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HomeMy WebLinkAbout2016-10-17 City Council Agenda PacketCity 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. October 17, 2016 Regular Meeting Council Chambers 6:00 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 6:00-6:10 PM 1.Life Saving Recognition Ceremony to Recognize Police and Fire First Responders for Saving a Young Man Agenda Changes, Additions and Deletions City Manager Comments 6:10-6:20 PM Oral Communications 6:20-6:35 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 6:35-6:40 PM 2.Approval of Action Minutes for the September 26 and October 4, 2016 Council Meetings MEMO 2 October 17, 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 6:40-6:45 PM Items will be voted on in one motion unless removed from the calendar by three Council Members. 3. Utilities Advisory Commission Recommendation That the City Council Adopt a Resolution Amending Utility Gas Rate Schedules G-1, G-1-G, G-2, G-2-G, G-3, G-3-G, G-10 and G-10-G, to Include a Separate Transportation Charge as a Discrete Pass-Through Component and to Reduce the Distribution Charge by the Initial Transportation Charge Amount of $1.1088 per Therm Effective November 1, 2016 4. Approval of Contract No. C17164199 With Kennedy/Jenks Consultants in the Total Not-to-Exceed Amount of $466,318 to Provide Design Services for the new Primary Outfall Line at the Regional Water Quality Control Plant - Wastewater Treatment Fund Capital Improvement Program Project WQ-80021 5. Annual Review of Williamson Act Contract Renewals, Approval of Non- Renewal for APN 351-05-050 and Approval of Exemption Under Section 15317 of the California Environmental Quality Act 6. Adoption of Three Resolutions to Execute State Revolving Fund (SRF) Financial Assistance Applications, Designate the Amount of Project Expenditures to be Reimbursed by SRF Proceeds, and Pledge Revenue for Repayment of SRF Loans; Amend the 2009 SRF Assistance Agreement; and Authorize Contract Amendments With RWQCP Partners Mountain View and Los Altos, East Palo Alto Sanitary District, and the Board of Trustees of the Leland Stanford Junior University for the Funding of the Sludge Dewatering and Load Out Facility, the Primary Sedimentation Tank Rehabilitation, the Fixed Film Reactor Rehabilitation, and the Laboratory Environmental Services Building for the Wastewater Treatment Enterprise Fund Facilities at the Palo Alto Regional Water Quality Control Plant (RWQCP) 7. Policy and Services Committee Recommendation to Accept the Disability Rates and Workers' Compensation Audit 8. Policy and Services Committee Recommendation to Accept the City Auditor's Office Fiscal Year 2017 Proposed Work Plan 9. Policy and Services Committee Recommendation to Accept the City Auditor's Office Quarterly Report as of June 30, 2016 10. SECOND READING: 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 3 October 17, 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. 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 (FIRST READING: Sept. 26, 2016 PASSED: 9-0) Action Items Include: Reports of Committees/Commissions, Ordinances and Resolutions, Public Hearings, Reports of Officials, Unfinished Business and Council Matters. 6:45-7:30 PM 11. Approval of 2000 Geng Road as the Temporary Location for Fire Station No. 3 During Construction of the Replacement Fire Station No. 3 7:30-9:00 PM 12. Discussion and Direction Regarding Parameters of an Ordinance Strengthening Retail Protections in Downtown and the South of Forest Area (SOFA II) Inter-Governmental Legislative Affairs 9:00-9:30 PM 13. Request for City Council Endorsement of Santa Clara County Measure A, an Affordable Housing Bond Measure 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 October 17, 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 Standing Committee Meetings Finance Committee Meeting October 18, 2016 Schedule of Meetings Schedule of Meetings Tentative Agenda Tentative Agenda Informational Report Agreement With East Palo Alto to Temporarily Relocate Baylands Interpretive Center Programs to Cooley Landing During Renovations of the Baylands Interpretive Center Public Letters to Council October 10, 2016 October 17, 2016 Sp. City / School Commitee Meeting October 20, 2016 City of Palo Alto (ID # 7357) City Council Staff Report Report Type: Special Orders of the Day Meeting Date: 10/17/2016 City of Palo Alto Page 1 Summary Title: PD/FD Recognition Title: Life Saving Recognition Ceremony to Recognize Police and Fire First Responders for Saving a Young Man From: City Manager Lead Department: City Clerk Attachments:  Attachment A: Certificates of Recognition (PDF) CITY OF PALO ALTO OFFICE OF THE CITY CLERK October 17, 2016 The Honorable City Council Attention: Finance Committee Palo Alto, California Approval of Action Minutes for the September 26 and October 4, 2016 Council Meetings Staff is requesting Council review and approve the attached Action Minutes. ATTACHMENTS:  Attachment A: 09-26-16 DRAFT Action Minutes (DOC)  Attachment B: 10-04-16 DRAFT Action Minutes (DOC) Department Head: Beth Minor, City Clerk Page 2 CITY OF PALO ALTO CITY COUNCIL DRAFT ACTION MINUTES Page 1 of 8 Special Meeting September 26, 2016 The City Council of the City of Palo Alto met on this date in the Council Chambers at 5:34 P.M. Present: Berman, Burt, DuBois, Filseth, Holman, Kniss, Scharff, Schmid, Wolbach Absent: Special Orders of the Day 1. Proclamation Honoring Cybersecurity Awareness Month. 2. Proclamation Honoring The Christmas Bureau's 60th Anniversary. Agenda Changes, Additions and Deletions MOTION: Council Member Kniss moved, seconded by Council Member DuBois to hear Agenda Item Number 9- Review and Direction Regarding Interpretation of Planned Community (PC) Ordinances… as the last Action Item tonight. MOTION PASSED: 5-4 Berman, Burt, Filseth, Wolbach, no Minutes Approval 3. Approval of Action Minutes for the September 12, 2016 Council Meeting. MOTION: Council Member Schmid moved, seconded by Council Member Wolbach to approve the Action Minutes for the September 12, 2016 Council Meeting. MOTION PASSED: 9-0 DRAFT ACTION MINUTES Page 2 of 8 City Council Meeting Draft Action Minutes: 9/26/16 Consent Calendar Council Member Filseth registered a no vote on Agenda Item Number 5- Approval and Authorization for the City Manager or his Designee to Execute two Energy Efficiency Program Contract Amendments… MOTION: Council Member Kniss moved, seconded by Council Member Berman to approve Agenda Item Numbers 4-7. 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 for 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. MOTION FOR AGENDA ITEM NUMBER 5 PASSED: 8-1 Filseth, no MOTION FOR AGENDA ITEM NUMBERS 4, 6-7 PASSED: 9-0 DRAFT ACTION MINUTES Page 3 of 8 City Council Meeting Draft Action Minutes: 9/26/16 Action Items 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. MOTION: Council Member Holman moved, seconded by Council Member Schmid to: A. 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; and B. Adopt a finding that these actions are exempt from the California Environmental Quality Act (CEQA) under Section 15301 of the CEQA Guidelines. SECOND WITHDRAWN BY THE SECONDER MOTION FAILED DUE TO THE LACK OF A SECOND MOTION: Council Member Kniss moved, seconded by Vice Mayor Scharff to: A. 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; and B. 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 the Cubberley Community Center to operate a temporary senior center during the renovations at 450 Bryant Street; and C. Adopt a finding that these actions are exempt from the California Environmental Quality Act (CEQA) under Section 15301 of the CEQA Guidelines. DRAFT ACTION MINUTES Page 4 of 8 City Council Meeting Draft Action Minutes: 9/26/16 MOTION PASSED: 9-0 Council took a break from 7:21 P.M. to 7:32 P.M. MOTION: Vice Mayor Scharff moved, seconded by Council Member DuBois to hear Agenda Item Number 9- Review and Direction Regarding Interpretation of Planned Community (PC) Ordinances… at this time. MOTION PASSED: 9-0 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 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). Vice Mayor Scharff advised he will not participate in this Agenda Item because he owns real property near the subject properties. Council Member Kniss advised she will not participate in this Agenda Item because she owns real property near the subject properties. Council Member Kniss and Vice Mayor Scharff left the meeting at 7:37 P.M. MOTION: Council Member Berman moved, seconded by Council Member Wolbach to make the following determinations: A. 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 Avenue, such that no amendments are needed to these PC ordinances; and B. 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; and DRAFT ACTION MINUTES Page 5 of 8 City Council Meeting Draft Action Minutes: 9/26/16 C. The proposed support structures for the photovoltaic panels at all four sites are considered “minor” projects subject to Staff Level Architectural Review in accordance with Palo Alto Municipal Code (PAMC) Section 18.76.020; and D. The recommended actions are exempt from review under the California Environmental Quality Act (CEQA) Sections 21080.35, 15303, and 15301 (existing facilities). MOTION PASSED: 7-0 Kniss, Scharff not participating 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 Consumer Price Increase (CPI) Increase After 2019 Indexed to the Bay Area CPI With a 5 Percent Cap and no Exemption. Vice Mayor Scharff and Council Member Kniss returned to the meeting at 8:56 P.M. MOTION: Council Member DuBois moved, seconded by Council Member Kniss to adopt an Ordinance amending the City’s Minimum Wage Ordinance to align with the Cities Association recommendation to increase the minimum wage to $15.00 per hour in three steps: $12.00 on January 1, 2017; $13.50 on January 1, 2018, $15.00 on January 1, 2019, and a Consumer Price Index (CPI) increase after 2019 indexed to the Bay Area CPI with a 5 percent cap and no exemptions and commit to updating the City’s Ordinance to exclude tipped employees if Labor Code Section 351 is updated to allow this exemption and the City will support advocating for this exemption at the state level. SUBSTITUTE MOTION: Council Member Wolbach moved, seconded by Council Member Berman to adopt an Ordinance amending the City’s Minimum Wage Ordinance to increase the minimum wage to $15.00 per hour in three steps: $12.00 on April 1, 2017; $13.50 on January 1, 2018, $15.00 on July 1, 2018, and a Consumer Price Index (CPI) increase after 2019 indexed to the Bay Area CPI with a 5 percent cap and no exemptions. INCORPORATED INTO THE SUBSTITUTE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Substitute DRAFT ACTION MINUTES Page 6 of 8 City Council Meeting Draft Action Minutes: 9/26/16 Motion, “and direct the Policy and Services Committee to evaluate the concept of a tipped worker exemption and the impacts of advocating for this concept in Sacramento.” SUBSTITUTE MOTION RESTATED: Council Member Wolbach moved, seconded by Council Member Berman to adopt an Ordinance amending the City’s Minimum Wage Ordinance to increase the minimum wage to $15.00 per hour in three steps: $12.00 on April 1, 2017; $13.50 on January 1, 2018, $15.00 on July 1, 2018, and a Consumer Price Index (CPI) increase after 2019 indexed to the Bay Area CPI with a 5 percent cap and no exemptions and direct the Policy and Services Committee to evaluate the concept of a tipped worker exemption and the impacts of advocating for this concept in Sacramento. SUBSTITUTE MOTION AS AMENDED FAILED: 2-7 Berman, Wolbach, yes MOTION RESTATED: Council Member DuBois moved, seconded by Council Member Kniss to adopt an Ordinance amending the City’s Minimum Wage Ordinance to align with the Cities Association recommendation to increase the minimum wage to $15.00 per hour in three steps: $12.00 on January 1, 2017; $13.50 on January 1, 2018, $15.00 on January 1, 2019, and a Consumer Price Index (CPI) increase after 2019 indexed to the Bay Area CPI with a 5 percent cap and no exemptions and commit to updating the City’s Ordinance to exclude tipped employees if Labor Code Section 351 is updated to allow this exemption and the City will support advocating for this exemption at the state level. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to replace in the Motion, “commit to” with “evaluate.” INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to replace in the Motion, “the City will support advocating for this exemption at the state level” with “add this to the list of topics for the Policy and Services Committee to consider when reviewing the Legislative Policy Program.” INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to replace in the Motion, “exclude” with “best address the issue of.” DRAFT ACTION MINUTES Page 7 of 8 City Council Meeting Draft Action Minutes: 9/26/16 MOTION RESTATED: Council Member DuBois moved, seconded by Council Member Kniss to adopt an Ordinance amending the City’s Minimum Wage ordinance to align with the Cities Association recommendation to increase the minimum wage to $15.00 per hour in three steps: $12.00 on January 1, 2017; $13.50 on January 1, 2018, $15.00 on January 1, 2019, and a Consumer Price Index (CPI) increase after 2019 indexed to the Bay Area CPI with a 5 percent cap and no exemptions and evaluate updating the City’s Ordinance to best address the issue of tipped employees if Labor Code Section 351 is updated to allow this exemption and add this to the list of topics for the Policy and Services Committee to consider when reviewing the Legislative Policy Program. MOTION AS AMENDED PASSED: 9-0 11. PUBLIC HEARING: Resolution 9626 Entitled, “Resolution of the Council of the City of Palo Alto 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.” Public Hearing opened and closed without public comment at 10:50 P.M. MOTION: Council Member Holman moved, seconded by Council Member Filseth to adopt a Resolution confirming the Code Enforcement Abatement Report and ordering abatement costs to be a special assessment on the properties specified in the Report. MOTION PASSED: 9-0 Inter-Governmental Legislative Affairs None. Council Member Questions, Comments and Announcements Council Member Kniss reported her attendance at the League of California Cities, Peninsula Division Quarterly Meeting last Thursday. At this meeting, a presentation was given that included information on two projects that provide housing for teachers; Cañada Vista in San Mateo County and Casa de Maestro in Santa Clara. Both projects were funded by and built by local school districts without the assistance of tax credits. DRAFT ACTION MINUTES Page 8 of 8 City Council Meeting Draft Action Minutes: 9/26/16 Council Member DuBois reported his attendance at the NTD Health Expo at the Mitchell Park Community Center. He suggested that this event be coordinated with the annual health fair. Mayor Burt reported his attendance at the recent San Francisquito Creek Joint Powers Authority (JPA) meeting. The JPA Received an update on efforts with Pacific Gas and Electric (PG&E) to align PG&E’s gas line work along the Palo Alto Golf Course with JPA projects. City of Palo Alto Staff and Santa Clara Valley Water District Staff are engaged with this effort. He reported that the Peninsula Corridor Joint Powers Board’s (Caltrain) Local Policy Maker Group is seeking a Metropolitan Transit Commission (MTC) grant to fund a system-wide grade separation study. Adjournment: The meeting was adjourned at 11:00 P.M. CITY OF PALO ALTO CITY COUNCIL DRAFT ACTION MINUTES Page 1 of 8 Special Meeting October 4, 2016 The City Council of the City of Palo Alto met on this date in the Council Chambers at 5:05 P.M. Present: Berman, Burt, DuBois, Filseth, Holman arrived at 5:07 P.M., Kniss arrived at 7:01 P.M., Scharff, Schmid, Wolbach Absent: Library Advisory Commission Present: Chin, Hagan, Loy, McDougall, Moss arrived at 6:10 P.M. Absent: Closed Session 1. CONFERENCE WITH CITY ATTORNEY Existing Litigation - 1 Matter Authority: Government Code Section 54956.9(d)(1) Eileen Staats v. City of Palo Alto Santa Clara County Superior Court, Case No. 1:15-cv-284956. MOTION: Vice Mayor Scharff moved, seconded by Council Member Filseth to go into Closed Session. MOTION PASSED: 7-0 Holman, Kniss absent Council went into Closed Session at 5:06 P.M. Council returned from Closed Session at 6:00 P.M. Mayor Burt announced no reportable action. DRAFT ACTION MINUTES Page 2 of 8 City Council Meeting Draft Action Minutes: 10/4/16 Study Session 2. Potential List of Topics for Joint Meeting With the City Council and the Library Advisory Commission (LAC). Special Orders of the Day 3. Appointment of two Candidates to the Planning and Transportation Commission for Terms Ending December 15, 2020 and one Candidate to the Planning and Transportation Commission for an Unexpired Term Ending December 15, 2018. First Round of voting for two positions on the Planning and Transportation Commission with terms ending December 15, 2020: Voting For Rebecca Eisenberg: Voting For Claude Ezran: Voting For Przemek Gardias: Burt, Kniss Voting For Brian Hamachek: Voting For David Hirsch: Voting For Frank Ingle: Voting For Natasha Kachenko: Voting For Gabriel Kralik: Voting For Michelle Kraus: Berman, Kniss, Scharff, Wolbach Voting For Ed Lauing: Burt, DuBois, Filseth, Holman, Schmid Voting For Christian Pease: Voting For Jessica Resmini: Voting For Reshma Singh: Berman, Scharff, Wolbach DRAFT ACTION MINUTES Page 3 of 8 City Council Meeting Draft Action Minutes: 10/4/16 Voting For Srinivasan Subramanian: Voting For Doria Summa: DuBois, Filseth, Holman, Schmid Beth Minor, City Clerk announced that Ed Lauing with 5 votes was appointed to the Planning and Transportation Commission. Second Round of voting for one position on the Planning and Transportation Commission with a term ending December 15, 2020: Voting For Przemek Gardias: Burt, Scharff Voting For Reshma Singh: Berman, Wolbach Voting For Doria Summa: DuBois, Filseth, Holman, Kniss, Schmid Beth Minor, City Clerk announced that Doria Summa with 5 votes was appointed to the Planning and Transportation Commission. First Round of voting for one position on the Planning and Transportation Commission with a term ending December 15, 2018: Voting For Przemek Gardias: Berman, Burt, DuBois, Filseth, Holman, Kniss, Scharff, Schmid, Wolbach Beth Minor, City Clerk announced that Przemek Gardias with 9 votes was appointed to the Planning and Transportation Commission. Agenda Changes, Additions and Deletions None. Minutes Approval 4. Approval of Action Minutes for the September 19, 2016 Council Meeting. MOTION: Council Member DuBois moved, seconded by Council Member Schmid to approve the Action Minutes for the September 19, 2016 Council Meeting. DRAFT ACTION MINUTES Page 4 of 8 City Council Meeting Draft Action Minutes: 10/4/16 MOTION PASSED: 9-0 Consent Calendar MOTION: Council Member Holman moved, seconded by Mayor Burt, third by Council Member Filseth to pull Agenda Item Number 9- Adoption of a Resolution Amending and Restating the Administrative Penalty Schedule and Civil Penalty Schedules… to be heard as Agenda Item Number 9b tonight and be continued to November 7, 2016 for full discussion. MOTION: Council Member Kniss moved, seconded by Council Member Berman to approve Agenda Item Numbers 5-8, 9a. 5. Resolution 9627 Entitled, “Resolution of the Council of the City of Palo Alto Authorizing the City Manager or his Designee to Approve a Base Contract for Sale and Purchase of Natural Gas With Sequent Energy Management, LP, and to Purchase a Portion of the City’s Natural Gas Requirements Under Specified Terms and Conditions During Calendar Years 2016 Through 2022.” 6. Resolution 9628 Entitled, “Resolution of the Council of the City of Palo Alto Approving the Standard Form Natural Gas Purchase and Sales Agreement With Special Terms and Conditions (“Standard Form Master Agreement”).” 7. Approval of a two Year Professional Services Contract Number C16163563 With Mott MacDonald Group for Rail Program Management Services to Allow for Multiple Specific Task Orders With a Total Not-to- Exceed Amount of $1,614,763. 8. Approve and Authorize the City Manager to Execute Contract Number C17165053 With Salas O'Brien, in an Amount Not-to-Exceed $217,800 for Design Services for the Municipal Service Center Mechanical, Electrical, and Lighting Improvements, and Zero Waste Office Renovation Capital Improvements Program Project PF-16006. 9. Adoption of a Resolution Amending and Restating the Administrative Penalty Schedule and Civil Penalty Schedules for Certain Violations of the Palo Alto Municipal Code and the California Vehicle Code Established by Resolution Number 9554. DRAFT ACTION MINUTES Page 5 of 8 City Council Meeting Draft Action Minutes: 10/4/16 9a. Appointment of Utilities General Manager (Director of Utilities)/Assistant City Manager, Approval of Amendment to Employment Agreement and Approval of Recommended Staffing Reorganization in the City Manager’s Office and the Utilities Department. MOTION FOR AGENDA ITEM NUMBERS 5-8, 9a PASSED: 9-0 Action Items 9b. (Former Agenda Item Number 9) Adoption of a Resolution Amending and Restating the Administrative Penalty Schedule and Civil Penalty Schedules for Certain Violations of the Palo Alto Municipal Code and the California Vehicle Code Established by Resolution Number 9554. NO ACTION TAKEN 10. PUBLIC HEARING: Adoption of Nine Ordinances to Adopt 2016 California Building Codes, Local Amendments, and Related Updates: (1) Repealing Chapter 16.04 of the Palo Alto Municipal Code and Amending Title 16 to Adopt a new Chapter 16.04, California Building Code, California Historical Building Code, and California Existing Building Code, 2016 Editions, and Local Amendments and Related Findings; (2) Repealing Chapter 16.05 of the Palo Alto Municipal Code and Amending Title 16 to Adopt a new Chapter 16.05, California Mechanical Code, 2016 Edition, and Local Amendments and Related Findings; (3) Repealing Chapter 16.06 of the Palo Alto Municipal Code and Amending Title 16 to Adopt a new Chapter 16.06, California Residential Code, 2016 Edition, and Local Amendments and Related Findings; (4) Repealing Chapter 16.08 of the Palo Alto Municipal Code and Amending Title 16 to Adopt a new Chapter 16.08, California Plumbing Code, 2016 Edition, and Local Amendments and Related Findings; (5) Repealing Chapter 16.14 of the Palo Alto Municipal Code and Amending Title 16 to Adopt a new Chapter 16.14, California Green Building Standards Code, 2016 Edition, and Local Amendments and Related Findings; (6) Repealing Chapter 16.16 of the Palo Alto Municipal Code and Amending Title 16 to Adopt a new Chapter 16.16, California Electrical Code, 2016 Edition, and Local Amendments and Related Findings; (7) Repealing Chapter 15.04 of the Palo Alto Municipal Code and Amending Title 15 to Adopt a new Chapter 15.04, California Fire Code, 2016 Edition, and Local Amendments and Related Findings; and (8) Adopt a new Title 16, Chapter 16.18 Private DRAFT ACTION MINUTES Page 6 of 8 City Council Meeting Draft Action Minutes: 10/4/16 Swimming Pool and Spa Code, 2016 Edition and Local Amendments and Related Findings; (9) Amending Title 16, Chapters 16.36 House Numbering and 16.40 Unsafe Buildings for Local Amendments and Related Findings. Adoption of Categorical Exemptions Under Sections 15305 and 15308 of the CEQA Guidelines. Public Hearing opened and closed without public comment at 8:13 P.M. MOTION: Vice Mayor Scharff moved, seconded by Council Member Wolbach to: A. Adopt nine Ordinances, amending Title 16 of the Palo Alto Municipal Code: i. Seven of the Ordinances adopt by reference and make local amendment to the various parts of the 2016 California Building Standards Code (CBSC), Title 24 of the California Code of Regulations, along with the necessary findings of fact supporting each local amendment; and ii. An Ordinance adopting a new Chapter 16.18 Private Swimming Pool and Spa Code, 2016 Edition and Local Amendments; and iii. An Ordinance making minor amendments to Chapter 16.36 (House Numbering) and Chapter 16.40 (Unsafe Buildings) to conform with state law; and B. Adopt categorical exemptions under sections 15305 and 15308 of the California Environmental Quality Act Guidelines. MOTION PASSED: 9-0 11. PUBLIC HEARING: Faircourt #3 and #4 Single Story Overlay (SSO) Rezoning: Request for a Zone Change of the Faircourt #3 and #4 Tracts #1921 and #1816 From R-1 Single Family Residential (8000) to R-1(8000)(S) Single Family Residential With Single Story Overlay (SSO); Environmental Assessment: Exempt From the California Environmental Quality Act per Section 15305; Planning and Transportation Commission Recommended Denial of the SSO Request. Public Hearing opened at 8:46 P.M. DRAFT ACTION MINUTES Page 7 of 8 City Council Meeting Draft Action Minutes: 10/4/16 Public Hearing closed at 9:04 P.M. MOTION: Vice Mayor Scharff moved, seconded by Council Member Kniss to deny the request for a Single Story Overlay (SSO). SUBSTITUTE MOTION: Council Member Schmid moved, seconded by Council Member DuBois to continue this Agenda Item to a date when Council can consider updates to the Single Story Overlay (SSO) process. INCORPORATED INTO THE SUBSTITUTE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Substitute Motion, “or allow the neighborhood to decide if they would like to exclude the Ross Road properties.” INCORPORATED INTO THE SUBSTITUTE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Substitute Motion, “and/or Louis Road properties.” SUBSTITUTE MOTION RESTATED: Council Member Schmid moved, seconded by Council Member DuBois to continue this Agenda Item to a date when Council can consider updates to the Single Story Overlay (SSO) process or allow the neighborhood to decide if they would like to exclude the Ross Road properties and/or Louis Road properties. SUBSTITUTE MOTION AS AMENDED FAILED: 3-6 DuBois, Holman, Schmid, yes MOTION RESTATED: Vice Mayor Scharff moved, seconded by Council Member Kniss to deny the request for a Single Story Overlay (SSO). MOTION PASSED: 6-3 DuBois, Holman, Schmid, no 12. Review Options and Provide Direction for Citywide Bike Share System Operated by Motivate, LLC and Finding That the Project is Exempt From Review Under Sections 15061(b)(3) and 15303 of the California Environmental Quality Act Guidelines. MOTION: Council Member DuBois moved, seconded by Vice Mayor Scharff to: DRAFT ACTION MINUTES Page 8 of 8 City Council Meeting Draft Action Minutes: 10/4/16 A. Direct Staff to return to the City Council with a contract to implement a 350-bicycle, Social Bicycles (SoBi) smart-bike system, operated by Motivate, LLC as part of the Bay Area Bike Share System (BABS); and B. Find the Project exempt from review under Sections 15061(b) (3) and 15303 of the California Environmental Quality Act Guidelines. MOTION PASSED: 9-0 13. PUBLIC HEARING: Adoption of an Urgency Ordinance Amending the Urgency Interim Ordinance (Ordinance 5325 Extended by Ordinance 5330) Preserving Ground Floor Retail Uses on a Citywide Basis to Allow Educational Uses on the Ground Floor of Parcels Zoned RT-35 Along Alma Street and Finding the Amendment Exempt From Review Under the California Environmental Quality Act (CEQA) Pursuant to State CEQA Guidelines Section 15061(b)(3). Public Hearing opened and closed without public comment at 11:18 P.M. MOTION: Vice Mayor Scharff moved, seconded by Council Member Wolbach to adopt an Ordinance amending interim protections for ground floor retail uses to provide a limited exception permitting conversion to private educational facility, and finding the amendments exempt from review under the California Environmental Quality Act. MOTION FAILED: 5-4 DuBois, Filseth, Holman, Schmid, no Inter-Governmental Legislative Affairs None. Council Member Questions, Comments and Announcements None. Adjournment: The meeting was adjourned at 11:25 P.M. City of Palo Alto (ID # 7260) City Council Staff Report Report Type: Consent Calendar Meeting Date: 10/17/2016 City of Palo Alto Page 1 Summary Title: Amend Gas Rates with Transportation Charge Title: Utilities Advisory Commission Recommendation That the City Council Adopt a Resolution Amending Utility Gas Rate Schedules G-1, G-1-G, G-2, G- 2-G, G-3, G-3-G, G-10 and G-10-G to Include a Separate Transportation Charge as a Discrete Pass-Through Component and to Reduce the Distribution Charge by the Initial Transportation Charge Amount of $1.1088 per Therm Effective November 1, 2016 From: City Manager Lead Department: Utilities Recommendation Staff and the Utilities Advisory Commission (UAC) recommend that the City Council adopt a resolution (Attachment A) to amend Utility Gas Rate Schedules G-1, G-1-G, G-2, G-2-G, G-3, G-3- G, G-10 and G-10-G, as attached (Attachment B), to separately identify, as a pass-through rate component, a Transportation Charge, and reduce the Distribution Charge by the initial Transportation Charge amount of $0.1088 per therm. Executive Summary Natural gas purchased by the City of Palo Alto (CPAU) Gas Utility for its customers is brought to Palo Alto via Pacific Gas and Electric’s (PG&E)’s transportation pipelines. The cost that CPAU pays to use those pipelines is based on the applicable PG&E transportation rate schedule, G- WSL, which was increased effective August 1, 2016. This rate schedule is under the purview of the California Public Utilities Commission (CPUC). Staff receives little notice as to when transportation rate changes will take effect or what the final rate will be. Staff proposes that, both due to the uncertainty in timing and to minimize potential under/over collection of funds with regards to transportation charges, that the City’s Gas Transportation Charge be: 1) listed as a separate item on the gas rate schedules and customer bills as a separate item; and 2) be allowed to change to directly pass through PG&E’s G-WSL rate for Palo Alto. Due to the relatively small difference between staff’s estimate and the final value of the G-WSL City of Palo Alto Page 2 rate, the initial change to the residential and commercial gas rates will be revenue-neutral, decreasing the Distribution Charge the same amount as the initial Transportation Charge. The City’s compressed natural gas (CNG) facility will see a slight rate increase. The Utilities Advisory Commission reviewed the proposal at its August 31, 2016, meeting and voted unanimously to recommend Council approve the proposed resolution. Background CPAU’s natural gas is transported to Palo Alto’s gas distribution system via PG&E’s transportation pipelines. The cost that PG&E charges CPAU for transportation services is stated on PG&E’s Gas Transportation Service to Wholesale/Resale Customers (G-WSL) tariff sheet. This schedule applies to Palo Alto and other cities and agencies who procure natural gas for resale (such as Coalinga, Island Energy, and others). As the CPUC oversees PG&E’s rates, and while staff can and does provide input when changes to the G-WSL rate are proposed, staff does not know when the CPUC will: (1) approve the new rate, (2) set a date for when it will become effective, or (3) determine to what extent the final approved rates will differ from PG&E’s proposed rates. On December 19, 2013, PG&E filed its application for revised Gas Transmission and Storage (GT&S) rates for the period of 2015 through 2017. While a decision was initially anticipated by March 2015, several subsequent events created delays. Briefs were filed by several parties, including Palo Alto, and final oral arguments were heard in October 2015. Safety related costs pertaining to PG&E’s response to the San Bruno pipeline explosion caused additional postponements, and changes to rates due to that investigation were moved to a separate hearing item that are still under evaluation by the CPUC. On June 23, 2016, the CPUC announced the most recent change to G-WSL, effective August 1, 2016. Staff closely followed the proceedings and the proposed rate and the proposed timing of the effective date for the rate changed many times over the last couple of years. The uncertainty of when, and by how much, the rate would change caused budgeting uncertainty Discussion As of August 1, 2016, PG&E’s G-WSL rate increased from $0.043 to $0.107 per therm, a 249% increase. Staff anticipated that the transportation rate would rise significantly based on the GT&S proceedings and increased costs for transportation were included in the fiscal year (FY) 2017 budget. However, due to timing and cost uncertainties which are outside of Palo Alto’s control, staff proposes separating out the transportation cost from the distribution costs and showing it on the rate schedule as a separate Transportation Charge. As with the monthly- varying Commodity Charge, staff recommends making the Transportation Charge a ‘pass- through’ charge, based on the PG&E’s G-WSL rate applicable tor Palo Alto, accounting for delivery losses. Staff expected and budgeted for an average transportation rate of $0.106/therm, and the City of Palo Alto Page 3 August G-WSL average rate is very close to that ($0.107/therm). The G-WSL rate includes a small fixed charge and a volumetric charge. Staff proposes to pass through the volumetric portion of the G-WSL rate adjusted for the City’s distribution system losses. The volumetric portion of the G-WSL rate that went into effect August 1, 2016 is $0.10553/therm. Therefore, the initial Transportation Charge would be $0.1088/therm ($0.10553/therm times 1.031, the City’s distribution system loss factor of 3.1%). The Distribution Charge would be reduced by the initial Transportation Charge ($0.1088/therm), resulting in a revenue-neutral rate change for almost all customers. The City’s CNG facility (G-10 rate schedules) will have a slight rate increase, as described below. Staff proposes to include a minimum ($0) and a maximum ($0.15/therm) range on the Transportation Charge. Any future changes to the G-WSL rate will be passed through to customers as they become effective to CPAU. Changes to the Transportation Charge will be posted on the City’s website. In addition, staff proposes to list the Transportation Charge as one of the Supply Cost components (along with the Commodity and the Cap and Trade Compliance charges) as this cost is related to delivering the commodity to Palo Alto and the Distribution Charges are related to the cost to deliver gas to customers in Palo Alto. CNG facility rates (G-10 and G-10G) Gas rates were increased 8% effective July 1, 2016. This rate increase did not wholly recover costs, but required a drawdown of reserves to cover shortfalls. Separating out the Transportation Charge from the Distribution Charge on a revenue-neutral basis for most customers maintains this shortfall. However, the CNG facility is a special case as it is directly connected to PG&E’s high-pressure line from PG&E and does not utilize CPAU’s distribution system, but is still allocated transportation and administrative related costs. Since the existing rates are under-collecting for these components, including the transportation costs as a separate charge results in a rate increase for the CNG facility of about $2,400 in FY 2017. Committee Review and Recommendation The UAC reviewed staff’s recommendation at its August 31, 2016, meeting and voted unanimously to support staff’s recommendation. The minutes to the UAC meeting are provided as Attachment C. Resource Impact As part of the FY 2017 budget calculations, staff assumed that the average transportation cost would be $0.106/therm, while the final average August G-WSL rate ended up being $0.107/therm. The difference is estimated to be less than $30,000 during FY 2017, and can be absorbed by existing budget. In addition, the proposed rate change will increase costs for the City’s CNG facility by about $2,400 in FY 2017 which wil be absorbed by existing budget. Policy Implications This recommendation does not represent a change to current City policies. The proposed revisions do not have any policy implications. City of Palo Alto Page 4 Environmental Review Adoption of this resolution changing gas rates to meet operating expenses and meet financial reserve needs is not subject to the California Environmental Quality Act (CEQA), pursuant to California Public Resources Code Sec. 21080(b)(8) and Title 14 of the California Code of Regulations Sec. 15273(a). Attachments:  Attachment A: Resolution Amending Gas Rate Schedules G-1, G-1-G, G-2, G-2-G, G-3, G- 3-G, G-10 and G-10-G (PDF)  Attachment B: Gas Rate Schedules G-1, G-1-G, G-2, G-2-G, G-3, G-3-G, G-10 and G-10-G (PDF)  Attachment C: Excerpted Draft UAC Minutes of August 31, 2016 Special Meeting (PDF) NOT YET APPROVED 160921 jb JM/UTL/Staff Reports 1 Resolution No. _________ Resolution of the Council of the City of Palo Alto Amending Rate Schedules G-1 (Residential Gas Service), G-1-G (Residential Green Gas Service), G-2 (Residential Master-Metered and Commercial Gas Service), G-2-G (Residential Master-Metered and Commercial Green Gas Service), G-3 (Large Commercial Gas Service), G-3-G (Large Commercial Green Gas Service), G-10 (Compressed Natural Gas Service Service) and G-10-G (Compressed Natural Green Gas Service) Effective November 1, 2016 R E C I T A L S A. The City’s transportation costs for gas are based on the current Pacific Gas and Electric Company’s (PG&E’s) G-WSL rate for Palo Alto. B. Due to the variability in PG&E’s G-WSL, largely dependent on when the California Public Utilities Commission approves new rates, sets an effective date and makes a determination on the extent to which the final rates will deviate from PG&E’s proposed rates, the City has determined that it is best to identify the Transportation Charge as a separate, pass- through component of the City’s rates so that these transportation costs can be fully and timely recovered. C. The initial Transportation Charge ($0.1088 per them) will be subtracted from the existing Distribution Charges on the G-1, G-1-G, G-2, G-2-G, G-3 and G-3-G rate schedules, resulting in a revenue neutral change to these rates. The G-10 and G-10-G schedules will see an initial $0.0218/therm increase. Future Transportation Charge changes will not result in changes to other rate components. D. The Transportation Charge will be based on PG&E’s G-WSL rate for Palo Alto, accounting for delivery losses to the Customer’s Meter, and will be updated whenever the G- WSL is changed. E. Pursuant to Chapter 12.20.010 of the Palo Alto Municipal Code, the Council of the City of Palo Alto may by resolution adopt rules and regulations governing utility services, fees and charges. The Council of the City of Palo Alto does hereby RESOLVE as follows: SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule G-1 (Residential Gas Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule G-1, as amended, shall become effective November 1, 2016. SECTION 2. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule G-1-G (Residential Green Gas Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule G-1-G, as amended, shall become effective November 1, 2016. Attachment A NOT YET APPROVED 160921 jb JM/UTL/Staff Reports 2 SECTION 3. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule G-2 (Residential Master-Metered and Commercial Gas Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule G-2, as amended, shall become effective November 1, 2016. SECTION 4. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule G-2-G (Residential Master-Metered and Commercial Green Gas Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule G-2-G, as amended, shall become effective November 1, 2016. SECTION 5. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule G-3 (Large Commercial Gas Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule G-3, as amended, shall become effective November 1, 2016. SECTION 6. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule G-3-G (Large Commercial Green Gas Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule G-3-G, as amended, shall become effective November 1, 2016. SECTION 7. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule G-10 (Compressed Natural Gas Service Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule G-10, as amended, shall become effective November 1, 2016. SECTION 8. