/15 999020‐eml Lessee shall procure and maintain property insurance coverage for: (a) all office furniture, trade fixture, office equipment, merchandise, and all other items of Lessee’s property in, on, at, or about the Premises and the building, include property installed by, for, or at the expense of Lessee; (b) all other improvements, betterments, alterations, and additions to the premises. Lessee’s property insurance must fulfill the following requirements: (a) it must be written on the broadest available “all risk” policy form or an equivalent form acceptable City of Palo Alto, including earthquake sprinkler leakage. (b) for no less than ninety percent (90%) of the full replacement cost (new without deduction for depreciation) of the covered items and property; and (c) the amounts of coverage must meet any coinsurance requirements of the policy or policies. (RL 28.2) Deductibles and Self-Insured Retentions Any deductibles or self-insured retentions must be declared to and approved by the City. At the option of the City either: the insurer shall reduce or eliminate such deductibles or self-insured retentions as respects the City, its officers, officials, employees and volunteers; or the Lessee shall procure a bond guaranteeing payment of losses and related investigations, claim administration and defense expenses. Insurance shall be in full force and effect commencing on the first day of the term of this Lease. Each insurance policy required by this Lease shall: 1. Be endorsed to state that coverage shall not be suspended, voided, canceled by either party, reduced in coverage or in limits except after thirty (30) days' prior written notice by certified mail, return receipt requested, has been given to the City. 2. Include a waiver of all rights of subrogation against the City and the members of the City Council and elective or appointive officers or employees, and each party shall indemnify the other against any loss or expense including reasonable attorney fees, resulting from the failure to obtain such waiver. 3. Name the City of Palo Alto as a loss payee on the property policy. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F EXHIBITS LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page EX-17 Rev. 11/18/15 999020‐eml 4. Provide that the City, its officers, officials, employees, agents and volunteers are to be covered as insureds as respects: liability arising out of activities performed by or on behalf of the Lessee; products and completed operations of the Lessee; premises owned, occupied or used by the Lessee; or automobiles owned, leased, hired or borrowed by the Lessee. The coverage shall contain no special limitations on the scope of protection afforded to the City, its officers, officials, employees, agents or volunteers. 5. Provide that for any claims related to this Lease, the Lessee's insurance coverage shall be primary insurance as respects the City, its officers, officials, employees, agents and volunteers. Any insurance or self-insurance maintained by the City, its officers, officials, employees, agents or volunteers shall be excess of the Lessee's insurance and shall not contribute with it. 6. Provide that any failure to comply with reporting or other provisions of the policies including breaches of warranties shall not affect coverage provided to the City, its officers, officials, employees, agents or volunteers. 7. Provide that Lessee's insurance shall apply separately to each insured against whom claim is made or suit is brought, except with respect to the limits of the insurer's liability. 8. Lessee agrees to promptly pay to City as Additional Rent, upon demand, the amount of any increase in the rate of insurance on the Premises or on any other part of Building that results by reason of Lessee’s act(s) or Lessee’s permitting certain activities to take place. Acceptability of Insurers All insurance policies shall be issued by California-admitted carriers having current A.M. Best's ratings of no lower than A-:VII. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 1 POWER PURCHASE AGREEMENT ELIGIBLE RENEWABLE ENERGY RESOURCE (Palo Alto Clean Local Energy Accessible Now Program) This Power Purchase Agreement - Eligible Renewable Energy Resource, dated, for convenience, , 20 (the “Effective Date”), is entered into by and between the CITY OF PALO ALTO, a California chartered municipal corporation, and , a corporation (individually, a “Party” and, collectively, the “Parties”). RECITALS 1.The Buyer has adopted and implemented its CLEAN Program, which allows an owner of a qualifying electric generation system to sell to the Buyer the power output of a small-scale distributed generation Eligible Renewable Energy Resource, subject to the CLEAN Program’s rules and requirements. 2.The Seller owns or operates and desires to interconnect its Facility in parallel with Buyer’sDistribution System and sell the Energy produced by its Facility, net of Station Service Load, directly to the Buyer in furtherance of the CLEAN Program. 3.The Parties do not intend this Agreement to constitute an agreement by the Buyer to provide retail electrical service to the Seller. 4.The Parties wish to enter into a power purchase agreement for the sale and purchase of theOutput of the Facility. The Parties will enter into a separate “Interconnection Agreement” in connection with this Agreement. NOW THEREFORE, in consideration of the foregoing recitals and the following covenants, terms and conditions, the Parties agree, as follows: AGREEMENT 1.1 DEFINITIONS The initially capitalized terms, whenever used in this Agreement, have the meanings set forth below, unless they are otherwise herein defined. The terms “include,” “includes,” and “including,” when used in this Agreement, shall mean, respectively, “include, without limitation,“ “includes, without limitation” and “including, without limitation.” “Agreement” means this Power Purchase Agreement – Eligible Renewable Energy Resource between the Buyer and the Seller. “Business Day” means any day except a Saturday, Sunday, or a day that the City observes as a regular holiday under Palo Alto Municipal Code section 2.08.100(a). “Buyer” refers to the City of Palo Alto, California, with a principal place of business at 250 Hamilton Avenue, Palo Alto, California 94301. “Buyer’s Distribution System” means the wires, transformers, and related equipment used by the Buyer to deliver electric power to the Buyer’s retail customers, typically at sub-transmission level voltages or lower. “CAISO” means the California Independent System Operator Corporation, or successor entity. “CAISO Tariff” means the CAISO FERC Electric Tariff, as amended. “Capacity” means the ability of a generator at any given time to produce Energy at a specified rate, as EXHIBIT "H" FORM OF CLEAN PPA DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 2 measured in megawatts (“MW”) or kilowatts (“kW”), and any reporting rights associated with it. “Capacity Attributes” means any current or future defined characteristic, certificate, tag, credit, or ancillary service attribute, whether general in nature or specific as to the location or any other attribute of the Facility, intended to value any aspect of the Contract Capacity of the Facility to produce Energy or ancillary services, including contributions towards Resource Adequacy (including those requirements defined in Section 40 of the CAISO Tariff) or reserve requirements (if any), and any other reliability or power attributes. “CEC” means the California Energy Resources Conservation and Development Commission, or successor agency. “Certificate of RPS Eligibility” means a certificate issued by the CEC as evidence of RPS Certification of the Facility. “City” means the government of the City of Palo Alto, California. “CLEAN Program” refers to the Palo Alto Clean Local Energy Accessible Now Program, a renewable energy program established by the City by adoption of resolution number , dated , of the Palo Alto City Council, whereby the Buyer will purchase from the Seller the Output of Eligible Renewable Energy Resources that meet specified criteria set forth in the City’s applicable ordinances and resolutions. “Commercial Operation” means the period of operation of the Facility, once the Commercial Operation Date has occurred. “Commercial Operation Date” means the date specified in the Commercial Operation Date Confirmation Letter, which the Parties execute and exchange in accordance with this Agreement. “Contract Capacity” means the installed electrical Capacity available upon the Commercial Operation Date of the Facility in an amount, as specified in Exhibit “PPA-A.” “Contract Capacity” is measured at the Buyer’s revenue meter at the Delivery Point and is net of any Station Service Loads, any applicable Facility step-up transformer losses, and distribution losses on Buyer’s Distribution System up to the Delivery Point. “Contract Price” means the price paid by the Buyer to the Seller for the Output generated at the Facility and received by the Buyer, as set forth in Exhibit “PPA-A.” “CPUC” means the California Public Utilities Commission, or successor agency. “Delivery Point” means the point of interconnection to Buyer’s Distribution System, where the Buyer accepts title to the Output. “Delivery Term” has the meaning set forth in Section 14.2 hereof. “Eligible Renewable Energy Resource” means an electric generating facility that is defined and qualified as an “eligible renewable energy resource” under California Public Utilities Code Section 399.12(e) and California Public Resources Code Section 25471, respectively, as amended. “Energy” means electrical energy generated from the Facility and delivered to Buyer’s Distribution System with the voltage and quality required by the Buyer, and measured in megawatt-hours (“MWh”) or kilowatt- hours (“kWh”), as metered at the Delivery Point. “Facility” means the qualifying renewable energy generation equipment and associated power conditioning and interconnection equipment that deliver the Output to the Buyer at the Delivery Point. “FERC” means the Federal Energy Regulatory Commission, or successor agency. 9512 5/27/15 DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 3 “Forced Outage” means an unplanned outage of one or more of the Facility’s components that results in a reduction of the ability of the Facility to produce Capacity. “Force Majeure” means an event or circumstance, which prevents a Party from performing its obligations under this Agreement, and which is not in the reasonable control of, or the result of negligence of, the Party claiming Force Majeure, and which by the exercise of due diligence is unable to overcome or cause to be avoided. “Force Majeure” shall include: (a) An act of nature, riot, insurrection, war, explosion, labor dispute, fire, flood, earthquake, storm, lightning, tidal wave, backwater caused by flood, act of the public enemy, terrorism, or epidemic; (b) Interruption of transmission or generation services as a result of a physical emergency condition (and not congestion-related or economic curtailment) not caused by the fault or negligence of the Party claiming Force Majeure and reasonably relied upon and without a reasonable source of substitution to make or receive deliveries hereunder, civil disturbances, strike, labor disturbances, labor or material shortage, national emergency, restraint by court order or other public authority or governmental agency, actions taken to limit the extent of disturbances on the electrical grid; or (c) Other similar causes beyond the control of the Party affected, which causes such Party could not have avoided by the exercise of due diligence and reasonable care. A Party's financial incapacity, the Seller’s ability to sell the Output at a more favorable price or under more favorable conditions, or the Buyer’s ability to acquire the Output at a more favorable price or under more favorable conditions or other economic reasons shall not constitute an event of Force Majeure. “Force Majeure” does not include a Forced Outage to the extent such event is not caused or exacerbated by an event of Force Majeure, as described above, and does not include the Seller’s inability to obtain financing, permits, or other equipment and instruments necessary to plan for, construct, or operate the Facility. “Good Utility Practice” means those practices, methods and acts that would be implemented and followed by prudent operators of electric energy generating facilities in the western United States, similar to the Facility, during the relevant time period, which practices, methods and acts, in the exercise of prudent and responsible professional judgment in the light of the facts known at the time the decision was made, could reasonably have been expected to accomplish the desired result consistent with good business practices, reliability, and safety. The Seller acknowledges that its use of Good Utility Practice does not exempt it from performing any of its obligations arising under this Agreement. “Good Utility Practice” includes, at a minimum, those professionally responsible practices, methods and acts described in the preceding paragraph that comply with manufacturers’ warranties, restrictions in this Agreement, the interconnection requirements of Buyer, the requirements of governmental authorities, and WECC and NERC standards. “Good Utility Practice” also includes the taking of reasonable steps to ensure that: (a) Equipment, materials, resources, and supplies, including spare parts inventories, are available to meet the Facility’s needs; (b) Sufficient operating personnel are available at all times and are adequately experienced and trained and licensed as necessary to operate the Facility properly and efficiently, and are capable of responding to reasonably foreseeable emergency conditions at the Facility and emergencies whether caused by events on or off the Facility’s site; (c) Preventive, routine, and non-routine maintenance and repairs are performed on a basis that ensures reliable, long-term and safe operation of the Facility, and are performed by knowledgeable, trained, and experienced personnel utilizing proper equipment and tools; (d) Appropriate monitoring and testing are performed to ensure equipment is functioning as designed; and (e) Equipment is not operated in a reckless manner, in violation of manufacturer’s guidelines or in a manner unsafe to workers, the general public, or the connecting utility’s electric system or contrary to environmental laws, permits or regulations or without regard to defined limitations such as, flood conditions, safety inspection requirements, operating voltage, current, volt ampere reactive (VAR) loading, frequency, rotational speed, polarity, synchronization, and control system limits; and equipment and components are designed and manufactured to meet or exceed the standard of durability that is generally used for electric energy generating facilities operating in the western United States and will function properly over the full range of ambient temperature and weather conditions reasonably expected to occur at the Facility site and under both normal and emergency conditions. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 4 “Green Attributes” refers to the definition set forth in the Standard Terms and Conditions, Appendix A-2, as amended, Decision D.07-02-011, as modified by D.07-05-057, of the CPUC, which incorporates the definition of “Environmental Attributes” set forth in the Standard Terms and Conditions, Appendix A-1, as amended, D. 04-06-014. “Green Attributes” includes any and all credits, benefits, emissions reductions, environmental air quality credits, offsets, and allowances, howsoever entitled, attributable to the generation from the Facility, and its displacement of conventional energy generation, whether existing now or arising in the future. “Green Attributes” includes RECs, as well as (1) any avoided emissions of pollutants to the air, soil or water, such as sulfur oxides (“SOx”), nitrogen oxides (“NOx”), carbon monoxide (“CO”) and other pollutants; (2) any avoided emissions of carbon dioxide (“CO2”), methane (“CH4”), nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride, and other greenhouse gases (“GHGs”) that have been determined by the United Nations Intergovernmental Panel on Climate Change, or otherwise by law, to contribute to the actual or potential threat of altering the Earth’s climate by trapping heat in the atmosphere; and (3) the reporting rights to these avoided emissions such as Green Tag Reporting Rights and RECs. “Green Tag Reporting Rights” are the right of a Green Tag Purchaser to report the ownership of accumulated Green Tags in compliance with federal or state law, if applicable, and to a federal or state agency or any other party at the Green Tag Purchaser’s discretion, and include those Green Tag Reporting Rights accruing under Section 1605(b) of the Energy Policy Act of 1992 and any present or future federal, state, or local law, regulation or bill, and international or foreign emissions trading program. Green Tags are accumulated on a kWh basis and one Green Tag represents the Green Attributes associated with one (1) MWh of Energy. “Green Attributes” do not include (i) any Energy, Capacity, reliability, or other power attributes of the Facility, (ii) production or investment tax credits associated with the construction or operation of the Facility and other financial incentives in the form of credits, grants, reductions, or allowances associated with the Facility that are applicable to a state or federal income taxation obligation, (iii) fuel-related subsidies or “tipping fees” that may be paid to Seller to accept certain fuels, or local subsidies received by the generator for the destruction of particular pre-existing pollutants or the promotion of local environmental benefits, or (iv) emission reduction credits encumbered, used or created by the Facility for compliance with or sale under local, state, or federal operating and/or air quality permits or programs. If the Facility is a biomass or landfill facility and the Seller receives any tradable Green Attributes based on the Facility’s greenhouse gas reduction benefits or other emission offsets attributed to its fuel usage, the Seller shall provide the Buyer with sufficient Green Attributes to ensure that there are zero net emissions associated with the production of electricity from the Facility. “Green Attributes” includes any other environmental credits or benefits recognized in the future and attributable to Energy generated by the Facility during the Term that may not be represented by Green Tag Reporting Rights or RECs, unless otherwise excluded herein. Any Green Attributes provided under this Agreement shall be documented by RECs, or any other representation of the environmental benefits of the Output, the monthly cumulative total of which shall be provided to the Buyer, as specified herein. “Interconnection Agreement” refers to the agreement between the Buyer and the Seller, specific to the interconnection of the Facility to Buyer’s Distribution System. “NERC” means the North American Electric Reliability Corporation, or successor organization. “NCPA” means Northern California Power Agency, a California joint action agency, or successor agency. “Output” means all Capacity associated with Contract Capacity and associated Energy made available from the Facility, as well as any Capacity Attributes, Green Attributes, or other attributes existing now or in the future associated with Contract Capacity and/or associated Energy. “Output” does not include production or investment tax credits associated with the construction or operation of the Facility and other financial incentives in the form of credits, grants, reductions, or allowances associated with the Facility that are applicable to a state or federal income taxation obligation. “Planned Outage” means an outage, scheduled in advance, of one or more of the Facility’s components that results in a reduction of the ability of the Facility to produce Capacity. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 5 “Pre-Certification Price” means the contract price to be paid for all Energy delivered to the Buyer prior to the RPS Certification Date, as specified in Exhibit “PPA-A”. “Renewable Energy Credit” or “REC” has the meaning set forth in Section 399.12(h)(1) and (2) of the California Public Utilities Code, and includes a certificate of proof that one unit of electricity was generated by an Eligible Renewable Energy Resource. Currently, RECs are used to convey all Green Attributes associated with electricity production by a renewable energy resource. RECs are accumulated on a kWh basis and one REC represents the Green Attributes associated with the generation of 1 MWh (1,000 kWhs) from the Facility. For purposes of this Agreement, the term REC shall be synonymous with the term Green Tag, green ticket, bundled or unbundled renewable energy credit, tradable renewable energy certificates, or any other term used to describe the documentation that evidences the renewable and Green Attributes associated with electricity production by an Eligible Renewable Energy Resource. “Renewables Portfolio Standard” or “RPS” means the standard adopted by the State of California pursuant to Senate Bill 2 1st Extraordinary Session (SBX1 2, Chapter 1, Statutes 2011-12), and California Public Utilities Code Sections 399.11through 399.31, inclusive, as may be amended, setting minimum renewable energy targets for local publicly owned electric utilities. “Reservation Deposit” means the monetary deposit submitted by the Seller (or the Facility sponsor on behalf of the Seller) to secure a reservation of the CLEAN Program’s prices. The Reservation Deposit is set forth in Exhibit “PPA-A.” “Resource Adequacy” means a requirement by a governmental authority or in accordance with its FERC- approved tariff, or a policy approved by a local regulatory authority, that is binding upon either Party and that requires that Party to procure a certain amount of electric generating capacity. “RPS Certification” means certification by the CEC that the Facility qualifies as an Eligible Renewable Energy Resource for RPS purposes, and that all Energy produced by the Facility qualifies as generation from an Eligible Renewable Energy Resource, as evidenced by a Certificate of RPS Eligibility. “RPS Certification Date” means the date on which the RPS Certification begins, as specified in the Certificate of RPS Eligibility. “Seller” means with a principal place of business at , , . “Station Service Load” means the electrical loads associated with the operation and maintenance of the Facility, which may at times be supplied from the Facility’s Energy. “Term” has the meaning set forth in Section 14.1 hereof. “WECC” means the Western Electricity Coordinating Council, the regional entity responsible for coordinating and promoting regional bulk electric system reliability in the Western Canada and the United States, or any successor organization. 2.0 SELLER’S GENERATING FACILITY, PURCHASE PRICE AND PAYMENT 2.1 Facility. This Agreement governs the Buyer’s purchase of the Output from the Facility, as described in Exhibit “PPA-A.” The Seller shall not modify the Facility to increase or decrease the Contract Capacity after the Commercial Operation Date. 2.2 Products Purchased. During the Delivery Term, the Seller shall sell and deliver, or cause to be delivered, and the Buyer shall purchase and receive, or cause to be received, the Output from the Facility. The Seller shall not have the right to procure the Output from sources other than the Facility for sale or delivery to the Buyer under this Agreement or to substitute the Output. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 6 2.3 Delivery Term. The Delivery Term shall commence on the Commercial Operation Date under this Agreement, and shall continue for an uninterrupted period of [twenty (20) or twenty-five (25)] years. This period will commence on the first day of the calendar month immediately following the Commercial Operation Date. As evidence of the Commercial Operation Date, the Parties shall execute and exchange the “Commercial Operation Date Confirmation Letter,” attached hereto as Exhibit “PPA-B.” The Commercial Operation Date shall be the date on which the Parties acknowledge, in writing, that the Facility starts operating and is otherwise in compliance with applicable interconnection and system protection requirements, including the final approvals by the City’s building department official. 2.4 Payment for Products Purchased. 2.4.1 Deliveries Prior to RPS Certification Date. Once the Facility has achieved Commercial Operation, if the CEC has not issued a Certificate of RPS Eligibility for the Facility or the Facility has not been registered with the appropriate entity for the tracking of Green Attributes, the Buyer will pay the Seller for the Output by multiplying the Pre-Certification Price by the quantity of Energy. 2.4.2 Deliveries After RPS Certification Date. Once the Facility has achieved Commercial Operation, the CEC has issued a Certificate of RPS Eligibility for the Facility, and the Facility has been registered with the appropriate entity for the tracking of Green Attributes, the Buyer shall pay the Seller for all Output on or after the RPS Certification Date by multiplying the Contract Price by the quantity of Energy. 2.4.3 True-up Upon Issuance of Certificate of RPS Eligibility. Once the Facility has achieved Commercial Operation, the CEC has issued a Certificate of RPS Eligibility for the Facility, and the Facility has been registered with the appropriate entity for the tracking of Green Attributes, the Buyer will pay the Seller an amount equal to the difference between the Contract Price and the Pre-Certification Price for the Output (a) that was delivered on or after the RPS Certification Date and (b) for which the Seller has already received payment at the Pre- Certification Energy Price. 2.4.4 Energy in Excess of Contract Capacity. The Seller shall not receive payment for any Energy or Green Attributes delivered in any hour to the Buyer in excess of the following amount of energy (in kilowatt-hours): 110% of the Contract Capacity (in kilowatts) multiplied by one hour. Any payment in excess of this amount shall be refunded to the Buyer, on demand. 2.5 Billing. The Buyer shall pay the Seller by check or electronic funds transfer, on a monthly basis, within thirty (30) days of the meter reading date. 2.6 Title and Risk of Loss. Title to and risk of loss related to the Output shall be transferred from the Seller to the Buyer at the Delivery Point. The Seller warrants that it will deliver to the Buyer the Output free and clear of all liens, security interests, claims, encumbrances or any interest therein or thereto by any person, arising prior to the Delivery Point. 2.7 No Additional Incentives. The Seller warrants that it has not received any other incentives funded by the Buyer’s ratepayers and it further agrees that, during the Term, it shall not seek additional compensation or other benefits from the Buyer pursuant to the following programs of the Buyer: (a) Photovoltaic (PV) Partners Program; (b) Power from Local Ultra-Clean Generation Incentive (PLUG- In) Program; or (c) other similar programs that are or may be funded by the Buyer’s ratepayers. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 7 3.0 RPS CERTIFICATION; GREEN ATTRIBUTES 3.1 CEC Certification. The Seller, at its own cost and expense, shall obtain the RPS Certification within six (6) months of the Commercial Operation Date. The Seller shall maintain the RPS Certification at all times during the Delivery Term. The foregoing provision notwithstanding, the Seller shall not be in breach of this Agreement and the Buyer shall not have the right to terminate this Agreement, if the Seller’s failure to obtain or maintain the RPS Certification is due to a change in California law, occurring after the Commercial Operation Date, so long as the Seller has used commercially reasonable efforts to obtain and maintain the RPS Certification and the Seller’s actions or omissions did not contribute to its inability to obtain and maintain the RPS Certification. 3.2 Obligation to Deliver Green Attributes. The Seller shall sell and deliver to the Buyer, and the Buyer shall buy and receive from the Seller, all right, title, and interest in and to Green Attributes associated with Energy, produced by the Facility and delivered to the Buyer at the Delivery Point, whether now existing or that hereafter come into existence during the Term, except as otherwise excluded herein; provided, the Buyer shall not be obligated to purchase and pay the Seller for any Green Attributes associated with any amount of the Output, that is generated by any fuel which is not renewable and which cannot be counted for the purpose of the production of Green Attributes. The Seller agrees to sell and make all such Green Attributes available to the Buyer to the fullest extent allowed by applicable law, in accordance with the terms and conditions of this Agreement. The Seller warrants that the Green Attributes provided under this Agreement to the Buyer shall be free and clear of all liens, security interests, claims and encumbrances. 3.3 Conveyance of Green Attributes. The Seller shall provide Green Attributes associated with the Facility, which shall be documented and conveyed to the Buyer in accordance with the procedure described in Exhibit “PPA-D.” 3.4 Additional Evidence of Green Attributes Conveyance. At the Buyer’s request, the Seller shall provide additional reasonable evidence to the Buyer or to third parties of the Buyer’s right, title, and interest in the Green Attributes and any other information with respect to Green Attributes, as may be requested by the Buyer. 3.5 Modification of Green Attributes Conveyance Procedure. The Buyer may unilaterally modify Exhibit “PPA-D” in order to reflect changes necessary in the Green Attributes conveyance procedures, so that the Buyer may be able to receive and report the Green Attributes, purchased under this Agreement, as belonging to the Buyer. 3.6 Reporting of Ownership of Green Attributes. The Seller shall not report to any person or entity that the Green Attributes sold and conveyed to the Buyer belong to any person other than the Buyer. The Buyer may report under any applicable program that Green Attributes purchased by the Buyer hereunder belong to it. 3.7 Greenhouse Gas Emissions. The Seller shall comply with any laws and/or regulations regarding the need to offset emissions of GHGs by delivering to the Buyer the Energy from the Facility with a net zero GHG impact. 4.0 CONVEYANCE OF CAPACITY ATTRIBUTES 4.1 Conveyance of Resource Adequacy Capacity. The Seller shall not report to any person or entity that the Resource Adequacy Capacity, as defined in the CAISO Tariff) associated with the Facility, if any, belongs to a person other than the Buyer, which may report that Resource Adequacy Capacity purchased hereunder belongs to it to fulfill the Resource Adequacy requirements, as defined in Section 40 of the CAISO Tariff, as amended, or any successor program. The Seller shall take those actions described in Section 6.0 hereof, as applicable, to secure recognition of Resource Adequacy Capacity by the CAISO. 4.2 Conveyance of Other Capacity Attributes. In addition to the obligations imposed on the DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 8 Seller under Section 4.1, the Seller will undertake any and all actions reasonably needed to enable the Buyer to effect the recognition and transfer of any Capacity Attributes in addition Resource Adequacy, to the extent that such Capacity Attributes exist now or will exist in the future; provided, if such actions require any actions beyond the giving of notice by the Seller, then the Buyer shall reimburse all out-of- pocket costs and charges of such actions. 4.3 Reporting of Ownership of Capacity Attributes. The Seller shall not report to any person or entity that the Capacity Attributes sold and conveyed to the Buyer belong to any person other than the Buyer. The Buyer may report under any such program that such Capacity Attributes purchased hereunder belong to it. 5.0 METERING AND OPERATIONS 5.1 Timing of Outages. The Seller may not schedule or take any Planned Outage from 12:00 p.m. through 7:00 p.m. Pacific Time during the months of June through October. 5.2 Outage Reporting. 5.2.1 Buyer Request. The Seller is not required to report any Planned Outage or Forced Outage, unless the Buyer first submits a written request to the Seller to commence Outage reporting. Upon receipt of such a request, the Seller shall report all subsequent Planned Outages and the Forced Outages according to the procedures described in subsections 5.2.2 and 5.2.3, and shall continue such reporting until (a) the termination of this Agreement for any reason, or (b) the Buyer subsequently provides written notice to the Seller that the Seller may cease such reporting in the future. 5.2.2 Planned Outage Notifications. The Seller shall notify the Buyer at least 72 hours in advance of any Planned Outage that would result in a reduction in the effective Output of the Facility during the period over which the Planned Outage is scheduled. Notification shall be provided by e-mail to the e-mail address (or addresses) set forth in Exhibit “PPA-F.” 5.2.3 Forced Outage Notifications. Within 24 hours of the occurrence of a Forced Outage of the Facility that impacts the ability of the Facility to produce Energy, the Seller shall notify the Buyer of the Forced Outage, including the Capacity of the Facility that is impacted, and the expected duration of the Forced Outage. Within 24 hours of the return of the Facility to service following the Forced Outage, the Seller shall notify the Buyer of the return-to-service details. Notification shall be made by e-mail to the address (or addresses) set forth in Exhibit “PPA-F.” 5.3 Metering. The Buyer shall furnish and install one or more standard watt-hour meters to read Energy generated by the Facility, and it will charge a meter fee to the Seller to cover the costs associated with the meter’s purchase and installation. As requested, the Seller shall provide and install a meter socket in accordance with the Buyer’s metering standards. The Buyer reserves the right to install additional metering equipment at its sole cost and expense. 6.0 PARTICIPATING GENERATORS 6.1 Applicability. This Section 6.0 shall apply if the Facility meets the definition of a “Participating Generator,” as may be defined by the CAISO Tariff. This Section 6.0 shall not apply if the definition applies to the Facility only upon the election by the Seller. For the purposes of this Section 6.0, all special terms not otherwise defined in Section 1.0 are defined in the CAISO Tariff. 6.2 Participating Generator Agreement. The Buyer will notify the CAISO of the Seller’s interconnection to Buyer’s Distribution System. If the CAISO requires it, the Seller, at its own expense, shall negotiate and enter in to two contracts, a “Participating Generator Agreement” and a “Meter Services Agreement for CAISO Metered Entities,” with the CAISO. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 9 6.3 Scheduling Coordination. If the CAISO requires the Seller to enter in to a Participating Generator Agreement, then the Seller shall designate NCPA as the Buyer’s scheduling coordinator. The Buyer, acting in its sole discretion, may replace NCPA as the scheduling coordinator for the Facility. If NCPA ceases to be the scheduling coordinator for the Facility and the Buyer has not, upon fourteen (14) days’ prior written notice of inquiry from the Seller, appointed a replacement scheduling coordinator, then the Seller shall have the right to appoint a replacement scheduling coordinator on the Buyer’s behalf. Thereafter, the Buyer shall enter into all reasonable and appropriate agreements with such replacement scheduling coordinator at its own costs. 6.4 Scheduling Procedure. The Buyer may require the Seller to provide the Buyer with Energy forecasts on a periodic basis, as may be necessary for the Buyer to account for expected Facility generation in its daily power scheduling process. The requirements are set forth in Exhibit “PPA-C.” 6.5 Modification of Scheduling and Outage Notification Procedure. The Buyer may unilaterally modify Exhibit “PPA-C” to reflect changes necessary in the scheduling and Outage notification procedures. The Buyer shall give the Seller reasonable notice of any such changes. 6.6 Provision of Other Equipment. If the Seller is required to enter into a Participating Generator Agreement with the CAISO, then the Seller, at its own cost and expense, shall provide and maintain data transmission-grade phone line and telecommunications equipment at the meter location that complies with applicable requirements of the CAISO, the Buyer, and NCPA. Any meter installed by the Seller shall comply at all times with the CAISO’s metering requirements. If the Seller fails to provide or maintain any such required equipment or data connection, then the Buyer shall acquire, install and maintain the same at the Seller’s sole cost and expense. 6.7 Designation as Resource Adequacy Resource. The Buyer may submit a written request to the Seller to obtain the CAISO’s designation of the Facility as a Resource Adequacy Resource. Upon receipt of such request, the Seller shall provide such information and undertake such steps as may be required by the CAISO in order to complete such an assessment. If the Buyer makes such a request, then the Buyer shall be responsible for the following: (1) any costs charged to the Seller by the CAISO as a condition of applying for or receiving designation as a Resource Adequacy Resource, including any deposits required during the study process or the cost of any related studies or deliverability assessments performed by the CAISO; (2) the capital, installation, and maintenance costs of any additional equipment required by the CAISO as a condition of receiving designation as a Resource Adequacy Resource; (3) the costs of any Network Upgrades, as defined in the CAISO Tariff, as may be required by the CAISO, provided, the Buyer shall receive any subsequent repayments from the CAISO or the Participating Transmission Owner related to such upgrades; and (4) any charges or penalties assessed by the CAISO as a consequence of the Facility’s designation as a Resource Adequacy Resource. 6.8 CAISO Charges. The Buyer shall be solely responsible for paying all costs and charges associated with the receipt of Energy under this Agreement, at the Delivery Point, and for the transmission and delivery of Energy from the Delivery Point to any other point downstream of the Delivery Point, including transmission costs and charges, competition transition charges, applicable control area service charges, transmission congestion charges, inadvertent energy flows, any other CAISO charges related to the transmission of such Energy by the CAISO and any charge assessed or collected in the future pursuant to any utility tariff or rate schedule, however defined, for transmission or transmission-related service rendered by or for any transmission-owning or operating entity. The Seller will undertake any and all actions reasonably needed to allow the Buyer to comply with any obligations, and minimize any potential liability, under the CAISO tariff. If and to the extent that the Seller fails to comply with the notice provision in Exhibit “PPA-C,” concerning Outages, or with its obligations as outlined in the previous sentence, the Seller shall be wholly responsible for all imbalances, deviations, or any other CAISO charges or penalties associated with such Outage or other CAISO Tariff obligation. 6.9 Inclusion in Metered Subsystem. At the option of the Buyer, the Facility may be included within NCPA’s metered sub-system in connection with the scheduling of power over the CAISO grid and related functions; provided, however, that such inclusion shall have no adverse effect on the Facility’s operations or the Seller (or any such effect shall be fully mitigated by the Buyer). The Seller will undertake any and all actions reasonably needed to allow the Buyer to comply with any obligations, and DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 10 minimize any potential liability, under the CAISO Tariff; provided, that if such actions require any actions beyond the giving of notice to be provided by the Buyer, then the Buyer shall reimburse the Seller for all out-of-pocket costs and charges of such actions. 7.0 COMMERCIAL OPERATION DATE; REFUND OF RESERVATION DEPOSIT 7.1 Commercial Operation Date. The Facility shall achieve Commercial Operation by the Commercial Operation Date deadline (the “Deadline”), which is one (1) year from the Effective Date. 7.2 Reservation Deposit. The Buyer acknowledges that, as of the Effective Date or other date established by the Buyer, the Seller has provided the Reservation Deposit to the Buyer. 7.2.1 If the Commercial Operation Date occurs on or prior to the Deadline, the Buyer shall refund to the Seller the Reservation Deposit without interest. 7.2.2 If the Commercial Operation Date commences within seventy (70) days of the Deadline, the Seller, as liquidated damages and not as a penalty, shall relinquish its claim to a ten percent (10%) portion of the amount of the Reservation Deposit for every full week transpiring between the Deadline and the Commercial Operation Date, but the total amount to be relinquished to the Buyer shall not exceed 100% of the Reservation Deposit. 7.2.3 If the Facility has not achieved Commercial Operation within seventy (70) days of the Deadline, then the Buyer may terminate this Agreement without liability of either Party to the other Party by giving written notice of termination to the Seller. 7.2.4 If the Seller gives notice of termination to terminate the Agreement before Commercial Operation occurs, then the Buyer shall refund a percentage of the Reservation Deposit equal to the following: the percentage to be refunded will equal A/B, where A equals the number of days between the date of the Seller’s notice of termination, received by the Buyer, and the Deadline, and B equals the number of days between the Effective Date and the Deadline. 7.3 Return of Reservation Deposit. The Buyer shall return to the Seller the Reservation Deposit, without interest, in the event that (a) the Buyer furnishes written notice of the costs of interconnection (defined in the Interconnection Agreement to include the costs related to the Interconnection Facilities and Distribution Upgrades) to the Seller and (b) within thirty (30) days of receipt of the notice regarding costs of interconnection, the Seller provides the Buyer with written notice that the Seller does not intend to sign the Interconnection Agreement and does intend to proceed with the project. 8.0 REPRESENTATION AND WARRANTIES; COVENANTS 8.1 Representations and Warranties. On the Effective Date, each Party represents and warrants to the other Party that: DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 11 8.1.1 It is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation; 8.1.2 The execution, delivery and performance of this Agreement is within its powers, have been duly authorized by all necessary action and do not violate any of the terms and conditions in its governing documents, any contracts to which it is a party or any law, rule, regulation, order or the like applicable to it; 8.1.3 This Agreement and each other document executed and delivered in accordance with this Agreement constitutes its legally valid and binding obligation enforceable against it in accordance with its terms; 8.1.4 It is not bankrupt and there are no proceedings pending or being contemplated by it or, to its knowledge, threatened against it which would result in it being or becoming bankrupt; 8.1.5 There is not pending or, to its knowledge, threatened against it or any of its affiliates, if any, any legal proceedings that could materially adversely affect its ability to perform its obligations under this Agreement; and 8.1.6 It is acting for its own account, has made its own independent decision to enter into this Agreement and as to whether this Agreement is appropriate or proper for it based upon its own judgment, is not relying upon the advice or recommendations of the other Party in so doing, and is capable of assessing the merits of, and understands and accepts, the terms, conditions and risks of this Agreement. 8.2 General Covenants. Each Party covenants that, during the Term: 8.2.1 It shall continue to be duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation; 8.2.2. It shall maintain (or obtain from time to time as required, including through renewal, as applicable) all regulatory authorizations necessary for it to legally perform its obligations under this Agreement; and 8.2.3 It shall perform its obligations under this Agreement in a manner that does not violate any of the terms and conditions in its governing documents, any contracts to which it is a party or any law, rule, regulation, order or the like applicable to it. 8.3 Covenant by Seller. The Seller covenants that, during the Term: 8.3.1 If the Eligible Renewal Energy Resource or the Facility is considered an ‘eligible qualifying facility’ under applicable law and has a net power production capacity of greater than one (1) megawatt, then the Seller covenants and agrees that, within thirty (30) days of the Effective Date or longer period allowed by law, it will complete and file Form No. 556 or other similar form with FERC as the same may be required by law.” 9.0 GENERAL CONDITIONS 9.1 Facility Care and Interconnection. During the Delivery Term, the Seller shall execute and maintain an “Interconnection Agreement” with the Buyer, whereby the Seller shall pay and be responsible for designing, installing, operating, and maintaining the Facility in accordance with all applicable laws and regulations and shall comply with all applicable Buyer, WECC, FERC, and NERC requirements, including applicable interconnection and metering requirements. The Seller shall also comply with any modifications, amendments or additions to the applicable tariff and protocols. The Seller also shall arrange and pay independently for any and all necessary costs under the Interconnection Agreement with the Buyer. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 12 9.2 Standard of Care. The Seller shall: (a) operate and maintain the Facility in a safe manner in accordance with its existing applicable interconnection agreements, manufacturer’s guidelines, warranty requirements, Good Utility Practice, industry norms (including standards of the National Electrical Code, Institute of Electrical and Electronic Engineers, American National Standards Institute, and the Underwriters Laboratories, and in accordance with the requirements of all applicable federal, state and local laws and the National Electric Safety Code, as such laws and code norms may be amended from time to time; (b) obtain any governmental authorizations and permits required for the construction and operation thereof. The Seller shall make any necessary and commercially reasonable repairs with the intent of optimizing the availability of electricity to the Buyer. The Seller shall reimburse the Buyer for any and all losses, damages, claims, penalties, or liability that the Buyer incurs as a result of the Seller’s failure to obtain or maintain any governmental authorizations and permits required for the construction and operation of the Facility throughout the Term. 9.3 Access Rights. The Buyer, its authorized agents, employees and inspectors shall have the right to inspect the Facility on reasonable advance notice during normal business hours and for any purposes reasonably connected with this Agreement or the exercise of any and all rights secured to the Buyer by law, including, without limitation, its ordinances, resolutions, tariffs, utility rate schedules or utilities rules and regulations. The Buyer shall make reasonable efforts to coordinate its emergency activities with the safety and security departments, if any, of the Facility’s operator. The Seller shall keep the Buyer advised of current procedures for communicating with the Facility operator’s safety and security departments. 9.4 Protection of Property. Each Party shall be responsible for protecting its own facilities from possible damage resulting from electrical disturbances or faults caused by the operation, faulty operation, or non-operation of the other Party’s facilities and such other Party shall not be liable for any such damages so caused. 9.5 Insurance. During the Term, the Seller shall obtain and maintain and otherwise comply with the insurance requirements, as set forth in Exhibit “PPA-E.” 9.6 Buyer’s Performance Excuse; Seller Curtailment. 9.6.1 Buyer Performance Excuse. The Buyer shall not be obligated to accept or pay for the Output during Force Majeure that affects the Buyer’s ability to accept Energy. 9.6.2 Seller Curtailment. The Buyer may require the Seller to interrupt or reduce deliveries of Energy: (a) whenever necessary to construct, install, maintain, repair, replace, remove, or investigate any of its equipment or part of the Buyer’s Distribution System or facilities; or (b) if the Buyer determines that curtailment, interruption, or reduction is necessary due to a System Emergency, as defined in the CAISO Tariff, an unplanned outage on Buyer’s Distribution System, Force Majeure, or compliance with Good Utility Practice. 9.7 Notices of Outages. Whenever possible, the Buyer shall give the Seller reasonable notice of the possibility that interruption or reduction of deliveries may be required. 9.8 No Additional Loads. The Seller shall not connect any loads not associated with Station Service Loads at the location of the Facility in a manner that would reduce Energy provided from the Facility to the Buyer hereunder. The Seller shall obtain separate retail electric service under the Buyer’s rate schedules for the service of such additional loads. 10.0 FORCE MAJEURE 10.1 Effect of Force Majeure. A Party shall be excused from its performance under this Agreement to the extent, but only to the extent, that its performance hereunder is prevented by Force Majeure. A Party claiming Force Majeure shall exercise due diligence to overcome or mitigate the effects DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 13 of Force Majeure; provided, that nothing in this Agreement shall be deemed to obligate the Party affected by Force Majeure (a) to forestall or settle any strike, lock-out or other labor dispute against its will; or (b) for Force Majeure affecting the Seller only, to purchase electric power to cure Force Majeure. 10.2 Remedial Action. A Party shall not be liable to the other Party if the Party is prevented from performing its obligations hereunder due to Force Majeure. The Party rendered unable to fulfill an obligation by reason of Force Majeure shall take all action necessary to remove such inability with all due speed and diligence. The nonperforming Party shall be prompt and diligent in attempting to remove the cause of its failure to perform, and nothing herein shall be construed as permitting that Party to continue to fail to perform after that cause has been removed. Notwithstanding the foregoing, the existence of Force Majeure shall not excuse any Party from its obligations to make payment of amounts due hereunder. 10.3 Notice of Force Majeure. In the event of any delay or nonperformance resulting from Force Majeure, the Party directly impacted by Force Majeure shall, as soon as practicable under the circumstances, notify the other Party, in writing, of the nature, cause, date of commencement thereof and the anticipated extent of any delay or interruption in performance. 10.4 Termination Due to Force Majeure. If a Party will be prevented from performing its material obligations under this Agreement for an estimated period of twelve (12) consecutive months or longer due to Force Majeure, then the unaffected Party may terminate this Agreement, without liability of either Party to the other, upon thirty (30) Days’ prior written notice at any time during Force Majeure. 11.0 INDEMNITY 11.1 Indemnity by the Seller. The Seller shall indemnify, defend, and hold harmless the Buyer, its elected and appointed officials, directors, officers, employees, agents, and representatives against and from any and all losses, claims, demands, liabilities and expenses, actions or suits, including reasonable costs and attorney’s fees, resulting from, or arising out of or in any way connected with claims by third parties associated with (A) (i) Energy delivered at the Delivery Point; (ii) the Seller’s operation and/or maintenance of the Facility; or (iii) the Seller’s actions or inactions with respect to this Agreement, and (B) any loss, claim, action or suit, for or on account of injury, bodily or otherwise, to, or death of, persons, or for damage to or destruction of property belonging to the Buyer or other third party, excepting only such loss, claim, action or suit as may be caused solely by the willful misconduct or gross negligence of the Buyer, its agents, employees, directors or officers. 11.2 Indemnity by the Buyer. The Buyer shall indemnify, defend, and hold harmless the Seller, its directors, officers, employees, agents, and representatives against and from any and all losses, claims, demands, liabilities and expenses, actions or suits, including reasonable costs and attorney’s fees resulting from, or arising out of or in any way connected with claims by third parties associated with acts of the Buyer, its officers, employees, agents, and representatives, relating to: (A) Energy delivered by the Seller under this Agreement after the Delivery Point, and (B) any loss, claim, action or suit, for or on account of injury, bodily or otherwise, to, or death of, persons, or for damage to or destruction of property belonging to the Seller or other third party, excepting only such loss, claim, action or suit as may be caused solely by the willful misconduct or gross negligence of the Seller, its agents, employees, directors or officers. 12.0 LIMITATION OF DAMAGES EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT THERE IS NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND ANY AND ALL IMPLIED WARRANTIES ARE DISCLAIMED. LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED UNLESS EXPRESSLY HEREIN PROVIDED. NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 14 CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE. UNLESS EXPRESSLY HEREIN PROVIDED, AND SUBJECT TO THE PROVISIONS OF SECTION 11 (INDEMNITY), IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. 13.0 NOTICES Notices shall, unless otherwise specified herein, be given, in writing, and may be delivered by hand delivery, United States mail, overnight courier service, facsimile or electronic messaging (e-mail) to the addresses set forth in Exhibit “PPA-F.”. Whenever this Agreement requires or permits delivery of a “notice” (or requires a Party to “notify”), the Party with such right or obligation shall provide a written communication in the manner specified below. A notice sent by facsimile transmission or electronic mail will be recognized and shall be deemed received on the Business Day on which such notice was transmitted if received before 5 p.m. Pacific Time (and if received after 5 p.m., on the next Business Day) and a notice by overnight mail or courier shall be deemed to have been received two (2) Business Days after it was sent or such earlier time as is confirmed by the receiving Party unless it confirms a prior oral communication, in which case any such notice shall be deemed received on the day sent. A Party may change its addresses by providing notice of same in accordance with this provision. A Party may request a change to Exhibit “PPA- F” as necessary to keep the information current. 14.0 TERM, TERMINATION EVENT AND TERMINATION 14.1 Term. The Term shall commence upon the execution by the duly authorized representatives of each of the Parties, and shall remain in effect until the conclusion of the Delivery Term, unless terminated sooner pursuant to the terms and conditions of this Agreement. All indemnity rights shall survive the termination of this Agreement for twelve (12) months. 14.2 Delivery Term. The Delivery Term of the Agreement is _______ years and is defined as the period of time from the Commercial Operation Date through the expiration or early termination of this Agreement. 14.3 Termination Event. 14.3.1 The Buyer shall have the right, but not the obligation, to terminate this Agreement upon the occurrence of any of the following, each of which is a “Termination Event”: (a) The Facility has not achieved Commercial Operation within seventy (70) days following the Deadline; (b) After the Commercial Operation Date, the Seller has not sold or delivered Energy from the Facility to the Buyer for a period of twelve (12) consecutive months; (c) If the Facility does not obtain RPS Certification within six (6) months of the Commercial Operation Date and maintain RPS Certification as required by Section 3.2; or (d) The Seller breaches any other material obligation of this Agreement. 14.3.2 The Seller shall have the right, but not the obligation, to terminate this Agreement upon the occurrence of any of the following, each of which is a “Termination Event”: (a) The Buyer fails to make a payment due and payable under this Agreement within thirty (30) days after written notice that such payment is due; or (b) The Buyer breaches any other material obligation of this Agreement. The preceding sentence notwithstanding, the Seller may terminate this Agreement without cause at any time prior to the Commercial Operation Date, subject to the provisions of Section 7 of this Agreement. 14.4 Time to Cure. None of the events described in Section 14.2.1 and 14.2.2 shall constitute a Termination Event if the Buyer or the Seller cures the event, failure, or circumstance within thirty (30) days after receipt of written notification sent by the other Party, seeking termination, or such longer period as may be necessary to cure so long as the Party subject to the Terminating Event is exercising diligent efforts to cure. 14.5 Termination. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 15 14.5.1 Declaration of a Termination Event. If a Termination Event has occurred and is continuing, the Party with the right to terminate shall have the right to: (a) send notice, designating a day, no earlier than thirty (30) days after such notice is deemed to be received (as provided in Section 13), as an early termination date of this Agreement (the “Early Termination Date”), unless the Seller has timely communicated with the Buyer and the Parties have agreed to resolve the circumstances giving rise to the Termination Event; (b) accelerate all amounts owing between the Parties; and (c) terminate this Agreement and end the Delivery Term effective as of the Early Termination Date. 14.5.2 Release of Liability for Termination Event. Upon termination of this Agreement pursuant to this section neither Party shall be under any further obligation or subject to liability hereunder, except with respect to the indemnity provision in Section 11 hereof, which shall remain in effect for a period of 12 months following the Early Termination Date. 14.6 No Limitation on Damages. Nothing in this Agreement shall be deemed or construed to limit a Party’s right to recover damages from the other Party, except as otherwise provided in this Agreement. 15.0 RELEASE OF DATA Except as may be exempt from disclosure under applicable law, the Seller authorizes the Buyer to release to any regulatory authority having jurisdiction over the Facility or a Party, or to any request made pursuant to the California Constitution or the California Public Records Act, information regarding the Facility, including the Seller’s name and location, operational characteristics, the Term of this Agreement, the Facility resource type, the scheduled Commercial Operation Date, the actual Commercial Operation Date, the Contract Capacity, payments made to the Seller and Energy production information. The Seller acknowledges that this information may be made publicly available. 16.0 ASSIGNMENT Neither Party shall assign this Agreement or its rights hereunder without the prior written consent of the other Party, which consent shall not be unreasonably withheld. 16.1 Upon the written request of the Seller, the Buyer will execute a “Lender Consent and Agreement” between the Seller and the Seller’s lender(s), if any, in the form acceptable to the Parties; provided, for illustration purposes only, an exemplar is attached hereto as Exhibit “PPA-G.” 16.2 Notwithstanding the foregoing, no Consent and Agreement shall be required for: 16.2.1 Any assignment or transfer of this Agreement by the Seller to an affiliate of the Seller, provided that such affiliate’s creditworthiness is equal to or better than that of Seller, as reasonably determined by the non-assigning or non-transferring Party; or 16.2.2 Any assignment or transfer of this Agreement by the Seller or the Buyer to a person succeeding to all or substantially all of the assets of such Party, provided that such person’s creditworthiness is equal to or greater than that of such Party, as reasonably determined by the non-assigning or non-transferring Party. 16.2.3 Notification of any assignment or transfer of this Agreement under Section 16.2.1 or 16.2.2 shall be given to the non-assigning or non-transferring Party in accordance with Exhibit “PPA-F.” 17.0 APPLICABLE LAW, VENUE, ATTORNEYS’ FEES, AND INTERPRETATION This Agreement will be governed by and construed in accordance with the laws of the State of California. The Parties will comply with applicable laws pertaining to their obligations arising under this DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 16 Agreement. In the event that an action is brought, the Parties agree that trial of such action will be vested exclusively in the state courts of California or in the United States District Court for the Northern District of California in the County of Santa Clara, State of California. The prevailing party in any action brought to enforce the provisions of this Agreement may recover its reasonable costs and attorneys' fees expended in connection with that action. If a court of competent jurisdiction finds or rules that any provision of this Agreement, the Exhibits, or any amendment thereto is void or unenforceable, the unaffected provisions of this Agreement, the Exhibits, or any amendment thereto will remain in full force and effect. The Parties agree that the normal rule of construction to the effect that any ambiguity is to be resolved against the drafting party will not be employed in the interpretation of this Agreement or any Exhibit or any amendment thereof. 18.0 SEVERABILITY If any provision in this Agreement is determined to be invalid, void or unenforceable by any court having jurisdiction, such determination shall not invalidate, void, or make unenforceable any other provision, agreement or covenant of this Agreement and the Parties shall use their best efforts to modify this Agreement to give effect to the original intention of the Parties. 19.0 COUNTERPARTS; INTERPRETATION OF CONFLICTING PROVISIONS This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall be deemed one and the same Agreement. Delivery of an executed counterpart of this Agreement by facsimile or portable document format (“PDF”) transmission will be deemed as effective as delivery of an originally executed counterpart. Each Party delivering an executed counterpart of this Agreement by facsimile or PDF transmission will also deliver an originally executed counterpart, but the failure of any Party to deliver an originally executed counterpart of this Agreement will not affect the validity or effectiveness of this Agreement. In the event of a conflict between the Agreement and any, some or all of the Exhibits, the document imposing the more specific duty or obligation will prevail. 