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule G-10-G (Compressed Natural Green Gas Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule G-10-G, as amended, shall become effective November 1, 2016. SECTION 9. The Council finds that the revenue derived from the adoption of this resolution shall be used only for the purpose set forth in Article VII, Section 2, of the Charter of the City of Palo Alto. SECTION 10. The Council finds that the fees and charges adopted by this resolution are charges imposed for a specific government service or product provided directly to the payor that are not provided to those not charged, and do not exceed the reasonable costs to the City of providing the service or product. SECTION 10. The Council finds that the adoption of this resolution changing gas rates to meet operating expenses and meet financial reserve needs is not subject to the California Environmental Quality Act (CEQA), pursuant to California Public Resources Code Sec. 21080(b)(8) and Title 14 of the California Code of Regulations Sec. 15273(a). After reviewing the staff report and all attachments presented to Council, the Council incorporates these NOT YET APPROVED 160921 jb JM/UTL/Staff Reports 3 documents herein and finds that sufficient evidence has been presented setting forth with specificity the basis for this claim of CEQA exemption. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ___________________________ ___________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ ___________________________ Senior Deputy City Attorney City Manager ___________________________ Director of Utilities ___________________________ Director of Administrative Services RESIDENTIAL GAS SERVICE UTILITY RATE SCHEDULE G-1 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-1-1 Effective 711-1-2016 dated 27-1-20156 Sheet No G-1-1 A. APPLICABILITY: This schedule applies to the following Customers receiving Gas Service from City of Palo Alto Utilities: 1. Separately-metered single-family residential Customers. 2. Separately-metered multi-family residential Customers in multi-family residential facilities. B. TERRITORY: This schedule applies anywhere the City of Palo Alto provides Gas Service. C. UNBUNDLED RATES: Per Service Monthly Service Charge: ........................................................................................................$10.32 Tier 1 Rates: Per Therm Supply Charges: 1. Commodity (Monthly Market Based) .......................................... $0.10-$2.00 2. Cap and Trade Compliance Charge ..................................................$0.00-$0.25 3. Transportation Charge........................................................................$0.00-$0.15 Distribution Charge: .............................................................................................$0.50213933 Tier 2 Rates: (All usage over 100% of Tier 1) Supply Charges: 1. Commodity (Monthly Market Based) .......................................... $0.10-2.00 2. Cap and Trade Compliance Charge ...................................................$0.00-$0.25 3. Transportation Charge........................................................................$0.00-$0.15 Distribution Charge: ............................................................................................. ........................................................................................................$1.04070.931 9 D. SPECIAL NOTES: 1. Calculation of Cost Components ATTACHMENT B RESIDENTIAL GAS SERVICE UTILITY RATE SCHEDULE G-1 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-1-2 Effective 711-1-2016 dated 27-1-20156 Sheet No G-1-2 The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or Taxes. On a Customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. The Commodity Charge is based on the monthly natural gas Bidweek Price Index for delivery at PG&E Citygate, accounting for delivery losses to the Customer’s Meter. The Cap and Trade Compliance Charge reflects the City’s cost of regulatory compliance with the state’s Cap and Trade Program, including the cost of acquiring compliance instruments sufficient to cover the City’s Gas Utility’s compliance obligations. The Cap and Trade Compliance Charge will change in response to changing market conditions, retail sales volumes and the quantity of allowances required. The Transportation Charge is based on the current PG&E G-WSL rate for Palo Alto, accounting for delivery losses to the Customer’s Meter. The Commodity, and Cap and Trade Compliance and Transportation Charges will fall within the minimum/maximum ranges set forth in Section C. 2. Seasonal Rate Changes: The Summer period is effective April 1 to October 31 and the Winter period is effective from November 1 to March 31. When the billing period includes use in both the Summer and the Winter periods, the usage will be prorated based on the number of days in each seasonal period, and the charges based on the applicable rates for each period. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. 3. Calculation of Usage Tiers Tier 1 natural gas usage shall be calculated and billed based upon a level of 0.667 therms per day during the Summer period and 2.0 therms per day during the Winter period, rounded to the nearest whole therm, based on meter reading days of service. As an example, for a 30 day bill, the Tier 1 level would be 20 therms during the Summer period and 60 therms during the Winter period months. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. {End} RESIDENTIAL GREEN GAS SERVICE UTILITY RATE SCHEDULE G-1-G CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-1-G-1 Effective 711-1-2016 dated 27-1-20156 Sheet No G-1-G-1 A. APPLICABILITY: This schedule applies to the following Customers receiving Gas Service from the City of Palo Alto Utilities under the PaloAltoGreen Gas Program: 1. Separately-metered single-family residential Customers. 2. Separately-metered multi-family residential Customers in multi-family residential facilities. B. TERRITORY: This schedule applies anywhere the City of Palo Alto provides Gas Service. C. UNBUNDLED RATES: Per Service Monthly Service Charge: ........................................................................................................$10.32 Tier 1 Rates: Per Therm Supply Charges: 1. Commodity (Monthly Market Based) .......................................... $0.10-$2.00 2. Cap and Trade Compliance Charges .............................................. $0.00-$0.25 3 Transportation Charge .................................................................... $0.00-$0.15 Distribution Charge:.............................................................................................$0.50213933 PaloAltoGreen Gas Charge .................................................................................. $0.1200 Tier 2 Rates: (All usage over 100% of Tier 1) Supply Charges: 1. Commodity (Monthly Market Based) .......................................... $0.10-2.00 2. Cap and Trade Compliance Charges ..................................................$0.00-$0.25 3 Transportation Charge .......................................................................$0.00-$0.15 Distribution Charge:.............................................................................................$1.04070.9319 PaloAltoGreen Gas Charge .................................................................................. $0.1200 RESIDENTIAL GREEN GAS SERVICE UTILITY RATE SCHEDULE G-1-G CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-1-G-2 Effective 711-1-2016 dated 27-1-20156 Sheet No G-1-G-2 D. SPECIAL NOTES: 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or Taxes. On a Customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. The Commodity Charge is based on the monthly natural gas Bidweek Price Index for delivery at PG&E Citygate, accounting for delivery losses to the Customer’s Meter. The Cap and Trade Compliance Charge reflects the City’s cost of regulatory compliance with the state’s Cap and Trade Program, including the cost of acquiring compliance instruments sufficient to cover the City’s Gas Utility’s compliance obligations. The Cap and Trade Compliance Charge will change in response to changing market conditions, retail sales volumes and the quantity of allowances required. The Transportation Charge is based on the current PG&E G-WSL rate for Palo Alto, accounting for delivery losses to the Customer’s Meter. The Commodity, and Cap and Trade Compliance and Transportation Charges will fall within the minimum/maximum ranges set forth in Section C. 2. Seasonal Rate Changes: The Summer period is effective April 1 to October 31 and the Winter period is effective from November 1 to March 31. When the billing period includes use in both the Summer and the Winter periods, the usage will be prorated based on the number of days in each seasonal period, and the charges based on the applicable rates for each period. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. 3. Calculation of Usage Tiers Tier 1 natural gas usage shall be calculated and billed based upon a level of 0.667 therms per day during the Summer period and 2.0 therms per day during the Winter period, rounded to the nearest whole therm, based on meter reading days of service. As an example, for a 30 day bill, the Tier 1 level would be 20 therms during the Summer period and 60 therms during the Winter period months. For further discussion of bill calculation and proration, refer to Rule and Regulation 11. RESIDENTIAL GREEN GAS SERVICE UTILITY RATE SCHEDULE G-1-G CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-1-G-3 Effective 711-1-2016 dated 27-1-20156 Sheet No G-1-G-3 4. PaloAltoGreen Gas Program Description and Participation PaloAltoGreen Gas provides for the reduction of green-house gas (GHG) emissions associated with a Customer’s Gas usage, through the purchase of certified environmental offsets, with a preference to projects located in California. Purchases are made to match 100% of the therm usage at the Customer’s premises every month. Customers choosing to participate shall fill out a PaloAltoGreen Gas Program application provided by the Customer Service Center. {End} RESIDENTIAL MASTER-METERED AND COMMERCIAL GAS SERVICE UTILITY RATE SCHEDULE G-2 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-2-1 Effective 711-1-2016 dated 27-1-20156 Sheet No G-2-1 A. APPLICABILITY: This schedule applies to the following Customers receiving Gas Service from the City of Palo Alto Utilities: 1. Commercial Customers who use less than 250,000 therms per year at one site. 2. Master-metered residential Customers in multi-family residential facilities. B. TERRITORY: This schedule applies anywhere the City of Palo Alto provides Gas Service. C. UNBUNDLED RATES: Per Service Monthly Service Charge: ........................................................................................................$78.23 Per Therm Supply Charges: 1. Commodity (Monthly Market Based) .................................... $0.10-$2.00 2. Cap and Trade Compliance Charges ................................................. $0.00-0.25 3. Transportation Charge........................................................................$0.00-$0.15 Distribution Charge: ........................................................................................................ $0.6855 5767 D. SPECIAL NOTES: 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or Taxes. On a Customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. The Commodity Charge is based on the monthly natural gas Bidweek Price Index for delivery at PG&E Citygate, accounting for delivery losses to the Customer’s Meter. The Cap and Trade Compliance Charge reflects the City’s cost of regulatory compliance with the state’s Cap and Trade Program, including the cost of acquiring compliance instruments sufficient to cover the City’s Gas Utility’s compliance obligations. The Cap and Trade Compliance Charge will change in response to changing market conditions, retail sales volumes and the quantity of allowances required. RESIDENTIAL MASTER-METERED AND COMMERCIAL GAS SERVICE UTILITY RATE SCHEDULE G-2 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-2-2 Effective 711-1-2016 dated 27-1-20156 Sheet No G-2-2 The Transportation Charge is based on the current PG&E G-WSL rate for Palo Alto, accounting for delivery losses to the Customer’s Meter. The Commodity, and Cap and Trade Compliance and Transportation Charges will fall within the minimum/maximum ranges set forth in Section C. {End} RESIDENTIAL MASTER-METERED AND COMMERCIAL GREEN GAS SERVICE UTILITY RATE SCHEDULE G-2-G CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-2-G-1 Effective 711-1-2016 dated 27-1-20156 Sheet No G-2-G-1 A. APPLICABILITY: This schedule applies to the following Customers receiving Gas Service from the City of Palo Alto Utilities under the PaloAltoGreen Gas Program: 1. Master-metered residential Customers in multi-family residential facilities. 2. Commercial Customers who use less than 250,000 therms per year at one site. B. TERRITORY: This schedule applies anywhere the City of Palo Alto provides Gas Service. C. UNBUNDLED RATES: 1. 100% Renewable/Full Green option: Per Service Monthly Service Charge: ............................................................................................$78.23 Per Therm Supply Charges: 1. Commodity (Monthly Market Based) .......................................... $0.10-$2.00 2. Cap and Trade Compliance Charges .................................................... $0.00-0.25 3. Transportation Charge .......................................................................... $0.00-$0.15 Distribution Charge: ............................................................................................$0.68555767 PaloAltoGreen Gas Charge .................................................................................. $0.1200 2. 100 Therm block option: Per Service Monthly Service Charge: ............................................................................................$78.23 Per Therm Supply Charges: 1. Commodity (Monthly Market Based) .......................................... $0.10-$2.00 2. Cap and Trade Compliance Charges ....................................................... $0.00-0.25 3. Transportation Charge .............................................................................$0.00-$0.15 Distribution Charge: ............................................................................................$0.68555767 RESIDENTIAL MASTER-METERED AND COMMERCIAL GREEN GAS SERVICE UTILITY RATE SCHEDULE G-2-G CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-2-G-2 Effective 711-1-2016 dated 27-1-20156 Sheet No G-2-G-2 PaloAltoGreen Gas Charge (per 100 therm block) .............................................. $12.00 D. SPECIAL NOTES: 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or Taxes. On a Customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. The Commodity Charge is based on the monthly natural gas Bidweek Price Index for delivery at PG&E Citygate, accounting for delivery losses to the Customer’s Meter. The Cap and Trade Compliance Charge reflects the City’s cost of regulatory compliance with the state’s Cap and Trade Program, including the cost of acquiring compliance instruments sufficient to cover the City’s Gas Utility’s compliance obligations. The Cap and Trade Compliance Charge will change in response to changing market conditions, retail sales volumes and the quantity of allowances required. The Transportation Charge is based on the current PG&E G-WSL rate for Palo Alto, accounting for delivery losses to the Customer’s Meter. The Commodity, and CCap and Trade Compliance and Transportation Charges will fall within the minimum/maximum ranges set forth in Section C. 2. Request for Service A qualifying Customer may request service under this schedule for more than one account or meter if the accounts are located on one. A site consists of one or more contiguous parcels of land with no intervening public right-of-ways (e.g. streets). 3. PaloAltoGreen Gas Program Description and Participation PaloAltoGreen Gas provides for the reduction of green-house gas (GHG) emissions associated with a Customer’s gas usage, through the purchase of certified environmental offsets, with a preference to projects located in California. Purchases are made to match 100% of the therm usage at the Customer’s facility every month (the 100% Renewable/Full Green option), or in 100 therm blocks. RESIDENTIAL MASTER-METERED AND COMMERCIAL GREEN GAS SERVICE UTILITY RATE SCHEDULE G-2-G CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-2-G-3 Effective 711-1-2016 dated 27-1-20156 Sheet No G-2-G-3 Customers choosing to participate shall fill out a PaloAltoGreen Gas Program application provided by the Customer Service Center. {End} LARGE COMMERCIAL GAS SERVICE UTILITY RATE SCHEDULE G-3 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-3-1 Effective 711x-1-2016 dated 27-1-20156 Sheet No G-3-1 A. APPLICABILITY: This schedule applies to the following Customers receiving Gas Service from the City of Palo Alto Utilities: 1. Commercial Customers who use at least 250,000 therms per year at one site. 2. Customers at City-owned generation facilities. B. TERRITORY: This schedule applies anywhere the City of Palo Alto provides natural gas service. C. UNBUNDLED RATES: Per Service Monthly Service Charge: $377.43 Per Therm Supply Charges: 1. Commodity (Monthly Market Based) .................................................... $0.10-$2.00 2. Cap and Trade Compliance Charges ...................................................... $0.00-0.25 3. Transportation Charge .......................................................................... $0.00-$0.15 Distribution Charge: .....................................................................................................$0.67755687 D. SPECIAL NOTES: 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or Taxes. On a Customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. The Commodity Charge is based on the monthly natural gas Bidweek Price Index for delivery at PG&E Citygate, accounting for delivery losses to the Customer’s Meter. The Cap and Trade Compliance Charge reflects the City’s cost of regulatory compliance with the state’s Cap and Trade Program, including the cost of acquiring compliance LARGE COMMERCIAL GAS SERVICE UTILITY RATE SCHEDULE G-3 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-3-2 Effective 711x-1-2016 dated 27-1-20156 Sheet No G-3-2 instruments sufficient to cover the City’s Gas Utility’s compliance obligations. The Cap and Trade Compliance Charge will change in response to changing market conditions, retail sales volumes and the quantity of allowances required. The Transportation Charge is based on the current PG&E G-WSL rate for Palo Alto, accounting for delivery losses to the Customer’s Meter. The Commodity, and Cap and Trade Compliance and Transportation Charges will fall within the minimum/maximum ranges set forth in Section C. 2. Request for Service A qualifying Customer may request service under this schedule for more than one account or meter if the accounts are located on one site. A site consists of one or more contiguous parcels of land with no intervening public right-of- ways (e.g. streets). 3. Changing Rate Schedules Customers may request a rate schedule change at any time to any applicable City of Palo Alto full-service rate schedule. {End} LARGE COMMERCIAL GREEN GAS SERVICE UTILITY RATE SCHEDULE G-3-G CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-3-G-1 Effective 7x11-1-2016 dated 27-1-20156 Sheet No G-3-G-1 A. APPLICABILITY: This schedule applies to the following Customers receiving Gas Service from the City of Palo Alto Utilities under the PaloAltoGreen Gas Program: 1. Commercial Customers who use at least 250,000 therms per year at one site. 2. Customers at City-owned generation facilities. B. TERRITORY: This schedule applies anywhere the City of Palo Alto provides Gas Service. C. UNBUNDLED RATES: 1. 100% Renewable/Full Green option: Per Service Monthly Service Charge: $377.43 Per Therm Supply Charges: 1. Commodity (Monthly Market Based) .......................................................... $0.10-$2.00 2. Cap and Trade Compliance Charges .......................................................... $0.00-0.25 3. Transportation Charge ................................................................................. $0.00-$0.15 Distribution Charge: .........................................................................................$0.67755687 PaloAltoGreen Gas Charge: ......................................................................................$0.1200 2. 100 Therm block option: Per Service Monthly Service Charge: $377.43 Per Therm Supply Charges: 1. Commodity (Monthly Market Based) .......................................................... $0.10-$2.00 2. Cap and Trade Compliance Charges .......................................................... $0.00-0.25 3. Transportation Charge ................................................................................. $0.00-$0.15 Distribution Charge: ...........................................................................................$0.6775687 PaloAltoGreen Gas Charge (per 100 therm block): ....................................................$12.00 LARGE COMMERCIAL GREEN GAS SERVICE UTILITY RATE SCHEDULE G-3-G CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-3-G-2 Effective 7x11-1-2016 dated 27-1-20156 Sheet No G-3-G-2 D. SPECIAL NOTES: 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or Taxes. On a Customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. The Commodity Charge is based on the monthly natural gas Bidweek Price Index for delivery at PG&E Citygate, accounting for delivery losses to the Customer’s Meter. The Cap and Trade Compliance Charge reflects the City’s cost of regulatory compliance with the state’s Cap and Trade Program, including the cost of acquiring compliance instruments sufficient to cover the City’s Gas Utility’s compliance obligations. The Cap and Trade Compliance Charge will change in response to changing market conditions, retail sales volumes and the quantity of allowances required. The Transportation Charge is based on the current PG&E G-WSL rate for Palo Alto, accounting for delivery losses to the Customer’s Meter. The Commodity, and Cap and Trade Compliance and Transportation Charges will fall within the minimum/maximum ranges set forth in Section C. 2. Request for Service A qualifying Customer may request service under this schedule for more than one account or meter if the accounts are located on one site. A site consists of one or more contiguous parcels of land with no intervening public right-of-ways (e.g. streets). 3. PaloAltoGreen Gas Program Description and Participation PaloAltoGreen Gas provides for the reduction of green-house gas (GHG) emissions associated with a Customer’s gas usage, through the purchase of certified environmental offsets, with a preference to projects located in California. Purchases are made to match 100% of the therm usage at the Customer’s facility every month, (the 100% Renewable/Full Green option), or in 100 therm blocks. Customers choosing to participate shall fill out a PaloAltoGreen Gas Program application provided by the Customer Service Center. {End} COMPRESSED NATURAL GAS SERVICE UTILITY RATE SCHEDULE G-10 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-10-1 Effective 711-1-2016 dated 47-201-20156 Sheet No.G-10-1 A. APPLICABILITY: This schedule applies to the sale of natural gas to the City-owned compressed natural gas (CNG) fueling station at the Municipal Service Center in Palo Alto B. TERRITORY: Applies to location at the Municipal Service Center in City of Palo Alto. C. UNBUNDLED RATES: Per Service Monthly Service Charge: ........................................................................................................$52.93 Per Therm Supply Charges: Commodity (Monthly Market Based) ................................................................ $0.10-$2.00 Cap and Trade Compliance Charges .......................................................................... $0.00 to $0.25 Transportation Charge........................................................................................ $0.00-$0.15 Distribution Charge .......................................................................................................$0.09630093 D. SPECIAL CONDITIONS 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or Taxes. On a Customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. The Commodity charge is based on the monthly natural gas Bidweek Price Index for delivery at PG&E Citygate, accounting for delivery losses to the Customer’s Meter. The Cap and Trade Compliance Charge reflects the City’s cost of regulatory compliance with the state’s Cap and Trade Program, including the cost of acquiring compliance instruments sufficient to cover the City’s Gas Utility’s compliance obligations. The Cap and Trade Compliance Charge will change in response to changing market conditions, retail sales volumes and the quantity of COMPRESSED NATURAL GAS SERVICE UTILITY RATE SCHEDULE G-10 CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-10-2 Effective 711-1-2016 dated 47-201-20156 Sheet No.G-10-2 allowances required. The Transportation Charge is based on the current PG&E G-WSL rate for Palo Alto, accounting for delivery losses to the Customer’s Meter. The Commodity, and Cap and Trade Compliance and Transportation Charges will fall within the minimum/maximum range set forth in Section C. {End} COMPRESSED NATURAL GREEN GAS SERVICE UTILITY RATE SCHEDULE G-10-G CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-10-G--1 Effective 117-1-2016 dated 47-201-20156 Sheet No.G-10-G-1 A. APPLICABILITY: This schedule applies to the wholesale sale of natural gas to the City-owned compressed natural gas (CNG) fueling station at the Municipal Service Center in Palo Alto under the PaloAltoGreen Gas Program: B. TERRITORY: The City-owned compressed natural gas (CNG) fueling station located at the Municipal Service Center in City of Palo Alto. C. UNBUNDLED RATES: Per Service Monthly Service Charge: ........................................................................................................$52.93 Per Therm Supply Charges: Commodity (Monthly Market Based) .................................................... $0.10-$2.00 Cap and Trade Compliance Charges .................................................. $0.00 to $0.25 Transportation Charge........................................................................................ $0.00-$0.15 Distribution Charge ......................................................................................................$0.0963.0093 PaloAltoGreen Gas Charge ...................................................................................................$0.1200 D. SPECIAL CONDITIONS 1. Calculation of Cost Components The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or Taxes. On a Customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C. The Commodity charge is based on the monthly natural gas Bidweek Price Index for delivery at PG&E Citygate, accounting for delivery losses to the Customer’s Meter. The Cap and Trade Compliance Charge reflects the City’s cost of regulatory compliance with the COMPRESSED NATURAL GREEN GAS SERVICE UTILITY RATE SCHEDULE G-10-G CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes Sheet No G-10-G--2 Effective 117-1-2016 dated 47-201-20156 Sheet No.G-10-G-2 state’s Cap and Trade Program, including the cost of acquiring compliance instruments sufficient to cover the City’s Gas Utility’s compliance obligations. The Cap and Trade Compliance Charge will change in response to changing market conditions, retail sales volumes and the quantity of allowances required. The Transportation Charge is based on the current PG&E G-WSL rate for Palo Alto, accounting for delivery losses to the Customer’s Meter. The Commodity, and Cap and Trade Compliance and Transportation Charges will fall within the minimum/maximum range set forth in Section C. 2. PaloAltoGreen Gas Program Description and Participation PaloAltoGreen Gas provides for the reduction of green-house gas (GHG) emissions associated with a Customer’s Gas usage, through the purchase of certified environmental offsets, with a preference to projects located in California. Purchases are made to match 100% of the therm usage at the Customer’s premises every month. Customers choosing to participate shall fill out a PaloAltoGreen Gas Program application provided by the Customer Service Center. {End} EXCERPTED DRAFT MINUTES OF THE AUGUST 31, 2016 – SPECIAL MEETING UTILITIES ADVISORY COMMISSION MEETING ITEM 4. ACTION: Staff Recommendation that the Utilities Advisory Commission Recommend that the City Council Adopt a Resolution Amending Utility Gas Rate Schedules G-1, G-1-G, G-2, G-2-G, G-3, G-3-G, G-10, and G-10-G to Include a Separate-Transportation Charge as a Discrete Pass-Through Component Rates Manager Eric Keniston summarized the written report. He said that Palo Alto pays Pacific Gas and Electric (PG&E) to transport natural gas to Palo Alto, as stated in PG&E rate schedule G- WSL. Changes to that schedule are dictated by the California Public Utilities Commission (CPUC) and their proceedings. Staff does not know when the schedule will change or what the final change will be, and proceedings have been subject to substantial delays. Staff requested to make the G-WSL charges a pass-through charge on customer bills. The initial charge would be based on the August 2016 G-WSL rate and be subtracted from the existing distribution charge. The effect would be revenue neutral for all but the City’s CNG facility (G-10), which would see a small initial increase estimated at $2400 per year. The UAC did not have any questions related to this item. ACTION: Vice Chair Danaher made a motion that the UAC recommend that Council adopt a resolution to amend Utility Gas Rate Schedules G-1, G-1-G, G-2, G-2-G, G-3, G-3-G, G-10, and G-10-G, as proposed, to separately identify as a pass-through rate component, a Transportation Charge. Commissioner Ballantine seconded the motion. The motion passed unanimously (7-0) with Chair Cook, Vice Chair Danaher and Commissioners Danaher, Forssell, Johnston, Schwartz and Trumbull voting yes. ATTACHMENT C City of Palo Alto (ID # 7245) City Council Staff Report Report Type: Consent Calendar Meeting Date: 10/17/2016 City of Palo Alto Page 1 Summary Title: Design Services for WQCP Primary Outfall Line Design Title: Approval of Contract No. C17164199 with Kennedy/Jenks Consultants in the Total Amount Not-to-Exceed $466,318 to Provide Design Services for the New Primary Outfall Line at Regional Water Quality Control Plant - Wastewater Treatment Fund Capital Improvement Program Project WQ- 80021 From: City Manager Lead Department: Public Works Recommendation Staff recommends that Council approve and authorize the City Manager or his designee to execute the attached contract with Kennedy/Jenks Consultants (Attachment A) in the total amount not to exceed $466,318 for the design and associated services of a new outfall line from Water Quality Control Plant to the bay as part of the Regional Water Quality Control Plant Capital Improvement Program project WQ-80021, including $423,925 for basic services and $42,393 for additional services. Background The Regional Water Quality Control Plant (RWQCP) has one 54-inch diameter outfall line to convey treated effluent from RWQCP to the bay, traversing the Palo Alto Airport property. The reinforced concrete pipe, assembled by a bell and spigot type connection, was installed 52 years ago in 1964. The new outfall line design project is consistent with the RWQCP’s Long Range Facilities Plan (LRFP), completed in October 2012 and accepted by Council in July 2012 (Staff Report ID 2914). The LRFP identified the need for a capital project to replace and/or rehabilitate the pipeline. Additionally, the LRFP Technical Memorandum No. 3 analyzed the capacity of the outfall line to handle the City of Palo Alto Page 2 RWQCP’s permitted capacity of 80 MGD under various climate change senarios related to sea level rise. The study concluded that the exisiting outfall line capacity is not adequate to pass the RWQCP’s peak wet weather hydraulic flow capacity of 80 million gallons per day on its own under all circumstances of high tides and high flows. Discussion The outfall line has been in service for about half of its useful life, and although the pipe itself appears to be in good condition, the bell and spigot joints have been failing. In 2014 and 2016, the RWQCP utilized contractors to repair leaks at pipe joints between the RWQCP and the City’s airport. In both instances, staff inspected the pipe sections and found them to be in good condition, but repairs were required on a total of nine joints. Subsidence in the soft bay mud since the pipe was installed has likely contributed to the pipe leaks. The leaks are also tidally influenced. The effected pipe sections cover a distance of 2,133 linear feet, consist of approximate 10-foot lengths and equate to about 211 pipe joints. Of equal concern, as noted previously in this report, the flow carrying capacity of the Outfall Line is inadequate to convey the entire RWQCP peak flow during heavy rain events at very high tides. During the design of the RWQCP’s UV Disinfection Facility in 2009, an engineering consultant reviewed the hydraulic capacity for the UV System and the Outfall Line; they determined that the Outfall Line does not have the capacity to pass the design flow of 80 MGD. The estimated maximum capacity of the line in that analysis fell significantly short during peak tides. During heavy rain events and peak tides, this would result in a portion of the Plant’s treated effluent flowing to the Bay through a 36-inch Emergency Outfall Line. Due to the inadequate flow carrying capacity of the Outfall Line, coupled with a high probability of leaky joints continuing to occur along the alignment, a new Outfall pipeline design is recommended. It does not make economic sense to excavate the entire distance, which is routed through the airport’s property, apron, and runway, to repair all of the joints. Therefore, a new pipeline is to be designed and constructed, and then the original line can be rehabilitated by a new construction method, such as sliplining, for example. As the outfall line is in service at all times, it cannot be rehabilitated until a new line is operational. Scope of Services Description City of Palo Alto Page 3 The consultant will provide engineering services to design a new pipeline alignment, including investigation of tidal influence and sea level rise and evaluation of horizontal directional drilling or micro-tunneling construction methods to minimize construction impacts where the pipe crosses Embarcadero Road, areas of the levee, and/or the airport runway/taxiway. The consultant will develop specifications for the existing outfall line rehabilitation, develop needed California Environmental Quality Act (CEQA) documentation, and investigate needed project permits. The consultant will provide services during all phases of the project, including preliminary option assessments, design and permitting, and engineering services during bid, construction, and startup. On May 16, 2016, a notice for Request for Proposals for design services for a Primary Outfall Primary Outfall Line Design at The Regional Water Quality Control Plant was posted to the City’s website and sent to seven design firms. A proposal was received from one firm on June 28, 2016. Summary of Solicitation Process Proposal Title/Number: Primary Outfall Line Design at The Regional Water Quality Control Plant - RFP No. 164199 Proposed Length of Project: 10 months Number of Proposals Mailed and/or Emailed: 7 Total Days to Respond to Proposal: 44 Pre-Proposal Meeting Date: May 25, 2016 Number of Company Attendees at Pre- Proposal Meeting: 9 firms Number of Proposals Received: 1 Number of Companies Interviewed: 1 Range of Proposal Amounts Submitted: $423,925 Evaluation of Proposals An evaluation committee consisting of the RWQCP engineering staff reviewed the proposal received. The committee carefully reviewed the firm's qualifications and submittal in response to the criteria identified in the RFP. The criteria used to evaluate the proposing firm included: quality and completeness of proposal; City of Palo Alto Page 4 quality, performance and effectiveness of the work plan; proposer's experience; proposer's ability to perform the work within the time specified; cost; proposer's financial stability; proposer's prior record of performance with the City; and proposer's compliance with applicable laws and regulations. The firm, Kennedy/Jenks Consultants (Kennedy/Jenks), was invited to participate in an oral interview on July 13, 2016. Kennedy/Jenks, having designed many projects at the RWQCP, has substantial knowledge of the RWQCP. Kennedy/Jenks was selected because of its understanding of needed design services, the quality, innovation and thoroughness of its proposed work plan, and the professional experience of the key team members. Although Kennedy/Jenks submitted the lone proposal for the project, during Kennedy/Jenks’s presentation and interview, their team members demonstrated a very good understanding of the RWQCP’s intentions for this design project, especially in regards to handling the complex permitting process for a construction project under important City assets, including the airport and the Baylands Park. In addition, Palo Alto Airport upgrades are underway with plans to reconfigure the airport parking areas and resurface the apron and tarmac. Public Works Department staff is coordinating design and construction efforts, to avoid duplication and redesign. In recent years, Kennedy/Jenks has worked at the San Carlos Airport, coordinating similar airport and FAA requirements for pending pipeline construction. Kennedy/Jenks has previously worked with Palo Alto Airport staff. Timeline The base design work is estimated to be completed ten months after the issuance of the notice to proceed. Construction is estimated to be completed approximately eighteen months after the issuance of notice to proceed (end of 2018). Resource Impact Funds for this design are included in the Plant Equipment Replacement Capital Improvement Program project WQ-80021 in the Wastewater Treatment Fund. It is anticipated that a low interest state loan will be obtained for the construction cost of the project along with modifications to Mountain View, Los Altos, East Palo Alto Sanitary District, and Stanford University partners’ agreements for City of Palo Alto Page 5 repayment of the construction loan. The loan will include the cost of this design, which can be reimbursed after issuance of the construction loan. Policy Implications Authorization of this project does not represent a change in existing policies. Environmental Review This design phase of the project does not require a review under the California Environmental Quality Act pursuant to CEQA Guidelines Section 15301 (b), however, a CEQA review will be completed for the construction phase of the project. At a minimum, a mitigated negative declaration (MND) is expected for the construction phase. Attachments:  Attachment A: KennedyJenks Consultants- C17164199-082916 (PDF) CITY OF PALO ALTO CONTRACT NO. C17164199 AGREEMENT BETWEEN THE CITY OF PALO ALTO AND KENNEDY/JENKS CONSULTANTS FOR PROFESSIONAL SERVICES This Agreement is entered into on this 17th day of October, 2016, (“Agreement”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and KENNEDY/JENKS CONSULTANTS, a California corporation, located at 2350 Mission College Boulevard, Suite 525, Santa Clara, CA 95054 ("CONSULTANT"). RECITALS The following recitals are a substantive portion of this Agreement. A. CITY intends to install a new outfall pipeline in parallel to the existing 54-inch outfall pipeline at the Regional Water Quality Control Plant (“Project”) and desires to engage a consultant to provide design services in connection with the Project (“Services”). B. CONSULTANT has represented that it has the necessary professional expertise, qualifications, and capability, and all required licenses and/or certifications to provide the Services. C. CITY in reliance on these representations desires to engage CONSULTANT to provide the Services as more fully described in Exhibit “A”, attached to and made a part of this Agreement. NOW, THEREFORE, in consideration of the recitals, covenants, terms, and conditions, in this Agreement, the parties agree: AGREEMENT SECTION 1. SCOPE OF SERVICES. CONSULTANT shall perform the Services described at Exhibit “A” in accordance with the terms and conditions contained in this Agreement. The performance of all Services shall be to the reasonable satisfaction of CITY. Optional On-Call Provision (This provision only applies if checked and only applies to on- call agreements.) Services will be authorized by CITY, as needed, with a Task Order assigned and approved by CITY’s Project Manager. Each Task Order shall be in substantially the same form as Exhibit A- 1. Each Task Order shall designate a CITY Project Manager and shall contain a specific scope of work, a specific schedule of performance and a specific compensation amount. The total price of all Task Orders issued under this Agreement shall not exceed the amount of Compensation set forth in Section 4 of this Agreement. CONSULTANT shall only be compensated for work performed under an authorized Task Order and CITY may elect, but is not required, to authorize work up to the maximum compensation amount set forth in Section 4. SECTION 2. TERM. 1 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 The term of this Agreement shall be from the date of its full execution through completion of the services in accordance with the Schedule of Performance attached at Exhibit “B” unless terminated earlier pursuant to Section 19 of this Agreement. SECTION 3. SCHEDULE OF PERFORMANCE. Time is of the essence in the performance of Services under this Agreement. CONSULTANT shall complete the Services within the term of this Agreement and in accordance with the schedule set forth in Exhibit “B”, attached to and made a part of this Agreement. Any Services for which times for performance are not specified in this Agreement shall be commenced and completed by CONSULTANT in a reasonably prompt and timely manner based upon the circumstances and direction communicated to the CONSULTANT. CITY’s agreement to extend the term or the schedule for performance shall not preclude recovery of damages for delay if the extension is required due to the fault of CONSULTANT. SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be paid to CONSULTANT for performance of the Services described in Exhibit “A” (“Basic Services”), and reimbursable expenses, shall not exceed four hundred twenty-three thousand nine hundred twenty-five Dollars ($423,925). CONSULTANT agrees to complete all Basic Services, including reimbursable expenses, within this amount. In the event Additional Services are authorized, the total compensation for Basic Services, Additional Services and reimbursable expenses shall not exceed four hundred sixty-six thousand three hundred eighteen Dollars ($466,318). 