20.0 GENERAL No amendment to or modification of this Agreement shall be enforceable unless reduced to writing and executed by both Parties. This Agreement shall not impart any rights enforceable by any third party other than a permitted successor or assignee bound to this Agreement. Waiver by a Party of any default by the other Party shall not be construed as a waiver of any other default. The headings used herein are for convenience and reference purposes only. // // // // // // DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 17 21. EXHIBITS The following exhibits shall be deemed incorporated in and made a part of this Agreement. Exhibit “PPA-A” - Facility Description, Prices, and Reservation Deposit Exhibit “PPA-B” - Commercial Operation Date Confirmation Letter Exhibit “PPA-C” - Scheduling and Outage Notification Procedure Exhibit “PPA-D” - Green Attributes Reporting and Conveyance Procedures Exhibit “PPA-E” - Insurance Requirements Exhibit “PPA-F” - Notices Exhibit “PPA-G” - Form of Lender Consent and Agreement IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed by their authorized representatives as of the Effective Date. CITY OF PALO ALTO SELLER APPROVED AS TO FORM Senior Deputy City Attorney APPROVED City Manager Director of Utilities DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 18 EXHIBIT “PPA-A” Facility Description, Rates, and Reservation Deposit Program Rates Contract Term: Twenty (20) or twenty-five (25) years Contract rate: $0.165 per kWh for solar resources, 20-year or 25-year contract term $0.093 per kWh for non-solar resources, 20-year contract term $0.094 per kWh for non-solar resources, 25-year contract term Pre-certification rate: $0.08 per kWh Reservation Deposit Reservation Deposit ($20/kW of Contract Capacity) $ Service address: Facility Description: Contract Capacity: kW (CEC-AC), based on solar array rating (Panel rated output at PV USA test conditions x inverter efficiency) Facility primary fuel/technology: DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 19 EXHIBIT “PPA-B” Commercial Operation Date Confirmation Letter In accordance with the terms of the Power Purchase Agreement (Palo Alto CLEAN), dated (the “Agreement”) by and between the City of Palo Alto, as the Buyer, and , as the Seller, this Confirmation Letter serves to document the Parties’ agreement that (i) the conditions precedent to the occurrence of the Commercial Operation Date have been satisfied, and (ii) the Buyer has received Energy, as specified in the Agreement, as of , . The actual installed Contract Capacity is kW. This Confirmation Letter shall confirm the Commercial Operation Date, as defined in the Agreement, as of the date referenced in the preceding sentence. IN WITNESS WHEREOF, each Party has caused this letter to be duly executed by its authorized representative as of the date of last signature provided below: Buyer Seller By: By: Name: Name: Title: Director of Utilities Title: Date: Date: In recognition of the Commercial Operation Date relative to the Effective Date of the Agreement by and between the Buyer and the Seller, the Seller hereby calculates the amount to return, if any, of the Seller’s deposit, as follows: Original Reservation Deposit Amount: $ Commercial Operation Date Deadline: □ Commercial Operation Date is prior to Deadline □ Commercial Operation Date occurred weeks following the Deadline, meaning that % of the Reservation Deposit is relinquished by Seller per Section 7.2.2 of the Power Purchase Agreement. Amount (if any) of Reservation Deposit to return to the Seller is: $ DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 20 EXHIBIT “PPA-C” Scheduling and Outage Notification Procedure C.1 Applicability. This Exhibit” PPA-C” shall apply if the Facility is subject to Section 6.0 of this Agreement. C.2 Annual Operations Forecast C.2.1 By the tenth (10th) day September of each calendar year, the Seller will provide NCPA with an annual operations forecast detailing hourly expected generation and all proposed planned Outages for the next calendar year. The annual operations forecast for the calendar year shall be provided by not later than ninety (90) days prior to the scheduled Commercial Operation Date of the Generating Facility. C.2.2 NCPA may request modifications to the annual operations forecast at any time, and the Seller shall use good faith efforts to accommodate the requested modifications. C.2.3 The Seller shall not conduct Planned Outages at times other than as set forth in its annual operations forecast, unless approved in advance by NCPA, which approval shall not be withheld or delayed unreasonably. C.2.4 The Seller shall not schedule or conduct Planned Outages from 12:00 p.m. through 7:00 p.m. Pacific Time during the months of June through October. C.3. Short Term Operations Forecasts C.3.1. Quarterly Operations Forecast C.3.1.1 By the fifth (5th) day of January, April and July of each Contract Year, the Seller shall provide a calendar quarter-operations forecast by hour of expected generation and all proposed Planned Outages for the next full calendar quarter and the twelve (12) months following that calendar quarter. As an example, by January 5, 2014, the Seller would provide a calendar quarter-operations forecast by hour of expected generation for the period, April 1, 2014 through June 30, 2014, and identify all proposed Planned Outages for the period, April 1, 2014 through June 30, 2015. C.3.1.2 NCPA will approve or require modifications to the proposed calendar quarter-operations forecast within ten (10) days of receipt of the forecast. C.3.1.3 If required by NCPA, the Seller will provide a modified calendar quarter-operations forecast within seven (7) days after receipt of required modifications from NCPA. C.3.2 Weekly Update C.3.2.1 By 14:00 of each Wednesday, the Seller shall provide an electronic update, in a format specified by NCPA, to the calendar quarter-operations forecast for the following seven (7) days (Thursday through the next Wednesday). C.3.2.2 The weekly update shall include hourly expected generation and all proposed planned Outages for the relevant seven (7) day period. C.4 Outage Detail for Annual and Short Term Operations Forecasts. Outage information provided by the Seller shall include, at a minimum, the start time and stop time of the Outage, capacity out of service (kW), the equipment that is or will be out of service, and the reason for the Outage. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 21 C.5 General Scheduling Protocols C.5.1 Daily Modifications to Forecasts. Unless otherwise mutually agreed, the Seller may make changes to the weekly update to the calendar quarter-operations forecast by providing such changes to NCPA prior to 08:00 of the day that is two (2) Business Days before the active scheduling day as determined by the WECC prescheduling calendar. Example: For power that is scheduled for generation or delivery on Friday, March 29, 2014, changes must be submitted to NCPA by 08:00 on Wednesday, March 27, 2014. C.5.2 Hourly Modifications to Active Schedules. Unless otherwise mutually agreed, the Seller may request changes to active schedules by providing such changes to NCPA with a minimum of four (4) hours’ notice prior to the applicable CAISO market deadline (e.g. Hour Ahead Scheduling Process (“HASP”) Scheduling deadline, as defined in the CAISO Tariff). Active day Schedule changes are not binding. Changes to active Schedules are limited to two (2) changes per day, excluding forced Outages, unless otherwise agreed to between the Parties. One request for a Schedule change, of one-hour or multiple-hours duration, constitutes one Schedule change. Example: For power that is scheduled for generation or delivery in hour ending 15:00 (for the period from 14:01 to 15:00), changes must be submitted to NCPA by 10:00. C.5.3. Unforeseen Circumstances. At the Seller’s request, NCPA may, but is not required to, modify the Schedules for the Generation Facility Output due to unforeseen circumstances in accordance with the above scheduling timeline constraints described in this Exhibit PPA-C. C.5.4. Absence of Forecasts. In the absence of forecasts and schedules as required by this Agreement or this Exhibit, NCPA shall utilize the most current information the Seller provides in the development and submission of Schedules. C.6 Outage Reporting Protocols C.6.1. Notification. The Seller shall notify NCPA of all planned or forced Outages of the Generating Facility to ensure compliance with the CAISO Outage Coordination and Enforcement Protocols. C.6.1.1 Outage information provided by the Seller shall include, at a minimum, the start time and stop time of the Outage, Capacity out of service (kW), equipment out of service, and the reason for the Outage. C. 6.1.2 Seller shall provide the Planned Outages not included in the annual operations forecast, the calendar quarter-operations forecast, or the weekly update, to NCPA at least four (4) Business Days prior to the start of the requested outage. C. 6.1.3 At any time prior to the start of a Planned Outage, the CAISO may deny the Outage due to a System Emergency (as defined in the CAISO Tariff) or as otherwise permitted under the CAISO Tariff. If NCPA receives notice that the CAISO has denied an Outage in accordance with the CAISO Tariff, NCPA will notify the Seller as soon as possible and the Seller shall modify the planned Outage as required by the CAISO. C.6.2 Commencement of an Outage. The Seller shall not begin any Planned Outage without the prior approval of NCPA and the CAISO. C.6.3 Forced Outages C.6.3.1 The Seller shall report the Forced Outages to NCPA within twenty (20) DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 22 minutes of such Outages. C.6.3.2 The Seller’s notice of a Forced Outage sent to NCPA shall include the reason for the Outage (if known), expected duration of the Outage, and the Capacity reduction. C.6.3.3 By the end of the next Business Day following the day on which a Forced Outage has occurred, the Seller shall provide to NCPA a detailed written report, specifying the reason for the Outage, expected duration of such Outage, capacity reduction, and actions taken to mitigate such Outage. C.6.4 Return to Service. The Seller shall notify NCPA as soon as possible, but in any case before the Generating Facility is returned to service. C.7 Notices. All Scheduling notices and Schedules shall be submitted to NCPA by phone, fax or email, or other means as may be mutually agreed by the Parties, to the persons designated in Exhibit “PPA-F.” C.8 Changes in Scheduling and Outage Procedure. The Buyer shall revise Exhibit “PPA-C,” or, as appropriate, give written notice to the Seller regarding the revision, and issue a new Exhibit “PPA-C,” which shall then become part of the Agreement to reflect changes in the scheduling and outage notification procedure. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 23 EXHIBIT “PPA-D” Green Attributes Reporting and Conveyance Procedures D.1 Additional Definitions for the Conveyance of Green Attributes D.1.1 “Certificate Transfers” means the process, as described in the WREGIS Operating Rules, whereby a WREGIS account holder may request that WREGIS Certificates from a specific generating unit shall be directly deposited to another WREGIS account. D.1.2 “WREGIS Certificates” means a certificate created within the WREGIS system that represents all Renewable and Green Attributes from one MWh of electricity generation from an Eligible Renewable Energy Resource that is registered with WREGIS. D.1.3 “WREGIS Operating Rules” means the document published by WREGIS that governs the operation of the WREGIS system for registering, tracking, and conveying, among others, RECs produced from Eligible Renewable Energy Resources that shall be registered with WREGIS. D.1.4 “WREGIS” means Western Renewable Energy Generation Information System. D.2 RECs. Green Attributes shall be conveyed by the Seller to the Buyer through RECs, which shall be registered tracked and conveyed to the Buyer, using WREGIS. D.3 WREGIS Registration. Prior to the Commercial Operation Date, the Buyer will register the Facility in the Buyer’s WREGIS account on behalf of the Seller. The Buyer shall charge back to the Seller any costs of registering and maintaining the registration of the Facility with WREGIS. The Seller shall provide to the Buyer any documents required by WREGIS and assign the Seller’s rights to register the Facility in WREGIS, using agreements provided by WREGIS. D.4 B u yer ’s W REGI S Acco unt . The Buyer shall, at its sole expense, establish and maintain the Buyer’s WREGIS account sufficient to accommodate the WREGIS Certificates produced by the output of the Facility. The Buyer shall be responsible for all expenses associated with (A) establishing and maintaining the Buyer’s WREGIS Account, and (B) subsequently transferring or retiring WREGIS Certificates. D.5 Qualified Reporting Entity. The Buyer shall be the Qualified Reporting Entity (as such term is defined by WREGIS) for the Facility, and shall be responsible for providing the metered Output data to WREGIS. D.6 Reporting of Environmental Attributes. In lieu of the Seller’s transfer of the WREGIS Certificates using Certificate Transfers from the Seller’s WREGIS account to the Buyer’s WREGIS account, the Buyer shall report the Facility as being held directly in its WREGIS account, which will preclude the Seller from reporting the Facility in its own WREGIS account. D.6.1 By avoiding the use of Certificate Transfers, there will be no transaction costs to the Seller or the Buyer for the Certificate Transfers that would otherwise be used. D.6.2 WREGIS Certificates for the Facility will be created on a calendar month basis in accordance with the certification procedure established by the WREGIS Operating Rules in an amount equal to the Energy generated by the Project and delivered to the Buyer in the same calendar month. D.6.3 WREGIS Certificates will only be created for whole MWh amounts of energy generated. Any fractional MWh amounts (i.e., kWh) will be carried forward until sufficient generation is accumulated for the creation of a WREGIS Certificate and all such accumulated DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 24 MWh of Environmental Attributes will then be available to Buyer. D.6.4 If a WREGIS Certificate Modification (as such term is defined by WREGIS) will be required to reflect any errors or omissions regarding the Green Attributes from the Facility, then the Buyer will manage the submission of the WREGIS Certificate Modification. D.6.5 Due to the expected delay in the creation of WREGIS Certificates relative to the timing of invoice payments under Section 2, the Buyer will normally be making an invoice payment for the Output for a given month in accordance with Section 2 before the WREGIS Certificates for such month may be created in the Buyer’s WREGIS account. Notwithstanding this delay, the Buyer shall have all right and title to all such WREGIS Certificates upon payment to the Seller in accordance with Section 2. D.7 Changes in Green Attributes Reporting and Conveyance Procedures. The Buyer shall revise this Exhibit “PPA-D,” as appropriate, give written notice to the Seller regarding the revision, and issue a new Exhibit “PPA-D,” which shall then become part of this Agreement in the event that: D.7.1 WREGIS changes the WREGIS Operating Rules (as defined by WREGIS) after the Effective Date or applies the WREGIS Operating Rules in a manner inconsistent with this Exhibit “PPA-D” after the Effective Date; or, D.7.2 WREGIS is replaced as the primary method that the Buyer uses for conveyance of Green Attributes, or additional methods to convey all Green Attributes, are required. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 25 EXHIBIT “PPA-E” Insurance Requirements CONTRACTORS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, WILL FOR THE TERM OF THE CONTRACT OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW, AFFORDED BY COMPANIES WITH A BEST’S KEY RATING OF A-:VII, OR HIGHER, LICENSED OR AUTHORIZED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF CALIFORNIA. AWARD IS CONTINGENT ON COMPLIANCE WITH CITY’S INSURANCE REQUIREMENTS, AS SPECIFIED, BELOW: REQUIRED TYPE OF COVERAGE REQUIREMENT MINIMUM LIMITS EACH OCCURRENCE AGGREGATE YES YES WORKER’S COMPENSATION AUTOMOBILE LIABILITY STATUTORY STATUTORY YES COMMERCIAL GENERAL LIABILITY, INCLUDING PERSONAL INJURY, BROAD FORM PROPERTY DAMAGE BLANKET CONTRACTUAL, AND FIRE LEGAL LIABILITY BODILY INJURY PROPERTY DAMAGE BODILY INJURY & PROPERTY DAMAGE COMBINED. $1,000,000 $1,000,000 $1,000,000 $2,000,000 $2,000,000 $2,000,000 YES COMPREHENSIVE AUTOMOBILE LIABILITY, INCLUDING, OWNED, HIRED, NON-OWNED BODILY INJURY - EACH PERSON - EACH OCCURRENCE PROPERTY DAMAGE BODILY INJURY AND PROPERTY DAMAGE, COMBINED $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 NO PROFESSIONAL LIABILITY, INCLUDING, ERRORS AND OMISSIONS, MALPRACTICE (WHEN APPLICABLE), AND NEGLIGENT PERFORMANCE ALL DAMAGES $1,000,000 YES THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: PROPOSER, AT ITS SOLE COST AND EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE AND EFFECT THROUGHOUT THE ENTIRE TERM OF ANY RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY PROPOSER AND ITS SUBCONSULTANS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS’ COMPENSATION, EMPLOYER’S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS ADDITIONAL INSURES CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES. I. INSURANCE COVERAGE MUST INCLUDE: A. A PROVISION FOR A WRITTEN THIRTY DAY ADVANCE NOTICE TO CITY OF CHANGE IN COVERAGE OR OF COVERAGE CANCELLATION; AND B. A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR CONTRACTOR’S AGREEMENT TO INDEMNIFY CITY – SEE, SAMPLE AGREEMENT FOR SERVICES. II. SUBMIT CERTIFICATE(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE, OR COMPLETE THIS SECTION AND IV THROUGH V, BELOW. A. NAME AND ADDRESS OF COMPANY AFFORDING COVERAGE (NOT AGENT OR BROKER): B. NAME, ADDRESS, AND PHONE NUMBER OF YOUR INSURANCE AGENT/BROKER: DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 26 C. POLICY NUMBER(S): D. DEDUCTIBLE AMOUNT(S) (DEDUCTIBLE AMOUNTS IN EXCESS OF $5,000 REQUIRE CITY’S PRIOR APPROVAL): III. AWARD IS CONTINGENT ON COMPLIANCE WITH CITY’S INSURANCE REQUIREMENTS, AND PROPOSER’S SUBMITTAL OF CERTIFICATES OF INSURANCE EVIDENCING COMPLIANCE WITH THE REQUIREMENTS SPECIFIED HEREIN. IV. ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO “ADDITIONAL INSURES” A. PRIMARY COVERAGE WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED, INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR CONTRIBUTING WITH ANY OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE ADDITIONAL INSURES. B. CROSS LIABILITY THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSURES UNDER THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS POLICY. C. NOTICE OF CANCELLATION 1. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. 2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. V. PROPOSER CERTIFIES THAT PROPOSER’S INSURANCE COVERAGE MEETS THE ABOVE REQUIREMENTS: THE INFORMATION HEREIN IS CERTIFIED CORRECT BY SIGNATURE(S) BELOW. SIGNATURE(S) MUST BE SAME SIGNATURE(S) AS APPEAR(S) ON SECTION II, ATTACHMENT A, PROPOSER’S INFORMATION FORM. Firm: Signature: Name: (Print or type name) Signature: Name: (Print or type name) DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 27 NOTICES SHALL BE MAILED TO: PURCHASING AND CONTRACT ADMINISTRATION CITY OF PALO ALTO P.O. BOX 10250 PALO ALTO, CA 94303. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 28 EXHIBIT “PPA-F” Notices Contract Administration BUYER: SELLER: City of Palo Alto Utilities Resource Management 250 Hamilton Avenue Palo Alto, CA 94301 Ph: 650-329-2689 Email: UtilityCommoditySettlements@CityofPaloAlto.Org Billing and Settlements BUYER: SELLER: City of Palo Alto Utilities Resource Management 250 Hamilton Avenue Palo Alto, CA 94301 Ph: 650-329-2689 Email: UtilityCommoditySettlements@CityofPaloAlto.Org Forecasting and Outage Reporting under Section 6 of this Agreement Planned Outages: BUYER: SELLER: Northern California Power Agency Real- Time Dispatch 651 Commerce Drive Roseville, CA 95678 Ph: 916-786-3518 Forced Outages BUYER: SELLER: Northern California Power Agency Real-Time Dispatch 651 Commerce Drive Roseville, CA 95678 Ph: 916-786-3518 Forecasting and Scheduling BUYER: SELLER: Northern California Power Agency Operations and Pre-Scheduling 651 Commerce Drive Roseville, CA 95678 Ph: 916-786-0123 DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 29 EXHIBIT “PPA-G” Form of Lender Consent and Agreement This CONSENT AND AGREEMENT (this “Consent”), dated as of , 20 , is entered into by and among the CITY OF PALO ALTO, a California chartered municipal corporation (the “City”), , a corporation (the “Lender),” by its agent, (the “Administrative Agent”), and , a corporation (the “Borrower”) (collectively, the “Parties”). Unless otherwise defined, all capitalized terms have the meaning given in the Contract (as hereinafter defined). RECITALS A. Borrower intends to develop, construct, install, test, own, operate and use an approximately MW electric generating facility located in the city of Palo Alto in the State of California, known as the Project (the “Project”). B. In order to partially finance the development, construction, installation, testing, operation and use of the Project, Borrower has entered into that certain financing agreement dated as of (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Financing Agreement”), among Borrower, the financial institutions from time to time parties thereto (collectively, the “Lenders”) , and Administrative Agent for the Lenders, pursuant to which, among other things, Lenders have extended commitments to make loans and other financial accommodations to, and for the benefit of, Borrower. C. The City and Borrower have entered into that certain Power Purchase Agreement, dated as of (attached hereto and incorporated herein by reference, as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms thereof and hereof, the “Power Purchase Agreement”). D. The City and Borrower have entered into that certain Interconnection Agreement, dated as of _ (attached hereto and incorporated herein by reference, as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms thereof and hereof, the “Interconnection Agreement”). E. Pursuant to a security agreement executed by Borrower and Administrative Agent for the Lenders (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Security Agreement”), Borrower has agreed, among other things, to assign, as collateral security for its obligations under the Financing Agreement and related documents (collectively, the “Financing Documents”), all of its right, title and interest in, to and under the Power Purchase Agreement and Interconnection Agreement to Administrative Agent for the benefit of itself, the Lenders and each other entity or person providing collateral security under the Financing Documents. F. It is a requirement under the Financing Agreement that the Parties hereto execute this Consent. AGREEMENT NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound, the Parties agree, as follows: 1. CONSENT TO ASSIGNMENT. The City acknowledges the assignment referred to in Recital E above, consents to an assignment of the Power Purchase Agreement and Interconnection Agreement pursuant thereto, and agrees with Administrative Agent, as follows: (a) Administrative Agent shall be entitled (but not obligated) to exercise all rights and to cure any DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 30 defaults of Borrower under the Power Purchase Agreement or Interconnection Agreement, as the case may be, subject to applicable notice and cure periods provided in the Power Purchase Agreement and Interconnection Agreement. Upon receipt of notice from Administrative Agent, the City agrees to accept such exercise and cure by Administrative Agent if timely made by Administrative Agent under the Power Purchase Agreement or Interconnection Agreement, as the case may be, and this Consent. Upon receipt of Administrative Agent's written instructions and to the extent allowed by law, the City agrees to make directly to such account as Administrative Agent may direct the City, in writing, from time to time, all payments to be made by the City to Borrower under the Power Purchase Agreement or Interconnection Agreement, as the case may be, from and after the City’s receipt of such instructions, and Borrower consents to any such action. The City shall not incur any liability to Borrower under the Power Purchase Agreement, Interconnection Agreement, or this Consent for directing such payments to Administrative Agent in accordance with this subsection (a). (b) The City will not, without the prior written consent of Administrative Agent (such consent not to be unreasonably withheld), (i) cancel or terminate the Power Purchase Agreement or Interconnection Agreement, or consent to or accept any cancellation, termination or suspension thereof by Borrower, except as provided in the Power Purchase Agreement or Interconnection Agreement and in accordance with subparagraph 1(c) hereof, (ii) sell, assign or otherwise dispose (by operation of law or otherwise) of any part of its interest in the Power Purchase Agreement or Interconnection Agreement, except as provided in the Power Purchase Agreement or Interconnection Agreement, or (iii) amend or modify the Power Purchase Agreement or Interconnection Agreement in any manner materially adverse to the interest of the Lenders in the Power Purchase Agreement and Interconnection Agreement as collateral security under the Security Agreement. (c) The City agrees to deliver duplicates or copies of all notices of default delivered by the City under or pursuant to the Power Purchase Agreement or Interconnection Agreement to Administrative Agent in accordance with the notice provisions of this Consent. The City shall deliver any such notices concurrently with delivery of the notice to Borrower under the Power Purchase Agreement or Interconnection Agreement. To the extent that a cure period is provided under the Power Purchase Agreement or Interconnection Agreement, Administrative Agent shall have the same period of time to cure the breach or default that Borrower is entitled to under the Power Purchase Agreement or Interconnection Agreement, except that if the City does not deliver the default notice to Administrative Agent concurrently with delivery of the notice to Borrower under the Power Purchase Agreement or Interconnection Agreement, then as to Administrative Agent, the applicable cure period under the Power Purchase Agreement or Interconnection Agreement shall begin on the date on which the notice is given to Administrative Agent. If possession of the Project is necessary to cure such breach or default, and Administrative Agent or its designee(s) or assignee(s) declare Borrower in default and commence foreclosure proceedings, Administrative Agent or its designee(s) or assignee(s) will be allowed a reasonable period to complete such proceedings so long as Administrative Agent or its designee(s) continue to perform any monetary obligations under the Power Purchase Agreement or Interconnection Agreement, as the case may be. The City consents to the transfer of Borrower's interest under the Power Purchase Agreement and Interconnection Agreement to the Lenders or Administrative Agent or their designee(s) or assignee(s) or any of them or a purchaser or grantee at a foreclosure sale by judicial or nonjudicial foreclosure and sale or by a conveyance by Borrower in lieu of foreclosure and agrees that upon such foreclosure, sale or conveyance, the City shall recognize the Lenders or Administrative Agent or their designee(s) or assignee(s) or any of them or other purchaser or grantee as the applicable party under the Power Purchase Agreement and Interconnection Agreement (provided that such Lenders or Administrative Agent or their designee(s) or assignee(s) or purchaser or grantee assume the obligations of Borrower under the Power Purchase Agreement and Interconnection Agreement, including, without limitation, satisfaction and compliance with all credit provisions of the Power Purchase Agreement and Interconnection Agreement, if any, and provided further that such Lenders or Administrative Agent or their designee(s) or assignee(s) or purchaser or grantee has a creditworthiness equal to or better than DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 31 Borrower, as reasonably determined by City). (d) In the event that either the Power Purchase Agreement or Interconnection Agreement, or both is rejected by a trustee or debtor-in-possession in any bankruptcy or insolvency proceeding, and if, within forty-five (45) days after such rejection, Administrative Agent shall so request, the City will execute and deliver to Administrative Agent a new power purchase agreement or interconnection agreement, as the case may be, which power purchase agreement or interconnection agreement shall be on the same terms and conditions as the original Power Purchase Agreement or Interconnection Agreement for the remaining term of the original Power Purchase Agreement or Interconnection Agreement before giving effect to such rejection, and which shall require Administrative Agent to cure any defaults then existing under the original Power Purchase Agreement or Interconnection Agreement. Notwithstanding the foregoing, any new renewable power purchase agreement or interconnection agreement will be subject to all regulatory approvals required by law. The City will use good faith efforts to promptly obtain any necessary regulatory approvals. (e) In the event Administrative Agent, the Lenders or their designee(s) or assignee(s) elect to perform Borrower's obligations under the Power Purchase Agreement and Interconnection Agreement, succeed to Borrower’s interest under the Power Purchase Agreement and Interconnection Agreement, or enter into a new power purchase agreement or interconnection agreement as provided in subparagraph 1(d) above, the recourse of the City against Administrative Agent, Lenders or their designee(s) and assignee(s) shall be limited to such Parties’ interests in the Project, and the credit support required under the Power Purchase Agreement and Interconnection Agreement, if any. (f) In the event Administrative Agent, the Lenders or their designee(s) or assignee(s) succeed to Borrower's interest under the Power Purchase Agreement and Interconnection Agreement, Administrative Agent, the Lenders or their designee(s) or assignee(s) shall cure any then-existing payment and performance defaults under the Power Purchase Agreement or Interconnection Agreement, except any performance defaults of Borrower itself, which by their nature are not susceptible of being cured. Administrative Agent, the Lenders and their designee(s) or assignee(s) shall have the right to assign all or a pro rata interest in the Power Purchase Agreement and Interconnection Agreement to a person or entity to whom Borrower’s interest in the Project is transferred, provided such transferee assumes the obligations of Borrower under the Power Purchase Agreement and Interconnection Agreement and has a creditworthiness equal to or better than Borrower, as reasonably determined by the City. Upon such assignment, Administrative Agent and the Lenders and their designee(s) or assignee(s) (including their agents and employees) shall be released from any further liability thereunder accruing from and after the date of such assignment, to the extent of the interest assigned. 2. REPRESENTATIONS AND WARRANTIES. The City hereby represents and warrants that as of the date of this Consent: (a) It (i) is duly formed and validly existing under the laws of the State of California, and (ii) has all requisite power and authority to enter into and to perform its obligations hereunder and under the Power Purchase Agreement and Interconnection Agreement, and to carry out the terms hereof and thereof and the transactions contemplated hereby and thereby; (b) the execution, delivery and performance of this Consent, the Power Purchase Agreement and the Interconnection Agreement have been duly authorized by all necessary action on its part and do not require any approvals, material filings with, or consents of any entity or person which have not previously been obtained or made; (c) each of this Consent, the Power Purchase Agreement, and the Interconnection Agreement is in full force and effect; DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 32 (d) each of this Consent, the Power Purchase Agreement, and the Interconnection Agreement has been duly executed and delivered on its behalf and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as the enforceability thereof may be limited by (i) bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and (ii) general equitable principles (whether considered in a proceeding in equity or at law); (e) there is no litigation, arbitration, investigation or other proceeding pending for which the City has received service of process or, to the City’s actual knowledge, threatened against the City relating solely to this Consent, the Power Purchase Agreement, or the Interconnection Agreement and the transactions contemplated hereby and thereby; (f) the execution, delivery and performance by it of this Consent, the Power Purchase Agreement, and the Interconnection Agreement, and the consummation of the transactions contemplated hereby, will not result in any violation of, breach of or default under any term of any material contract or material agreement to which it is a party or by which it or its property is bound, or of any material requirements of law presently in effect having applicability to it, the violation, breach or default of which could have a material adverse effect on its ability to perform its obligations under this Consent; (g) neither the City nor, to the City’s actual knowledge, any other party to the Power Purchase Agreement or Interconnection Agreement, is in default of any of its obligations thereunder; and (h) to the City’s actual knowledge, (i) no Force Majeure Event exists under, and as defined in, the Power Purchase Agreement or Interconnection Agreement and (ii) no event or condition exists which would either immediately or with the passage of any applicable grace period or giving of notice, or both, enable either the City or Borrower to terminate or suspend its obligations under the Power Purchase Agreement or the Interconnection Agreement. Each of the representations and warranties set forth herein shall survive the execution and delivery of this Consent and the consummation of the transactions contemplated hereby. 3. NOTICES. All notices required or permitted hereunder shall be given, in writing, and shall be effective (a) upon receipt if hand delivered, (b) upon telephonic verification of receipt if sent by facsimile and (c) if otherwise delivered, upon the earlier of receipt or three (3) Business Days after being sent registered or certified mail, return receipt requested, with proper postage affixed thereto, or by private courier or delivery service with charges prepaid, and addressed as specified below: If to the City: [ ] [ ] [ ] Telephone No.: [ ] Facsimile No.: [ ] Attn: [ ] If to Administrative Agent: [ ] [ ] [ ] Telephone No.: [ ] Facsimile No.: [ ] Attn: [ ] DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 33 If to Borrower: [ ] [ ] [ ] Telephone No.: [ ] Facsimile No.: [ ] Attn: [ ] Any party shall have the right to change its address for notice hereunder to any other location within the United States by giving thirty (30) days written notice to the other parties in the manner set forth above. 4. ASSIGNMENT, TERMINATION, AMENDMENT. This Consent shall be binding upon and benefit the successors and assigns of the Parties hereto and their respective successors, transferees and assigns (including without limitation, any entity that refinances all or any portion of the obligations under the Financing Agreement). The City agrees (a) to confirm such continuing obligation, in writing, upon the reasonable request of (and at the expense of) Borrower, Administrative Agent, the Lenders or any of their respective successors, transferees or assigns, and (b) to cause any successor-in-interest to the City with respect to its interest in the Power Purchase Agreement or Interconnection Agreement to assume, in writing and in form and substance reasonably satisfactory to Administrative Agent, the obligations of City hereunder. Any purported assignment or transfer of the Power Purchase Agreement or Interconnection Agreement not in conjunction with the written instrument of assumption contemplated by the foregoing clause (b) shall be null and void. No termination, amendment, or variation of any provisions of this Consent shall be effective unless in writing and signed by the parties hereto. No waiver of any provisions of this Consent shall be effective unless in writing and signed by the party waiving any of its rights hereunder. 5. GOVERNING LAW. This Consent shall be governed by the laws of the State of California applicable to contracts made and to be performed in California. The federal courts or the state courts located in California shall have exclusive jurisdiction to resolve any disputes with respect to this Consent with the City, Assignor, and the Lender or Lenders irrevocably consenting to the jurisdiction thereof for any actions, suits, or proceedings arising out of or relating to this Consent. 6. COUNTERPARTS. This Consent may be executed in one or more duplicate counterparts, and when executed and delivered by all the parties listed below, shall constitute a single binding agreement. 7. SEVERABILITY. In case any provision of this Consent, or the obligations of any of the Parties hereto, shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions, or the obligations of the other Parties hereto, shall not in any way be affected or impaired thereby. 8. ACKNOWLEDGMENTS BY BORROWER. Borrower, by its execution hereof, acknowledges and agrees that neither the execution of this Consent, the performance by the City of any of the obligations of the City hereunder, the exercise of any of the rights of the City hereunder, or the acceptance by the City of performance of the Power Purchase Agreement by any party other than Borrower shall (1) release Borrower from any obligation of Borrower under the Power Purchase Agreement or Interconnection Agreement, (2) constitute a consent by the City to, or impute knowledge to the City of, any specific terms or conditions of the Financing Agreement, the Security Agreement or any of the other Financing Documents, or (3) except as expressly set forth in this Consent, constitute a waiver by the City of any of its rights under the Power Purchase Agreement or Interconnection Agreement. Borrower and Administrative Agent acknowledge hereby for the benefit of City that none of the Financing Agreement, the Security DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 040914 jrm 0180042 34 Agreement, the Financing Documents or any other documents executed in connection therewith alter, amend, modify or impair (or purport to alter, amend, modify or impair) any provisions of the Power Purchase Agreement. CITY OF PALO ALTO ADMINISTRATIVE AGENT APPROVED AS TO FORM Senior Deputy City Attorney BORROWER APPROVED City Manager Director of Utilities DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 110927 dm 0073626 1 INTERCONNECTION AGREEMENT This Interconnection Agreement (the “Agreement”), dated, for convenience, ____________________, 20__ (the “Effective Date”), is entered into by and between the CITY OF PALO ALTO, a California chartered municipal corporation (the “City”), acting by and through its Department of Utilities (“CPAU”), and ABC COMPANY, a California corporation (the “Facility Owner”), located at the address stated below (the City and the Facility Owner are referred to, individually, as a “Party”, and, collectively, as the “Parties”). 1.0 TERM 1.1 This Agreement takes effect on the Effective Date, and it will continue for a term of ten (10) years, until it is earlier terminated, as follows: (a) the Facility Owner gives the City or CPAU thirty (30) days’ prior written notice of termination; (b) if Operating Mode #2 or Operating Mode #3 is selected in Exhibit A, upon the effective date of termination of the Power Purchase Agreement or the Other Agreement between the Parties; or (c) a Party effectively terminates due to a material default and breach by the other Party. 1.2 Upon a default referred to in Section 1.1(c), the non-defaulting Party shall give written notice of such event of default to the defaulting Party. The defaulting Party shall have sixty (60) days from the receipt of notice of default in which to cure the default; provided, if the defaulting Party informs the non-defaulting Party that it cannot cure the default within the sixty-days period and it in good faith has continuously and diligently attempted to cure the default, then, if the defaulting Party cures within six (6) months from the receipt of the notice of default, the non-defaulting Party may not terminate this Agreement.. No default shall be deemed to exist if the failure to discharge an obligation (other than the payment of money) is the result of force majeure or an act or omission of the other Party 2.0 GENERATING FACILITY INTERCONNECTION AND METERING 2.1 The Facility Owner will install, operate, maintain, and repair the Generating Facility and use the meter(s) that meet(s) the requirements of CPAU’s Rules and Regulations, as amended, and other applicable laws, rules and regulations, including, without limitation, CPAU’s interconnection standards, as set forth in its Utilities Rule and Regulation 27 (“Rule 27”). 2.2 CPAU, at its sole cost and expense, may inspect and approve the installation of the Generating Facility and verify or otherwise authenticate the accuracy of the meter(s) as a condition precedent to its obligation to interconnect. 2.3 The Facility Owner grants to the City, including CPAU, its officers, employees, agents and representatives the non-exclusive right of ingress and egress on, over and across the Premises, upon reasonable prior notice, for the purpose of inspecting and approving the installation and operation of the Generating Facility and authenticating the accuracy of the meter(s), or without notice, in the event of an emergency, to protect the public health, safety and welfare, or in regard to a disconnection of the Generating Facility, if CPAU reasonably determines that a condition hazardous to person or property exists and immediate action is necessary to protect person or property from damage or interference caused by the Facility or as a result of the lack of properly operating protective devices of the Facility. 2.4 The Facility Owner will obtain and maintain the required governmental approvals, authorizations, permits, and any policy (or policies) of insurance, including, without limitation, commercial general liability, property, and professional liability insurance, as may be required by the City or CPAU or applicable laws. 2.5 The Facility Owner will comply with all applicable federal, state and local safety and performance standards applicable to the Generating Facility and established by or under the National Electrical Code (NEC), the Institute of Electrical and Electronics Engineers (IEEE) and accredited testing laboratories, including, without limitation, Underwriters Laboratories (UL), and in accordance with the applicable orders, rules and regulations of the California Public Utilities Commission, pertaining to the safety and reliability of electrical generating systems, and applicable City building codes. EXHIBIT "I" FORM OF CLEAN PPA INTERCONNECTION AGREEMENT DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 110927 dm 0073626 2 2.6 Neither the City nor CPAU will be obligated to accept or pay for, and the City or CPAU may require the Facility Owner to temporarily interrupt or reduce, the delivery of available energy generated by the Generating Facility in the event of the following: (a) whenever CPAU determines that the interruption or reduction is necessary in order for CPAU to construct, install, maintain, repair, replace, remove, investigate, or inspect any part of CPAU’s electric utility distribution system; or (b) if CPAU determines that the interruption or reduction is necessary on account of an emergency, voluntary or involuntary outage, force majeure, or compliance with good utility practice. 2.7 Notwithstanding any other provision of this Agreement, if CPAU determines that either (a) the operation of the Generating Facility may threaten or endanger the public health, safety or welfare or the City or CPAU’s personnel or property, or (b) the continued operation of the Generating Facility may endanger the operational integrity of CPAU’s electric utility distribution system, then CPAU will have the right to temporarily or permanently disconnect the Generating Facility from CPAU’s electric utility distribution system upon the delivery of prior reasonable notice to the Facility Owner; provided, CPAU may act without giving prior notice to the Facility Owner, if CPAU determines that it is impracticable to provide the notice. The Generating Facility will remain disconnected until such time as CPAU is satisfied that the conditions referred to in this subsection have been corrected or sufficiently addressed. 2.8 The Facility Owner will (a) maintain the Generating Facility, which interconnects with CPAU’s electric utility distribution system, in a safe and prudent manner and in conformance with all applicable laws, rules and regulations, including, without limitation, the requirements of this Section 2, and (b) obtain any governmental approvals, authorizations and permits required for the construction and operation of the Generating Facility. 2.9 The Facility Owner will reimburse CPAU for any and all losses, damages, claims, penalties, or liability that the City or CPAU may incur or sustain as a result of the Facility Owner’s failure to obtain and maintain any and all governmental approvals, authorizations and permits that may be required for the construction, installation, operation, repair or maintenance of the Generating Facility. 3.0 INTERCONNECTION FACILITIES, DISTRIBUTION SYSTEM UPGRADES, AND AFFECTED SYSTEMS 3.1 The Facility Owner shall, in accordance with CPAU Rule 27 or other applicable CPAU Rule, pay, in advance and in full, for all of CPAU’s estimated design and construction costs of the Interconnection Facilities and the Distribution System Upgrades, which are specified in Exhibit A. 3.2 In the event that the Facility Owner owns the real property, on which the Interconnection Facilities are or will be located, then the Facility Owner shall grant to the City and CPAU (or in the event that Facility Owner is leasing or otherwise obtaining rights to locate the Generating Facility on real property of a third party, the Facility Owner shall obtain for the City and CPAU): 3.2.1 The right to install the Interconnection Facilities and related equipment or materials on that real property along the most practical route, which is of sufficient width to provide the appropriate and safe clearance from all structures now or hereafter erected on that real property; and 3.2.2 The right of ingress and egress to and from that real property, as may be reasonably necessary for CPAU to operate, maintain, repair, and remove the Interconnection Facilities. 3.3 Where rights-of-entry or easements are required on or over that real property or the property of a third party for the installation of the Interconnection Facilities, the Facility Owner acknowledges and agrees that CPAU’s obligation to install the Interconnection Facilities is expressly conditioned on the granting, without cost to the City or CPAU, of any and all necessary rights-of-entry or easements to the City. 3.4 THE CITY MAKES NO REPRESENTATIONS, WARRANTIES, COVENANTS OR ASSURANCES WITH RESPECT TO THE DESIGN, CONSTRUCTION, DURABILITY OR SUITABILITY OF THE DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 110927 dm 0073626 3 NEW INTERCONNECTION FACILITIES OR ANY PART THEREOF, WHETHER EXPRESS OR IMPLIED, AND THE CITY EXPRESSLY DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY, QUIET ENJOYMENT, AND ANY IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE APPLICABLE TO SUCH WORK. 3.5 The one-line diagram of the interconnection (at the Delivery Point) is described in Exhibit A. The Interconnection Facilities are the sole and exclusive property of and shall be owned, operated, maintained, and repaired by the City and CPAU, and the Facility Owner disclaim any interest therein. 3.6 The Facility Owner shall pay CPAU for the costs of the Interconnection Facilities. The direct costs for the design and construction of the Interconnection Facilities shall be paid in advance by the Facility Owner. The Facility Owner shall be additionally responsible for costs related to ongoing operations, maintenance, and replacement of the Interconnection Facilities. 3.7 Upon the Facility Owner’s discontinuation of use of the Interconnection Facilities due to termination of this Agreement, or otherwise, CPAU shall have the right to remove any portion of the Interconnection Facilities from the real property on which the Interconnection Facilities are installed or located. 3.8 As may be required by applicable agreements between the City or CPAU and one or more Affected Systems’ owners and/or operators, CPAU shall coordinate with those Affected Systems’ owners and/or operators to support the interconnection. An “Affected System” is an electric system not owned by the City or CPAU but to which CPAU’s electric utility distribution system is connected. “Affected System” includes, without limitation, the transmission system that is owned by the Pacific Gas and Electric Company but is operated by the California Independent System Operator Corporation (“CAISO”). If upgrades to an Affected System are required by an Affected System owner and/or operator as a condition of interconnection of the Generating Facility, then the Facility Owner shall be responsible for the costs of such upgrades. The Facility Owner and each Affected System owner and/or operator shall enter into one or more agreements that provide(s) for the financing of such upgrades, as needed, and any repayment as set forth in applicable tariffs of the Affected System’ owner and/or operator. The Facility Owner, at its own cost and expense, shall be responsible for entering into any other agreements as may be required by an Affected System’s owner and/or operator as a condition of interconnected operation and complying with the requirements of any applicable tariffs. Such agreements may include the “Participating Generator Agreement” (ISO Tariff Appendix M) and the “Meter Services Agreement for CAISO Metered Entities” with the CAISO. 4.0 INDEMNITY 4.1 Each Party, as indemnitor, shall defend, protect, indemnify and hold harmless the other Party, as indemnitee, its elected and appointed officials, directors, officers, employees, agents and representatives of the other Party from and against any and all losses, liability, damages, claims, costs, charges, demands, or expenses (including any direct, indirect or consequential loss, liability, damage, claim, cost, charge, demand, or expense, and reasonable attorneys’ fees) for personal injury or death and property damage, arising, directly or indirectly, out of or in connection with (a) the engineering, design, construction, maintenance, repair, operation, supervision, inspection, testing, protection or ownership of the indemnitor’s facilities, or (b) the making of replacements, additions, betterments to, or reconstruction of the indemnitor’s facilities; provided, however, the Facility Owner’s duty to indemnify the City and CPAU shall not extend to any loss, liability, damage, claim, cost, charge, demand, or expense resulting from interruptions in electrical service to CPAU’s electric utility customers other than the Facility Owner. Neither Party shall be indemnified hereunder for its loss, liability, damage, claim, cost, charge, demand, or expense arising out of or resulting from its sole negligence or willful misconduct. 4.2 Notwithstanding the foregoing indemnity, and excepting a Party’s willful misconduct or sole negligence, each Party shall be solely responsible for damage to its own facilities resulting from electrical disturbances or faults. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 110927 dm 0073626 4 4.3 This Section 4 shall not be construed to relieve any insurer of its obligations to pay any insurance claims in accordance with the provisions of any valid insurance policy to be procured by a Party. 4.4 EXCEPT AS OTHERWISE PROVIDED IN SECTION 4.1, A PARTY SHALL NOT BE LIABLE TO THE OTHER PARTY FOR ANY CONSEQUENTIAL, PUNITIVE, EXEMPLARY, SPECIAL OR INCIDENTAL DAMAGES (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS, LOSS OF REVENUE, LOSS OF OPPORTUNITY OR LOSS OF DATA), HOWSOEVER CAUSED, WHETHER ARISING UNDER TORT, CONTRACT, OR OTHER LEGAL THEORY, AND WHETHER OR NOT FORESEEABLE, THAT ARE INCURRED BY THE OTHER PARTY. 5.0 NOTICE 5.1 Any notice required to be given under this Agreement will be delivered, in writing, and electronically mailed or delivered by the United States Postal Service, with postage prepaid and correctly addressed to the Party, or personally delivered to the Party, at the address below. Changes to such designation may be made by notice similarly given. All written notices will be directed, as follows: TO CITY: City of Palo Alto Department of Utilities 250 Hamilton Ave Palo Alto, CA 94301 ATTN.: Utilities Resource Management Phone: (650) 329-2689 FAX: (650) 326-1507 Email: UtilityCommoditySettlements@CityofPaloAlto.org TO FACILITY OWNER: ABC Company 123 Main Street Anytown, CA 90909 ATTN: Senior Vice-President of Operations Phone: (999) 999-9999 FAX: (999) 111-1111 Email: RenewableEnergyOperations@ABCInc.org 6.0 MISCELLANEOUS PROVISIONS 6.1 This Agreement is governed by and interpreted in accordance with the laws of the State of California as if executed and to be performed wholly within the State of California. 6.2 Any amendment or modification to this Agreement will not be binding upon the Parties, unless the Parties agree thereto, in writing. The failure of a Party at any time or times to require performance of any provision hereof will in no manner affect the right at a later time to enforce the same. No waiver by a Party of the breach of any covenant, term or condition contained in this Agreement, whether by conduct or otherwise, will be deemed or be construed as a further or continuing waiver of any such breach or a waiver of the breach of any other covenant, term or condition, unless such waiver is stated, in writing. 6.3 This Agreement supersedes any existing agreement, to which the City and the Facility Owner are parties, under which the Facility Owner is currently operating the Generating Facility, and any such agreement shall be deemed terminated as of the date this Agreement becomes effective. IN WITNESS WHEREOF, the Parties by their duly appointed representatives have executed this Interconnection Agreement in Palo Alto, County of Santa Clara, as of the Effective Date. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 110927 dm 0073626 5 CITY OF PALO ALTO ABC COMPANY _________________________________ _________________________________ City Manager President APPROVED AS TO FORM: APPROVED: _________________________________ _________________________________ Senior Asst. City Attorney Director of Utilities DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 110927 dm 0073626 6 EXHIBIT A PART 1. GENERATING FACILITY DESCRIPTION 1. Service address: ___________________________________, Palo Alto, CA ____________ (the “Premises”) 2. Generating Facility Description: ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ 3. Gross power rating of the Generating Facility ________ kW, based on: □ Inverter rating □ Solar array rating (Panel rated output at PV USA test conditions x inverter efficiency) □ Generator nameplate □ Prime mover nameplate 4. Generating Facility primary fuel/technology: ____________________________________________________ 5. Net power rating of the Generating Facility: ____ kW, which is the gross power rating stated above net of power used in the Generating Facility to power lights, motors, control systems, and other electrical loads used in operation, including losses on the Generating Facility’s electric distribution system 6. Maximum instantaneous power to be exported through the Point of Common Coupling: ______ kW 7. Generating facility is connected to the CPAU distribution system at ______ Kv 8. Operating Mode (select one of following): □ #1 Power used on-site; no energy export or incidental energy export (default choice); □ #2 Sale to CPAU (feed-in tariff (FIT) rate or merchant generator), which requires disclosure of the Power Purchase Agreement # ______________; □ #3 Other Agreement: Description: ____________________________________________________________, which requires disclosure of the Other Agreement # ______________. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F 110927 dm 0073626 7 PART 2. INTERCONNECTION FACILITIES DESCRIPTION; ESTIMATED COSTS □ No Interconnection Facilities are required. □ Interconnection Facilities are required (provide information below). 1. The Interconnection Facilities Description: _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 2. The direct costs of the design and construction of the Interconnection Facilities shall be paid in advance by the Facility Owner in accordance with Rule 27, as amended. 3 The Final Estimated CPAU Design and Construction Costs is $_____________. 4 The Final Estimated CPAU Operations and Maintenance Cost is $ ________________. 5. The Total Cost of Interconnection Facilities is $______________. 6. A One-line Diagram of the Interconnection is inserted as Page(s) __ through __. 7. A diagram of the Site Layout is inserted as Page(s) __ through __. PART 3. DISTRIBUTION SYSTEM UPGRADES REQUIRED □ No Distribution Upgrades are required. □ Distribution Upgrades are required (provide information below). 1. Description of Distribution Upgrades: _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 2. The direct costs of the design and construction of the Distribution Upgrades shall be paid in advance by the Facility Owner in accordance with Rule 27, as amended. 3. The Final Estimated CPAU Design and Construction Cost is $_____________. 4. The Final Estimated CPAU Operations and Maintenance Cost is $ ________________. 5. The Total Cost of the Distribution Upgrades is $______________. 6. A description of the Distribution Upgrades is inserted as Page(s) __ through __. DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F EXHIBIT “J” FORM OF LENDER CONSENT AND AGREEMENT This CONSENT AND AGREEMENT (this “Consent”), dated as of , 20 , is entered into by and among the CITY OF PALO ALTO, a California chartered municipal corporation (the “City”), , a corporation (the “Lender),” by its agent, (the “Administrative Agent”), and , a corporation (the “Borrower”) (collectively, the “Parties”). Unless otherwise defined, all capitalized terms have the meaning given in the Contract (as hereinafter defined). RECITALS A. Borrower intends to develop, construct, install, test, own, operate and use an approximately MW electric generating facility located in the city of Palo Alto in the State of California, known as the Project (the “Project”). B. In order to partially finance the development, construction, installation, testing, operation and use of the Project, Borrower has entered into that certain financing agreement dated as of (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Financing Agreement”), among Borrower, the financial institutions from time to time parties thereto (collectively, the “Lenders”) , and Administrative Agent for the Lenders, pursuant to which, among other things, Lenders have extended commitments to make loans and other financial accommodations to, and for the benefit of, Borrower. C. The City and Borrower have entered into that certain Lease Agreement, dated as of (attached hereto and incorporated herein by reference, as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms thereof and hereof, the “Lease”). D. Pursuant to a security agreement executed by Borrower and Administrative Agent for the Lenders (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Security Agreement”), Borrower has agreed, among other things, to assign, as collateral security for its obligations under the Financing Agreement and related documents (collectively, the “Financing Documents”), all of its right, title and interest in, to and under the L e a s e to Administrative Agent for the benefit of itself, the Lenders and each other entity or person providing collateral security under the Financing Documents. E. It is a requirement under the Financing Agreement that the Parties hereto execute this Consent. AGREEMENT NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound, the Parties agree, as follows: 1. CONSENT TO ASSIGNMENT. The City acknowledges the assignment referred to in Recital E above, consents to an assignment of the Lease pursuant thereto, and agrees with Administrative Agent, as follows: (a) Administrative Agent shall be entitled (but not obligated) to exercise all rights and to cure any DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F defaults of Borrower under the Lease, as the case may be, subject to applicable notice and cure periods provided in the Lease. Upon receipt of notice from Administrative Agent, the City agrees to accept such exercise and cure by Administrative Agent if timely made by Administrative Agent under the Lease, as the case may be, and this Consent. Upon receipt of Administrative Agent's written instructions and to the extent allowed by law, the City agrees to make directly to such account as Administrative Agent may direct the City, in writing, from time to time, any and all payments to be made by the City to Borrower under the Lease, as the case may be, from and after the City’s receipt of such instructions, and Borrower consents to any such action. The City shall not incur any liability to Borrower under the Lease or this Consent for directing such payments to Administrative Agent in accordance with this subsection (a). (b) The City will not, without the prior written consent of Administrative Agent (such consent not to be unreasonably withheld), (i) cancel or terminate the Lease, or consent to or accept any cancellation, termination or suspension thereof by Borrower, except as provided in the Lease and in accordance with subparagraph 1(c) hereof, (ii) sell, assign or otherwise dispose (by operation of law or otherwise) of any part of its interest in the Lease, except as provided in the Lease, or (iii) amend or modify the Lease in any manner materially adverse to the interest of the Lenders in the Lease as collateral security under the Security Agreement. (c) The City agrees to deliver duplicates or copies of all notices of default delivered by the City under or pursuant to the Lease to Administrative Agent in accordance with the notice provisions of this Consent. The City shall deliver any such notices concurrently with delivery of the notice to Borrower under the Lease. To the extent that a cure period is provided under the Lease, Administrative Agent shall have the same period of time to cure the breach or default that Borrower is entitled to under the Lease, except that if the City does not deliver the default notice to Administrative Agent concurrently with delivery of the notice to Borrower under the Lease, then as to Administrative Agent, the applicable cure period under the Lease shall begin on the date on which the notice is given to Administrative Agent. If possession of the Project is necessary to cure such breach or default, and Administrative Agent or its designee(s) or assignee(s) declare Borrower in default and commence foreclosure proceedings, Administrative Agent or its designee(s) or assignee(s) will be allowed a reasonable period to complete such proceedings so long as Administrative Agent or its designee(s) continue to perform any monetary obligations under the Lease, as the case may be. The City consents to the transfer of Borrower's interest under the Lease to the Lenders or Administrative Agent or their designee(s) or assignee(s) or any of them or a purchaser or grantee at a foreclosure sale by judicial or nonjudicial foreclosure and sale or by a conveyance by Borrower in lieu of foreclosure and agrees that upon such foreclosure, sale or conveyance, the City shall recognize the Lenders or Administrative Agent or their designee(s) or assignee(s) or any of them or other purchaser or grantee as the applicable party under the Lease (provided that such Lenders or Administrative Agent or their designee(s) or assignee(s) or purchaser or grantee assume the obligations of Borrower under the Lease, including, without limitation, satisfaction and compliance with all credit provisions of the Lease, if any, and provided further that such Lenders or Administrative Agent or their designee(s) or assignee(s) or purchaser or grantee has a creditworthiness equal to or better than DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F Borrower, as reasonably determined by City). (d) In the event that the Lease is rejected by a trustee or debtor-in-possession in any bankruptcy or insolvency proceeding, and if, within forty-five (45) days after such rejection, Administrative Agent shall so request, the City will execute and deliver to Administrative Agent a new lease, which lease shall be on the same terms and conditions as the original Lease for the remaining term of the original Lease before giving effect to such rejection, and which shall require Administrative Agent to cure any defaults then existing under the original Lease. Notwithstanding the foregoing, any new lease will be subject to all regulatory approvals required by law. The City will use good faith efforts to promptly obtain any necessary regulatory approvals. (e) In the event Administrative Agent, the Lenders or their designee(s) or assignee(s) elect to perform Borrower's obligations under the Lease, succeed to Borrower’s interest under the Lease, or enter into a new lease as provided in subparagraph 1(d) above, the recourse of the City against Administrative Agent, Lenders or their designee(s) and assignee(s) shall be limited to such Parties’ interests in the Project, and the credit support required under the lease, if any. (f) In the event Administrative Agent, the Lenders or their designee(s) or assignee(s) succeed to Borrower's interest under the Lease, Administrative Agent, the Lenders or their designee(s) or assignee(s) shall cure any then-existing payment and performance defaults under the Lease, except any performance defaults of Borrower itself, which by their nature are not susceptible of being cured. Administrative Agent, the Lenders and their designee(s) or assignee(s) shall have the right to assign all or a pro rata interest in the Lease to a person or entity to whom Borrower’s interest in the Project is transferred, provided such transferee assumes the obligations of Borrower under the Lease and has a creditworthiness equal to or better than Borrower, as reasonably determined by the City. Upon such assignment, Administrative Agent and the Lenders and their designee(s) or assignee(s) (including their agents and employees) shall be released from any further liability thereunder accruing from and after the date of such assignment, to the extent of the interest assigned. 2. REPRESENTATIONS AND WARRANTIES. The City hereby represents and warrants that as of the date of this Consent: (a) It (i) is duly formed and validly existing under the laws of the State of California, and (ii) has all requisite power and authority to enter into and to perform its obligations hereunder and under the Lease, and to carry out the terms hereof and thereof and the transactions contemplated hereby and thereby; (b) the execution, delivery and performance of this Consent and the Lease have been duly authorized by all necessary action on its part and do not require any approvals, material filings with, or consents of any entity or person which have not previously been obtained or made; (c) each of this Consent and the Lease is in full force and effect; DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F (d) each of this Consent and the Lease has been duly executed and delivered on its behalf and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as the enforceability thereof may be limited by (i) bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and (ii) general equitable principles (whether considered in a proceeding in equity or at law); (e) there is no litigation, arbitration, investigation or other proceeding pending for which the City has received service of process or, to the City’s actual knowledge, threatened against the City relating solely to this Consent, the Lease and the transactions contemplated hereby and thereby; (f) the execution, delivery and performance by it of this Consent and the Lease, and the consummation of the transactions contemplated hereby, will not result in any violation of, breach of or default under any term of any material contract or material agreement to which it is a party or by which it or its property is bound, or of any material requirements of law presently in effect having applicability to it, the violation, breach or default of which could have a material adverse effect on its ability to perform its obligations under this Consent; (g) neither the City nor, to the City’s actual knowledge, any other party to the Lease, is in default of any of its obligations thereunder; and (h) to the City’s actual knowledge, (i) no event or condition exists which would either immediately or with the passage of any applicable grace period or giving of notice, or both, enable either the City or Borrower to terminate or suspend its obligations under the Lease. Each of the representations and warranties set forth herein shall survive the execution and delivery of this Consent and the consummation of the transactions contemplated hereby. 3. NOTICES. All notices required or permitted hereunder shall be given, in writing, and shall be effective (a) upon receipt if hand delivered, (b) upon telephonic verification of receipt if sent by facsimile and (c) if otherwise delivered, upon the earlier of receipt or three (3) Business Days after being sent registered or certified mail, return receipt requested, with proper postage affixed thereto, or by private courier or delivery service with charges prepaid, and addressed as specified below: If to the City: [ ] [ ] [ ] Telephone No.: [ ] Facsimile No.: [ ] Attn: [ ] If to Administrative Agent: [ ] [ ] [ ] Telephone No.: [ ] Facsimile No.: [ ] Attn: [ ] DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F If to Borrower: [ ] [ ] [ ] Telephone No.: [ ] Facsimile No.: [ ] Attn: [ ] Any party shall have the right to change its address for notice hereunder to any other location within the United States by giving thirty (30) days written notice to the other parties in the manner set forth above. 4. ASSIGNMENT, TERMINATION, AMENDMENT. This Consent shall be binding upon and benefit the successors and assigns of the Parties hereto and their respective successors, transferees and assigns (including without limitation, any entity that refinances all or any portion of the obligations under the Financing Agreement). The City agrees (a) to confirm such continuing obligation, in writing, upon the reasonable request of (and at the expense of) Borrower, Administrative Agent, the Lenders or any of their respective successors, transferees or assigns, and (b) to cause any successor-in-interest to the City with respect to its interest in the Lease to assume, in writing and in form and substance reasonably satisfactory to Administrative Agent, the obligations of City hereunder. Any purported assignment or transfer of the Lease not in conjunction with the written instrument of assumption contemplated by the foregoing clause (b) shall be null and void. No termination, amendment, or variation of any provisions of this Consent shall be effective unless in writing and signed by the parties hereto. No waiver of any provisions of this Consent shall be effective unless in writing and signed by the party waiving any of its rights hereunder. 5. GOVERNING LAW. This Consent shall be governed by the laws of the State of California applicable to contracts made and to be performed in California. The federal courts or the state courts located in California shall have exclusive jurisdiction to resolve any disputes with respect to this Consent with the City, Assignor, and the Lender or Lenders irrevocably consenting to the jurisdiction thereof for any actions, suits, or proceedings arising out of or relating to this Consent. 6. COUNTERPARTS. This Consent may be executed in one or more duplicate counterparts, and when executed and delivered by all the parties listed below, shall constitute a single binding agreement. 7. SEVERABILITY. In case any provision of this Consent, or the obligations of any of the Parties hereto, shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions, or the obligations of the other Parties hereto, shall not in any way be affected or impaired thereby. 8. ACKNOWLEDGMENTS BY BORROWER. Borrower, by its execution hereof, acknowledges and agrees that neither the execution of this Consent, the performance by the City of any of the obligations of the City hereunder, the exercise of any of the rights of the City hereunder, or the acceptance by the City of performance of the Lease by any party other than Borrower shall (1) release Borrower from any obligation of Borrower under the Lease, (2) constitute a consent by the City to, or impute knowledge to the City of, any specific terms or conditions of the Financing Agreement, the Security Agreement or any of the other Financing Documents, or (3) except as expressly set forth in this Consent, constitute a waiver by the City of any of its rights under the Lease. Borrower and Administrative Agent acknowledge hereby for the benefit of City that none of the Financing Agreement, the Security DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F Agreement, the Financing Documents or any other documents executed in connection therewith alter, amend, modify or impair (or purport to alter, amend, modify or impair) any provisions of the Lease. CITY OF PALO ALTO ADMINISTRATIVE AGENT APPROVED AS TO FORM Senior Deputy City Attorney BORROWER APPROVED City Manager Director of Utilities DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F EXHIBITS LEASE AGREEMENT/CITY OF PALO ALTO & KOMUNA PALO ALTO LLC Page EX-21 Rev. 11/18/15 999020‐eml Schedule 23.2 Termination Value Year 275 Cambridge 475 Cambridge 520 Webster 445 Bryant 1 $995,014 $1,222,788 $992,017 $683,323 2 $959,623 $1,179,296 $956,733 $659,018 3 $925,897 $1,137,849 $923,108 $635,857 4 $893,564 $1,098,115 $890,873 $613,653 5 $862,366 $1,059,775 $859,769 $592,227 6 $660,578 $811,795 $658,589 $453,650 7 $646,500 $794,494 $644,553 $443,982 8 $631,414 $775,955 $629,512 $433,622 9 $615,219 $756,052 $613,366 $422,500 10 $597,801 $734,647 $596,000 $410,538 11 $579,035 $711,585 $577,291 $397,651 12 $558,786 $686,701 $557,103 $383,745 13 $536,903 $659,808 $535,286 $368,716 14 $513,220 $630,704 $511,674 $352,452 15 $487,556 $599,165 $486,087 $334,827 16 $459,710 $564,945 $458,325 $315,704 17 $429,462 $527,773 $428,169 $294,932 18 $396,571 $487,353 $395,377 $272,344 19 $360,770 $443,356 $359,684 $247,758 20 $321,767 $395,424 $320,798 $220,972 21 $279,238 $343,160 $278,397 $191,766 22 $232,830 $286,128 $232,129 $159,895 23 $182,153 $223,850 $181,604 $125,093 24 $126,778 $155,799 $126,396 $87,064 25 $66,233 $81,395 $66,034 $45,485 DocuSign Envelope ID: 09D09B17-A2E0-4787-B4B8-67BAA0A28C3F Certificate Of Completion Envelope Id: 09D09B17A2E04787B4B867BAA0A28C3F Status: Completed Subject: Please DocuSign: Komuna Lease Agreement Exhibits FINAL 1.14.2016.pdf Source Envelope: Document Pages: 106 Signatures: 4 Envelope Originator: Certificate Pages: 1 Initials: 0 Janet Billups AutoNav: Enabled EnvelopeId Stamping: Enabled Time Zone: (UTC-08:00) Pacific Time (US & Canada) 250 Hamilton Ave Palo Alto , CA 94301 janet.billups@cityofpaloalto.org IP Address: 199.33.32.254 Record Tracking Status: Original 1/14/2016 10:03:46 AM Holder: Janet Billups janet.billups@cityofpaloalto.org Location: DocuSign Signer Events Signature Timestamp Zach Rubin zrubin@komunaenergy.com Security Level: Email, Account Authentication (None) Using IP Address: 24.130.60.185 Sent: 1/14/2016 10:14:13 AM Viewed: 1/14/2016 10:17:40 AM Signed: 1/14/2016 10:21:48 AM Electronic Record and Signature Disclosure: Not Offered ID: In Person Signer Events Signature Timestamp Editor Delivery Events Status Timestamp Agent Delivery Events Status Timestamp Intermediary Delivery Events Status Timestamp Certified Delivery Events Status Timestamp Carbon Copy Events Status Timestamp Notary Events Timestamp Envelope Summary Events Status Timestamps Envelope Sent Hashed/Encrypted 1/14/2016 10:21:50 AM Certified Delivered Security Checked 1/14/2016 10:43:57 AM Signing Complete Security Checked 1/14/2016 10:43:55 AM Completed Security Checked 1/14/2016 10:43:55 AM Applicant’s Project Description (Summary) In a cooperative effort between Komuna Energy, MBL & Sons, Inc, and Sprig Electric, we intend to provide the City of Palo Alto with solar shade structure attached to the top deck of four Public Parking Garages with the primary purpose of providing the City of Palo Alto with a renewable energy source. 445 Bryant Street Overview A 240.32kw system will be installed per the submitted plan sets with a wide span I-beam style design to support the solar modules. 1) Installation of elevated solar support structure on City of Palo Alto Parking Garage a. Scope includes installation of steel support structure on the top floor of the existing parking garage. b. Installation of trellis “style” photovoltaic modules including open air gaps between each row of modules and a structure design the reduces the finished height of the installation to a single story. c. Solar system will be interconnect to the utility and will generate clean energy back to the grid. 2) Existing use of the parking garage will remain the same new uses will include EV charging stations, partially shaded top floor parking and clean energy generation 3) Design concept is a wide span style of structure is designed to provide the maximum amount of kilowatts per square foot of available parking garage deck. This is best achieved by designing a structure that not only covers the individual parking stalls but also includes spanning across the drive aisles of the parking deck. The I-beam structure will be painted in a color that does not draw unnecessary attention to the structure. All of the wiring will be managed in manner to conceal the wiring as much as possible as well. 4) Renderings provided show relationship to neighbor property and streets. And the structure design will be fitted on the existing footprint of the top floor of the garage. 5) All materials for support structure will be steel, solar modules are glass with aluminum framing. Modules underside have a white back and a blue top. Gaps between each module leaving an open air style construction with no impact to existing drainage of garage 6) MBL is the structural design build contactor and Spring Electric is the design build electrical contractor for the specified work. Conceptually the below image is from the street view of a previous installation of the same style of structure that is intended to be installed at the Bryant Street Parking Garage. 475 Cambridge Overview A 378.8kw system will be installed per the submitted plan sets with a wide span I-beam style design to support the solar modules. 1) Installation of elevated solar support structure on City of Palo Alto Parking Garage a. Scope includes installation of steel support structure on the top floor of the existing parking garage. b. Installation of trellis “style” photovoltaic modules including open air gaps between each row of modules and a structure design the reduces the finished height of the installation to a single story. c. Solar system will be interconnect to the utility and will generate clean energy back to the grid. 2) Existing use of the parking garage will remain the same new uses will include EV charging stations, partially shaded top floor parking and clean energy generation 3) Design concept is a wide span style of structure is designed to provide the maximum amount of kilowatts per square foot of available parking garage deck. This is best achieved by designing a structure that not only covers the individual parking stalls but also includes spanning across the drive aisles of the parking deck. The I-beam structure will be painted in a color that does not draw unnecessary attention to the structure. All of the wiring will be managed in manner to conceal the wiring as much as possible as well. 4) Renderings provided show relationship to neighbor property and streets. And the structure design will be fitted on the existing footprint of the top floor of the garage. 5) All materials for support structure will be steel, solar modules are glass with aluminum framing. Modules underside have a white back and a blue top. Gaps between each module leaving an open air style construction with no impact to existing drainage of garage 6) MBL is the structural design build contactor and Spring Electric is the design build electrical contractor for the specified work. Conceptually the below image is from the street view of a previous installation of the same style of structure that is intended to be installed at the Bryant Street Parking Garage. 520 Webster Overview A 376.64kw system will be installed per the submitted plan sets with a wide span I-beam style design to support the solar modules. 1) Installation of elevated solar support structure on City of Palo Alto Parking Garage a. Scope includes installation of steel support structure on the top floor of the existing parking garage. b. Installation of trellis “style” photovoltaic modules including open air gaps between each row of modules and a structure design the reduces the finished height of the installation to a single story. c. Solar system will be interconnect to the utility and will generate clean energy back to the grid. 2) Existing use of the parking garage will remain the same new uses will include EV charging stations, partially shaded top floor parking and clean energy generation 3) Design concept is a wide span style of structure is designed to provide the maximum amount of kilowatts per square foot of available parking garage deck. This is best achieved by designing a structure that not only covers the individual parking stalls but also includes spanning across the drive aisles of the parking deck. The I-beam structure will be painted in a color that does not draw unnecessary attention to the structure. All of the wiring will be managed in manner to conceal the wiring as much as possible as well. 4) Renderings provided show relationship to neighbor property and streets. And the structure design will be fitted on the existing footprint of the top floor of the garage. 5) All materials for support structure will be steel, solar modules are glass with aluminum framing. Modules underside have a white back and a blue top. Gaps between each module leaving an open air style construction with no impact to existing drainage of garage 6) MBL is the structural design build contactor and Spring Electric is the design build electrical contractor for the specified work. 275 Cambridge Overview Not submitted Plans Provided to Councilmembers Not Yet Approved 160713 jb 0131537 1 Ordinance No. _______ Ordinance of the Council of the City of Palo Alto Amending Palo Alto Municipal Code (PAMC) Title 18 (Zoning Regulations), Section 18.76.020 (Architectural Review) The Council of the City of Palo Alto does ORDAIN as follows: SECTION 1. Findings and Declarations. The City Council finds and declares as follows: A. As part of the City’s annual Zoning Code update, the City desires to improve its Architectural Review findings to ensure robust design review, to eliminate repetitive findings and to remove outmoded and unnecessary findings. B. On September 3 and October 1, 2015, the Architectural Review Board (ARB) reviewed the draft updated architectural review findings and provided input. Subsequently, the Planning and Transportation Commission (PTC) reviewed the AR findings and recommended that Council approve them without any changes. C. On April 11, 2016, the Council reviewed the draft findings, suggested revisions and directed staff and the ARB to review the updated language and offer approval, feedback or changes. D. On June 16, 2016, the ARB reviewed the updated findings and provided additional comments. E. On August 10, 2016, the Planning and Transportation Commission reviewed the updated findings and concurred with the ARB and Staff’s comments. F. On September 12, 2016, the City Council conducted a public hearing on the current draft of the updated architectural review findings. SECTION 2. Subdivision (d) of Section 18.76.020 of the Palo Alto Municipal Code is amended to read as follows: 18.76.020 Architectural Review. *** (d) Findings Neither the director, nor the city council on appeal, shall grant architectural review approval, unless it is found that each of the following applicable findings is met: (1) The design is consistent and compatible with applicable elementsprovisions of the Palo Alto Comprehensive Plan;, Zoning Code (including context-based design criteria, as applicable), coordinated area plans (including compatibility requirements), and any relevant design guides. Attachment A Not Yet Approved 160713 jb 0131537 2 (2) The project has a unified and coherent design, that: (a) creates an internal sense of order and desirable environment for occupants, visitors, and the general community, (b) preserves, respects and integrates existing natural features that contribute positively to the site and the historic character including historic local resources of the area when relevant, (c) is compatible with its setting, (d) provides harmonious transitions in scale and character to adjacent land uses and land use designations, and (e) enhances living conditions on the site (if it includes residential uses) and in adjacent residential areas. (3) The design is of high aesthetic quality, using high quality, integrated materials and appropriate construction techniques, and incorporating textures, colors, and other details that are compatible with and enhance the surrounding area. (4) The design is functional, allowing for ease and safety of pedestrian and bicycle traffic and providing for elements that support the building’s necessary operations (e.g. convenient vehicle access to property and utilities, appropriate arrangement and amount of open space and integrated signage, if applicable, etc.). (5) The landscape design complements and enhances the building design and its surroundings, is appropriate to the site’s functions, and utilizes climate appropriate plant material capable of providing desirable habitat when feasible, and that can be appropriately maintained. (6) The project incorporates design principles that achieve sustainability in areas related to energy efficiency, water conservation, building materials, landscaping, and site planning. (2) The design is compatible with the immediate environment of the site; (3) The design is appropriate to the function of the project; (4) In areas considered by the board as having a unified design character or historical character, the design is compatible with such character; (5) The design promotes harmonious transitions in scale and character in areas between different designated land uses; (6) The design is compatible with approved improvements both on and off the site; (7) The planning and siting of the various functions and buildings on the site create an internal sense of order and provide a desirable environment for occupants, visitors and the general community; (8) The amount and arrangement of open space are appropriate to the design and the function of the structures; (9) Sufficient ancillary functions are provided to support the main functions of the project and the same are compatible with the project's design concept; (10) Access to the property and circulation thereon are safe and convenient for pedestrians, cyclists and vehicles; (11) Natural features are appropriately preserved and integrated with the project; Not Yet Approved 160713 jb 0131537 3 (12) The materials, textures, colors and details of construction and plant material are appropriate expression to the design and function and whether the same are compatible with the adjacent and neighboring structures, landscape elements and functions; (13) The landscape design concept for the site, as shown by the relationship of plant masses, open space, scale, plant forms and foliage textures and colors create a desirable and functional environment and whether the landscape concept depicts an appropriate unity with the various buildings on the site; (14) Plant material is suitable and adaptable to the site, capable of being properly maintained on the site, and is of a variety which would tend to be drought-resistant and to reduce consumption of water in its installation and maintenance; (15) ITie project exhibits green building and sustainable design that is energy efficient, water conserving, durable and nontoxic, with high-quality spaces and high recycled content materials. The following considerations should be utilized in determining sustainable site and building design: (A) Optimize building orientation for heat gain, shading, daylighting, and natural ventilation; (B) Design of landscaping to create comfortable micro-climates and reduce heat island effects; (C) Design for easy pedestrian, bicycle and transit access; (D) Maximize on site stormwater management through landscaping and permeable paving; (E) Use sustainable building materials; (F) Design lighting, plumbing and equipment for efficient energy and water use; (G) Create healthy indoor environments; and (H) Use creativity and innovation to build more sustainable environments. (16) The design is consistent and compatible with the purpose of architectural review as set forth in subsection (a). SECTION 3. Adoption of this ordinance is found to be categorically exempt from the California Environmental Quality Act under CEQA Guideline sections 15061(b)(3) (Common Sense Exemption) and 15305 (Minor Alterations in Land Use Limitations)because: (1) the activity (rewording of Architectural Review findings) is covered by the general rule that CEQA applies only to projects which have the potential for causing a significant effect on the environment, and it can be seen with certainty that there is no possibility that the activity in question may have a significantly effect on the environment, and (2) this ‘minor alteration in land use limitations’ does not result in any changes in land use or density. SECTION 4. If any section, subsection, sentence, clause or phrase of the ordinance is for any reason held to be invalid, such decision shall not affect the validity of the remaining portions of this ordinance. The City Council hereby declares that it should have adopted the ordinance and each section, subsection, sentence, clause or phrase thereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses or phrases be declared unconstitutional. Not Yet Approved 160713 jb 0131537 4 SECTION 5. This ordinance shall be effective upon the thirty-first day after its passage and adoption. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: __________________________ _____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ _____________________________ Senior Asst. City Attorney City Manager _____________________________ Director of Planning and Community Environment 9/14/2016 Chapter 18.38 PC PLANNED COMMUNITY DISTRICT REGULATIONS http://library.amlegal.com/alpscripts/getcontent.aspx 1/8 Print Palo Alto Municipal Code Chapter 18.38 PC PLANNED COMMUNITY DISTRICT REGULATIONS Sections: 18.38.010 Specific purposes. 18.38.020 Applicability of regulations. 18.38.030 Permitted uses. 18.38.040 Conditional uses. 18.38.050 Establishment of districts. 18.38.060 Required determinations. 18.38.065 Application process. 18.38.070 Application requirements. 18.38.080 Development program statement. 18.38.090 Development plan. 18.38.100 Development schedule. 18.38.110 Action by commission. 18.38.120 Action by council. 18.38.130 Change in development schedule. 18.38.140 Failure to meet development schedule. 18.38.150 Special requirements. 18.38.160 Inspections. 18.38.170 Recycling storage. 18.38.010 Specific purposes. The PC planned community district is intended to accommodate developments for residential, commercial, professional, research, administrative, industrial, or other activities, including combinations of uses appropriately requiring flexibility under controlled conditions not otherwise attainable under other districts. The planned community district is particularly intended for unified, comprehensively planned developments which are of substantial public benefit, and which conform with and enhance the policies and programs of the Palo Alto Comprehensive Plan. (Ord. 3048 (part), 1978) 9/14/2016 Chapter 18.38 PC PLANNED COMMUNITY DISTRICT REGULATIONS http://library.amlegal.com/alpscripts/getcontent.aspx 2/8 18.38.020 Applicability of regulations. The specific regulations of this chapter, and the additional regulations and procedures established by Chapters 18.54 to 18.99, inclusive, shall apply to all planned community districts. Notwithstanding the regulations of Chapters 18.54 to 18.99, inclusive, where specific regulations are adopted pursuant to Sections 18.38.110 and 16.68.120, the specific regulations so adopted shall apply to that planned community district. (Ord. 3108 § 22, 1979: Ord. 3070 § 3, 1978: Ord. 3048 (part), 1978) 18.38.030 Permitted uses. Any use may be permitted in any specific PC district; provided such use shall be specifically listed as a permitted use and shall be located and conducted in accord with the approved development plan and other applicable regulations adopted pursuant to this chapter to govern each specific PC district. (Ord. 3048 (part), 1978) 18.38.040 Conditional uses. Any use may be established as a conditional use in any specific PC district, provided such use shall be specifically listed as a conditional use subject to the provisions of Chapter 18.76 (Permits and Approvals), and shall be located and conducted in accord with the approved development plan and other applicable regulations adopted pursuant to this chapter to govern each specific PC district. (Ord. 4826 § 108, 2004: Ord. 3048 (part), 1978) 18.38.050 Establishment of districts. Planned community districts may be established, modified, or removed from the zoning map, and the regulations applicable to any specific PC district may be established, modified, or deleted in accord with Chapter 18.80. All PC districts shall be identified on the zoning map with the letter coding "PC" followed by a specific reference number identifying each separate district. All use regulations, development plans, development schedules, and other regulatory provisions adopted pursuant to this chapter, or pursuant to Chapter 18.80, which apply to any specific PC district, shall be considered to be a part of this title as if fully set forth in this title, and shall be identified by reference to the corresponding designation of each specific PC district on the zoning map. (Ord. 3048 (part), 1978) 18.38.060 Required determinations. The planning commission, prior to recommending approval of any PC district application, and the city council, prior to approving an ordinance designating and regulating any PC district, shall make all of the following required findings with respect to the application, in addition to findings required by Chapter 18.80: (a) The site is so situated, and the use or uses proposed for the site are of such characteristics that the application of general districts or combining districts will not provide sufficient flexibility to allow the 9/14/2016 Chapter 18.38 PC PLANNED COMMUNITY DISTRICT REGULATIONS http://library.amlegal.com/alpscripts/getcontent.aspx 3/8 proposed development. (b) Development of the site under the provisions of the PC planned community district will result in public benefits not otherwise attainable by application of the regulations of general districts or combining districts. In making the findings required by this section, the planning commission and city council, as appropriate, shall specifically cite the public benefits expected to result from use of the planned community district. (c) The use or uses permitted, and the site development regulations applicable within the district shall be consistent with the Palo Alto Comprehensive Plan, and shall be compatible with existing and potential uses on adjoining sites or within the general vicinity. (Ord. 3048 (part), 1978) 18.38.065 Application process. (a) The applicant for a PC district shall initially submit to the planning commission a development program statement, development plan, and a development schedule which are described in Sections 18.38.080, 18.38.090, and 18.38.100. The plot plans, landscape development plan, and design plan in the development plan should only be preliminary during this phase of review by the planning commission. (b) If the planning commission acts favorably in its initial review of the PC application, the development plan shall be submitted to the architectural review board for review, except in the case of singlefamily and accessory uses. In this phase, a detailed plot plan, landscape development plan, and design plan of the development plan are required. The architectural review board shall make a recommendation on the development plan based on the findings for architectural review in Section 18.76.020 (d). (c) The development plan as approved by the architectural review board is then returned to the planning commission for final planning commission review and recommendation before being submitted to the city council for final action. (Ord. 4826 § 109, 2004: Ord. 3048 (part). 1978) 18.38.070 Application requirements. In addition to the provisions of Chapter 18.80, each application for a PC district shall be accompanied by a development program statement, a development plan, and a development schedule. The development plan shall, as approved by the city council, become a part of the zoning regulations applicable within the respective PC district. Subsequent changes in the development plan shall be made in accord with Chapter 18.80, or, for minor changes, through the architectural review process, as set forth in Section 18.76.020 (b)(3)(D). The development schedule shall, as approved by the city council, become a part of the zoning regulations applicable within the respective PC district. Subsequent changes in the development schedule, if included as part of the regulations, shall be made in accord with Chapter 18.80 or, for minor changes, through the architectural review process, as set forth in Section 18.76.020 (b)(3)(D); provided, that specifically authorized changes may be made by the director pursuant to Section 18.38.130. (Ord. 4826 § 110, 2004: Ord. 3048 (part), 1978) 18.38.080 Development program statement. 9/14/2016 Chapter 18.38 PC PLANNED COMMUNITY DISTRICT REGULATIONS http://library.amlegal.com/alpscripts/getcontent.aspx 4/8 The purpose of the development program statement shall be to describe the proposed use or uses to be conducted in the district in a manner sufficient to enable preparation and consideration of regulations governing permitted uses, conditional uses, site use and development regulations, offstreet parking and loading requirements, and other special regulations which may be appropriate to govern development, use, and maintenance of the site or sites included within the PC district. The development program statement shall include the following: (a) A statement by the applicant demonstrating the necessity of the application for the PC district, including information demonstrating the compliance of the proposed development with the required determinations set forth in Section 18.38.060; (b) A complete listing of all uses proposed, or potentially to be included, within the PC district, incorporating insofar as possible the terminology used in other parts of this title to define, describe, and regulate permitted uses and conditional uses, and the definitions pertinent thereto; (c) A complete description of the nature of uses proposed, and the conditions or characteristics of occupancy, use, or operation, with particular reference to those conditions or characteristics which may warrant regulation differing from those regulations which might apply to such uses if located in one or more general districts within the city; (d) A schedule or statement indicating number, type, floor area, number of bedrooms, and projected sale or rental price of all housing units proposed in the district; (e) Such additional information as the director may prescribe as necessary, in his judgment, to facilitate review and action on the application by the planning commission, the architectural review board, and the city council. (Ord. 3048 (part), 1978) 18.38.090 Development plan. The development plan submitted with the application for a PC district shall include the following, unless waived by the director for cause: (a) An aerial photograph of the site and adjacent land within two hundred fifty feet of the site, at a scale to be prescribed by the director. The director may specify that information required by subsections (b) through (i) be superimposed on the aerial photograph, or a duplicate copy thereof; (b) A map showing any public or private streets, proposed building sites, and any areas proposed to be dedicated or reserved for parks, parkways, paths, playgrounds, school sites, public buildings and other such uses. Compliance with this requirement shall not be construed to relieve the applicant from compliance with the subdivision code in Title 21, or any other applicable ordinances of the city; (c) A map showing the existing and proposed topography of the proposed district at contour intervals as determined appropriate by director; (d) A land use plan for the proposed district indicating the areas proposed for each use or combination of uses identified by the development program statement; (e) A plot plan or plans for each building site in the proposed district, or any portion thereof, in such form as required by the director. The required plans shall show the location of all proposed buildings and principal site improvements, shall indicate dimensions of buildings, site lines, and improvements, and shall indicate the location of physical or natural site features, including trees, and any changes proposed thereto. (f) A landscape development plan, showing the boundaries and location of proposed landscaped areas and exterior site improvements, including but not limited to lights, swimming pools, and service and refuse 9/14/2016 Chapter 18.38 PC PLANNED COMMUNITY DISTRICT REGULATIONS http://library.amlegal.com/alpscripts/getcontent.aspx 5/8 areas. (g) A circulation plan, indicating the proposed movement of vehicles, goods, and pedestrians within the district, and to and from adjacent public thoroughfares. Any special engineering features and traffic regulation devices needed to insure safety or to facilitate ease of access and circulation, whether on or off the site, shall be shown. (h) A parking and loading plan, showing the number of spaces and the location, internal circulation and dimensions of all parking and loading areas. The parking and loading plan shall be based upon the requirements of Chapter 18.54, unless requested modifications to meet the needs of the individual project are supported by traffic engineering studies or relevant data, as may be required by the director, demonstrating the feasibility and adequacy of the plan. (i) Preliminary design plans, including such schematic floor plans, schematic exterior elevations and sections, and/or perspective drawings, as may be necessary to indicate the height of proposed buildings and the general appearance of the proposed structures to the end that the entire development will have architectural unity and will be compatible with existing and proposed neighborhood development. Such drawings need not show final architectural detail. Construction drawings and contract plans, subsequently submitted with applications for required permits or other construction approvals pursuant to approved PC district regulations, shall conform substantially to the preliminary design plans, and shall be subject to all applicable review and permit requirements in effect at the time of approval and permit issuance. (Ord. 3108 § 20, 1979: Ord. 3048 (part), 1978) 18.38.100 Development schedule. The development schedule submitted with the application for a PC district shall include the following: (a) A schedule, indicating to the best of the applicant's knowledge, the approximate date on which construction or development is expected to begin, the duration of time required for completion of the development, and the approximate date or dates of occupancy; (b) A phasing program, indicating, in the event the proposed development within the district is expected to require more than two years for completion and occupancy, a logical or programmed sequence of phases and incorporating a schedule as described in subsection (a) for each phase of development. (Ord. 3048 (part), 1978) 18.38.110 Action by commission. In addition to the requirements of Chapter 18.80, the planning commission shall review and consider all materials submitted by the applicant pursuant to this chapter, and shall prepare and recommend to the city council, as appropriate, the specific regulations to be applied within the proposed planned community district. The specific regulations may modify those regulations contained in Chapters 18.54 to 18.99, inclusive, as is appropriate to meet the individual district and shall include the following: (a) Permitted Uses. A listing of all uses to be permitted generally within the district, or the uses to be permitted in specific locations within the district as shown on the development plan; (b) Conditional Uses. A listing of all uses to be conditionally allowed within the district, or the uses to be permitted in specific locations within the district as shown on the development plan; (c) Site Development Regulations. Maximum or minimum regulations, as appropriate, governing site dimensions, required yards and distances between buildings, site coverage, building height, residential density, and floor area ratio, open space requirements, accessory facilities and uses, and other aspects of the 9/14/2016 Chapter 18.38 PC PLANNED COMMUNITY DISTRICT REGULATIONS http://library.amlegal.com/alpscripts/getcontent.aspx 6/8 proposed development within the district. The regulations may be in text, or by reference to the development plan, or both. In no event shall the maximum height exceed fifty feet except as provided in Chapter 18.76 (Permits and Approvals); (d) Parking and Loading Requirements. Regulations establishing offstreet parking and loading requirements for the district, and governing design, location, screening, landscaping and operation of parking and loading activities. The regulations may be by reference to Chapter 18.54, or in text if the regulations of Chapter 18.54 are modified for the individual district, or both; (e) Special Requirements. Additional regulations, as may be appropriate to assure a harmonious relationship between uses within the district, and a compatible relationship with existing or potential uses within adjoining districts, may be recommended by the commission. Such regulations may include additional height limitations, yard requirements, landscaping and screening, provisions governing outdoor activities, and other requirements; (f) Development Plan and Development Schedule. The development plan submitted pursuant to Section 18.38.090 and the development schedule submitted pursuant to Section 18.38.100, as amended or approved by the planning commission, shall be recommended for inclusion in the regulations applicable to the PC planned community district; (g) Definitions. Definitions applicable specifically to the regulations recommended for the district may be included. (Ord. 4826 § 111, 2004: Ord. 3108 § 21, 1979: Ord. 3048 (part), 1978) 18.38.120 Action by council. In the event the city council adopts an ordinance pursuant to Chapter 18.80 establishing a specific PC planned community district, the council shall include the regulations described in Section 18.38.110, either as recommended by the planning commission or as modified by the council. (Ord. 3048 (part), 1978) 18.38.130 Change in development schedule. For good cause shown by the property owner in writing and unless otherwise specified by the specific applicable regulations for the district, prior to the expiration of the original time schedule for the development, the director may, without a public hearing, modify the time limits imposed by any adopted development schedule; provided, that such modification shall not extend the schedule by more than one year; and provided, that only one such modification may be made. (Ord. 3048 (part), 1978) 18.38.140 Failure to meet development schedule. Sixty days prior to the expiration of the development schedule, the director shall notify the property owner in writing of the date of expiration and advise the property owner of Section 18.38.130. Failure to meet the approved development schedule, including an extension, if granted, shall result in: (a) The expiration of the property owner's right to develop under the PC district. The director shall notify the property owner, the city council, the planning commission and the building official of such expiration; and 9/14/2016 Chapter 18.38 PC PLANNED COMMUNITY DISTRICT REGULATIONS http://library.amlegal.com/alpscripts/getcontent.aspx 7/8 (b) The director's initiating a zone change for the property subject to the PC district in accordance with Chapter 18.80. The property owner may submit a new application for a PC district concurrently with the director's recommendation for a zone change. (Ord. 3418 § 1, 1983: Ord. 3345 § 21, 1982: Ord. 3048 (part), 1978) 18.38.150 Special requirements. Sites abutting or having any portion located with one hundred fifty feet of any RE, R1, R2, RM, or any PC district permitting singlefamily development or multiplefamily development shall be subject to the following additional height and yard requirements: (a) Parking Facilities. The maximum height shall be equal to the height established in the most restrictive adjacent zone district. (b) All Other Uses. The maximum height within one hundred fifty feet of any RE, R1, R2, RM, or applicable PC district shall be thirtyfive feet; provided, however, that for a use where the gross floor area excluding any area used exclusively for parking purposes, is at least sixty percent residential, the maximum height within one hundred fifty feet of an RM4 or RM5 district shall be fifty feet (c) Sites sharing any lot line with one or more sites in any RE, R1, R2, RM or applicable PC district, a minimum interior yard of 10 feet shall be required, and a solid wall or fence between 5 and 8 feet in height shall be constructed and maintained along the common site line. Where a use in a PC district where the gross floor area, excluding any area used exclusively for parking purposes, is at least sixty percent residential, the interior yard shall be at least as restrictive as the interior yard requirements of the most restrictive residential district abutting each such side or rear site line. The minimum interior yard shall be planted and maintained as a landscaped screen. (d) On any portion of a site in the PC district which is opposite from a site in any RE, R1, R2, RM or applicable PC district, and separated therefrom by a street, alley, creek, drainage facility or other open area, a minimum yard of 10 feet shall be required. Where a use in a PC district where the gross floor area, excluding any area used exclusively for parking purposes, is at least sixty percent residential, the minimum yard requirement shall be at least as restrictive as the yard requirements of the most restrictive residential district opposite such site line. The minimum yard shall be planted and maintained as a landscaped screen, excluding areas required for access to the site. (e) Sites sharing any lot line with one or more sites in any RE, R1, R2, RM or any residential PC district shall be subject to a maximum height established by a daylight plane beginning at a height of ten feet at the applicable side or rear site lines and increasing at a slope of three feet for each six feet of distance from the side or rear site lines until intersecting the height limit otherwise established for the PC district; provided, however, that for a use where the gross floor area excluding any area used exclusively for parking purposes, is at least sixty percent residential, the daylight planes may be identical to the daylight plane requirements of the most restrictive residential district abutting each such side or rear site line until intersecting the height limit otherwise established for the PC district. If the residential daylight plane, as allowed in this section, is selected, the setback regulations of the same adjoining residential district shall be imposed. (Ord. 3683 §§ 12, 13, 1986: Ord. 3465 §§ 40, 44, 1983: Ord. 3418 §§ 2 and 3, 1983: Ord. 3130 §§ 11, 25(f), 1979: Ord. 3108 § 9, 1979: Ord. 3048 (part), 1978) 18.38.160 Inspections. Each PC district shall be inspected by the building division at least once every three years for compliance with the PC district regulations and the conditions of the ordinance under which the district was created. 9/14/2016 Chapter 18.38 PC PLANNED COMMUNITY DISTRICT REGULATIONS http://library.amlegal.com/alpscripts/getcontent.aspx 8/8 (Ord. 3345 § 23, 1982) 18.38.170 Recycling storage. All new development, including approved modifications that add thirty percent or more floor area to existing uses, shall provide adequate and accessible interior areas or exterior enclosures for the storage of recyclable materials in appropriate containers. The design, construction and accessibility of recycling areas and enclosures shall be subject to architectural review approval pursuant to Chapter 18.76 (Permits and Approvals). (Ord. 4826 § 112, 2004: Ord. 4069 § 12, 1992) 9/12/2016 Chapter 18.80 AMENDMENTS TO ZONING MAP AND ZONING REGULATIONS http://library.amlegal.com/alpscripts/getcontent.aspx 1/6 Print Palo Alto Municipal Code Chapter 18.80 AMENDMENTS TO ZONING MAP AND ZONING REGULATIONS Sections: 18.80.010 Amendments 18.80.020 Changes in District Boundaries 18.80.030 Application by Property Owner 18.80.035 Application for SingleStory Overlay Districts 18.80.040 Initiation by City 18.80.050 Action by Director 18.80.060 Notice of Public Hearing 18.80.070 Action by Commission 18.80.080 Changes in Regulations 18.80.090 Recommendations by Planning Commission 18.80.100 Action by City Council 18.80.110 Resubmittal of Application 18.80.120 Prezoning 18.80.010 Amendments This title may be amended by changing the boundaries of districts, or by changing the regulations applicable within one or more districts, or by changing any other provision of this title, whenever the public interest or general welfare may so require. (Ord. 3048 (part), 1978) 18.80.020 Changes in District Boundaries Changes in the boundaries of districts established by this title may be initiated by any one of the following actions: (a) By application of a property owner as provided by Section 18.80.030. (b) By motion of the city council, or by motion of the planning commission, as provided by Section 18.80.040. 9/12/2016 Chapter 18.80 AMENDMENTS TO ZONING MAP AND ZONING REGULATIONS http://library.amlegal.com/alpscripts/getcontent.aspx 2/6 (c) For creating or removing a singlestory combining district (S), by application of an affected property owner as provided by Section 18.80.035, or by motion of the city council or planning commission, as provided by Section 18.80.040. (Ord. 4869 § 47, 2005: Ord. 3048 (part), 1978) 18.80.030 Application by Property Owner (a) Application for a change in district boundaries may be made by the owner of record of property for which a change is sought, or by one of the following: (1) A purchaser of property for which a change is sought, when acting pursuant to a contract in writing duly executed and acknowledged by both the buyer and the owner of record; (2) A lessee in possession of property for which a change is sought, when acting with the written consent of the owner of record; (3) An agent of the owner of record of property for which a change is sought, when duly authorized by the owner in writing. (b) Application shall be made to the director on a form prescribed by the director, and shall contain the following: (1) A description and map showing the boundaries of existing and requested districts, and identifying the property for which a change of district is requested; (2) A written statement setting forth the reasons for the application and all facts relied upon by the applicant in support thereof; (3) Such additional information as the director may deem pertinent and essential to the application. (c) Application for a change in district boundaries shall be accompanied by the fee prescribed by the municipal fee schedule, no part of which shall be returnable to the applicant. (Ord. 3048 (part), 1978) 18.80.035 Application for SingleStory Overlay Districts An application for creation or removal of a singlestory combining district may be made by an owner of record of property located in the singlestory overlay district to be created or removed, in accordance with the requirements of 18.12.100 (Regulations for the Single Story Overlay (S) Combining District). Such applications shall be considered in accordance with the provisions of this Chapter 18.80. (Ord. 4869 § 48, 2005) 18.80.040 Initiation by City (a) Upon its own initiative, either the city council or the planning commission may by motion initiate application and proceedings for a change in district boundaries. (b) A motion of the city council or the planning commission pursuant to this section may include any public or private property, and shall be accompanied by such maps or descriptions as may be necessary to define existing and proposed boundaries of districts, and by a statement, describing in general terms, the 9/12/2016 Chapter 18.80 AMENDMENTS TO ZONING MAP AND ZONING REGULATIONS http://library.amlegal.com/alpscripts/getcontent.aspx 3/6 reasons for consideration of a change in district boundaries. The motion shall be directed to the director, who shall process the application, without fee, as otherwise prescribed in this chapter. (Ord. 3048 (part), 1978) 18.80.050 Action by Director (a) Upon receipt of an application for change in boundaries, or upon receipt of the motion of the city council or the planning commission, or upon the expiration of a development schedule in a PC zone, the director shall notify the chairman of the planning commission. (b) Upon receipt of such notice, the chairman of the commission shall, on or before the fifteenth day of the month following the month in which the application or motion was filed, set a date for a public hearing upon the matter at either a regular or special meeting of the commission, unless the application is a minor change to a planned community district development plan diverted to minor architectural review under Section 18.76.020(b)(3)(D). Nothing contained in this section modifies any provision of or authority granted by Section 18.76.020(b)(3)(D). The hearing before the commission shall commence within ninety days of the date of filing. (Ord. 4826 § 136, 2004: Ord. 3345 § 22, 1982; Ord. 3048 (part), 1978) 18.80.060 Notice of Public Hearing (a) The planning commission shall give a notice of hearing on a proposed change of district boundaries in the following manner: (1) Notice of the hearing shall be given by publication once in a local newspaper of general circulation not less than twelve days prior to the date of the hearing. (2) Additionally, excepting a citywide change in the zoning map, the city shall mail written notice of such hearing at least twelve days prior to the date of the hearing to each owner of real property and to each residential occupant within 600 feet of the exterior boundary of the property for which classification is sought. Notice shall be provided as specified in Section 18.77.080. Compliance with the procedures set forth in this section shall constitute a good faith effort to provide notice, and the failure of any owner or occupant to receive notice shall not prevent the city from proceeding with the hearing or from taking any action nor affect the validity of any action. (b) The notice of public hearing shall contain the following: (1) The exact address of the property, if known, or the location of the property, if the exact address is not known, and the existing and requested district or districts applicable; (2) The time, place and purpose of the hearing; (3) A brief description, the content of which shall be in the sole discretion of the city, of the change in district boundaries or regulations sought; (4) Reference to the application or motion on file for particulars; and (5) A statement that any interested person, or agent thereof may appear and be heard. Typographical and/or publishing errors shall not invalidate the notice nor any city action. (Ord. 4964 § 22, 2007: Ord. 3536 § 40, 1984: Ord. 3465 § 60, 1983: Ord. 3273 § 4,1981: Ord. 3048 (part), 1978) 9/12/2016 Chapter 18.80 AMENDMENTS TO ZONING MAP AND ZONING REGULATIONS http://library.amlegal.com/alpscripts/getcontent.aspx 4/6 18.80.070 Action by Commission (a) On the basis of evidence and testimony presented to the commission at the public hearing, the commission may determine that the public interest will be served either by revising the area being considered for reclassification to include properties not originally part of the application, or by giving consideration to district classifications not originally requested by the application. The commission may, solely at its option, consider additional properties or district classifications, or both. (b) If the area proposed for reclassification is enlarged, or the district proposed for any parcel is changed to a district of a less restrictive nature than originally cited in the notice of public hearing, additional notice shall be given in accord with Section 18.80.060, and the hearing shall be continued, allowing public consideration of and comment upon the enlarged or less restrictive proposal. (c) If the modifications, if any, considered by the commission involve the same or a reduced area, or involve alternative districts of a generally equivalent or more restrictive nature than originally cited in the notice of public hearing, no additional notice or hearings shall be required. (d) If, from the facts presented at the public hearing, including public testimony and reports and recommendations from the director of planning and community environment or other appropriate city staff, the commission finds that a change of district boundaries would be in accord with the purposes of this title and in accord with the Palo Alto Comprehensive Plan, the commission may recommend such change as it deems appropriate to the council. (e) If the commission finds that a change of district boundaries, either as requested by an application or as modified by the commission pursuant to this section, would not be in accord with the purposes of this title, or would not be in accord with the Palo Alto Comprehensive Plan, the commission shall recommend against any such reclassification. (f) The decision of the commission shall be rendered within a reasonable time following the close of any public hearing or hearings and the written recommendation of the commission shall be forwarded to the council within thirty days thereof. The recommendation of the commission shall set forth fully the findings and determinations of the commission with respect to the application. (Ord. 3048 (part), 1978) 18.80.080 Changes in Regulations Changes in the provision of this title other than the boundaries of districts may be initiated from time to time, by one of the following actions: (a) Changes in the provision of this title other than the boundaries of districts may be initiated from time to time, by one of the following actions: (1) By motion of the city council on its own initiative; (2) By motion of the planning commission on its own initiative; or (3) By application of the owner of property that would be subject to the proposed text amendment. (b) Changes initiated by motion of the council shall be forwarded to the commission, and may be supplemented by such explanatory material as the council may deem appropriate to facilitate review and recommendation by the commission. A request by a property owner shall be supplemented by an application, statement and explanatory material as required by the director under Section 18.80.030. Changes initiated by application of a property owner shall require consideration by the planning and transportation commission first as an initiation request to determine whether to proceed with the rezoning 9/12/2016 Chapter 18.80 AMENDMENTS TO ZONING MAP AND ZONING REGULATIONS http://library.amlegal.com/alpscripts/getcontent.aspx 5/6 request and public hearing. If the commission so directs, the text revisions shall be reviewed pursuant to the provisions of Section 18.80.090. (Ord. 4964 § 23, 2007: Ord. 3048 (part), 1978) 18.80.090 Recommendations by Planning Commission The commission shall review any proposed change in the provisions of this title, whether initiated by the council or the commission. The planning commission shall hold a public hearing on any changes proposed to the zoning regulations. Notice of the time and place of such hearing and the purpose thereof shall be given by publication once in a local newspaper of general circulation not less than twelve days prior to the date of hearing. In the case of proposed changes initiated by the council, the commission shall forward its recommendations to the council within a reasonable time period, but not to exceed one hundred eighty days in any event unless extended by the council. In the case of proposed changes initiated by the commission, the commission shall forward its recommendations to the council at such time as it deems appropriate. The written recommendation of the planning commission shall be submitted to the council, and shall set forth the findings and determinations of the commission with respect to the proposed change. Nothing in this section shall prevent the city council from changing or suspending operation of any provision of this title for temporary periods when in the determination of the council such suspension or change is necessary for the public health, safety or welfare. In such case, planning commission review shall not be required. (Ord. 4181 § 5, 1993: Ord. 3465 § 61, 1983: Ord. 3273 § 5, 1981: Ord. 3130 § 21,1979: Ord. 3048 (part), 1978) 18.80.100 Action by City Council Upon receipt of the recommendation of the planning commission on a change of district boundaries, or on a change to the provisions of this title other than a change in district boundaries, the council may, at its option, give notice of a hearing in the manner provided by Sections 18.80.060 or 18.80.090, whichever is applicable. After consideration of the recommendation of the planning commission, and the completion of a public hearing, if any, the council may approve, modify, or disapprove the proposed change ofdistrict boundaries or change of any other provisions of this title. Should the council determine that a change of district boundaries or change of any other provisions of this title shall be appropriate, such change shall be accomplished by ordinance. (Ord. 4826 § 137, 2004: Ord. 3273 § 6, 1981: Ord. 3048 (part), 1978) 18.80.110 Resubmittal of Application When an application for change of district boundaries has been submitted by a property owner and subsequently denied by the council, no new application by a property owner for the same change, or for substantially the same change, either with respect to properties included within the proposed change or with respect to proposed district classifications, or both, shall be filed or accepted by the director within one year of the date of closing of the hearing before the commission, except upon a showing to the satisfaction of the 9/12/2016 Chapter 18.80 AMENDMENTS TO ZONING MAP AND ZONING REGULATIONS http://library.amlegal.com/alpscripts/getcontent.aspx 6/6 director of a substantial change of circumstances. This provision shall not be construed to prevent the initiation of proceedings by either the planning commission or city council in accord with Section 18.80.040 at any time. (Ord. 3048 (part), 1978) 18.80.120 Prezoning The determination of district classifications and district boundaries appropriate for property located outside the city, but potentially subject to annexation, may be made in the same manner as prescribed in this chapter for any property within the city; provided, that any ordinance duly passed by the city council establishing or changing such classification shall become effective only upon the effective date of annexation of such property to the city. Upon passage of such an ordinance, the zoning map shall be revised to show the prezoned or potential classification to become effective upon annexation, and shall identify the district or districts applicable to such property with the label or nomenclature "PREZONED." (Ord. 3048 (part), 1978) City of Palo Alto (ID # 7283) City Council Staff Report Report Type: Action Items Meeting Date: 9/26/2016 City of Palo Alto Page 1 Summary Title: Minimum Wage Recommendation from Policy and Services to Council Title: Policy and Services Committee Recommends Adoption of an Ordinance Amending the City's Minimum Wage Ordinance to Align With the Santa Clara Cities Association Recommendation to Increase the Minimum Wage to $15 per Hour in Three Steps: $12 on 1/1/2017; $13.50 on 1/1/2018, $15.00 on 1/1/2019, and a CPI Increase After 2019 Indexed to the Bay Area CPI With a 5 Percent Cap and No Exemption From: City Manager Lead Department: Administrative Services RECOMMENDATION The Policy and Services Committee recommends that the City Council adopt the attached Ordinance (Attachment B) amending the City’s Minimum Wage ordinance to align with the Cities Association recommendation to increase the minimum wage to $15 per hour in three steps: $12 on 1/1/2017; $13.50 on 1/1/2018, $15 on 1/1/2019, and a CPI increase after 2019 indexed to the Bay Area CPI with a 5 percent cap and no exemptions. Discussion On August 16, 2016 the Policy and Services Committee reviewed the status of Palo Alto’s minimum wage and considered changes (Attachment A). The minutes of the meeting are included as Attachment C. Committee discussion largely focused on the Cities Association of Santa Clara County recommendation (Attachment A) along with possible changes. Comments from members of the