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. 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 the CITY. 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”. SECTION 5. INVOICES. In order to request payment, CONSULTANT shall submit monthly invoices to the CITY describing the services performed and the applicable charges (including an identification of personnel who performed the services, hours worked, hourly rates, and reimbursable expenses), based upon the CONSULTANT’s billing rates (set forth in Exhibit “C- 1”). If applicable, the invoice shall also describe the percentage of completion of each task. The information in CONSULTANT’s payment requests shall be subject to verification by CITY. CONSULTANT shall send all invoices to the City’s project manager at the address specified in Section 13 below. The City will generally process and pay invoices within thirty (30) days of receipt. SECTION 6. QUALIFICATIONS/STANDARD OF CARE. All of the Services shall be performed by CONSULTANT or under CONSULTANT’s supervision. CONSULTANT represents that it possesses the professional and technical personnel necessary to perform the Services required by this Agreement and that the personnel have sufficient skill and experience to perform the Services assigned to them. CONSULTANT represents that it, its employees and subconsultants, if permitted, have and shall maintain during the term of this Agreement all 2 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 licenses, permits, qualifications, insurance and approvals of whatever nature that are legally required to perform the Services. All of the services to be furnished by CONSULTANT under this agreement shall meet the professional standard and quality that prevail among professionals in the same discipline and of similar knowledge and skill engaged in related work throughout California under the same or similar circumstances. SECTION 7. COMPLIANCE WITH LAWS. CONSULTANT shall keep itself informed of and in compliance with all federal, state and local laws, ordinances, regulations, and orders that may affect in any manner the Project or the performance of the Services or those engaged to perform Services under this Agreement. CONSULTANT shall procure all permits and licenses, pay all charges and fees, and give all notices required by law in the performance of the Services. SECTION 8. ERRORS/OMISSIONS. CONSULTANT is solely responsible for costs, including, but not limited to, increases in the cost of Services, arising from or caused by CONSULTANT’s errors and omissions, including, but not limited to, the costs of corrections such errors and omissions, any change order markup costs, or costs arising from delay caused by the errors and omissions or unreasonable delay in correcting the errors and omissions. SECTION 9. COST ESTIMATES. If this Agreement pertains to the design of a public works project, CONSULTANT shall submit estimates of probable construction costs at each phase of design submittal. If the total estimated construction cost at any submittal exceeds ten percent (10%) of CITY’s stated construction budget, CONSULTANT shall make recommendations to CITY for aligning the PROJECT design with the budget, incorporate CITY approved recommendations, and revise the design to meet the Project budget, at no additional cost to CITY. SECTION 10. INDEPENDENT CONTRACTOR. It is understood and agreed that in performing the Services under this Agreement CONSULTANT, and any person employed by or contracted with CONSULTANT to furnish labor and/or materials under this Agreement, shall act as and be an independent contractor and not an agent or employee of CITY. SECTION 11. ASSIGNMENT. The parties agree that the expertise and experience of CONSULTANT are material considerations for this Agreement. CONSULTANT shall not assign or transfer any interest in this Agreement nor the performance of any of CONSULTANT’s obligations hereunder without the prior written consent of the city manager. Consent to one assignment will not be deemed to be consent to any subsequent assignment. Any assignment made without the approval of the city manager will be void. SECTION 12. SUBCONTRACTING. Option A: No Subcontractor: CONSULTANT shall not subcontract any portion of the work to be performed under this Agreement without the prior written authorization of the city manager or designee. Option B: Subcontracts Authorized: Notwithstanding Section 11 above, CITY agrees that subconsultants may be used to complete the Services. The subconsultants authorized by CITY to 3 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 perform work on this Project are: Abrams Associates, Bohley Consulting, Inc., CSC, McMillen Jacobs, Tanner Pacific, Inc., WRA. CONSULTANT shall be responsible for directing the work of any subconsultants and for any compensation due to subconsultants. CITY assumes no responsibility whatsoever concerning compensation. CONSULTANT shall be fully responsible to CITY for all acts and omissions of a subconsultant. CONSULTANT shall change or add subconsultants only with the prior approval of the city manager or his designee. SECTION 13. PROJECT MANAGEMENT. CONSULTANT will assign Mark Minkowski, PE as the project manager to have supervisory responsibility for the performance, progress, and execution of the Services and 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 the 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 Tom Kapushinski, Public Works Department, Environmental Services Division, email: Tom.Kapushinski@CityofPaloAlto.org, Telephone:650-617-3130. 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 14. OWNERSHIP OF MATERIALS. Upon delivery, all work product, including without limitation, all writings, drawings, plans, reports, specifications, calculations, documents, other materials and copyright interests developed under this Agreement shall be and remain the exclusive property of CITY without restriction or limitation upon their use. CONSULTANT agrees that all copyrights which arise from creation of the work pursuant to this Agreement shall be vested in CITY, and CONSULTANT waives and relinquishes all claims to copyright or other intellectual property rights in favor of the CITY. Neither CONSULTANT nor its contractors, if any, shall make any of such materials available to any individual or organization without the prior written approval of the City Manager or designee. CONSULTANT makes no representation of the suitability of the work product for use in or application to circumstances not contemplated by the scope of work. SECTION 15. AUDITS. CONSULTANT will permit CITY to audit, at any reasonable time during the term of this Agreement and for three (3) years thereafter, CONSULTANT’s records pertaining to matters covered by this Agreement. CONSULTANT further agrees to maintain and retain such records for at least three (3) years after the expiration or earlier termination of this Agreement. SECTION 16. INDEMNITY. [Option A applies to the following design professionals pursuant to Civil Code Section 2782.8: architects; landscape architects; registered professional engineers and licensed 4 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 professional land surveyors.] 16.1. To the fullest extent permitted by law, CONSULTANT shall protect, indemnify, defend and hold harmless CITY, its Council members, officers, employees and agents (each an “Indemnified Party”) from and against any and all demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, including all costs and expenses of whatever nature including attorneys fees, experts fees, court costs and disbursements (“Claims”) that arise out of, pertain to, or relate to the negligence, recklessness, or willful misconduct of CONSULTANT, its officers, employees, agents or contractors under this Agreement, regardless of whether or not it is caused in part by an Indemnified Party. [Option B applies to any consultant who does not qualify as a design professional as defined in Civil Code Section 2782.8.] 16.1. To the fullest extent permitted by law, CONSULTANT shall protect, indemnify, defend and hold harmless CITY, its Council members, officers, employees and agents (each an “Indemnified Party”) from and against any and all demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, including all costs and expenses of whatever nature including attorneys fees, experts fees, court costs and disbursements (“Claims”) resulting from, arising out of or in any manner related to performance or nonperformance by CONSULTANT, its officers, employees, agents or contractors under this Agreement, regardless of whether or not it is caused in part by an Indemnified Party. 16.2. Notwithstanding the above, nothing in this Section 16 shall be construed to require CONSULTANT to indemnify an Indemnified Party from Claims arising from the active negligence, sole negligence or willful misconduct of an Indemnified Party. 16.3. The acceptance of CONSULTANT’s services and duties by CITY shall not operate as a waiver of the right of indemnification. The provisions of this Section 16 shall survive the expiration or early termination of this Agreement. SECTION 17. WAIVERS. The waiver by either party of any breach or violation of any covenant, term, condition or provision of this Agreement, or of the provisions of any ordinance or law, will not be deemed to be a waiver of any other term, covenant, condition, provisions, ordinance or law, or of any subsequent breach or violation of the same or of any other term, covenant, condition, provision, ordinance or law. SECTION 18. INSURANCE. 18.1. CONSULTANT, at its sole cost and expense, shall obtain and maintain, in full force and effect during the term of this Agreement, the insurance coverage described in Exhibit "D". CONSULTANT and its contractors, if any, shall obtain a policy endorsement naming CITY as an additional insured under any general liability or automobile policy or policies. 18.2. All insurance coverage required hereunder shall be provided through carriers with AM Best’s Key Rating Guide ratings of A-:VII or higher which are licensed or authorized to transact insurance business in the State of California. Any and all contractors of CONSULTANT retained to perform Services under this Agreement will obtain and maintain, in full force and effect during the term of this Agreement, identical insurance coverage, naming 5 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 CITY as an additional insured under such policies as required above. 18.3. Certificates evidencing such insurance shall be filed with CITY concurrently with the execution of this Agreement. The certificates will be subject to the approval of CITY’s Risk Manager and will contain an endorsement stating that the insurance is primary coverage and will not be canceled, or materially reduced in coverage or limits, by the insurer except after filing with the Purchasing Manager thirty (30) days' prior written notice of the cancellation or modification. If the insurer cancels or modifies the insurance and provides less than thirty (30) days’ notice to CONSULTANT, CONSULTANT shall provide the Purchasing Manager written notice of the cancellation or modification within two (2) business days of the CONSULTANT’s receipt of such notice. CONSULTANT shall be responsible for ensuring that current certificates evidencing the insurance are provided to CITY’s Chief Procurement Officer during the entire term of this Agreement. 18.4. The procuring of such required policy or policies of insurance will not be construed to limit CONSULTANT's liability hereunder nor to fulfill the indemnification provisions of this Agreement. Notwithstanding the policy or policies of insurance, CONSULTANT will be obligated for the full and total amount of any damage, injury, or loss caused by or directly arising as a result of the Services performed under this Agreement, including such damage, injury, or loss arising after the Agreement is terminated or the term has expired. SECTION 19. TERMINATION OR SUSPENSION OF AGREEMENT OR SERVICES. 19.1. The City Manager may suspend the performance of the Services, in whole or in part, or terminate this Agreement, with or without cause, by giving ten (10) days prior written notice thereof to CONSULTANT. Upon receipt of such notice, CONSULTANT will immediately discontinue its performance of the Services. 19.2. CONSULTANT may terminate this Agreement or suspend its performance of the Services by giving thirty (30) days prior written notice thereof to CITY, but only in the event of a substantial failure of performance by CITY. 19.3. Upon such suspension or termination, CONSULTANT shall deliver to the City Manager immediately any and all copies of studies, sketches, drawings, computations, and other data, whether or not completed, prepared by CONSULTANT or its contractors, if any, or given to CONSULTANT or its contractors, if any, in connection with this Agreement. Such materials will become the property of CITY. 19.4. Upon such suspension or termination by CITY, CONSULTANT will be paid for the Services rendered or materials delivered to CITY in accordance with the scope of services on or before the effective date (i.e., 10 days after giving notice) of suspension or termination; provided, however, if this Agreement is suspended or terminated on account of a default by CONSULTANT, CITY will be obligated to compensate CONSULTANT only for that portion of CONSULTANT’s services which are of direct and immediate benefit to CITY as such determination may be made by the City Manager acting in the reasonable exercise of his/her discretion. The following Sections will survive any expiration or termination of this Agreement: 14, 15, 16, 19.4, 20, and 25. 6 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 19.5. No payment, partial payment, acceptance, or partial acceptance by CITY will operate as a waiver on the part of CITY of any of its rights under this Agreement. SECTION 20. NOTICES. All notices hereunder will be given in writing and mailed, postage prepaid, by certified mail, addressed as follows: To CITY: Office of the City Clerk City of Palo Alto Post Office Box 10250 Palo Alto, CA 94303 With a copy to the Purchasing Manager To CONSULTANT: Attention of the project director at the address of CONSULTANT recited above SECTION 21. CONFLICT OF INTEREST. 21.1. In accepting this Agreement, CONSULTANT covenants that it presently has no interest, and will not acquire any interest, direct or indirect, financial or otherwise, which would conflict in any manner or degree with the performance of the Services. 21.2. CONSULTANT further covenants that, in the performance of this Agreement, it will not employ subconsultants, contractors or persons having such an interest. CONSULTANT certifies that no person who has or will have any financial interest under this Agreement is an officer or employee of CITY; this provision will be interpreted in accordance with the applicable provisions of the Palo Alto Municipal Code and the Government Code of the State of California. 21.3. If the Project Manager determines that CONSULTANT is a “Consultant” as that term is defined by the Regulations of the Fair Political Practices Commission, CONSULTANT shall be required and agrees to file the appropriate financial disclosure documents required by the Palo Alto Municipal Code and the Political Reform Act. SECTION 22. NONDISCRIMINATION. As set forth in Palo Alto Municipal Code section 2.30.510, CONSULTANT 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. CONSULTANT 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 agrees to meet all requirements of Section 2.30.510 pertaining to nondiscrimination in employment. SECTION 23. ENVIRONMENTALLY PREFERRED PURCHASING AND ZERO WASTE REQUIREMENTS. CONSULTANT shall comply with the CITY’s Environmentally 7 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 Preferred Purchasing policies which are available at CITY’s Purchasing Department, incorporated by reference and may be amended from time to time. CONSULTANT shall comply with waste reduction, reuse, recycling and disposal requirements of CITY’s Zero Waste Program. Zero Waste best practices include first minimizing and reducing waste; second, reusing waste and third, recycling or composting waste. In particular, CONSULTANT shall comply with the following zero waste requirements: (a) All printed materials provided by CCONSULTANT to CITY generated from a personal computer and printer including but not limited to, proposals, quotes, invoices, reports, and public education materials, shall be double-sided and printed on a minimum of 30% or greater post-consumer content paper, unless otherwise approved by CITY’s Project Manager. Any submitted materials printed by a professional printing company shall be a minimum of 30% or greater post- consumer material and printed with vegetable based inks. (b) Goods purchased by CONSULTANT on behalf of CITY shall be purchased in accordance with CITY’s Environmental Purchasing Policy including but not limited to Extended Producer Responsibility requirements for products and packaging. A copy of this policy is on file at the Purchasing Division’s office. (c) Reusable/returnable pallets shall be taken back by CONSULTANT, at no additional cost to CITY, for reuse or recycling. CONSULTANT shall provide documentation from the facility accepting the pallets to verify that pallets are not being disposed. SECTION 24. COMPLIANCE WITH PALO ALTO MINIMUM WAGE ORDINANCE. CONSULTANT shall comply with all requirements of the Palo Alto Municipal Code Chapter 4.62 (Citywide Minimum Wage), as it may be amended from time to time. In particular, for any employee otherwise entitled to the State minimum wage, who performs at least two (2) hours of work in a calendar week within the geographic boundaries of the City, CONSULTANT shall pay such employees no less than the minimum wage set forth in Palo Alto Municipal Code section 4.62.030 for each hour worked within the geographic boundaries of the City of Palo Alto. In addition, CONSULTANT shall post notices regarding the Palo Alto Minimum Wage Ordinance in accordance with Palo Alto Municipal Code section 4.62.060. SECTION 25. NON-APPROPRIATION 25.1. 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 funds are not appropriated for the following fiscal year, 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 for this Agreement 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 26. PREVAILING WAGES AND DIR REGISTRATION FOR PUBLIC WORKS CONTRACTS 26.1 This Project is not subject to prevailing wages. CONSULTANT is not required to pay prevailing wages in the performance and implementation of the Project in accordance with SB 7 if the contract is not a public works contract, if the contract does not 8 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 include a public works construction project of more than $25,000, or the contract does not include a public works alteration, demolition, repair, or maintenance (collectively, ‘improvement’) project of more than $15,000. OR 26.1 CONSULTANT 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. CONSULTANT 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. CONSULTANT 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. 26.2 CONSULTANT shall comply with the requirements of Exhibit “E” for any contract for public works construction, alteration, demolition, repair or maintenance. SECTION 27. MISCELLANEOUS PROVISIONS. 27.1. This Agreement will be governed by the laws of the State of California. 27.2. 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 in the County of Santa Clara, State of California. 27.3. 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. The prevailing party shall be entitled to recover an amount equal to the fair market value of legal services provided by attorneys employed by it as well as any attorneys’ fees paid to third parties. 27.4. This document represents the entire and integrated agreement between the parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This document may be amended only by a written instrument, which is signed by the parties. 27.5. The covenants, terms, conditions and provisions of this Agreement will apply to, and will bind, the heirs, successors, executors, administrators, assignees, and consultants of the parties. 27.6. If a court of competent jurisdiction finds or rules that any provision of this Agreement or any amendment thereto is void or unenforceable, the unaffected provisions of this Agreement and any amendments thereto will remain in full force and effect. 9 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 27.7. All exhibits referred to in this Agreement and any addenda, appendices, attachments, and schedules to this Agreement which, from time to time, may be referred to in any duly executed amendment hereto are by such reference incorporated in this Agreement and will be deemed to be a part of this Agreement. 27.8 In the event of a conflict between the terms of this Agreement and the exhibits hereto or CONSULTANT’s proposal (if any), the Agreement shall control. In the case of any conflict between the exhibits hereto and CONSULTANT’s proposal, the exhibits shall control. 27.9 If, pursuant to this contract with CONSULTANT, CITY shares with CONSULTANT personal information as defined in California Civil Code section 1798.81.5(d) about a California resident (“Personal Information”), CONSULTANT shall maintain reasonable and appropriate security procedures to protect that Personal Information, and shall inform City immediately upon learning that there has been a breach in the security of the system or in the security of the Personal Information. CONSULTANT shall not use Personal Information for direct marketing purposes without City’s express written consent. 27.10 All unchecked boxes do not apply to this agreement. 27.11 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. 27.12 This Agreement may be signed in multiple counterparts, which shall, when executed by all the parties, constitute a single binding agreement 10 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 CONTRACT No. C17164199 SIGNATURE PAGE 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 City Manager (Contract over $85k) Purchasing Manager (Contract over $25k) Contracts Administrator (Contract under $25k) APPROVED AS TO FORM: City Attorney or designee (Contract over $25k) Contracts Administrator (Checklist Approval) KENNEDY/JENKS CONSULTANTS Officer 1 By: Name: Title: Officer 2 (Required for Corp. or LLC) By: Name: Title: Attachments: EXHIBIT “A”: SCOPE OF SERVICES EXHIBIT “B”: SCHEDULE OF PERFORMANCE EXHIBIT “C”: COMPENSATION EXHIBIT “C-1”: HOURLY RATE SCHEDULE EXHIBIT “D”: INSURANCE REQUIREMENTS EXHIBIT “E”: DIR REGISTRATION FOR PUBLIC WORKS CONTRACTS 11 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Vice President John M. Wyckoff Douglas B. Henderson Assistant Secretary Professional Services Rev. April 27, 2016 EXHIBIT “A” SCOPE OF SERVICE I. INTRODUCTION The City of Palo Alto, Department of Public Works, Regional Water Quality Control Plant (RWQCP, or the Plant) intends to install a new outfall in parallel to the existing 54- inch outfall. The outfall operates 24/7 and conveys final treated water from the Plant to an unnamed slough in San Francisco Bay. Upon completion of the new pipeline, the City may choose to reline and/or rehabilitate the existing line for use as supplemental capacity in light of current sea level rise and the flow-through capacity limitations during high tide / high Plant flow situations. RWQCP is requesting proposals for Consultant services for the design of a new outfall pipeline at the RWQCP and for the rehabilitation and/or relining of the existing 54-inch outfall. The Consultant (Engineer) shall provide engineering services during all phases of the project from preliminary options assessments, environmental documentation, design, permitting, and services during bidding, construction, and startup. II. BACKGROUND The Palo Alto Regional Water Quality Control Plant (Plant or RWQCP) treats wastewater from six communities (the Partners). The City of Palo Alto (City) owns and operates the RWQCP. The service area is a mix of institutional, residential, and commercial uses consisting of approximately 223,100 residents. The Plant has a design capacity of 39 mgd, average treated flow of 19 mgd, and a wet weather capacity of 80 mgd. Peak daily flow to the outfall during dry weather is 30 to 39 mgd and the morning low flow is typically about 5 to 10 mgd. The plant has two outfalls. The 54-inch outfall is the line that is currently in use at the RWQCP. The 36-inch emergency outfall is used only in the event that the 54-inch outfall is blocked or cannot carry all water. Stop logs inside the Outfall Box normally direct all flow to the 54-inch outfall. Both outfalls exit the Outfall Box at the north end of the Plant site. The 54-inch outfall exits the RWQCP and discharges into an unnamed slough adjacent to the Palo Alto Airport. The pipe consists of individual 10-foot-long segments. The alignment of the outfall travels north beneath the airport apron (with parked airplanes above) and crosses over to the slough just south of the south end of the airport runway under a levee. It was installed in approximately 1964. It is a reinforced concrete pipe (RCP), 2,133-feet in length, which transitions to a 60-inch corrugated metal pipe (CMP) for the final 24-foot run into the unnamed slough. The outfall was installed in shallow earth using open trench construction methods with a few feet of cover and has no slope (i.e., is installed at the same invert along its entire length). Recent excavations to repair leaks in the outfall have revealed that the pipe cylinder is still in relatively good condition; however the rubber gasket joints have begun to fail in a handful of locations 12 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 and cause small leaks. Subsidence over the last 51 years has likely contributed to the small pipe leaks; the flowrate of the leaks have been tidally influenced when the pipe is surcharged. The Emergency Outfall is a 36-inch line that discharges to the former Yacht Harbor, which is now the Baylands tidal marsh within Baylands Park. The alignment travels east from the Outfall Box. It was installed in approximately 1956. It is also an RCP outfall, 950-feet in length, which transitions to a 36-inch CMP for the final 30-foot run into Mayfield Slough. III. SCOPE OF WORK The Consultant's scope of work shall include, but not necessarily be limited to the following: Task 1 – Design Services Task 1.1 New Outfall. The Consultant shall provide a design for a new pipeline alignment. Two pipe alignments are to be considered: a route that runs parallel to the existing line; and a route that avoids the airport apron and runs somewhat parallel to the levee to the east of the airport property. - Investigate tidal influence and sea level rise implications. Consider a check valve at the pipeline discharge into the slough. The check valve, if needed, should be a passive valve that requires little maintenance, and provides reliable outfall backflow prevention from surcharging. - Consider that the levee elevation could potentially be raised to address future sea level rise. The pipeline design should account for the additional load placed on it should the levee elevation be increased. Refer to the Preliminary Alternatives Report for the SAFER Bay Project, Task Order 2 (See attachment B15). For more information, contact staff in the Public Works Engineering Services Division and their engineering Consultant (HDR Engineers), who developed the report, and who are conducting an ongoing study of levee improvement options to address future sea level rise scenario. - Develop plans and specifications for the pipe material, isolation valves, jointing method, and construction methods. Regarding pipe materials and joining methods, Plant Engineering staff is interested in seamless HDPE piping but open to the Consultant’s recommendation. - Investigate pipe materials and joining methods and a recommendation of the best alternative for the Plant. - Consider the use of horizontal directional drilling (HDD), jack and bore, or micro-tunneling construction methods to minimize the construction impacts of the new alignment, especially where it crosses Embarcadero Road, areas of the levee, and/or the airport runway/taxiway. - Develop options for making the new pipeline tie-ins to the Outfall Box or to the Chlorine Contact Tank Outlet Box. - Address potential impacts to the 12-inch HDPE Renzel Marsh line that is 13 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 connected at the Outfall Box. Consider options to have the existing 12-inch Renzel Marsh suction pipe changed to a pumped connection (appx 30 h. p. submersible pump) from the old Chlorine Contact Tank outlet box instead of a gravity fed (tidally influenced) feed from the Outfall Box. The problem is this: the 12-inch line receives air and causes Renzel Marsh pump cavitation at the marsh pump in the Administration Building during very low tides or after plant shutdowns when the outfall box level is low. A VFD driven submersible pump would also have a higher suction head in the old Chlorine Contact Tank outlet box, match flow needs of the Renzel Marsh, and thereby lower energy consumption for this pumping. - Address impacts to the sampling connections at the Outfall Box needed for regulatory permit compliance on a daily basis, including sampling connections (all pumped by a sample pump at the Outfall Box) for peak flow grab samples, 24-hour composite samples taken daily and during bypasses with powered and refrigerated composite samplers, and 5-day flow through bioassay acute toxicity sampling. - Provide design drawings that are compliant with FAA design standards for airport construction. - Ensure that all areas of the RWQCP, the Airport, and the Baylands that are affected by the construction of the pipeline is returned to its original conditions or even improved. All landscaping, roads, curbs, fencing, etc. is to be restored. Task 1.2 Electrical, Instrumentation, and Control Systems Include electrical and instrumentation design of key analytical instruments. An Effluent Monitoring Station is envisioned to be located at the outlet of the pipeline to monitor several water quality parameters, primarily pH to lower upstream alkalinity chemical dosing costs but also potentially measurement of dissolved oxygen and temperature as well to reduce staff workload. - Develop the electrical design for power and signal conductor conduits to provide power circuits from the RWQCP to the Station. - Provide the control system interface for output signals, such to enable the analytical signals to be transmitted from the instruments to the Plant Allen- Bradley PLC and thereon to the iFix 5.8 SCADA System. - Provide a fenced or similar protective, secure enclosure for the Effluent Monitoring Station to protect against vandalism. The preferred location of the station is on the airport property. Fencing or enclosures need to comply with the Design Guidelines of the City of Palo Alto Baylands Nature Preserve. Refer to the Baylands Design Guidelines. - Note that any utilities at the levee, junction boxes at the airport, etc., will also need to be secured against vandalism and meet the requirements of agencies having jurisdiction over utilities in and around the levee as well as at the airport. Task 1.3 Existing 54-Inch Outfall Rehabilitation and/or Relining. 14 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 The Consultant shall to provide a design method to rehabilitate and/or reline the existing pipeline. - Provide a technical memorandum that investigates and summarizes the various rehabilitation and relining options to be considered, with a recommendation and reasoning for the method selected. - Develop plans and specifications for the pipe rehabilitation and/or relining option selected and the construction method. Task 1.4 Design Review Workshops. The Consultant shall include a design review workshop at the RWQCP at the 30%, 60%, and 90% design phases. A design review teleconference is sufficient at the 100% design phase. Task 1.5 Stakeholders and Outside Entities Impact Evaluation. The Consultant shall investigate how the design and the construction of the new pipeline will impact several stakeholders and other outside agencies. Recommend mitigation measures to reduce the potential impacts. - Provide a technical memorandum summarizing the impact of the construction and operation of the new pipeline with the various stakeholders and other entities having jurisdiction over infrastructure in the local vicinity. - Investigate the impact the new outfall will have on the Plant’s NPDES Permit and issues of the Regional Water Quality Control Board. Coordinate with Plant regulatory staff. - Ensure the design and construction will comply with the Baylands Master Plan. - Ensure that the pipe complies with the design standards and permit requirements of jurisdictions having oversight of the levee system. - Any disturbance to the existing levee may require permits from California Department of Fish and Wildlife, the USEPA, the U.S. Army Corps of Engineers, the Regional Water Quality Control Board, and the Bay Conservation and Development Commission. Investigate which permits will be required to allow for construction. Complete permitting applications and process applications as required. - Ensure that the design meets the requirements of the Palo Alto Planning & Transportation Commission (PTC) and the Parks and Recreation Commission (PARC) for acceptable land use. The PARC may require a Parks Improvement Ordinance (PIO), which may include the addition of vegetation and restoration of native habitat in the local area where the Outfall Line discharges into the Baylands. - Review the design requirements of the Palo Alto Airport business plan. - Ensure the pipeline alignment and construction methods through the airport property meet Federal Aviation Administration (FAA) criteria and are compatible with the airport business plan. - The Palo Alto Airport (PAA) has initiated a project on the airport property for the redesign of the Airport Apron and Runway. The Consultant selected for 15 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 the new outfall design project will be required to coordinate with the Airport’s on-call design Consultant, so as to avoid duplicate efforts and unnecessary redesign costs. Currently, PAA has contracts with C & S Companies and Mead & Hunt for engineering services. Task 1.6: CEQA Documentation The Consultant shall develop the documentation that is necessary to meet requirements of the California Environmental Quality Act (CEQA) for the project. Staff anticipate the need for an Initial Study/Mitigated Negative Declaration (IS/MND) for the project, at a minimum. The Consultant shall address environmental concerns related to the pipeline alignment, including the construction methods, as it relates to the levee. - Consultant shall evaluate the impacts of construction and levee protection during construction. - Consultant shall evaluate the pipeline alignment and construction impacts on the Baylands’ biological and recreational resources. - Air emissions and noise associated with truck traffic and heavy equipment during construction, although not expected to be substantial, needs to be considered. The impacts to these resources need to be evaluated and are required to be less than the CEQA significance threshold to allow adoption of an MND. The City also has a Noise Ordinance that must be complied with, as outlined under Task 1.7. - Consultant needs to carefully consider the impact of construction at the Baylands. This preserve has a substantial resident population of birds as well as it is a major migratory stopover on the Pacific Flyway. The Consultant shall evaluate and design mitigation measures for possible impact to Ridgway’s Rail and Salt Marsh Harvest Mouse habitat. - If there are no significant impacts to be mitigated, the MND documentation is anticipated to be most important aspect of the CEQA document. The Consultant shall prepare the document, respond to comments, and attend a public hearing at an evening meeting of the Palo Alto City Council. NOTE: If an EIR is required, a contract amendment for Council approval would be prepared for the additional work. Task 1.7 – Permits and Regulations Design shall comply with Palo Alto Municipal Code, state and federal regulations, CalOSHA requirements, and so forth. Details are listed below. - Consultant will investigate what permits are necessary for the project and will assist the City to obtain all permits required by the outside stakeholders, as outlined in Task 1.5. - Regional Water Quality Control Board (RWQCB): Plant staff will handle coordination with RWQCB staff for the construction of the new pipeline. Consultant shall provide technical support, as necessary, as it relates to the 16 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 new pipeline. - Avoidance measures for Special Status Wildlife Species during construction may be required by the Planning and Transportation Commission. Pre- construction nesting surveys, biological monitoring of work activities for active bird nests, as well as training construction staff to recognize these habitat activities, are all part of the mitigation measures that the construction Contractor may need to implement. The Consultant shall develop specifications for all required mitigation measures. - The Consultant needs to be aware of the coordination required with the City stakeholders. The City stakeholders that could have a role in the approval process for various aspects of this project include The Planning and Transportation Commission (PTC), City Council (PACC), and the Parks and Recreation Commission (PARC). Palo Alto Planning Department Coordinated Approvals: Permits and approvals are required: Specifically, the design shall comply with the plant and airport zoning requirements of a PF (D), which is a Public Facilities District (see PAMC Chapter 18.28). The airport and airport related uses are conditionally permitted (CUP) land uses for the Special Purpose Districts. Comply with noise ordinance at PAMC Chapter 9.10 and Palo Alto Comprehensive Plan Goal N-8, regarding noise. Conduct a noise study, as necessary to comply with PAMC and Comprehensive Plan goal. RWQCP will pay Planning Department fees. Planning & Transportation Commission (PTC): It is anticipated that Planning Department internal Staff Review of the project will be sufficient, however, assume one public meeting for approval at PTC. Palo Alto City Council (PACC): Assume one public hearing at PACC for project CEQA approval. Parks and Recreation Commission (PARC): A Park Improvement Ordinance application is required by PARC for review, with approvals by PARC and PACC. Assume one public hearing for the Park Improvement Ordinance approval. Tree Removal Trees that must be removed must be detailed on a landscape drawing and a permit obtained prior to removal. As there are a few trees located in the vicinity of the Plant Outfall Box, one or more trees may require being removed to allow for construction to take place. Tree removal should be avoided, if possible. Task 1.8 Utility Coordination - Show buried utilities by researching all available sub-surface utilities owned 17 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 by the City, the PAA, EPASD and third parties. - Include utility re-routing designs as necessary for interfering utilities at the Plant, in Embarcadero Road, and at the airport area including street lighting lines, high voltage lines, low voltage lines, signal, irrigation control, sewer, water, phone, fiber optic, recycled water, gas, cable, and storm drain. - Include design for maintaining and restoring impacted landscaping and landscaping irrigation at the Plant, along Embarcadero Road at the airport, and along the levee. - Include design for reconstructing the levee trail for park users. Include trail control detours and work restrictions for use during construction per requirements of Palo Alto Community Services Department Open Space staff. - Include design for trench backfill, temporary paving, repaving, surface restoration, and restriping per Plant, City Public Works Department, City Utilities Department, Palo Alto Airport, and FAA standards and requirements. Follow City Public Works and Utilities Standards. Follow FAA standards in airport area of influence. Task 2 – Construction Coordination Task 2.1 Shutdown / Bypass for Piping Tie-Ins - Develop plans and work restrictions as a guideline for the contractor to set up to isolate the Outfall Box from the work and to perform the new pipe tie-in to the Outfall Box, taking into account the seasonal flow conditions and continuous operation of the Plant. - The work restrictions are to include a detailed plan for the contractor to coordinate the shutdown (if required) with Plant Operations for a temporary bypass line / pumping operation that will be required while making piping tie- ins, pipe pressure testing, and commissioning the new line. Task 2.2 Airport and Embarcadero Road Work Restrictions - Develop plans and work restrictions in order to minimize the impact to the Airport operations during the construction. - Investigate the current Federal Aviation Administration (FAA) requirements for the construction on and in the Airport Influence Area of existing airports. Include these requirements in the project specifications for work restrictions. Prepare FAA paperwork for submission in advance of Planning Department and CEQA approvals. - Develop traffic control design drawings by a registered professional for approval by the Transportation group in the Planning Department for stipulating traffic control requirements for construction impacting the right-of- way in Embarcadero Road. Include these requirements in the project specifications for work restrictions. Task 2.3 Laydown and Pipe Storage Area Coordination - If required, Consultant shall prepare drawings indicating where trucks can unload pipe segments, backfill materials, etc. Drawings shall indicate where pipe segments can be stored during construction. If lease arrangements are needed, Consultant will coordinate requirements and identify potential sites 18 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 that the City can use in its invitation for bid documents. Task 3 – Services during Bidding Although the design of the new pipeline and rehabilitation/relining design of the existing 54-inch outfall will be performed under the scope of this design contract, it is likely that the construction of the project will take place in two phases. The new pipeline will be installed first, and the rehabilitation of the existing line would not take place until a later date. This point should be kept in mind in the development of the design package and for services during bidding (SDB) and services during construction (SDC). The cost proposal shall include breakdown for each phase of construction. Consultant shall assist the City in preparation of construction bid package. The construction bid form will be broken down into two phases, the construction of the new pipeline and rehabilitation of the existing 54-inch outfall. Task 3.1 – Prepare Clarifications and Support City Response Consultant will receive inquiries from potential bidders pertaining to the bid documents and will provide responses to requests for clarifications and/or information from prospective bidders. Task 3.2 – Prepare Addenda Consultant shall assist the City with preparation of Project addenda and furnish the original plans, specifications and/or details required for said addenda Task 3.3 – Pre-Bid Conference Support / Site Walk Consultant will attend and assist the City at the pre-bid conference as well as the project site walk-through for each of the project phase packages. Task 4 – Services during Construction Task 4.1 New Pipeline Services. - Consultant shall review submittals from the contractor for conformance with the Contract Documents. The Consultant shall review and return the submittal comments to the City within seven calendar days. - Consultant shall prepare written responses to the Requests for Information (RFI) submitted by the contractor. The Consultant shall review, comment and return the RFI responses within seven calendar days. - Consultant shall review and validate the Contract Change Order requests submitted by contractor for accuracy and correctness, as requested by the City. - As requested, the Consultant shall attend periodic Project Progress Meetings with the Contractor. Please allow for one meeting per month, at a minimum, during the construction phase. - The Consultant shall provide the technical support to the City during testing of the new pipeline alignment. The Consultant shall assist the City in monitoring, documenting and/or validating any testing required by the permitting agencies. 19 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 - The Consultant shall review equipment O&M Manuals for valves, instruments, etc. - The Consultant shall review the “as-built” or “red line” drawings and documents maintained by the contractor during construction. Upon construction completion, the Consultant shall prepare one full-size, one half-size (11”X17”) sets and two electronic copies of the record drawings. The electronic copies shall be (a) in AutoCAD 3D Civil 2013 format and (b) in a format (such as ‘DXF’) suitable for uploading into City’s GIS system. The record drawings shall consist of annotated contract drawings and electronic files showing changes in design and construction. Task 4.2 Existing Outfall Relining and/or Rehabilitation Services. - Consultant shall review submittals from the contractor for conformance with the Contract Documents. The Consultant shall review and return the submittal comments to the City within seven calendar days. - Consultant shall prepare written responses to the Requests for Information (RFI) submitted by the contractor. The Consultant shall review, comment and return the RFI responses within seven calendar days. - Consultant shall review and validate the Contract Change Order requests submitted by contractor for accuracy and correctness, as requested by the City. - As requested, the Consultant shall attend periodic Project Progress Meetings with the Contractor. Please allow for one meeting per month, at the minimum, during the construction phase. - The Consultant shall provide the technical support to the City during testing of the repaired pipeline alignment. The Consultant shall assist the City in monitoring, documenting and/or validating any testing required by the permitting agencies. Task 5 – Specialty Services Task 5.1 Specialty Services. Consultant shall provide specialty services as requested by the City that are deemed to be important supplements to the design of the project. These services include Geotechnical CPT, Trenchless supplemental ESDC, CEQA Noise Evaluation, and a Risk Workshop and technical memorandum. Task 5.2 Reimbursables. Fees for this should include miscellaneous costs incurred such as travel, copying documents, film, video, photographs, computer, and postage expenses; and assistance during testing. The expenses for above are reimbursed at cost. Task 6 – Project Management This task covers work activities on the proposed Project related to project management, project administration, and coordination with the City and various agencies. This task also consists of the activities associated with measuring and reporting the progress of the project. 20 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 Task 6.1 Project Management Communications. Consultant Project Manager will conduct a bi-weekly status call with the project team, including the environmental and permitting subconsultants. The frequency of the internal team meeting is anticipated to be less frequent during final production phases. Task 6.2 Project Status Updates & Invoicing. Consultant will establish and maintain a Project accounting system to organize and track Project costs in accordance with the Professional Services Agreement (Agreement) and the work breakdown structure (WBS). Consultant will prepare and submit monthly invoices electronically to the City in accordance with the Agreement. Task 6.3 Project Set-Up. This task addresses activities related to initial project set up once the City has authorized the work. It also covers contract and authorization modifications, if any, that may be necessary during the course of the Project. Task 6.4 Health & Safety. This task covers work activities to prepare a Health and Safety Plan (HASP) and a Hazard Appraisal and Recognition Plan (HARP). Task 6.5 QA / QC. Consultant will conduct a quality assurance/quality control (QA/QC) program for all work activities included in this scope of services including a Concept & Criteria Review during the preliminary design phase (10%), and Quality Control Reviews of all intermediate and final deliverables. IV. DELIVERABLES 30% Design - Develop Design Criteria - Provide a Preliminary Design Report (PDR) that discusses the impact to permits and regulations, CEQA research and evaluation, and compliance with outside stakeholders’ requirements. - Develop a technical memorandum with a geotechnical investigation, including drilling permits, of the soil conditions and how the soil could impact the finished pipeline. - Provide technical memorandum detailing hydraulic design decisions and analysis for a new outfall. Provide details of the impact to the Plant discharge permit and if it is possible to use the Emergency Outfall during the piping tie- in to the Outfall Box - Provide a technical memorandum that discusses the rehabilitation and/or relining options for the existing pipeline and how the recommended option was arrived at. The memo should also include the details of the repair / rehabilitation methods for the existing 54-inch outfall. 21 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 - Provide preliminary plan and profile for the proposed parallel pipeline alignment. - Provide a preliminary cost estimate for the proposed parallel pipeline, and separately for rehabilitation of the existing outfall. - Provide six hardcopy sets of the PDR, technical memorandums and associated documents and one electronic copy (PDF would suffice). 60% Design - Draft of the Final Preliminary Design Report (PDR), as necessary based on further correspondence with CA CEQA and outside stakeholders’ input. The report should discuss the City’s desire to minimize the impact to the environment, with an effort towards gaining adoption of an MND. - Develop construction documents, which include drawings, technical specifications, work restrictions and other special conditions. - Consultant shall incorporate all the comments and concerns issued during the previous review. The design shall be the true reflection of City’s intent for this project, which is to provide a reliable, leak-free outfall. - Provide four sets of drawings, specifications and other 60% deliverable documents. - Update construction cost estimate for each task and phase. 90% Design and Final Design - - Consultant shall perform final updates derived from City’s comments and Consultant’s own internal quality control and audits. - Provide a Final Design Report. Discuss CEQA compliance and the steps outlined to gain the adoption of an MND. - The pipeline design and the method to re-line the existing pipeline, at this stage, is to include complete construction documents with plans, specifications, design calculations and the final construction cost estimates. - Prepare the design package to secure applicable permitting and soliciting construction / procurement for each task. Specifications are to be developed using the 2016 edition of the CSI Master Format for specifications. - Provide one unbound copy and one Microsoft Word electronic copy of final specifications. 22 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 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 Completion No. of Weeks From NTP 1. Design Kick-Off Meeting 2 2. Design Workshop 1 6 3. Design 30% 15 4. Design Workshop 2 21 5. Design 60% 31 6. Design 90% 39 7. Design Final 44 8. Work Plan for Outfall Box Piping Tie-Ins 39 9. Services During Bidding 54 10. Services During Construction & Closure 106 23 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 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, and as set forth in the budget schedule below. Compensation shall be calculated based on the hourly rate schedule attached as exhibit C-1 up to the not to exceed budget amount for each task set forth below. 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, including reimbursable expenses, and the total compensation for Additional Services do not exceed the amounts set forth in Section 4 of this Agreement. BUDGET SCHEDULE NOT TO EXCEED AMOUNT Task 1 $272,847 (Design Services) Task 2 $19,697 (Construction Coordination) Task 3 $21,035 (Services during Bidding) Task 4 $62,155 (Services during Construction) Task 5 24,041 (Specialty Services) Task 6 (Project Management) $20,650 Sub-total Basic Services $420,425 Reimbursable Expenses $3,500 Total Basic Services and Reimbursable expenses $423,925 Additional Services (Not to Exceed) $42,393 24 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 Maximum Total Compensation $466,318 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: A. Travel outside the San Francisco Bay area, including transportation and meals, will be reimbursed at actual cost subject to the City of Palo Alto’s policy for reimbursement of travel and meal expenses for City of Palo Alto employees. B. Long distance telephone service charges, cellular phone service charges, facsimile transmission and postage charges are reimbursable at actual cost. All requests for payment of expenses shall be accompanied by appropriate backup information. Any expense anticipated to be more than $1,000 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 expense, 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 Work required because the following conditions are not satisfied or are exceeded shall be considered as additional services: 1. Should an Environmental Impact Report (EIR) be required due to CEQA complications, the additional services fund may be considered for use on this task, depending upon the estimated cost to perform this service. 2. Upon completion of the pipeline capacity analysis, should it be determined that an effluent pump station is required, the additional services fund may be considered for use on this task, depending upon the estimated cost to perform this service. 25 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 EXHIBIT “C-1” HOURLY RATE SCHEDULE Kennedy/Jenks Billing Rates Classification Hourly Rate CAD-Technician .................................................................................................... $96 Designer-Senior Technician ................................................................................ $131 Engineer-Scientist-Specialist 1 ............................................................................ $110 Engineer-Scientist-Specialist 2 ............................................................................ $126 Engineer-Scientist-Specialist 3 ............................................................................ $148 Engineer-Scientist-Specialist 4 ............................................................................ $163 Engineer-Scientist-Specialist 5 ............................................................................ $182 Engineer-Scientist-Specialist 6 ............................................................................ $194 Engineer-Scientist-Specialist 7 ............................................................................ $217 Engineer-Scientist-Specialist 8 ............................................................................ $254 Engineer-Scientist-Specialist 9 ............................................................................ $259 Project Administrator ............................................................................................. $90 Administrative Assistant ........................................................................................ $70 Aide ....................................................................................................................... $55 Sub-consultant Billing Rates Firm Name Hourly Rate Abrams Associates ……………………………………………………………….$200 Bohley Consul ting, Inc. ………………………………………………………….$200 CSC………………………………………………………………………………. $210 McMillen Jacobs………………………………………………………………….$210 Tanner Pacific, Inc. ………………………………………………………………$220 WRA ……………….................................................................................................$190 26 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 EXHIBIT “D” INSURANCE REQUIREMENTS CONTRACTORS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, SHALL FOR THE TERM OF THE CONTRACT OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW, AFFORDED BY COMPANIES WITH AM 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 EMPLOYER’S LIABILITY STATUTORY STATUTORY YES 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 $1,000,000 $1,000,000 $1,000,000 YES AUTOMOBILE LIABILITY, INCLUDING ALL 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 YES 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: CONTRACTOR, 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 CONTRACTOR AND ITS SUBCONSULTANTS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS’ COMPENSATION, EMPLOYER’S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS ADDITIONAL INSUREDS CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES. I. INSURANCE COVERAGE MUST INCLUDE: A. A PROVISION FOR A WRITTEN THIRTY (30) 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. C. DEDUCTIBLE AMOUNTS IN EXCESS OF $5,000 REQUIRE CITY’S PRIOR APPROVAL. II. CONTACTOR MUST SUBMIT CERTIFICATES(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE AT THE FOLLOWING URL: https://www.planetbids.com/portal/portal.cfm?CompanyID=25569. III. ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO “ADDITIONAL INSUREDS” 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 INSUREDS. B. CROSS LIABILITY 27 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS 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 CONSULTANT 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 CONSULTANT SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. VENDORS ARE REQUIRED TO FILE THEIR EVIDENCE OF INSURANCE AND ANY OTHER RELATED NOTICES WITH THE CITY OF PALO ALTO AT THE FOLLOWING URL: HTTPS://WWW.PLANETBIDS.COM/PORTAL/PORTAL.CFM?COMPANYID=25569 OR HTTP://WWW.CITYOFPALOALTO.ORG/GOV/DEPTS/ASD/PLANET_BIDS_HOW_TO.ASP 28 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 EXHIBIT “E” DIR REGISTRATION FOR PUBLIC WORKS CONTRACTS This Exhibit shall apply only to a contract for public works construction, alteration, demolition, repair or maintenance work, CITY will not accept a bid proposal from or enter into this Agreement with CONSULTANT without proof that CONSULTANT and its listed subcontractors are registered with the California Department of Industrial Relations (“DIR”) to perform public work, subject to limited exceptions. City requires CONSULTANT and its listed subcontractors to comply with the requirements of SB 854. CITY provides notice to CONSULTANT of the requirements of California Labor Code section 1771.1(a), which reads: “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 contractor is registered to perform public work pursuant to Section 1725.5 at the time the contract is awarded.” CITY gives notice to CONSULTANT and its listed subcontractors that CONSULTANT is required to post all job site notices prescribed by law or regulation and CONSULTANT is subject to SB 854-compliance monitoring and enforcement by DIR. CITY requires CONSULTANT and its listed subcontractors to comply with the requirements of Labor Code section 1776, including: 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, CONSULTANT and its listed subcontractors, in connection with the Project. 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 CONSULTANT and its listed subcontractors, respectively. At the request of CITY, acting by its project manager, CONSULTANT 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 CONSULTANT and its listed subcontractors to submit the certified payroll records to the project manager at the end of each week during the Project. If the certified payroll records are not produced to the project manager within the 10-day period, then CONSULTANT and its listed subcontractors shall be subject to a penalty of one hundred 29 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 Professional Services Rev. April 27, 2016 dollars ($100.00) per calendar day, or portion thereof, for each worker, and CITY shall withhold the sum total of penalties from the progress payment(s) then due and payable to CONSULTANT. Inform the project manager of the location of CONSULTANT’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. 30 DocuSign Envelope ID: 8AFF54AF-2F27-4F1F-9554-3282897288E2 City of Palo Alto (ID # 7293) City Council Staff Report Report Type: Consent Calendar Meeting Date: 10/17/2016 City of Palo Alto Page 1 Summary Title: Annual Williamson Act Contract Renewal Title: Annual Review of Williamson Act Contract Renewals, Approval of Nonrenewal for APN 351-05-050 and Approval of Exemption Under Section 15317 of the California Environmental Quality Act From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that the City Council review the Williamson Act Properties Report for Calendar Year 2016 (Attachment A), approve the renewal of 23 contracts, accept and approve the nonrenewal request filed in March 2016 for APN 351-05-050, direct staff to file the current list of Williamson Act properties with the appropriate agencies, and find the actions exempt from review under the California Environmental Quality Act per Categorical Exclusion 15317. Executive Summary The California Land Conservation Act of 1965, commonly known as the Williamson Act, is a state program to discourage agricultural lands from being converted to urban uses. The City of Palo Alto currently has 23 properties that are subject to this program and requesting renewal. The proposed action would continue 23 existing contracts between the City and landowners, which are aimed at preserving agricultural and compatible open-space uses. The report also acknowledges the list of properties that have filed to not renew their Williamson Act contracts since 2008. The City has received one new request for nonrenewal during this reporting cycle. Background The California Land Conservation Act of 1965, commonly known as the Williamson Act, is a state program to discourage agricultural lands from being converted to urban uses, to preserve open space and to promote an efficient urban growth pattern. The program provides property tax relief to owners of agricultural land who agree to limit the use of their property to agricultural or other approved compatible uses. City of Palo Alto Page 2 On July 24, 1974, the City of Palo Alto adopted Ordinance No. 2663 to establish rules for both establishing and administering Williamson Act contracts for Palo Alto properties. Highlights of the rules regarding administration of established contracts include:  Contracts limit the allowable uses of the property to what is described in the contract.  Contracts remain in place when a property is sold and new owners are subject to the same use restrictions.  Contracts are for 10-year terms and have a renewal date of January 1.  Each year—at least 80 days prior to that renewal date—the Council reviews the contracts and, at that time, may initiate a notice of nonrenewal for any contract or approve a notice of nonrenewal submitted by a landowner. If the Council takes such action, then that contract does not renew on January 1 and terminates nine years later.  Under certain conditions, the Council may also approve a landowner’s request to cancel a contract.  Contracts, for which the Council has not approved a notice of nonrenewal or a cancellation, automatically renew for another 10-year term each January 1. Discussion Under the California Land Conservation Act Program (Williamson Act), private landowners voluntarily restrict their land to agricultural and compatible open-space uses under minimum 10-year rolling term contracts administered by City of Palo Alto. In return, restricted parcels are assessed for property tax purposes at a rate consistent with their actual use or generated income, rather than potential market value. The attached Williamson Act Report (Attachment A) describes the parcels that were under contract during this calendar year with their 2016 assessed land value. The report identifies the parcels that will have their contracts renewed and those for which a notice of nonrenewal had been filed. Attachment B is also provided to show the location of these parcels on a map. At this time, the Council may initiate a notice of nonrenewal for any contract and have that notice take effect this year. The updated list of properties under contract will be filed in the City Clerk’s office and the information will be forwarded to the appropriate agencies. Properties under Contract Renewal: Currently, there are 23 properties renewing their contract with the City of Palo Alto. Approximately 364 acres of land are under Williamson Act contracts in Palo Alto, as compared to 306,551 acres in Santa Clara County. The 23 contracts will renew for another 10-year term starting from January 1, 2017. Of the 23 contracts, the private Palo Alto Hills Golf and Country Club, is not eligible for tax benefits. Although a golf course is a permitted use, only golf courses that are open to the public and charge minimal green fees are eligible for tax benefits. Properties under Contract Nonrenewal: City of Palo Alto Page 3 A new Williamson Act contract nonrenewal request was filed in March of 2016 by the property owner for Assessor’s Parcel Number or APN 351-05-050 (see Attachment A page 9). No reason was given for the request, and there would be no change in development potential as a result of non-renewal. Staff has processed and recorded the owner’s request with Santa Clara County Recorder’s Office and requests that the City Council accept and approve this nonrenewal request. Upon City Council’s approval, the ten year nonrenewal cycle will commence on January 1, 2017 and the effective termination date will be December 31, 2026 (see Attachment C). Attachment A (pages 8 and 9) also includes a list of five properties owned by Midpeninsula Regional Open Space District that were approved for nonrenewal by City Council in 2008 (properties# 1-4) and 2014 (property#5). The ten year nonrenewal cycle for these properties has already begun and the expected end dates for these contracts are December 31, 2017 and January 1, 2024. This year’s report also acknowledges the inclusion of five parcels owned by Stanford University under Williamson Act contract which were missing from prior reporting. The parcels comprise of APN: 142-16-052, -057, -064, -065, and -069. These contracts will also be renewed for another 10-year term, starting from January 1, 2017. The California Department of Conservation’s Williamson Act Program requires participating cities and counties to complete and submit applications for an Open Space Subvention Act payment per Government Code section 16144, which states: "On or before October 31 each year, the governing body of each county, city, or city and county shall report to the Secretary of the Resources Agency the number of acres of land under its regulatory jurisdiction which qualify for state payments pursuant to the various categories enumerated in Section 16142, together with supporting documentation as the secretary by regulation may require.” While the State no longer provides meaningful subvention payments to local agencies, this reporting requirement remains in the law. Staff recommends that the City Council (1) renew the Williamson Act contracts for the 23 parcels identified in Attachment A, and (2) accept and approve the new nonrenewal request. Following the Council’s decision, the list of affected properties/acreages will be filed in the City Clerk’s Office and will be forwarded to the State Department of Conservation, Division of Land Resource Protection by October 31, 2016, in compliance with the Williamson Act. Resource Impacts Minimal resource impacts would result from the recommended action. Forgone property tax revenue is generally not significant for properties in Williamson Act contracts here in Palo Alto. Historically, the City of Palo Alto received approximately $1,000 a year in subvention payments from the State. However, the State has suspended funding for these payments. Most recently, Assembly Bill 1265, passed on July 15, 2011, again allowed participating cities and counties to recapture 10% of the benefits; however, implementation of this provision is generally only cost effective for cities and counties that have significant acreage under contract. City of Palo Alto Page 4 Policy Implications The recommended action implements Ordinance 2663 regarding the administration of the Williamson Act for Palo Alto properties. The Williamson Act in general complies with the land use policies of the Comprehensive Plan and specifically supports Goal L-1 regarding growth management as well as Policy L-1 regarding the extent of urban development. Environmental Review The recommended action of renewal of 23 contracts under the Williamson Act is exempt from review under the California Environmental Quality Act per Categorical Exclusion 15317 (Open space contracts or easements). This action of approving the attached report does not have the potential for causing a significant effect on the environment. Attachments:  Attachment A: WA 2016 Report (PDF)  Attachment B: Williamson Act Parcels 2016 Map (PDF)  Attachment C: Recorded Notice of NonRenewal _3849 Page Mill Road (PDF) Williamson Act Properties Report for Calendar Year 2016 On the following pages is a list of the 29 Palo Alto properties that were enrolled in the Williamson Act during the calendar year of 2016. About the Williamson Act About this List/Report The California Land Conservation Act of 1965, commonly known as the Williamson Act is a state program to discourage agricultural lands from being converted to urban uses. The program provides property tax relief to owners of agricultural land who agree to limit the use of their property to agricultural or other approved compatible uses. On July 24, 1974, the City of Palo Alto adopted Ordinance No. 2663 to establish rules for both establishing and administering Williamson Act contracts for Palo Alto properties. Highlights of the rules regarding administration of established contracts include: Contracts limit the allowable uses of the property to what is described in the contract. Contracts remain in place when a property is sold and new owners are subject to the same use restrictions. Contracts are for 10-year terms and have a renewal date of January 1. Each year—at least 80 days prior to that renewal date—the Council reviews the contracts and, at that time, may initiate a notice on nonrenewal for any contract or approve a notice of nonrenewal submitted by a landowner. If the Council takes such action then that contract does not renew on January 1 and terminates 9 years later. Under certain conditions, the Council may also approve a landowner's request to cancel a contract. Contracts, for which the Council has not approved a notice of nonrenewal or a cancellation, automatically renew for another 10-year term each January1. 23 contracts will renew on January 1, 2017 if the Council approves this report. 6 contracts will not renew because Notices of Nonrenewal have been approved or filed. See individual records for termination dates. Note: One of the 23 contracts does not include tax benefits. Although the Palo Alto Hills Golf Course is under contract the use is not eligible for tax benefits--see notes for this parcel. 