public in attendance at the meeting were primarily a mix of those in support of increasing the minimum wage to $15 per hour and some businesses recommending an exemption for wait staff in restaurants. The City Attorney noted that California is one of just a few states prohibiting tip credits as follows: “No employer or agent shall collect, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron, or deduct any amount from wages City of Palo Alto Page 2 due an employee on account of a gratuity, or require an employee to credit the amount, or any part thereof, of a gratuity against and as a part of the wages due the employee from the employer. Every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for…. .” (Labor Code 351.) Whether this State law applies only to the state minimum wage or also to a local minimum wage has not been decided in court.1 From a policy standpoint, the Cities Association’s research shows that the restaurant industry accounts for 20.2% of the County’s lower end wages and that 71% of restaurant employees would be impacted by a local minimum wage. Policy & Services Committee Recommendation After public comment and Committee discussion the following motion was passed by the Committee on a 4-0 vote. MOTION: Vice Mayor Scharff moved, seconded by Council Member Kniss to recommend the City Council approve the Cities Association recommended minimum wage increase without the off-ramp triggers and direct Staff to prepare related Ordinance amendments to increase the minimum wage to $15 in three steps: $12 on 1/1/2017, $13.50 on 1/1/2018, $15 on 1/1/19, and a CPI increase after 2019 indexed to the Bay Area with a 5% cap and no exemptions. The Committee also directed staff place the report on the agenda as an action item A draft ordinance is attached, which incorporates the Committee’s recommendation. Should the Council accept the Committee’s recommendation without changes the ordinance is provided to facilitate timely approval. If the Council proposes a more aggressive phase in schedule, staff recommends the ordinance be re-agendized for another first reading. Noticing for the upcoming minimum wage rate must take place in October and be officially posted in December. Restaurant Association Outreach Following the Committee’s meeting the Restaurant Association requested a meeting with staff prior to the full Council review of the ordinance. The meeting is currently scheduled for September 16 and staff will summarize the discussion at the Council meeting. ENVIRONMENTAL IMPACT An ordinance to increase the minimum wage is not a project for purposes of the California Environmental Quality Act. Attachments: Attachment A: CMR ID# 7161 (PDF) 1 The City Attorney has provided further legal analysis to the City Council in a confidential memorandum. City of Palo Alto Page 3 Attachment B: Ordinance Amending Citywide Minimum Wage (PDF) Attachment C: Excerpt Minutes from Policy and Services Committee 08-16-16 (PDF) City of Palo Alto (ID # 7161) Policy and Services Committee Staff Report Report Type: Action Items Meeting Date: 8/16/2016 City of Palo Alto Page 1 Summary Title: Update on Minimum Wage and Possible Options for Increasing the Local Minimum Wage Title: Consider Options for Changing the Palo Alto Minimum Wage, Currently $11 Per Hour, By Further Increasing the Rate and Considering Exemptions and Direct Staff to Take Related Action or Maintain the Existing Rate and Rate Increase Scheduled for January 2017 From: City Manager Lead Department: Administrative Services RECOMMENDATION Staff recommends that the Policy and Services Committee (P&S) review options for changing the Palo Alto minimum wage, currently $11.00 per hour, and that P&S recommend to the full Council to direct staff (1) to prepare ordinance amendments and take related actions or (2) to maintain the existing rate; publish the October 2016 announcement of the new rate, and implement the new rate increase scheduled for January 2017. BACKGROUND In 2015, the Council approved an ordinance establishing a local Palo Alto minimum wage (Attachment A). The ordinance structure was modeled after other Santa Clara cities, but the wage rates were slightly different. Palo Alto’s local minimum wage went into effect on January 1, 2016, with an initial hourly wage rate of $11.00 per hour. Under the current ordinance the minimum wage is set to increase on January 1, 2017 by an amount equal to the consumer price index. The City is required to announce the upcoming change by October of each year. There have been several developments since Palo Alto’s adoption of its minimum wage ordinance. First the Governor signed SB-3 a new statewide law which increases minimum wages to $15 an hour by 2022 for large businesses and 2023 for small businesses. Starting in 2024, the minimum wage will be indexed to the cost of living. The State minimum wage is currently $10.00 and under the new legislation will increase to $10.50 on January 1, 2017. Second, the Cities Association of Santa Clara County recently voted to encourage all Santa Clara cities to consider a regional effort to increase the minimum wage to $19.00 by 2019. The Cities Association also recommended some refinements to local minimum wage ordinances to better City of Palo Alto Page 2 align with the State’s new minimum wage legislation. In light of these developments, Council may want to review Palo Alto’s minimum wage and consider options for changing it. DISCUSSION Palo Alto’s minimum wage is $11.00 per hour and is set to increase to approximately $11.11 on January 1, 2017 as established by the current City of Palo Alto ordinance. The ordinance also requires the new minimum wage to be announced in October, 2016 and every October proceeding the annual January increase. Since Council adopted the minimum wage in 2015, a regional minimum wage effort has been proposed by the Cities Association of Santa Clara County (Attachment B). Vice Mayor Scharff represents Palo Alto at the Cities Association. In April and June, the Cities Association discussed minimum wage and a related presentation (Attachment C), and subsequently issued a joint press release with other stakeholders (Attachment B). The Cities Association proposal would increase the minimum wage to $15 per hour by 2019, earlier than the State plan to reach $15 per hour by 2022. Minutes of the Cities Association meetings are included (Attachments D and E). The table below shows the current Palo Alto minimum wage along with the Cities Association proposed regional effort and state minimum wages. The Palo Alto minimum wage is shown with the current national CPI inflator along with the regional CPI inflator for comparison. Current Palo Alto Minimum Wage with Projections and Comparisons to the Proposed Regional Minimum Wage and the State Minimum Wage Calendar Year Current Palo Alto Min Wage Ordinance (based on national CPI) Palo Alto Minimum Wage with Bay Area CPI Proposed Regional $15 in 2019; then Bay Area CPI (fixed increases until 2019) State $15 in 2022 for large businesses and 2023 for small*; then National CPI (fixed increases until 2022) 2016 $11.00 $11.00 2017 $11.11 $11.30 $12.00 $10.50 2018 $11.23 $11.62 $13.50 $11.00 2019 $11.34 $11.95 $15.00 $12.00 2020 $11.46 $12.28 $15.43 $13.00 2021 $11.58 $12.63 $15.86 $14.00 2022 $11.71 $12.99 $16.31 $15.00 2023 $11.83 $13.36 $16.77 $15.16 2024 $11.95 $13.74 $17.25 $15.32 2025 $12.08 $14.13 $17.74 $15.48 *Small businesses are defined as 25 or fewer employees. City of Palo Alto Page 3 Under the current projected increases for the Palo Alto minimum wage the rate wouldn’t increase to $15 until after 2025. This is in contrast to the State minimum wage hitting $15 in 2022 (for large employers) and the proposed regional minimum wage getting to $15 in 2019, as highlighted above. Exceptions The Cities Association voted not to make recommendations on exceptions, instead deferring to local cities to act on exceptions. The Council asked the Policy and Services Committee to consider two exceptions: a youth/learners exception and a wait staff exception. The City’s ordinance is designed to complement State minimum wage law. Structurally, this is accomplished by incorporating the State’s minimum wage law in the City’s definition of “employee.” This reference also serves the purpose of incorporating the State’s standard minimum wage exemptions. One such exemption is the State’s learner exemption. Under this exemption, learners may be paid not less than 85% of the minimum during their first 160 hours of employment in occupations in which they have no previous similar or related experience.”1 The Santa Clara County cities with minimum wage ordinances (including Palo Alto) have not gone beyond the learners exemption. On the other hand, cities with active job training programs (Berkeley, Richmond and San Francisco) have adopted expanded youth/learner exemptions. Berkeley makes an exception for trainees up to 25 years of age in youth job training programs operated by non-profits or governmental agencies. Richmond makes an exception for the 15 to 21-year-old employees in its Youth Summer Employment Program. And San Francisco allows employers to pay a slightly lower minimum wage to youth under the age of 18 employed as an after-school or summer employee in a bona fide training/apprenticeship program and in a government-subsidized position. As an exception to its Minimum Compensation Ordinance (which applies to contractors), San Francisco has a youth exception for an after-school or summer employee under the age of 18 who is claimed as a dependent for federal income tax purposes. (See Attachment C.) This is largely a policy call for the Council. Consideration of a wait staff exception is more complicated. Thus far, no other city has adopted such an exception. California, unlike other states, has a unique state law (California Labor Code Section 351) which prohibits tip credits as follows: “351. No employer or agent shall collect, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron, or deduct any amount from wages due an employee on account of a gratuity, or require an employee to credit the amount, or any part thereof, of a gratuity against and as a part of the wages due the employee from the employer. Every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for…. .” (Emphasis added.) 1 The State defines “learners” as: “Employees during their first 160 hours of employment working in occupations in which they have no previous similar or related experience. A learner may be of any age.” http://www.dir.ca.gov/dlse/faq_minimumwage.htm. City of Palo Alto Page 4 Whether section 351 applies only to the state minimum wage or also to a local minimum wage has not been decided in court. The City Attorney will provide further analysis to the Council in a confidential memorandum. From a policy standpoint, the Cities Association’s research shows that the restaurant industry accounts for 20.2% of the County’s lower end wages and that 71% of restaurant employees would be impacted by a local minimum wage. Other Ordinance Changes In addition to the exceptions, the Cities Association also recommended cities consider the following additional issues: • Ramp in 3 steps $12.00 on 1/1/17, $13.50 on 1/1/18, $15.00 on 1/1/19 • “Off-ramp” triggers during ramp phase • Index to Bay Area CPI-W after 2019, capped at 5% Local Economic Study The City of San Jose sponsored a study through the University of California at Berkeley to estimate the impact of a $15.00 minimum wage on businesses and the local economy. The study concluded that there would be an overall net positive impact for workers with the implementation of the minimum wage. The study is available in Attachment H. Local Outreach Two Palo Alto organized surveys have been conducted over the past year collecting input from employees and business owners regarding minimum wage. The results of those surveys indicate some support for increasing the minimum wage. The summaries of the survey responses are included (Attachments F and G). Update on Enforcement The City contracts with the City of San Jose for minimum wage enforcement services. San Jose has received one complaint since January 2016 and is currently investigating the matter. FISCAL IMPACT The City of Palo Alto increased the minimum pay rate for its employees in 2015 to match the $11.00 minimum wage starting in 2017. This rate will have a negligible impact on the City’s budget. The City will raise the minimum rate in January 2017 at either the current level inflated by CPI, or at another level as approved by Council. This will have a negligible impact on the budget as there is only one current employee paid near the minimum wage level of $11.24 per hour. The proposed regional minimum wage, if enacted in Palo Alto, also will have a similar City of Palo Alto Page 5 negligible effect on the City’s budget since few employees are currently paid less than $15 per hour. ENVIRONMENTAL IMPACT An ordinance to increase the minimum wage City-wide, if adopted, is exempt from CEQA per Guidelines Section 15061(b)(3), because it can be seen with certainty that there is no possibility that the action may have a significant effect on the environment. Attachments: Attachment A: Staff Report Minimum Wage August 24 2015 (PDF) Attachment B: Cities Assoc Press Release June 16 2016 (PDF) Attachment C: Cities Assoc Presentation Min Wage June 9 2016 (PDF) Attachment D: Cities Association Meeting Minutes June 2016 (PDF) Attachment E: Cities Assoc Minutes April 2016 (PDF) Attachment F: Survey Employees Individuals 2015 (PDF) Attachment G: Survey Managers Businesses 2015 (PDF) Attachment H: San Jose Memo on Sponsored Study and Links to Findings and Study Report (PDF) CITY OF PALO ALTO OFFICE OF THE CITY ATTORNEY August 24, 2015 The Honorable City Council Palo Alto, California Recommendation to Adopt an Ordinance Implementing a Local Minimum Wage Requirement of $11.00 by January 1, 2016 and Discussion of Collaborating With Other Cities to Implement a Regional Minimum Wage of $15.00 Per Hour by 2018 RECOMMENDATION The Policy and Services Committee and Staff recommend that the City Council: 1. Adopt an Ordinance Adding Chapter 4.62 to Title 4 of the Palo Alto Municipal Code to Require the Payment of a City-Wide Minimum Wage (Attachment A), to take effect on January 1, 2016; 2. Establish a base wage of $11.00 to commence of January 1, 2016; 3. Discuss collaborating with other cities to implement a regional minimum wage of $15.00 by 2018; and 4. Provide input on an outreach plan. EXECUTIVE SUMMARY On February 9, 2015, the City Council considered a Colleagues memo recommending the adoption of a city-wide minimum wage ordinance modeled after those recently adopted in Mountain View and Sunnyvale. (Attachment B.) The Council voted to refer the matter to the Policy and Services Committee for further consideration and for recommendation on a near- term base wage, inflationary adjustments and long term goals. Council also requested the Committee make a recommendation to Council regarding a strategy for outreach/education, investigation and enforcement of violations. On April 28, 2015, the Policy and Services Committee reviewed a draft ordinance modeled after the cities of Mountain View and Sunnyvale. The draft ordinance applies to all employees in Palo Alto who work more than 2 hours per week. The Committee recommended that the base wage be increased to $11.00, rather than the $10.30 currently in place in Mountain View and Sunnyvale. The Committee reasoned that the $11.00 rate would ultimately align with neighboring cities and provided an enhancement to State minimum wage which is scheduled to increase to $10.00 in 2016. The ordinance also contains an annual adjustment based on the US Department of Labor’s Regional Consumer Price Index. To provide regional consistency and to reduce costs of enforcement it permits Palo Alto to contract with the City of San Jose for complaint driven enforcement. Page 2 BACKGROUND Effective July 1, 2014, State law required a minimum wage of $9.00 per hour. The State law minimum wage will increase to $10.00 per hour on January 1, 2016. The Federal minimum wage for covered nonexempt employees has been $7.25 per hour since July 24, 2009. The Federal minimum wage applies to States and cities without their own minimum wage requirements. Given the high cost of living in the Bay area, many northern California cities are beginning to enact local wage ordinances. On November 6, 2012, City of San Jose voters approved a minimum wage ordinance by ballot initiative. It required employers to pay their employees a minimum wage of $10.00 per hour as of March 11, 2013 for work performed within the City of San Jose and required the minimum wage to increase annually by the cost of living, beginning on January 1, 2014. The current minimum wage under the San Jose ordinance is $10.30 per hour, and it will increase by an annual Consumer Price Index (CPI) adjustment every January 1. The City of Berkeley adopted a minimum wage ordinance on June 27, 2014 of $10.00 per hour effective October 1, 2014, and the City of Richmond adopted an ordinance on May 6, 2014 of $9.60 per hour effective January 1, 2015. Most recently in October 2014, the City of Sunnyvale adopted a minimum wage of $10.30 effective January 1, 2015 and Mountain View adopted a $10.30 minimum wage effective July 1, 2015. Like San Jose’s ballot initiative, both Sunnyvale and Mountain View’s ordinances included annual cost of living adjustments. In addition, the Mountain View Council directed staff to come back with a plan to raise the minimum wage to $15.00 by 2018 (coining the phrase “15 by 18”). Attachment C summarizes cities that have recently adopted a local minimum wage ordinance. DISCUSSION Legal Framework of Ordinance As directed by Council, the framework of the proposed minimum wage ordinance follows the Sunnyvale and Mountain View model. It is also similar to San Jose’s ordinance and the ordinance that Santa Clara is considering. Because San Jose’s ordinance was adopted by initiative, the San Jose Council may not amend it in any substantive manner without voter approval. As Mountain View and Sunnyvale were not constrained by voter initiative governing San Jose, they added helpful clarifications such as defining organizations that are exempt because of sovereign immunity, which include State, Federal, and County agencies, as well as school districts. The proposed Palo Alto ordinance includes similar legally required exemptions and also authorizes the City to adopt administrative guidelines to retain flexibility in developing implementation and enforcement procedures and responding to specific instances. As drafted, the ordinance requires covered employers who are either subject to the City’s business registry requirements, conduct business in Palo Alto1 or maintain a business facility in 1 This phrase was inserted into Palo Alto’s draft following the Policy & Services Committee meeting to capture employees who worked for a business not having an office in Palo Alto. Since Palo Alto’s business registry only Page 3 the City to pay the minimum wage to covered employees. Covered employees are those who perform at least two (2) hours of work in a calendar week within the geographic boundaries of the City. For ease of administration, like neighboring cities, Palo Alto’s draft incorporates State minimum wage law exemptions. These exemptions include independent contractors as well as other employees exempt by statute or wage order (for example minor babysitters who are babysitting in an employer’s home). The ordinance, as drafted, would go into effect on January 1, 2016 as directed by the Policy and Services Committee, although that date could easily be changed if the Council desired additional outreach. The City’s minimum wage would be slightly higher than Sunnyvale, Mountain View and San Jose’s 2015 rate of $10.30 per hour and likewise would be adjusted by the US Department of Labor’s Regional Consumer Price Index annually thereafter on January 1 of each year. In addition to the payment of the minimum wage, other significant terms of the ordinance require covered employers to: • Post a notice at the workplace of the current and prospective minimum wage rates and the employees’ rights under the local law; • Maintain payroll records for a period of four years; and • Provide the employer’s name, address, and telephone number in writing to each employee at the time of hire. The ordinance also prohibits retaliation or discrimination against any person seeking to enforce its terms. The enforcement provisions of the ordinance include the right for employees to pursue a civil action to recover back wages and to seek reinstatement. The ordinance also authorizes the City to issue administrative citations and monetary fines, conduct administrative hearings, and seek injunctive relief against noncompliant employers. Compliance and Enforcement If Palo Alto adopts an ordinance substantially the same as San Jose’s, compliance and enforcement under the ordinance could be a coordinated effort with the City of San Jose Office of Equality Assurance (OEA). Staff recommends that, at least initially, certain functions be performed by the OEA because: (1) the OEA has dedicated staff who are well-versed in the workings of the ordinance which would offer efficient enforcement for the City; and (2) through initial assistance from the OEA, the City will learn from San Jose’s experience in administering the ordinance. Legal staff has had preliminary discussions with OEA staff who indicated they are willing to contract with the City to handle early enforcement functions such as initial complaint intake requires businesses having a physical office in Palo Alto to register, this additional language is needed to protect transitory employees working in Palo Alto. For instance, the ordinance would apply to a gardening service having a home office in Los Altos, and employing gardeners who perform work in Palo Alto. The ordinance, of course, would only apply to the hours worked by such employees in Palo Alto. Page 4 and investigation, and informal resolution of complaints. This arrangement would be memorialized by contract between the City and OEA, with fees likely to be set as flat fees per task. Based on the relatively low number of enforcement cases handled by San Jose to date, staff estimates the annual cost of OEA enforcement assistance to be low, not exceeding several thousand dollars annually. Both Sunnyvale and Mountain View have similar contracts with OEA. Update on Regional Efforts The Cities Association has formed a subcommittee on minimum wage. On June 6, 2015, the subcommittee issued a report recognizing Silicon Valley’s particularly high cost of living and urging cities to prioritize a regional approach to the minimum wage. (See Attachment F.) Also, following the Policy and Services Committee meeting, the Mayors of Sunnyvale and Mountain View sent a letter to Palo Alto requesting collaboration on a regional approach to raise the minimum wage to $15.00 by 2018. The letter suggested the following potential phasing schedule: The letter and related press release are attached as Exhibits G and H. Staff requests the Council to provide input on this request. Implementation of a regional program or an additional increase in minimum wage in Palo Alto would require an ordinance and would remain within the authority of Council to determine at a future time. Public Outreach and Input Most cities who adopted minimum wage ordinances conducted some form of outreach prior to their council’s formal consideration of the ordinance. The most common forms of outreach were community input meetings and online surveys. On March 25, 2015, the City posted the question, “Should the City of Palo Alto adopt an ordinance setting a local minimum wage that is higher than the State minimum wage?” on Open City Hall (an online engagement tool). Page 5 A total of 197 individuals visited the topic on Open City Hall with 52 posting responses to the question. Approximately two-thirds of those responding indicated they were in support of raising the local minimum wage to a level higher than California’s. For those who indicated they were opposed, there were a number of similar reasons including: minimum wage jobs are not designed to support a family but are designed to pay unskilled workers; minimum wage should be used for entry level jobs for teenagers; minimum wage hike will impact local small businesses; federal and state should set regulations; those needing hike in minimum wage cannot afford to live in Palo Alto; the cost of labor should be consistent with the task not the location. Those in support of raising the local minimum wage above California’s noted the high cost of living in Palo Alto, and in some cases, indicated that even raising the minimum wage level would not help people to live in Palo Alto. However, a number of posters suggested that raising the minimum wage was a good idea to help with living expenses, and also to align with similar actions in nearby cities. Staff has conducted additional outreach to the business and greater community by utilizing a variety of methods including Survey Monkey (an online survey tool), Nextdoor and Facebook (social media) and by attending meetings with various business groups including the Chamber of Commerce, the Downtown Business & Professional Association, and the California Avenue Area Business Association/ Merchants of California Avenue. Additionally, staff attended a forum hosted by the Chamber that included several Council Members. Input from Open City Hall, Nextdoor, and Facebook is included as Attachment D and E, respectively. General feedback through the variety of channels outlined above was mixed, with many in support of raising the minimum wage, including the regional approach of $15 by 2018. Some concerns expressed included the unknown economic impacts that a $15 minimum wage by 2018 could cause, whether student job opportunities might be harmed, and the impacts to non-profits. Restaurant owners/ managers generally opposed the idea of including tipped employees within the ordinance. The reasoning noted was that effect of not excluding tipped employees who often make $30/hr or more would have the effect of increasing their wage while taking limited funds away from kitchen and janitorial staff who live off minimum wage. Other concerns had to do with questions about which businesses were covered, as well as the connection between those subject to the Business Registry and to the Minimum Wage Ordinance. Staff has attempted to clarify these questions within the attached ordinance. Currently, there are two active surveys to gauge opinions, especially as they relate to the potential of a regional effort, from business owners, employees, and the greater community. The surveys are available at https://www.surveymonkey.com/r/F9T56B5 and https://www.surveymonkey.com/r/FNMKX72. Results are anticipated to be included in further discussion at subsequent Policy & Services and/or Council meetings. Page 6 Potential Business and Economic Impact Although Council did not direct staff to perform a detailed economic analysis of the potential impacts of a minimum wage increase in Palo Alto, the results of local surveys and studies were gathered in order to provide a general overview. Two predominant viewpoints on the impact of a minimum wage increase are whether an increase would stimulate the economy, boost spending, and reduce employee turnover versus whether it would create increased business costs, higher prices on goods and services, and job losses. In 2012, during the City of San Jose minimum wage deliberations, a study was released by Beacon Economics on behalf of the California Restaurant Association, which concluded that minimum wage ordinances have a large impact on the restaurant industry, where profit margins are generally slim. The report suggested that San Jose’s minimum wage ordinance would lead to a loss of 900 to 3,100 jobs, and would cost San Jose employers $88 million to $96 million in increased wages and payroll expenses, which would be partially offset from increased spending by workers of $26 million to $28 million. A subsequent report issued by the Institute for Research on Labor and Employment at the University of California, Berkeley, differed from the Beacon Economics findings. In contrast, Berkeley economists found that increasing the minimum wage would increase business operating costs by an “average of less than 2.5 percent,” and would create cost savings due to lower employee turnover rates and higher worker productivity. Further, with more income, minimum wage workers would have more spending power and inject more money into the local economy, which would benefit both businesses through increased sales and the government through increased sales tax revenue. Finally, the report asserts that gainful employment of low-wage workers does not change after a minimum wage increase, and any negative outcomes typically affect teens, not adults. Since the San Jose minimum wage increase took effect on January 1, 2014, the Institute for Research on Labor and Employment estimates that operating costs for restaurants rose by approximately 0.25 percent to 1.0 percent over the past year and prices for customers rose less than 1.0 percent on average. These cost increases coincided with a booming economy and increased consumer spending throughout Silicon Valley. Employers also reported experienced employees staying longer at their jobs. Overall, minimum wage ordinances may create tangible impacts to the business community and consumers. The magnitude of these impacts is difficult to assess and would likely vary by city. Page 7 FISCAL IMPACT The adoption of a minimum wage ordinance is anticipated to have a minimal fiscal impact on the City in terms of both wages paid by the City and anticipated enforcement costs. The City currently pays the State minimum wage of $9.00 per hour or above to all City employees. No employee is currently paid at minimum wage. The lowest City hourly wage paid is $9.89. Based on a payroll census from August, 64 hourly positions are paid below $11.00 per hour. If Council adopts an hourly wage of $11.00 the ongoing increased cost to the General Fund would be approximately $7,000 annually. Seven classifications: Instructor Aide, Recreation Aide, Recreation Leader, Arts & Sciences Aide, General Laborer, Staff Specialist and Journey Level Laborer all have their beginning rate below the $11.00 hourly rate. All of these classifications are in the Limited Hourly or SEIU Hourly groups. If Council chooses to increase the minimum wage, staff will return to Council with a recommendation for existing positions and the detailed fiscal impact to the General Fund. The State minimum wage will increase to $10.00 per hour on January 1, 2016, and the City would similarly pay that wage rate if it does not adopt it’s own minimum wage ordinance. In addition, all City contractors are also required to pay their employees the State minimum wage. If adopted, the City minimum wage would be $11.00 per hour on January 1, 2016, adjusted annually thereafter by CPI increases on January 1 of each following year. In terms of enforcement costs, the ordinance as drafted allows delegation of preliminary investigation and informal resolution tasks to the San Jose OEA, which staff recommends. Based upon a relatively low volume of complaints received in San Jose since the adoption of its ordinance, the cost for this delegated work is estimated to not exceed several thousand dollars per year. The Administrative Services Department (ASD) would take a lead on minimum wage issues for the City and oversee the agreement with the City of San Jose. ASD staff will monitor the level of activity and budget accordingly in future years. If a complaint advances to the formal administrative hearing stage, the ordinance provides that the City will handle such proceedings in accordance with already established procedures in the City Code. Based on San Jose’s experience to date, staff anticipates that few formal administrative proceedings will be needed, and therefore City costs for formal enforcement are likely to be nominal. If formal proceedings are required, however, City costs could be considerable. In that case, depending on the other demands for legal work of this nature, it may be necessary to return to Council for additional funding. Depending on the date of the ordinance becoming effective, if approved by City Council, staff may bring forward an amendment to the General Fund budget to cover the costs of enforcement. ENVIRONMENTAL IMPACT Adoption of an ordinance to increase the minimum wage City-wide is exempt from CEQA per Guidelines Section 15061(b)(3), because it can be seen with certainty that there is no possibility that the action may have a significant effect on the environment. Page 8 ATTACHMENTS: x A: Citywide Minimum Wage Ordinance (PDF) x B: Colleagues Memo to City Council re Citywide Minimum Wage (PDF) x C: Minimum Wage Comparison City Chart (PDF) x D: Community Feedback from Open City Hall (PDF) x E: Community Feedback from Nextdoor and Facebook (PDF) x F: Cities Association Recommendation on Minimum Wage (PDF) x G: 2015 Regional Letter Minimum Wage Palo Alto (PDF) x H: Joint News Release Mtn View and Sunnyvale Community Feedback (PDF) Department Head: Molly Stump, City Attorney Page 9 Not Yet Approved Ordinance No. ____ Ordinance of the Council of the City of Palo Alto Adding Chapter 4.62 to Title 4 (Business Licenses and Regulations) of the Palo Alto Municipal Code to Adopt a Citywide Minimum Wage for Palo Alto Employees RECITALS 1. The Bay area in general and Palo Alto in particular are becoming increasingly expensive places to live and work. 2. Payment of a minimum wage advances the interests of the City as a whole, by creating jobs that keep workers and their families out of poverty. 3. A minimum wage will enable a worker to meet basic needs and avoid economic hardship. 4. This ordinance is intended to improve the quality of services provided in the City to the public by reducing high turnover, absenteeism, and instability in the workplace. 5. Prompt and efficient enforcement of this Chapter will provide workers with economic security and assurance that their rights will be respected. The City Council of the City of Palo Alto does ORDAIN as follows: SECTION 1. Chapter 4.62 (Citywide Minimum Wage) of the Palo Alto Municipal Code is added to read as follows: CHAPTER 4.62 CITYWIDE MINIMUM WAGE Sections: 4.62.010 Purpose. 4.62.020 Definitions. 4.62.030 Minimum Wage. 4.62.040 Exempt organizations. 4.62.050 Waiver through collective bargaining. 4.62.060 Notice, posting and payroll records. 4.62.070 Retaliation prohibited. 4.62.080 Implementation. 150311 jb 0131322 1 Rev. August 10, 2015 Not Yet Approved 4.62.090 Enforcement. 4.62.100 Relationship to other requirements. 4.62.010 Purpose. This ordinance shall be known as the “Minimum Wage Ordinance.” 4.62.020 Definitions. The following words, terms and phrases, when used in this chapter, shall have the meanings set forth in this section, except where the context clearly indicates a different meaning: a. “City” shall mean City of Palo Alto or any agency designated by the City of Palo Alto to perform various investigative, enforcement and informal resolution functions pursuant to this article. b. “Employee” shall mean any person who: 1. In a calendar week performs at least two (2) hours of work for an employer as defined below; and 2. Qualifies as an employee entitled to payment of a minimum wage from any employer under the California minimum wage law, as provided under Sec. 1197 of the California Labor Code and wage orders published by the California Industrial Welfare Commission, or is a participant in a welfare-to-work program. c. “Employer” shall mean any person, including corporate officers or executives, as defined in Sec. 18 of the California Labor Code, who directly or indirectly through any other person, including through the services of a temporary employment agency, staffing agency, or similar entity, employs or exercises control over the wages, hours, or working conditions of any employee and who is either subject to the city’s business registrylicense requirements, conducts business in Palo Alto or maintains a business facility in the city. d. “Minimum wage” shall have the meaning set forth in Sec. 4.62.030 of this article. e. “Welfare-to-Work Program” shall mean the CalWORKs program, and the Santa Clara County Works Program (SCC Works) employment assistance program, and any successor programs that are substantially similar to them. 4.62.030 Minimum wage. a. Employers shall pay employees no less than the minimum wage set forth in this section for each hour worked within the geographic boundaries of the City of Palo Alto. 150311 jb 0131322 2 Rev. August 10, 2015 Not Yet Approved b. The minimum wage shall be an hourly rate of $10.30 $11.00. To prevent inflation from eroding its value, beginning on January 1, 2016, and each year thereafter, the minimum wage shall increase by an amount corresponding to the prior year’s increase, if any, in the cost of living. The prior year’s increase in the cost of living shall be measured by the percentage increase, if any, as of August of the immediately preceding year over the level as of August of the previous year of the Consumer Price Index (Urban Wage Earners and Clerical Workers, U.S. City Average for All Items) or its successor index as published by the U.S. Department of Labor or its successor agency, with the amount of the minimum wage increase rounded to the nearest multiple of five (5) cents. The adjusted minimum wage shall be announced by October 1 of each year and shall become effective as the new minimum wage on January 1 of each year. c. A violation for unlawfully failing to pay the minimum wage shall be deemed to continue from the date immediately following the date that the wages were due and payable as provided in Part 1 (commencing with Sec. 200) of Division 2 of the California Labor Code, to the date immediately preceding the date the wages are paid in full. 4.62.040. Exempt organizations. State, federal and county agencies, including school districts, shall not be required to pay minimum wage when the work performed is related to their governmental function. However, for work that is not related to their governmental function, including, but not limited to: booster or gift shops, non-K-12 cafeterias, on-site concessions and similar operations, minimum wage shall be required to be paid. Minimum wage shall also be required to be paid by lessees or renters of facilities or space from an exempt organization. Any organization claiming “auxiliary organization” status under California Education Code Sec. 89901 or Sec. 72670(c) shall not be required to pay minimum wage. The organization, upon request of the city, shall provide documentary proof of its auxiliary organization status. 4.62.050. Waiver through collective bargaining. To the extent required by federal law, all or any portion of the applicable requirements of this article may be waived in a bona fide collective bargaining agreement, provided that such waiver is explicitly set forth in such agreement in clear and unambiguous terms. 4.62.060. Notice, posting and payroll records. a. By December 1 of each year, the city shall publish and make available to employers a bulletin announcing the adjusted minimum wage rate for the upcoming year, which shall take effect on January 1 of each year. In conjunction with this bulletin, the city shall, by December 1 of each year, publish and make available to employers, in all languages spoken by more than five (5) percent of the work force in the City, a notice suitable for posting by 150311 jb 0131322 3 Rev. August 10, 2015 Not Yet Approved employers in the workplace informing employees of the current minimum wage rate and of their rights under this article. b. Every employer shall post in a conspicuous place at any workplace or job site where any employee works the notice published each year by the city informing employees of the current minimum wage rate and of their rights under this article. Every employer shall post such notices in any language spoken by at least five (5) percent of the employees at the workplace or job site. Every employer shall also provide each employee at the time of hire with the employer’s name, address and telephone number in writing. c. Employers shall retain payroll records pertaining to employees for a period of four (4) years, and shall allow the city access to such records, with appropriate notice and at a mutually agreeable time, to monitor compliance with the requirements of this article. Where an employer does not maintain or retain adequate records documenting wages paid or does not allow the city reasonable access to such records, the employee’s account of how much he or she was paid shall be presumed to be accurate, absent clear and convincing evidence otherwise. 4.62.070. Retaliation prohibited. It shall be unlawful for an employer or any other party to discriminate in any manner or take adverse action against any person in retaliation for exercising rights protected under this article. Rights protected under this article include, but are not limited to: the right to file a complaint or inform any person about any party’s alleged noncompliance with this article; and the right to inform any person of his or her potential rights under this article and to assist him or her in asserting such rights. Protections of this article shall apply to any person who mistakenly, but in good faith, alleges noncompliance with this article. Taking adverse action against a person within ninety (90) days of the person’s exercise of rights protected under this article shall raise a rebuttable presumption of having done so in retaliation for the exercise of such rights. 4.62.080. Implementation. a. Guidelines. The city manager or designee shall be authorized to coordinate implementation and enforcement of this article and may promulgate appropriate guidelines or rules for such purposes. Any guidelines or rules promulgated by the city shall have the force and effect of law and may be relied on by employers, employees and other parties to determine their rights and responsibilities under this article. Any guidelines or rules may establish procedures for ensuring fair, efficient and cost effective implementation of this article, including supplementary procedures for helping to inform employees of their rights under this article, for monitoring employer compliance with this article and for providing administrative hearings to determine whether an employer or other person has violated the requirements of this article. 150311 jb 0131322 4 Rev. August 10, 2015 Not Yet Approved b. Reporting Violations. An employee or any other person may report to the city in writing any suspected violation of this article. The city shall encourage reporting pursuant to this subsection by keeping confidential, to the maximum extent permitted by applicable laws, the name and other identifying information of the employee or person reporting the violation, provided, however, that with the authorization of such person, the city may disclose his or her name and identifying information as necessary to enforce this article or other employee protection laws. In order to further encourage reporting by employees, if the city notifies an employer that the city is investigating a complaint, the city shall require the employer to post or otherwise notify its employees that the city is conducting an investigation, using a form provided by the city. c. Investigation. The city shall be responsible for investigating any possible violations of this article by an employer or other person. The city shall have the authority to inspect workplaces, interview persons and request the city attorney to subpoena books, papers, records or other items relevant to the enforcement of this article. d. Informal Resolution. The city shall make every effort to resolve complaints informally, in a timely manner, and shall have a policy that the city shall take no more than one (1) year to resolve any matter before initiating an enforcement action. The failure of the city to meet these time lines within one (1) year shall not be grounds for closure or dismissal of the complaint. SEC. 4.62.090. Enforcement. a. Where prompt compliance is not forthcoming, the city shall take any appropriate enforcement action to secure compliance. In addition to all other civil remedies, the city may enforce this ordinance pursuant to Title 1 of the Palo Alto Municipal Code. To secure compliance, the city may use the following enforcement measures: 1. The city may issue an administrative citation with a daily fine for each day or portion thereof and for each employee or person as to whom the violation occurred or continued. 2. The city may issue an administrative compliance order. 3. The city may initiate a civil action for injunctive relief and damages and civil penalties in a court of competent jurisdiction. b. Any person aggrieved by a violation of this article, any entity a member of which is aggrieved by a violation of this article or any other person or entity acting on behalf of the public as provided for under applicable state law may bring a civil action in a court of competent jurisdiction against the employer or other person violating this article and, upon prevailing, shall be awarded reasonable attorneys’ fees and costs and shall be entitled to such legal or equitable relief as may be appropriate to remedy the violation including, without 150311 jb 0131322 5 Rev. August 10, 2015 Not Yet Approved limitation, the payment of any back wages unlawfully withheld, the payment of an additional sum as a civil penalty in the amount of fifty dollars ($50) to each employee or person whose rights under this article were violated for each day that the violation occurred or continued, reinstatement in employment and/or injunctive relief; provided, however, that any person or entity enforcing this article on behalf of the public as provided for under applicable state law shall, upon prevailing, be entitled only to equitable, injunctive or restitutionary relief to employees, and reasonable attorneys’ fees and costs. c. This section shall not be construed to limit an employee’s right to bring legal action for a violation of any other laws concerning wages, hours or other standards or rights, nor shall exhaustion of remedies under this article be a prerequisite to the assertion of any right. d. Except where prohibited by state or federal law, city agencies or departments may revoke or suspend any registration certificates, permits or licenses held or requested by the employer until such time as the violation is remedied. e. Relief. The remedies for violation of this article include, but are not limited to: 1. Reinstatement, and the payment of back wages unlawfully withheld, and the payment of an additional sum as a civil penalty in the amount of fifty dollars ($50) to each employee or person whose rights under this article were violated for each day or portion thereof that the violation occurred or continued, and fines imposed pursuant to other provisions of this code or State law. 2. Interest on all due and unpaid wages at the rate of interest specified in subdivision (b) of Sec. 3289 of the California Civil Code, which shall accrue from the date that the wages were due and payable as provided in Part 1 (commencing with Sec. 200) of Division 2 of the California Labor Code, to the date the wages are paid in full. 3. Reimbursement of the city’s administrative costs of enforcement and reasonable attorney’s fees. f. Posted Notice. If a repeated violation of this article has been finally determined, the city may require the employer to post public notice of the employer’s failure to comply in a form determined by the city. 4.62.100. Relationship to other requirements. This article provides for payment of a local minimum wage and shall not be construed to preempt or otherwise limit or affect the applicability of any other law, regulation, requirement, policy or standard that provides for payment of higher or supplemental wages or benefits, or that extends other protections. SECTION 2. CEQA. The City Council finds that this ordinance is exempt from the provisions of the California Environmental Quality Act pursuant to Section 15061(b)(3) of the 150311 jb 0131322 6 Rev. August 10, 2015 Not Yet Approved California Environmental Quality Act Guidelines, because it can be seen with certainty that there is no possibility of significant environmental effects occurring as a result of the adoption of this ordinance. SECTION 3. Severability. If any provision or clause of this chapter is held to be unconstitutional or otherwise invalid by any court of competent jurisdiction, such invalidity shall not affect other provisions of this chapter, and clauses of this chapter are declared to be severable. SECTION 4. Effective Date. This ordinance shall become effective on January 1, 2016.upon the commencement of the thirty-first day after the date of its adoption. [Or delayed implementation per City Council direction.] INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: __________________________ _____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ _____________________________ Senior Asst. City Attorney City Manager 150311 jb 0131322 7 Rev. August 10, 2015 CITY OF PALO ALTO OFFICE OF THE CITY CLERK February 9, 2015 The Honorable City Council Palo Alto, California Colleagues Memo from Council Members Berman, Burt, DuBois, and Wolbach Regarding a City-Wide Minimum Wage Ordinance RECOMMENDATION We ask our Council Colleagues to refer this colleague’s memo to the Policy and Services Committee, supported by appropriate staff as determined by the City Manager, to analyze and make recommendations to the City Council on a City-Wide Minimum Wage Ordinance. BACKGROUND State law currently requires a minimum wage for all industries of not less than $9.00 per hour, which will increase to $10.00 per hour after January 1, 2016. In response to our higher regional cost of living and growing gap between minimum wages and the cost of living in Silicon Valley, the cities of Mountain View, Sunnyvale and San Jose have recently adopted local minimum wage ordinances. If minimum wages were adjusted based on local costs of living, they would be considerably higher in Palo Alto and the peninsula than most elsewhere in the state. Recently, the Santa Clara County Cities Association made minimum wage issues one of their 2015 priorities. Despite our general affluence, along with high costs of living and working in Palo Alto, we currently have the same minimum wage as low cost regions of California and lower minimum wages than some neighboring cities. PURPOSE Our lowest wage workers perform valued services in Palo Alto and often have to work multiple jobs with long commutes to barely make ends meet. A local minimum wage would be a modest step in supporting these workers who are vital to maintaining the services we value and that are essential to our local economy. In addition, the strength of our community and society relies on maintaining a level of economic fairness and opportunity for all. This measure will be a modest but constructive step towards providing adequate income for all workers. PROPOSAL The Council is being asked to: 1) Refer the matter to the Policy and Services Committee. Direct the City Manager and City Attorney to provide adequate staff support for the analysis and recommendations, modeled after ordinances in Sunnyvale and Mountain View. 2) Request the Policy and Services Committee to recommend to the City Council terms of a local minimum wage ordinance that would set a near term base wage, inflationary adjustments and long term goals. Page 2 3) Request the Policy and Services Committee to explore with the City Manager and City Attorney and make recommendations to Council regarding a strategy for outreach/education, investigation and enforcement of violations. RESOURCE IMPACT Staff impacts to develop an ordinance are anticipated to be low based upon reliance on similar ordinances in Mountain View and Sunnyvale as models. If Council adopts an ordinance, resources will be required to educate businesses and workers, investigate complaints and bring enforcement actions. Resources and strategies should be explored by the Policy and Services Committee, with recommendations to Council. Department Head: Beth Minor, Acting City Clerk Carnahan, David From: Sent: To: Subject: Steve Rock <rockjs@sbcglobal.net> Monday, January 26, 2015 12:42 PM Council, City Minimum Wage Increase CITY OF PALO ALTO. GA GITY CLERK'S OFJiHjE 15 JAN 26 PM 3: 97 I urge you to vote for a minimum wage in Palo Alto significantly higher than the state minimum wage. 1) The cost of living in Palo Alto is much higher than the state average 2) The state minimum wage has not kept up with inflation. 3) People who work should be able to live on their wages and not need govt. subsidies 4) The increased costs to employers is very small. $1/hr is 1.6 cents/minute. A 6 minutes of service would thus cost about 10 cents more. This is a trivial amount in Palo Alto. Who would go to a neighboring city, with all the time and expenses of travel to "save" a few cents? 5) It is the just and moral thing to have more equality in our society. -Steve Stephen Rock 3872 Nathan Way Palo Alto CA 94303 ser84@columbia.edu MINIMUM WAGE ORDINANCES (Updated 08-6-15) City/ County/ State Ordinance Adoption Date Current Minimum Wage/Hr. All Cities Future Increases Tied to CPI Notable Aspects San Jose 3/11/13 $10.00 on 3/11/13 $10.15 on 1/1/14 $10.30 on 1/1/15 Voter-initiated ordinance. Annual increase tied to CPI. Applies to any worker who works 2 or more hours per week. San Francisco 11/4/14 $12.25 on 5/1/15 $13.00 on 7/1/16 $14.00 on 7/1/17 $15.00 on 7/1/18 Voters approved City initiated ballot measure on November 4, 2014 which raises minimum hourly wage to $15.00 in 2018. Following 2018, annual increase tied to CPI. Sunnyvale 10/28/14 $10.30 on 1/1/15 Annual increase tied to CPI. Santa Clara Pending $11.00 on 1/1/16 Annual increase tied to CPI. Council meeting scheduled for August 18, 2015/ Mountain View 10/9/14 $10.30 on 7/1/15 Annual increase tied to CPI. Berkeley 6/27/14 $10.00 on 10/1/14 $11.00 on 10/1/15 $12.53 on 10/1/16 Richmond 5/6/14 $9.60 on 1/1/15 $11.52 on 1/1/16 $12.30 on 1/1/17 $13.00 on 1/1/18 Several exemptions negotiated late in the adoption process. Small business employers who pay less than 800 hours of employee wages over a two-week period are exempt. Employers who derive more than 50 percent of their income where the point of sale is outside the city must pay intermediate wage halfway between the city and state minimum wage. Deduction for medical benefits is included. Increases after 2018 will be based on CPI. Oakland 11/4/14 $12.25 on 3/2/15 Voter-initiated ordinance. Voters approved ballot measure on November 4, 2014 increasing the minimum wage to $12.25. Annual increase tied to CPI. Hospitality workers to keep all wages and tips. Five or nine days of sick leave are required based upon the size of the employer. San Diego 7/28/14 $9.75 on 1/1/15 $10.50 on 1/1/16 $11.50 on 1/1/17 Wage tied to inflation after 1/1/19 . Mayor vetoed minimum wage increase on 8/8/14. Council overrode Mayor’s veto on 8/19/14. Ordinance stayed pending referendum vote in June 2016 election. Includes 10 days of paid leave and 10 days of unpaid leave for workers per year. Los Angeles 06/13/15 $9.00 on 7/1/15 $10.50 on 7/1/16 $12.00 on 7/1/17 $13.25 on 7/1/18 $14.25 on 7/1/19 $15.00 on 7/1/20 Applies to all businesses, but grants an additional year for small businesses to comply. Once both small and large businesses reach $15 in 2022, CPI adjustments will be used. San Leandro 9/1/07 $13.07 on 7/1/14 w/benefits $14.57 on 7/1/14 w/o benefits Benefit contribution must equal $1.50 or more to count. Provides 12 days paid leave and 10 days unpaid leave. CPI adjustments on July 1. State of California 1/1/14 _______________ Pending Currently $9 on 7/1/14 $10 on 1/1/16 _________________ Proposed SB 3 $11 on 1/1/16 $13 on 7/1/17 __________________________________ Under Proposed SB 3, on 7/1/18 CPI adjustment and annually thereafter. All Statements sorted chronologically As of April 15, 2015, 9:31 AM As with any public comment process, participation in Open City Hall is voluntary. The statements in this record are not necessarily representative of the whole population, nor do they reflect the opinions of any government agency or elected officials. All Statements sorted chronologically As of April 15, 2015, 9:31 AM http://peakdemocracy.com/2596 Local Minimum Wage Should the City of Palo Alto adopt an ordinance setting a local minimum wage that is higher than the State minimum wage? As of April 15, 2015, 9:31 AM, this forum had: Attendees:189 All Statements:52 Hours of Public Comment:2.6 This topic started on March 25, 2015, 4:48 PM. All Statements sorted chronologically As of April 15, 2015, 9:31 AM http://peakdemocracy.com/2596 Page 2 of 12 Local Minimum Wage Should the City of Palo Alto adopt an ordinance setting a local minimum wage that is higher than the State minimum wage? Name not available (unclaimed)April 12, 2015, 9:08 PM No, I don't believe the minimum wage should be raised. Minimum wage jobs are not designed to support a family or provide adequate income to live in Palo Alto (or anywhere in the Bay Area), they are designed to pay unskilled workers who then gain experience and move up. They are also designed to provide work experience and spending money for teens living at home and some college students. I think we should protect small business owners who are being run out of town much too often because of the high costs of doing business in Palo Alto. Raising the minimum wage will only exacerbate the problem. Name not shown in Palo Verde (on forum)April 12, 2015, 4:44 PM No, I don't support an increased local min wage. Many people have already provided very good arguments against. Min wage jobs do not have to be "living wage" jobs. They can and should be "starter" positions. Name not shown in Crescent Park (on forum)April 10, 2015, 7:48 PM Minimum wage laws are immoral. These laws mandate that if a prospective employee is not worth a certain amount, it is illegal to hire them. The arguments in favor of a minimum wage are all nonsense - for one thing, if it made good business sense to pay least-skilled workers more, you could make a fortune doing it yourself rather than getting a politician to order someone else to do it. If there was a benefit in morale, productivity, or retention, then savvy employers would catch on fast and do it without being told. Entry level jobs give teenagers their introduction to the adult world. Such jobs provide essential training and social skills. High minimum wages destroy those job opportunities. The Affordable Care Act has already turned many low-wage jobs into part-time gigs. Don't eliminate even those small, crucial opportunities by pricing those workers out of the market. Recent careful studies of increases in the minimum wage demonstrate that they reduce employment - see Clemens and Wither, NBER Dec.2014; and Hanson and Hawley, Journal of Labor Research, Dec.2014. European countries with no minimum wage laws have half the unemployment of countries with the highest minimum wage laws (Trading Economics, "Youth Unemployment Rate - Countries - List. 4/11/2015"). With teenage unemployment in the US well over 20%, the last thing we need to do is to saw off the bottom rungs on the career ladder. It is no coincidence that while a round of minimum wage boosts takes shape, McDonald's has announced a rollout of robotic order-taking devices, and White Castle, Chili's, and Applebees are all testing ordering kiosks to reduce labor costs. Local Minimum Wage Should the City of Palo Alto adopt an ordinance setting a local minimum wage that is higher than the State minimum wage? All Statements sorted chronologically As of April 15, 2015, 9:31 AM http://peakdemocracy.com/2596 Page 3 of 12 A decent job at any wage is better than no job. You might even know someone - an "intern" - who offered to help out for free just to learn a trade. Minimum wage laws generally make that arrangement illegal. Palo Alto should eliminate any minimum wage requirement, and be proud to offer job opportunities to the least skilled - those most in need of jobs. 1 Supporter Name not shown in Greenmeadow (on forum)April 9, 2015, 11:06 PM I support raising the minimum wage to $15. It's not about paying people enough to live in Palo Alto. It's about paying a living wage. It's the right thing to do. Some say that businesses will have to lay off people or go out of business. If the wage was increased $2/hour immediately, that would increase expenses by $16 per employee per day. Is that really going to force a business to close? Are you even going to notice the price increase needed to cover that? Name not available (unclaimed)April 9, 2015, 11:00 PM It won't matter. No matter what the minimum wage is, it is definitely not enough to live in Palo Alto. I have a family member who works in Palo Alto making almost $50/hr who is married with children and is renting a tiny 2 bedroom/1 bath piece of crap house in Palo Alto for almost $4,000. After paying for rent, utilities, bills, and other necessities every month, there is no money left to put away for savings. Even though their family has no debt and are very thrifty, they are having a very hard time living in this area. Every year their rent goes up a lot, but his income stays the same. Even though it seems like he makes a lot, just remember that taxes takes a huge chunk of his paycheck. Palo Alto is not meant for low wage workers, let alone the hard working middle class. Name not shown in Charleston Terrace (on forum)April 9, 2015, 10:58 PM No, i do not agree with increasing the minimum wage, i support the local business owners. PA does not have very many small businesses, I do not want to see them disappear. June Loy in Palo Verde (on forum)April 9, 2015, 8:18 PM I am not at all sure that mandating a higher minimum wage than the federal standard will have the beneficial effect that people are assuming. However, I would support programs that provide businesses in Palo Alto incentives (such as tax credits) if they provide a higher standard of employee benefits, which might include payment above the minimum for jobs that would otherwise qualify as minimum wage, as well as better health insurance or paid medical leave. This could be attractive to businesses and to employees. Dedra Hauser in Evergreen Park (on forum)April 9, 2015, 3:45 PM Local Minimum Wage Should the City of Palo Alto adopt an ordinance setting a local minimum wage that is higher than the State minimum wage? All Statements sorted chronologically As of April 15, 2015, 9:31 AM http://peakdemocracy.com/2596 Page 4 of 12 I think we should. The minimum wage costs the government billions of dollars for food stamps and other programs for the poor. Businesses should bear these costs, not the taxpayer. And local areas with high living costs, such as us, should set a minimum living wage for people who work here. 2 Supporters Name not available (unclaimed)April 9, 2015, 2:34 PM No - let Fed/State governments set regulations. Elliott Bloom in Midtown/ Midtown West (on forum)April 9, 2015, 1:03 PM I believe this would be a good way of lowering traffic in Palo Alto by discouraging businesses to locate in Palo Alto. Better yet, make it $15/hr. Name not available (unclaimed)April 9, 2015, 12:52 PM Palo Alto should not further raise the minimum wage. It would prevent some businesses from being competitive, and many customers would take their business elsewhere. A raise would also make the cost of living in Palo Alto higher, and it may push out the already struggling lower earning families in Palo Alto. People who work for minimum wage cannot live in Palo Alto anyway, so higher minimum wage would not benefit Palo Alto residents. If business owners believe that higher pay would help them retain top talent, they could always pay them over the minimum wage. Name not shown in Palo Verde (on forum)April 3, 2015, 10:52 AM I'm against a local minimum. People supporting this argue the high living cost. What percentage of employees on minimum wage can afford living in the city by themselves anyway? They are either working class from remote less expensive area or part-time youth from local wealthy families. Even doubling the hourly rate wouldn't change the situation much. It'd only penalize the small business owners. 