9/21/2016 Page 1 of 9S:\PLAN\PLADIV\Advance Planning\Williamson Act\2016 Will Renew on January 1, 2017 Palo Alto Hills Golf and Country Club at 3000 Alexis Drive Although this property is under contract, there are no tax benefits.A golf course may only be eligible for tax benefits if it is open to the public and charges minimal green fees. Prime Owner: 1 Assessed Value Land Class: 5/1/1973Contract Start: Unchanged; contract will continue for at least another 10 years.Contract Status: PALO ALTO HILLS GOLF AND COUNTRY CLUB INC, 3000 ALEXIS DR, PALO ALTO CA Acreage: General Notes: 119.92 182-35-035APN: 2014:$1,377,466.00 Value Notes: 4279Resolution No: 2015:$1,404,987.0 2016 $1,426,413.0 No address; adjacent to Country Club at 3000 Alexis Drive Prime Owner: 2 Assessed Value Land Class: 5/1/1973Contract Start: Unchanged; contract will continue for at least another 10 years.Contract Status: PALO ALTO HILLS GOLF AND COUNTRY CLUB INC, 3000 ALEXIS DR, PALO ALTO CA Acreage: General Notes: 5.52 182-35-008APN: 2014:$49,981.00 Value Notes: 4279Resolution No: 2015:$50,979.00 2016 $51,756.00 Open Space land adjacent to the Arastradero Preserve Prime Owner: 3 Assessed Value Land Class: UnknownContract Start: Unchanged; contract will continue for at least another 10 years.Contract Status: CITY OF PALO ALTO, 1305 MIDDLEFIELD RD, PALO ALTO CA Acreage: General Notes: 11.42 182-33-014APN: 2014:$0.00 Value not assessed because owned by public/quasi public agencyValue Notes: UnknownResolution No: 2015:$0.00 2016 $0.00 9/21/2016 Page 2 of 9S:\PLAN\PLADIV\Advance Planning\Williamson Act\2016 Coyote Hill Rd, Palo Alto, 94304 Non Prime Owner: 4 Assessed Value Land Class: UnknownContract Start: Unchanged; contract will continue for at least another 10 years.Contract Status: LELAND STANFORD JR UNIVERSITY BOARD OF TR, 3160 PORTER DR STE 200, PALO ALTO CA Acreage: General Notes: 13.48 minus 1 acre for Homesite = 12.48 142-16-069APN: 2014:$6,127.00 Value Notes: UnknownResolution No: 2015:$6,419.00 2016 $6,419.00 Coyote Hill Rd, Palo Alto, 94304 Non Prime Owner: 5 Assessed Value Land Class: UnknownContract Start: Unchanged; contract will continue for at least another 10 years.Contract Status: LELAND STANFORD JR UNIV THE BD OF TR OF THE, 3160 PORTER DR STE 200, PALO ALTO CA Acreage: General Notes: 37.02 minus 1 acre for Homesite = 36.02 142-16-052APN: 2014:$13,461.00 Value Notes: UnknownResolution No: 2015:$14,102.00 2016 $14,102.00 Coyote Hill Rd, Palo Alto, 94304 Non Prime Owner: 6 Assessed Value Land Class: UnknownContract Start: Unchanged; contract will continue for at least another 10 years.Contract Status: LELAND STANFORD JR UNIV THE BD OF TR OF THE, 3160 PORTER DR STE 200, PALO ALTO CA Acreage: General Notes: 16.33 minus 1 acre for Homesite = 15.33 142-16-057APN: 2014:$7,422.00 Value Notes: UnknownResolution No: 2015:$7,776.00 2016 $7,776.00 Deer Creek Rd, Palo Alto, 94304 Non Prime Owner: 7 Assessed Value Land Class: UnknownContract Start: Unchanged; contract will continue for at least another 10 years.Contract Status: LELAND STANFORD JR UNIV THE BD OF TR OF THE, 3160 PORTER DR STE 200, PALO ALTO CA Acreage: General Notes: 5.04 minus 1 acre for Homesite = 4.04 142-16-064APN: 2014:$2,290.00 Value Notes: UnknownResolution No: 2015:$2,399.00 2016 $2,399.00 9/21/2016 Page 3 of 9S:\PLAN\PLADIV\Advance Planning\Williamson Act\2016 Deer Creek Rd, Palo Alto, 94304 Non Prime Owner: 8 Assessed Value Land Class: UnknownContract Start: Unchanged; contract will continue for at least another 10 years.Contract Status: LELAND STANFORD JR UNIV THE BD OF TR OF THE, 3160 PORTER DR STE 200, PALO ALTO CA Acreage: General Notes: 17.70 minus 1 acre for Homesite = 16.70 142-16-065APN: 2014:$8,045.00 Value Notes: UnknownResolution No: 2015:$8,428.00 2016 $8,428.00 El Camino Park (west of Palo Alto Ave to the creek) Prime Owner: 9 Assessed Value Land Class: UnknownContract Start: Unchanged; contract will continue for at least another 10 years.Contract Status: LELAND STANFORD JR UNIV BD OF TR, PO BOX 10250, PALO ALTO CA Acreage: General Notes: 0.72 12031001APN: 2014:$10,036.00 The City of Palo Alto leases this land for public use; however, it is privately owned.Value Notes: UnknownResolution No: 2015:$10,514.00 2016 $10,514.00 El Camino Park (east of Palo Alto Ave to University Ave) Prime Owner: 10 Assessed Value Land Class: UnknownContract Start: Unchanged; contract will continue for at least another 10 years.Contract Status: LELAND STANFORD JR UNIVERSITY THE BD OF TR, PO BOX 10250, PALO ALTO CA Acreage: General Notes: 10.00 120-31-009APN: 2014:$139,636.00 The City of Palo Alto leases this land for public use; however, it is privately owned.Value Notes: UnknownResolution No: 2015:$146,285.00 2016 $146,285.00 No address; on Page Mill Road; below Foothill Open Space Preserve Non Prime Owner: 11 Assessed Value Land Class: UnknownContract Start: Unchanged; contract will continue for at least another 10 years.Contract Status: GUHSE RICHARD D TRUSTEE, 95 SPRING GROVE RD, HOLLISTER CA Acreage: General Notes: 20.01 351-05-043APN: 2014:$1,090.00 Value Notes: UnknownResolution No: 2015:$1,142.00 2016 $1,142.00 9/21/2016 Page 4 of 9S:\PLAN\PLADIV\Advance Planning\Williamson Act\2016 3837 Page Mill Rd, Palo Alto, 94304 Non Prime Owner: 12 Assessed Value Land Class: UnknownContract Start: Unchanged; contract will continue for at least another 10 years.Contract Status: LAUTZENHEISER DAVID P AND CYNTHIA TRUSTEE, 3837 PAGE MILL RD, LOS ALTOS CA Acreage: General Notes: 10.00 minus 1 acre for Homesite = 9.00 351-05-042APN: 2014:$383,196.00 Value Notes: UnknownResolution No: 2015:$390,866.00 2016 $396,818.00 3845 Page Mill Rd, Palo Alto, 94304 Non Prime Owner: 13 Assessed Value Land Class: 2/16/1976Contract Start: Unchanged; contract will continue for at least another 10 years.Contract Status: BLOCK JUDITH A TRUSTEE, 4201 BEACH DR SW, SEATTLE WA Acreage: General Notes: 8.72 minus 1 acre for Homesite = 7.72 351-05-024APN: 2014:$50,401.00 Value Notes: UnknownResolution No: 2015:$51,419.00 2016 $52,196.00 3855 Page Mill Rd, Palo Alto, 94306 Non Prime Owner: 14 Assessed Value Land Class: UnknownContract Start: Unchanged; contract will continue for at least another 10 years.Contract Status: SUPPES PATRICK K, PO BOX 60970, PALO ALTO CA Acreage: General Notes: 10.00 351-05-049APN: 2014:$500,130.00 Value Notes: UnknownResolution No: 2015:$510,122.00 2016 $517,901.00 3865 Page Mill Rd, Palo Alto, 94304 Non Prime Owner: 15 Assessed Value Land Class: UnknownContract Start: Unchanged; contract will continue for at least another 10 years.Contract Status: CARLAND GRACE TRUSTEE, 3865 PAGE MILL RD, LOS ALTOS HILLS CA Acreage: General Notes: 10.00 minus 1 acre for Homesite = 9.00 351-05-048APN: 2014:$34,639.00 Value Notes: UnknownResolution No: 2015:$35,345.00 2016 $35,876.00 9/21/2016 Page 5 of 9S:\PLAN\PLADIV\Advance Planning\Williamson Act\2016 3875 Page Mill Rd, Palo Alto, 94304 Non Prime Owner: 16 Assessed Value Land Class: UnknownContract Start: Unchanged; contract will continue for at least another 10 years.Contract Status: KNISS RICHARD D TRUSTEE & ET AL, 1985 COWPER ST, PALO ALTO CA Acreage: General Notes: 10.00 351-05-047APN: 2014:$545.00 Value Notes: UnknownResolution No: 2015:$571.00 2016 $571.00 3885 Page Mill Rd, Palo Alto, 94304 Non Prime Owner: 17 Assessed Value Land Class: UnknownContract Start: Unchanged; contract will continue for at least another 10 years.Contract Status: LUCIW WILLIAM W AND SHARON T TRUSTEE, 3885 PAGE MILL RD, LOS ALTOS CA Acreage: General Notes: 8.45 minus 1 acre for Homesite = 7.45 351-05-046APN: 2014:$1,003,445.00 Value Notes: UnknownResolution No: 2015:$1,023,504.0 2016 $1,039,105.0 3895 Page Mill Rd, Palo Alto, 94304 Non Prime Owner: 18 Assessed Value Land Class: UnknownContract Start: Unchanged; contract will continue for at least another 10 years.Contract Status: WILKINSON MARC AND LESLEY, 3895 PAGE MILL RD, PALO ALTO CA Acreage: General Notes: 10.00 minus 1 acre for Homesite = 9.00 351-05-045APN: 2014:$1,004,540.00 Value Notes: UnknownResolution No: 2015:$1,024,590.0 2016 $1,040,235.0 3905 Page Mill Rd, Palo Alto, 94304 Non Prime Owner: 19 Assessed Value Land Class: UnknownContract Start: Unchanged; contract will continue for at least another 10 years.Contract Status: LOWRY MICHAEL R, 3905 PAGE MILL RD, LOS ALTOS HILLS CA Acreage: General Notes: 6.43 minus 1 acre for Homesite = 5.43 351-05-044APN: 2014:$175,589.00 Value Notes: UnknownResolution No: 2015:$179,097.00 2016 $181,828.00 9/21/2016 Page 6 of 9S:\PLAN\PLADIV\Advance Planning\Williamson Act\2016 4201 Page Mill Rd, Palo Alto, 94304 Non Prime Owner: 20 Assessed Value Land Class: UnknownContract Start: Unchanged; contract will continue for at least another 10 years.Contract Status: LEAK BRUCE A, 4201 PAGE MILL RD, LOS ALTOS HILLS CA Acreage: General Notes: 11.31 minus 1 acre for Homesite = 10.31 351-25-015APN: 2014:$1,536,828.00 Value Notes: UnknownResolution No: 2015:$1,567,594.0 2016 $1,591,464.0 2287 Skyline Blvd, Palo Alto, 94304 Non Prime Owner: 21 Assessed Value Land Class: UnknownContract Start: Unchanged; contract will continue for at least another 10 years.Contract Status: SCHULTE ROBERT E TRUSTEE & ET AL, 1019 MIDDLE AVE, MENLO PARK CA Acreage: General Notes: 0.24 minus 1 acre for Homesite = -0.76 351-12-066APN: 2014:$23.00 Value Notes: UnknownResolution No: 2015:$24.00 2016 $24.00 22601 Skyline Blvd, Palo Alto, 94306 Non Prime Owner: 22 Assessed Value Land Class: UnknownContract Start: Unchanged; contract will continue for at least another 10 years.Contract Status: ROGERS NOAH, 4125 WOODSIDE RD, WOODSIDE CA Acreage: General Notes: 10.39 351-12-062APN: 2014:$602.00 Value Notes: UnknownResolution No: 2015:$630.00 2016 $630.00 No address; adjacent to 22601 Skyline Blvd Non Prime Owner: 23 Assessed Value Land Class: UnknownContract Start: Unchanged; contract will continue for at least another 10 years.Contract Status: SCHULTE ROBERT E TRUSTEE & ET AL, 1019 MIDDLE AVE, MENLO PARK CA Acreage: General Notes: 12.35 minus 1 acre for Homesite = 11.35 351-12-063APN: 2014:$462,088.00 Value Notes: UnknownResolution No: 2015:$471,320.00 2016 $478,507.00 9/21/2016 Page 7 of 9S:\PLAN\PLADIV\Advance Planning\Williamson Act\2016 Will Not Renew on January 1, 2017. Notice of Nonrenewal Approved by City Council. Open Space within Foothill Open Space Preserve Non Prime Owner: 1 Assessed Value Land Class: 2/27/1979Contract Start: Notice of Nonrenewal approved on 10/6/2008; contract will terminate on 12/31/2017Contract Status: MIDPENINSULA REGIONAL OPEN SPACE DIST, 330 DISTEL CIR, LOS ALTOS CA Acreage: General Notes: 27.34 351-04-031APN: 2014: Value not assessed because owned by public/quasi public agencyValue Notes: 5657 and 5658Resolution No: 2015:2016 Open Space within the Montebello Open Space Preserve Non Prime Owner: 2 Assessed Value Land Class: 2/28/1973Contract Start: Notice of Nonrenewal approved on 10/6/2008; contract will terminate on 12/31/2017Contract Status: MIDPENINSULA REGIONAL OPEN SPACE DIST, SKYLINE BLVD, PALO ALTO CA Acreage: General Notes: 8.74 351-12-043APN: 2014: Value not assessed because owned by public/quasi public agencyValue Notes: 4706Resolution No: 2015:2016 Open Space within the Montebello Open Space Preserve Non Prime Owner: 3 Assessed Value Land Class: 2/26/1975Contract Start: Notice of Nonrenewal approved on 10/6/2008; contract will terminate on 12/31/2017Contract Status: MIDPENINSULA REGIONAL OPEN SPACE DIST, 330 DISTEL CIR, LOS ALTOS CA Acreage: General Notes: 10.72 351-25-014APN: 2014: Value not assessed because owned by public/quasi public agencyValue Notes: 5067Resolution No: 2015:2016 Open Space within the Montebello Open Space Preserve Non Prime Owner: 4 Assessed Value Land Class: 2/28/1973Contract Start: Notice of Nonrenewal approved on 10/6/2008; contract will terminate on 12/31/2017Contract Status: MIDPENINSULA REGIONAL OPEN SPACE DIST, 1185 SKYLINE BLVD, PALO ALTO CA Acreage: General Notes: 24.00 minus 1 acre for Homesite = 23.00 351-06-017APN: 2014: Value not assessed because owned by public/quasi public agencyValue Notes: 4708Resolution No: 2015:2016 9/21/2016 Page 8 of 9S:\PLAN\PLADIV\Advance Planning\Williamson Act\2016 5061, 5065, 22601 Skyline Blvd Non Prime Owner: 5 Assessed Value Land Class: 3/6/1973Contract Start: Notice of Nonrenewal approved on 10/6/2014; contract will terminate on 1/1/2024Contract Status: MIDPENINSULA REGIONAL OPEN SPACE DIST, 330 DISTEL CIR, LOS ALTOS CA Acreage: General Notes: 139.59 minus 1 acre for Homesite = 138.59 351-12-006APN: 2014:$37,346.00 Value Notes: 4707Resolution No: 2015:2016 New Notice of Nonrenewal Filed for City Council Approval 3849 Page Mill Rd, Palo Alto, 94306 Non Prime Owner: 6 Assessed Value Land Class: Contract Start: 10.00 Unknown Resolution No: Unknown Notice of Nonrenewal filed on 3/17/2016; Contract Status: THOMAS JEFFREY A AND MARY L, 3849 PAGE MILL RD, LOS ALTOS HILLS CA Acreage: General Notes: 351-05-050APN: 2014:$1,446,137.00 Value Notes: 2015:$1,475,030.0 2016 $1,497,524.0 9/21/2016 Page 9 of 9S:\PLAN\PLADIV\Advance Planning\Williamson Act\2016 Arastradero Lake Felt Lake Boronda Lake HeritagePark FoothillsPark Los TrancosOpen SpacePreserve Monte Bello OpenSpace Preserve Upper StevensCreek CanyonCounty Park Skyline Ridge OpenSpace Preserve Long Ridge OpenSpace Preserve Russian RidgeOpen SpacePreserve Coal CreekOpen SpacePreserve JasperRidgeBiologicalPreserve Rancho San AntonioOpen Space Preserve Palo AltoBaylandsNaturePreserve Shoreline Park Mtn.View Munic.Golf Course FoothillOpen SpacePreserve ArastraderoPreserve CameronPark WeisshaarPark MayflieldPark PeersPark ElPaloAltoPark LyttonPlaza CogswellPlaza ScottPark KelloggPark BolPark RinconadaPark BowdenPark JohnsonPark EleanorPardeePark BoulwarePark TermanPark RoblesPark MonroePark MitchellPark D Jesus RamosPark HooverPark GreerPark Atheletic ByxbeePark BowlingGreen HenrySealePark SarahWallisPark WerryPark JuanaBrionesPark EstherClarkPark WilliamsPark Stanford/Palo AltoCommunityPlaying Fields San Antonio Rd 280 B o ule v ard Alameda de las Pulgas S a nd H i l l Ro a d 2 8 0 Junipe r o SerraBoulevard P a ge Mi l l Road A r a s trad e ro R o a d El Cam i n o R e a l San Antonio Avenue Ch a r l e s t o n R o a d G 5 M o n t e B e l l o R o a d Moody Road A l t a m on t Road Or e gon Expressway Middlefi el d R o ad Unive 1 0 1 Alm a Street A l p i n e R o a d Foothill Expre s s w a y H i g h w a y 2 8 0 Los Trancos Road Hillv iew East Bayshore W est Bayshore Fabian Central Expressway El Camino Real Bayshore Freeway El M onte R oad Sand Hill Road Road MillPage Skyline E m barcad e ro Road StanfordUniversity Mountain View Los AltosLos Altos Hills Santa Clara County San Mateo County Portola Valley El CaminoPark This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. Legend Williamson Act Parcels Under Contract for 2017 Parcels with Non Renewal Notices Appproved/Filed 0'7000' Williamson Act Parcels2016 CITY O F PALO A L TO I N C O R P O R ATE D C ALIFOR N IA P a l o A l t oT h e C i t y o f A P RIL 16 1894 The City of Palo Alto assumes no responsibility for any errors ©1989 to 2016 City of Palo Alto RRivera, 2016-09-21 14:22:08Williamson Act Properties 2016 (\\cc-maps\gis$\gis\admin\Personal\Planning.mdb) City of Palo Alto (ID # 7144) City Council Staff Report Report Type: Consent Calendar Meeting Date: 10/17/2016 City of Palo Alto Page 1 Summary Title: Partner Agreements and Resolutions for Sludge Dewatering & Loadout Facility Title: Adoption of Three Resolutions to Execute State Revolving Fund (SRF) Financial Assistance Applications, Designate the Amount of Project Expenditures to be Reimbursed by SRF Proceeds, and Pledge Revenue for Repayment of SRF Loans; Amend the 2009 SRF Assistance Agreement; and Authorize Contract Amendments with RWQCP Partners Mountain View and Los Altos, East Palo Alto Sanitary District, and the Board of Trustees o f the Leland Stanford Junior University for the Funding of the Sludge Dewatering and Load Out Facility, the Primary Sedimentation Tank Rehabilitation, the Fixed Film Reactor Rehabilitation, and the Laboratory Environmental Services Building for the Wastewater Treatment Enterprise Fund Facilities at the Palo Alto Regional Water Quality Control Plant (RWQCP) From: City Manager Lead Department: Public Works Recommendation Staff recommends that Council 1. Adopt a Resolution (Attachment A) authorizing the City Manager or his designee to execute State Revolving Fund Financial Assistance Applications from the State Water Resources Control Board (SWRCB) on behalf of the Palo Alto Regional Water Quality Control Plant (RWQCP) for the planning, design, and construction of projects identified in the RWQCP’s Long Range Facility Plan; 2. Adopt a Resolution (Attachment B) designating the amount of sludge dewatering and loadout facility project expenditures to be reimbursed by proceeds from the State Revolving Fund; 3. Adopt a Resolution (Attachment C) pledging a dedicated source of revenue for the repayment of two State Revolving Fund loans from the SWRCB: one City of Palo Alto Page 2 for the construction of the sludge treatment facility, and one for the planning of three additional projects: the laboratory/environmental services building, the primary sedimentation tank rehabilitation, and fixed film reactor rehabilitation projects; 4. Amend the City’s existing 2009 State Revolving Fund Financial Assistance Agreement to be Subordinate to 1995 and 1999 Utility Revenue Bonds, and on parity with the City’s 2007 SRF loan (Attachment D); and 5. Authorize the City Manager or his designee to execute the following contract amendments with the RWQCP partners for the construction of the sludge dewatering facility: a. Addendum No. 8 to the Basic Agreement with the cities of Mountain View and Los Altos (Attachment E); b. Amendment No. 6 to Agreement No. C237 with East Palo Alto Sanitary District (Attachment F); and c. Amendment No. 4 to Agreement No. C869 with the Board of Trustees of the Leland Stanford Junior University (Attachment G). Executive Summary A facility to replace the sewage sludge (“biosolids”) incinerators at the Regional Water Quality Control Plant (RWQCP) has been designed (Capital Improvement Program (CIP) project WQ-14001) and Council is being asked to approve the application for a low interest loan from the State Water Resources Control Board for construction. The facility will dewater the biosolids and allow it to be loaded onto trucks and taken offsite for further treatment, until further treatment units can be built onsite. The type of further treatment has not been decided, and could be anaerobic digestion, gasification, or another technology. Council is also being asked to approve the application for a second low interest loan from the state to conduct planning for the next three major projects, collectively referred to as Projects, the laboratory/environmental services building, the primary sedimentation tank rehabilitation, and fixed film reactor rehabilitation (CIP projects WQ-14002, WQ-14003, and WQ-14004, respectively). To finalize the applications, Council authorization of several resolutions is required. Background The RWQCP, originally constructed in 1934, has undergone several expansions City of Palo Alto Page 3 and upgrades. The RWQCP is now an advanced (tertiary treatment) facility that provides treatment and disposal of wastewater for Palo Alto, Mountain View, Los Altos, Los Altos Hills, East Palo Alto Sanitary District, and Stanford University. A Long Range Facilities Plan (LRFP) was prepared in 2012 to provide a plan for future capital projects. A Biosolids Facility Plan (BFP) was completed in 2014 to map the management of biosolids when the sewage sludge incinerators are decommissioned. State Revolving Fund Program The State Water Resources Control Board (SWRCB), Division of Financial Assistance administers the Clean Water State Revolving Fund (SRF) program. The SRF program has a fixed amount of funds available each year and provides loans to agencies on a first-come-first-served basis primarily for construction of wastewater treatment projects. The program’s low interest rates, roughly half of the State General Obligation Rate and currently 1.7%, and other favorable terms help lower total project costs, maximizing benefits to rate-payers and partner agencies. Previously the City obtained SRF loans for the Ultraviolet Disinfection Facility ($8.5 million, 20-year term) and Palo Alto/Mountain View recycled water pipeline project ($9.0 million, 20-year term). Sludge Dewatering and Truck Loadout Facility Project Council directed staff in May 2014 to initiate the design of the sludge dewatering and truck loadout facility (CMR ID# 4744). Council approved a contract with CH2MHILL Engineers in January 2015 to provide design and environmental consulting services for the sludge dewatering and truck loadout facility to be located at the RWQCP (CMR ID# 5295). Component One of BFP is a new sludge dewatering and truck loadout facility, which will allow the retirement of the City’s two sewage sludge incinerators. The facility will be used to load trucks with dewatered sludge to be hauled to a regional facility outside of Palo Alto for further treatment, such as composting, gasification and/or anaerobic digestion. Staff will return to Council for approval of the sludge hauling contract and identification of final treatment/disposal location(s) after commencement of facility construction, closer to the anticipated date of the sludge dewatering facility startup in early 2020. City of Palo Alto Page 4 In March 2016, Council approved the Mitigated Negative Declaration, the Mitigation and Monitoring Program, and the Record of Land Use approving the Site and Design Review and Architectural Review application for the new dewatering facility at RWQCP (CMR ID# 6424). Discussion Staff has submitted two draft applications to the SWRCB for SRF financing including an application for 1) construction of the sludge dewatering and truck loadout facility (CIP project WQ-14001) and 2) planning/design of the primary sedimentation tank rehabilitation, fixed film reactor rehabilitation, and the laboratory/environmental services building (CIP projects WQ-14002, WQ-14003, and WQ-14004), (all four collectively referred to as the Projects). Each of these Projects is further described in the LRFP. To finalize the applications, Council authorization of several resolutions is required. Staff is pursuing two SRF loans: one for the planning, design, construction, and construction management of the sludge dewatering and loadout facility, estimated at $30 million, and one for the planning/design of the primary sedimentation tank rehabilitation, fixed film reactor rehabilitation, and the laboratory/environmental services building projects, estimated at $6.75 million. The RWQCP partner agencies (Mountain View, Los Altos, East Palo Alto Sanitary District, and Stanford University) have already approved the Projects, pursuit of the SRF loans to fund the Projects, and agreed to repay their share of financial obligations. City of Palo Alto has final approval of the Projects and loans as the lead agency and SRF loan applicant. Staff will return to Council for approval of the (a) final SRF loans, (b) sludge dewatering construction contract, and (c) sludge dewatering construction management contract. Several steps in the loan process will require Council action, including approval of the final loan amounts, and staff will return to Council accordingly. The items currently brought for Council approval are: 1. Adoption of Authorizing Resolution (Attachment A) Authorizing the City Manager or his designee to apply for SRF loans for capital improvement projects identified in the Long Range Facility Plan. While initially staff plans to apply for two SRF loans, one to fund the sludge dewatering construction project and one to fund planning of the sedimentation tank City of Palo Alto Page 5 rehabilitation, fixed film reactor rehabilitation, and laboratory/environmental sciences building, the resolution is drafted to authorize the City’s application for any of the capital improvement projects listed in the LRFP. The resolution also authorizes the City Manager or his designee, the Director of Public Works or the Manager of the Water Quality Control Plant, to execute SRF financial assistance agreements and any amendments with the SWRCB. SRF applications will be submitted after Council approval of a funding strategy and final construction contract for the relevant facilities. 2. Adoption of Reimbursement Resolution (Attachment B) The SRF program requires the City to pay in advance for certain tasks such as planning and design (eligible allowances) to be reimbursed by the SRF loan. Through the Reimbursement Resolution, Council will designate a maximum of $30 million in advance funding for expenditures for the sludge dewatering project. Staff anticipates returning to Council at a later date with any reimbursement resolutions required for the other three projects. 3. Adoption of Pledged Sources of Revenue Resolution (Attachment C) Section 603 of the Federal Clean Water Act requires each financing recipient to establish one or more pledged sources of revenue to be eligible for SRF assistance. The City will pledge the Net Revenues of its Wastewater Treatment enterprise fund for both SRF loans being sought this year. In compliance with existing bond covenants and the requirements of Proposition 218, the revenue pledge for both new SRF loans will be subordinate to the 1995 Storm Drain and Water Enterprise Bonds, the 1999 Storm Drain, Wastewater Collection and Treatment Bonds, the 2007 SRF loan for the Mountain View/Moffett Area Reclaimed Water Pipeline Project and the 2009 SRF loan for the Ultraviolet Disinfection Project. 4. Amend the 2009 SRF Financial Assistance Agreement (Attachment D) The City’s bond counsel advised that the City’s existing 2009 SRF Financial Assistance Agreement be amended so the City’s pledge of revenues as security for its 2009 SRF repayment obligation is subordinate to the City’s 1995 and 1999 Utility Revenue Bonds, and on parity with the City’s 2007 SRF loan. SWRCB agreed to this modification in concept. The City’s bond counsel has drafted the attached Amendment No. 1 to the City’s 2009 SRF Financial City of Palo Alto Page 6 Assistance Agreement and the City is awaiting feedback from SWRCB’s legal department. 5. Approval of Changes to Partner Agencies’ Agreements (Attachments E, F & G) Except for Los Altos Hills, partner agencies are required to approve the Projects and promise to repay the SRF loans which will finance each Project’s planning and construction. The City prepared amendments were made to each of the partner agency’s relevant agreement, which each agency approved on the dates listed below. Mountain View City Council October 13, 2015 Stanford University January 25, 2016 Los Altos City Council February 23, 2016 Board of East Palo Alto Sanitary District Board September 22, 2016 The Addendum and Amendments document the partner agencies’ approval of the Projects and establish the partner agencies’ acceptance of, and responsibilities for, the terms and conditions of SRF Financial Assistance Agreements and Project costs. Timeline Palo Alto Council approval of SRF Application Submittal, Reimbursement and Revenue Pledge Resolutions* October 17, 2016 Palo Alto Council approval of Sludge Dewatering Construction Contract and SRF Construction Loan January 2017 Construction Notice To Proceed February 2017 Sludge Dewatering Project completion February 2019 * If approved, staff anticipates bringing the SRF loan agreement for the three planning projects to Council in 2017 Resource Impact No financial impacts are associated with the adoption of the resolutions, amendment of the 2009 SRF loan or approval of the Partner Agreement addendum and amendments. City of Palo Alto Page 7 Applying for SRF funds does not obligate the City to proceed with the Projects. The resource impact of proceeding with Projects will be evaluated at the time Council approval for each Project is requested. Funding for the design and environmental consulting services for the dewatering facility was in the Wastewater Treatment Fund CIP project WQ-80021 and the fund reserve will be reimbursed with the SRF loan principal. Repayment of the sludge dewatering 30-year SRF loan is expected to begin in 2020, a year after construction completion, and would be included as an expense in the Fiscal Year 2020 Wastewater Treatment Fund operating budget. Approximately 62% of the fund’s operating expenses are offset by revenue from the RWQCP partner agencies. Policy Implications Adoption of the resolutions, amendment of the 2009 SRF loan and approval of the addendum and amendments to the partner agencies’ agreements do not represent a change in existing policies. Environmental Review The City of Palo Alto performed an environmental review for the sludge dewatering and loadout facility under provisions of the California Environmental Quality Act (CEQA). An Initial Study/Mitigated Negative Declaration was prepared for the project and approved by Council on March 28, 2016 (CMR ID# 6424). Adoption of the SRF application and funding resolutions, amendment of the 2009 SRF agreement and approval of the addendum and amendments to the partner agencies’ agreements are not actions that require CEQA review. These actions do not meet the definition of a project for the purposes of CEQA, under Public Resources Code Section 21065 and CEQA Guidelines Section 15378(b)(5), because they are administrative governmental activities which will not cause a direct or indirect physical change in the environment. Attachments:  Attachment A: Resolution Authorizing FINAL (PDF)  Attachment B: Resolution Reimbursement (PDF)  Attachment C: Resolution Pledged Revenue (PDF)  Attachment D: Amendment 1 2009 SRF Loan Agreemnt (DOCX) City of Palo Alto Page 8  Attachment E: Amendment 8 Palo Alto--Mountain View--Los Altos (PDF)  Attachment F: Amendment 6 EPASD (PDF)  Attachment G: Amendment 4 Stanford University (DOCX) NOT YET APPROVED 160928 jb 6053825 1 Resolution No. ______ Resolution of the Council of the City of Palo Alto Approving the City’s Submittal of a Financial Assistance Application to the State Water Resources Control Board for Capital Improvement Projects Applicable to the Regional Water Quality Control Plant R E C I T A L S A. The State of California State Water Resources Control Board (the “Board”) has a funding program entitled “Clean Water State Revolving Fund,” and pursuant to this program, the Board makes funds available for various capital water-related projects. B. The City of Palo Alto (the “City”) owns and operates the Regional Water Quality Control Plant (the “Plant”), and engages in various capital improvement projects to improve and maintain the Plant. C. The City wishes to apply for State Revolving Fund funds to cover the cost of certain capital improvement projects identified in the attached Long Range Facility Plan, Exhibit A. D. The first State Revolving Fund application the City submits will cover the sludge dewatering and load-out facility construction project. City staff anticipates seeking multiple State Revolving Fund applications for other capital improvement projects identified in the Long Range Facility Plan, under the authority granted by Council via this resolution. The Council of the City of Palo Alto RESOLVES as follows: SECTION 1. The Council hereby finds that it is in the City and the public’s interest in the health, safety and welfare of the community to file Financial Assistance Application(s) with the Board to seek funds made available under the State Revolving Fund for any of the CIP projects listed in Exhibit A. SECTION 2. The Council hereby authorizes and directs the City Manager or his designee, the Director of Public Works or the Manager of the Plant, to: (a) File and sign, for and on behalf of the City of Palo Alto, a Financial Assistance Application for a financing agreement from the Board for the planning, design, and construction of projects identified in the Plant’s Long Range Facility Plan, Exhibit A. (b) Provide the assurances, certifications, and commitments required for the financial assistance application, including executing a financial assistance agreement from the Board and any amendments or changes thereto. (c) Represent the City in carrying out the City’s responsibilities under the financing agreement, including certifying disbursement requests on behalf of the city and compliance with applicable state and federal laws. NOT YET APPROVED 160928 jb 6053825 2 SECTION 3. The Council finds that the filing of a Financial Assistance Application with the State Water Resources Control Board does not constitute a project requiring California Environmental Quality Act (CEQA) review. This action does not meet the definition of a project under Public Resources Code Section 21065 and CEQA Guidelines Section 15378(b)(5), because it is an administrative governmental activity which will not cause a direct or indirect physical change in the environment. An Initial Study/Mitigated Negative Declaration was prepared for the sludge dewatering and loadout facility project and approved by Council on March 28, 2016 (Staff Report ID# 6424). Implementation of the primary sedimentation tanks, fixed film reactors, and the laboratory/environmental service building projects is subject to future CEQA analysis. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: __________________________ _____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ _____________________________ Senior Deputy City Attorney City Manager _____________________________ Director of Public Works _____________________________ Director of Administrative Services NOT YET APPROVED 160928 jb 6053826 Resolution No. _________ Resolution of the Council of the City of Palo Alto Authorizing the Reimbursement of Funding for the Regional Water Quality Control Plant Sludge Dewatering and Loadout Facility Project from the State Water Resource Control Board R E C I T A L S A. The City of Palo Alto (the “City”) desires to finance the costs of constructing and/or reconstructing certain public facilities and improvements relating to its water and wastewater system, including certain treatment facilities, pipelines and other infrastructure (the "Project"). B. The City intends to finance the construction and/or reconstruction of the Project or portions of the Project with moneys ("Project Funds") provided by the State of California, acting by and through the State Water Resources Control Board (State Water Board). C. The State Water Board may fund the Project Funds with proceeds from the sale of obligations the interest upon which is excluded from gross income for federal income tax purposes (the "Obligations"). D. Prior to either the issuance of the Obligations or the approval by the State Water Board of the Project Funds the City has incurred certain capital expenditures (the "Expenditures") with respect to planning and design of the Project from available moneys of the City. E. The City has determined that those moneys to be advanced on and after the date hereof to pay the Expenditures are available only for a temporary period and it is necessary for the State Water Board to reimburse the City for the Expenditures from the proceeds of the Obligations. NOW, THEREFORE, the Council of the City of Palo Alto RESOLVES as follows: SECTION 1. The City hereby states its intention and reasonably expects to reimburse Expenditures paid prior to the issuance of the Obligations or the approval by the State Water Board of the Project Funds. SECTION 2. The reasonably expected maximum principal amount of the Project Funds is $30,000,000. SECTION 3. This resolution is being adopted no later than 60 days after the date on which the City will expend moneys for the construction portion of the Project costs to be reimbursed with Project Funds. SECTION 4. Each City expenditure will be of a type properly chargeable to a capital account under general federal income tax principles. NOT YET APPROVED 160928 jb 6053826 SECTION 5. To the best of our knowledge, the City is not aware of the previous adoption of official intents by the City that have been made as a matter of course for the purpose of reimbursing expenditures and for which tax-exempt obligations have not been issued. SECTION 6. This resolution is adopted as official intent of the City in order to comply with Treasury Regulation §1.150-2 and any other regulations of the Internal Revenue Service relating to the qualification for reimbursement of Project costs. SECTION 7. All the recitals in this Resolution are true and correct and this City so finds, determines and represents. SECTION 8. The Council finds that its authorization of funding reimbursement does not constitute a project requiring review under the California Environmental Quality Act (CEQA) or CEQA Guidelines. This action does not meet the definition of a project under Public Resources Code Section 21065 and CEQA Guidelines Section 15378(b)(5), because it is an administrative governmental activity which will not cause a direct or indirect physical change in the environment. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: _________________________ ______________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: __________________________ ______________________________ Senior Deputy City Attorney City Manager ______________________________ Director of Public Works ______________________________ Director of Administrative Services NOT YET APPROVED 160928 jb 6053827 1 Resolution No. _____ Resolution of the Council of the City of Palo Alto Establishing One or More Pledged Sources of Revenue For Repayment of Funding Pursuant to The Federal Clean Water Act Amendments R E C I T A L S A. The City of Palo Alto (the “City”) desires to finance the costs of planning, design, and/or construction of certain public facilities and improvements relating to its wastewater system, including the planning/design of primary sedimentation tanks, fixed film reactors, and the laboratory/environmental service building, and the construction of a sludge treatment and load-out facility (the “Projects”) that were identified in the Regional Water Quality Control Plant’s Long Range Facility Plan. B. The City intends to finance the planning, design, and/or construction of the Projects or portions of the Projects with moneys (“Project Funds”) provided by the State of California, acting by and through the State Water Resources Control Board (the “Water Boards”). C. Section 603(d)(1)(C) of the Federal Clean Water Act Amendments require each financing recipient to establish one or more pledged sources of revenue for Clean Water State Revolving fund (CWSRF) financial assistance. D. Revenue will be considered pledged when the City adopts a resolution committing a source of funds for repayment. NOW, THEREFORE, the Council of the City of Palo Alto RESOLVES as follows: SECTION 1. The City of Palo Alto hereby pledges Net Revenues of its Wastewater Treatment enterprise fund to repayment of any and all Clean Water State Revolving Fund financing incurred for CWSRF Project No. 8104, including the planning/design of primary sedimentation tanks, fixed film reactors, and a laboratory/environmental service building, and CWSRF Project No. 8091-110, including the design and construction of a sludge dewatering and load-out facility. Net Revenues of the City’s Wastewater Treatment enterprise, and other terms relevant to this action, are defined as follows: "Net Revenues" means, with respect to the Wastewater Treatment enterprise, for any period of computation, the amount of the Gross Revenues received from the Wastewater Treatment enterprise during such period, less the amount of Maintenance and Operation Costs of the Wastewater Treatment enterprise becoming payable during such period. "Gross Revenues" means, for any period of computation, all gross charges received for, and all other gross income and revenues derived by the City from, the ownership or operation of the Wastewater Treatment enterprise or otherwise arising from the Wastewater Treatment enterprise during such period, including but not limited to (a) all Charges received by NOT YET APPROVED 160928 jb 6053827 2 the City for use of the Wastewater Treatment enterprise, (b) all receipts derived from the investment of funds, (c) transfers from (but exclusive of any transfers to) any stabilization reserve funds, and (d) all moneys received by the City from other entities whose customers are served pursuant to contracts between those entities and the City. "Maintenance and Operation Costs" means the reasonable and necessary costs spent or incurred by the City for maintaining and operating the Wastewater Treatment enterprise, calculated in accordance with sound accounting principles, including the cost of supply of water, gas and electric energy under contracts or otherwise, the funding of reasonable reserves, and all reasonable and necessary expenses of management and repair and other expenses to maintain and preserve the Wastewater Treatment enterprise in good repair and working order, and including all reasonable and necessary administrative costs of the City attributable to the Wastewater Treatment enterprise and any financing instruments incurred to finance improvements to the Wastewater Treatment enterprise, such as salaries and wages and the necessary contribution to retirement of employees, overhead, insurance, taxes (if any), expenses, compensation and indemnification of any bond trustee or other lender, and fees of auditors, accountants, attorneys or engineers, and including all other reasonable and necessary costs of the City or charges required to be paid by it to comply with the terms of any financing instrument related to the Wastewater Treatment enterprise, but excluding depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles or other bookkeeping entries of a similar nature. "Charges" means fees, tolls, assessments, rates and rentals prescribed under applicable law by the City Council for the services and facilities of the Wastewater Treatment enterprise. This pledged source of revenue shall remain in effect until such financing is fully discharged unless modification or change of such dedication is approved in writing by the State Water Resources Control Board. SECTION 2: The Council’s pledge of the revenues to repay State Revolving Fund financing for the above-referenced projects does not meet the definition of a project for the purposes of the California Environmental Quality Act, under Public Resources Code Section 21065 and CEQA Guidelines Section 15378(b)(5), because it is an administrative governmental activity which will not cause a direct or indirect physical change in the environment. Council approved an Initial Study/Mitigated Negative Declaration for the sludge-dewatering and loadout facility project on March 28, 2016 (Staff Report ID# 6424). / / / / / / / / NOT YET APPROVED 160928 jb 6053827 3 Implementation of the primary sedimentation tanks, fixed film reactors, and the laboratory/environmental service building projects is subject to future CEQA analysis. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: _________________________ ______________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: __________________________ ______________________________ Senior Deputy City Attorney City Manager ______________________________ Director of Public Works ______________________________ Director of Administrative Services Attachment D AMENDMENT NO. 1 TO PROJECT FINANCE AGREEMENT STATE REVOLVING FUND PROJECT NO. C-06-5044-110 AGREEMENT NO. 09-814-550 This Amendment No. 1 to Project Finance Agreement (including all exhibits and attachments hereto, this “Amendment No. 1”) is dated as of ____, 2016, and is by and between the State Water Resources Control Board, an administrative and regulatory agency of the State of California (the “State Water Board”), and the City of Palo Alto, a charter city duly organized and existing under the laws of the State of California (the “Recipient”). WITNESSETH WHEREAS, the State Water Board and the Recipient previously entered into Project Finance Agreement No. 09-814-550 (the “Original Agreement”) to provide financing for the Project described therein; WHEREAS, the Original Agreement provides that the Recipient’s Obligation under the Original Agreement is secured by a lien on and pledge of Net Revenues in priority as specified in Exhibit F to the Original Agreement; WHEREAS, Exhibit D of the Original Agreement provides that that the Recipient’s obligations under the Original Agreement shall be secured on a parity with the outstanding 1999 Series A Revenue Bonds; WHEREAS, the State Water Board and the Recipient wish to amend Exhibits D and F to correct the priority relationship of the Obligation to other System Obligations; NOW, THEREFORE, in consideration of the premises and of the mutual representations, covenants and agreements herein set forth, the State Water Board and the Recipient, each binding itself, its successor and assigns, do mutually promise, covenant and agree as follows: ARTICLE I DEFINITIONS All capitalized terms used in this Amendment No. 1 and not defined in this Amendment No. 1 have the meaning given such terms in the Original Agreement. ARTICLE II AMENDMENT OF THE ORIGINAL AGREEMENT 2.1 Section D of the Original Agreement is hereby amended and restated in its entirety as shown on Attachment 1. 2.2 Section F of the Original Agreement is hereby amended and restated in its entirety as shown on Attachment 2. ARTICLE III MISCELLANEOUS 3.1 In the event of any conflict between the Original Agreement and this Amendment No. 1, the terms of this Amendment No. 1 shall govern. Otherwise, the Original Agreement shall remain in full force and effect. 3.2 This contract is governed by and shall be interpreted in accordance with the laws of the State of California. 