2 Supporters Becky Brewer in Duveneck/ St Francis (on forum)April 3, 2015, 9:27 AM Yes. The cost of living in Palo Alto is exceedingly high and is making this community unaffordable for many families. Name not available (unclaimed)April 3, 2015, 3:19 AM Local Minimum Wage Should the City of Palo Alto adopt an ordinance setting a local minimum wage that is higher than the State minimum wage? All Statements sorted chronologically As of April 15, 2015, 9:31 AM http://peakdemocracy.com/2596 Page 5 of 12 No. Absolutely not. Name not shown in Midtown/ Midtown West (on forum)April 2, 2015, 10:40 PM An increase in the Palo Alto minimum wage is not going to help minimum wage workers live in Palo Alto. A $20 per hour minimum wage translates into $3600 per month. It is hard to afford housing in Palo Alto for $3600 (pre tax) a month. In these cases, higher minimum wages usually benefit the teenagers of Palo Alto and those of nearby communities. Many (if not most) of these teenagers are from very wealthy families. It's not clear why we need a policy that transfers wealth from small business owners (many of which do not live in Palo Alto) to children of wealthy families. Name not available (unclaimed)April 2, 2015, 10:33 PM Yes! $15. It costs way more to live here than other parts of the state. Name not available (unclaimed)April 2, 2015, 8:16 PM if the minimum wage only applied to residents of Palo Alto I could be part of that discussion. Name not available (unclaimed)April 2, 2015, 5:16 PM Yes it should be higher, even double the minimum would not be living wages. Name not shown in Southgate (on forum)April 2, 2015, 4:48 PM I strongly support an increase to the minimum wage. The minimum wage hike to $10/hour in 2016 will lead to an income of roughly $1600/month. It would be very difficult or impossible for someone in our city to pay for rent, food, and other necessities on that, especially if they have children. Name not shown in College Terrace (on forum)April 2, 2015, 4:08 PM Yes 15.00 dollars !! 1 Supporter Name not available (unclaimed)April 2, 2015, 4:03 PM Local Minimum Wage Should the City of Palo Alto adopt an ordinance setting a local minimum wage that is higher than the State minimum wage? All Statements sorted chronologically As of April 15, 2015, 9:31 AM http://peakdemocracy.com/2596 Page 6 of 12 Higher than the state minimum wage !! Erin H in Palo Verde (on forum)April 2, 2015, 3:56 PM Yes. According to the department of labor, the notion that increasing the minimum wage costs jobs is a myth: http://www.dol.gov/minwage/mythbuster.htm Their statistics also show that most small businesses support increasing minimum wage because of its benefits on consumer spending power and employee retention. The argument that it "costs jobs" is a bullying tactic used by larger businesses who want to optimize large workforces. Minimum wage has lagged behind for too long, and communities like Oakland (which voted to raise its minimum wage to $12.25) are growing for a reason: they're smart and staying ahead of the curve in a society increasingly concerned with income inequality. Palo Alto following suit would send a powerful message that might even help salve its reputation as one of the most inequitable places in the country. It's a step in the right direction. 2 Supporters Name not shown in Midtown/ Midtown West (on forum)April 2, 2015, 3:32 PM No, the cost of labor should be consistent with the task performed, not location. Families are struggling to live in this already very expensive city, not to mention the Peninsula. Alexandra Acker-Lyons in Palo Verde (on forum)April 2, 2015, 3:11 PM YES! $15 minimum. Living in PA or anywhere near is prohibitively expensive. Transportation to/from is expensive. Parking is expensive. Food is expensive. PA should tie minimum wage to cost of living. 1 Supporter Cedric Chin in Palo Verde (on forum)April 2, 2015, 2:52 PM No. I'd rather have the cost of living -- particularly utilities -- in Palo Alto go down. 4 Supporters Name not shown in Community Center (on forum)April 2, 2015, 2:50 PM I agree with one posting that we can't raise minimum wage enough to really support living in Palo Alto because of the super high rents. We can't make it so difficult for small businesses that more will choose surrounding cities like RC. This would leave our city with even less retail and locally owned businesses.it should do it more often (yearly) by small increments to accommodate inflation plus a little extra. But I think minimum wage above the State levels should not apply to people under age 18. This helps high school students to get jobs. Minimum wages could be raised to be similar to nearby communities. Local Minimum Wage Should the City of Palo Alto adopt an ordinance setting a local minimum wage that is higher than the State minimum wage? All Statements sorted chronologically As of April 15, 2015, 9:31 AM http://peakdemocracy.com/2596 Page 7 of 12 3 Supporters Name not available (unclaimed)April 2, 2015, 2:32 PM Absolutely not. People don't realize that raising the minimum wage will only increase costs broadly and increase inflation. This will make the effective cost of living the same or worse, particularly for those on a fixed income. Name not shown in Charleston Meadows (on forum)April 2, 2015, 2:30 PM Yes. Of course they should. With the amount of money in Palo Alto, so what if it costs an extra nickle to buy a latte. 1 Supporter Name not shown in Midtown/ Midtown West (on forum)April 2, 2015, 1:35 PM Palo Alto is an amazing place to live and one of the most beautiful towns in the bay area, however, as most know, the cost of living in the bay is higher than the rest of the state. On top of that the cost of living in Palo Alto is higher than the rest of the bay. The minimum wage should definitely be more than the rest of the state for the very reason that it costs more to do the same things here. 3 Supporters Name not available (unclaimed)April 2, 2015, 1:31 PM No. There is no need. If a business wants to reduce turnover or compete with other employers it can certainly pay its employees more after they've worked there a while. There is no need to mandate this from the government! This will simply limit the ability of first time employees to gain work experience. Most longer term employees get periodic raises if they work well--there are positive incentives to work hard and not leave your job as your salary doesn't stay at minimum wage if your work ethic is good, even at fast food establishments and other restaurants. Name not shown in College Terrace (on forum)April 2, 2015, 1:00 PM YES. Occupations like house cleaners, nannies, gardeners already command $20 or more per hour. You don't see people firing these workers - they are more in demand than ever. Paying people in other low-skilled jobs - groundskeepers at Stanford, Starbucks and retail workers, etc. - helps everyone by raising incomes at the low- end, not just the high end. 2 Supporters Shelton Ehrlich in Leland Manor/ Garland (on forum)April 2, 2015, 12:56 PM Local Minimum Wage Should the City of Palo Alto adopt an ordinance setting a local minimum wage that is higher than the State minimum wage? All Statements sorted chronologically As of April 15, 2015, 9:31 AM http://peakdemocracy.com/2596 Page 8 of 12 No. Experience in other towns shows it costs jobs. 3 Supporters jean Roth outside Palo Alto (on forum)March 31, 2015, 12:56 PM I think Palo Alto should definitely raise the local minimum wage. Over half of minimum wage workers are working full time. Many of them have families. Looking at San Jose, we can see that raising the minimum wage did not affect the employment statistics. Many small businesses recognize that it helps to prevent turnover. It is also clear that the more money in circulation, the more people spend, and the more the economy grows. 3 Supporters Megan Fogarty in Midtown/ Midtown West (on forum)March 30, 2015, 8:02 PM Follow our local cities who have already made this commitment and commit to a more just community in our wage practices. Thanks! 3 Supporters Darryl Fenwick in Downtown North (on forum)March 30, 2015, 11:16 AM I'm sure most people in Palo Alto would like to find ways to help the low-skilled worker who cannot command high wages live in such a high priced area as Palo Alto. I am certainly one of them. However, recent studies show that raising the minimum wage hurts many of the same low-skilled workers it aims to help, by either denying them employment opportunities, reducing work hours, or being dismissed from employment (see works by MaCurdy, Stanford University, Meer & West, Texas A&M and MIT, and Clemens & Wither, UCSD). The main conclusion is that although raising minimum wage may help some, it will hurt others. And really, these conclusions make common sense - employers react to price signals. In essence, they see a raise in minimum wage as equivalent to a tax on low-skilled workers. I am not willing to help some to the detriment of others, especially since the others are suffering the same plight as those we are trying to help. Fortunately, there are other solutions other than the overly-simplistic solution of raising the minimum wage. For example, increasing the EITC is one. On a local level, I'm sure that Palo Alto can come up with clever solutions to help those low-skilled workers we are trying to help. Why not subsidize their salaries with city money? This has no impact on employment, yet the result is the same. If we can spend $8 million for Buena Vista, we certainly can spend some $$ to help those in need. 3 Supporters Name not shown in Charleston Meadows (on forum)March 28, 2015, 5:09 PM Yes Local Minimum Wage Should the City of Palo Alto adopt an ordinance setting a local minimum wage that is higher than the State minimum wage? All Statements sorted chronologically As of April 15, 2015, 9:31 AM http://peakdemocracy.com/2596 Page 9 of 12 2 Supporters Name not available (unclaimed)March 28, 2015, 10:02 AM Yes, of course we should adopt an ordinance setting a higher minimum wage than that of the state. It is terribly expensive to live here. And it is the right thing to do. Name not shown in Palo Verde (on forum)March 27, 2015, 4:13 PM Small businesses have choices - Increase prices. Reduce worker hours. Reduce the wages of higher paid workers including owners. Relocate. At a higher wage, a worker with fewer hours may still be earning more. Even with a $15 minimum wage, it will take a lot of roommates and overtime to live in Palo Alto or anywhere on the peninsula. While I'm sure there are consequences I am not imagining, both good and bad, I am confident that far more lives will be improved rather than hurt by raising our city minimum wage to $15. 3 Supporters Name not shown in Duveneck/ St Francis (on forum)March 27, 2015, 4:04 PM Yes, we should. San Jose has raised theirs and has not experienced problems with losing jobs. 1 Supporter Name not shown in Evergreen Park (on forum)March 27, 2015, 10:45 AM As the Operations Manager of a small Business in Palo Alto I’ve struggled greatly with my thoughts on increasing Minimum Wage. Philosophically I support this idea, people should be paid enough to live near where they work. However, I do know that if these increases raises to minimum wage happen too fast I will be forced to lay-off employees, it is difficult to deal with rapidly increased cost when your sales are flat or in a decline (perhaps because of an unwanted streetscape construction project). As I look at our budget and wonder where this money to pay for this increase will come from. We have already cut every other cost. I’m left with reducing labor and jobs to find the money. Let our small business deal with the increases we already have to deal with from the state. Then if the state does not continue to raise the minimum wage then Palo Alto should consider raising the City’s minimum. Jumping my expenses suddenly by a huge percentage would most likely result in us going out of business. I can’t believe that we are alone in this. 4 Supporters Name not shown in Old Palo Alto (on forum)March 27, 2015, 10:20 AM Local Minimum Wage Should the City of Palo Alto adopt an ordinance setting a local minimum wage that is higher than the State minimum wage? All Statements sorted chronologically As of April 15, 2015, 9:31 AM http://peakdemocracy.com/2596 Page 10 of 12 As a small business owner, the minimum wage does not affect my employees who all make more than mandated levels. The law prevents businesses from hiring our kids as part time workers and seems to result in lower employment. If this is the case, the minimum wage actually hurts those people rather than helping them. You cannot create a minimum wage high enough that these people will suddenly be able to afford housing in Palo Alto, so I would not support an additional minimum wage ordinance in Palo Alto for something that is already covered by other ordinances. Spend your time on more important issues, such as business zoning and parking, providing space for more small businesses and hiring in our town. 4 Supporters Name not shown outside Palo Alto (on forum)March 27, 2015, 8:07 AM On the surface raising the minimum wage looks like a good idea, but it is extremely hard on small business owners. 3 Supporters Randy Mont-Reynaud in Greenmeadow (on forum)March 27, 2015, 7:57 AM Yes, and it should be $15.00 hour. The people who work here should be able to commute and park here! 1 Supporter Name not available (unclaimed)March 26, 2015, 10:05 PM Palo Alto is an expensive place to live, so very few lower income people do live here. However they still need income to enable them to work here and provide services and commercial support that we need, so they should be paid fairly. I would suggest a minimum wage of $11.50/hour, increasing each year by the Cost Of Living Index. Paul Heft in Midtown/ Midtown West (on forum)March 26, 2015, 9:04 PM Yes, a higher minimum wage makes sense, given the unaffordability of the Bay Area. But we know that many businesses will minimize costs by eliminating positions or cutting benefits (e.g., through reducing full-time work). What we really need is a federally-funded guaranteed income, especially since there are not enough good jobs to go around--and automation and globalization make the situation worse and worse. 1 Supporter gary fine in College Terrace (on forum)March 26, 2015, 1:03 PM absolutely; its so hard to live in PA, so the higher it is the better chance we have of keeping "normal" people in PA Local Minimum Wage Should the City of Palo Alto adopt an ordinance setting a local minimum wage that is higher than the State minimum wage? All Statements sorted chronologically As of April 15, 2015, 9:31 AM http://peakdemocracy.com/2596 Page 11 of 12 2 Supporters Name not available (unclaimed)March 26, 2015, 11:54 AM Richard Placone Barron Park I will support an increase to $15 per hour minimum wage. This won't help workers to live in high priced PA, but it may make it easier for workers to support themselves where ever they live. Joel Davidson in Barron Park (on forum)March 26, 2015, 11:27 AM I strongly believe that at least a $15 wage is necessary especially in this area of opulence and high rents and prices. 3 Supporters Name not available (unclaimed)March 26, 2015, 9:23 AM Absolutely. This is an extremely expensive area in which to live. Name not shown in Crescent Park (on forum)March 26, 2015, 9:06 AM I do not think we should adopt a higher minimum wage than the state, but do favor increasing wages as appropriate to the work provided at any wage level. Name not shown in University South (on forum)March 26, 2015, 8:37 AM I believe the minimum wage itself is misguided and results in marginally (depending of the minimum wage level) lower overall employment. If this is the case, the minimum wage actually hurts those people with the lowest marginal productivity rather than helping them. So, I would not support a minimum wage ordinance in Palo Alto. 2 Supporters Judith Wasserman in Leland Manor/ Garland (on forum)March 26, 2015, 7:50 AM Yes, we should. Palo Alto is a very expensive place to live, and the people who work here should be able to live here. 2 Supporters Local Minimum Wage Should the City of Palo Alto adopt an ordinance setting a local minimum wage that is higher than the State minimum wage? All Statements sorted chronologically As of April 15, 2015, 9:31 AM http://peakdemocracy.com/2596 Page 12 of 12 Network Response Person Date NextDoor No. See what happened in Seattle.Frank N. from Midtown 4/2 NextDoor Yes. Palo Alto is way pricier than average CA, and the minimum wage should be aligned. Otherwise, it's a de facto exclusion of minimum wage workers from our economic community.Alex L. from Crescent Park 4/2 NextDoor Bill M Walnut Grove NO NO NO. Think of our seniors on fixed income. Minimum wage goes up, their quality of life goes down. Simple economics .. wages go up-prices go up. William M. from Walnut Grove 4/2 NextDoor I agree.The minimum wages needs to be up anyways. If somebody can afford to live in Palo Alto, scrape by even, then it is ok to pay more than the minimum wages. And if we can afford to buy Organic Orange juice for $8 for 8oz, then we should we generous enough to pay our workers more than the cost of orange juice. We need more economic diversity in Palo Alto, to raise our children in an empathetic community, that knows how to share their wealth. Moitreyee C. from Midtown 4/2 NextDoor Absolutely not. Palo Alto has more than enough regulations and taxes. Why make it more difficult for low income workers to find jobs (and there will be fewer low income-entry level jobs with a higher minimum wage than the state requires)--not to mention letting our privileged kids get real world work experience. I bet very few PA workers actually are at minimum wage today!! Bruce C. from Crescent Park 4/2 NextDoor the de facto minimum wage in Palo Alto is already higher. PA Businesses paying the state minimum aren't retaining workers. Knowing the city of palo alto you will probably spend a ton of money consultants and lots of CPA workers time studying this 'problem'. The problem is bigger than the city can solve and this small city has no business addressing it. Leave the social engineering to the state and feds. Please do not spend city tax dollars studying this problem and please do not hire over priced outside consultants. Greg G. from Ventura 4/2 NextDoor Majority of the workers are not from rich families and yes we should pay living wage for the individuals who travel to Palo Alto to support their families.Samina S. from Evergreen Park 4/2 NextDoor I would like to see a higher minimum wage.Hamilton H. from Duveneck - St. Francis 4/2 NextDoor Don't mess with the free market.Richard C. from Duveneck - St. Francis 4/4 NextDoor Starbucks CEO Howard Schultz says $15/hour minimum wage will hurt business but he rakes in $9,600/hour. http://read.bi/1bvYCL2 It is criminal that is all I can say. Have you heard his latest plans? how he is planing to make Starbucks even in poor areas. He does not care about them, only he wants share of that market too so he can make $12,000 an hour. Samina S. from Evergreen Park 4/4 Post Question: Should Palo Alto adopt a higher local minimum wage than the State's minimum wage? Share your thoughts with city officials here: http://bit.ly/copa_opencityhall Post Link: https://nextdoor.com/city/feed/?post=10412799 NextDoor How would we know if raising minimum wage is better or worse? There have been some studies that show that there's short term negative side effects but long term positives. Free market is great for many things but not perfect. Having higher minimum wage could mean SMBs shed workers (since they run unsustainable, 5% margin businesses often) and cause larger companies to hire more contractors. But it really depends on the industry, size of company, etc. The city should release numbers on which groups of people, sectors, etc raising the minimum wage helps and those that it hurts. Without data how on earth could we make this decision, city govt? Srini K. from Professorville 4/6 NextDoor Minimum wage laws are immoral. These laws mandate that if a prospective employee is not worth a certain amount, it is illegal to hire them. The arguments in favor of a minimum wage are all nonsense - for one thing, if it made good business sense to pay least-skilled workers more, you could make a fortune doing it yourself rather than getting a politician to order someone else to do it. If there was a benefit in morale, productivity, or retention, then employers would do it anyway. Better a minimum wage job than no job at all. There is unequivocal, indisputable evidence that increasing the minimum wage reduces employment among the least skills, those most in need of taking the first step on the employment ladder. Don Boudreax at cafehayek.com has extensive resources on the evils of the minimum wage. Palo Alto should eliminate any minimum wage requirement, and be proud to offer job opportunities to the least skilled - those most in need of jobs. Jonathan S. from Fulton Street 4/6 NextDoor Can you post the minimums of the neighboring cities? Fred K. from University South 4/6 NextDoor Jonathan, thank you for your response. Finally, a comment based on logic rather than irrational and ridiculous arguments. Proponents of minimum wage laws hurt those people most in need of a job -- namely the unskilled who can obtain new skills by holding a job and working their way up through a career. The only people that benefit from minimum wage laws are union members whose wages are tied to increases in minimum wages and who are the biggest supporters of politicians that create and enforce minimum wage laws. Furthermore, it is immoral to force business owners to pay someone more than they feel their employees' skills are worth. Both employers and employees have the right to seek work at the rate they feel is fair. Seavan S. from Midtown 4/6 NextDoor I literally see 0 numbers or real data in any of these comments. It's just hard to have an objective discussion honestly Srini K. from Professorville 4/6 NextDoor There are ample sources of data. Unfortunately, because we have had minimum wage laws in place in the US for many years, all that can be measured are the effects of small increases in the minimum employable skill level. These effects are dominated by the fact that the least employable are already priced out of the market. Jonathan S. from Fulton Street 4/6 NextDoor Starbucks and Howard Schultz are one of the few companies that do seem to care about their workers. They have always provided health care coverage for all their workers and family if employed 20 or more hours a week. I believe it is the major cost of a cup of coffee. If he gave up his salary it would mean each employee would get around a few cents cents/hour more. I suspect the figure is "realized" pay for last year, which in his case is from old stock options stretching back 12 years. Starbucks is one of the few companies where shareholders can vote on pay. The fellow started a company 40 years ago that now employs 150,000. Even at this rate of pay it is similar to what the new CFO of Google is getting and she has not created a job for anyone. Our government has all sorts of schemes to create jobs I doubt any come close to the number created by an $100 million annual cost. If anyone thinks they can do better than Howard please go ahead. I won't begrudge you your salary. I certainly will not think it criminal. I don't own Starbucks stock and have been in a Starbucks very rarely and only when someone else wants to go. Walter M. from Adobe Meadow 4/6 Here is the Washington Post, looking at a number of studies that ask whether minimum wages reduce poverty: http://www.washingtonpost.com/blogs/wonk... It looks like the answer is yes. I guess wages going up affects prices less than expected. I admit to being a bit surprised: I thought that some of these jobs would end up moving to other places. Maybe some already have, such as manufacturing jobs, which are now being done mostly in Asia. But service jobs are here to stay. For now, anyway. (Until robots take over?) I suppose a small number of people might decide they want to clean their own house instead of paying more to have it done, but maybe not that many. Similarly for other service jobs: who is going to drive to another town to get their fix of fast food? Or to save a couple of bucks on a haircut? If you're making a decent salary, a couple of extra bucks is no biggie, you just pay it and get on with life. Personally, I don't find it immoral to force businesses to pay people enough that they can feed themselves and keep a roof over their heads. In fact, I consider it akin to theft to offer people less than a living wage. Lottie P. from Charleston Meadows 4/6 NextDoor It's immoral for government to tell someone that they can't hire someone whose productivity is less than some threshold. As for robots taking over, McDonald's recently announced a rollout of robotic order-taking devices, replacing part of their workforce with tablets. The Washington Post article cited by Lottie P looks at minimum wage changes and poverty effects in 21-44 year old family heads and individuals, rather than employment effects among teenagers. There are relatively few minimum wage workers in this age range, and their poverty status is affected by AFDC, food stamps, Section 8 housing vouchers, ACA health care subsidies or Medicaid, direct welfare, and other payments - such that they may be better off staying home than getting a minimum wage job. By selecting for cases like this, the authors might have biased their study to favor fewer jobs at a higher minimum wage. That's just one of the problems with that report. A decent job at any wage is better than no job. You might even know someone - an "intern" - who offered to help out for free just to learn a trade. Minimum wage laws generally make that arrangement illegal. Jonathan S. from Fulton Street 4/6 NextDoor I add my strong endorsement for a higher minimum wage statute. This will stimulate business through consumer spending and send a clear signal that our community cares for the well-being and sustainability of local employment and employees. Roland H. from South of Midtown 4/7 NextDoor Three more careful studies showing that boosts in the minimum wage reduce employment: - Clemens and Wither, National Bureau of Economic Research Dec.2014 - Hanson and Hawley, Journal of Labor Research, Dec.2014 - European countries with no minimum wage laws have half the unemployment of countries with the highest minimum wage laws (Trading Economics, "Youth Unemployment Rate - Countries - List. 4/11/2015"). Jonathan S. from Fulton Street 4/7 NextDoor I absolutely think Palo Alto should adopt a higher minimum wage. The cost of living here is much greater than in other areas as you know. With the number of individuals who are working at minimum wage, there is no way they can afford what is considered affordable housing here. It seems to be an obvious thing to do to increase the quality of life for them. Dianna Z. from South of Midtown 4/10 NextDoor I think a study needs to be done on how a higher minimum wage will affect small businesses. Anyone who is making minimum wage in Palo Alto will NEVER be able to afford housing in the city. Unless your planning on making the Minimum wage over $20.00 an hour and/or are living in subsidized housing. They commute into Palo Alto. You know what would be a great idea, is minimum wage employees who work in Palo Alto, offer them free train/bus passes. Not only would that offer immediate Financial relief, it might actually help with the parking problem DT. Deanne D. from Stanford University 4/10 NextDoor Yes but a higher minimum should be adopted in cooperation with our neighboring communities Stephen L. from University South 4/10 (2nd Post - same wording) Post Link: https://nextdoor.com/city/feed/?post=10599697 NextDoor Bill C. South P.. Any auch rule must consider where worker lives and where he works.Smokey C. from Palo Verde 4/10 NextDoor Higher wages transfers the burden of living to employers, and doesn't fix the original issue of the cost of living. Cedric C. from Palo Verde 4/10 NextDoor Yes. it has to be higher. Every body deserves living wages. Palo Alto takes the lead in many places in our society in terms of education, communities, entrepreneurship, then why not this? We can only hope that the rest of the state would follow up then. We must help our neighboring cities, from where the minimum wage workers are coming to Palo Alto, develop, grow and flourish. If a single mother can actually come back home at a decent time, because she can live with one wage, then her children will have better chances of becoming a productive member of the society. This will in the end, add on to the value of PAlo Alto, its houses, its schools. There is nothing to lose in the long term. Moitreyee C. from Midtown 4/10 NextDoor I am in favor of allowing market forces determine the minimum wage. Alan B. (inbox) 4/10 Facebook Yes Juliefe Rosete 4/1 Facebook (thumbs up) Maria Osorio 4/1 Facebook Post (same wording) Post Link: http://bit.ly/paminwagefb To:$$Cities&Association&Board&of&Directors& From:$$Cities&Association&Subcommittee&on&Minimum&Wage:&Jim&Griffith,&Rod& &&Sinks,&John&McAlister& Re:$$$Report/Recommendation$on$the$Minimum$Wage$ Date:$June&7,&2015$ Introduction* & Income&inequality&in&America&is&an&increasing&problem&that&is&encouraging&elected& officials&to&take&a&hard&look&at&the&minimum&wage&as&one&tool&to&bring&relief&to&the& problem.&&With&Congress¤tly&unwilling&to&examine&the&issue&at&the&federal& level,&many&states&and&local&jurisdictions&have&already&approved&or&are&considering& local& minimum& wage& increases.& &In& August& 2014,& the& US& Conference& of& Mayors’& “Cities&of&Opportunity&Task&Force”&endorsed&higher&minimum&wages&as&a&key&tool& for&addressing&income&inequality.& & Santa&Clara&County&is&no&exception&to&the&challenges&of&income&inequality,&with&the& San&JoseVSunnyvaleVSanta&Clara&metropolitan&area&having&the&second&highest&cost&of& living&index&in&the&state&of&California.&&Already,&the&cities&of&San&Jose,&Sunnyvale,&and& Mountain&View&have&approved&minimum&wage&increases.&&The&cities&of&Palo&Alto,& Santa& Clara,&Morgan& Hill,&and& Campbell&are& additionally& considering& a& minimum& wage&increase.& & The&legal&and&policy&issues&with&a&minimum&wage&increase&are&lengthy.&Rather&than& repeating& those& issues& in& its& report,& the& subcommittee& provides& the& Sunnyvale& Report&To&Council&(RTC)&on&the&topic&as&an&overview.& & The&state&is&considering&the&issue,&and&CA&Senate&Bill&3&(Leno)&proposes&an&increase& to&$11/hour&in&2016&and&$13&in&2017,&with&CPI&adjustments&starting&in&2019.& & San& Jose& and& Sunnyvale& have&already&established& a& $10.30/hour& minimum& wage& with&annual&CPI&adjustments.&Mountain&View&has&adopted&an&identical&ordinance& that& takes& effect&July& 1,& 2015.& & Mountain& View& and& Sunnyvale& have& additionally& established&a&policy&goal&of&a&$15/hour&minimum&wage&by&2018.&&Mountain&View&is& currently&discussing&a&possible&phased&increase&to&$15&by&2018,&and&Sunnyvale&is& monitoring& Mountain& View’s& efforts&with& an&expressed&interest& in& adopting& Mountain&View’s&schedule.& & However,&Palo&Alto&is&now&proposing&a&minimum&wage&that&matches&none&of&the& other&three&increases&initially,&although&it&is&likewise&targeting&$15&by&2018.&&Santa& Clara& has& proposed& a& minimum& wage& increases& that& matches& the& other& three& jurisdictions& with& $10.30& and& a& CPIVbased& increase,& but& Santa& Clara& has& not& yet& expressed&an&opinion®arding&the&$15&by&2018&goal.&&In&light&of&this,&Mountain& View&and&Sunnyvale&have&sent&a&joint&letter&to&the&other&cities&in&Santa&Clara&County& encouraging®ional&consistency&in&any&schedules&and°rees&of&a&minimum&wage& increase.& Priority*Consideration* & In&looking&at&this&issue,&the&subcommittee&asserts&that®ional$consistency$is$a$ paramount$consideration&for&jurisdictions&that&are&considering&adopting&a&higher& minimum& wage.& A& lack& of& regional& consistency& in& minimum& wage& rates& creates& serious& problems& for&jurisdictions,& locations,& and& employers.&&A& parallel& can& be& drawn& with& local& jurisdictions’& efforts& to& adopt& singleVuse& bag& policies,& and& the& confusion&and&competitiveness&issues&caused&when&jurisdictions’&requirements&vary.& & Jurisdictions&suffer&from&a&lack&of&consistency,&in&that&differences&in&minimum&wage& requirements& can& affect& a& city’s& economic& competitiveness.& & Additionally,& jurisdictions&have&already&received&reports&from&employers&in&Santa&Clara&County& stating&that&cities&without&an&increased&minimum&wage&are&losing&quality&employees& to&opportunities&in&cities&with&higher&minimum&wages.& & A&lack&of&consistency&can&even&impact&specific&locations&that&span&jurisdictions,&such& as& Valley& Fair.& & A& business& in& the& lowerVwage& portion& of& the& location& has& a& competitive&advantage&over&a&related&business&in&the&higherVwage&portion&of&the& location.&&Similar&behavior&was&observed&in&Valley&Fair&when&San&Jose&adopted&a& plastic&bag&ban&well&in&advance&of&any&effort&by&Santa&Clara&to&do&the&same.& & Employers&who&operate&locations&in&different&jurisdictions&encounter&payroll&and& employment&challenges&when&the&locations&have&different&minimum&wage&rates.& & The& issue& of& regional& consistency& argues&strongly&for& either& a& national& or& state& minimum& wage& increase.& & While& Congress& has& demonstrated& no& willingness& to& examine&this&issue,&CA&Senate&Bill&3&(Leno)&proposes&an&increase&to&$11/hour&in& 2016&and&$13&in&2017,&with&CPI&adjustments&starting&in&2019.&&The&subcommittee& considered& this& but& instead&suggests&the& SunnyvaleVMountain& View& goals&as& a& starting&point&for&discussion,&since&they&surpass&SB&3&in&timing&and°ree.&&The& considerably& higher& cost& of& living& in& Silicon& Valley& was& an& additional& factor& in& recommending& efforts& beyond& those& that& might& be& achieved& by& SB& 3,& should& it& eventually&be&approved.&&In&general,&significant&differences&in®ional&economies& argue&for&minimum&wages&based&on®ions&smaller&than&the&State&of&California.& & At& the& last& Silicon& Valley& Leadership& CEO& Economic& Outlook& Conference,& the& attendees&were&asked&“would&you&support&a&minimum&wage&of&$15/hour,&phased&in&& through&2020”&85%&of&respondents&answered&in&the&affirmative.& & Accordingly,$ the$ subcommittee$ recommends$ that$ the$ Cities$ Association$ encourage$ jurisdictions$ to$ place$ particular$ emphasis$ and$ value$ on$ establishing$ minimum$ wage$ ordinances$ that$ promote$ regional$ consistency$ within$Silicon$Valley.$$While$not$willing$to$endorse$a$specific$minimum$wage$ requirement$or$timeline,$the$subcommittee$points$to$the$Sunnyvale/Mountain$ View$efforts$as$the$only$existing$effort$towards$regional$consistency,$and$the$ subcommittee$encourages$jurisdictions$to$take$a$close$look$at$these$efforts.$ Issues* & The&subcommittee&identified&three&specific&issues&that&jurisdictions&should&consider& in&their&discussion&of&a&minimum&wage&increase,&namely&possible&exemptions&for& youths,&for&restaurant&wait&staff,&and&for&nonVprofit&organizations.& Exemption*for*Youths* & One&frequent&concern&is&the&impact&on&youth&hiring,&particularly&as&it&affects&summer& and&holiday&hiring.&&When&contemplating&a&minimum&wage&increase,&jurisdictions& often&consider&making&an&exception&for&youth&hiring.&&The&argument&in&favor&of&such& an&exemption&asserts&that&without&such&an&exemption,&employers&tend&to&reduce& youth& hiring.& & Early& employment& opportunities& can& have& a& significant& impact& on& future& job& prospects,& so& cities& are& strongly& motivated& to& encourage& youth& employment.& & The& argument& against& such& an&exemption& asserts&that& such& an& exception&encourages&employers&to&hire&younger&workers&at&the&expense&of&older& workers.&&& & All&three&County&jurisdictions&that&have&adopted&a&higher&minimum&wage&considered& this&issue,&and&none&of&the&jurisdictions&have&adopted&a&youth&exemption.& & It&is&the&opinion&of&the&subcommittee&that&a&youth&exemption&has&no®ional&impact,& since&youths&are&most&likely&to&work&in&close&to&home®ardless&of&employment& conditions.& & Such& an&exemption&is& unlikely& to& create& issues& of& regional& competitiveness.& & Therefore,&the$ subcommittee$ makes$ no$ recommendation$ about$ a$ youth$ exemption$other$ than$ to$ encourage$ the$ general$ concept$ of$ regional$consistency.& Exemption*for*Restaurant*Wait*Staff* & One&concern&is&the&disparity&that&exists&when&a&minimum&wage&is&applied&to&both& wait& staff& and& behindVtheVcounter& employees& in& restaurants,& since& wait& staff& can& receive&tips&and&other&restaurant&employees&do¬.&Restaurant&employers&argue& that&minimum&wage&wait&staff&receives&considerably&more&than&minimum&wage&once& tip&income&is&taken&into&account.&&They&further&assert&that&applying&a&minimum&wage& increase&to&& & California& state& law& prohibits& employers& from& crediting& tip& income& towards& an& employer’s&minimum&wage&requirements.& & All&three&County&jurisdictions&that&have&adopted&a&higher&minimum&wage&considered& this&issue,&and&none&of&the&jurisdictions&have&adopted&a&wait&staff&exemption.& & It& is& the& opinion& of& the& subcommittee& that& a& wait& staff& exemption&would& have& significant&and&direct®ional&impact,&given&the&multiple&existing&ordinances&that&do& not& make& such& an& exemption.&When& minimum& wages& vary& from& jurisdiction& to& jurisdiction,&employees&and&customers&are&willing&to&look&to&restaurants&in&other& jurisdictions&when&employment&terms&or&prices&differ.&&Maintaining&an&environment& where&Silicon&Valley&restaurants&are&equally&attractive&to&potential&employees&and& customers®ardless&of&jurisdiction&is&of&significant&value.&&Additionally,&wait&staff&is& often& required& to& work& during& hours& when& little& or& no& income& from& tips& can& be& realized.&&&The&State&of&California&does¬&permit&employers&to&credit&tips&towards& the&state&legal& minimum& wage& requirement.& It& is& difficult& to& justify& a& wait& staff& exemption& for& local& minimum& wage& requirements& when& state& minimum& wage& requirements& make& no&such&distinction.&Therefore,&the$ subcommittee$ recommends$against$cities$creating$an$exception$for$restaurant$wait$staff.& Exemption*for*non;profit*employees* & Concerns& have& been& raised& about& applying& an& increased& minimum& wage& to& nonV profits&and&to&organizations&reimbursed&by&the&state,&since&such&entities&tend&to& provide&services&for&the&most&atVrisk&community&members.&&A&higher&minimum&wage& may&decrease&a&nonVprofit’s&ability&to&provide&those&services.& & All&three&County&jurisdictions&that&have&adopted&a&higher&minimum&wage&considered& this&issue,&and&none&of&the&jurisdictions&have&adopted&a&nonVprofit&exemption.& & It&is&the&opinion&of&the&subcommittee&that&a&nonVprofit&exemption&has&no®ional& impact,&since&nonVprofits&tend¬&to&suffer&from&issues&of®ional&competitiveness.&& Therefore,&the$ subcommittee$ makes$ no$ recommendation$ about$ a$nonIprofit$ exemption$other$ than$ to$ encourage$ the$ general$ concept$ of$ regional$ consistency.& Other*Issues* & The&subcommittee&discussed&the&pros&and&cons&of&a$total$compensation$approach& rather&than&a&minimum&wage&specific&approach.&&As&a&matter&of&best&practices,&there& is&considerable&merit&to&a&total&compensation&approach.&&Terms&of&employment&vary& from& profession& to& profession,& with& some& professions& placing& greater& value& on& considerations&such&as&leave&or&medical&benefits&than&others.&&A&total&compensation& approach&may&provide&more&robust&and&equitable&requirements&for&both&employers& and&employees,&and&such&an&approach&may&be&a&more&effective&way&to&address&issues& of&income&inequality.&&However,&existing&state&and&local&laws&invariably&deal&with& compensation&issues&on&a&benefitVbyVbenefit&basis,&with&one&law&addressing&health& insurance,&another&addressing&wages,&a&third&addressing&sick&leave,&and&so&on.&&Given& existing&legislation& addressing&specific& benefits,& applying& an& additional& total& compensation&requirement&is&unlikely&to&achieve&the&desired&level&of&flexibility&or& effectiveness.&&The&subcommittee&is&additionally&unaware&of&any&jurisdictions&taking& a&total&compensation&approach&to&this&issue.& & & Attachments:& 1. Sunnyvale&Report&to&Council&of&5/20/2014& 2. Sunnyvale&Report&to&Council&of&10/14/2014& 3. Campbell&Staff&Report&on&Minimum&Wage&Study&Session&of&05/19/15& 4. Campbell&Staff&Report&Attachments:&Cost&of&Living&and&Demographic&Charts,& Campbell&Minimum&Wage&Survey,&Campbell&Minimum&Wage&Survey&Results,& Addendum&to&Staff&Memo&& 5. California&Restaurant&Association&Letter&to&Campbell&City&Council&re:& Minimum&Wage&Study&Session& 6. Sunnyvale/Mountain&View&Letter&to&Mayor&Cristina&of&Campbell&(and&all& Mayors&in&Santa&Clara&County)&re:&minimum&wage&increase&approach& & City of Sunnyvale Agenda Item 14-0280 Agenda Date:5/20/2014 REPORT TO COUNCIL (REPUBLISHED 5/21/2014) SUBJECT Establish a City Advocacy Position on Minimum Wage, and Provide Further Input Regarding Creation of a Local Minimum Wage Ordinance, Including Enforcement and Implementation of Such Ordinance (Study Issue) BACKGROUND In June 2013, Council sponsored Study Issue OCM-14-01,Consider Adopting a Local Minimum Wage Ordinance Modeled on the City of San Jose Initiative (Attachment 1). At that time, the City Manager made no recommendation on the study issue paper. In the fall of 2013, Governor Jerry Brown signed legislation that would increase the state’s minimum wage rate to $9.00 per hour on July 1, 2014 and $10.00 per hour on January 1, 2016. Staff updated the study issue paper to include information on the new California law and the City Manager updated the staff recommendation from no recommendation to drop, citing the new law as the basis for no longer needing a local ordinance. At the 2014 Study/Budget Issues Workshop, however, Council directed staff to study a local minimum wage ordinance similar to the one recently enacted in the City of San Jose that would adopt a $10 per hour minimum wage with an annual adjustment tied to the Consumer Price Index (CPI). The City of San Jose’s ordinance is presented as Attachment 6. Staff has been researching and evaluating the requirements, including both programmatic and community consequences, for adopting a minimum wage ordinance similar to the initiative passed by San Jose voters in 2012. That initiative increased San Jose’s minimum wage from $8.00 per hour to $10.00 per hour effective March 11, 2013. Beginning on January 1, 2014, the minimum wage was to be adjusted annually by the amount corresponding to the prior year’s August Consumer Price Index (Urban Wage Earners and Clerical Workers, U.S. City Average for All Items) as published by the U.S. Department of Labor. Employers in Sunnyvale are governed by the state’s minimum wage requirement, which is currently $8.00 per hour, and which is set to increase to $9.00 per hour on July 1, 2014 and $10.00 per hour on January 1, 2016. In San Jose, the current minimum wage is $10.15 per hour. The State’s minimum wage law does not preempt local ordinances from requiring payment of a higher minimum wage. Meanwhile, pending legislative efforts at both the state and federal level have presented opportunities to advocate for increased minimum wage rates that staff has been unable to respond to because the City has not adopted a policy position on minimum wage. This report presents a draft Legislative Advocacy Position for Council’s consideration, which would enable City advocacy on this topic. In addition, the report provides information about the typical provisions which make up local minimum wage ordinances, including the provisions in the City of San Jose’s initiative that increased the minimum wage and included an annual cost of living adjustment tied to the CPI, and alternatives for Page 1 of 8 14-0280 Agenda Date:5/20/2014 implementation and remedies/enforcement of the ordinance. EXISTING POLICY Council Policy 7.3.1 Legislative Management - Goals and Policies: Policy 7.3B.3 Prepare and update ordinances to reflect current community issues and concerns in compliance with state and federal laws. Policy 7.3B.4 Prepare and update the Legislative Advocacy Positions as the shorter-term policies that support the General Plan and guide Council and staff on intergovernmental matters. ENVIRONMENTAL REVIEW N/A DISCUSSION A. City Advocacy Position There are several key pieces of minimum wage-related legislation making their way through the Congress and the California Legislature. Senate Bill 935 (Leno) may address Council’s intent regarding raising the minimum wage and tying annual increases to the CPI. However, the City does not have a policy position allowing advocacy regarding minimum wage increases at the state or federal level. To support this issue at the state and federal level, a new long-term advocacy position such as the following would need to be adopted by Council: “Supporting the quality of life in Sunnyvale, the City would support legislation to increase the current minimum wage or tie future increases to Consumer Price Index (CPI) or the rate of inflation.” Adoption of such a policy would allow staff to advocate for minimum wage increases at the state and federal level in a timely manner. B. Local Minimum Wage Ordinance Since Council’s ranking of Study Issue OCM 14-01, staff has evaluated the efforts of other cities on the topic of minimum wage increases and local ordinances, and researched current and pending legislation at the state and federal level. In addition, staff performed outreach in the community via an online survey and targeted industry outreach meetings with business owners, business representatives and business groups, including the Sunnyvale Chamber of Commerce and California Restaurant Association, and nonprofit representatives including the Sunnyvale Community Services Board. There appears to be a growing concern that the current state minimum wage does not acknowledge the high cost of living in California and in particular the Bay Area. The cities of San Francisco and San Jose have already enacted local minimum wage laws, and a number of other Bay Area cities are in the process of considering them. Some cities are having discussions about the viability of a regional minimum wage for a geographic area, such as a county. Additionally, both the federal and state legislatures are considering amending their minimum wage laws. Below is a table showing some of the efforts currently underway: Jurisdiction Proposal per hour Tied to CPI/Inflation Status/Exemptions US Congress, Minimum Wage Fairness Act $10.10 Yes; tied to Inflation Failed to garner support from the Senate, but several additional bills are pending. The minimum wage issue continues to be an actively discussed topic at the Federal level. California Legislature, SB 935 (Leno) 1/1/15 $11.00 1/1/16 $12.00 1/1/17 $13.00 Yes; tied to Inflation beginning January 2018 Suspense file (used by Appropriations Committees in both houses of the legislature to temporarily hold bills with $150,000 or more of expenditures). Berkeley 7/1/14 $9.00 (same as state) 1/1/15 $10.00 1/1/16 $10.75 No Second Reading of the ordinance to be on 5/20/14. The Council also established a task force to work with businesses on additional increases. Task force would explore creating a “regional minimum wage” with Oakland and other East Bay cities. Some exemptions, but “direct tipped” employees included in the ordinance. Richmond 1/1/15 $9.60 1/1/16 $11.52 1/1/17 $12.30 Yes; tied to CPI beginning January 2018 Council directed staff to draft an ordinance with several exemptions, including, but not limited to: 1. People less than 18 years of age 2. Businesses with fewer than 10 employees 3. Employees that are regularly tipped Mountain View Nothing formally proposed Nothing formally proposed Community activists asking council to consider a ballot initiative or adopt ordinance to raise minimum wage to $15 per hour. Page 2 of 8 14-0280 Agenda Date:5/20/2014 Jurisdiction Proposal per hour Tied to CPI/Inflation Status/Exemptions US Congress, Minimum Wage Fairness Act $10.10 Yes; tied to Inflation Failed to garner support from the Senate, but several additional bills are pending. The minimum wage issue continues to be an actively discussed topic at the Federal level. California Legislature, SB 935 (Leno) 1/1/15 $11.00 1/1/16 $12.00 1/1/17 $13.00 Yes; tied to Inflation beginning January 2018 Suspense file (used by Appropriations Committees in both houses of the legislature to temporarily hold bills with $150,000 or more of expenditures). Berkeley 7/1/14 $9.00 (same as state) 1/1/15 $10.00 1/1/16 $10.75 No Second Reading of the ordinance to be on 5/20/14. The Council also established a task force to work with businesses on additional increases. Task force would explore creating a “regional minimum wage” with Oakland and other East Bay cities. Some exemptions, but “direct tipped” employees included in the ordinance. Richmond 1/1/15 $9.60 1/1/16 $11.52 1/1/17 $12.30 Yes; tied to CPI beginning January 2018 Council directed staff to draft an ordinance with several exemptions, including, but not limited to: 1. People less than 18 years of age 2. Businesses with fewer than 10 employees 3. Employees that are regularly tipped Mountain View Nothing formally proposed Nothing formally proposed Community activists asking council to consider a ballot initiative or adopt ordinance to raise minimum wage to $15 per hour. In addition to the efforts under way in Richmond, Berkeley, and Mountain View, similar initiatives are also being considered in Los Angeles, Oakland, and San Diego. In all of these jurisdictions, councils are being lobbied to join San Francisco and San Jose in setting a minimum wage higher than state law and, in some cases, to include an automatic annual increase linked to the CPI. Community Outreach A survey was created and promoted via Facebook, Twitter, and direct emails, resulting in about 460 participants providing input (Attachment 2). Approximately 65 percent of survey respondents were Page 3 of 8 14-0280 Agenda Date:5/20/2014 Sunnyvale residents, 23 percent were business owners, and the remaining 12 percent choosing either employee or “other”. About 78 percent of residents support an increase to $10.00 per hour prior to the state’s increase in January 2016, and about 74 percent support linking the increase to the CPI. Business owners’ responses were split nearly down the middle with 53 percent opposing an increase to the minimum wage (47 percent in support) and 51 percent opposing linking future increases to the CPI (49 percent in support). The nonprofits unanimously support a minimum wage increase and support linking future increases to the CPI (Attachment 5). Sunnyvale Community Services Board of Directors, an emergency assistance provider, voted unanimously to support a minimum wage increase and tying future increases to the CPI. The main reason for the support is due to the high cost of living in Sunnyvale. These organizations are seeing more clients unable to pay for basic necessities such as housing and food. Points for Council Consideration 1.Typical Provisions of a Local Ordinance The San Jose local minimum wage law adopts a local minimum wage which adjusts automatically each year based on any increase to the CPI. It requires employers to pay its minimum wage for each hour worked within the geographic boundaries of the City. It defines “Employer” as any person, including corporate officers or executives, as defined in Section 18 of the California Labor Code, who directly or indirectly through any other person, including through the services of a temporary employment agency, staffing agency or similar entity, employs or exercises control over the wages, hour or working conditions of any Employee and who is ether subject to the Business License Tax Chapter of the Municipal Code or maintain a facility in the City.” The ordinance set the original minimum wage at $10.00 per hour; under the adjustment formula, on January 1, 2014, San Jose increased its minimum wage to $10.15 per hour. Staff has met with business owners and groups, the Sunnyvale Chamber of Commerce, and nonprofit organizations to discuss the study issue. A survey was also conducted to gather additional input from the community at large. Based on the feedback from these groups, below are additional provisions for Council consideration, including potential exemptions for specific working groups and the intervals at which adjustments to the minimum are applied. Increases to CPI or Inflation. Some businesses are supportive of increasing the City’s minimum wage to $10.00 prior to the state’s mandated $10.00 per hour on January 1, 2016. However, the majority of businesses, including the Chamber of Commerce and California Restaurant Association, are opposed to linking any future increases to the CPI. Business owners representing sectors such as restaurants, hotels, small retail businesses, stated that they currently pay more than the State’s minimum wage. However, most of the impacted businesses say that linking the minimum wage to the CPI would change the minimum wage every year and would be costly and inconvenient as they will not be able to accurately predict annual budgets. Intervals at which adjustments to the minimum wage would be considered. As an alternative to an annual increase that ties to CPI, the Sunnyvale Chamber of Commerce is proposing that Council consider a fixed minimum wage with reviews every Page 4 of 8 14-0280 Agenda Date:5/20/2014 three years and adjustments to a predictable and fixed amount (Attachment 3). The logic behind the proposal is that if the CPI increases by two percent on year one, four percent on year two, and three percent on year three, when Council reviews the minimum wage issue in year three, the increase could be up to nine percent. Potential exemptions for specified working groups or categories of people. Directly-Tipped Employees: The California Restaurant Association strongly opposes any minimum wage increase (Attachment 4) due to the industry’s low profit margins and their assertion that tipped employees would profit the most from a minimum wage increase. Restaurant owners repeatedly stated that minimum wage should not apply to directly-tipped employees because they have higher compensation when tips are taken into account, and because more base pay for tipped workers would mean less funding would be available for non-tipped employees. At the state level, California Labor Code 351 precludes crediting tips against wages to meet a minimum wage requirement. San Jose’s ordinance (Attachment 6) does not exclude any directly-tipped employees from the minimum wage requirement. Additional Exemptions Being Considered by Other Cities: Other cities, including Berkeley and Richmond, are considering exempting businesses with less than a certain number of employees, persons less than 18 years of age, and directly-tipped employees. 2.Implementation and Enforcement San Jose and San Francisco’s minimum wage ordinances were mandated by voter initiatives. San Francisco voters approved their minimum wage ordinance in 2003. San Francisco’s program is enforced by its Labor Standards Enforcement, which also enforces Healthy San Francisco (a healthcare ordinance) and its Paid Sick Leave requirement. The San Jose Minimum Wage Initiative was approved by voters in November 2012 and took effect March 2013. San Jose’s program enforcement is managed by the city's Office of Equality Assurance, which also manages the city’s Living Wage and Prevailing Wage programs. The City of San Jose has two full-time positions assigned to enforcement of their program - a division manager and a contract compliance specialist. The City of San Jose’s ordinance identifies two means of enforcement or remedy, including administrative action by the city’s Office of Equality Assurance (OEA) and/or a private enforcement action through the courts by the person aggrieved by the violation. The San Jose minimum wage ordinance basically creates a minimum wage program. In order for the City to implement an ordinance modeled after the one adopted in the City of San Jose, the following activities would be required. Implementation: • Provide outreach and education to affected businesses and employees about their rights and responsibilities, which would include creation and distribution of educational materials with annual updates. • Develop any guidelines required to implement the program. • Answer questions about the ordinance. Page 5 of 8 14-0280 Agenda Date:5/20/2014 Administrative Enforcement: • Accept complaints. • Investigate complaints made regarding compliance, which include interviewing employees, requesting and reviewing documentation, and possible subpoenas. • Negotiate informal resolutions of complaints. • Issue administrative citations for noncompliance. • Provide appeals with the hearing office for administrative citations. • Collect and track administrative citations. Unlike San Jose and San Francisco, Sunnyvale does not have infrastructure in place nor staff expertise to manage a minimum wage program. Currently, persons employed within the City rely on the State’s Department of Industrial Relations to enforce any wage issues between an employee and their employer. Enforcement of a minimum wage ordinance program for the City is not currently considered a core service. Development of such a program would take time and resources. Staff estimates that up to six months and approximately 900 staff hours may be needed to fully develop an implementation and enforcement program based on adoption of a minimum wage ordinance. The amount of hours may increase or decrease depending on any exemptions and the intervals on which increases are made. It may be possible to contract out enforcement actions with another local agency that already has resources dedicated to enforce such an ordinance. Should Council choose to explore this option, staff would return with language presenting enforcement options for Council consideration. Additionally, Council could consider an ordinance that adopted a local minimum wage that did not include administrative enforcement provisions and provided only a private enforcement mechanism. Under that scenario, an aggrieved person would file an enforcement action directly with the courts rather than through a complaint with the City. FISCAL IMPACT There is no immediate fiscal impact to Council’s adopting an advocacy position or providing direction on the specific provisions it would want in a local ordinance. At a minimum, to implement a City minimum wage ordinance with City enforcement may require approximately 900 hours of staff time to conduct outreach and update employee/employer notifications and guidelines; the estimated cost for promotional and outreach materials would be approximately $10,000 per year. Specific costs for the various provisions of a potential ordinance as presented in this report could vary and would be presented to Council in a follow-up report. PUBLIC CONTACT Public contact was made by posting the Council agenda on the City's official-notice bulletin board outside City Hall, at the Sunnyvale Senior Center, Community Center and Department of Public Safety; and by making the agenda and report available at the Sunnyvale Public Library, the Office of the City Clerk and on the City's website. Staff also notified interested parties and those that submitted comments and/or attended the outreach meetings. As previously mentioned, staff conducted a community survey regarding the issue; survey results are presented as Attachment 2. Additional letters received on this matter are presented as Attachments 3, 4, and 5 Page 6 of 8 14-0280 Agenda Date:5/20/2014 ALTERNATIVES 1. Advocacy Position: a. Adopt a new long-term advocacy position as presented:Supporting the quality of life in Sunnyvale, the City would support legislation to increase the current minimum wage or tie future increases to Consumer Price Index (CPI) or the rate of inflation. b. Adopt a modified long-term advocacy position. c. Do not adopt a City advocacy position on this subject. 2. Direct staff to Create a Minimum Wage Ordinance: a. Automatic Future Increases. i. Annual increases tied to CPI. Ii Increases every three years tied to CPI. iii. Other interval as directed by Council. iv. Do not tie future increases of the minimum wage to CPI. b. Potential exemptions for specified working groups or categories of people. i. Exempt directly-tipped employees. ii.Exempt businesses with less than a certain number of employees, as specified by Council. iii. Exempt persons within age ranges as specified by Council. iv. Exempt public agencies and/or nonprofits. v. Other exemptions as directed by Council. vi. Do not provide any exemptions. c. Enforcement options: i. Direct staff to explore options for in-house City enforcement of the ordinance and return to Council with their findings. ii. Direct staff to explore options for contract enforcement of the ordinance and return to Council with findings. iii. Other action as directed by Council. iv. Introduce an Ordinance with no City enforcement and only a Private Right of Action. 3. Do not move forward with a minimum wage ordinance. 