3.3 The State Water Board and the Recipient hereby agree that any action arising out of this Amendment No. 1 shall be filed and maintained in the Superior Court in and for the County of Sacramento, California, or in the United States District Court in and for the Eastern District of California. IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto. CITY OF PALO ALTO By: Name: Title: Date: STATE WATER RESOURCES CONTROL BOARD By: Name: Title: Date: City of Palo Alto Amendment No. 1 to Agreement No.: 09-814-550 Project No.: C-06-5044-110 Attachment 1 AMENDMENT OF EXHIBIT D Exhibit D of the Original Agreement is hereby amended and restated in its entirety as follows: EXHIBIT D -- SPECIAL CONDITIONS Special condition as follows: D.1 The financing agreement shall be subordinate to the outstanding 1999 Series A Revenue Bonds; and D.2 The financing agreement shall be subordinate to the outstanding 1995 Series A Revenue Bonds; and D.3 The City of Palo Alto shall fund a reserve fund of one year’s debt service and maintain it throughout the term of the financing agreement. Attachment 2 AMENDMENT OF EXHIBIT F Exhibit F of the Original Agreement is hereby amended and restated in its entirety as follows: EXHIBIT F -- SCHEDULE OF SYSTEM OBLIGATIONS Except for the following and the Obligation evidenced by this Agreement, the Recipient certifies that it has no outstanding System Obligations: The following outstanding debt is senior to the Obligation: Title Interest Rate Total Amount Amount Remaining End Date 1995 Utility Revenue Bonds 5-0-6.25% $8,640,000 $5,650,000 June 1, 2020 1999 Utility Revenue Bonds 3.25-5.25% $17,735,000 $14,670,000 June 1, 2024 The following outstanding debt is on parity with the Obligation: Title Interest Rate Total Amount Amount Remaining End Date Mountain View/Moffett Area Reclaimed Water Pipeline Project SRF Contract #07- 814-550-0 Project #C-06- 4132-110 0%* $9,000,000 $9,000,000 June 30, 2029 * Local Match Financing The following outstanding debt is subordinate to the Obligation: Title Interest Rate Total Amount Amount Remaining End Date Not Applicable ADDENDUM NO. EIGHT TO THE BASIC AGREEMENT BETWEEN THE CITY OF PALO ALTO, THE CITY OF MOUNTAIN VIEW AND THE CITY OF LOS ALTOS FOR THE ACQUISITION, CONSTRUCTION AND MAINTENANCE OF A JOINT SEWER SYSTEM This Addendum No. Eight (8) to the Basic Agreement for the Acquisition, Construction and Maintenance of a Joint Sewer System is made and entered into on _______________________, by and among the CITY OF PALO ALTO (“Palo Alto”), the CITY OF MOUNTAIN VIEW (“Mountain View”), and the CITY OF LOS ALTOS (“Los Altos”) (individually, a “Party”, collectively, the “Parties”), all municipal corporations under the laws of the State of California. R E C I T A L S: A. The Parties have entered into that certain Basic Agreement Between the City of Palo Alto, the City of Mountain View and the City of Los Altos for the Acquisition, Construction, and Maintenance of a Joint Sewer System, executed on October 10, 1968, as amended by the Addenda described below (collectively, the “Basic Agreement”). The Basic Agreement has been amended seven times by addenda, as follows: Addendum No. One (1) to Basic Agreement Between the Cities of Palo Alto, Mountain View, and Los Altos for Acquisition, Construction and Maintenance of a Joint Sewer System, dated as of December 5, 1977; Addendum No. Two (2) to Basic Agreement Between the Cities of Palo Alto, Mountain View, and Los Altos for Acquisition, Construction and Maintenance of a Joint Sewer System dated as of January 14, 1980; Addendum No. Three (3) to an Agreement By and Between the Cities of Palo Alto, Mountain View, and Los Altos for Acquisition, Construction and Maintenance of a Joint Sewer System, dated as of April 9, 1985; Addendum No. Four (4) to the Agreement By and Between the Cities of Mountain View, Los Altos, and Palo Alto as further amended and dated May 30, 1991; Addendum No. Five (5) to Basic Agreement Between the Cities of Palo Alto, Mountain View, and Los Altos for Acquisition, Construction and Maintenance of a Joint Sewer System, dated as of July 31, 1992; Addendum No. Six (6) to Basic Agreement Between the City of Palo Alto, the City of Mountain View, and the City of Los Altos for Acquisition, Construction and Maintenance of a Joint Sewer System dated as of March 16, 1998; and Addendum No. Seven (7) to Basic Agreement Between the City of Palo Alto, the City of Mountain View, and the City of Los Altos for Acquisition, Construction and Maintenance of a Joint Sewer System dated as of April 15, 2009 (collectively, the “Addenda”). B. Palo Alto owns and operates the sanitary sewerage treatment and disposal works and system (the “Joint System”) pursuant to the Basic Agreement, and is responsible for making capital additions to the Joint System. Under the Basic Agreement, any major capital additions for the replacement of obsolete or worn-out units require an agreement by the Parties amending the Basic Agreement. The Parties now desire to agree upon and implement projects to improve the Joint System by planning and designing the rehabilitation of the primary sedimentation tanks, the fixed film reactors, a new laboratory/Environmental Service building, and constructing and implementing a sludge dewatering and load-out facility (individually, “Project”, collectively, the “Projects”). The Parties also agree to provide for the sharing of costs associated with the Projects. The Projects will become part of the regional water quality control plant (the “Plant”), which is owned and operated by Palo Alto as part of the Joint System. NOW, THEREFORE, in consideration of the terms, conditions and covenants set forth in this Addendum No. Eight (8), the Basic Agreement is hereby amended, as follows: Section 2. Paragraph 38 is hereby added to the Basic Agreement to read, as follows: “38. IMPLEMENTATION OF THE PROJECTS. Palo Alto, Mountain View, and Los Altos hereby approve the Projects for planning/design of the primary sedimentation tanks, the fixed film reactors, a new laboratory/Environmental Service building, and the design/construction of a sludge dewatering and load-out facility (the “Projects”). Each Party shall pay its share of the Projects Costs, in proportion to the capacity it owns in the Joint System or portion thereof as shown in Exhibit “H” to Addendum No. Six (6) to the Basic Agreement. “Project Costs” means all costs incurred in connection with the planning, design, construction and implementation of the Projects. Without limiting the generality of the foregoing, Project Costs shall include, but not be limited to: design, engineering, and other consultants’ fees and costs, including fees incurred pursuant to agreements with engineers, contractors and other consulting, design and construction professionals; environmental analysis and approval costs, including cost of compliance with the California Environmental Quality Act; deposits, applicable permit fees; all costs to apply for and secure necessary permits from all required regional, state, and federal agencies; plan check fees, and inspection fees; construction costs; initial maintenance; attorneys’ fees and costs; insurance; interest from the date of payment on any contracts. The Parties authorize Palo Alto to pursue State Revolving Fund (“SRF”) loans from the State Water Resources Control Board (“SWRCB”) to fund the costs of the Projects. The maximum amount of the SRF planning/design loan sought for the planning/design of the primary sedimentation tanks, the fixed film reactors, and a new laboratory/Environmental Service building will be $6.75 million. The maximum amount of the SRF construction loan sought for the design/construction of a sludge dewatering and load-out facility will be $28 million. The loan will have a thirty-year repayment term. The repayments of the SRF loan shall be treated in the same manner as debt services under the Basic Agreement and its Addenda, and repaid by the Parties in the same proportionate shares as shown on Exhibit “H” to Addendum No. Six (6) to the Basic Agreement. The Parties further agree that, if necessary, each Party shall propose to raise their sewer use rates for the repayment of the SRF loan, operations, and/or maintenance of the Projects, following any appropriate process executed under California Constitution article XIII C and D (Proposition 218). If the SWRCB terminates its loan commitment unexpectedly following execution of the planning and/or construction contract(s) for the Projects or the Project, Palo Alto shall notify the Parties promptly. Following notification of the termination of the SRF, the Parties shall meet in a timely manner to discuss alternative funding sources and strategies for completion of the Projects. If the Parties are unable to agree on new funding sources in a timely manner, then Palo Alto shall have the right to terminate the Project or the Projects. The Parties shall remain responsible for Project costs and loans incurred, whether before or after termination of the Project/Projects, in connection with the termination of the Project planning/design/construction contract, in the same proportion to each organization’s share of plant capacity, as stated in Exhibit “H” to Addendum No. Six (6) of the Basic Agreement. Total project costs shall not exceed the authorized maximum SRF loan approved by Parties without prior approval of each party’s governing body. Unless earlier terminated, the obligations and responsibilities of the Parties shall commence with the execution of this addendum No. Eight and be in force for the term of the SRF loan. Mountain View and Los Altos shall pay their respective shares of any Project Costs within thirty (30) business days of receipt of the quarterly billing statement sent by Palo Alto. Palo Alto shall not send more than one invoice in any thirty-day period. If a Party disputes the correctness of an invoice, it shall pay the invoice in full and the dispute shall be resolved after payment in accordance with Section 19 of the Basic Agreement, and shall not offset against any payment due. Section 1. Paragraph 27. TERM. is amended to read as follows: The Basic Agreement shall commence upon execution and will terminate on December 31, 2060, provided that any party hereto who wishes to withdraw from the Basic Agreement shall tender written notice of withdrawal at least ten (10) years preceding the date of withdrawal. Section 3. Except as modified herein, the Basic Agreement shall remain unchanged, and is hereby ratified and confirmed. [SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties have by their duly authorized representatives executed this Addendum as of the date first written above. ATTEST: __________________________________ City Clerk APPROVED AS TO FORM: __________________________________ Deputy City Attorney APPROVED AS TO CONTENT: __________________________________ City Manager CITY OF PALO ALTO By: __________________________________ Mayor ATTEST: __________________________________ City Clerk APPROVED AS TO FORM: __________________________________ City Attorney APPROVED AS TO CONTENT: __________________________________ FINANCIAL APPROVAL: ________________________________ Finance and Administrative Services Director CITY OF MOUNTAIN VIEW By: __________________________________ City Manager ATTEST: __________________________________ City Clerk APPROVED AS TO FORM: __________________________________ City Attorney APPROVED AS TO CONTENT: __________________________________ City Manager CITY OF LOS ALTOS By: __________________________________ Mayor AMENDMENT NO. SIX TO CONTRACT RESTATEMENT AND AMENDMENT NO. C237 BETWEEN THE CITY OF PALO ALTO AND THE EAST PALO ALTO SANITARY DISTRICT This Amendment No. Six (6) to the Contract Restatement and Amendment No. C237 is made and entered into on _______________________, by and between the CITY OF PALO ALTO, a chartered municipal corporation of the State of California (the “City”) and East Palo Alto Sanitary District, a public corporation under the laws of the State of California (the “District”) (individually, a “Party”, collectively, the “Parties”). R E C I T A L S: A. On March 11, 1940, the Parties entered into a contract, “Contract Restatement and Amendment No. C237,” whereby the City agreed to provide treatment of the District’s wastewater, which contract was subsequently amended by amendments dated September 10, 1963, June 25, 1964, and May 1971 (the “Original Agreement”); B. On October 10, 1968, the City joined with the cities of Mountain View and Los Altos to fund the construction, operation, and maintenance of a regional sewage treatment plant (the “Treatment Plant”) that is part of a sewerage system (“System”), owned and operated by the City; C. In May 1971, the City and District agreed that the District’s share of the primary/secondary design capacity of the Treatment Plant would be 2.25 mgd (ADWF). The Treatment Plant was subsequently expanded to include tertiary treatment, and the District’s share of tertiary capacity was established at 1.9 mgd (ADWF); D. On March 16, 1989, the Parties restated and amended the Original Agreement (the “1989 Agreement”) to provide for the District’s participation in financing an expansion of the Treatment Plant’s capacity from 35.0 primary/secondary capacity to 38.0 mgd (ADWF) (40.0 AAF) and from a tertiary capacity of 30.6 mgd to 38.0 mgd ADWF (40.0 AAF); E. On May 30, 1989, the Parties amended the 1989 Agreement to revise the billing and payment provisions in Paragraph 6.b of the 1989 Agreement (“Amendment No. 1”); F. On December 18, 1989, the Parties amended the 1989 Agreement to provide specific measures and procedures for complying with federal and state laws and regulations regarding wastewater collection, transmission, treatment and disposal in Paragraph 9 of the 1989 Agreement (“Amendment No. 2”); G. On December 7, 1998, the Parties amended the 1989 Agreement to add Paragraph 26 to permit the rehabilitation of the City’s incinerators (“Amendment No. 3”); H. On November 19, 2003, the Parties executed an agreement entitled “Settlement and Release Agreement” and amended Paragraphs 6.a and 8 of the 1989 Agreement on June 2, 2005 to be consistent with the Settlement and Release Agreement (“Amendment No. 4”); I. On March 19, 2009, the Parties amended the 1989 Agreement to add Paragraph 28, which provided for the funding, design, and construction of an ultra violet treatment system at the Treatment Plan (“Amendment No. 5”). The 1989 Agreement and Amendment Nos. 1-5 are referred to collectively, herein as the “Contract.” J. The City owns and operates the System pursuant to the Contract, is responsible for making capital additions to the System, and intends to renovate the Treatment Plant. The Parties desire to amend the Contract to clarify the indemnity provision applicable to the Contract and to set forth the terms of their agreement for the sharing of costs associated with the planning and design of the rehabilitation of the primary sedimentation tanks, the fixed film reactors, a new laboratory/Environmental Service building, and the design and construction of a sludge dewatering and load-out facility (individually, the “Project”, collectively, the “Projects”). The Projects are set forth in more detail in Exhibit I, attached to this Amendment No. Six. The Projects will become part of the Treatment Plant, which is owned and operated by the City as part of the System. NOW, THEREFORE, in consideration of the terms, conditions and covenants set forth in this Amendment No. Six (6), the Contract is hereby amended as follows: Section 1. Paragraph 29 is hereby added to the Contract to read, as follows: “29. IMPLEMENTATION OF THE PROJECTS. City and District hereby approve the Projects. Each Party shall pay its share of Project Costs for the Projects in proportion as it owns capacity in the Joint System or portion thereof, as shown in Exhibit “H” to Amendment No. Three (3) to the Contract. “Project Costs” means all costs incurred in connection with the planning, design, construction and implementation of the Projects. Without limiting the generality of the foregoing, Project Costs shall include, but not be limited to: design, engineering, and other consultants’ fees and costs, including fees incurred pursuant to agreements with engineers, contractors and other consulting, design and construction professionals; environmental analysis and approval costs, including cost of compliance with the California Environmental Quality Act; deposits, applicable permit fees; all costs to apply for and secure necessary permits from all required regional, state, and federal agencies; plan check fees, and inspection fees; construction costs; initial maintenance; attorneys’ fees and costs; insurance; interest from the date of payment on any contracts. The Parties authorize the City to pursue State Revolving Fund (“SRF”) loans from the State Water Resources Control Board (“SWRCB”) to fund the costs of the Projects. The maximum amount of the SRF planning/design loan sought for the planning/design of the primary sedimentation tanks, the fixed film reactors, and a new laboratory/Environmental Service building will be $6.75 million. The maximum amount of the SRF construction loan sought for the design/construction of a sludge dewatering and load-out facility will be $28 million. The loan will have a thirty year repayment term. The SRF loan shall be repaid in the same proportionate share, as shown on Exhibit “H” to Amendment No. Three (3) to the Contract. The Parties further agree that, if necessary, each Party shall raise their sewer use rates for the repayment of the SRF loan, operations, and/or maintenance of the Project, following any appropriate process under California Constitution article XIII C and D (Proposition 218). If the SWRCB terminates its loan commitment unexpectedly following execution of the planning and/or construction contract(s) for a Project or the Projects, Palo Alto shall notify the Parties promptly. Following notification of the termination of the SRF, the Parties shall meet in a timely manner to discuss alternative funding sources and strategies for completion of the Projects. If the Parties are unable to agree on new funding sources in a timely manner, then Palo Alto shall have the right to terminate the Project or the Projects immediately. The Parties shall remain responsible for Project Costs and loans incurred, whether before or after termination of the Project, in connection with the termination of the Project construction contract, in the same proportion to each organization’s share, as shown on Exhibit “H” to Amendment No. Three (3) to the Contract. Unless earlier terminated, the obligations and responsibilities of the Parties shall commence with the execution of this amendment and be in force for the life of the SRF loan. Pursuant to Paragraph 6.c of the Contract, the City will supply the District with all information supporting the City’s determinations regarding the Project Costs, including but not limited to, information relating to the computation of the relative shares of each organization. The City will make available all such information (historical and current) to the District’s auditors, on request. District shall pay its share of any Project Costs within ten (10) business days of receipt of the quarterly billing statement sent by the City. If District disputes the correctness of an invoice, it shall pay the invoice in full and the dispute shall be resolved after payment in accordance with the Contract, and shall not offset against any payment due. The Parties shall undertake any dispute resolution in accordance with Paragraph 10 of the Contract. Section 2. Paragraph 19 of the Contract and Paragraph 7 of Amendment No. 2 are hereby deleted and replaced with the following: Indemnity. Each of the Parties shall defend, indemnify and hold the other party harmless of and from all claims, liabilities, actions, causes of action, proceedings, damages, fines, penalties, costs, expenses, attorneys’ fees or any other forms of pecuniary or non- pecuniary relief which result from: (i) That party's violation of laws and regulations governing the collection, transmission, treatment and disposal of wastewater or wastewater byproducts, including, without limitation, laws and regulations governing disruption of treatment processes or operations, degradation of sludge quality, and NPDES permit violations attributable to the conduct of that party or other persons, including industrial waste dischargers for whom that party exercises regulatory responsibility. (ii) That party's failure to exercise reasonable care in the operation and maintenance of its wastewater facilities. Section 3. Except as modified herein, the Contract shall remain unchanged, and is hereby ratified and confirmed. [SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties have by their duly authorized representatives executed this Amendment No. Six to the Contract Restatement and Amendment No. C237 Between the City of Palo Alto and The East Palo Alto Sanitary District as of the date first written above. ATTEST: __________________________________ City Clerk APPROVED AS TO FORM: __________________________________ Deputy City Attorney APPROVED AS TO CONTENT: __________________________________ City Manager CITY OF PALO ALTO By: __________________________ Mayor ATTEST: __________________________________ APPROVED AS TO FORM: __________________________________ Attorney APPROVED AS TO CONTENT: __________________________________ EAST PALO ALTO SANITARY DISTRICT By: __________________________ Name: . Title: . EXHIBIT I PROJECT DESCRIPTION / DEPICTION ATTACHMENT G AMENDMENT NO. FOUR TO CONTRACT NO. C869 BETWEEN THE CITY OF PALO ALTO AND THE BOARD OF TRUSTEES OF THE LELAND STANFORD JUNIOR UNIVERSITY This Amendment No. Four (4) to the Contract is made and entered into on _______________________, by and between the CITY OF PALO ALTO, a chartered city and a chartered municipal corporation of the State of California (“City”) and the BOARD OF TRUSTEES OF THE LELAND STANFORD JUNIOR UNIVERSITY, a body having corporate powers under the laws of the State of California (“Stanford”) (individually, a “Party”; collectively, the “Parties”). R E C I T A L S: A. The Parties have entered into that certain Contract Between Palo Alto and Stanford, executed on November 30, 1956, as amended by the Addendum and Amendments described below (collectively, the “Contract”). The Contract has been amended three times as follows: Addendum No. One (1) to the Contract Between the City of Palo Alto and Stanford, dated as of June 11, 1971; Amendment No. Two (2) to the Contract Between the City of Palo Alto and Stanford, dated as of November 2, 1998; and Amendment No. Three (3) to the Contract Between the City of Palo Alto and Stanford, dated as of March 16, 2009. B. Palo Alto owns and operates the sewerage system (the “System”) pursuant to the Contract, and is responsible for making capital additions to the System. Under the Contract, prior to commencement of construction of any capital additions or enlargements of the System, City and Stanford shall agree upon the terms of payment by Stanford of its proportionate cost. The Parties now desire to agree upon the sharing of costs associated with the planning and design of the rehabilitation of the primary sedimentation tanks, the fixed film reactors, a new laboratory/Environmental Service building, and the design and construction of a sludge dewatering and load-out facility (individually, the “Project”, collectively, the “Projects”). The Projects will become part of the regional water quality control plant (the “Plant”), which is owned and operated by Palo Alto as part of the System. NOW, THEREFORE, in consideration of the terms, conditions and covenants set forth in this Amendment No. Four (4), the Contract is hereby amended as follows: Section 1. Paragraph 24 is hereby added to the Contract to read, as follows: “24. IMPLEMENTATION OF THE PROJECTS. Palo Alto and Stanford hereby approve the planning/design of the rehabilitation of the primary sedimentation tanks, the fixed film reactors, a new laboratory/Environmental Service building, and the design/construction of a sludge dewatering and load-out facility (individually, the “Project”, collectively, the “Projects”). Each Party shall pay its share of the Project Costs for the Projects in proportion to the capacity it owns in the Joint System or portion thereof as shown in Exhibit “H” to Amendment No. 2 to the Contract. “Project Costs” means all costs incurred in connection with the planning, design, construction and implementation of the Projects. Without limiting the generality of the foregoing, Project Costs shall include, but not be limited to: design, engineering, and other consultants’ fees and costs, including fees incurred pursuant to agreements with engineers, contractors and other consulting, design and construction professionals; environmental analysis and approval costs, including cost of compliance with the California Environmental Quality Act; deposits, applicable permit fees; all costs to apply for and secure necessary permits from all required regional, state, and federal agencies; plan check fees, and inspection fees; construction costs; initial maintenance; attorneys’ fees and costs; insurance; interest from the date of payment on any contracts. The Parties authorize Palo Alto to pursue State Revolving Fund (“SRF”) loans from the State Water Resources Control Board (“SWRCB”) to fund the costs of the Projects. The maximum amount of the SRF planning/design loan sought for the planning/design of the primary sedimentation tanks, the fixed film reactors, and a new laboratory/Environmental Service building will be $6.75 million. The maximum amount of the SRF construction loan sought for the design/construction of a sludge dewatering and load-out facility will be $28 million. The loan will have a thirty-year repayment term. The SRF loan shall be repaid by the Parties in the same proportionate shares as shown on Exhibit “H” to Amendment No. Two to the Contract. If the SWRCB terminates its loan commitment unexpectedly following execution of the planning and/or construction contract(s) for the Project or the Projects, Palo Alto shall notify the Parties promptly. Following notification of the termination of the SRF, the Parties shall meet in a timely manner to discuss alternative funding sources and strategies for completion of the Projects. If the Parties are unable to agree on new funding sources in a timely manner, then Palo Alto shall have the right to terminate the Project or Projects immediately. The Parties shall remain responsible for Project Costs and loans incurred, whether before or after termination of the Project/Projects, in connection with the termination of the Project planning/design/construction contract(s), in the same proportion to each organization’s share, as shown on Exhibit “H” to Amendment No. Two (2) to the Contract. Unless earlier terminated, the obligations and responsibilities of the Parties shall commence with the execution of this Amendment No. Four and be in force for the term of the SRF loan. Stanford shall pay its share of any Project Costs within ten (10) business days of receipt of the annual billing statement sent by Palo Alto. If Stanford disputes the correctness of an invoice, it shall pay the invoice in full and the dispute shall be resolved after payment in accordance with the Contract, and shall not offset against any payment due. Section 2. Except as modified herein, the Contract shall remain unchanged, and is hereby ratified and confirmed. [SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties have by their duly authorized representatives executed this Amendment as of the date first written above. ATTEST: __________________________________ City Clerk APPROVED AS TO FORM: Deputy City Attorney APPROVED AS TO CONTENT: __________________________________ City Manager CITY OF PALO ALTO By: __________________________________ Mayor ATTEST: __________________________________ APPROVED AS TO FORM: __________________________________ Attorney APPROVED AS TO CONTENT: __________________________________ THE BOARD OF TRUSTEES OF THE LELAND STANFORD JUNIOR UNIVERSITY By: __________________________________ Name: __________________________________ Title: __________________________________ CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR October 17, 2016 The Honorable City Council Palo Alto, California Policy and Services Committee Recommendation to Accept the Disability Rates and Workers' Compensation Audit The Office of the City Auditor recommends acceptance of the Disability Rates and Workers' Compensation Audit. At its meeting on June 14, 2016, the Policy and Services Committee approved and unanimously recommended that the City Council accept the report. The Policy and Services Committee minutes are included in this packet. Respectfully submitted, Harriet Richardson City Auditor ATTACHMENTS:  Attachment A: Disability Rates and Workers' Compensation Audit (PDF)  Attachment B: Policy and Services Committee Meeting Minutes Excerpt (June 14, 2016) (PDF) Department Head: Harriet Richardson, City Auditor Page 2 CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR June 14, 2016 The Honorable City Council Palo Alto, California Disability Rates and Workers' Compensation Audit In accordance with the Fiscal Year 2016 Annual Audit Work Plan, the Office of the City Auditor has completed the Disability Rates and Workers’ Compensation Audit. The audit report presents 5 findings with a total of 15 recommendations. The Office of the City Auditor recommends that the Policy and Services Committee review and recommend to the City Council acceptance of the Disability Rates and Workers’ Compensation Audit. Respectfully submitted, Harriet Richardson City Auditor ATTACHMENTS:  Attachment A: Disability Rates and Workers' Compensation Audit (PDF) Department Head: Harriet Richardson, City Auditor Attachment A Page 2 Attachment A   Disability Rates and  Workers’ Compensation Audit  June 2016  Office of the City Auditor      Harriet Richardson, City Auditor  Yuki Matsuura, Senior Performance Auditor  Lisa Wehara, Performance Auditor II       Attachment A   Page intentionally left blank    Attachment A Office of the City Auditor   ●   250 Hamilton Avenue, 7th Floor   ●   Palo Alto, CA 94301   ●   650.329.2667  Copies of the full report are available on the Office of the City Auditor website at:  http://www.cityofpaloalto.org/gov/depts.aud/reports/performance.asp      OFFICE OF THE CITY AUDITOR  EXECUTIVE SUMMARY:  Disability Rates and Workers’ Compensation Audit  June 2016  PURPOSE OF THE AUDIT  The audit objectives were to determine if the City's Workers’ Compensation policies and Injury and Illness Prevention  Program are implemented in a manner that minimizes injuries and illnesses and workers' compensation costs.  REPORT HIGHLIGHTS  Finding 1: The City’s Injury  and Illness Prevention  Program (IIPP) is  comprehensive but has lost  its effectiveness due to the  loss of its City Safety Officer  (Page 7)  The City has a comprehensive safety manual to help protect City employees from work‐ related injuries and illnesses. However, the manual has not been updated since 2000, and has  lost its effectiveness as its procedures, forms, and tools have become outdated. While the  number of workers’ compensation claims filed decreased in FY 2015 and has generally  decreased since FY 2009, the City may face a future increase in workplace injuries and  illnesses if the IIPP remains outdated.  Key Recommendations to the City Manager’s Office:   Allocate sufficient resources to implement and maintain the City’s IIPP and to monitor the  City’s compliance with the program.   Update the safety manual to redefine the roles and responsibilities and ensure compliance  with Cal/OSHA standards and other applicable safety laws.   Review departmental procedures and safety requirements to ensure they align with the  revised IIPP and City policy and procedures.   Work with York and departments to identify useful safety statistics, appropriate recipients  of this information, and establish an automated process for those statistics to be  provided.   Identify training opportunities to minimize common injuries, and coordinate with  departments to ensure regular training is provided to employees.  Finding 2: Injured employees’  benefit eligibility is not  accurately and completely  tracked and monitored,  resulting in both  overpayments and  underpayments of workers’  compensation benefits (Page  14)  The City does not have an effective process or tools to monitor benefit eligibility and the  work status of injured employees, resulting in both overpayments and underpayments of the  benefits paid to injured employees. The City’s workers’ compensation benefit structure is  highly complex due to additional City‐provided benefits defined by City policy and labor  agreements. This complexity also resulted in some disability leave payments being incorrectly  reported as compensation to CalPERS. HR staff track eligibility of each injured employee  manually because the City’s SAP system is not configured to support administration of these  benefits. York relies on HR staff to immediately communicate any changes in the work status  of injured employees to ensure that benefit eligibility is updated and communicated to the  injured employee in a timely manner as required by state law.  The former City Safety Officer used to play a key monitoring role and facilitated  communication between the City and York, but roles and responsibilities became unclear as  HR was reorganized and the processes changed. Lack of monitoring resulted in multiple  instances of benefit overpayment and underpayment.  Attachment A      Key Recommendations to the City Manager’s Office:  Continue working with ASD and CalPERS to address the disability leave benefits that were  incorrectly reported as compensation to CalPERS.   Review the 22 claims that accounted for 87 percent of the additional city benefits in  Exhibit 11, and take necessary action to address any errors identified.   Review the existing disability leave management process in Exhibit 12 and determine the  optimal monitoring structure, update the tools and procedures, and allocate sufficient and  skilled resources.   HR work with ASD to ensure that the data necessary for disability leave management is  captured through time reporting in SAP to support the process.   Work with York to identify and train responsible HR staff, and maintain online access to  York data for analyzing claims, payment transactions, and trends.  Finding 3: The City has not  met the state requirement  for timely reporting of its  workers’ compensation  claims to York, potentially  causing the cost of claims to  increase (Page 24)  California law requires employers to report within five days of their knowledge every  occupational injury or illness that results in lost time beyond the date of the incident or  requires medical treatment beyond first aid. The City has not met this requirement, which  could result in penalties and could also increase the cost of claims. A recent study concluded  that claims with more than a two‐week delay in reporting involve a longer period before the  injured worker can return to work, take longer to close, and are more complex to settle.  Key Recommendations to the City Manager’s Office:   Streamline the workers’ compensation reporting process and improve the accuracy and  completeness of the claim forms.  Finding 4: The City has not  ensured that York met all  contract terms (Page 29)  The York contract includes various terms that could help the City reduce its workers'  compensation costs, such as cost reduction guarantees and utilization review. While most  requirements are met, there are some that the City has not required York to fulfill. The City  could better manage its claims and reduce costs by fully using services York is required to  provide under the contract.  Key Recommendations to the City Manager’s Office:   Create a list of key contract terms and assign staff to monitor and follow up on York  performance against each term   Work with York to streamline the monthly, quarterly, and annual reporting process by  leveraging online access to York data  Finding 5: Workers’  compensation revenues,  costs, and performance data  are not clearly reported for  informed decision making  (Page 31)  The Workers’ Compensation Fund accounts for administration of the City’s workers’  compensation program, and the revenues and expenditures are reported in the City's  comprehensive annual financial report and budget documents. However, the Workers’  Compensation Fund does not include all of the City’s workers’ compensation costs, and the  costs presented in the budget documents are difficult to understand the nature and true cost  of each line item. Without a clear understanding of the workers’ compensation costs, Council  and management may not be able to make informed decisions regarding the City’s workers’  compensation related programs.  Key Recommendations to the City Manager’s Office:   HR work with ASD’s Office of Management and Budget to clarify the presentation of the  workers’ compensation costs in the City’s budget documents   Work with York to identify useful performance measures and establish procedures to  ensure reliable reporting of performance data using a consistent methodology.  Attachment A     TABLE OF CONTENTS  Objective ................................................................................................................................................. 1  Background ............................................................................................................................................. 1  Scope ...................................................................................................................................................... 5  Methodology .......................................................................................................................................... 5  Finding 1:   The City’s Injury and Illness Prevention Program (IIPP) is comprehensive but has lost its  effectiveness due to the loss of its City Safety Officer ................................................................ 7  Recommendations ........................................................................................................................... 13  Finding 2:  Injured employees’ benefit eligibility is not accurately and completely tracked and monitored,  resulting in both overpayments and underpayments of workers’ compensation benefits...... 14  Recommendations ........................................................................................................................... 22  Finding 3:  The City has not met the state requirement for timely reporting of its workers’ compensation  claims to York, potentially causing the cost of claims to increase ............................................ 24  Recommendations ........................................................................................................................... 27  Finding 4:  The City has not ensured that York met all contract terms ............................................................. 29  Recommendations ........................................................................................................................... 30  Finding 5:  Workers’ compensation revenues, costs, and performance data are not clearly reported for  informed decision making ......................................................................................................... 31  Recommendations ........................................................................................................................... 34  Appendix 1: The City’s Workers’ Compensation Costs ........................................................................ 35  Appendix 2: City Manager’s Response ................................................................................................. 37       Attachment A     ABBREVIATIONS   4850  ASD  AWW  CAL/OSHA  CalPERS  CSAC   DIR  EMS  FTE  FY  HR  IIPP  MOA  PD  RMI  SEIU  TD  TPA  California Labor Code Section 4850  Administrative Services Department  Average weekly wage  California Occupational Safety and Health Act  California Public Employees' Retirement System  California State Association of Counties  Department of Industrial Relations  Emergency medical service  Full‐time equivalent  Fiscal year  Human Resources  Injury and illness prevention program  Memorandum of agreement  Permanent disability  Repetitive motion injury  Service Employees International Union  Temporary disability  Third party administrator    Attachment A Disability Rates and Workers’ Compensation Audit 1      INTRODUCTION   Objective The audit objectives were to determine if the City's Workers’  Compensation policies and Injury and Illness Prevention Program are  implemented in a manner that minimizes injuries and illnesses and  workers' compensation costs.  Background California State law requires employers to have workers’  compensation insurance, either by purchasing a policy or through  self‐insurance, and pay workers’ compensation benefits. Employees  are entitled to receive prompt, effective medical treatment for on‐ the‐job injuries or illnesses regardless of fault and, in return, are  prevented from suing employers for those injuries.  The City of Palo Alto is permissibly self‐insured for workers’  compensation up to $500,000 per claim, and has a workers’  compensation insurance policy through California State Association  of Counties (CSAC) Excess Insurance Authority, a joint powers  authority, with excess coverage up to the statutory limits set by the  state of California. 1 The City’s workers’ compensation policy states  that City employees and elected or appointed public officials are  generally covered under workers’ compensation, while volunteers  are not. The Risk Manager in the City’s Human Resources (HR)  Department is responsible for administering workers’ compensation  benefits.  State Oversight The California State Department of Industrial Relations (DIR),  through its Division of Workers’ Compensation: 1) administers  workers’ compensation laws, 2) resolves disputes over workers’  compensation benefits, and 3) provides information and assistance  about the workers’ compensation system. The DIR’s Office of Self  Insurance Plans is responsible for oversight and regulation of  workers’ compensation self‐insurance in California.  Third Party Administrator  (TPA)  The City has contracted with York Risk Services Group (York), a third  party administrator, since July 2006 to administer the City’s workers’  compensation claims. York claims examiners, on behalf of the City,  determine what benefits should be paid or rendered under the  applicable workers’ compensation laws in each reported claim, and  pay benefits out of City funds. The City maintains control over  authorizing appeals, settlements, awards, and all other decisions  related to benefits.                                                               1 The maximum amount depends on various factors, such as type of benefit, loss date, or nature of injury or illness.  Attachment A Disability Rates and Workers’ Compensation Audit 2      Workers’ Compensation  Claim Types and Benefits  There are three types of workers’ compensation claims:   First aid – Minor medical treatment only, as defined by state law   Medical only – Medical treatment only beyond first aid   Indemnity – Medical treatment and wage support when the  employee cannot return to work  Exhibit 1 describes workers’ compensation benefits state law  requires the City to pay.    EXHIBIT 1  Workers’ Compensation Benefits Required by State Law  Benefit Category Benefit Provided by the City  Medical Treatment All reasonable and necessary medical care and incidental costs, including  transportation. The City generally is not liable for the cost of medical treatment  obtained by the employee before the City was notified of the injury.  Salary Continuation  for Safety Employees  (4850)  Eligible public safety employees (e.g., firefighters, police officers) can receive up to 365  days of full salary while on disability leave in accordance with California Labor Code  Section 4850.  Temporary Disability  (TD)  Employees who are unable to work for more than three days while recovering from  injury can receive two‐thirds of gross wages tax free up to 104 weeks within five years  from the date of injury. There are two types of TD benefits:   Temporary Total Disability benefits – payments to an employee who cannot work  at all while recovering.   Temporary Partial Disability benefits – payments to an employee who can work  part‐time while recovering.  Permanent Disability  (PD)  When maximum recovery is achieved and a permanent injury remains, the employee  may receive a settlement based on the level of permanent disability, type of injury,  continuing medical treatment, and the employee’s age and occupation.  Death  The dependents receive burial expenses up to $10,000* and benefit payments up to  $320,000,* depending on the number of dependents.  Supplemental Job  Displacement  Benefits  A Supplemental Job Displacement Voucher up to $6,000,* payable to a state  accredited training school to assist with retraining, if the City cannot provide  modified  or alternative work to accommodate permanent work restrictions.  * The maximum benefit set by the state of California for injuries on or after January 1, 2013.  Source: California state laws and City policies    City’s Workers’ Compensation  Claims and Costs  It is difficult to identify trends in the City’s workers’ compensation  claims without understanding the unique nature and severity of  individual cases. Exhibit 2 shows that the number of claims filed by  City employees has decreased by half in the last decade, from 154 in  fiscal year (FY) 2006 to 74 in FY 2015. However, the number of claims  does not always correlate with the cost of claims, which is highly  dependent on the severity of each case. The FY 2015 number is also  Attachment A Disability Rates and Workers’ Compensation Audit 3      likely to increase as employees sometimes report at a later date their  injuries or illnesses that originated in the past.  Exhibit 3 shows that indemnity claims comprise the majority of the  City’s cost for workers’ compensation claims, representing more  severe injuries and illnesses with higher medical cost, wage support,  and in some cases, the cost of litigation and settlement. Although the  cost of claims incurred has decreased by 61 percent, from  $2.9 million in FY 2006 to $1.1 million in FY 2015, the cost of newer  claims is expected to increase as claims develop (e.g., a knee injury  later requiring surgery). For example, the total cost of FY 2013 claims  was $1 million as of June 30, 2013, but increased to $3.2 million by  June 30, 2015. Spikes in the cost of claims incurred in FY 2012 and  FY 2013 were due to two separate claims involving an unusually  severe injury or illness that progressed over time.    EXHIBIT 2  Number of Workers’ Compensation Claims Filed by Fiscal Year of Loss  As of June 30, 2015   Source: York data    80 76 75 73 71  45 56 42 59  36  74  57 56 57  38  46  45  39  45  37  6 9 5  5  4 1  1  4  1  0 20 40 60 80 100 120 140 160 180 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Indemnity Medical Only First Aid Number of claims may increase as  more are filed after the loss date  Attachment A Disability Rates and Workers’ Compensation Audit 4      EXHIBIT 3  Cost of Claims Incurred and Paid by Fiscal Year of Loss  Valued as of June 30, 2015   *  The actual cost paid as of June 30, 2015, for claims grouped by fiscal year of their loss dates. The difference between the  estimated cost incurred and the actual cost paid becomes smaller as the injured employees receive benefits and the  older claims are closed.  Source: York data    Injury and Illness Prevention  Program (IIPP)  The City’s safety policy requires all employees to comply with all  California Occupational Safety and Health Act (Cal/OSHA) standards,  all applicable safety laws, and the City’s injury and illness prevention  manual (the safety manual). Cal/OSHA requires employers to  establish and implement a written injury and illness prevention  program (IIPP), and regularly update it to maintain its effectiveness.  According to Cal/OSHA, an effective IIPP must:  • Fully involve all employees, supervisors, and management  • Identify employees’ exposure to specific workplace hazards  • Correct identified hazards in an appropriate and timely manner  • Provide effective training  Modified Duty Program Helping an injured employee return to work with modified or  alternative duty can benefit both the City and the employee in  multiple ways. Not only can the City reduce workers’ compensation  costs and retain experienced employees, the employees can also  avoid financial stress and continue to be productive. Wages will be  the same rate of pay the employee received in his/her regular  $2.9 $2.1 $2.7 $2.6 $2.5 $1.9 $2.8 $3.2 $2.1 $1.1 $2.6 $1.9 $2.5 $2.1 $2.2 $1.4 $2.0 $1.7 $1.2 $0.5 $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Mi l l i o n s Estimated Cost Incurred Actual Cost Paid* Indemnity claims represent about 98% of the costs Costs are expected to  increase as claims develop Attachment A Disability Rates and Workers’ Compensation Audit 5      assignment. City policy limits modified work assignments to 180 days  unless there are extenuating medical reasons approved by the Risk  Manager.  Scope We reviewed the City’s workers’ compensation claims and related  financial and operational data for the injuries and illnesses that  occurred from FY 2011 through FY 2015. Our analysis focused on  indemnity claims involving four departments that represent over  90 percent of the City’s indemnity claims cost: Police, Fire, Utilities,  and Public Works. We did not review the actual claim files, medical  records, or legal records.   Our comparison of the City’s data to York’s data was limited because:  We could not obtain the dates of disability leave covered by each  York voucher, so we compared the amount of York vouchers that  reflected the City’s disability leave payments to the actual City  payments based on the voucher issuance date. Any vouchers  reissued to make adjustments resulted in discrepancies if they  covered prior disability leave dates.   There was not a common unique data field. Although we used  the name as a common field, the employee’s name in the City’s  data sometimes differed from the claimant’s name in York’s  data, which required us to visually compare names to identify  employees.  Methodology To accomplish our audit objective, we:   Interviewed staff from the HR, the Administrative Services  Department (ASD), Police, Fire, Utilities, and Public Works  departments to understand the City’s workers’ compensation  processes.   Reviewed California DIR publications, California laws and  regulations, City policies and procedures, and labor agreements  to understand the laws, regulations, and requirements related to  the workers’ compensation claims filed by City employees.   Reviewed the City’s Comprehensive Annual Financial Reports,  Operating Budget documents, City data, and other departmental  records, including safety committee minutes for Fire, Utilities  (Water‐Gas‐Wastewater Field Operations, Electric Field  Operations), and Public Works.   Interviewed York staff, including claims examiners and the  account manager, and reviewed York data.   Identified risks that could prevent achieving the program  objectives and procedures implemented to mitigate the risks.  Attachment A Disability Rates and Workers’ Compensation Audit 6       Mapped relevant processes in coordination with HR and ASD  staff.   Compared the disability leave benefits recorded by York to the  benefits the City actually paid to the injured employees from  FY 2013 through FY 2015. Selected 22 employees with a  difference of $10,000 or more between York records and City  benefit amounts paid, and reviewed their workers’ compensation  claim data, York check register records, City’s financial records,  and the employees’ timecards. Worked with HR and ASD staff  and York staff to identify causes for the differences and  determine if the benefits were paid accurately in accordance with  state law and City policies.  Data reliability To assess the reliability of the data needed to answer the audit  objective, we reviewed the data for completeness, consistency, and  reasonableness, and discussed issues we identified with  knowledgeable City and York staff. We also cross‐referenced multiple  reports generated from the City’s SAP system and York’s system to  further understand the data and related processes.2  Although our assessment identified some discrepancies between the  City’s data and York data, we were able to understand the sources of  discrepancies and isolate them or make manual adjustments to  support our audit findings and conclusions. From these efforts, we  believe the information is sufficiently reliable for this report.  Compliance with government  auditing standards  We conducted this audit of disability rates and workers’  compensation in accordance with our FY 2016 Annual Audit Work  Plan and generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objective. We believe  that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objective.  We would like to thank management and staff in the Human Resources, Administrative Services,  Police, Fire, Utilities, Public Works departments and the City Attorney’s Office for their time,  cooperation, and assistance during the audit process.                                                                 2  SAP is the City’s enterprise resource planning system that supports the City’s core business functions, including  accounting, purchasing, and utilities.  Attachment A Disability Rates and Workers’ Compensation Audit 7      Finding 1 The City’s Injury and Illness Prevention Program (IIPP) is  comprehensive but has lost its effectiveness due to the  loss of its City Safety Officer   The City has a comprehensive safety manual to help protect City  employees from work‐related injuries and illnesses. However, the  manual has not been updated since 2000, and has lost its  effectiveness as its procedures, forms, and tools have become  outdated. While the number of workers’ compensation claims filed  decreased in FY 2015 and has generally decreased since FY 2009, the  City may face a future increase in workplace injuries and illnesses if  the IIPP remains outdated.  The City’s Injury and Illness  Prevention Program is no  longer effective  The City Safety Officer is responsible for maintaining an effective IIPP,  but the City has not had a City Safety Officer since 2013. HR went  through a series of reorganizations beginning in FY 2014, but it did  not redefine the roles and responsibilities over the IIPP. As a result,  the City Safety Officer’s responsibilities went unfulfilled while  departments have stopped referring to the manual in favor of their  own departmental safety procedures or practices.  The City has not had a City  Safety Officer since July 2013  due to HR reorganization  The safety manual assigns the City Safety Officer the responsibility to  maintain an effective IIPP by ensuring regulatory compliance and  coordinating all City safety activities. However, the City has not had a  City Safety Officer since the previous officer retired in July 2013. HR  went through a series of reorganizations beginning FY 2014, and  implemented a new business partner model where each department  was assigned to one of the HR business partner teams that provide a  wide range of human‐resource related services for their  departments.  HR did not revise the safety  manual to realign it with the  new business partner model  Upon reorganization, HR did not revise the safety manual procedures  or redefine the roles and responsibilities over the IIPP to ensure the  IIPP remains effective and sufficient resources are allocated to  administer the program. Between November 2013 and June 2015, HR  hired four Senior HR Administrators to lead each business partner  team. However, their involvement in the City’s IIPP has been minimal  because their job duties cover a wide range of other high priority HR  areas, and their workload, as they are trained and learn on the job,  has been full with pressing issues and no capacity left for injury and  illness prevention efforts. Exhibit 4 shows that HR staffing for the IIPP  decreased from 1.75 in FY 2011 to 0.54 in FY 2015, while the  department’s staffing increased slightly during the same period, from  16.34 in FY 2011 to 16.70 in FY 2015. This indicates that HR  Attachment A Disability Rates and Workers’ Compensation Audit 8      reallocated its resources away from the IIPP to other functions,  rather than losing a position due to a budget reduction.     EXHIBIT 4  HR Staffing and Cost to Administer the IIPP (General Fund)   FY 2011 FY 2012 FY 2013 FY 2014 FY 2015  HR Authorized Staffing – IIPP  1.75  1.00  1.02  0.54  0.54  HR Administration Cost – IIPP  $190,976  $155,518  $93,136  $75,113  $85,034  Source: City’s financial records    Citywide safety committees  have not been established as  required  The City is required to establish certain safety committees and hold  meetings as specified by its policies and labor agreements. Although  departments hold regular safety committee meetings, the citywide  committees shown in Exhibit 5 have not been established as  required. The Citywide Safety Committee, for example, is designed to  monitor departmental safety activities and monitor compliance with  safety and occupational health standards and practices, but it has not  met for years.    EXHIBIT 5: Safety Committees not Established  Safety  Committee Authority Composition Frequency Functions  Citywide Policy and Procedures  (3‐01/HRD)  SEIU MOA  SEIU Hourly MOA  Safety Manual  Ten members with equal  union and management  membership*  Upon call Review safety standards, act as  an advisory group to the  departmental safety  committees, and review all  departmental safety programs  Civic  Center  (City Hall)  SEIU MOA  Safety Manual  One facilities management,   one building inspection,  and two union  representatives, and the  City Risk Manager**  As  needed**  Safety matters of the Civic  Center (City Hall)  Ergonomics SEIU MOA None specified None  specified  Provide management with  recommendations on  safe  ergonomic work practices   *  Service Employees International Union (SEIU) Memorandum of Agreement (MOA)  ** According to the SEIU MOA. However, the safety manual includes the City Safety Officer, not the Risk Manager, in the  composition and requires the meeting to take place at least quarterly.  Source: City policies and procedures and labor agreements     In addition, the responsibilities of the City Risk Manager and City  Safety Officer are not consistently defined in the City’s policies and  procedures, safety manual, and labor agreements. For example, the  safety manual states the City Safety Officer is responsible for the  Attachment A Disability Rates and Workers’ Compensation Audit 9      functions of the Citywide committee, while City procedures assign  the responsibility to the Risk Manager. HR did not clarify the  assignment of responsibility as part of the reorganization.  Ergonomic training  workshops have not been  provided as required  The SEIU labor agreement also requires that management develop  and provide training workshops on safe ergonomic work practices at  least twice a year and immediately adopt Cal/OSHA ergonomic  standards as part of the IIPP. The Cal/OSHA ergonomics standard  requires every employer that had at least two workers report a  Repetitive Motion Injury (RMI), as diagnosed by licensed physicians  within a 12‐month period, to implement a program designed to  minimize RMIs. The program must include a worksite evaluation,  control of exposures that have caused RMIs, and employee training.  Because there were two to four workers’ compensation claims  involving RMIs in each of the last five fiscal years, the City is subject  to this requirement.   Since its reorganization, HR has not had the resources to identify and  coordinate ergonomic training that the former City Safety Officer did  in the past. While the City increased its annual budget for ergonomic  evaluations from $25,000 to $55,000 in FY 2016, its current expense  is focused on office environments where office furniture and  equipment are improperly set up.  Industry specific ergonomic  training may prevent certain  sprain and strain injuries  Studies show the importance of a comprehensive ergonomics  program in preventing sprains, strains, and RMIs.3 Strains and sprains  are the highest priority concern for all public safety workers in terms  of injury frequency and amount of lost work time, and back injuries  are the most common for police and emergency medical service  (EMS) responders who often lift and carry injured people when on  medical calls.  Exhibits 6 and 7 show that strain and sprain injuries represented  more than half of the City’s indemnity claims, both in incurred cost  (52 percent) and in number of claims filed (59 percent) from FY 2011  through FY 2015. Public safety employees filed more than half  (56 percent) of the claims.  While general interventions (e.g., maintaining a healthy body weight  and staying physically fit) may have a beneficial effect on activities                                                               3  Preventing Sprains, Strains, and Repetitive Motion Injuries (2012, State Building & Construction Trades Council of  California); Occupational Safety and Health for Public Safety Employees (2008, RAND Institute for Civil Justice and  Infrastructure, Safety, and Environment).  Attachment A Disability Rates and Workers’ Compensation Audit 10      such as foot pursuits by police officers, specific ergonomic  interventions (e.g., training, modification to equipment) are more  effective in addressing certain risk factors, such as working in  awkward body postures and performing the same or similar tasks  repetitively. As part of their negotiated benefits, public safety  employees have a wellness or fitness program available.    EXHIBIT 6  Top Five Injuries or Illnesses for Indemnity Claims  From FY 2011 through FY 2015, Valued as of June 30, 2015   Nature of Injury or Illness Number of Claims Filed % Cost Incurred (in millions) %  Strain 120 50% $4.4 40%  Sprain 21 9% $1.3 12%  Respiratory Disorders 7 3% $2.2 20%  Laceration 6 3% $0.6 6%  Cancer 4 2% $0.5 4%  Other 80 34% $2.0 18%  Total 238 100% $10.9 100%  Source: York data    EXHIBIT 7  Number of Indemnity Claims Filed for Strain or Sprain Injury by Body Part  From FY 2011 through FY 2015   Department  Lower  Back Knee Shoulders Multiple Other Total %  Fire 6 11 6 4 18 45 32%  Police 11 5 4 6 8 34 24%  Utilities 4 6 3 2 7 22 16%  Public Works 3 2 2 0 13 20 14%  Other 4 2 1 0 13 20 14%  Total 28 26 16 12 59 141 100%  Source: York data    Police, Fire, Utilities, and  Public Works departments  incur the City’s highest  workers’ compensation costs  Exhibit 8 shows that a majority of the City’s indemnity claims (over  80 percent in number and over 90 percent in incurred cost) are filed  by employees from four departments: Police, Fire, Utilities, and  Public Works. Public safety officers who are charged with protecting  the public, such as police officers and firefighters, have a much  higher incidence and cost of injuries that result in workers’  compensation claims than other public employees. Utilities and  Public Works employees also face higher risks of injury due to the  nature of their job duties.  Attachment A Disability Rates and Workers’ Compensation Audit 11      EXHIBIT 8  Number of Indemnity Claims Filed, Cost Incurred, and Industrial Disability Retirement  By Department From FY 2011 through FY 2015, Valued as of June 30, 2015  Department  Number of Claims Filed   Industrial Disability Retirement  Accepted Denied Total % Cost Incurred  (in millions) % Number  Average Age  at Retirement  Fire 54 15 69 29%$2.9 26% 6 50  Police 51 13 64 27%$4.7* 43% 9** 40  Utilities 32 6 38 16%$1.5 13% 0 N/A  Public Works 26 4 30 13%$1.3 12% 0 N/A  Others 31 6 37 16%$0.6 6% 1 43  Total 194 44 238 100%$10.9 100% 16 44  *  Includes two claims with unusually high severity filed in FY 2012 and FY 2013, valued at $0.5 million and $2.2 million,  respectively.  ** One of the Police employees was not a safety officer.  Source: York data and City’s personnel records     Exhibit 9 shows that employees with one of five job titles comprise  67 percent of the total indemnity claim costs incurred from FY 2011  through FY 2015. During this period, 87 employees with these job  titles filed 115 indemnity claims, with 19 employees filing two or  more indemnity claims.    EXHIBIT 9  Top Five Job Titles by Cost of Indemnity Claims Incurred  From FY 2011 through FY 2015, Valued as of June 30, 2015   Job Title Department  Cost Incurred  (in millions)  % of City  Total  Number of  Claims Filed  % of City  Total  Police Officer Police $4.3 39% 51 21%  Fire Fighter/Paramedic Fire $1.1 10% 31 13%  Fire Captain Fire $0.8 7% 12 5%  Heavy Equipment Operator Utilities, Public Works $0.7 6% 7 3%  Firefighter Fire $0.6 6% 14 6%  Total  $7.4 67% 115 48%  Source: York data    16 industrial disability  retirements resulted from  workers’ compensation cases  in the last five years  During the last five fiscal years, 16 City employees retired with  industrial disability, and 14 of them were safety employees. Safety  employees and other eligible members of the California Public  Employees' Retirement System (CalPERS) may qualify for an  industrial disability retirement if they are unable to return to work  because of a job‐related injury or illness that is expected to be  permanent or last indefinitely. While an employee must be at least  Attachment A Disability Rates and Workers’ Compensation Audit 12      age 50 and have a minimum of five years of service credit to be  eligible for a service retirement, there are no age or vesting  requirements for an industrial disability retirement. If approved,  employees generally receive the greater of:   50 percent of the highest average monthly salary within the last  three years, tax free; or   A higher percentage of the salary depending on the years of  service credit, but only the first 50 percent is tax free.  Reducing the number of industrial disability retirements is in the best  interest of both the employees and the City. The sooner employees  retire, the more contributions the City must make to fund the future  obligations of retirement benefits, while the disabled employees face  a reduced income with the inability to work. All 16 retirees had filed  one or more workers’ compensation claims involving a sprain, strain,  cumulative, or repetitive motion injury prior to applying for an  industrial disability retirement. Preventing these injuries could  potentially reduce the number of disability retirements among safety  employees.  Departments do not have  access to York injury and  illness records to better  identify and correct hazards  One of the City Safety Officer’s responsibilities is to maintain safety  statistics on City employees and participate as needed in  departmental safety committees, and direct activities of those  involved in the daily management of employee safety, including  safety training and hazard identification. In the absence of the City  Safety Officer, departmental safety committees and safety  coordinators have lost access to the workers’ compensation  statistics, which could have helped them develop better safety  programs focused on prevention of high frequency or high cost  injuries and illnesses. York staff stated that regular reporting of  safety statistics can be customized for each department and  automated using their system, as is done for their other clients.  Some of the City’s workplace  postings are outdated  All employers in California must post information regarding safety  rules, regulations, and workers’ compensation benefits in areas  frequented by employees where it may be easily read during the  workday. Although HR annually purchases labor law posters and  distributes them to City facilities to meet this requirement, there was  outdated information posted in multiple locations, including the  names and phone numbers of the City’s occupational health service  provider and the workers’ compensation claims administrator. At  City Hall, there was only one poster displayed on the A level, in an  area that may not be seen by all employees. Most of the information  posted by other departments on other City Hall floors also contained  outdated information.  Attachment A Disability Rates and Workers’ Compensation Audit 13        Recommendations We recommend that:   1.1. The City Manager allocate sufficient resources to implement  and maintain the City’s IIPP and to monitor the City’s  compliance with the program.   1.2. HR update the safety manual, including supplemental tools and  guidance posted on the intranet, to ensure:   The roles and responsibilities over the IIPP are redefined.   The City’s IIPP complies with all Cal/OSHA standards and  other applicable safety laws.   1.3. HR review departmental procedures and safety requirements  to ensure they align with the revised IIPP and City policy and  procedures.   1.4. HR work with York and departments to identify useful safety  statistics, appropriate HR and departmental recipients of this  information, and reporting frequency, and establish an  automated process for those statistics to be provided.   1.5. HR identify industry‐specific ergonomics and general wellness  training opportunities to minimize common injuries, and  coordinate with departments to ensure regular training is  provided to employees.       Attachment A Disability Rates and Workers’ Compensation Audit 14      Finding 2 Injured employees’ benefit eligibility is not accurately and  completely tracked and monitored, resulting in both  overpayments and underpayments of workers’  compensation benefits   The City does not have an effective process or tools to monitor  benefit eligibility and the work status of injured employees, resulting  in both overpayments and underpayments of the benefits paid to  injured employees. The City’s workers’ compensation benefit  structure is highly complex due to additional City‐provided benefits  defined by City policy and labor agreements. This complexity also  resulted in some disability leave payments being incorrectly reported  as compensation to CalPERS. HR staff track eligibility of each injured  employee manually because the City’s SAP system is not configured  to support administration of these benefits. York relies on HR staff to  immediately communicate any changes in the work status of injured  employees to ensure that benefit eligibility is updated and  communicated to the injured employee in a timely manner as  required by state law.  The former City Safety Officer used to play a key monitoring role and  facilitated communication between the City and York, but roles and  responsibilities became unclear as HR was reorganized and the  processes changed. Lack of monitoring resulted in multiple instances  of benefit overpayment and underpayment, as described below.  The City provides workers’  compensation disability leave  benefits beyond what is  required by state law  City policies and labor agreements provide additional workers’  compensation disability leave benefits to City employees beyond the  state requirement, as shown in Exhibit 10. The City pays these  disability leave payments directly through employees’ paychecks.  York is contractually required to determine and track benefits to be  paid or rendered under the applicable workers’ compensation laws,  and does not track these additional City benefits. York issues  vouchers to record the City’s disability leave payments, and in  theory, this amount is less than the actual City payments by the  amount of additional City benefits.  As shown in Exhibit 11, the City made disability leave payments of  $2.4 million from FY 2013 through FY 2015, which was about  $570,000 more than the amount of vouchers issued by York  ($1.8 million) during the same period.    Attachment A Disability Rates and Workers’ Compensation Audit 15      EXHIBIT 10  City’s Workers’ Compensation Disability Leave Benefits Direct Payroll Categories   Benefit Category  Payroll Code  (Tax Free) Benefits under State Law Additional Benefits by the City  Salary Continuation for  Safety Employees  (Labor Code 4850)  7200 *Full salary up to 365 days N/A  Salary Continuation for  Nonsafety Employees  7200 N/A *Full salary for the initial 60 calendar  days following the injury  Temporary Disability  (TD)  7100 **Two‐thirds of gross wages  lost up to 104 weeks within  five years from the date of  injury; subject to the weekly  maximum amount set by  state law  *The greater of the amount  determined under state law or two‐ thirds of full salary regardless of the  state weekly maximum (City Policies  and Procedures 3‐03/HRD, last  updated in 2000)  ***Medical  Appointments  7200 N/A Can be coded as disability leave on  the timecard  * As of the date processed by the City’s payroll. The amount of full salary is often different from the average weekly  wage (AWW) calculated in accordance with the California Labor Code.  ** York determines the AWW by going back one year from the date of injury in accordance with the California Labor  Code. The AWW must consider various factors such as overtime and scheduled wage increases.  ***  The City Policy and Procedures 3‐03/HRD state, “The injured employee is entitled to one day of TD (temporary  disability) for each day of wages actually lost when submitting to medical examination at the request of the City or  the Workers' Compensation Appeals Board and when off work for a medical examination to prove his/her contested  claim.  Source: Auditor’s analysis of state law and city policies and procedures    EXHIBIT 11  Summary of Disability Leave Payments   Fiscal Year  Vouchers Issued by York  (Benefits Required by State Law)  Additional  City Benefits*  City Payroll Payments Made  (Includes Additional City Benefits)  2013 $460,454 $232,825 $693,279  2014 $788,390 $213,017 $1,001,407  2015 $595,236 $124,060 $719,297  Total $1,844,080 $569,902 $2,413,983  * Includes errors the City made in paying disability leave benefits.Quantifying the monetary impact of each case would  involve in‐depth analysis of the timecard data and case files.  Source: City’s financial records and York data    Some disability leave  payments have been  incorrectly reported to  CalPERS as compensation  The California Public Employees’ Retirement System (CalPERS)  defines reportable compensation that should be included in a  member’s “compensation earnable” for the purpose of determining  the member’s retirement allowance. The City has been reporting all  workers’ compensation disability leave benefits included in  Exhibit 11, captured under the payroll codes 7100 and 7200, as  Attachment A Disability Rates and Workers’ Compensation Audit 16      compensation. However, CalPERS confirmed that only salary  continuation for safety employees as defined in Labor Code section  4850 is reportable to CalPERS, and other disability leave benefits,  including temporary disability and any other salary continuation  plans offered by the employer, are not reportable. HR has been  aware of this issue and stated that it has been working with ASD and  CalPERS to address it.  The City’s disability leave  payments included errors  The former City Safety Officer used to track benefit eligibility of  injured employees and communicate the status to York staff. HR  business partners have been tasked with this function since the  reorganization, but the change was implemented without the new  process being defined or the business partners being fully trained.  We reviewed 22 claims that accounted for about $493,300  (87 percent) of the additional city benefits in Exhibit 11, and  identified multiple errors:    In 3 cases, the City paid disability leave benefits totaling about  $221,600, before the claims had been accepted and York  determined if the employees were entitled to the benefits. One  of the claims was later accepted, and the settlement took into  account payments made by the City. Estimated overpayments  for the other two claims, which were denied, total about  $33,600.   In 2 cases, the City amended the employee's timecard after a  settlement to pay out accrued sick or vacation leave in  accordance with City policies and labor agreements but did not  take into account the disability leave check that York had already  issued. These employees either retired or resigned prior to the  settlement and were no longer on the City’s payroll. Estimated  overpayments total about $23,900.   In 8 cases, HR did not track the first 60 calendar days of salary  continuation for nonsafety employees in accordance with City  policies, resulting in estimated overpayments totaling about  $44,700 to seven employees and an underpayment of about  $3,500 to one employee.   In 14 cases, York vouchers did not reflect the employee's  timecard coding. For example, York issued vouchers after the  employee had returned to work, or conversely, York stopped  issuing vouchers when the employee was still on disability leave.  Quantifying the monetary impact of each case would involve an  in‐depth analysis of the timecard data and case files.  Attachment A Disability Rates and Workers’ Compensation Audit 17      A highly manual process  requires timely  communication to work  Exhibit 12 shows that the City’s disability leave management process  is highly manual because the City’s SAP system is not configured to  support the process. HR business partners are required to track the  injured employees' work status and benefit eligibility by reviewing  the work status notes issued by the treating physicians that describe  work capacities and restrictions and updating the HR work status  tracking sheet.  To limit the use of disability leave payroll codes to eligible  employees, HR business partners manually set a limited number of  hours, called “buckets,” to be charged to disability leave for salary  continuation (7200 time code in SAP), temporary disability (7100  time code in SAP), and modified duty (1000 time code in SAP), for  each employee based on the work status notes. The HR business  partners are also required to periodically run an SAP time report to  ensure that employees are coding their timecards appropriately.    EXHIBIT 12  The City’s disability leave management process      Source: Auditor’s analysis of City policies and procedures.    Attachment A Disability Rates and Workers’ Compensation Audit 18       This process relies heavily on the timely communication of work  status through multiple parties:   Employees obtain and immediately submit the work status note  to the supervisor   Supervisors immediately forward the note to the HR business  partner team (sometimes with a copy to York)   HR business partner teams forward the note to the York claims  examiner, determine benefit eligibility, and update the time  buckets   York claims examiners determine and update benefit eligibility  and send a notice to the employee with a copy to HR   If any of the individuals in this chain of communication is absent,  cannot get to the note, or is not trained to take timely and  appropriate action, the process may not work, creating unnecessary  delay. Department staff reported that the time buckets often run out  even if the work status note had already been submitted, and it  prevents the employee from using appropriate disability leave  payroll codes on the timecard until the buckets are adjusted. HR staff  reported that they do not always receive work status notes timely,  and are unable to update the buckets before the payroll period ends.  HR business partners do not  have effective tools to  monitor work status and time  reporting  The former City Safety Officer used to centrally monitor injured  employees’ work status and facilitate communication between  supervisors and York. The HR reorganization decentralized this  monitoring function without effective tools being implemented,  which left the business partners, most of them newly hired upon the  reorganization, unsure of how to use the tools provided. Business  partners reported that they do not have the capacity to proactively  monitor the work status or time reporting of the employees on  workers’ compensation due to their demanding workload with other  priorities. Without complete and accurate information on the work  status of all injured employees, the City is unable to ensure they  return to work in a timely manner or determine the true cost of  workers' compensation disability leave.  