4. Other action as directed by Council. RECOMMENDATION Staff makes no recommendation on Alternatives 1 (City advocacy position) or 2 (whether or not City should adopt a minimum wage ordinance). However, should Council pursue an ordinance, staff recommends that Council provide guidance addressing each of the Alternative categories - Automatic Future Increases,Potential Exemptions, and Enforcement Options. More specifically with regard to Enforcement Options, should Council pursue an ordinance with City enforcement, staff recommends Council move both Alternatives 2c(i) and 2c(ii) to ensure staff returns with a comprehensive list of options. The costs and effort required for either of those options could vary significantly. An in-house program, for example, would require development from the ground up as currently the City has no supportive infrastructure in place. The cost of a contracted enforcement service might be less; however there may be additional inconveniences to the aggrieved parties in traveling to another city to file a complaint. Exploring both options would benefit Council by resulting in a more comprehensive list of options. Page 7 of 8 14-0280 Agenda Date:5/20/2014 Prepared by: Connie Verceles, Economic Development Manager Approved by: Robert A. Walker, Interim City Manager ATTACHMENTS 1. Study Issue OCM-14-01 2. Minimum Wage Increase Survey Results 3. Sunnyvale Chamber of Commerce Letter 4. California Restaurant Association Letter 5. Silicon Valley Council of Nonprofits Letter 6. City of San Jose Minimum Wage Ordinance Page 8 of 8 City of Sunnyvale Agenda Item 14-0694 Agenda Date:10/14/2014 REPORT TO COUNCIL SUBJECT Introduce an Ordinance to Add Chapter 3.70 (Minimum Wage) to Title 3 of the Sunnyvale Municipal Code to Require the Payment of a Citywide Minimum Wage; Find that the proposed ordinance is exempt from the California Environmental Quality Act (CEQA) under CEQA Guideline Section 15061 (b)(3); and Approve Budget Modification No.16. BACKGROUND Currently, most Sunnyvale employers are governed by the State’s minimum wage requirement, which is $9.00 per hour and is set to increase to $10.00 per hour on January 1, 2016. In San Jose, the current minimum wage is $10.15 per hour and may increase on January 1, 2015, based on this year’s increase in the Consumer Price Index (CPI). At the May 20, 2014 City Council meeting, Council took three actions related to Study Issue OCM 14- 01: 1. Adopted a long-term advocacy position supporting legislation to increase minimum wage and tie future increases to the CPI. 2. Directed staff to return to Council with a minimum wage ordinance (modeled after the City of San Jose’s Minimum Wage Ordinance) with no exemptions for specific groups of employees and with annual increases tied to CPI. 3. Directed staff to explore options for contract and in-house enforcement of the ordinance and to return to Council with findings. Staff has continued to monitor state legislation regarding minimum wage increases and submitted a support letter for SB 935 (De Leon), which proposes to increase the minimum wage over a three year period, and then provide for annual automatic adjustments based on the CPI. SB 935 did not garner enough votes to pass the Assembly Labor and Employment Committee, and will not be heard again this year. Similar to the San Jose ordinance, the City of Sunnyvale’s proposed ordinance (Attachment 1) adopts a local minimum wage which adjusts automatically each year based on any increase in the CPI. The ordinance requires Sunnyvale employers to pay a minimum wage of $10.30 per hour starting January 1, 2015, for each hour worked within the geographic boundaries of the City of Sunnyvale. It defines “Employer” as any person, including corporate officers or executives, as defined in Section 18 of the California Labor Code, who directly or indirectly through any other person, including through the services of a temporary employment agency, staffing agency or similar entity, employs or exercises control over the wages, hours or working conditions of any employee. In accordance with Council direction provided to staff on May 20, 2014, the proposed ordinance creates a minimum wage program for the City of Sunnyvale. In order for the City to implement and Page 1 of 6 14-0694 Agenda Date:10/14/2014 administer the proposed ordinance the following is required: ··Adoption of the ordinance by City Council ··Outreach and education for employers and employees ··Informational materials regarding new ordinance ··Clear and concise program guidelines ··Investigation of complaints ··Complaint resolution EXISTING POLICY Council Policy 7.3.1 Legislative Management - Goals and Policies: Policy 7.3B.3 Prepare and update ordinances to reflect current community issues and concerns in compliance with state and federal laws. Council 5.0 Long-term Advocacy Positions - Socio-Economic: Policy 5.2.3 Supporting the quality of life in Sunnyvale, the City would support legislation to increase the current minimum wage or tie future increases to Consumer Price Index (CPI) or inflation. ENVIRONMENTAL REVIEW Adoption of the proposed ordinance is exempt from the requirements of CEQA in that it is not a project which has the potential for causing a significant effect on the environment. (CEQA Guidelines Section 15061(b)(3).) DISCUSSION Proposed Ordinance The proposed ordinance creates Chapter 3.70 (Minimum Wage) of Title 3 of the Sunnyvale Municipal Code and requires employers, including the City, to pay a citywide minimum wage to all employees employed within the boundaries of the City of Sunnyvale. The provisions of the proposed ordinance include, but are not limited to: ··A minimum of $10.30 per hour be paid by employers beginning January 1, 2015 ··An adjustment to the minimum wage, every year on January 1, based on the prior year’s CPI ··Employers' adherence to the higher minimum wage in the City of Sunnyvale even though the minimum wage rate is higher than the state and federal requirements While the text of the proposed ordinance is very similar to the one adopted by the City of San Jose, Sunnyvale’s ordinance also incorporates state provisions which are contained in San Jose’s administrative regulations rather than the ordinance. For instance, state law allows offsets for meals and housing costs if there is a prior voluntary agreement between employee and employer; San Jose also allows the offset, but it is contained in the administrative regulations rather than the ordinance. For convenience to both employers and employees, Sunnyvale proposes to include substantive requirements in the ordinance itself, rather than in administrative regulations. Implementation and Enforcement Options As per Council direction, staff explored options for in-house and contract enforcement of the proposed ordinance. The enforcement model of the proposed ordinance is complaint-driven. There are two major phases needed for the implementation and enforcement of a minimum wage ordinance: Page 2 of 6 14-0694 Agenda Date:10/14/2014 1.Outreach & Education-actions include, but are not limited to: a.Developing administrative guidelines for program implementation b.Distributing materials regarding the ordinance to employers and employees c.Creating a set of FAQs to respond to inquiries d.Partnering with business associations to distribute information to employers and employees e.Staff training f. Translating documents into different languages as prescribed in ordinance g.Updating information on annual basis 2.Administration & Enforcement-actions include, but are not limited to: a.Informal resolution i. Conducting investigations ii. Informal resolution of complaints iii. Receiving and distributing restitution checks for affected employees b.Administrative Citation i. Issuing administrative citations for non-compliance ii. Implementing a process for due process hearings, including defending court appeals iii. Pursuing civil action or other remedies if an employer does not respond to administrative citations iv. Receiving and distributing restitution checks for affected employees Staff explored the pros and cons of both options for the two phases needed to implement the ordinance. Below is a table outlining staff’s findings: In-House Enforcement Pros Cons Outreach & Education Familiarity with constituents New program - lack of staff expertise Businesses familiar with staff No enforcement infrastructure in place Aware of City’s outreach requirements Administration & Enforcement Higher cost due to lack of staff expertise Small number of anticipated complaints does not justify ongoing staffing costs No infrastructure in place to manage program Need to create program from scratch Contract Enforcement Pros Cons Outreach & Education Familiarity with ordinance Not familiar with constituents Businesses unfamiliar with staff Not familiar with City of Sunnyvale’s outreach requirements Administration & Enforcement Lower cost due to staff expertise and by leveraging existing staff resources already dedicated to this effort in San Jose Not familiar with constituents Fully developed program in place Employees having to go through another city for enforcement Staff familiar with Ordinance Page 3 of 6 14-0694 Agenda Date:10/14/2014 Contract Enforcement Pros Cons Outreach & Education Familiarity with ordinance Not familiar with constituents Businesses unfamiliar with staff Not familiar with City of Sunnyvale’s outreach requirements Administration & Enforcement Lower cost due to staff expertise and by leveraging existing staff resources already dedicated to this effort in San Jose Not familiar with constituents Fully developed program in place Employees having to go through another city for enforcement Staff familiar with Ordinance The City of Sunnyvale does not have infrastructure in place nor staff expertise to manage a minimum wage program. Currently, persons employed within the City rely on the State’s Department of Industrial Relations to enforce any wage issues between an employee and their employer. Administration and enforcement of a minimum wage program for the City of Sunnyvale is not currently considered a core service. At a minimum, to implement a City of Sunnyvale minimum wage ordinance with City enforcement may require approximately 900 hours of staff time to conduct enforcement, outreach and update employee/employer notifications and guidelines. Staff has explored both options and plans initially to pursue a hybrid model. Under the hybrid model, the City of Sunnyvale will complete the Outreach and Education phase in-house and contract with the City of San Jose for the Administration & Enforcement- Informal Resolution part of phase two. The City of Sunnyvale will coordinate with San Jose staff, but will have primary responsibility for the Administration & Enforcement-Administrative Citation part of phase two. This operational strategy is based on the fact that preliminary discussions with the City of San Jose suggest that contracting with San Jose will be more cost-effective than providing these services in-house. It also recognizes existing City resources: Sunnyvale is staffed to perform outreach and education functions, but lacks the expertise and resources to execute day-to-day enforcement functions. Given this type of program is new to the City of Sunnyvale and there is no existing City department that administers a similar program, the hybrid model will allow Sunnyvale staff time to become familiar with the program and determine whether other operational strategies should be pursued. The City already has provisions in the Sunnyvale Municipal Code for the issuance of administrative citations and staff will coordinate with the Office of the City Attorney to implement those administrative procedures when necessary. FISCAL IMPACT Based on preliminary discussions, the potential fiscal impact of entering into a contract with the City of San Jose may be up to $30,000 per year. This amount could be lower or higher depending on the number of cases needing to be resolved. The contract with the City of San Jose will only cover administration and enforcement of typical cases; those needing to be moved to the administration Page 4 of 6 14-0694 Agenda Date:10/14/2014 citation phase will return to Sunnyvale for staff issuance of citations and coordination with the Office of the City Attorney. Costs for the outreach and education phase will be absorbed within the current budget. In addition to the costs of outreach and enforcement, adopting this ordinance also affects the City’s operating costs. The City employs a variety of casual and seasonal staff, primarily in the Recreation Division, who are paid at or below $10.30 per hour. The state minimum wage is already set to rise to $10 per hour in 2016. Had the minimum wage of $10.30 been in place over the last fiscal year, it would have affected approximately 50 employees at a total cost of approximately $25,000 for the year. Therefore, bringing Sunnyvale staff up to a higher wage will not significantly affect the cost of operations and can be absorbed in the current budget and adjusted for in future budgets. However, on a long-term basis, this ordinance changes the nature of budgeting for these personnel as the costs will subsequently be tied to CPI as opposed to directly under the City’s control. Staff is recommending that the $30,000 per year for enforcement be funded from the General Fund Budget Stabilization Fund. Should this cost remain stable, this will have a 20-year impact of approximately $750,000. Budget Modification No. 16 has been prepared to appropriate $30,000 from the Budget Stabilization Fund to a new project to fund minimum wage enforcement activities. Budget Modification No. 16 FY 2014/15 Current Increase/ (Decrease) Revised General Fund Expenditures: New Project - Minimum Wage Ordinance Enforcement $ 0 $30,000 $30,000 Reserves Budget Stabilization Fund $38,371,772 ($30,000)$38,341,772 PUBLIC CONTACT Public contact was made by posting the Council agenda on the City's official-notice bulletin board outside City Hall, at the Sunnyvale Senior Center, Community Center and Department of Public Safety; and by making the agenda and report available at the Sunnyvale Public Library, the Office of the City Clerk and on the City's website. Staff also sent postcards stating time and location of this evening's Council meeting to businesses with valid business licenses. In addition, staff notified interested parties that attended outreach meetings in the past regarding this issue and posted information regarding the ordinance on the City’s Facebook and Twitter pages. ALTERNATIVES 1. Introduce an ordinance, as presented in Attachment 1, to add Chapter 3.70 (Minimum Wage) to Title 3 of the Sunnyvale Municipal Code to require the payment of a citywide minimum wage Page 5 of 6 14-0694 Agenda Date:10/14/2014 2. Find that the proposed ordinance is exempt from CEQA under CEQA Guideline 15061(b)(3) 3. Approve Budget Modification No. 16 4. Introduce an ordinance with modifications 5. Do not create Chapter 3.70 at this time RECOMMENDATION Alternatives 1, 2 and 3: Introduce an ordinance, as presented in Attachment 1, to add Chapter 3.70 (Minimum Wage) to Title 3 of the Sunnyvale Municipal Code to require the payment of a citywide minimum wage; Find that the proposed ordinance is exempt from CEQA under CEQA Guideline 15061(b)(3); and Approve Budget Modification No. 16 to fund the hybrid enforcement model. Staff developed the ordinance in accordance with Council’s direction on May 20, 2014. Staff also explored options for contract and in-house enforcement of a minimum wage program. Staff plans initially to implement a hybrid enforcement model based on discussions with San Jose and the limited resources currently available within the City of Sunnyvale. This ordinance creates a new minimum wage program for the City of Sunnyvale and there is no existing City department to administer such a program. The hybrid enforcement model will allow Sunnyvale staff time to become familiar with the program and determine whether other operational strategies should be pursued. Prepared by: Connie Verceles, Economic Development Manager Reviewed by: Joan Borger, City Attorney Reviewed by: Robert A. Walker, Assistant City Manager Approved by: Deanna J. Santana, City Manager ATTACHMENTS 1. Sunnyvale Draft Ordinance Page 6 of 6 Attachment 1 As of December 2014 Source: National Employment Law Project. Retrieved from http://www.nelp.org/content/uploads/2015/03/City-Minimum-Wage-Laws-Recent-Trends- Economic-Evidence.pdf Bay Area Minimum Wage Ordinances City Ordinance Adopted Current Hourly Minimum Wage Rate Notes Berkeley 6/27/2014 $10.00 $11.00 on 10/1/2015 $12.53 on 10/1/2016 Passed by the City Council. Campbell - $9.00 The City Council will hold a study session on 5/19/2015 to examine the issue of a minimum wage ordinance. Emeryville 5/5/2015 $9.00 $14.44 (for large businesses) on 7/1/2015 $12.25 (for small businesses) on 7/1/2015 $13.00 (for small businesses) on 7/1/2016 $14.00 (for small businesses) on 7/1/2017 $15.00 (for small businesses) on 7/1/2018 $16.00 (for small businesses) on 7/1/2019 Passed by the City Council. Small business classification for those with fewer than 55 employees. Minimum wage rate for large businesses will be tied to the Consumer Price Index (CPI) and increase each July 1 starting in 2016. Morgan Hill - $9.00 The City Council has directed staff to study the issue of a minimum wage ordinance tied to the CPI. Mountain View 10/9/2014 $9.00 $10.30 on 7/1/2015 $12.00 on 7/1/2016 $13.50 on 7/1/2017 $15.00 on 7/1/2018 Passed by the City Council. Tied to the CPI after 2018. Oakland 11/4/2014 $12.25 Voter-initiated ordinance (Measure FF). Tied to the CPI, will increase January 1 of each year. City Ordinance Adopted Current Hourly Minimum Wage Rate Notes Palo Alto - $9.00 The City Council Policy and Services Committee endorsed the following minimum wage rate schedule on 4/28/2015: $11.00 on 1/1/2016, which would gradually climb to $15.00 by 2018 through increments approved by the City Council. Richmond 5/6/2014 $9.60 $11.52 on 1/1/2016 $12.30 on 1/1/2017 $13.00 on 1/1/2018 Passed by the City Council. Employers who pay less than 800 hours of employee wages over a two-week period are exempt. Employers who derive more than 50% of their income where the point of sale is outside the city must pay an intermediate wage halfway between the city and state minimum wage. San Francisco 11/4/2003 $12.25 $13.00 on 7/1/2016 $14.00 on 7/1/2017 $15.00 on 7/1/2018 Voter-initiated ordinance (Measure J). Tied to the CPI after 2018. San Jose 3/11/2013 $10.30 Voter-initiated ordinance (Measure D). No exceptions. Tied to the CPI, will increase January 1 of each year. Sunnyvale 10/14/2014 $10.30 Passed by the City Council. Based on San Jose’s ordinance. At t a c h m e n t 2 Ch a r t s In d e x a v e r a g e f o r a l l p a r t i c i p a t i n g p l a c e s , b o t h m e t r o p o l i t a n a n d n o n m e t r o p o l i t a n , i s 1 0 0 . A n i n d e x va l u e of 1 5 0 in d i c a t e s a 5 0 % h i g h e r c o s t o f l i v i n g co m p a r e d t o a n i n d e x s c o r e o f 1 0 0 . T h e Sa n J o s e – Su n n y v a l e – Sa n t a C l a r a m e t r o p o l i t a n a r e a d i d n o t pr o v i d e d a t a fo r 20 1 4 . 020406080 10 0 12 0 14 0 16 0 18 0 20 0 9 20 1 0 20 1 1 20 1 2 20 1 3 20 1 4 Cost of Living Index Value Ye a r Sa n F r a n c i s c o B a y A r e a C o s t o f L i v i n g , 2 0 0 9 -20 1 4 Sa n F r a n c i s c o - R e d w o o d C i t y - S o u t h S a n F r a n c i s c o C A Sa n J o s e - S u n n y v a l e - S a n t a C l a r a C A Oa k l a n d - H a y w a r d - B e r k e l e y C A Na t i o n a l A v e r a g e So u r c e : Co u n c i l f o r C o m m u n i t y an d E c o n o m i c R e s e a r c h 14 1 . 6 10 1 . 9 10 4 . 8 13 0 . 4 13 6 . 1 11 2 . 5 11 2 . 5 13 0 16 1 . 6 14 9 . 3 12 8 . 0 7 020406080 10 0 12 0 14 0 16 0 18 0 Cost of LIving Index Score Ca l i f o r n i a M e t r o p o l i t a n A r e a s C o s t o f L i v i n g I n d e x , 2 0 1 3 So u r c e : Co u n c i l f o r C o m m u n i t y a n d E c o n o m i c R e s e a r c h At t a c h m e n t 2 1. 2 2. 0 3. 2 3. 3 3. 1 0. 7 1. 4 2. 6 2. 7 2. 2 2. 8 0. 0 0. 5 1. 0 1. 5 2. 0 2. 5 3. 0 3. 5 20 0 4 20 0 5 20 0 6 20 0 7 20 0 8 20 0 9 20 1 0 20 1 1 20 1 2 20 1 3 20 1 4 Percentage Increase Ye a r Co n s u m e r P r i c e I n d e x A n n u a l P e r c e n t C h a n g e , Sa n F r a n c i s c o -Oa k l a n d -S a n J o s e C A So u r c e : Bu r e a u o f L a b o r S t a t i s t i c s Ret r i e v e d f r o m C a l i f o r n i a D e p a r t m e n t o f T r a n s p o r t a t i o n , ht t p : / / w w w . d o t . c a . g o v / h q / t p p / o f f i c e s / e a b / s o c i o _ e c o n o m i c _ f i l e s / 2 0 1 4 / S a n t a C l a r a . p d f Ret r i e v e d f r o m C a l i f o r n i a D e p a r t m e n t o f T r a n s p o r t a t i o n , ht t p : / / w w w . d o t. c a . g o v / h q / t p p / o f f i c e s / e a b / s o c i o _ e c o n o m i c _ f i l e s / 2 0 1 4 / S a n t a C l a r a . p d f Attachment 5 Survey Results 16.9% 9.4% 7.4% 6.9% 6.6% 4.0% 3.4% 45.4% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Pe r c e n t a g e Type of Business n = 350 69.6% 24.9% 5.5% Respondent Title Business Owner Business Manager Other (16 categories) n = 342 Percentage of Minimum Wage Employees in Organization Frequency Percent Cumulative Percent 0% - 10% 270 77.4 77.4 11% - 20% 10 2.9 80.2 21% - 30% 4 1.1 81.4 31% - 40% 9 2.6 84.0 41% - 50% 8 2.3 86.2 51% - 60% 6 1.7 88.0 71% - 80% 4 1.1 89.1 81% - 90% 1 0.3 89.4 91% - 100% 37 10.6 100.0 Total 349 38.9% 24.4% 14.5% 11.6% 3.1% 3.4% 0.6% 3.4% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 0 - 5 6 - 10 11 - 15 16 - 30 31 - 45 46 - 75 76 - 90 91+ Pe r c e n t a g e Number of Employees Number of Employees in Organization n = 352 What percentage of total positions would be eliminated (and not replaced)? Frequency Percent Cumulative Percent 0% - 10% 227 84.4 84.4 11% - 20% 26 9.7 94.1 21% - 30% 8 3.0 97.0 31% - 40% 4 1.5 98.5 41% - 50% 1 0.4 98.9 51% - 60% 1 0.4 99.3 61% - 70% 1 0.4 99.6 71% - 80% 1 0.4 100.0 Total 269 10.1% 7.1% 2.5% 60.1% 14.7% 1.8% 3.7% 0% 10% 20% 30% 40% 50% 60% 70% Definitely Yes Probably Yes Maybe Yes Definitely No Probably No Maybe No Unsure Pe r c e n t a g e Would your business eliminate (and not replace) any positions to compensate for increased labor costs? n = 326 7.6% 6.3% 5.7% 47.0% 19.7% 1.3% 12.4% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Definitely Yes Probably Yes Maybe Yes Definitely No Probably No Maybe No Unsure Pe r c e n t a g e Would your organization also increase the hourly wages of any higher-paying positions, such as those who supervise minimum wage employees? n = 315 7.9% 8.8% 2.5% 59.1% 15.4% 1.9% 4.4% 0% 10% 20% 30% 40% 50% 60% 70% Definitely Yes Probably Yes Maybe Yes Definitely No Probably No Maybe No Unsure Pe r c e n t a g e Would your business reduce employee work hours? n = 318 What percentage of employees would have their work hours reduced? Frequency Percent Cumulative Percent 0% - 10% 214 80.5 80.5 11% - 20% 10 3.8 84.2 21% - 30% 11 4.1 88.3 31% - 40% 8 3.0 91.4 41% - 50% 9 3.4 94.7 51% - 60% 3 1.1 95.9 71% - 80% 2 0.8 96.6 81% - 90% 1 0.4 97.0 91% - 100% 8 3.0 100.0 Total 266 15.7% 11.4% 5.9% 46.0% 15.1% 0.9% 4.9% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Definitely Yes Probably Yes Maybe Yes Definitely No Probably No Maybe No Unsure Pe r c e n t a g e Would your business increase its prices to customers? n = 324 What percentage would your business' prices to customers increase? Frequency Percent Cumulative Percent 0% - 10% 194 78.5 78.5 11% - 20% 26 10.5 89.1 21% - 30% 10 4.0 93.1 31% - 40% 7 2.8 96.0 41% - 50% 2 0.8 96.8 51% - 60% 1 0.4 97.2 71% - 80% 1 0.4 97.6 91% - 100% 6 2.4 100.0 Total 247 1.8% 1.5% 28.2% 13.4% 12.2% 42.9% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Pe r c e n t a g e If there was a possibility to expand your organization, would a minimum wage increase affect this expansion? n = 329 What percentage of your organization's total expenditures would a $1.30 increase in the minimum wage be? Frequency Percent Cumulative Percent 0% - 10% 249 80.3 80.3 11% - 20% 28 9.0 89.4 21% - 30% 8 2.6 91.9 31% - 40% 9 2.9 94.8 41% - 50% 4 1.3 96.1 51% - 60% 6 1.9 98.1 61% - 70% 2 0.6 98.7 71% - 80% 1 0.3 99.0 81% - 90% 2 0.6 99.7 91% - 100% 1 0.3 100.0 Total 310 5.5% 4.3% 34.9% 49.5% 5.8% 0% 10% 20% 30% 40% 50% 60% Highly Likely Likely Unlikely Highly Unlikely Not Sure Pe r c e n t a g e How likely would a minimum wage increase to $10.30 per hour be to cause your organization to move to another city with a lower minimum wage? n = 327 *Question allowed for multiple responses per respondent, thus total figures sum to greater than 100%. 2.8% 7.5% 54.6% 4.7% 6.2% 24.2% 0% 10% 20% 30% 40% 50% 60% Yes, Significantly More Qualified Applicants Yes, Slightly More Qualified Applicants No, Equally Qualified Applicants No, Slightly Less Qualified Applicants No, Significantly Less Qualified Applicants Unsure Pe r c e n t a g e Would increased wages for your lowest-paid employees result in higher qualified applicants for these positions? n = 322 6.8% 17.8% 8.9% 18.4% 60.2% 0% 10% 20% 30% 40% 50% 60% 70% Increased Productivity Increased Morale Reduced Turnover Would Not Result in Any Unsure Pe r c e n t a g e * Would increased wages for your lowest-paid employees result in increased productivity, increased morale, or reduced turnover? n = 337 75.5% 24.5% Would you support a minimum wage increase if it led to increases in employee productivity, employee retention, employee morale, and the level of qualifications of applicants, to offset all or part of increased labor costs? Yes No n = 322 37.3% 62.7% Would you support a minimum wage increase if it did not lead to increases in employee productivity, employee retention, employee morale, and the level of qualifications of applicants, to offset all or part of increased labor costs? Yes No n = 322 Attachment 6 References Aaronson, D., French, E., & MacDonald, J. (2008). The minimum wage, restaurant prices, and labor market structure. Journal of Human Resources, 43(3), 688-720. Retrieved from http://davideharrington.com/wp-content/uploads/2014/01/R9-Min- Wage-Restaurant-Prices-and-Labor-MS.pdf. Acs, G., Wheaton, L., Enchautegui, M., & Nichols, A. (2014). Understanding the implications of raising the minimum wage in the District of Columbia. Retrieved from http://www.urban.org/UploadedPDF/413200-Understanding-the-Implications- of-Raising-the-Minimum-Wage-in-the-District-of- Columbia.pdf?RSSFeed=UI_Employment.xml Addison, J. T., Blackburn, M. L., & Cotti, C. D. (2009). Do minimum wages raise employment? Evidence from the U.S. retail-trade sector. Labour Economics, 16(4), 397-408. doi: http://dx.doi.org.libaccess.sjlibrary.org/10.1016/j.labeco.2008.12.007. Allegretto, S. A., Dube, A., & Reich, M. (2011). Do minimum wages really reduce teen employment? Accounting for heterogeneity and selectivity in state panel data. Industrial Relations: A Journal of Economy and Society, 50(2), 205-240. Allegretto, S. & Reich M. (2014). Minimum wage effects on prices: Preliminary results. Paper presented at the Portland meeting of the Labor and Employment Research Association. Benner, C., & Jayaraman, S. (2012). A dime a say: The Impact of the Miller/Harkin minimum wage proposal on the price of food. University of California Berkeley Food Labor Research Center, Food Chain Workers Alliance and Restaurant Opportunities Center. Retrieved from: http://laborcenter.berkeley.edu/pdf/2012/price_food12.pdf. Boushey, H. & Glynn, S. J. (2012). There are significant business costs to replacing employees. Washington, DC: Center for American Progress. Retrieved from https://www.americanprogress.org/wp- content/uploads/2012/11/CostofTurnover.pdf. Coomer, N. M., & Wessels, W. J. (2013). The effect of the minimum wage on covered teenage employment. Journal of Labor Research, 34(3), 253-280. Doucouliagos, H., & Stanley, T. D. (2009). Publication selection bias in minimum-wage research? A meta-regression analysis. British Journal of Industrial Relations, 47(2), 406-428. Dube, A., Lester, T. W., & Reich, M. (2010). Minimum wage effects across state borders: Estimates using contiguous counties. The Review of Economics and Statistics, 92(4), 945-964. Dube, A., Lester, T. W., & Reich, M. (2013). Minimum wage shocks, employment flows and labor market frictions. Working Paper No. 149-13. Institute for Research on Labor and Employment, UC Berkeley. Retrieved from http://irle.berkeley.edu/workingpapers/149-13.pdf. Dube, A., Naidu, S., & Reich, M. (2007). The economic effects of a citywide minimum wage. Industrial & Labor Relations Review, 60(4), 522-543. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=25641161&si te=ehost-live Elmendorf, D. W. (2014). The effects of a minimum-wage increase on employment and family income. Retrieved from https://www.cbo.gov/sites/default/files/44995- MinimumWage.pdf Giuliano, L. (2013). Minimum wage effects on employment, substitution, and the teenage labor supply: Evidence from personnel data. Journal of Labor Economics, 31(1), 155-194. Hirsch, B. T., Kaufman, B. E., & Zelenska, T. (2011). Minimum wage channels of adjustment. Andrew Young School of Policy Studies Research Paper Series, (11- 34). Retrieved from http://www.econstor.eu/bitstream/10419/58927/1/690181728.pdf. Lee, C., Schluter, G., & O’Roark, B. (2000). Minimum wage and food prices: an analysis of price pass-through effects. The International Food and Agribusiness Management Review, 3(1), 111-128. Retrieved from http://core.ac.uk/download/pdf/6553466.pdf. Meer, J., & West, J. (2013). Effects of the minimum wage on employment dynamics. (No. w19262). National Bureau of Economic Research. Myers-Lipton, S., & Quyo, P. (2014, March 12). San Jose minimum wage: A year-old success story. San Jose Mercury News. Retrieved from http://www.mercurynews.com/opinion/ci_25315215/san-jose-minimum-wage- year-old-success-story Potter, N. (2006). Earnings and employment: The effects of the living wage ordinance in Santa Fe, New Mexico. Retrieved from https://repository.unm.edu/bitstream/handle/1928/3257/SF_earnings_final_rpt. pdf?sequence=1 Reich, M. (2012). Increasing the minimum wage in San Jose: Benefits and costs. Berkeley, CA: Institute for Research on Labor and Employment, University of California, Berkeley, 2012-2001. Reich, M., Jacobs, K. & Berhhardt, A. (2014). Local minimum wage laws: Impacts of workers, families, and businesses. Working Paper No. 104-14. Institute for Research on Labor and Employment, UC Berkeley. Retrieved from http://www.irle.berkeley.edu/workingpapers/104-14.pdf. Reich, M., Jacobs, K. & Dietz, M. (eds.). (2014). When mandates work: Raising labor standards at the local level. Berkeley, CA: University of California Press. Ropponen, O. (2011). Reconciling the evidence of Card and Krueger (1994) and Neumark and Wascher (2000). Journal of Applied Econometrics, 26(6), 1051-1057. doi: 10.1002/jae.1258. Sabia, J. (2009). The effects of minimum wage increases on retail employment and hours: New evidence from monthly CPS data. Journal of Labor Research, 30(1), 75-97. doi: 10.1007/s12122-008-9054-1. Schmitt, J. (2013). Why does the minimum wage have no discernible effect on employment? Center for Economic and Policy Research, 22. Retrieved from http://dev.takeactionminnesota.org/wp-content/uploads/2013/10/Why-Does- the-Minimum-Wage-Have-No-Discernible-Effect-on-Employment.pdf. Schmitt, J., & Rosnick, D. (2011). The wage and employment impact of minimum-wage laws in three cities. Center for Economic and Policy Research. Retrieved from http://new.reimaginerpe.org/files/min-wage-2011-03.pdf. Wolfson, P. J., & Belman, D. (2014). What does the minimum wage do?. W.E. Upjohn Institute for Employment Research: Kalamazoo, MI. Zavodny, M. (2000). The effect of the minimum wage on employment and hours. Labour Economics, 7(6), 729-750. doi: http://dx.doi.org.libaccess.sjlibrary.org/10.1016/S0927-5371(00)00021-X 5/19/2015 – Addendum to Staff Memo Question 13: Would you support a minimum wage increase if it led to increases in employee productivity, employee retention, employee morale, and the level of qualifications of applicants, to offset all or part of increased labor costs? - All respondents: 75.5% Yes ; 24.5% No Question 14: Would you support a minimum wage increase if it did not lead to increases in employee productivity, employee retention, employee morale, and the level of qualifications of applicants, to offset all or part of increased labor costs? - All respondents: 37.3% Yes ; 62.7% No Scenario 1: Remove all respondents with 0% - 10% of employees in their organization earning the minimum wage. Question 13: Yes – 58.5% No – 41.4% Question 14: Yes – 22.9% No – 77.1% Scenario 2: Remove all respondents with 0% - 50% of employees in their organization earning the minimum wage. Question 13: Yes – 54.8% No – 45.2% Question 14: Yes – 28.6% No – 71.4% Scenario 3: Remove all respondents with 0% - 90% of employees in their organization earning the minimum wage. Question 13: Yes – 68.8% No – 31.3% Question 14: Yes – 34.4% No – 65.6% News Release For Immediate Release Contacts July 27, 2015 Kimberly S. Thomas, Assistant to the City Manager, City of Mountain View, (650) 903‐6301; kimberly.thomas@mountainview.gov Connie Verceles, Economic Development Manager, City of Sunnyvale, (408) 730-7256 CVerceles@sunnyvale.ca.gov Community Feedback Wanted for Regional Minimum Wage FOR IMMEDIATE RELEASE (Mountain View, Calif.) — The cities of Mountain View and Sunnyvale invite all community members to attend one of two public meetings about a regional increase to the minimum wage rate. The current minimum wage is $10.30 per hour in both Mountain View and Sunnyvale. By the end of this year, both city councils will receive a minimum wage update and may consider proposed ordinances to increase the minimum wage to $15 per hour by 2018. Mountain View Community Meeting Sunnyvale Community Meeting When: Wednesday, September 2, 2015, from 6:30 - 8:00 p.m. When: Thursday, September 3, 2015, from 2:00 — 3:30 p.m. Where: Mountain View Senior Center 266 Escuela Ave. - Social Hall Mountain View Where: City of Sunnyvale Council Chambers 456 W. Olive Ave., Sunnyvale [More] Community Meetings on Regional Minimum Wage – page _ The following schedule is a potential approach to reaching $15.00 by 2018. Neither Council has voted on the approach as of the time of this release. In addition to the two meetings, members of the community may express feedback to the Mountain View and Sunnyvale City Councils in the following ways: Mountain View Community Feedback: Sunnyvale Community Feedback: Online Feedback: Mountain View Open City Hall forum – available on September 1, 2015 at www.mountainview.gov/open- city-hall Online Feedback: City of Sunnyvale Open City Hall forum – available on September 1, 2015 at Sunnyvale.ca.gov or MinimumWage.inSunnyvale.com E-mail/ Call: citycouncil@mountainview.gov (650) 903-6301 E-mail/ Call: MinimumWage@Sunnyvale.ca.gov or (408) 730-7902 Council Meeting: Attend the City Council meeting on October 27, 2015, to address the City Council (expected meeting date as of the time of this announcement). Council Meeting: Council date is to be determined. Visit TCMAC.inSunnyvale.com to view upcoming Council items More Info: MountainView.gov/minwage City Manager's Office 500 Castro St., PO Box 7540 Mountain View, CA 94039 (650) 903-6301 MinWage@mountainview.gov More Info: MinimumWage.inSunnyvale.com City of Sunnyvale 456 W. Olive Ave. Sunnyvale, CA 94086 (408) 730-7902 MinimumWage@Sunnyvale.ca.gov # # # Proposed Effective Date Proposed Minimum Wage Rate Current $10.30 7/1/2016 $12.00 7/1/2017 $13.50 7/1/2018 $15.00 July 1st Each Following Year CPI Increase For Immediate Release June 16, 2016 Media Contacts: Cities Association of Santa Clara County: Raania Mohsen, (408) 766-‐9534 or executive_director@citiesassociation.org Office of Mayor Liccardo: David Low, 408-‐535-‐4840 or david.low@sanjoseca.gov Silicon Valley Rising: Elly Matsumura (510-‐301-‐1045 or elly@wpusa.org) or Dianna Zamora Marroquin (408-‐518-‐1034 or dianna@southbaylabor.org) South Bay Leaders Come Together on Regional Minimum Wage Proposal Regional recommendation aims to raise minimum wage to $15 by 2019 in Santa Clara County cities Sunnyvale, Calif. – The Cities Association of Santa Clara County and a coalition of Santa Clara County Mayors have announced their support of a regional minimum wage proposal, providing a common path for cities throughout Silicon Valley to help ensure that more residents benefit from the region’s growing economic prosperity. The two groups endorsed raising the minimum wage to $15 per hour by 2019, with increases taking place in three steps starting in January 2017. As a result, the regional minimum wage would reach $15 three years sooner than the new $15 statewide minimum wage will take effect. Mountain View, Palo Alto and Sunnyvale have already adopted ordinances that will bring their minimum wage to $15 faster than the state. The groups also endorsed tying future increases to inflation and including “off-‐ramp” provisions that would allow for scheduled increases to be delayed under certain economic conditions – two elements that also align with the statewide minimum wage legislation signed by Governor Brown in April. “The Cities Association acknowledges the severity of income inequality throughout the nation,” noted Cities Association President/Sunnyvale Councilmember Jim Griffith. “The fact is minimum wage has not kept pace with Silicon Valley's economic success for decades and thus it is an issue of regional concern. The Cities Association encourages cities to take a regional approach to protect our most vulnerable residents and to work in concert towards a uniform solution that will best benefit Silicon Valley's employees and employers.” This regional effort was launched last fall when San Jose Mayor Sam Liccardo brought together a group of mayors from Santa Clara County cities and began engaging with the Cities Association to jointly explore a potential minimum wage increase. “I’d like to thank my colleagues throughout Santa Clara County who have come together in support of a unified proposal that will help the growing number of families in our community who are struggling to make ends meet,” said Mayor Liccardo. “By taking a regional approach, we will ensure that all of our residents, businesses and cities are helping address the widening gap between rich and poor here in Silicon Valley.” Working in collaboration with the Cities Association, the coalition of mayors and other community stakeholders, the City of San Jose commissioned an economic analysis to study the potential impacts of raising the minimum wage in the region. Among the findings, the study found that raising the minimum wage to $15 by 2019 would increase annual earnings for 250,000 workers in the county (approximately 25% of the total workforce) by an average of 19.4%, or $3,200. View the full economic analysis report and accompanying employer survey. “Silicon Valley Rising applauds this bold leadership by our allies in elected office,” said Ben Field, Executive Director of the South Bay AFL-‐CIO Labor Council and co-‐founder of Silicon Valley Rising, a campaign to build an inclusive middle class in the region that has made improved wages and job standards its top goal. “Sunnyvale and Mountain View broke ground by passing $15 minimum wages, and now our movement has grown to unprecedented levels. This kind of regional action by over a dozen cities is a first in our nation’s history.” The coalition of Santa Clara County mayors and the Cities Association Board Members agreed to bring the regional minimum wage proposal to their respective City Councils for consideration this fall. Additional Quotes from local mayors and city councilmembers involved in the regional minimum wage increase effort: Rod Sinks, Cupertino City Council and Cities Association Minimum Wage Subcommittee Member “Though the recommendation is not binding for cities, the Cities Association strongly encourages cities to consider it as a regional effort to increase the earnings of our low-‐wage constituents, ease the cost of living in Silicon Valley, and promote economic growth.” Greg Scharff, Palo Alto Vice Mayor and Cities Association Minimum Wage Subcommittee Member “I am very pleased that we have come together to promote a regional solution which will promote economic growth and equity as well as begin the process of addressing income inequality and the high cost of living in Silicon Valley.” Jason Baker, Mayor of Campbell “A regional minimum wage is a groundbreaking effort to make the high cost of living in Silicon Valley a little less burdensome to working families and all those in our prosperous valley who are struggling to get by. I applaud this effort of the Cities to address regional problems with regional solutions.” Lionel (Lon) Allan, Mayor of Monte Sereno “A regional approach to raising the minimum wage is essential to providing equity when it comes to business growth throughout Santa Clara County. Different rules for different cities create an uneven playing field that can be damaging to local economics. We’re taking steps towards ensuring all residents feel a positive impact from any minimum wage increase.” Derecka Mehrens, Executive Director of Working Partnerships USA and co-‐founder of Silicon Valley Rising “To lift themselves out of poverty, working families need higher wages and access to more hours. The move to raise the wage to $15 by ’19 is a critical step as Silicon Valley Rising campaigns to develop regional standards for wages, hours and benefits that will create the good jobs our communities need.” # # # Minimum Wage Regional Recommendation June 9, 2016 Minimum Wage Subcommittee Greg Scharff Rod Sinks 1 2 •Cities Association priority in 2015 & 2016 •June 2015 Cities Association position: •Regional consistency is paramount •No specific wage or timeline, but watch Mountain View and Sunnyvale •Restaurant wait staff exemption – recommend against •Non-profit exemption –no recommendation •Youth exemption –no recommendation History 3 •Sept 2015: Mayors of Campbell, Cupertino, Milpitas, Morgan Hill, Monte Sereno, San Jose and Santa Clara call for a study; Cities Association signed on to San Jose’s effort; Ben Brownstein, Matt Mahood, Rod Sinks appointed as Advisory Team to San Jose Economic Development Staff •Oct 2015: Study RFP posted •Dec 2015: IRLE/CWED selected to conduct study •Jan 2016: BW Research selected for employer survey •April 2016: Results presented to Cities Association Board •June 2016: Call for regional recommendation History continued The Effects of a $15 Minimum Wage by 2019 in Santa Clara County by Michael Reich, Claire Montialoux, Annette Bernhardt, Sylvia Allegretto, Sarah Thomason, and Ken Jacobs With the assistance of Saika Belal and Ian Perry Summary of Key Findings April 2016 4 Increase in payroll costs 5 The net effect on jobs reflects the balance among factors impacting workers and employers Source: UC Berkeley IRLE Minimum Wage Research Group. 6 •Increase earnings for 250,000 workers •Raise average annual earnings of affected workers by 19.4 percent, or $3,200 (in 2014 dollars) •Increase average prices in Santa Clara County by 0.2 percent over three years •Have a net effect on employment that is slightly negative at the county level (1,450 jobs) and close to zero at a 10 county regional level Key Findings for Santa Clara County Conclusions •Higher wage costs would be absorbed through improved productivity, reduced worker turnover, and modest price increases. •Net effects on employment would be very slightly negative at the city and county levels and close to zero at the regional level. •The resulting improvement in living standards would outweigh the small effects on employment. 7 Santa Clara County Minimum Wage Employer Survey A Study Conducted by BW Research Partnership In Collaboration with City of San Jose and Institute for Research on Labor and Employment (IRLE) April 2016 The majority of surveyed employers report that they will likely have to increase prices for customers, but that their employees will be more satisfied and productive given a minimum wage increase. 40.9% 42.1% 22.0% 21.2% 17.8% 18.0% 12.5% 8.3% 24.7% 20.7% 23.2% 20.7% 22.2% 21.2% 14.1% 12.7% 22.0% 20.7% 34.9% 43.4% 46.7% 45.0% 57.5% 58.5% 6.8% 9.7% 11.4% 7.9% 7.9% 9.5% 8.5% 10.4% You will need to increase prices to your customers to pay for the… Your employees at the minimum wage will be more satisfied and… Your costs of employee turnover will decrease because employees… You will invest in technologies that reduces the need for workers… You will reduce the total number of workers that you employ You will reduce the hours for your minimum wage employees You will move the business to a community that has a lower… You will have to close the business Very likely Somewhat likely Not at all likely 2016 2017 2018 2019 Existing San Jose $10.53**$10.76**$11.00** Palo Alto & Santa Clara City $11.25**$11.50**$11.75** Mountain View & Sunnyvale $11.00 $13.00 $15.00 $15.37** Rest of Santa Clara County (State schedule) $10.50*$11.00*$12.00* Subcommittee Recommendation 1/1/2017 1/1/2018 1/1/2019 Santa Clara County $12.00 $13.50 $15.00 Local Minimum Wage * Businesses of 25 or more employees; delayed one year for less than 25 employees ** Where minimum wages are scheduled to increase according to CPI, we estimate the increase using the average annual CPI increase over the past 10 years. Mountain View’s minimum wage is indexed to the San Francisco CMSA CPI-W. All other cities are indexed to the U.S. All Cities CPI-W. 10 Schedule of California minimum wage increases State schedule Business with more than 25 employees Businesses with 25 or fewer employees 2017 $10.50 $10.00 2018 $11.00 $10.50 2019 $12.00 $11.00 2020 $13.00 $12.00 2021 $14.00 $13.00 2022 $15.00 $14.00 2023 $15.00 $15.00 11 The new statewide law, SB-3 (Leno), increases minimum wages to $15 an hour by 2022 for large businesses and 2023 for small businesses. Starting in 2024, the minimum wage will be indexed to the cost of living. New California Minimum Wage Subcommittee Recommendation $12.00 $13.50 $15.00 $15.33* $15.68* $16.03* $16.38* * Assumes annual 2.2% CPI adjustment. 12 Local Indexing •Past 2018, Mountain View and Sunnyvale both index minimum wage increases to San Francisco Bay Area CPI-W, capped at 5% per year 13 San Francisco Bay Area CPI-W 14 Ramp-Up Provisions & State Indexing •Until Min Wage reaches $15, SB-3 provides “off-ramp” triggers –Sec 3 (d)(1)On or before July 28, 2017, and on or before every July 28 thereafter until the minimum wage is fifteen dollars ($15) per hour pursuant to paragraph (1) of subdivision (b), to ensure that economic conditions can support a minimum wage increase, the Director of Finance shall annually make a determination… •Past 2024, SB-3 indexes minimum wage to U.S. CPI-W, capped at 3.5% annually and rounded to nearest 10 cents –Sec 3 (c)(1)Following the implementation of the minimum wage increase specified in subparagraph (F) of paragraph (2) of subdivision (b), on or before August 1 of that year, and on or before each August 1 thereafter, the Director of Finance shall calculate an adjusted minimum wage. The calculation shall increase the minimum wage by the lesser of 3.5 percent and the rate of change in the averages of the most recent July 1 to June 30, inclusive, period over the preceding July 1 to June 30, inclusive, period for the United States Bureau of Labor Statistics nonseasonally adjusted United States Consumer Price Index for Urban Wage Earners and Clerical Workers (U.S. CPI-W). The result shall be rounded to the nearest ten cents ($0.10). Each adjusted minimum wage increase calculated under this subdivision shall take effect on the following January 1. 15 Subcommittee Recommendation on Ramp-Up and Indexing •Use State defined economic “off-ramp” triggers with local determination during the ramp up period •Index to Bay Area CPI-W after 2019 –If CPI-W negative, hold min wage flat –If CPI-W exceeds 5%, cap minimum wage increase at 5% –Round to nearest 10 cents –Use same calculation process as the State 16 State of California Exemptions •Learners (regardless of age) –May be paid not less than 85% of the minimum wage rounded to the nearest nickel during their first 160 hours of employment in occupations in which they have no previous similar or related experience. 17 Cities’ Learner Exemptions •Most cities in California incorporate the state’s learner exemption. •4 exempt youth training programs operated by a non- profit corporation or government agency (Sacramento, Richmond, Berkeley, San Diego) •1 exempts publicly subsidized job-training and apprenticeship programs for teens (San Francisco) •2 extend the state learner provision to 480 hours or 6 months (Santa Monica, Long Beach) 18 Transitional Job Programs •Transitional jobs programs provide short-term, subsidized employment and supportive services through a non-profit organization to help participants overcome barriers to employment •Most minimum wage laws treat transitional jobs programs the same as other non-profit organizations •In Los Angeles and Santa Monica, participants in transitional jobs programs that meet specified criteria are exempted from the higher minimum wage for a maximum of 18 months 19 Local Exemptions •Mountain View and Sunnyvale included no exemptions in their ordinances •San Jose has a collective bargaining waiver •Some interest expressed in learner/training exemptions •Palo Alto studying potential exemptions 20 Subcommittee Recommendation on Exemptions •Each city determines its own exemptions, if any 21 Alternative for Consideration •Adopt the State learner exemption but no other exemptions –Learners (regardless of age) •May be paid not less than 85% of the minimum wage rounded to the nearest nickel during their first 160 hours of employment in occupations in which they have no previous similar or related experience 22 Elements for Board Consideration •Ramp in 3 steps –$12.00 on 1/1/17, $13.50 on 1/1/18, $15.00 on 1/1/19 •“Off-ramp” triggers during ramp phase •Index to Bay Area CPI-W after 2019, capped at 5% •Exemptions •Questions from Board Members •Public Input •Deliberation 23 Backup slides follow 24 25 96% of Santa Clara County workers receiving increases are over the age of 20, and 57% are over 30Age 26 Workers receiving pay increases are much more likely to live in families with incomes below the Federal Poverty Level (FPL). Family poverty level Scenario B: Santa Clara County Industry Percent of affected workforce Percent of workers in the industry receiving an increase Restaurants 20.2%71.0% Retail 16.1%44.4% Administrative & waste management*11.9%47.6% The three industries shown below account for nearly half of all workers receiving increases in Scenario B. Industry impacts * Includes office administrative services, facilities support services, employment services, business support services, and waste management.27 Increase in payroll costs 28 Total payroll impact estimated at 1.0% for Santa Clara County employers 1 JUNE 2016 LAC, CSC & BOARD OF DIRECTORS MEETING SUMMARY Legislative Action Committee Meeting Summary • Larry Stone, Santa Clara County Assessor, presented on legislation addressing assessment of commercial airlines, assessment of below- market homes, and a review of the 2016 Assessment Roll. • The airline industry is attempting to change the aircraft assessment appeals process in favor of the airlines through AB 2622 (Nazarian) and SB 1329 (Hertzberg). • After the 9/11 terrorist attacks, the airline industry suffered major financial losses. In 2005, the assessment methodology was modified to provide interim property tax relief for domestic airlines. Commercial aircrafts were assessed at 10% less than the wholesale value. • AB 2622 and SB 1329 address whether or not airlines are allowed to continue to receive about a $2 billion reduction in assessed value. • Last year the interim assessment methodology was set to expire; AB 2622 (Nazarian) was proposed in order to extend the sunset for another year to allow more time for dialog between the airline industry and the California Association of Assessors. • SB 1329 (Hertzberg) proposes to extend the current valuation indefinitely and provides “trial de nevo” for airline companies disputing the value of commercial aircrafts. This would allow airline companies to take appeals of valuations to the Supreme Court instead of the Assessment Appeals Board, which is more equipped and prepared to resolve technical valuation assessments, and will likely lead to the airline companies using the Appeals Board as a “trial run” for expensive trials in the Superior Court System and extend the time it takes to resolve an assessed value dispute to more than two or three years. • Recently, a compromise has been proposed that eliminates “trial de nevo,” and extends the current assessment methodology for another three years provided the assessment period of the aircrafts are changed to occur during a more accurate “representative period.” Currently the representative period is the second week of January, which is the lowest travel period. The busiest time of the year for airlines is generally between Thanksgiving and the New Year. Assessing commercial aircraft requires assessors to consider many factors including average activity of each carrier operating in California for the year. Sampling data for a single week during the month of the lowest passenger load creates an unfair and inaccurate estimate. 2 • The LAC was requested to provide recommendation to oppose SB 1329 and support AB 2622 as amended. The LAC unanimously voted to support the request. • AB 2450 (Achadjian) improves the accuracy of information submitted by property owners to assessors upon a change of ownership, and also clarifies that the county assessor, in addition to the tax collector, are to be provided notice when a public entity proposes to acquire property for a public use. These changes will improve the accuracy and efficiency of the property tax assessment process. • LAC members unanimously passed recommendation to support AB 2450. • The 2016 Assessment Roll was reviewed. • Oral Communication: LAC Member Liz Gibbons and Seth Williams of the League of California Cities recommended cities submit expressions of opposition to the Governor’s by right affordable housing proposal due to the undermining of cities’ local control. The LCC’s template opposition letter is at https://www.cacities.org/Policy-Advocacy/Action-Center/Governor-s-By-Right- Housing-Proposal. Leslye Corsiglia of Silicon Valley at Home urged Members to consider the Non-profit Housing Association’s position, which is supportive with amendments. City Selection Committee Meeting • Jim Davis of Sunnyvale and Greg Scharff of Palo Alto were unanimously reappointed to ABAG Executive Board for a new term expiring June 2018. • Chris Clark of Mountain View and Mary-Lynne Bernald of Saratoga were unanimously appointed to ABAG Executive Board as Alternates to a new term expiring June 2018. • Glenn Hendricks of Sunnyvale was unanimously reappointed to the Airport Land Use Commission (ALUC) as a representative from a city that is adjacent to an airport to a new term expiring May 2, 2020. • Greg Scharff of Palo Alto was unanimously appointed as the At-Large Representative to the ALUC for a term expiring May 2, 2020. • Marsha Grilli of Milpitas was unanimously appointed to the Silicon Valley Regional Interoperability Authority (SVRIA) as an Alternate to fulfill an ongoing term expiring October 2018. Board of Directors Meeting Summary Minimum Wage Subcommittee Members Rod Sinks of Cupertino and Greg Scharff of Palo Alto presented recommendation on minimum wage. • The Cities Association first adopted minimum wage as a priority in 2015 and supported regional consistency. • Though the state has passed legislation raising the minimum wage to $15 by 2022, our region has an option to adopt a more aggressive schedule (like Sunnyvale and Mountain View) due to the higher cost of living than any other region in the state. • The recent economic analysis and report led by San Jose and presented to the Cities Association in April found increasing the minimum wage to $15 by 2019 will: 3 o Increase earnings for 250,000 workers, 25% of the workforce o Raise average annual earnings of affected workers by 19.4 percent, or $3,200 (in 2014 dollars) o Increase average prices in Santa Clara County by 0.2 percent over three years o Have a net effect on employment that is slightly negative at the county level (1,450 jobs) and close to zero at a 10 county regional level. For details of the presentation and report see presentation at • Economic analysis shows that: o Higher wage costs would be absorbed through improved productivity, reduced worker turnover, and modest price increases. o Net effects on employment would be very slightly negative at the city and county levels and close to zero at the regional level. o The resulting improvement in living standards would outweigh the small effects on employment. • For analysis and presentation see http://sanjose.granicus.com/GeneratedAgendaViewer.php?event_id=ef9f9f98- 70c3-4924-8de8-50b24984686a • The subcommittee recommendation included: o Ramp-up (increases) take place in three steps ($12.00 on 1/1/17, $13.50 on 1/1/18, $15.00 on 1/1/19); o “Off-ramp” triggers during ramp-up phase that would allow for scheduled increases to be delayed under certain economic conditions; o Index to Bay Area CPI-W after 2019, capped at 5% o Round to nearest 10 cents o Exemptions to be determined by individual cities • Regarding exemptions: o An alternative recommendation includes consideration of adopting the State’s Learner exemption: regardless of of age, one may be paid not less than 85% of the minimum wage rounded to the nearest nickel during their first 160 hours of employment in occupations in which they have no previous similar or related experience. o Mountain View and Sunnyvale included no exemptions in their ordinances. o San Jose has a collective bargaining waiver. o Some interest expressed in learner/training exemptions. o Palo Alto studying potential exemptions. • Board Members discussed various jurisdictions’ status on considering increasing minimum wage. • Several members of the public representing San Jose State University, LUNA, Raise the Wage Coalition, Working Partnerships, Sacred Heart Community services, City of Sunnyvale, Santa Clara County provided comments of support for increasing the minimum wage, no exemptions, regional consistency, and ease of implementation across the region. • CA Restaurant Association representative expressed support for exemption to restaurant wait-staff in order to ease the burden of higher costs on restaurants. 4 • President Jim Griffith noted a letter of opposition to increasing the minimum wage was received from President and CEO Matt Mahood of San Jose Silicon Valley Chamber of Commerce. • Board Members endorsed motion to forward presented recommendation to all cities and the County with the following amendments: “no exemptions” and revise “round to nearest 10 cents” to “round to nearest 5 cents.” • The final adopted subcommittee minimum wage recommendation includes: o Increase minimum wage to $15 by 2019 in three steps: $12.00 on 1/1/17, $13.50 on 1/1/18, $15.00 on 1/1/19; o “Off-ramp” triggers during ramp-up phase that would allow for scheduled increases to be delayed under certain economic conditions; o Index to Bay Area CPI-W after 2019, capped at 5%; o Round to nearest 5 cents; o No exemptions. • Next steps include forwarding letter with recommendation and model ordinance to all membership cities and the County. Chris O’Connor of Silicon Valley Leadership Group briefly reviewed the proposed November 2016 Tax Measure and requested the Board of Directors to endorse the measure. • The proposed half-cent 30-year measure will raise approximately $6 billion. • The draft expenditure plan includes the following allocations: • On June 3, VTA Board of Directors unanimously voted to place the sales-tax measure on the November 2016 Ballot. 5 • Cities Association Board Members expressed individual and jurisdiction positions. • Public Comment representative of the Silicon Valley Taxpayers Association expressed opposition to the transportation tax measure. • Board Members motion to support the November 2016 Transportation Ballot Measure passed. Cities Association FY 2016-17 Budget Proposal was reviewed and presented for adoption. The budget proposal includes a 5% increase in dues in order to resume operations without using Reserves to meet expenses. The Association has been using its Reserves for the past five years in order to meet expenses. The Board of Directors unanimously supported and adopted the proposed 2016-17 Dues and Budget Proposal. Cities Association Board Appointees Mary-Lynne Bernald of Saratoga and Gary Waldeck of Los Altos Hills provided an update of the recent meetings of the FAA Select Committee on South Bay Arrival. The Select Committee includes four elected officials from each of three counties: San Mateo County, Santa Clara County, and Santa Cruz County. Their appointments are for a limited time and the Committee is not a standing committee. The Select Committee is responsible for accepting public comment, evaluating the new FAA Initiative on South Bay Arrivals, and providing recommendations on South Bay Arrivals to the FAA. Two meetings have occurred to discuss and evaluate the various flight paths and the next meetings are scheduled for June 15th in San Mateo County and June 29th in Santa Clara County; recommendations are due in August. CSC Appointee Greg Scharff of Palo Alto provided update on recent activities of ABAG. A decision has been made regarding merging ABAG and MTC. Per the various merger options presented by Management Partners, both organizations agreed to merge all of ABAG staff with MTC. The ABAG Board and MTC Boards will continue to govern. MTC will oversee both governing Boards and Executive Directors until one Executive Director is selected. Management Partners has been requested to propose an implementation plan which will then be presented and approved by both governing structures. Jim Griffith reviewed the LAC’s recommendation and the Board unanimously supported the following: o SB 1329 (Hertzberg) – Property Taxation: Certified Aircraft - Oppose o AB 2622 (Nazarian) – Certificated Aircraft Assessment – Support as amended o AB 2450 (Achadjian) – Property Taxation: Below Market-Rate Housing – Support o Board Member Steve Tate of Morgan Hill requested to consider SCC’s affordable housing bond at the August LAC/Board Meeting. o President Jim Griffith requested consideration of AB 45 (Mullin) Household Hazardous Waste at the August LAC/Board meeting. 6 City Managers’ Association Report: Assistant City Manager Kent Steffens’ report included an update on the joint Santa Clara County/San Mateo County City Managers’ Associations meeting – Seth Miller of the League of California Cities Peninsula Division presented update on the Governor’s by right affordable housing proposal and urged cities to opposed it; Leslye Corsiglia presented an overview of Silicon Valley at Home, and Nicole Pollack, Assistant Director of the San Mateo County Human Services Agency presented overview of its Homeless Outreach Teams (HOT). Legislation Report: Betsy Shotwell of San Jose provided update on November ballots; eight ballots thus far address medical marijuana. August 31st is the deadline for Legislators to pass bills. AB 2502 (Palmer Fix Bill) did not pass out of its house of origin; it may be included in the budget. Announcements • Save the date: SVLG Regional Economic Forum, July 21, 2016, 8 am – 12 pm; location TBD; Cities Association is participating as a co-partner. Draft Minutes BOARD OF DIRECTORS MEETING Sunnyvale West Conference Room April 14, 2016 The regular meeting of the Cities Association Board of Directors was called to order at 7:15 p.m. with President Jim Griffith presiding. 1. Call to Order/Roll Call Present: Also Present: Jason Baker, Campbell Raania Mohsen, Cities Association Rod Sinks, Cupertino Jim Davis, Sunnyvale Peter Leroe-Muñoz, Gilroy Omar Chatty Jeannie Bruins, Los Altos Steve Preminger, SCC Rob Rennie, Los Gatos Betsy Shotwell, San Jose Jose Esteves, Milpitas Sam Liccardo, San Jose Burton Craig, Monte Sereno Katie Martin Steve Tate, Morgan Hill Pat Showalter, Mountain View Kim Walesh, San Jose Victor Lecha III Chappie Jones, San Jose Michelle Thong, San Jose Teresa O’Neill, Santa Clara Carl Guardino, SVLG Manny Cappello, Saratoga Ken Jacobs Jim Griffith, Sunnyvale Josh Williams Deanna Santana, Sunnyvale 2. Oral Communication: None. 3. Consent Calendar Approval of February 2016 Financial Statements, Minutes for April 14, 2016 Board Meeting, Motion (Cappello)/ Second (Baker). Motion carried unanimously (13:0). Ayes: Baker, Bruins, Cappello, Craig, Esteves, Griffith, Jones, Leroe-Muñoz, O’Neill, Rennie, Sinks, Showalter No: Abstention: Absent: Scharff, Waldeck 4. Presentations & Priorities Discussions a. Mayor Liccardo and Economic Development Director Kim Walesh of San Jose introduced the regional minimum wage study presentation. • Though the state has passed legislation raising the minimum wage to $15 by 2022, our region has an option to adopt a more aggressive schedule (like Sunnyvale and Mountain View) due to the higher cost of living than any other region in the state. • The scope of the regional study on minimum wage was developed by an Advisory Committee (Rod Sinks of the Cities Association, Bob Brownstein of Working 2 Partnerships, Matt Mahood of San Jose/ Silicon Valley Chamber of Commerce, San Jose’s OED Staff). • Consultants BW Research Partnership and Institute for Research on Labor and Employment of UC Berkeley were selected to analyze the effects of increasing the minimum wage to $15 by 2019 in San Jose and across Santa Clara County. • Ken Jacobs presented “The Effects of a $15 Minimum wage by 2019 in Santa Clara County and the City of San Jose.” The report does the following: o Provides an economic analysis of the effects of increasing minimum wages to $15 by 2019 in San Jose only and in all of Santa Clara County. o Examines the economic context and the effects of a $15 minimum wage on workers, business, and the economy. o Assesses associated policy issues. • It was noted that the analysis was done before the state passed recent minimum wage legislation raising the state minimum wage to $15 by 2023. • Key findings of the report include: • Increasing the minimum wage to $15 an hour by 2019 in Santa Clara County would do the following: o Increase earnings for 250,000 workers, 25% of the workforce o Raise average annual earnings of affected workers by 19.4 percent, or $3,200 (in 2014 dollars) o Increase average prices in Santa Clara County by 0.2 percent over three years o Have a net effect on employment that is slightly negative at the county level (1,450 jobs) and close to zero at a 10 county regional level. For details of the presentation and report see presentation at • Economic analysis shows that: o Higher wage costs would be absorbed through improved productivity, reduced worker turnover, and modest price increases. o Net effects on employment would be very slightly negative at the city and county levels and close to zero at the regional level. o The resulting improvement in living standards would outweigh the small effects on employment. • In June 2016, a detailed report will be released and will include more details about how San Jose/ SCC would absorb an increase in the minimum wage to $15 over three years, qualitative discussion about the impact of increasing the minimum wage to $20, and a full description of the underlying economic model. • Josh Williams of BW Research Partnership presented “Santa Clara County Minimum Wage Employer Survey.” • Overall key findings included: o The majority of surveyed firms anticipate increasing prices. o However most also believe their employees will be more satisfied and productive under a minimum wage increase o Few firms think it is likely they will have to move or close business given an increase o Three-fourths of firms agree that an increase in the minimum wage makes sense given the high cost of living. 3 o The majority of surveyed firms believe a minimum wage increase will reduce income inequality in the region. o However, most also agree that it will be harder to start new businesses in the region • Fore more details and information, both presentations are available for review at http://sanjose.granicus.com/GeneratedAgendaViewer.php?event_id=ef9f9f98-70c3- 4924-8de8-50b24984686a • Second Vice President and Member of the Subcommittee on Minimum Wage recommended for Board Members to share the presentations and the results of the study with their respective cities and to come back in June to review potential regional recommendation. • Public Comment included positive remarks regarding the results of the study, some concern for the restaurant industry, and consideration of $15 by 2018. • Board Members expressed their appreciation for San Jose’s efforts with the study and presentation to the Board. b. Carl Guardino, CEO of Silicon Valley Leadership Group reviewed the potential November 2016 Tax Measure. • Overall, cities in Santa Clara County submitted $48 billion worth of project requests. • The proposed measure will raise approximately $6 billion. • The draft expenditure plan includes the following allocations: • Details of the draft expenditure plan can be reviewed in the attached presentation. 4 • On April 22, VTA plans to review the expenditure plan and determine if the tax measure will be placed on the November 2016 Ballot. 5. New Business a. Request to participate in SVLG’s Regional Economic Forum as a co-host, on July 21, 2016, at the Computer History Museum in Mountain View, with over 20 partners was reviewed and unanimously approved by the Board. Participation will cost the Cities Association $1,000 and will include a table of 10 for Cities Association Members/Guests, opportunity to participate in three planning sessions for the forum, and three on-stage roles during the program. Motion (Leroe-Muñoz)/ Second (Baker). Motion carried unanimously (13:0). Ayes: Baker, Bruins, Cappello, Craig, Esteves, Griffith, Jones, Leroe-Muñoz, O’Neill, Rennie, Sinks, Showalter No: Abstention: Absent: Scharff, Waldeck b. The Board unanimously ratified FAA Select Committee on South Bay Arrival Appointments and assigned Alternates. Gary Waldeck of Los Altos Hills – Alternate: Greg Scharff of Palo Alto Mary-Lynne Bernald of Saratoga – Alternate: Jean Mordo of Los Altos Motion (Cappello)/ Second (Bruins). Motion carried unanimously (13:0). Ayes: Baker, Bruins, Cappello, Craig, Esteves, Griffith, Jones, Leroe-Muñoz, O’Neill, Rennie, Sinks, Showalter No: Abstention: Absent: Scharff, Waldeck c. Jim Griffith reviewed the LAC’s recommendation and the Board unanimously supported the following: o AB 1851 (Gray & Ting) – Vehicular Air Pollution: Reduction Incentives - No Position o SB 873 (Beall) Sale of Low Income Housing Tax Credits – Support o AB 2817 (Chiu) Low Income Housing Tax Credit – Support o AB 2502 (Mullin & Chau) Land Use: Zoning Regulations – Support o AB 1591 (Frazier) Transportation Funding – Support o SB 1053 (Leno) Housing Opportunity Act – Watch Motion (Tate)/ Second (Jones). Motion carried unanimously (13:0). 5 Ayes: Baker, Bruins, Cappello, Craig, Esteves, Griffith, Jones, Leroe-Muñoz, O’Neill, Rennie, Sinks, Showalter No: Abstention: Absent: Scharff, Waldeck d. City Managers’ Association Report: City Manager Deanna Santana’s report included an update on the April City Managers’ Association meeting – City Managers have referred the Cities Association request to review countywide taxi regulations to the SCC Police Chiefs; the county presented a new proposal regarding weed abatement, and the county has extended the current EMS contract with Rural Metro for three more years. Joys & Challenges/Announcements • Rod Sinks of Cupertino announced that there are four potential ballot measures addressing the development of projects in Cupertino, e.g. Vallco Mall, and building height ordinances. • Jason Baker of Campbell announced VTA’s upcoming evaluation of the bus system across the county. • Rob Rennie of Los Gatos announced North 40’s progress and continued development. • Jeannie Bruins of Los Altos announced the city’s new search for a City Manager. • Jim Griffith of Sunnyvale announced the inaugural meeting of Community Choice Energy Authority, Wednesday, April 13, 2016; and the retirement of Sunnyvale Council Member David Whittum; there will be a special election in August for a replacement. • Save the date for the Cities Association General Membership Meeting, Thursday, May 12, 6 – 9 pm, Microsoft, Mountain View. Adjournment, 9:05 pm Next Meeting: Thursday, June 9, 2016, 7 pm, Sunnyvale City Hall. Respectfully submitted, Raania Mohsen,Executive Director, Cities Association of Santa Clara County May 13, 2016 Dear Cities Association Board Members and Alternates, In 2015, the Cities Association adopted Minimum Wage as a priority and endorsed the recommendation to implement regional consistency across the county. As an effort to provide economic data about the impacts of increasing minimum wage across the region, the Cities Association supported a regional minimum wage study led by the City of San Jose. At our April 14, 2016 Board Meeting, we received a presentation on the results of the regional minimum wage study and survey from the Institute for Research on Labor and Employment at UC Berkeley and BW Research. This effort was also supported by a number of mayors in September 2015, who expressed a desire to study and then take action on minimum wage to as best possible create regional consistency. Construction of the study scope of work, selection of expert consultants, and review of contents for completeness was conducted by the Minimum Wage Advisory Team of Matt Mahood of the Silicon Valley Chamber of Commerce, Bob Brownstein of Working Partnerships, Rod Sinks representing the Cities Association, and John Lang, Economic Coordinator, City of Morgan Hill, in conjunction with economic development staff at the City of San Jose. Key findings of the study showed that increasing the minimum wage to $15 an hour by 2019 in our County would: • Increase earnings for 250,000 workers • Raise average annual earnings of affected workers by 19.4 percent, or $3,200 (in 2014 dollars) • Increase average prices in Santa Clara County by 0.2 percent over three years • Have a net effect on employment that is slightly negative at the county level (1,450 jobs) and close to zero at a 10 county regional level The study assumed these steps, whi ch land at $15 one year after Mountain View and Sunnyvale, and three years before the State of California: • $12.00 on 1/1/2017 • $13.50 on 1/1/2018 • $15.00 on 1/1/2019 As we discussed in the April meeting, we are asking you as your city’s Cities Association board representative to come to our meeting on June 9 prepared to discuss and vote on a regional recommendation that interested cities could consider. Some cities are conducting study sessions to share the presentation and provide direction to their board representatives. The presentations are available here (Attachments B & D), and the San Jose Council study session video featuring presentations and questions of the study and survey consultants is available here. Questions on the study or survey may be directed to Michelle Thong, michelle.thong@sanjoseca.gov, 408-‐535-‐8169. Questions on the process may be directed to any of the members of the Minimum Wage Advisory Team listed above. Sincerely, cc: City Managers & Economic Development Staff Hon. Rod Sinks, City of Cupertino Minimum Wage Advisory Team Hon. Jim Griffith, Sunnyvale President, Cities Association Mayor Sam Liccardo City of San Jose Tweet Share 149 responses 371 days (7/13/2015 now) 3 views Need insights? SurveyMonkey has dozens of expertly designed survey templates. or Learn more City of Palo Alto Minimum Wage Survey Employees & Individuals Ü Question Summaries t Data Trends U Individual Responses Share Share Sign up FREE Q1 Q2 2.01%3 46.31%69 26.17%39 25.50%38 How old are you? Answered: 149 Skipped: 0 Total 149 1518 1940 4160 over 60 0%10%20%30%40%50%60%70%80%90%100% Answer Choices Responses 1518 1940 4160 over 60 Do you live in Palo Alto? Answered: 148 Skipped: 1 All Pages Sign InSign Up FREEPro Sign Up Q3 Q4 90.54%134 9.46%14 Total 148 Yes No 0%10%20%30%40%50%60%70%80%90%100% Answer Choices Responses Yes No 38.51%57 18.92%28 14.86%22 8.78%13 18.92%28 Which of the following best describes your current employment status? Answered: 148 Skipped: 1 Total 148 Work full time Work part time Selfemployed Full timestudent/not... Not employed/Una... 0%10%20%30%40%50%60%70%80%90%100% Answer Choices Responses Work full time Work part time Selfemployed Full time student/not working Not employed/Unable to work The cities of Sunnyvale and Mountain View are proposing a regional effort to achieve a minimum wage of $15 an hour by 2018. This will be achieved by increasing the minimum Q5 75.36%104 7.97%11 16.67%23 wage annually in increments until 2018. Palo Alto has been approached to join in this effort. What of the following would you most support? Answered: 138 Skipped: 11 Total 138 Reach a $15 anhour minimum... Reach a $15 an hour minimum... Not join theregional effort 0%10%20%30%40%50%60%70%80%90%100% Answer Choices Responses Reach a $15 an hour minimum wage by 2018 Reach a $15 an hour minimum wage by 2020 Not join the regional effort The Cities Association of Santa Clara County recently voted to endorse a regional consistency within the County on establishing minimum wage ordinances. Restaurant wait staff, youth or nonprofit employees would be included. While not willing to endorse a specific minimum wage requirement or timeline, the subcommittee points to the Sunnyvale/Mountain View efforts towards regional consistency and encourages other cities to take a closer look at these efforts. Would you support this regional consistency? Answered: 134 Skipped: 15 Yes No 0%10%20%30%40%50%60%70%80%90%100% Answer Choices Responses Q6 Q7 80.60%108 19.40%26 Total 134 Yes No 0.00%0 13.77%19 65.22%90 15.22%21 5.80%8 Beginning January 1, 2016 the State of California's minimum wage will increase to $10 an hour. There is currently proposed legislation that would raise that level to $11 in 2016 and $13 in 2017. Palo Alto is considering raising the city's minimum wage to the levels of surrounding cities by January 1, 2016. Which would you support? Answered: 138 Skipped: 11 Total 138 Raise the minimum wage... Raise theminimum wage... Raise theminimum wage... Keep in linewith the Sta... None 0%10%20%30%40%50%60%70%80%90%100% Answer Choices Responses Raise the minimum wage to $10.30 an hour by January 1, 2016 Raise the minimum wage to $11 an hour by January 1, 2016 Raise the minimum wage to $12 an hour by January 1, 2016 Keep in line with the State minimum wage of $10 beginning January 1, 2016 None Moving forward, which do you most support? Answered: 130 Skipped: 19 Q8 25.38%33 39.23%51 35.38%46 Total 130 Local minimumwage Regionalminimum wage State/Federalminimum wage 0%10%20%30%40%50%60%70%80%90%100% Answer Choices Responses Local minimum wage Regional minimum wage State/Federal minimum wage Please provide any additional comments that you may have on this issue: Answered: 68 Skipped: 81 no minimum wage. Instead lower cost of living by increasing development of housing, which is the biggest component of any family's budget. 9/6/2015 5:32 PM Unfortunately I don't think raising or lowering the minimum wage is the problem, if it is raised, will the cost of living inflate even higher? I would love to make $15 and hour, but I certainly hope that the cost of living doesn'tincrease with it or we will be right back to where we started. The real problem in this area is housing costs. People who work in the service industry can barely afford to live here. Just because there are a lot of incredibly rich people in this area, doesn't mean all apartments should raise their rates to over inflated prices. If the wealthy want to spend 3,000 a month on luxury apartments or buy a million dollar home, then fine. But they should berediculously luxurious! I'm paying nearly 2,000 per month for a tiny studio with asbestos in the ceiling! That's insane! Who's going to serve those fine dining experiences, wash the BMWs, and clean the homes for all those rich people when all the blue collar people are ran out of town? If Palo Alto wants to do something for the people making minimum wage, try putting a cap on rentals at a level that's possible for your average blue collar workerto afford. My husband and I moved here because he got offered a position in a startup company. He makes more money per hour than he has any where else plus I work as a bartender five days per week. We are making way more money than we ever did living in Oregon, and yet we have never been under such financial stress as we are here. We were paying $800 peri the for a 1000sf duplex in Portland. That won't even rent a room over here! This is the issue the city should be focusing on. This is the problem. Not minimum wage. 8/27/2015 11:44 AM Check out our sample surveys and create your own now! Powered by Tweet Share 15 responses 371 days (7/13/2015 now) 3 views Need insights? SurveyMonkey has dozens of expertly designed survey templates. or Learn more City of Palo Alto Minimum Wage Survey Business Owners and Managers Ü Question Summaries t Data Trends U Individual Responses Share Share Sign up FREE Q1 Q2 33.33%2 33.33%2 16.67%1 16.67%1 Type of business: Answered: 6 Skipped: 9 Total 6 Comments (9) 1 (16.67%) Retail Restaurant orFast Food Hospitality Manufacturing 0%10%20%30%40%50%60%70%80%90%100% Answer Choices Responses Retail Restaurant or Fast Food Hospitality Manufacturing You are a: Answered: 15 Skipped: 0 All Pages Sign InSign Up FREEPro Sign Up Q3 Q4 93.33%14 6.67%1 Total 15 Business Owner BusinessManager 0%10%20%30%40%50%60%70%80%90%100% Answer Choices Responses Business Owner Business Manager 73.33%11 0.00%0 13.33%2 0.00%0 13.33%2 What percentage of your business' employees earn the minimum wage? Answered: 15 Skipped: 0 Total 15 0%20% 21%40% 41%60% 61%80% 81%100% 0%10%20%30%40%50%60%70%80%90%100% Answer Choices Responses 0%20% 21%40% 41%60% 61%80% 81%100% How many employees does your business employ? Answered: 15 Skipped: 0 Q5 86.67%13 13.33%2 0.00%0 0.00%0 Total 15 010 1150 51100 more than 100 0%10%20%30%40%50%60%70%80%90%100% Answer Choices Responses 010 1150 51100 more than 100 28.57%4 14.29%2 57.14%8 0.00%0 Would your business eliminate (and not replace) any positions to compensate for increased labor costs? Answered: 14 Skipped: 1 Total 14 Yes Maybe No Don't know 0%10%20%30%40%50%60%70%80%90%100% Answer Choices Responses Yes Maybe No Don't know Q6 Q7 0.00%0 35.71%5 64.29%9 0.00%0 Would your business also increase the hourly wages of any higherpaying positions, such as those who supervise minimum wage employees? Answered: 14 Skipped: 1 Total 14 Yes Maybe No Don't know 0%10%20%30%40%50%60%70%80%90%100% Answer Choices Responses Yes Maybe No Don't know Would your business reduce employee work hours? Answered: 14 Skipped: 1 Q8 42.86%6 7.14%1 50.00%7 0.00%0 Total 14 Yes Maybe No Don't know 0%10%20%30%40%50%60%70%80%90%100% Answer Choices Responses Yes Maybe No Don't know 35.71%5 14.29%2 50.00%7 0.00%0 Would your business increase its prices to customers? Answered: 14 Skipped: 1 Total 14 Yes Maybe No Don't know 0%10%20%30%40%50%60%70%80%90%100% Answer Choices Responses Yes Maybe No Don't know Q9 Q10 37.50%3 62.50%5 50.00%4 50.00%4 Would increased wages for your lowest paid employees result in any of the following among these workers? (Select as many that apply) Answered: 8 Skipped: 7 Total Respondents: 8 Increasedproductivity IncreasedMorale ReducedTurnover Unsure 0%10%20%30%40%50%60%70%80%90%100% Answer Choices Responses Increased productivity Increased Morale Reduced Turnover Unsure The cities of Sunnyvale and Mountain View are proposing a regional effort to achieve a minimum wage of $15 an hour by 2018. This will be achieved by increasing the minimum wage annually in increments until 2018. Palo Alto has been approached to join in this effort. What of the following would you most support? Answered: 12 Skipped: 3 Q11 41.67%5 8.33%1 50.00%6 Total 12 Reach a $15 anhour minimum... Reach a $15 anhour minimum... Not join theregional effort 0%10%20%30%40%50%60%70%80%90%100% Answer Choices Responses Reach a $15 an hour minimum wage by 2018 Reach a $15 an hour minimum wage by 2020 Not join the regional effort 58.33%7 41.67%5 The Cities Association of Santa Clara County recently voted to endorse a regional consistency within the County on establishing minimum wage ordinances. Restaurant wait staff, youth or nonprofit employees would be included. While not willing to endorse a specific minimum wage requirement or timeline, the subcommittee points to the Sunnyvale/Mountain View efforts towards regional consistency and encourages other cities to take a closer look at these efforts. Would you support this regional consistency? Answered: 12 Skipped: 3 Total 12 Yes No 0%10%20%30%40%50%60%70%80%90%100% Answer Choices Responses Yes No Q12 Q13 40.00%4 10.00%1 10.00%1 40.00%4 Beginning January 1, 2016 the State of California's minimum wage will increase to $10 an hour. There is currently proposed legislation that would raise that level to $11 in 2016 and $13 in 2017. Palo Alto is considering raising the city's minimum wage to those of surrounding cities by January 1, 2016. Which would you support? Answered: 10 Skipped: 5 Total 10 Comments (2) Keep in linewith the Sta... Raise theminimum wage... Raise theminimum wage... Raise theminimum wage... 0%10%20%30%40%50%60%70%80%90%100% Answer Choices Responses Keep in line with the State minimum wage of $10 beginning January 1, 2016. Raise the minimum wage to $10.30 an hour by January 1, 2016 Raise the minimum wage to $11 an hour by January 1, 2016 Raise the minimum wage to $12 an hour by January 1, 2016 Moving forward, which do you most support? Answered: 10 Skipped: 5 Q14 10.00%1 40.00%4 50.00%5 Total 10 Local minimumwage Regionalminimum wage State/Federalminimum wage 0%10%20%30%40%50%60%70%80%90%100% Answer Choices Responses Local minimum wage Regional minimum wage State/Federal minimum wage Please provide any additional comments that you may have on this issue: Answered: 8 Skipped: 7 We will just have to raise our prices which hopefully will not result in customers spending their money in other cities. We will cut labor and replace with technology when possible. Minimum wage will raise and that is a reality of inflation but to quickly ramp it up will devalue the educated and reward those that have done nothing to improve themselves. Those making $1317 an hour currently will essentially be going backwards as they will notsee an increase in pay but a significant increase in the expense of necessary goods. Quickly raising minimum wage is very much a social experiment. The cost of living will rise requiring a need for a higher minimum wage in the future and additional price increases. The strong will survive and the weak will go out of business. 9/17/2015 1:40 PM Do not include tipped employees 8/26/2015 5:41 PM Rents have gone up considerably, the residential parking permit goes into effect in September, and now theywant to raise the minimum wage to $15/hr by 2018? Margins are shrinking as competition with internet retailers increases and the City makes it more difficult to do business here. How do you expect any of the independent retailers to survive in downtown Palo Alto? 8/24/2015 12:13 PM I hire 14 year olds and place them in administrative positions in an office environment. The kids I hire do this togain real work experience in a professional setting, as opposed to Jamba Juice, which doesn't really give them much in the way of training, other than how to use a blender. A 14 year old is not supporting a family on this Check out our sample surveys and create your own now! Powered by CITY OF SAN JOSE CITY OF Memorandum CAPITAL OF SILICON VALLEY TO: HONORABLE MAYOR AND CITY COUNCIL FROM: Kim Walesh SUBJECT: FINAL REPORTS FOR MINIMUM WAGE STUDY DATE: June 20, 2016 Approved Date (g(2o|«0 INFORMATION The purpose of this Information Memo is to inform City Council of the final report on the economic impacts of a minimum wage increase in San Jose and Santa Clara County. Background On September 15, 2015, the Mayor and City Council directed the City Manager to hire economists to study a potential increase of the minimum wage to $15 per hour. Council identified a range of specific elements to be studied (http://www.sanioseca.gov/DocumentCenter/View/48616L The Administration, with input from an Advisory Team comprised of members representing the Silicon Valley Chamber of Commerce, Working Partnerships USA and the Cities Association of Santa Clara County, selected the Institute for Research on Labor and Employment at UC Berkeley (IRLE). Details of the RFP process are described in an Information Memo dated December 18,2015. (http://www.sanioseinfo.Org/external/content/document/1914/2768661/l/12-18-15QED.PDFL The Advisory Team recommended the addition of an employer opinion survey to collect information on how employers perceive a potential minimum wage increase. The City of San Jose contracted independently with BW Research Partnership to conduct the survey. Scope of Work IRLE was directed to analyze the economic impacts on workers, businesses and consumers of a minimum wage increase, beginning on January 1, 2017 and increasing to $15 per hour by January 1, 2019, for San Jose and for Santa Clara County. BW Research Partnership was directed to conduct a countywide employer opinion survey with a focus on industries that would be most impacted by a minimum wage increase. RULES AND OPEN GOVERNMENT COMMITTEE June 20, 2016 Subject: Minimum Wage Study Page 2 Presentation of Findings On April 18, 2016, the City's consultants presented the findings of the economic analysis and countywide survey at a City Council Study Session. The materials for the Study Session included a summary presentation from IRLE (Attachment B) and the employer survey report from BW Research Partnership (Attachment C). (http://saniose.granicus.com/GeneratedAgendaViewer.php7event id=ef9f9f98-70c3-4924-8de8- 50b24984686aJ The results were also presented to the Board of Directors of the Cities Association of Santa Clara County on April 14, 2016. Final Reports To supplement the high-level findings presented at the Study Session, IRLE has prepared a final report that includes details of how the San Jose and Santa Clara County economies would absorb a minimum wage increase, a full description of the underlying economic model, and analysis of policy considerations. The final report is available at the following link: http ://sani o seca. go v/Do cumentCenter/V ie w/57459 The final report for the countywide survey remains the same as the version originally published for the Study Session: http://saniose.granicus.com/MetaViewer.php7view id=&event id=2266&meta id=568905 /s/ KIM WALESH Deputy City Manager Director of Economic Development For questions please contact Michelle Thong, Business Development Officer, at (408) 535-8169. NOT YET APPROVED 160907 jb 0131546 1 Sept. 7, 2016 Ordinance No. Ordinance of the Council of the City of Palo Alto Amending Chapter 4.62 to Title 4 (Business Licenses and Regulations) of the Palo Alto Municipal Code to Provide a Schedule Increasing the Citywide Minimum Wage to $15 per Hour by 2019 for Palo Alto Employees RECITALS 1. The Bay area in general and Palo Alto in particular are becoming increasingly expensive places to live and work. 2. Payment of a minimum wage advances the interests of the City as a whole, by creating jobs that keep workers and their families out of poverty. 3. A minimum wage will enable a worker to meet basic needs and avoid economic hardship. 4. This ordinance is intended to improve the quality of services provided in the City to the public by reducing high turnover, absenteeism, and instability in the workplace. 5. Prompt and efficient enforcement of this Chapter will provide workers with economic security and assurance that their rights will be respected. 6. Key findings of a regional minimum wage study and survey performed by the Institute for Research on Labor and Employment at UC Berkeley and BW Research showed that increasing the minimum wage to $15.00 an hour by 2019 in Santa Clara County would: ● Increase earnings for 250,000 workers ● Raise average annual earnings of affected workers by 19.4 percent, or $3,200.00 (in 2014 dollars) ● Slightly increase average prices in Santa Clara County by 0.2 percent over three years ● Have a net effect on employment that is slightly negative at the county level (1,450 jobs) and close to zero at a 10 county regional level. 7. The Cities Association of Santa Clara County recommends a regional minimum wage increase to $15.00 by 2019 as an effort to prevent an uneven playing field that can be damaging to local economies, provide equity to our shared economy, and implement regional consistency across the county. The City Council of the City of Palo Alto does ORDAIN as follows: SECTION 1. Section 4.62.030 of Chapter 4.62 (Citywide Minimum Wage) of the Palo Alto Municipal Code is amended to read as follows: NOT YET APPROVED 160907 jb 0131546 2 Sept. 7, 2016 4.62.030 Minimum wage. a. Employers shall pay employees no less than the minimum wage set forth in this section for each hour worked within the geographic boundaries of the City of Palo Alto. b. b. The minimum wage shall be an hourly rate of eleven dollars ($11.00) through December 31, 2016. On January 1, 2017, tThe minimum wage shall be an hourly rate of twelve dollars ($112.00). On January 1, 2018, the minimum wage shall be an hourly rate of thirteen dollars and fifty cents ($13.50). On January 1, 2019, the minimum wage shall be an hourly rate of fifteen dollars ($15.00). To prevent inflation from eroding its value, beginning on January 1, 20196, and each January 1styear thereafter, the minimum wage shall increase by an amount corresponding to the prior year’s increase, if any, in the cost of living, not to exceed 5%. The prior year’s increase in the cost of living shall be measured by the percentage increase, if any, as of August of the immediately preceding year over the level as of August of the previous year of the Bay Area Consumer Price Index (Urban Wage Earners and Clerical Workers, San Francisco-Oakland-San Jose, CAU.S. City Average for All Items) or its successor index as published by the U.S. Department of Labor or its successor agency, with the amount of the minimum wage increase rounded to the nearest multiple of five ($.05) cents. If there is no net increase in the cost of living, the minimum wage shall remain unchanged for that year. The adjusted minimum wage shall be announced by October 1 of each year, or as soon as practicable thereafter if the Consumer Price Index for August has not yet been published, and shall become effective as the new minimum wage on January 1st of each year. SECTION 2. CEQA. The City Council finds that this ordinance is exempt from the provisions of the California Environmental Quality Act pursuant to Section 15061(b)(3) of the California Environmental Quality Act Guidelines, because it can be seen with certainty that there is no possibility of significant environmental effects occurring as a result of the adoption of this ordinance. SECTION 3. Severability. If any provision or clause of this chapter is held to be unconstitutional or otherwise invalid by any court of competent jurisdiction, such invalidity shall not affect other provisions of this chapter, and clauses of this chapter are declared to be severable. SECTION 4. Effective Date. This ordinance shall become effective upon the commencement of the thirty-first day after the date of its adoption. INTRODUCED: PASSED: AYES: NOES: NOT YET APPROVED 160907 jb 0131546 3 Sept. 7, 2016 ABSENT: ABSTENTIONS: ATTEST: __________________________ _____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ _____________________________ Senior Asst. City Attorney City Manager _____________________________ Director of Administrative Services Excerpt Minutes POLICY AND SERVICES COMMITTEE TRANSCRIPT Page 1 of 31 Special Meeting August 16, 2016 Chairperson DuBois called the meeting to order at 6:01 P.M. in the Community Meeting Room, 250 Hamilton Avenue, Palo Alto, California. Present: Berman, DuBois (Chair), Kniss, Scharff Absent: 4. Consider Options for Changing the Palo Alto Minimum Wage, Currently $11 Per Hour, By Further Increasing the Rate and Considering Exemptions and Direct Staff to Take Related Action or Maintain the Existing Rate and Rate Increase Scheduled for January 2017. Chair DuBois: Ok, we can go ahead start this item on an update on the minimum wage. David Ramberg, Assistant Director of Administrative Services: Good evening, Chair and members of the Policy and Services Committee. My name’s Dave Ramberg. I’m the Assistant Director of the Administrative Services Department (ASD) and I’m joined here as well by Cara Silver from the City Attorney's office for this item tonight. We’ll jump into a few slides. I hope you all have the slides at your places. I did want to make one correction to the staff report on Page 1 of the Staff Report I think it's the second line from the bottom there's a typo where we say 19. You probably caught that by 2019 that should be $15.00 by 2019. Elsewhere in the report it's correctly called out. So for tonight the topics that we're going to cover briefly in these few slides that I have about six slides, six or seven slides, is just really to bring you up to speed on kind of where we're at with minimum wage since last year and then run through the recommendations that we're suggesting for consideration tonight. So we're going to talk about the current status of where we're at and then we're going to cover a recap of the State and regional minimum wage status, propose changes from the Cities Association which is kind of the big topic for tonight that’s covered in the staff report, highlight a couple exceptions for consideration by the committee and then TRANSCRIPT Page 2 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 jumping into recapping with what the recommendation is for the committee to consider for tonight. So going on then to Slide 3 to remind everyone that Palo Alto adopted a change in the minimum wage in 2015 that went into effect in 2016. So the current minimum wage in Palo Alto is $11.00 per hour. With under the current ordinance the minimum wage is scheduled to increase by the Consumer Price Index (CPI), the national CPI which right now is about a percent. So it would look to the August to August change in the CPI which is coming out to be reported here shortly. If it stays about the same the new minimum wage under the current ordinance would change to $11.11 roughly in January of 2017, so just coming up here. We are required in the Ordinance to announce what that change will be in by October 1st. So that's really the most immediate kind of timeframe item that we need to be considerate of as we talk about things tonight. And then December 1st we do the actual publishing of the new schedule and announcement that we make available to all the businesses via the website. Those are the two key dates coming up based on the current ordinance. Jumping then to moving on to Slide 4, just a quick recap of some of what's happened maybe since the last time we were all together or at least refreshing of what the current state is. California is at on a schedule to be at $15.00 by 2022. San Jose is currently at $10.50 with an annual Consumer Price Index (CPI) increase built in. Sunnyvale recently went to an $11.00 minimum wage. Mountain View is at an $11.00 minimum wage as well. Mountain View is currently scheduled to go to $15.00 by 2018. And then you see there Palo Alto at $11.00 right now as well. Next Slide 5. Council Member Berman: Sorry that, one question on that last slide. So my understanding was Sunnyvale’s going to $15.00 an hour by 2018 as well. Council Member Kniss: They have. They’ve adopted it. Council Member Berman: I just checked their website earlier today. Mr. Ramberg: Great. Thank you for that clarification. And we would say that Sunnyvale is going to $15.00 by [inaudible] Council Member Kniss: Right, by 2018? January 1st? Or 2018. Man: Yes. Woman: Just like Mountain View. TRANSCRIPT Page 3 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 Mr. Ramberg: Thank you. Slide 5 then the proposed changes from this Cities Association of Santa Clara County this is what this slide recaps which is kind of the basis of a lot of the discussion in the Staff Report. The proposal there is to have a $15.00 per hour by 2019 it’s the $15.00 by 19 proposal. It would be phased in starting in 2017 at $12.00 an hour, go to $13.50 cents by 2018 and $15.00 an hour by 2019. It would then increase by CPI by the Bay Area CPI after 2019. And there are no… Vice Mayor Scharff: January 1, 2020. Mr. Ramberg: Thank you. And there are no built in additional exceptions recommended in the Santa Clara County Cities Association proposal. And then speaking of exceptions there are a couple exceptions worth bringing forward that we're requested to bring forward for Council consideration. One is referred to as the State’s learner exception. We wanted to emphasize that this really is already built into the definition of employee in the Palo Alto ordinance. So the State learner's exception allows for employers to pay a minimum of 85 percent of the minimum wage for the first 160 hours of employment. Palo Alto assumed that exception in adopting the State's minimum standards when we brought in our Ordinance. So that's built in. Some cities have gone beyond that and that's the possible discussion topic if so desired. Berkeley and San Francisco have gone beyond that State's level. Vice Mayor Scharff: Well where’s Mountain View and Sunnyvale? Mr. Ramberg: They haven't made any changes to that. Vice Mayor Scharff: So they have a learner exception? Mr. Ramberg: Correct. Mr. Ramberg: They've incorporated the State’s. Woman: What? Person: No. Woman: Oh, we have no exemptions. Mr. Ramberg: They’ve incorporated the State’s definition of … TRANSCRIPT Page 4 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 Woman: No, oh, someone else can field that one. Mr. Keene: Maybe Cara, our City Attorney. Cara Silver, Senior Assistant City Attorney: Yes, that’s correct; Cara Silver, Senior Assistant City Attorney. So the this is a little bit complicated the State law contains a learner’s exemption as David mentioned and this City of Palo Alto incorporates the definition of this the State’s definition of employee thereby incorporating this learner's exception. So it does apply in Palo Alto’s ordinance and in Sunnyvale and Mountain View’s ordinance which has a similar structure. Mr. Ramberg: The other exception is one for… Mr. Keene: Well there was a request to bring this forward, the wait staff. Mr. Ramberg: Correct, yes. Thank you for that reminder Jim. The Council asked for information on the wait staff exception. And I believe you all received information from the City Attorney on that and that can be discussed further as needed. This would be an exception within the restaurant workers category and we don't have examples of other jurisdictions at this time incorporating a wait staff exception. Chair DuBois: The other thing the state splits it by small company/large company. Is, do other cities do that? Ms. Silver: So just recently in connection with Senate Bill (SB) 3 the new State law increasing the minimum wage there is a distinction between small businesses and large businesses. And so I think that's what you're referring to? Yes. Chair DuBois: Yeah, I was asking Cara about it. Are cities emulating that at all? Ms. Silver: As far as we've researched in California there are no cities that have that distinction. In the recently adopted ordinances San Mateo just recently considered an ordinance and it actually went on second reading last night and I don't know if they passed it or not. And they have an exemption, a one year delayed deferral for nonprofits. So that's sort of the most recent thing that we found. TRANSCRIPT Page 5 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 Chair DuBois: I guess was that the end of the report or? Mr. Keene: Can I just add something, Mr. Chairman? As it relates to the any sort of a special exemption you know just [inaudible] those specific. I mean in addition to the information you can get from the City Attorney I think just in general that aside from many perspectives about fairness just the fact of creating exemptions really complicates the ability to kind of collect and maintain and enforce issues. Even some of the issues we've had with the business registry had to do with starting to put lots of different layers of categories and it’s self-reporting and it’s varied and it gets confusing for folks. In addition as David mentioned none of the other jurisdictions are exempting wait staff and we contract actually with San Jose to provide for the enforcement of this function. So I mean as the City Manager I mean my perspective would be it injects the opportunity for lots of errors in collection that sort of thing and complicates our contract in relationship I think potentially with San Jose as to how to enforce the ordinance. Thanks. Chair DuBois: Alright so we have quite a few members of the public [inaudible] public comments next. Because we have so many you have two minutes to speak and if when I call your name if you could come up to the microphone. So first speaker is David Page and we have Michael Martin on deck. David Page: Hi, thanks. Thanks for having this, taking the time to listen to us tonight. I’m in favor of the $15.00 minimum wage. When I was looking through the literature about this it seemed like the toughest concern, biggest concern was about the potential loss of jobs. And if you're considering helping out these people that are making $11.00 an hour a couple more dollars an hour would be really appreciated, but on the other hand somebody is making $11.00 an hour losing their job isn't going to be helpful at all. So I think that would be a really difficult call to make if we were living in a different part of the country without this extremely expensive cost of living that we have here in the world famous Silicon Valley. So given that consideration I say let's go for the $15.00 and no exemptions. Thank you. Chair DuBois: Thank you. Ok, Michael Martin followed by Susyn Almond. Michael Martin: Good evening. I'm not going to say this more eloquently than Galen Fletcher said in his email to the to the Committee and or as succinctly as Laurie said in hers as well. Fleming's is a company I work with. We're very strongly in support of living wage. As a company we have long TRANSCRIPT Page 6 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 been paying in excess of minimum wage to non-tipped employees. Frankly $15.00 an hour is probably not enough to work a single job and live in Palo Alto and we understand that as well. Our tipped associates probably make anywhere from $20.00 to $40.00 dollars an hour. Our non-tipped associates we would like to be able to pay them an equal wage, $25.00 to $30.00 an hour. So we were just looking for an exemption and for that; however, I we also understand we lobby the State of California we realize that's probably the best place for that exemption to come forward, but thank you. Chair DuBois: Thank you. Susyn Almond followed by Camelia Coupal. Susyn Almond: Hi, I’m Susyn Almond and I'm here to tell you the family side of this. My kids went to Palo Alto schools and my son has for the last five years worked minimum wage at McDonald's, Jamba Juice, and delivered your pizzas among other things. The way that he's able to stay on the peninsula is he lives with eight other people in a two bedroom apartment. So in the last couple of years we, I have lived in Mountain View and Sunnyvale and advocated and we’ve successfully passed minimum wage. So what I'm here to ask is that you do the same, you pass it forward to Council, no exemptions and help our all of us out. Thanks. Chair Dubois: Ok, Camelia Coupal followed by Paul George. Camelia Coupal: Hi, I am in agreement with the $15.00 wage increase, but for restaurants and small businesses like Coupa Café having the wait staff exemption is necessary because there is a discrepancy between front of house and back house staff. So if you have a front of house staff making $15.00 with tips or making over $30.00 an hour discrepancy within the same people who should all be you know, trying to earn in the industry at the same level or range of $15.00, $20.00 an hour, but when you're adding tips which is the majority of the wage that they're going to be getting anyway the increases it's too high when you're comparing front and back of house. So I do think we need for restaurants the wait staff exemption. Thank you. Chair DuBois: Thank you. So Paul George followed by Alison Hicks. Paul George: Hi, Paul George with Municipal Peace and Justice Center. Through my organization I've been involved in literally every one of the local efforts to raise minimum wages. Most recently in San Mateo that was just mentioned and I thought I'd share some of the experiences there because the second reading was actually the third reading. They had an original bill TRANSCRIPT Page 7 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 where they had all kinds of exemptions build in and I think it's helpful to learn from them. First of all on restaurants our legal advice mostly from California Labor Federation and legislative analysts in Sacramento is the California law does not allow exemptions for tipped workers. The law is pretty clear to protect tip workers from just kind of exploitation that they have to get the same wage. Two tier wages offsetting tips things like that are pretty clearly banned. I sent you a copy of the analysis that we use. San Mateo backed off when they saw that. Another one that they had originally built in was for teenagers, but we pointed out to them that not all teenagers are there for spare pocket change. A lot of teenagers are working for minimum wage and actually contributing to the family income and there's no way you can write an ordinance that's going to be able to tell whether someone's working to put food on her family's table or for a summer job. So that's an exemption that got left out. On nonprofits it's an excellent question. San Mateo who originally just put nonprofits in their ordinance and then realized that places like the Chamber of Commerce are a nonprofit so they reduced it to 501(c)3 organizations. Those are tax exempt nonprofits and you might want to be careful about that one. And Councilman DuBois asked about defining small businesses. San Mateo originally had in their first ordinance a definition of under 50 employees, 50 employees or under and the question came up what about the places that have 52 or 53 employees, will they lay off two, three, four workers to benefit from a lower tier wage? The same thing could be said of if you set the limit at 20 or 30 or 10, there's always going to be that that break. In the end actually the employers in San Mateo said make it clean, it's easier for us, it's easier for enforcement. So thank you. Chair DuBois: Alison Hicks followed by Jesse Cool. Alison Hicks: Hi, I'm Alison Hicks. I'm with two groups: the let me see if I, The Raise the Wage Peninsula and South Bay Coalition and also I’m with the Raise the Wage Mountain View. I wanted to echo what Paul George said that when we were doing the work in Mountain View the legal opinion we got was that a two tiered wage for tipped workers and non-tipped workers was not legal and that's one of the reasons we didn't go for it in Mountain View. And then I just wanted to urge you to go to do a clean ordinance, a clean $15.00 by 2018 and to do it as quickly as possible. I have two big reasons for that. The first reason is that as you know from the presentation California wide there's going to be $15.00 by 2022. And that will apply to places like Bakersfield and Eureka, places where the cost of living is nowhere near as high as it is here. When we went to $15.00 by 2018 in Mountain View it was a somewhat new thing to do. Now this is not controversial anymore and I think we need you to move fast so that if you move more TRANSCRIPT Page 8 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 slowly the wage will be virtually the same as it is in the rest of California and we're living in a very different situation here in Mountain View in terms of cost of living. The second reason I'd like you to do it, the first was to get ahead of the rest of the wages around the State. The second reason is that low wage workers here are really living in a desperate situation. Let me tell you what happened to me the other day. I got I live in a family, a neighborhood of single family homes. I woke up in the morning I opened my kitchen window to look at the trees across the street and I couldn't see them. Instead of a man, a gentleman opened his kitchen window several feet from my house. He had moved to the street right outside my kitchen, virtually into my yard. He lived in a Recreational Vehicle (RV). You know I talked to him, he was a low wage worker and he can't afford to live in any other way. If if our elected officials don't take common sense steps like this to help out low wage workers they're going to take their own steps and possibly in ways that we don’t like. Thank you. Chair DuBois: Jesse Cool followed by Michael Ekwall. Jesse Cool: I'm actually Jesse Cool. That's ok. I've been a Palo Alto resident and have owned restaurants in Palo Alto and Menlo Park for 40 years. This is… sorry? This is one of the hardest challenges I think I've ever had in my career. Nothing compared to economic or businesses, business challenges. I am for the increased minimum wage, but I’m asking that you please consider an exemption for tipped employees. We are not going to be here much longer if you don't. We can't hire people, we can't find them. We're already all pay, already paying dishwashers from $13.00 to $14.00 an hour. I'm not sure if you all know but by law we cannot give any of the tips to the kitchen staff. None of your money goes to any of them. It all goes to the front of the house, tipped people. Half of our staff are tipped employees with men… and they make minimum wage from $18.00 to $24.00 and $40.00 an hour. In order for us to pay higher wages we are forced to raise prices on the food that you buy in our restaurants. When we pray, when we raise prices you tip more. It all goes to the servers and we can't pay our kitchen staff any more. My labor costs have gone within the last six months from 36 percent to 44 percent. In general in the restaurant business if we can make five to ten cents on a dollar we're doing really well. I'm down to about two percent. So if I have to pay everyone minimum wage and then on top of that the I keep raising prices and they're making more I will not be able to pay the kitchen staff and I'll be honest with you, I’ll be gone. I don't care how opulent this community is or how many people are in the restaurant, I’ll be gone. Most restaurant owners agree with an increased minimum wage. What we are asking you in Palo Alto, my community, is to please put a freeze no matter how hard it is for you we’ll keep the books. TRANSCRIPT Page 9 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 We've done it in the past with anything we have mandated to us. Put a freeze on the current minimum wage for only tipped employees. They'll automatically make more as we are forced to increase our cost to you because you tip on percentage. Thank you for your time and I'm really asking that my community take care of this. Thank you. Chair DuBois: Ok, Michael Ekwall followed by Peter Katz. Michael Ekwall: Good evening. I'll try to stick to my script tonight although I've heard a couple of things that I don't think are quite accurate. However, from our perspective as a local restaurant that's been open for 19 years in Palo Alto we're not opposed to the concept of raising the minimum wage, but to do so without acknowledging the tipped income and provide an exemption for these tipped employees only helps our top wage earners in tip settings and leaves the untipped staff which are generally our kitchen workers unaffected by your efforts. So the reality is that over 40 states including New York have a tiered minimum wage system. The federal government as well has a tiered minimum wage system. And regarding tips and gratuities as has been pointed out earlier the Department of Labor specifically states that it's against federal law for back of the house employees to participate in tip pools. So the reality here in Palo Alto is that none of our kitchen employees are paid minimum wage, but just with this past January’s minimum wage increase in our business it cost us this year $40,000 in additional payroll. Unfortunately, not one of those dollars went to our minimum wage, I'm sorry, to our kitchen staff. They all went to our minimum wage tipped employees. So what we're asking is the Council help create an ordinance that will help our lowest wage earners and also provide hospitality and our tipped employees with an exemption. Not a sub minimum wage exemption, but keeping us at the State minimum wage. So I heard earlier something about California Labor Code 351 that might allegedly prohibit the Council from an exemption to the State wage. Now legal experts that we've talked with have a contrary opinion and said that that only applies to the State mandated minimum wage. So what we're asking is let us pay our tipped employees that State mandated minimum wage. Also I noticed in tonight’s meeting notes on page four that there was a confidential memo from the City Attorney's office regarding this issue so we'd be interested in knowing why that issue is confidential. We're asking that our tipped employees be exempted from the law, but those employees still be compensated at the State's minimum wage. It's wrapped up. I thank you for your time. Chair DuBois: Thanks, Michael. Alright, Peter Katz followed by Dan Gordon. TRANSCRIPT Page 10 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 Peter Katz: Thank you. My name is Peter. I own a restaurant here in Palo Alto. I own seven other restaurants around the Bay Area. Everybody raise your hand if you don't believe in paying people living wage? Ok. We all believe and in fact we believe that what people are making in the Bay Area at the lower end is not enough. And I know a lot of restaurant owners and frankly I know very few if any that don't support raising the minimum wage to a living wage. We certainly do. The issue as others have said is more about the impact of that minimum wage on most of the workers in our restaurant. The folks that are going to gain from it are the folks that actually are really unconcerned with their daily paychecks because they're being paid $30.00 or $40.00 dollars an hour in tips. That wouldn't be a problem either if it didn't impact our ability to pay the rest of the folks that work in the restaurants. More than half our staff are making well above minimum wage right now and the more that we end up having to pay because of an increased minimum wage to folks that are already making $30.00 or $40.00 dollars an hour the less we're going to be able to afford to pay these other folks that are working in what we call the back of house. So the losers in all this are going to be the folks that probably most need it and also frankly the restaurant owners. And why should you be concerned about that? Well there are frank… candidly right now the restaurants and you probably haven't seen it yet, but you going to see it pretty quickly across the country and even here in the Bay Area and even here in Palo Alto are starting to suffer pretty serious economically. And we're going to see restaurants going out of business. We've already seen it across the country we've already seen restaurant chains shutting down, three in the last two weeks. You know very large restaurant chains. We’re kind of mom and pop, but the same thing is happening to us. I agree with what the previous speaker said about the State minimum wage being a floor for tipped employees that I believe in the gates what Mr. George pointed out about any legal ramifications. And candidly I've got as I said eight restaurants here in the Bay Area. We've stopped growing. We're not looking to open any more because of these economic issues and that should be a concern as well. And the last question before I close it up is I’ll ask the folks in support of no exceptions at all even though 48 other states have exceptions and it's to the City Manager it's managed properly in those 48 other states. I'd ask why not? What, why not take that money that's going to folks that are making $30.00/$40.00 an hour and pay it to the poor, you know, folks that are on the grill that are making today $15.00, $16.00, $17.00 an hour, but we could pay them more. We could pay them $18.00 or $25.00 an hour. Chair DuBois: Thank you. Dan Gordon followed by Meghan Fraley. TRANSCRIPT Page 11 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 Dan Gordon: Hi, I’m Dan Gordon. I’m the co-founder Gordon Biersch, now Dan Gordon’s around the corner. It’s great to be back in Palo Alto. It's kind of funny, 28 years ago I was sitting in the City Council Chamber wondering whether we’re going to get approved to have a building permit to open the place up and now I'm full circle. Mr. Keene: It didn’t take you 28 years to get the permit, did it? Mr. Gordon: No, it didn’t. It did take us, actually the permitting process went pretty quick. It was only like six months total and we were up and running so not, that wasn’t bad at all. Yeah, it was a very efficient City. I'm pleading for the exemption. Clearly no one can live on $15.00 an hour as if that's their only income. The reality is that servers that are tipped employees get anywhere from $20.00 to $40.00 dollars an hour in tips working in Palo Alto. They don't need the help. You've heard that from everybody. It's unanimous. Those are not underserved underpaid individuals. We've got to have that. We're the only one of seven states in the country that doesn't have a subminimum wage level. We're not even talking about subminimum wage for hourly employees. For the tip employees you go in a, you look check the stats and I brought some studies. If you want to keep these, they are economic studies about subminimum. It's crazy that we're even in a state that does it, let alone a City that's going to be putting forward a 36 percent increase in hourly pay for tipped employees. Thirty-six percent increase in labor costs for anybody in the world in business is going to take them under and that's what's going to happen down the street. By 2019 first thing there's going to threat to all businesses that want to consider opening up in Palo Alto. I, as an investor in this operation, would have seriously reconsidered opening up had I known that it was going to go from $11.00 to $15.00 in such a short time frame. Everybody in the restaurant industry is going to think the same way. You’re going to find that decimation there. Then there's going to be panic attacks on how to figure out how to accommodate this rapid increase. So when you're talking about someone like Jesse who's got you know 40 percent labor costs and half of those are hourly and you look at the inflationary aspect of a 36 percent increase and you're working on a two to three percent margin to begin with that means every, the majority of the restaurants in the industry are going to go to a rapid loss. And you’re going to see decimation of all the restaurants you like except for some power players, you know. I'm going to be honest we we’re pretty profitable over there. Rob does a great job at his place and we're very, very high volume oriented, but the majority of restaurants in this town are not that way. There are a lot of mom pop institutions and you can't discriminate against them. The ones that are winning, well, and then the majority that are TRANSCRIPT Page 12 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 barely eeking by. So you've got to really consider this. There is a legal precedent you can do this. It's just we're one of the few states that is bad at business environment and doesn't look to the outside of this region and this State to find out what's going to work. Ok, thanks. Chair DuBois: Thank you. So Jon Kiya. I’m sorry, Meghan and then Jon Kiya. Meghan Fraley: Hi, my name is Megan Fraley I'm with the Raise the Wage Coalition. We've been you've seen us many times I think at this point. I also an the Clinical Director of a Community Center for Health and Wellness which works with people and improving mental health here in Palo Alto. So our as part of the Raise the Wage Coalition though there's a few of us in this room, there's also thousands of people that we're here to speak on behalf of minimum wage workers who are working and also Peninsula Young Democrats, really as you can see even with all of these wonderful restaurant owners that are here this is about as popular and clear of an issue as it can get. Even Hillary and Bernie duked it out about $15.00 and we're not even talking about the heart of Silicon Valley. So in that sense it's very politically popular; that said what it really comes down to is what's moral and fair and people deserve to be able to live, right? As someone in the mental health field I see the very real consequences of not being able to work 40 hour weeks and instead 60-80 hour weeks and what that does to the children and what that does to the families and it's very it's very real. So I would ask that you join Palo Alto, sorry, yeah. Join the heart of Palo Alto and Mountain View and Sunnyvale and passing the a clean path to $15.00 by 2018. And join us, I’m a Mountain View resident as well. So please join us in leading the way. I think you know Sunnyvale and Mountain View moved, but right now after the Cities Association sent forth the recommendation, actually I have the letter here so I can share any of that from you. And you can share because you were there. It was beautiful, oh my God. But after the Cities Association sent out the recommendation for all of us to move in concert what was really clear was how important it was I think from everyone who really thought through that that it was a clean ordinance to make it easily replicable, much more easy to enforce because we already have people working on wage theft issues, easier for businesses who work in more than one city. So please pass a clean path to $15.00 by 2018. Thank you guys for being leaders on this issue and other cities are watching for the lead. So thanks. Chair DuBois: Thank you. So Jon Kiya followed by Ruth Silver Taube. TRANSCRIPT Page 13 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 Jon Kiya: Hi, Jon Kiya, a longtime resident; I’m on the Board of the Chamber of Commerce and I'm here to speak on behalf of the Chamber and its members and the business community, you know, local business community in general. So we don't want to stand in the way of the path to $15.00. That movement is already underway regionally we and we believe that's the it's the right thing. We are concerned about a couple of sectors that this impacts and one of course is the restaurant sector and tipped workers. And I can't say anything better than it's already been said by many of the restaurant owners, but we are concerned about the disparity between the front and the back of the house, the rise in prices in order to compensate some very low margin business, and I would also say that following the lead of a Sunnyvale or a Mountain View I don't think that we necessarily as a city have to go down that path. We're in, we're a vastly different city than Sunnyvale or Mountain View. You know I could I guess I would make the analogy that running a restaurant in Sunnyvale or Mountain View is not as challenging as it is running in Palo Alto. You've got a high cost of real estate. You've got fierce competition. You've got a real big challenge in hiring workers and so I don't think that we necessarily have to look at our neighboring cities and pattern our policies after those cities. We’re I think we’ll all agree that Palo Alto is a very different city. The others sector that we are concerned about is the a, it's the nonprofit sector. Because nonprofits many nonprofits get the bulk of their revenues for through government contracts: local, state, and federal or grants and they're multi- year grants they base those revenues off budgets, fixed budgets and to change those budgets would put a lot of pressure on these nonprofits. And one thing we don't want to do is drive nonprofits like Acterra, like Abilities United, like the Junior Museum, like Avenidas out of out of this area. I think we’ll agree that we're better community when we have those nonprofits operating here. Thank you very much. Chair DuBois: Thank you. Ruth Taube followed by Rob Fischer. Ruth Silver Taube: Hello, my name is Ruth Silver Taube. I'm the Supervising Attorney at the Workers' Rights Clinic at the Alexander Law Center at Santa Clara University Law School. And I see a lot of clients from Palo Alto that come to our clinic, low income clients that often because of the money that they're making which is so low have to either end up living in their cars being homeless or living in very crowded circumstances. And raising the minimum wage will make a huge difference. Many of these workers work many, many jobs. Really aren't… it impacts their health and it makes a huge difference. And I I'm speaking here in favor of a clean measure and I'm also an employment attorney. I teach employment law at Santa Clara University Law School. And I disagree vehemently with the TRANSCRIPT Page 14 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 interpretation of Labor Code 351 that was proffered by the speaker from the restaurant. In fact, the Labor Commission itself says that California law requires that employees receive the minimum wage plus any tips left for them by patrons of the employer's business. I do not agree that there is any exemption in because it's local rather than state. As a matter of fact the state is the floor. The local cannot, can maybe be better, but it can't go lower than that. And I am confident that that's a losing argument. The other thing about the learner's wage is that it's only for 160 hours and then it has to go up. So I don't think it's going to buy anybody very much. Finally, I don't believe that non-profits should be exempt. We're talking about a very low amount of money. The last speaker spoke about how challenging it is for the restaurants in Palo Alto which may very well be true, but conversely it is very, very, very challenging for people who live in Palo Alto and even more challenging than Mountain View and Sunnyvale because the costs are even higher here. And there's been studies. There was a University of California (UC) Berkeley study and it shows that the minimum wage has a very positive impact. Raising the minimum wage in the past has made a difference. People have more buying power and they're able to live near where they work. Thank you. Chair DuBois: Thank you. Rob Fischer followed by Forest Peterson. Rob Fischer: Hi, good evening. I’m Rob Fischer, local restaurateur. A couple things, one is I think what we all want is fairness for all of our employees. And that's what we're asking you to give us, the ability to be fair to everybody. Not, we're not looking to not do the minimum wage of $15.00 an hour, we're not looking to go below the floor of the State, but what we want to do is we want to take that money and give it to the people who work harder than anybody else in our restaurants. The people in our kitchens are by far the hardest workers we have. And there are dishwashers if anyone in here has washed dishes before I don't think you could disagree with me. They are the, that is the hardest job in any of our restaurants. Our cooks work extremely hard. The fact that we don't have the ability to pool our tips and share with those people the laws are pretty clear that if you're not touching that table, what I mean by that is if you're not going to that table and talking to the guest you cannot share in that gratuity. So it's really important for us to be able to pay our people in the back of the house more money. And we want them to have as good of a life as the people in the front of our restaurants do and that's what we're asking for and nothing more. Ok, thank you very much. Chair DuBois: Forest Peterson followed by Poncho Guevara. TRANSCRIPT Page 15 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 Forest Peterson: Thank you for giving me the opportunity to speak and I'd like to speak in favor of the $15.00 an hour wage. So first what I'd like to do is thank Gordon for his beer because that's what as a grad student at Stanford that's what keeps us going. And I haven't been to a single event where the difference between a good event and a bad event wasn't over that beer. So that brings me to grad students. A lot of my neighbors in Escondido Village we have to work in the community. Sometimes we threaten our advisors that I'm going to go work in the community for $10.00 an hour if I don't get funding. That's a big difference trying to support your family, your wife, your kids; some of it's the women supporting their husband and their kids while they're finishing their graduate degrees. So raising the wage I don't think is something I need to speak on that much. It sounds like everybody agrees that that's important. So what I can speak professionally is as a construction engineer. In the construction industry we have laws that are incredibly complex on wages. And I understand the importance of varying the wages for different types of workers and trying to equalize it and the problems that the law creates, but if you jump into the prevailing wage law you can create an entire business just in prevailing wage administration. And so I wouldn't recommend anybody to go down that road as a solution is a more complex law. Thank you. Chair DuBois: Poncho Guevara followed by Maria Noel Fernandez. Poncho Guevara: Hi, again my name is Poncho Guevara. I’m the Executive Director of Sacred Heart Community Service in San Jose and it’s a pleasure to actually be here. And actually I just want to congratulate you for having this dialogue and making sure that we're really lifting up this this conversation about what's happening with families in our community. Last year alone Sacred Heart served over like I said about over 62,000 men, women, and children that came through our doors last year out of our base of operations up in San Jose, but we serve folks that live and work throughout the Valley including over 300 folks that are working in Palo Alto according to information that we have. And one of the one of the gals was named, a woman by the name of Griselda who actually works at a restaurant up here takes two busses, takes over two hours in terms of commute time every day, time that she's not able to spend with her kids and she is doing everything that she can to try to make sure that she can actually provide for her family. She can't work full time because of all of her commute time and being able to be with her kids. And the hours that she's worked both front of the house and back of the house are what sustains her and she needs a strong working environment. And just being able to calculate what's happening and making sure that we're able to do everything we can to lift up everyone and trying to go through the process where TRANSCRIPT Page 16 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 sometimes she hasn't gotten paid everything that she was or not by necessarily in any of the employers in this room, but having to go to a clinic like Ruth’s and be able to say, you know I I'm not sure if I'm paid correctly and I didn't get this or that kind of thing. Most of these are complaint driven you know processes to actually audit for enforcement becomes very, very difficult to be able to make sure that everything is able to be operated efficiently and so creating a system that's fair, flat, and effective that doesn't have lots of exemptions is really important for the day to day reality of families like Griselda’s. So we ask for a clean $15.00 by 2018. It does create a standard for our area and is representative of the values that I think we'd like to share. Because let me say what we've been able to do even lifting it $11.00 an hour has made a huge difference in the lives of so many families like Griselda’s. We ask you to move forward with this in an effective and efficient way for the entire valley. Thank you. Chair DuBois: Thank you. Your last speaker is Maria Noel Fernandez. Maria Noel Fernandez: Good evening, Maria Noel Fernandez with Working Partnerships USA and Silicon Valley Rising. I don't want to be repetitive so I’ll try to be pretty short. The reality is that many of us in this room have been a part of this movement for many, many years. And since we started this work we were up against really this fear that is in the community and that's really being generated in part lot of times by the commerces etcetera and what we've found in passing the first step which was to get to $10.00 in San Jose we were told that restaurants were going to close that, you know, the sky was going to fall and the reality is that it didn't. And so I think it's really important for us to really look at some of the studies that have been done. Ruth lifted up a really important study that I'm fearful that we haven't talked enough about which is the University of California (UC) Berkeley report that was done. UC Berkeley really is seen as the gold standard in terms of studying this issue locally and nationally and from the report they were able to find really the benefit that it would bring to the local economy, but also address some of the fears that our business leaders are bringing to us. And what if found is that it would likely increase costs from about 0.3 percent to 2.9 percent and that could be something that would be able to be absorbed. I want to also just lift up this idea around tip minimum wage. The reality is that Code Section 351 is real and that it will potentially put Palo Alto at a real legal risk if that's ignored. I really do appreciate all the work that's already been done on this issue. I think we're all working to really figure out how we can make this work and how we can make Silicon Valley a place for all of us that businesses can thrive that communities and workers can thrive in and this is a key step in making that possible. And just really lastly I just want to lift up that I appreciate the concern for TRANSCRIPT Page 17 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 nonprofits. I am a nonprofit. I work for a nonprofit and the reality is is that the movement has been driven by nonprofits. And so I want to just make sure that people know that nonprofits are part of this movement and are a part of making $15.00 real. Thank you. Chair DuBois: Thank you. Thank you to all of our speakers. Now I’ll turn to Council Members. Council Member Kniss: Could we start with asking Cara if she would go through the 351, talk about other states, set the legal stage for us. Chair DuBois: Sure. That’s a good idea. Yeah. Did you hear that [inaudible] Ms. Silver: So certainly. So as the foundation I think that the most complex question here is the tip credit and most of the speakers addressed that question. So the statutory framework for the tip credit is Labor Code 351 which says that essentially it prohibits employees from taking tips from the workers to credit against their base pay. And there are cases that have interpreted that section as also prohibiting the State from providing for a tip credit or a tip exception. Now since there aren’t any cities that have actually provided this tip exception or tip credit there are no cases that talk about whether this State provision is applicable to cities. However, you know there are certainly commentators out there and lots of legal opinions out there that believe in they’re, you know, the best judgment that this provision would apply to cities as well. It is currently an open issue and we provided you a confidential memo on our assessment of at that issue. Chair DuBois: Ok, thank you. Greg? Vice Mayor Scharff: Thanks. So first of all I'd like to thank everyone for coming out today. This is a small town in many ways and I'm actually really glad that the restaurants came out that and I, and all the people that have been working so hard to have $15.00 by 2018. I appreciate you all coming out. I know how hard you’ve worked on this and I've seen you over and over again at many things like the Cities Association meetings and all of that. And I think the first thing I'm struck by is I think there almost seems universal agreement by all the speakers in the room that $15.00 is the way to go. I don't think that's really a question. I think everyone's thought about that. I actually also wanted to say that I appreciated the nonprofits that got up and spoke because I have had some concerns about an exemption for nonprofits. I have been concerned that for what the person from the Chamber of Commerce said, but I haven't seen the nonprofits. I’ve TRANSCRIPT Page 18 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 seen the nonprofits do the opposite. They've come up here and asked to be part of $15.00 by 2018 and that counts for a lot. So the most troubling thing of all for me obviously is that the restaurant tip issue. I think that's actually a really difficult issue, but we have a State law and the State law is if it's not clear we would then become the test case. And I am an attorney and no attorney I think who is any good would tell their client frankly to be the test case for the State. And I think if Palo Alto did that we would be the test case. And I want to say that because I appreciate what you've all said and frankly I actually have actually gone through some of the books with my friends who own restaurants in Palo Alto and I do think that there is an issue. And I recognize it is a true issue, but I actually think as I think it was the person from Fleming said this is really an issue to address to your State legislators. I really feel that we in the City here have our hands tied on this issue. And you know we could you know make a bold statement in favor of the restaurant industry. We could do that I suppose and take on litigation. I don't think that's the right thing to do. I also think there's an enforcement issue that we need to be cognizant about. That if we have separate rules it becomes much, much harder to enforce things. The other thing is as you know I'm part of the Cities Association, the Vice President of it. And I got to say that I think what we really want to do here is we want to take a regional approach. And if everyone has the same rules you all compete on a level playing field as restaurants and as everyone else. And that seems to make sense to me. And I got to say I think that's probably one of the strongest arguments why we should have a clean simple to enforce rule that everyone understands. So that's where I'm coming from. And I did sign the letter from the Cities Association so I'm sure that's not a huge surprise to people where I’m coming from on this. And when we talk about what we want to do today what I'd like us to do is to make sure we get in sync with our neighboring cities so that by 2020 frankly all the cities in Santa Clara County are on the same page. And that was the thrust and the reason I said 2020 I saw some confusion is that other people… No, it's a good question. Is cities of Mountain View and Sunnyvale are going to be ahead of a lot of other cities. A lot of people are at $10.00 right now. We're at $11.00 and so by 20 the Cities Association suggested $15.00 by January 1st of 2019. And the notion was at that point that Mountain View and Sunnyvale will go back and suspend the CPI increase and that the new CPI increase on $15.00 will actually be, you know, January 1, 2020. And that's why I said in 2020 everybody hopefully will have the same wage we just all have to catch up and get together. At least that was the vision of the Cities Association so that there's no difference everyone's at the same rate. If you open a restaurant in Mountain View or open in Palo Alto or you open any business you know where you are. And so that's the Cities Association vision of where we get to. I think there's obviously some details here, you know, Palo Alto is currently $11.00. A lot of cities are at $10.00. So the Cities TRANSCRIPT Page 19 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 Association said you know three steps you know $12.00, $13.00, $15.00 and $15.00 on January 1, 2019. How we actually get to that $15.00 we can talk about my view. You know, I mean there's different reasons I've heard from some restaurant owners that you know a little more time on some of these things is very helpful, but within that framework I think we need to all be the same, you know, by January 1, 2019 that we’re at $15.00 and then we all deal with the CPI increase to all come into alignment. So that's what I was thinking on that. I did want to say the other thing in the back of my head is a little bit is I ate at restaurants all over California and I haven't found the Oakland restaurant scene I am pretty sure Oakland's at $15.00 aren’t they? They're close, right? Woman: They’re between, they’re around $12.50 or $13.00. Vice Mayor Scharff: So they’re at $12.50. Ok. So what I've noticed is Oakland seems to be going to a different system where you don't tip. They seem to be going to a system of you know a surcharge. And I noticed that Tamarind frankly, I don’t know if anyone here represents Tamarind, now has like a three percent mandate charge. Man: Do they? I didn’t realize that. Vice Mayor Scharff: And I'm guessing that that is the work around. And when I was a Beverly Hills they didn't, they had the same thing. They had a large this is I don't remember I think it was like 15 percent or whatever. This is the surcharge due to the minimum wage. I think that's what they wrote on the menu. Because I think Beverly Hills is way up there. It may even be at $15.00 currently. So I know that you guys will adapt and I feel bad saying that. Man in audience: I know that this is probably out of order, but can I say that we did that in our restaurant in Cupertino? For three months and we had to change under duress from all of our [inaudible]. It is exactly where we all need to get, but there is no way as an individual restaurant we can do that in this environment. We tried it. We got Yelp reviews. All of our Yelp reviews prior to [inaudible] the restaurant said excellent and we go to the point where after three months we had to change it and apologize to our customers who called us greedy even though all of that money was going to higher wages. TRANSCRIPT Page 20 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 Vice Mayor Scharff: So fair enough, I think and I think that's what argues for a regional approach because if every city and every restaurant has the same rules then you won't have that problem. Chair DuBois: Let’s keep some order here. That’s ok. We’ve been a little lax tonight, but let’s maintain some order. Greg? Vice Mayor Scharff: So yeah, San Mateo, but San Mateo as a county is moving as a whole in the same direction. And I think you know we obviously can't, can't make a perfect world without, you know, we can't enforce everything. So what I want to see us do and I think it's really is I want to make sure that we do $15.00 by at least January 1, 2019. I want to make sure that we have some step increases so in 17 we start again. I would suggest probably that we move since the Cities Association is actually suggesting $12.00, we’re a dollar had already. I would probably suggest that we move to $13.00 on January 1, 2017. I realize and then I actually wouldn't have another increase to January 1, 2019 of $15.00 which gets us up. I mean there's some people are going to say that the $13.00 is too quick. Yes it's quick, it goes up, but it goes up the way the other cities went up. They were at $10.00, we’re at $11.00. I don't think we need to have another interim increase. I think you then have time to adapt by January 1, 2019 and then at that point we have a CPI increase start on January 1, 2020. And I also think that we should have actually that's in the Cities Association letter. I think I handed it out to my colleagues. And then I do think we should change the index frankly to be the Bay Area CPI as opposed to the National CPI. I think the… now the Cities Association also had some off ramps which I think we should. It said first of all that we cap the CPI at five percent in any one year. I think we should do that and I think we should have some off ramps that could be possibly triggered it would be at City Council discretion. That's only during the ramp up phase. I don't think we actually, I don't think Palo Alto needs that frankly. They, they basically had some off ramps that if there was a recession during this ramp up phase then that would basically be between 2017 and 2019. I don't think that's necessary in this. And then I don't think we should have any exceptions at all other than what's in the State law in terms of the learner's exception. I think that makes it easier to enforce. So I would make that as a Motion. So that's something… MOTION: Vice Mayor Scharff moved, seconded by Council Member Berman to recommend the City Council direct Staff to prepare Ordinance amendments to increase the minimum wage to $13 on 1/1/2017 and $15 on 1/1/2019 with a CPI increase starting 1/1/2020 indexed to the Bay Area. TRANSCRIPT Page 21 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 Council Member Kniss: I’d like a little discussion first. I realize Cities Association spent a lot of time on it. So it is wonderful to see everybody turn out tonight, but Jesse Cool’s comments certainly affected me. Many of you I know from the restaurants that you run. But the question will be and Jim you might have a better handle on this than some, we’re not just discussing restaurants tonight. We're discussing a minimum wage for every company that we are that is in our jurisdiction. As I understand, correct? Mr. Keene: Correct. Council Member Kniss: So it's not… this is the restaurant business may be a small part of this larger, larger hole. And as far as the minimum wage for everything outside of the restaurants I don't know, no problem with that. But I am, I'm puzzled. I want to go back to a couple of things that Cara said. Did you say 48 other states have different rules regarding tipped employees? Did I understand that? Ms. Silver: So I didn't, I didn't say that, but it is true that this is a very unique law that the 351 and there it's very common for other cities to have tip credit exceptions because they don't have a state, exactly other states, because they do not have the protection that California law has. Council Member Kniss: So therefore it means there's something behind this that I probably don't know about, but… Mr. Keene: Could I interrupt just for a second, do you mind? Just on this, this real quickly. Council Member Kniss: Sure. Mr. Keene: Well, I mean want to state the obvious. This is the United States of America. I mean we're divided into states where the dominant power in this country is allocated to states and so there's tremendous variety in the states. I'm sure if we came back to the Council with a list of laws that only California has that does not, did not exist in other states it would be a long, long list. I mean California it really is. So the challenge really is that I mean we have complaints all the time about things you'd like to do as a City Council that you’re precluded by and preempted by the State. And so it ultimately does require State legislative changes so many things. Council Member Kniss: And so what really surprised me about this though it was that how many other states have seen this as an issue, especially in TRANSCRIPT Page 22 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 New York as I understand states with, states known for their restaurants and so forth, Florida. I hear what we're saying about the State law, we’re hesitant to go up against it. I, Greg I hear you on the regionalism. I like the regionalism idea, but I think that we are perhaps without meaning to really singling restaurants out and really singling out those who are in the front versus the back and that that really troubles me. What I'm hearing you say Cara is we, we would be a test case if we were to do it otherwise? Ms. Silver: Yes that's correct. The other cities that have tried this, larger cities Sacramento and Los Angeles there were a lot of organized labor groups that fought that particular exception and we would expect the same thing here. Council Member Kniss: Alright, that gives me the answer that I was looking for. Council Member Berman: Politics, Liz. Council Member Kniss: Yeah I just heard that. So for those of you who are here in the restaurant business I can’t tell you how sympathetic I am. As a I once worked in the back and I once worked in the front to get through college. So I remember this very well. And it's tough. The back room certainly does do the work. I wish there were something we could do for you. I don't think we're quite at that test case yet, but I would hope that some of you would work with the State and I can hear how tough that is. I heard the message and what Cara was saying in order to alter this. You know several of you I know your restaurants. Your food is terrific. It would be an enormous loss if they were to close. That said, the path clear clearly is the one we have to follow as long as we're complying with the State law 351. And that’s regrettable. Council Member Berman: Yeah, so I mean just kind of along those lines I'm not here and thank you. I mean Greg and Liz have spoke very eloquently about the situation, about the context, and I'm not here to raise the minimum wage for the front of house staff for a lot of the restaurants in this room. That's not why I coauthored a colleague's memo to raise a minimum wage in Palo Alto. But I am here to raise the minimum wage in Palo Alto because wages across the region and across the State haven't kept up with the cost of living. And we heard about that with a speaker who said that her son is living 8 people to a two bedroom apartment and that's happening all that's happening in Palo Alto. And that's happening all across the region and that's why you see this effort to raise the minimum wage. And but I'm also TRANSCRIPT Page 23 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 not here to make a decision that clearly puts the City at a disadvantage in a legal dispute. And we don't know what the result will be because no city has done it. And that kind of tells me the answer I need. That there are 17 cities across the State that have not that have adopted minimum wages higher than the State minimum wage and have not carved out a tipped worker exemption. And I'm sure the restaurant associations in those communities have lobbied just as hard and as eloquently as you guys have here. But we wouldn't be doing our duty as stewards of this City and of this City’s resources if we walked ourselves into a lawsuit that the odds were heavily stacked against us. And so you know I think a lot of people have mentioned you know that different states have different rules and I think we've kind of keyed in on that you know where this this debate needs to occur, but we as a City I'm not willing to make a decision that's going to guarantee us a lawsuit tomorrow and probably [inaudible] hundreds of thousands of dollars of legal fees down the road and lots of staff time. And so I and I do think you know Mr. Gordon mentioned you know Menlo Park. And I do have concerns about San Mateo County. I was heartened to see the City of San Mateo pass a minimum wage ordinance for I think it’s $15.00 by 2019 and my hope is that the other San Mateo County cities follow suit. The Cities Association of Santa Clara County almost unanimously passed, it wasn’t an ordinance, but you know guidance to their cities. I think Gilroy was the only one to say no? Vice Mayor Scharff: I don't remember who said no. They may have abstained. Council Member Berman: Yeah, you know, and so I think you're going to see this happen in every city in Santa Clara County very soon. I mean that they will move to $15.00 by 2019. My hope is that San Mateo County cities follow suit. Tough to tell, but I'm always happy to see San Mateo do it. And I think that you know we when we raised the minimum wage to $11.00 an hour by January 1, 2016, said that you know we had a goal of getting to $15.00 an hour by 2018. We did not set a schedule to do that. There's right now there are two different schedules there's the Mountain View/Sunnyvale schedule which is $13.00 an hour by January 1, 2017, and $15.00 an hour by January 1, 2018. Both of those cities are that's their half. The Cities Association is a little different and Palo Alto kind of finds itself in the middle because we started earlier than the Cities Association, but we started later than Mountain View and Sunnyvale. And so I would second Greg’s Motion with an amendment which is $13.00 an hour by 2000, by January 1, 2017, and then $15.00 an hour by July 1, 2018, so a year and a half later. Which at that point we’ll actually be for a while there we’ll be behind all the cities in Santa Clara County for six months. And then there TRANSCRIPT Page 24 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 won’t be another increase for another 18 months after that until January 1st of [inaudible]. Vice Mayor Scharff: I would accept that. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND THE SECONDER to change the timeline to state “$13 on 1/1/2017 and $15 on 7/1/2018.” Chair DuBois: So if I could make a few comments, so I also co-authored the memo on minimum wage. I have given a lot of thought and again I also appreciate hearing from the business community. And the thing I really struggle with is this issue of regional alignment and which I think having a level playing field I mean consistency on the Peninsula makes a lot of sense. I’m also very sensitive to having something simple and keeping it enforceable. And I know that some restaurants have tried the service charge and again, maybe if it's a consistent playing field trying it again will have better results. The other thought I gave thought to which is in the State law it was, you know, should we lag businesses less than 25 employees for a year, which is what the State law does. It's something to consider. I mean I think you know ultimately I come down on keeping it simple, but I guess I'm a little confused about, you know, we did increase our minimum wage in Palo Alto already. Why would we not stick to the schedule that the Cities Association put out? Why would we go in advance of that? You know I think we need to look at the year on year increases and what that does to business and jumping that up a lot in any one year I would rather smooth it out and kind of match the proposed schedule which again seems like it would keep us in line with the most cities in the area. So if anybody wants to explain why you would go to a totally different schedule then this schedule? Vice Mayor Scharff: So what I thought is that we should end up where they are. And that's the [inaudible] we get there with Marc. And then we also get there with what I initially proposed. Chair DuBois: And we would also get there [inaudible]. Vice Mayor Scharff: And we also get there with their schedule. So the reason is, is because the Cities Association came up there when most cities were at $10.00 and we’re at $11.00. So I wanted us to basically continue along the same path we had, which would really bring us to $13.00 and that I thought the $13.00 to $15.00 that's why I proposed having it later. Marc TRANSCRIPT Page 25 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 wanted to bring it six months in and I think I can speak for Marc, but the reason I accepted that is I know that there was some promises by doing it by 2018 which brings it into the 2018 concept and it's six months earlier I said to myself is that really hardship, that extra six months? It might be you know it's, but then there's no other change for 18 months. I you know I think you could make arguments on the details of that and I… Chair DuBois: My concern is we're talking about $13.00 this coming January, right? Versus $12.00. You know, so again I guess I'm not really picturing what you guys are proposing. What was Marc’s proposal? Council Member Berman: It was yeah, so mine was $13.00 by this January, January 1st. And then just to give a little context what I want is the City we've already passed, when we passed our ordinance to raise the wage we said our goal as a City is to get to $15.00 by 2018. So we unanimously approved that a year ago. Sunnyvale and then it was looking at what Sunnyvale and Mountain View have done because we're all at the same place right now. We're all $11.00. Sunnyvale I think actually just got to $11.00 an hour three months ago. So on July 1, 2016, they went up to $11.00 and then on six months later on January 1, 2017, they're going to go up to $13.00. So I mean at least our increase isn’t that dramatic. We've been at $11.00 since January 1st. It's to go to $13.00 by January 1, 2017, then wait a year and a half and go to $15.00 by July 1st 2018, which meets with our goal of getting to $15.00 by 2018. And is slower actually then Mountain View and Sunnyvale. Mountain View and Sunnyvale go up to $15.00 by January 1, 2018. So we're giving our business community a year and a half instead of a year to implement that additional increase. Vice Mayor Scharff: And I guess I was thinking that frankly $12.00 you know I realize the restaurants have issues, but you know if you are working you know going from $11.00 to you know to $12.00 while it's helpful, $13.00 is much more in line with the promise of what we're trying to achieve. And that's why I suggested $13.00. Chair DuBois: And then the details and the CP alignment [inaudible] that we wouldn’t figure that out. Vice Mayor Scharff: Well I think the CP alignment is you don’t have any CPI until 2020. And that aligns everybody. And so… Mr. Keene: And that would be indexed in the Bay Area. TRANSCRIPT Page 26 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 Vice Mayor Scharff: And that would be indexed to the Bay Area. Council Member Berman: And so we would actually just correct what you were saying earlier we’d actually be all aligned at January 1, 2019, because we'd all be at just $15.00. And Mountain View, Sunnyvale, Palo Alto no increase and all the other cities are just getting to that point at that point. So we'd all be at the same place January 1, 2019. Chair DuBois: And so we’re penalizing our businesses versus other cities other than Mountain View and Sunnyvale. Council Member Berman: Well, no. I mean we set our goal already a year ago so I don't view it as penalizing businesses. I view it is as getting more… finally raising the wage for workers that hasn't been raised for too long and catching up to where you know we really should've started that process a lot earlier. And that's part of the problem is that you know wages have been so low for so long while the cost of living has increased so dramatically and so there is this big gap to catch up. And I'm cognizant of that, but you know this is a goal that we set a year ago already and it’s moving along … Chair DuBois: I mean I think that we've said that everybody seems to be pretty in favor of $15.00. I’m just concerned about the tips. Council Member Kniss: And I have that same concern. It just is a little troubling to suddenly change the methodology when we're sitting here tonight. Council Member Berman: We don't have a methodology, so we’re not changing it. Council Member Kniss: Well, yeah we are. We’re putting, we’re paying more earlier. So… Council Member Berman: We haven't set a schedule yet. Council Member Kniss: Well, we're discussing setting a schedule right now. So that’s… Council Member Berman: Yes, absolutely. So we’re not changing anything though. TRANSCRIPT Page 27 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 Council Member Kniss: Well I think which we're changing the understanding that was inherent. Council Member Berman: I disagree, but I won’t fight it. Vice Mayor Scharff: If both of you want the Cities Association schedule I'm not going to stand in the way of that. Council Member Kniss: I’d like the Cities Association schedule. Vice Mayor Scharff: Since I signed a letter suggesting we do that I’m going to stand [inaudible]. Council Member Kniss: I just, I know that you ground that out and it came to us and that I know. You know it’s the thing that we have in front of us, it’s what you had said you would do. So that’s where I’d be, right where the three of you all were as cities very recently. I’m sympathetic Marc, but this is where we were. It’s… Council Member Berman: It’s a great way to remind me that the Cities Association was the recommendation that every city follow that path? My recollection is Mountain View and Sunnyvale signed on to that also. Vice Mayor Scharff: They did. I mean I think the recommendation …. Council Member Berman: And then I’ll follow along with that. Vice Mayor Scharff: Well, right. I mean, but everyone [inaudible]. So this path Marc, you are correct, I mean this path was set forward to get everyone with regional consistency by January 1, 2019. Yeah and that’s, and that’s why I started this by saying you know I think that reasonable people could disagree in terms of how we do that. You know and whether or not we go to $12.00… Council Member Kniss: And unreasonable people could. Vice Mayor Scharff: Right, but I mean whether or not we go to $12.00 or we go to $13.00 I think that makes a big difference in people's lives. And so I would prefer that we do $13.00 frankly, but you know I would much rather we have a recommendation rather than split 2-2 the Council and so I'd much rather this be more of a you know let's get together and have something TRANSCRIPT Page 28 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 rather than fight over it. And so that's why I'm ok with following the Cities Association thing. Even though my heart actually is with Marc and that's why I made the choice. Council Member Kniss: Well, my heart might be with Marc, but I think when you're when you have come to us with something like this well discussed, well agreed on that was what made sense to me. It's not I'm very sympathetic with those who are working at minimum wage. At the same time businesses are, businesses have to adjust to that as well. So if you're a large business and you're adding that on that $1.00/$2.00 that has a fair amount of impact, but we're concentrating an awful lot on restaurants tonight when I think we're really talking a whole lot about across the board. And I have no idea how many employees we’re talking about, what we're probably talking about a huge number of employees. Chair DuBois: Well, when we talked about this previously I think we said that there actually I don't think, know if we ever had numbers, but in terms of numbers of employees working at minimum wage in Palo Alto you know it was hard to tell. Council Member Kniss: It's very hard to tell, right? Vice Mayor Scharff: So what I did notice that every time I see a sign it's about minimum wage in Palo Alto. I mean every time [inaudible]. Council Member Kniss: What I see all over Palo Alto are help wanted signs. Chair DuBois: Alright so do we have a Motion? Council Member Berman: There's currently a Motion and a second, but the maker of the Motion I think is going different directions, so if we need a Substitute Motion? Vice Mayor Scharff: Well I guess it would be ok if I ask some of the restaurant people just to basically weigh in? So I don't mind who wants to speak to it, but not too many people. The question really on the table is if we do the Cities Association schedule or if we go faster to $13.00. Does it make a big difference to you? I mean is it a huge problem? Jesse Cool: It’s just going to serve the tipped employees. It’s not going to serve our kitchens. The people you’re trying to take care of, the low income TRANSCRIPT Page 29 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 people who are living in houses like that one we talked about aren’t going to get touched because we’re going to have to get at all the servers. We aren’t going to have enough to give it to them. Woman: On the question of timing can you repeat the question? The question is the timing. Vice Mayor Scharff: Right. The question is purely on the timing. I guess I just you know everyone spoke to having a tipped exemption or whatever. So I want to get some sense, you know, we're talking about timing of basically what, a year? Mr. Keene: Do you want the exact recommendation from the Cities Association? Is that what the alternative is versus your $13.00 dollars? Vice Mayor Scharff: That’s correct. Mr. Keene: Ok. So just so we're clear the Cities Association says that we would basically we would be the position of increasing on January 1, 2017, the minimum wage to $12.00, $13.50 a year later on January 2018, and $15.00 on January 1, 2019. The alternate proposal that was put forward was increasing not to $12.00 dollars, but the $13.00 dollars on January 1, 2017, and there was some disagreement about whether or not the jump to $15.00 would take place in July of 2018 or in January 1, 2019. That's the difference. Laura: Hi, Laura. Sorry for being late tonight, I was working. I agree with what Jesse said and I think the longer we [inaudible] now add to that then I think the longer we can postpone it. I think the easier it is for us to adapt because I think it’s going to have such a great impact. So you can also ask yourself many places are just going to raise their prices and the cost of living here is already so expensive that when that happens all we’re going to do for the most part, especially at the established restaurants we’re already operationally efficient or as operationally efficient as we can be. So all we're going to be doing is passing that along so when your $5.00 beer is $8.00 do you want to postpone that? It’s only going to make the cost of living more expensive so anything you can do to postpone it we appreciate it. Vice Mayor Scharff: Alright, I’ll withdraw my Motion then and just make the Cities Association Motion without the off ramps though, because the off ramps were only in between. TRANSCRIPT Page 30 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 Council Member Kniss: Ok, I'll second that. MOTION WITHDRAWN BY THE MAKER MOTION: Vice Mayor Scharff moved, seconded by Council Member Kniss to recommend the City Council approve the Cities Association recommended minimum wage increase without the off-ramp triggers and direct Staff to prepare related Ordinance amendments to increase the minimum wage to $15 in three steps: $12 on 1/1/2017, $13.50 on 1/1/2018, $15 on 1/1/19, and a CPI increase after 2019 indexed to the Bay Area with five percent cap and no exemptions. Chair DuBois: Any more discussion? Council Member Berman: Give me a second to think. I’m deciding about how much I really want to say. Yeah. I’ll save it for the Council. Chair DuBois: Ok and then I guess because of the nature of this issue does this go as an Action Item to Council… Mr. Keene: Well, because it sounds like Council Member Berman’s not going to vote for this so it will go as an Action Item to the Council not as Consent. If it goes as Consent the public is still able to speak at the Council meeting when the Consent Item comes up at the Council. Essentially unless it’s pulled would be [inaudible] to the Committee. Chair DuBois: Last time we approved it unanimously, but we said we were going to take it to Council. Council Member Berman: Yeah I mean and so because I don't want to be seen as… I support raising the minimum wage, but I do think though this needs to be brought up as an Action Item obviously. Vice Mayor Scharff: So we’ll put it on Action anyway. Council Member Berman: And I'll vote and I’ll support it in the sense that I’m supporting raising the minimum wage, but I have a different, something different in mind in terms of the schedule for it. Chair DuBois: Ok, so all those in favor? TRANSCRIPT Page 31 of 31 Policy and Services Committee Special Meeting Transcript 8/16/16 MOTION PASSED: 4-0 Council Member Kniss: And as a postscript, it's the regionalism that I … Council Member Berman: Liz, let's talk afterwards because I've said… I mean we can get into this for the next 15 minutes, but there are two huge cities in the region that are moving at a different pace that signed onto this letter that are not moving at this letter’s schedule so let's not use regionalism as the reason why we're doing what we're doing. Because we're not going along, there is no regional schedule until January 1, 2018. Mr. Keene: Ok, so just so we're clear and Mr. Chairman then the Committee’s recommend, recommended the Cities Association recommendation apply to us without the off ramp triggers by a 4-0 vote, but specifically requested we put this on the Action Agenda for the Council when it comes up so that the public will be able to speak and the Council as a whole will re-discuss this again when it comes up. Ms. Silver: And just as further clarification so we’ll bring forward an amended Ordinance for a first reading to the fully Council. Vice Mayor Scharff: Right. That was part of the Motion just so we’re clear that it was what you asked for which was a record of the full Council to direct Staff to prepare the Ordinance and amendments. That was included. Chair DuBois: I’d suggest we take a five minute break, if we can keep it short so we can get at it. The Committee took a break from 8:21 P.M. to 8:29 P.M. eting was adjourned at 9:26 P.M. City of Palo Alto (ID # 7154) City Council Staff Report Report Type: Action Items Meeting Date: 9/26/2016 City of Palo Alto Page 1 Summary Title: Nuisance Abatements: 220 Matadero Avenue and 18 Roosevelt Circle Title: PUBLIC HEARING: Adoption of a Resolution Confirming Code Enforcement Abatement Report and Ordering Cost of Abatement to be a Special Assessment on the Properties Located at 220 Matadero Avenue and 18 Roosevelt Circle From: City Manager Lead Department: Planning and Community Environment Recommendation: Staff recommends that Council (1) hold a public hearing to hear and consider objections from affected owners of properties located at 18 Roosevelt Circle and 220 Matadero Avenue of proposed assessments related to completed nuisance abatement work and (2) adopt the attached resolution confirming the report and ordering abatement costs to be a special assessment on the properties specified in the report (Attachment A). Background: Abatement of Nuisances Chapter 9.56 of the Palo Alto Municipal Code declares a number of conditions public nuisances and authorizes abatement by the City when an enforcement officer determines that any such condition exists on any premises. If the nuisance condition does not constitute an immediate danger, the enforcement officer must first issue a notice to the responsible person to abate the condition by a date certain or to attend a hearing to show cause as to why the condition should not be abated. Only after the time for such abatement or hearing has passed may the enforcement officer proceed with abatement. If necessary, the City will obtain a nuisance abatement warrant from the Santa Clara Superior Court before abating the nuisance. In the event the City is required to abate the condition, Chapter 9.56 provides that the cost of the abatement shall be a civil debt owed to the City jointly and severally by the responsible persons. If the debt is not paid upon demand, the debt may be embodied in a report and an assessment list filed with the City Clerk. Thereafter, the City Council may impose a lien in the amount of the debt, or a reduced amount, by holding a noticed public hearing to consider the City of Palo Alto Page 2 report, together with any objections or protests, as provided in Palo Alto Municipal Code Chapters 9.56 and 8.08. Unsafe Buildings Chapter 16.40 of the Palo Alto Municipal Code declares a number of conditions that constitutes a dangerous building or substandard residential building and authorizes abatement by the City Engineer when such conditions are not corrected. Upon determining that a structure is a dangerous or substandard building, the Chief Building Official may issue a Notice and Order requiring the property owner to correct the dangerous or substandard condition. For conditions that present an imminent threat, the Chief Building Official may also order immediate evacuation of the building and post a notice that the building shall not be occupied. If the condition remains uncorrected after a specified period of time, the Chief Building Official may order and the City Engineer may cause abatement by the City. In the event the City is required to abate the condition, Chapter 16.40 provides that the itemized cost of abatement shall be embodied in a report filed with the City Clerk. Thereafter, the City Council may impose a lien for the cost of abatement by holding a noticed public hearing to consider the report, together with any objections or protests. Any interested person may file a written protest with the city clerk at any time prior to the hearing. The City Clerk has posted a copy of the report and assessment list, and published the required notice of this hearing in the Palo Alto Weekly. The cost report has been posted on the City Hall Plaza bulletin board for ten days prior to this hearing. Property owners may object to the charges for nuisance abatement being levied against their properties. Should there be any modifications in the proposed assessments as a result of the hearing; such changes will be reflected in the final resolution adopted by the Council. After the Council adopts a resolution confirming the abatements and ordering those costs to be imposed as liens or transferred to the unsecured roll, the assessments will be submitted to the County Assessor for entry on the October tax roll upon which general City taxes are to be collected, and a notice of lien may be recorded with the County Recorder. Discussion: 220 Matadero Avenue On August 5, 2014, the City’s Code Enforcement division issued a notice to abate to the property owner at 220 Matadero Avenue on the basis of an accumulation of solid waste on the premises as well as the existence of weeds, dirt, debris, and litter on the sidewalk fronting the property. The former property owner neither abated the nuisance nor appeared to contest the nuisance determination. After obtaining a nuisance abatement warrant, the code enforcement officer coordinated abatement of the nuisance with the City’s Public Works, Parks, and Police departments. The total cost of the abatement, including charges for several large waste containers was $11,456.59. After several unsuccessful attempts to collect the debt from the former property owner, staff is now seeking to have the debt levied as an assessment on the City of Palo Alto Page 3 tax roll. Because the property has been sold since the abatement was completed, the cost of abatement shall not result in a lien against the real property but instead shall be transferred to the unsecured roll for collection from the former owner. 18 Roosevelt Circle On December 10, 2015, the City’s Code Enforcement division issued a notice to abate to the property owner at 18 Roosevelt Circle on the basis of an accumulation of bicycle parts on the premises as well as the existence of junk and debris on the front yard and driveway of the property. The property owner did not contest the nuisance determination and made some efforts to reduce the extent of the nuisance after communicating with City staff. Nonetheless, some City abatement was required. After obtaining a nuisance abatement warrant, the code enforcement officer coordinated abatement of the nuisance with a third party contractor. The total cost of the abatement was $5,376.00. Staff is now seeking to have the debt levied as an assessment on the tax roll. Policy Implications: This procedure is consistent with existing City policies in the Palo Alto Municipal Code for recovering costs of nuisance abatements. City of Palo Alto Page 4 Resource Impact There is no direct fiscal impact of this action to the City. The assessments identified on Attachment B, totaling $11,456.59, will be transferred to the unsecured tax roll and will not be borne by the City. The assessments identified on Attachment C, totaling $5,376, will be imposed as a lien on the property at 18 Roosevelt Circle as listed and will not be borne by the City. Environmental Assessment The adoption of this resolution and confirmation of the nuisance abatement report are not projects for the purposes of the California Environmental Quality Act (CEQA), as there is no potential for a direct or indirect change in the environment, and therefore no environmental review is required. Attachments: Attachment A: Resolution Ordering Special Assessment for Nuisance Properties (DOCX) Attachment B: Supporting documentation for 220 Matadero (PDF) Attachment C: Supporting documentation for 18 Roosevelt (PDF) NOT YET APPROVED {date] sh ________ 1 Resolution No. _____ Resolution Confirming Nuisance Abatement Report and Ordering Cost of Abatement to be a Special Assessment R E C I T A L S A. The Council of the City of Palo Alto has heretofore declared a number of conditions to be public nuisances and B. Having identified public nuisance conditions, Code Enforcement staff issued notice to abate such nuisances or show cause why abatement should not occur; and C. Subsequent to the giving of said notice and in the absence of abatement or an adequate showing, Code Enforcement staff has caused to be abated the nuisance conditions on the herein described properties; and D. Code Enforcement staff has filed a report and assessment list for nuisance abatement as provided by law and a hearing has been duly set and noticed, for objections to said report and assessment list and for confirmation; and E. The Council has duly considered the report and assessment list and any objections thereto. NOW, THEREFORE, the Council of the City of Palo Alto does RESOLVE as follows: SECTION 1. The report and assessment list, together with any amendments ordered by the Council, is in all respects complete and correct and is hereby confirmed. The amounts of the cost for abating the nuisance are confirmed and those remaining unpaid ($5,376 for 18 Roosevelt Circle and $11,456.59 for 220 Matadero Avenue) shall constitute special assessments against the respective parcels of land and are a lien on the property for the amount of the respective assessment. SECTION 2. All written or oral protests or objections to said report and assessment list are overruled or denied. SECTION 3. The unpaid assessments noted above shall be entered upon the 2016- 2017 tax roll against the parcels of land and shall be collected at the same time and in the same manner as general City taxes, be subject to the same interest and penalties, and be subject to the same procedure and sale in case of delinquency. All laws and ordinances applicable to the levy, collection, and enforcement of City taxes are hereby made applicable to this special assessment. NOT YET APPROVED {date] sh ________ 2 SECTION 4. In the event the property has been transferred to a bona fide purchaser for value prior to the date on which the first installment of taxes imposed by this resolution would become delinquent, the cost of abatement shall be transferred to the unsecured roll for collection. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: __________________________ _____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: __________________________ _____________________________ Senior Deputy City Attorney City Manager _____________________________ Director of Administrative Services NOT YET APPROVED Exhibit 1 Nuisance Abatement Report and Assessment List – September 2016 Site Address APN Owner Name and Address Tax Roll Amount 1 220 Matadero Avenue 132-34-025 Douglass, Wayne J. PO Box 60337 Palo Alto, CA 94306-0337 $11,456.59 2 18 Roosevelt Circle 132-29-069 Bernstein, Jeanysse (Trustee) 18 Roosevelt Circle Palo Alto, CA 94306 $5,376.00 Invoice Date 12/15/2015 Invoice # 134973 Bill To City of Palo Alto Attn: Accounts Payable 285 Hamilton Ave Palo Alto, CA 94301 P.O. No.Terms Net 30 Thank you for your business.Total 655 Du Bois Street Ste F San Rafael, CA 94901 Phone: (415) 453-1182 Fax: (415) 453-5844 To book a job in your area please call (408) 988-5865 or (800) 468-5865 Description Amount Removal of 8 trucks full of bikes, bike parts, trash and misc junk from 18 Roosevelt Cir, Palo Alto CA 5,376.00 $5,376.00 City of Palo Alto (ID # 7276) City Council Staff Report Report Type: Informational Report Meeting Date: 9/26/2016 City of Palo Alto Page 1 Summary Title: Energy Risk Management Report Title: City of Palo Alto's Energy Risk Management Report for the Second and Third Quarters of Fiscal Year 2016 From: City Manager Lead Department: Administrative Services Recommendation This is an informational report and no City Council action is required. Executive Summary Staff continues to purchase electricity and gas in compliance with the City’s Energy Risk Management Policies, Guidelines, and Procedures. This report is based on market prices and load and supply data as of June 30, 2016, the end of the third and fourth quarters of Fiscal Year (FY) 2016. The projected cost of the City’s fixed-price electricity purchases is $0.79 million higher than the market value of that electricity as of June 30, 2016 for the 36-month period beginning July 1, 2016. In the third and fourth quarters of FY 2016 (January 1, 2016 through June 30, 2016) the City’s credit exposure to fixed price contracts is minimal. The projected Electric Supply Operations Reserve is above the FY 2016 minimum guideline reserve level and the projected gas reserve is within the FY 2016 guideline reserve level range. There were no exceptions to the Energy Risk Management Policies, Guidelines, or Procedures to report during the third and fourth quarters of FY 2016. Background The purpose of this report is to inform the Council about the status of the City’s energy portfolio and transactions executed with energy suppliers as of the end of the third and fourth quarters of FY 2016. The City’s Energy Risk Management Policy requires that staff report on a quarterly basis to Council on: 1) the City’s energy portfolio; 2) the City’s credit and market risk profile; 3) portfolio performance; and 4) other key market and risk information. Due to City of Palo Alto Page 2 continued staffing transitions, this report (again) covers activity for two quarters, in the future; the quarterly reports will be for a single quarter. The City’s Energy Risk Management Policy describes the management organization, authority, and processes to monitor, measure, and control market risks. “Market risks” include price and counterparty credit risk. These are risks that the City is exposed to on a regular basis in procuring electric supplies and to a lesser extent for gas supplies which are purchased now at market rates via a monthly index price. The energy risk management section is located in the Treasury Division of the Administrative Services Department. Its role is to monitor and mitigate these risks. This third and fourth quarters FY 2016 energy risk management report contains information on the following: Electric Supplies Hydroelectricity Fixed-Price Forward Electricity Purchases Gas Supplies Credit Risk Electric Forward Mark-to-Market Values Electric and Gas Supply Operations Reserves Adequacy Exceptions to Energy Risk Management Policies, Guidelines, or Procedures Discussion Electric Supplies In order to serve the City’s electric supply demands, the City obtains electricity from: hydroelectric resources (from Western and Calaveras Hydroelectric Projects); long-term renewable energy contracts (from landfill gas converted to electricity, wind, and solar projects); wholesale purchases which are carried out via fixed-priced forward market purchase contracts; and the electric spot market. Figure 1 below illustrates the projected sources and expected purchases of electricity supplies by month for the 36 months from July 2016 to June 2019, in megawatt-hours (MWh). City of Palo Alto Page 3 Hydroelectricity The projected cost of hydroelectricity received from Western over the 12-month period ending June 2016 is higher than its market value of electricity by $5.4 million. Hydroelectric power from Calaveras is expected to cost $9.4 million more than the market value of electricity for the same period. Note that Calaveras provides benefits not reflected in the mark-to-market (MTM) calculation, including, for example, ancillary services (e.g., the ability to regulate energy output when the electric grid needs change). Fixed-Price Forward Electricity Purchases The City as of June 30, 2016 has purchased fixed-priced supplies of electricity totaling 69,880 MWh for delivery between July 1, 2016 and June 30, 2017. The average price for all of the fixed- price purchases is $34.26 per MWh. The City contracted for these purchases with two of its approved counterparties: NextEra and Shell Energy North America (SENA). The 12-month MTM value of the City’s forward transactions for wholesale power was negative $0.1 million at the end of the quarter, respectively. In other words, the purchase cost (contract price) for these transactions was higher than the market value as of June 30, 2016. The figures below represent the electric forward volumes (Figure 2) and MTM positions (Figure 3) for each electric supplier by month of delivery for all forward fixed-price electricity contracts over the 12-month period ending June 30, 2016. City of Palo Alto Page 4 City of Palo Alto Page 5 Gas Supplies In order to serve the City’s natural gas needs, the City purchases gas on the monthly and daily spot markets. The City purchases all its forecasted gas needs for the month ahead at a price based on the published monthly spot market index price for that month. Within the month, the City’s gas operator buys and sells gas to match the City’s daily needs if the actual daily usage is different from the forecasted daily usage. Those daily transactions are made at an average price based on the published daily spot market index. Credit Risk Staff monitors and reports on counterparty credit risk based on the major credit rating agencies (S&P and Moody’s) scores, Ameresco has a 2.1 current Expected Default Frequency (EDF) which is above the recommended EDF level. Ameresco provides renewable (electricity) energy by developing and operating landfill gas-fired power plants. Staff is continuing to monitor Ameresco’s EDF and will continue to report back to City Council in future quarterly reports on the status of Ameresco’s EDF. Table 1 below shows the EDF values for the City’s renewable energy counterparties. Table 2 below shows the EDF values and credit exposure for the City’s electric suppliers. There is virtually no credit exposure to the City’s gas suppliers since the supplies are purchased on a short-term basis. City of Palo Alto Page 6 Table 1 - Renewable Counterparties Credit Ratings and Expected Default Frequency (EDF) as of 06/30/16 Renewable Counterparty S&P Credit Rating Current Expected Default Frequency S&P (EDF) Implied Rating Ameresco n/a 2.38%B Iberdrola BBB+0.01%AAA Table 2 - Credit Exposure and Expected Default Frequency (EDF) of Electric Suppliers as of 06/30/16 Electric Counterparty Cost of Transaction Market Value of Transaction Current Expected Default Frequency S&P (EDF) Implied Rating NextEra $1,916,308 $1,851,263 A-0.02%AA SENA $477,753 $427,096 0.24%BB Totals $2,394,061 $2,278,358 ($115,702)$0 Cost vs. Market to Market (MTM) Value S&P Credit Rating Expected Loss (MTM x Expected Default Frequency) ($50,657)A $0 $0($65,045) Electric Forward Mark-to-Market Values It is important to note that, for renewable energy companies, Council waived the investment grade credit rating requirement of Section 2.30.340(d) of the Palo Alto Municipal Code, which applies to energy companies that do business with the City. In addition, the City does not pay for renewable energy until it is received thereby reducing risk. An EDF of 0.08% or below indicates supplier’s current expected default frequency falls within the investment grade range. An EDF above 0.08% indicates the supplier may have financial issues that require monitoring. Electric and Gas Supply Operations Reserves Adequacy As shown in Table 3 below, the Electric Supply Operations reserve’s unaudited balance as of June 30, 2016 is $9.4 million, which is $3.0 million above the minimum reserve guideline level. This reserve balance, however, is above the immediate 12-month credit, hydro, and other risks that have been identified, and are estimated at $3.7 million. The unaudited Gas Operations reserve balance as of June 30, 2016 is $10.1 million, which is $1.7 million below the maximum reserve guideline level. City of Palo Alto Page 7 Table 3 - Electric Supply Operations and Gas Operations Reserve Levels for FY 2016 (Preliminary unaudited figures from City’s Financial System) Fund Reserve for Operations Balance as of 07/01/2015 ($ Millions) Changes to the Reserves for Operations ($ Millions) Unaudited Projected Reserve for Operations Balance as of 03/31/16 for FY 2016* ($ Millions) Minimum Guideline Reserve Level ($ Millions) Maximum Guideline Reserve Level ($ Millions) Electric $16.0 ($6.6)$9.4 $6.4 $12.8 Gas $10.8 ($0.7)$10.1 $5.9 $11.8 FY 2016 * The accounting activity to date reflects what has been booked into the City’s financial system. These figures are preliminary until outside auditors have completed their review and the Comprehensive Annual Financial Report is produced. There could be significant changes to the supply operation reserve balances based on year-end adjustments that have not been booked yet. Exceptions to Energy Risk Management Policies, Guidelines, or Procedures There were no exceptions to the Energy Risk Management Policies, Guidelines, or Procedures to report during the third and fourth quarters of FY 2016. CITY OF PALO ALTO OFFICE OF THE CITY CLERK September 26, 2016 The Honorable City Council Palo Alto, California Conflict of Interest Code Biennial Notice ATTACHMENTS: Attachment A: 2016 Local Agency Biennial Notice - Palo Alto (PDF) Attachment B: Notice 2016 (DOC) Department Head: Beth Minor, City Clerk Page 2 www.fppc.ca.gov FPPC Advice: advice@fppc.ca.gov (866.275.3772)Page 1 of 1 2016 Local Agency Biennial Notice Name of Agency: Mailing Address: Contact Person: Phone No. Email: Alternate Email: Accurate disclosure is essential to monitor whether officials have conflicts of interest and to help ensure public trust in government. The biennial review examines current programs to includes disclosure by those agency officials who make or participate in making governmental decisions. This agency has reviewed its conflict of interest code and has determined that (check one BOX): An amendment is required. The following amendments are necessary: (Check all that apply.) Include new positions Revise disclosure categories Revise the titles of existing positions Delete titles of positions that have been abolished and/or positions that no longer make or participate in making governmental decisions Other (describe) The code is currently under review by the code reviewing body. No amendment is required. (If your code is over five years old, amendments may be necessary.) Verification (to be completed if no amendment is required) ng of governmental decisions. The disclosure assigned to those positions accurately requires that all investments, business positions, interests in real property, and sources of income that may foreseeably be affected materially by the decisions made by those holding designated positions are reported. The code includes all other provisions required by Government Code Section 87302. __________________________________________ _________________________ Signature of Chief Executive Officer Date All agencies must complete and return this notice regardless of how recently your code was approved or amended. Please return this notice no later than October 3, 2016, or by the date specified by your agency, if earlier, to: (PLACE RETURN ADDRESS OF CODE REVIEWING BODY HERE) PLEASE DO NOT RETURN THIS FORM TO THE FPPC. DocuSign Envelope ID: 11D83878-8CFD-471A-A7C1-E73DC74625B2 City of Palo Alto City Clerk's Office, 250 Hamilton Avenue, Palo Alto, CA 94301 Beth Minor 650-329-2379 beth.minor@cityofpaloalto.org city.clerk@cityofpaloalto.org Revise department name(s) Certificate Of Completion Envelope Id: 11D838788CFD471AA7C1E73DC74625B2 Status: Completed Subject: Please DocuSign this document: 2016 Local Agency Biennial Notice.pdf Source Envelope: Document Pages: 1 Signatures: 1 Envelope Originator: Certificate Pages: 1 Initials: 0 David Carnahan AutoNav: Enabled EnvelopeId Stamping: Enabled Time Zone: (UTC-08:00) Pacific Time (US & Canada) 250 Hamilton Ave Palo Alto , CA 94301 david.carnahan@cityofpaloalto.org IP Address: 199.33.32.254 Record Tracking Status: Original 9/9/2016 11:09:07 AM Holder: David Carnahan david.carnahan@cityofpaloalto.org Location: DocuSign Signer Events Signature Timestamp Beth Minor Beth.minor@cityofpaloalto.org City Clerk City of Palo Alto Security Level: Email, Account Authentication (None) Using IP Address: 199.33.32.254 Sent: 9/9/2016 11:11:15 AM Resent: 9/12/2016 2:10:55 PM Viewed: 9/12/2016 2:32:39 PM Signed: 9/12/2016 2:35:08 PM Electronic Record and Signature Disclosure: Not Offered via DocuSign ID: In Person Signer Events Signature Timestamp Editor Delivery Events Status Timestamp Agent Delivery Events Status Timestamp Intermediary Delivery Events Status Timestamp Certified Delivery Events Status Timestamp Carbon Copy Events Status Timestamp Notary Events Timestamp Envelope Summary Events Status Timestamps Envelope Sent Hashed/Encrypted 9/12/2016 2:10:55 PM Certified Delivered Security Checked 9/12/2016 2:32:40 PM Signing Complete Security Checked 9/12/2016 2:35:08 PM Completed Security Checked 9/12/2016 2:35:08 PM NOTICE OF INTENTION TO AMEND THE CITY OF PALO ALTO CONFLICT OF INTEREST CODE NOTICE IS HEREBY GIVEN that the Council of City of Palo Alto intends to adopt or amend a conflict-of-interest code pursuant to Government Code Section 87302, the code will designate employees who must disclose certain investments, income, interests in real property, and business positions, and who must disqualify themselves from making or participating in the making of governmental decisions affecting those interests. A written comment period has been established commencing on September 26, 2016 and terminating on December 5, 2016. Any interested person may present written comments concerning the proposed code no later than December 5, 2016 to the City of Palo Alto, 250 Hamilton Avenue, Palo Alto, CA 94301. No public hearing on this matter will be held unless any interested person or his or her representative requests a public hearing no later than 15 days prior to the close of the written comment period. The City of Palo Alto has prepared a written explanation of the reasons for the designations and the disclosure responsibilities and has available all of the information upon which its proposal is based. A conflict of interest code designates those employees, members, officers, or consultants who make or participate in the making of decisions which may affect financial interests and who must disclose those interests on financial disclosure statements. A copy of the proposed conflict of interest code will be available in the City Clerk’s office on September 26, 2016, for inspection during normal business hours. Copies of the proposed code and all of the information upon which it is based may be obtained from the City of Palo Alto, 250 Hamilton Avenue, Palo Alto, CA 94301. Any inquiries concerning the proposed code should be directed to the City Clerk’s Office at 250 Hamilton Avenue, Palo Alto, CA 94301, City.Clerk@cityofpaloalto.com, 650-329-2571. BETH D. MINOR City Clerk