HR work status tracking sheet  not a useful tool  Their shared tool, the HR work status tracking sheet, is not designed  effectively to track the work status of injured employees. For  example, there are no columns to document key dates such as the  date released back to modified duty or date returned to full duty.  Business partners rely more on their calendar, email, or paper file  records to track the status. Most information on the report was  either incomplete or inaccurate regarding the employees’ work  status.  Attachment A Disability Rates and Workers’ Compensation Audit 19      Payroll codes used for time  reporting do not fully support  the disability leave  management process  The business partners also run an SAP time report for monitoring  disability leave, but the payroll codes are not structured to capture  all information necessary for efficient, systematic monitoring:   Salary continuation and medical appointments share the same  payroll code (7200), and the report cannot distinguish the two.  Timecard information does not include the date and type of  injury as required by the payroll procedures, and leave is not  clearly tracked by specific claims. HR reported that it has been  working with ASD to create a separate code for medical  appointments.   The modified duty code (1000) is also used by employees who  are on modified duty due to nonwork related injury or illness.  These employees are required to note on the timecard that the  modified duty is nonindustrial. Only 2 percent of the total  modified duty hours was noted as nonindustrial during the 5‐ year period, but the notes were inconsistent. It is questionable if  all employees with nonindustrial injuries enter the notes in SAP  or if supervisors review the notes to ensure accurate and  complete time recording.   About 40 percent of the Fire Department’s modified duty leave is  coded as 24‐hour shift (1200), because 24 hours exceeds the  daily maximum set for coding modified duty (1000) in the SAP  system. HR staff was not aware of these modified duty hours  coded as 24‐hour shift.  Exhibits 13 and 14 summarize the disability leave and modified duty  hours recorded in SAP from FY 2011 through FY 2015.    EXHIBIT 13  Disability Leave Hours* by Department from FY 2011 through FY 2015    FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Total FTE**  Police 7,102 4,300 6,848 7,770 5,872 31,890 18.7  Fire 3,624 4,805 5,015 7,953 6,770 28,168 16.5  Utilities 2,317 1,423 2,632 4,697 4,766 15,833 9.3  Public Works 1,372 2,659 3,428 6,187 1,890 15,536 9.1  Others 501 972 1,095 643 580 3,791 2.2  Total 14,916 14,158 19,017 27,250 19,878 95,219 55.8  * Includes hours coded as disability leave for medical appointments  ** Full‐time equivalent. Based on the productive time of 1,706 hours (2,080 hours x 82%) used by ASD’s Office of  Management Budget.  Source: City’s financial records    Attachment A Disability Rates and Workers’ Compensation Audit 20      EXHIBIT 14  Modified Duty Hours* by Department from FY 2011 through FY 2015    FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Total FTE**  Police 5,784 5,611 3,121 4,322 4,662 23,500 13.8  Fire*** 419 560 972 3,632 1,898 7,481 4.4  Utilities 2,792 1,963 1,765 853 1,199 8,572 5.0  Public Works 3,677 5,648 1,935 2,422 1,821 15,503 9.1  Others 2,754 2,333 159 1,096 893 7,235 4.2  Total 15,426 16,115 7,952 12,325 10,473 62,291 36.5  *  Includes modified duty hours resulting from employees’ personal injuries.  ** Based on the productive time of 1,706 hours (2,080 hours x 82%) established by ASD using a consultant’s study.  *** Includes 24‐hour modified duty hours coded 1200, which was 41 percent of the total Fire Department modified duty  hours.  Source: City’s financial records     The Disability Pay section of the City’s payroll procedures (2‐06/ASD,  last updated in 2001) contains outdated instructions for disability  time reporting, because procedures were written for the old process  involving manual paper timecards, before SAP was implemented.  Better data tracking needed  to measure the true cost and  effectiveness of the modified  duty program  Exhibits 13 and 14 also demonstrate the importance of monitoring  modified duty hours and the additional staffing impact. From  FY 2011 through FY 2015, 158 employees worked a total of about  62,300 hours, or 39 FTEs of modified duty, including six employees  whose modified duty exceeded 180 days during the five‐year  period.4 State workers’ compensation law requires the rate of pay  for modified duty to stay the same as the employee’s regular  assignment without any impact on benefits or accruals, and the City  cannot hire new employees to fill the regular duty positions while  employees are out on disability or modified duty.  As a result, those regular duty positions need to be backfilled, often  with overtime, unless overstrength positions are available or  temporary employees are hired to fill the gap.5 The cost of backfilling  can be significant. However, there was insufficient information on  the timecards to quantify the actual financial impact of overtime  charged for filling in for a disabled employee. The Fire Department                                                               4 The City’s modified duty policy, Policy and Procedures 3‐02/HRD, limits modified duty assignments to 180 days unless  there are extenuating medical reasons that are approved by the Risk Manager. The Risk Manager confirmed that she  approved five of the six cases. The unapproved case involved three separate indemnity claims, and the employee was  back on full duty between injuries.  5  Overstrength positions are additional positions, over and above the quantity approved in the Table of Organization,  authorized to cover temporary shortages in staffing.  Attachment A Disability Rates and Workers’ Compensation Audit 21      reports the number of FTE positions that require backfilling in its  quarterly performance report.   Similarly, we could not systematically evaluate whether the City is  successful at getting employees back to work as soon as medically  appropriate to minimize loss of productivity and disruption of  service. Neither the City nor York record when the employee has  received a medical clearance from the treating physician, and as  mentioned earlier, the HR work status tracking sheet did not  accurately and completely capture key dates such as when the  employee was released to modified duty or returned to full duty.  HR business partners do not  have the technical expertise  to determine benefit  eligibility and must  coordinate with York  Administration of workers’ compensation claims is highly complex  and technical, involving various laws and regulations. HR business  partners do not have prior background in workers' compensation  and do not possess York’s technical expertise. York makes the initial  eligibility determination to accept, delay, or deny the claim within  the first 14 days after the City learns about the injury. Throughout  the life of the claim, York relies on City staff to immediately  communicate any changes in the work status of injured employees  so that benefit eligibility is updated and communicated to the  injured employee in a timely manner.  HR business partners do not  review benefit notices issued  by York  York is required by state law to send benefit notices to the claimants  with a copy to HR to explain:  • How disability leave payment amounts were determined.  • When and why benefits are delayed, denied, starting, changing,  or ending (with a list of all benefits paid).  These notices contain critical information regarding benefit  eligibility, and should be closely reviewed to ensure that the work  status report and time reporting are consistent with York’s eligibility  determination. The business partners were not trained to review  these notices, and therefore, did not identify discrepancies.   Because York does not track additional City benefits, the notices are  based on the benefits as required by state law, and do not always  reflect the benefits the employees actually receive from the City.  York also provides a monthly Payment Transaction Report, which  lists checks and vouchers that York issued on behalf of the City, but  the business partners do not review the vouchers to ensure that the  information is consistent with the benefits paid through payroll.  For the business partners to be able to effectively monitor  employees’ benefit eligibility and time reporting, they need to be  equipped with better tools and fully trained to:  Attachment A Disability Rates and Workers’ Compensation Audit 22       Interpret the benefit notices and vouchers issued by York   Understand eligibility criteria for additional City benefits   Facilitate communication between York and departments   Monitor consistency between York records and City records  HR business partners do not  have access to York data  The City Safety Officer used to have online access to York’s system to  view all claims documentation and to export data to analyze claims,  payment transactions, and trends. As of December 2015, none of the  HR business partners had such access to York data. York recently  implemented a new risk management information system that  provides a user‐friendly interface with graphical information,  analytics, and reports. HR stated that it plans to have York provide  access to the new system and training to enhance its ability to  monitor claims and payment transactions.  Recommendations We recommend that HR:   2.1. Continue working with ASD and CalPERS to address the  disability leave benefits that were incorrectly reported as  compensation to CalPERS.   2.2. Review the 22 claims that accounted for 87 percent of the  additional city benefits in Exhibit 11, and take necessary action  to address any errors identified.   2.3. Review the existing disability leave management process in  Exhibit 12 and determine the optimal monitoring structure,  update the tools and procedures, and allocate sufficient and  skilled resources to ensure:  a. Benefit eligibility and work status of injured employees is  accurately, completely, and timely tracked including:   Start date of disability   Date released back to work by the treating physician   Date returned to modified duty, including the  assignment and payroll code used   Date returned to full duty  b. Any changes in work status are communicated to York  c. Disability leave time buckets are updated as soon as HR is  notified of the status change.  d. Benefit notices and vouchers issued by York are consistent  with the timecards and actual benefits paid through payroll. Attachment A Disability Rates and Workers’ Compensation Audit 23      e. Employees comply with the City policy requiring timely  submission of work status notes.   2.4. Work with ASD to ensure that the data necessary for disability  leave management is captured through time reporting in SAP  to support the process, including:  a. Revising the City’s payroll procedures, Policies and  Procedures 2‐06/ASD, to provide clear instruction for  reporting disability leave on SAP timecards.  b. Configuring the SAP system to:   Track compensation reportable to CalPERS separately.   Track medical appointments that qualify as disability  leave by creating a separate payroll code.   If feasible and cost‐effective, limit the number of days  each employee can code disability leave or modified  duty on their timecard based on their position.   2.5. Work with York to identify and train responsible HR staff, and  maintain online access to York data for analyzing claims,  payment transactions, and trends. Establish and maintain  written procedures for granting, monitoring, and removing  access to the York data and appropriate handling and  safeguarding of the data.       Attachment A Disability Rates and Workers’ Compensation Audit 24      Finding 3 The City has not met the state requirement for timely  reporting of its workers’ compensation claims to York,  potentially causing the cost of claims to increase   California law requires employers to report within five days of their  knowledge every occupational injury or illness that results in lost  time beyond the date of the incident or requires medical treatment  beyond first aid. The City has not met this requirement, which could  result in penalties and could also increase the cost of claims. A recent  study concluded that claims with more than a two‐week delay in  reporting involve a longer period before the injured worker can  return to work, take longer to close, and are more complex to  settle.6  Delays in reporting caused by  various reasons, and further  affected by HR reorganization  Exhibit 15 shows that only 52 percent of the claims were reported to  York within 5 days from the City’s knowledge in FY 2015, as  compared to 70 percent in FY 2011 and 83 percent in FY 2012. This  decline coincides with the loss of the City Safety Officer and the HR  reorganization. The City Safety Officer used to support department  staff in timely completion of the required forms, but this role has  diminished as HR implemented the new business partner model  without redefining the reporting process.    EXHIBIT 15  Number of Days from Knowledge to Date Reported to York (Excludes Denied Claims)  Number of Days  FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Total  Claims % Claims % Claims % Claims % Claims % Claims %  5 days or less 57 70% 75* 83% 51 68% 49 53% 34 52% 266* 66% 6 to 10 days 14 17% 5 6% 16 21% 16 17% 16 25% 67 16% 11 to 30 days 9 11% 4 4%5 7% 22 24% 10 15% 50 12% 31 to 60 days 0 0% 2 2%1 1%1 1%3 5% 7 2% 61 days or more 2 2% 4 4%2 3%5 5%2 3% 15 4% Total 82 100% 90 100% 75 100% 93 100% 66 100% 405 100% *  Includes one claim that was reported to York before the City’s knowledge. York set up this claim based on the medical  legal evaluator’s opinion for an old claim involving a cumulative injury.  Source: York data    City policies are in place to  meet the state requirement  City policies require employees to report all known or even potential  work‐related injuries to their supervisors as soon as possible.                                                               6  The Relationship Between Accident Report Lag and Claim Cost in Workers Compensation Insurance, May 2015, National  Council on Compensation Insurance Inc.  Attachment A Disability Rates and Workers’ Compensation Audit 25      Supervisors must immediately provide a copy of the Employee Claim  Form (State form DWC‐1), to the employee for the employee section  to be completed. Once returned, supervisors must complete the  employer section of the DWC‐1, the Employer’s Report of  Occupational Injury (State form 5020), and the Supervisor's Report of  Injury/Exposure (City form), and forward all three forms to HR within  24 hours. HR then forwards the forms to York, if they are not already  copied on the email.   State law requires the City to submit the Form 5020 to the third  party administrator within five days from the date the injury is  reported by the employee. State law also requires the TPA to decide  whether to accept, deny, or delay the claim within 14 days after the  employer learns about the injury or illness. The claim can be delayed  for 90 days after the injury is reported by the employee if there are  any issues requiring investigation or medical evaluation. In such  cases, the TPA must send a letter to the injured employee explaining  the reason for the delay, what information is needed, and when a  decision will be made. If there are unreasonable delays in temporary  disability payments, the injured employee could be awarded a total  of 25 percent of each late payment, up to $10,000. Although we did  not identify any instances of penalties, If the employer or TPA  discovers such delays prior to the employee claiming a penalty, a  self‐imposed penalty in the amount of 10 percent of the late  payment can be paid within 90 days of the date of discovery, in lieu  of the 25 percent penalty.Exhibit 16 shows the City’s reporting  process.    Attachment A Disability Rates and Workers’ Compensation Audit 26      EXHIBIT 16  The City’s workers’ compensation claim reporting process       Source: Auditor’s analysis of City policies and procedures    Manual paper forms cause  delays and insufficient or  missing information  Until recently, supervisors had to manually complete a hard copy of  the required forms. Manual forms cause:   Delays – If the injured employees were not on site when the  injuries were reported, supervisors had to either hand deliver or  mail the Employee Claim Forms (DWC‐1) to have the employees  complete, sign, and return.   Insufficient information – Some fields, such as a description of  how the injury/illness occurred, may not have enough room for  the supervisor to provide sufficient detail, requiring the HR  business partner team or York claims examiner to follow up. For  example, the Police Department does not use the City form and  instead documents the required information in a memo because  the department policy and procedures require detailed  documentation of the incident and description of the injury.   Missing information – Form 5020 includes fields that may not be  readily available to supervisors, such as gross wages, date of hire,  and location code, which is different from the codes defined in  Attachment A Disability Rates and Workers’ Compensation Audit 27      SAP. Many supervisors leave these fields blank, expecting the HR  business partner team to fill out the missing fields. However,  York reported that the forms submitted by the City are often  incomplete.  HR recently made electronic, fillable state forms available to  employees on the City’s intranet and is planning to add the capability  to electronically sign and submit.   The state forms require sensitive, confidential information, such as  social security numbers, and need to be handled with great care. City  policies and procedures provide no additional guidance as to how to  obtain or safeguard personnel or payroll information. York stated  that it is a common practice for HR staff to complete and submit  Form 5020 on behalf of the supervisors, which helps ensure that  personnel and payroll information is entered accurately and that  sensitive information is safeguarded within the HR department.  Availability of the immediate  supervisor or HR staff may  cause further delays  Even when the employee immediately reports his or her injury, the  supervisor or the responsible HR business partner may be absent or  may not get to the forms right away to take necessary action. To  address this issue, the Fire Department now requires staff to notify  all battalion chiefs of any injury to ensure timely paperwork  completion when the direct supervisor is off work. Battalion chiefs  are also required to copy both deputy fire chiefs and administrative  staff when submitting claim forms to the HR business partner team.  Similarly, the Police Department copies York when submitting the  forms to HR, which notifies York of the need to follow up on the  injury.  Using York’s online claims  reporting and modified City  form can streamline the  process and improve accuracy  of the claims data  Most fields on the City form are included in the other two state  forms, and there is an opportunity to significantly streamline the  reporting process. York encourages its clients to use its online claims  reporting for the Form 5020 submission, which prevents simple  errors with a drop‐down list of valid entries and does not allow  submission of an incomplete form. As of March 2016, Utilities  Electric Operations is the only business unit that consistently uses it.  Form 5020 is the source of most of the City’s workers’ compensation  claims data recorded by York. Improving the accuracy and  completeness of the Form 5020 could greatly enhance the ability of  the York claims examiners to provide their service in a timely  manner.  Attachment A Disability Rates and Workers’ Compensation Audit 28      Recommendations We recommend that HR:   3.1. Streamline the workers’ compensation reporting process and  improve the accuracy and completeness of the claim forms by:   Revising the procedures to clarify the roles and  responsibilities. This should include determining whether  departments should be responsible for completing only the  Employee Claim Forms (DWC‐1) and Supervisor’s Report of  Injury and Exposure (City form), with HR staff being  responsible for completing the Form 5020.   Revising the City form for supervisors to complete with  necessary information that can be easily copied and pasted  to the Form 5020.   Ensuring the use of York’s online claims reporting to submit  the Form 5020, and having appropriate and trained staff  enter any sensitive personnel or payroll information.   Making the required forms and procedures available online  in one place with clear instructions and adding electronic  signature capability, if feasible and cost‐effective.   Regularly reviewing the forms, procedures, and  performance to ensure their compliance with state law.       Attachment A Disability Rates and Workers’ Compensation Audit 29      Finding 4 The City has not ensured that York met all contract terms   The York contract includes various terms that could help the City  reduce its workers' compensation costs, such as cost reduction  guarantees and utilization review.7 While most requirements are  met, there are some that the City has not required York to fulfill. The  City could better manage its claims and reduce costs by fully using  services York is required to provide under the contract.  The City could reduce cost of  claims by fully using York  services  The following contract terms are not fully met:   Quarterly file review – York is required to coordinate and attend  quarterly file review meetings with HR and department staff to  discuss strategies to help employees return to work, close claims,  and minimize costs. However, these meetings had not been  regularly and effectively carried out recently due to staff  turnover and scheduling issues on both sides.   Required reports – York has not provided certain required  reports, such as a report of claims with no activity for the  previous six months. These reports are readily available from the  York system, and can be replaced with HR’s direct online access  to the system data. As described in Finding 2, York does not track  the City’s additional disability leave benefits, and its reports do  not always reflect the benefits actually paid by the City.   Indemnity claim closure ratio – The cost reduction guarantee  section of the contract requires York to pay $5,000 to the City if  at least 32 percent of the indemnity claims reported during each  fiscal year are not closed by the end of that year.8 HR was not  aware that York did not achieve the required ratio for FY 2013  and had not made the required payment.  No data available to evaluate  York performance for  returning employees to  modified duty  York is also required to aggressively pursue a release to modified  duty for all City employees through written and verbal  communication with the medical provider. The contract also states  that employees on lost time status shall be returned to modified  work status within 30 days if an appropriate position is available. As  described in Finding 2, HR does not have data necessary to monitor  York performance because neither HR nor York track modified duty  completely and accurately.                                                               7  Utilization review (UR) is a process of reviewing medical treatment recommended by a physician to determine if it is in  accordance with the medical treatment utilization schedule. All employers or their workers' compensation claims  administrators are required by law to have a UR program.  8  The City and York subsequently agreed to revise the contract language to base the closure ratio on claims closed within  12 months from reporting to York.  Attachment A Disability Rates and Workers’ Compensation Audit 30      Recommendations We recommend that HR:   4.1. Create a list of key contract terms and assign staff to monitor  and follow up on York performance against each term,  including recovery of $5,000 from York for not meeting the  indemnity claim closure ratio for FY 2013.   4.2. Work with York to streamline the monthly, quarterly, and annual  reporting process by leveraging online access to York data (see  recommendations 1.3 and 2.5).       Attachment A Disability Rates and Workers’ Compensation Audit 31      Finding 5 Workers’ compensation revenues, costs, and performance  data are not clearly reported for informed decision  making   The Workers’ Compensation Fund accounts for administration of the  City’s workers’ compensation program, and the revenues and  expenditures are reported in the City's comprehensive annual  financial report and budget documents. However, the Workers’  Compensation Fund does not include all of the City’s workers’  compensation costs, and the costs presented in the budget  documents are difficult to understand the nature and true cost of  each line item. Without a clear understanding of the workers’  compensation cost, Council and management may not be able to  make informed decisions regarding the City’s workers’ compensation  related programs.  The City’s budget documents  do not clearly present  workers’ compensation costs  There are multiple elements to the City’s workers’ compensation  cost structure, and the City’s budget documents do not clearly  present those elements to assist Council and management in  understanding the complete cost information. Including a simple  narrative to assist readers in navigating and understanding the  complete cost structure could enhance the City’s ability to better  allocate its resources.  The City’s Workers’  Compensation costs are  included in separate areas of  the budget document  The City’s Workers’ Compensation Fund does not include:   Disability leave benefits – Disability leave benefits paid directly  by the City through its payroll, which are included in the  department budgets.    HR administration costs – HR staff cost to administer the IIPP and  workers’ compensation program, which is included in the  General Fund.  As shown in Exhibit 17, the actual total cost is much higher than the  cost included in the Workers’ Compensation Fund. In addition, the  estimated self‐insured liability fluctuates year over year based on the  estimate of unpaid claim costs and expenses developed by an  actuarial study. If we exclude this liability, we can see the total  workers’ compensation cost actually paid by the City in a given year.  Different conclusions may be drawn depending on the line item used  to evaluate the workers’ compensation program.    Attachment A Disability Rates and Workers’ Compensation Audit 32      EXHIBIT 17  The City’s Workers’ Compensation Cost   Workers’ Compensation Fund FY 2011 FY 2012 FY 2013 FY 2014 FY 2015  Claims paid* $2,269,098 $2,069,975 $1,468,630 $2,451,424 $2,184,858  Change in estimated self‐insured liability**$2,527,098 $1,813,409 $559,747 $485,109 ($1,656,783)  CSAC excess insurance premium $285,530 $263,399 $398,376 $454,032 $461,365  Actuarial services $4,850 $4,750 $4,750 $4,750 $2,375  TPA administration fees $238,083 $294,667 $226,684 $232,050 $230,006  State self‐insurance fees $45,564 $52,180 $69,252 $45,993 $93,259*** Workers’ Compensation Fund Subtotal $5,370,224 $4,498,379 $2,727,038 $3,673,358 $1,315,080  Disability leave benefits (direct payroll) $688,167 $504,032 $693,279 $1,001,407 $719,297  HR administration cost (General Fund)  $313,157  $314,319  $200,948 $182,866  $221,260  Grand Total $6,371,548 $5,316,730 $3,621,265 $4,857,631 $2,255,637  Adjusted Total (excludes change in  estimated self‐insured liability) $3,844,450 $3,503,321 $3,061,518 $4,372,522 $3,912,420  *  Represents checks issued by York on behalf of the City, and does not include disability leave benefits paid directly  through the City’s payroll.  ** Determined based on an actuarial study. The City is required to record a liability for the ultimate cost of claims and  expenses associated with all reported and unreported claims in accordance with accounting standards.   ***  Includes about $9,300 in ergonomic evaluation expenses that should have been recorded in the General Benefits Fund.   Source: City’s financial records     Exhibit 18 shows that the budget line items under the Workers’  Compensation Fund do not always represent the underlying costs.  For example, administrator fees paid to York and State self‐insurance  fees are presented as part of salaries and benefits. Without  additional explanation, readers may assume salaries and benefits  under this fund represent HR staff cost to administer the workers’  compensation program, which instead is included in HR’s General  Fund budget.    Attachment A Disability Rates and Workers’ Compensation Audit 33      EXHIBIT 18  The City’s budget presentation of the workers’ compensation revenues and costs        Source: Auditor’s analysis of the City’s financial records    Performance data does not  reflect the City’s actual  performance  Our annual performance report includes performance data for  workers’ compensation as shown in Exhibit 19. HR provides the  numbers based on York data, but as described in Finding 2, York  data does not accurately and completely reflect the City’s actual  performance because York:   Does not track the additional disability leave benefits  provided by the City.   Does not have accurate and complete records of the injured  employees’ work status.  As a result, estimated cost and claims paid are generally  understated, and days lost to work related illness or injury do  not reflect the actual number of days the injured employees  were off work on disability as recorded in the SAP timecards.    Attachment A Disability Rates and Workers’ Compensation Audit 34      EXHIBIT 19  Workers’ Compensation Performance Data    Estimated cost  incurred1  (in thousands)  Claims Paid1  (in thousands)  Estimated cost  outstanding1  (in thousands)  Number of claims  filed with days  away from work2  Days lost to work‐ related illness or  injury3  FY 06 $2,858 $2,601 $258 80 ‐  FY 07 $2,114 $1,937 $177 76 2,242  FY 08 $2,684 $2,460 $224 75 1,561  FY 09 $2,628 $2,145 $483 73 1,407  FY 10 $2,521 $2,165 $356 71 1,506  FY 11 $1,918 $1,402 $516 45 1,372  FY 12 $2,843 $1,963 $880 56 1,236  FY 13 $3,182 $1,713 $1,469 42 1,815  FY 14 $2,088 $1,217 $871 59 1,783  FY 15 $1,121 $518 $602 36 1,366  Change from:  Last year ‐46% ‐57% ‐31% ‐39% ‐  FY 06 ‐61% ‐80% +134% ‐55% ‐23%    1  Estimates of claim costs incurred during each fiscal year, and associated costs paid and outstanding as of June 30, 2015.  Costs are expected to increase as claims develop. Prior‐year costs were updated to reflect current costs as of  June 30, 2015.  2  Restated to reflect the number of claims filed during each fiscal year that resulted in days away from work as of  June 30, 2015. Numbers may increase as claims develop.  3  Based on calendar days. Federal requirements limit each claim to 180 days.  Source: City of Palo Alto 2015 Performance Report     Recommendations We recommend that HR:   5.1. Work with ASD’s Office of Management and Budget to clarify  the presentation of the workers’ compensation costs in the  City’s budget documents.   5.2. Work with York to identify useful performance measures and  establish procedures to ensure reliable reporting of  performance data using a consistent methodology.  Attachment A Disability Rates and Workers’ Compensation Audit 35      APPENDIX 1: The City’s Workers’ Compensation Costs    EXHIBIT 20  The City’s Workers’ Compensation Cost    FY 2011 FY 2012 FY 2013 FY 2014 FY 2015  Workers’ Compensation Fund    Claims paid* $2,269,098 $2,069,975 $1,468,630 $2,451,424 $2,184,858  Change in estimated self‐insured liability**$2,527,098 $1,813,409 $559,747 $485,109 ($1,656,783)  CSAC excess insurance premium $285,530 $263,399 $398,376 $454,032 $461,365  Actuarial services $4,850 $4,750 $4,750 $4,750 $2,375  TPA administration fees $238,083 $294,667 $226,684 $232,050 $230,006  State self‐insurance fees $45,564 $52,180 $69,252 $45,993 $93,259*** Workers’ Compensation Fund Subtotal  $5,370,224 $4,498,379 $2,727,038 $3,673,358 $1,315,080   Disability Leave Benefits (Payroll)       Police $317,099 $193,488 $365,163 $386,892 $257,413  Fire $250,445 $181,709 $164,299 $258,035 $238,475  Utilities $61,703 $41,221 $60,585 $160,664 $146,044  Public Works $43,921 $62,048 $78,557 $173,007 $58,813  Others $15,000 $25,566 $24,675 $22,809 $18,552  Disability Leave Benefits Subtotal $688,167 $504,032 $693,279 $1,001,407 $719,297  HR Administration Cost (General Fund)         Injury and Illness Prevention Program $190,976 $155,518  $93,136 $75,113 $85,034  Worker's Compensation Program $122,182 $158,801 $107,812 $107,753 $136,227  HR Administration Cost Subtotal $313,157 $314,319 $200,948 $182,866 $221,260  * Represents checks issued by York on behalf of the City, and does not include disability leave benefits paid directly  through the City’s payroll.  ** Determined based on an actuarial study, and includes claim costs incurred but not reported.  *** Includes about $9,300 in ergonomic evaluation expenses that should have been recorded in the General Benefits Fund.  Source: City’s financial records    Attachment A Disability Rates and Workers’ Compensation Audit 36      EXHIBIT 21  Number of Indemnity Claims Filed* by Department by Fiscal Year of Loss  As of June 30, 2015    FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Total %  Police 7 18 10 15 14 64 27%  Fire 16 18 6 19 10 69 29%  Utilities 10 3 11 12 2 38 16%  Public Works 3 8 7 7 5 30 13%  Others 9 9 8 6 5 37 16%  Total 45 56 42 59 36 238 100%  * Includes denied claims  Source: York data    EXHIBIT 22  Cost of Indemnity Claims Incurred by Department by Fiscal Year of Loss  Valued as of June 30, 2015    FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Total %  Police $294,487 $1,344,485* $2,434,200* $298,675 $351,797 $4,723,643 43%  Fire $764,297 $865,850 $241,461 $455,446 $544,447 $2,871,501 26%  Utilities $440,441 $5,771 $140,473 $826,783 $42,513 $1,455,980 13%  Public Works $303,986 $436,044 $198,444 $274,319 $80,530 $1,293,323 12%  Others $85,690 $144,714 $139,430 $180,478 $53,345 $603,657 6%  Total $1,888,901 $2,796,864 $3,154,008 $2,035,701 $1,072,632 $10,948,104 100%  * The FY 2012 increase is due to one Police claim valued at $0.5 million, and the FY 2013 increase is due to another claim  valued at $2.2 million.  Source: York data    Attachment A Disability Rates and Workers’ Compensation Audit 37      APPENDIX 2 – City Manager’s Response     Attachment A Disability Rates and Workers’ Compensation Audit 38    The City Manager has agreed to take the following actions in response to the audit recommendations in this report. The City Manager will report progress on  implementation six months after the Council accepts the audit report, and every six months thereafter until all recommendations have been implemented.  Recommendation Responsible  Department(s)  Agree, Partially Agree, or Do Not Agree  and Target Date and Corrective Action  Plan  Status  Finding 1: The City’s Injury and Illness Prevention Program (IIPP) is comprehensive but has lost its effectiveness due to the loss of its City Safety  Officer.  1.1. The City Manager allocate sufficient  resources to implement and maintain the  City’s IIPP and to monitor the City’s  compliance with the program.   Concurrence: Agree Target Date:  December 1, 2016  Action Plan: The Human Resources Department  requested a new dedicated position (1 FTE) in  FY17 Budget.  As soon as the position is approved  and can be filled this position will review and  update the City’s IIPP to ensure effective program  compliance.    1.2. HR update the safety manual, including  supplemental tools and guidance posted on  the intranet, to ensure:  • The roles and responsibilities over the  IIPP are redefined.  • The City’s IIPP complies with all Cal/OSHA  standards and other applicable safety  laws.   Concurrence: Agree Target Date:  March 2017  Action Plan: Once appropriate staff resources are  in place, the roles and responsibilities can be  reestablished to ensure the safety manual (IIPP)  is reviewed and updated as necessary.  While a few safe work practices have been  updated, such as the Heat Stress Prevention  Guidelines in July 2014, a thorough review will be  conducted and any necessary updates will be  completed.  1.3. HR review departmental procedures and  safety requirements to ensure they align  with the revised IIPP and City policy and  procedures.   Concurrence:Agree Target Date:  December 15, 2016  Action Plan:  HR is in process of securing a safety  specialist to conduct periodic inspections of City  facilities for hazard assessment.  This  comprehensive evaluation will include  Attachment A Disability Rates and Workers’ Compensation Audit 39    Recommendation Responsible  Department(s)  Agree, Partially Agree, or Do Not Agree  and Target Date and Corrective Action  Plan  Status  determining if any corrections need to be  completed, including updating or implementing  work procedures.  1.4. HR work with York and departments to  identify useful safety statistics, appropriate  HR and departmental recipients of this  information, and reporting frequency, and  establish an automated process for those  statistics to be provided.   Concurrence: Agree Target Date:  December 16 , 2016  Action Plan:  HR will work with York to identify  useful reports that identify injury and illness  trends and implement an automated process for  those reports to be emailed to department  representatives.  1.5. HR identify industry‐specific ergonomics and  general wellness training opportunities to  minimize common injuries, and coordinate  with departments to ensure regular training  is provided to employees.   Concurrence: Agree Target Date:   September 16, 2016  Action Plan:  HR will coordinate industry‐specific  ergonomic training, similar to training provided  to Parks maintenance employees in 2010 and  Library employees in 2014.  We agree industry‐ specific ergonomic training serves as a reminder  for example, that the best way to prevent back  injuries is to develop habits that reduce the strain  placed on the back.  Finding 2: Injured employees’ benefit eligibility is not accurately and completely tracked and monitored, resulting in both overpayments and  underpayments of workers’ compensation benefits.  2.1. HR continue working with ASD and CalPERS  to address the disability leave benefits that  were incorrectly reported as compensation  to CalPERS.   Concurrence: Agree Target Date:   February 2017  Action Plan:  HR worked with Payroll to identify  wage codes and required corrections needed to  fix CalPERS payroll report.  Attachment A Disability Rates and Workers’ Compensation Audit 40    Recommendation Responsible  Department(s)  Agree, Partially Agree, or Do Not Agree  and Target Date and Corrective Action  Plan  Status  2.2. HR review the 22 claims that accounted for  87 percent of the total additional city  benefits difference in Exhibit 11, and take  necessary action to address any errors  identified.   Concurrence: Agree Target Date:  July 2016  Action Plan:  HR working on timecard  amendments to address errors with 2 Public  Safety officers whose claims were initially  delayed when claims first submitted and final  determination resulted in denial and non‐ acceptance.  2.3. HR review the existing disability leave  management process in Exhibit 12 and  determine the optimal monitoring structure,  update the tools and procedures, and  allocate sufficient and skilled resources to  ensure:  a. Benefit eligibility and work status of  injured employees is accurately,  completely, and timely tracked including:  • Start date of disability  • Date released back to work by the  treating physician  • Date returned to modified duty,  including the assignment and payroll  code used  • Date returned to full duty  b. Any changes in work status are  communicated to York  c. Disability leave time buckets are updated  as soon as HR is notified of the status  change.  d. Benefit notices and vouchers issued by  York are consistent with the timecards  and actual benefits paid through payroll.   Concurrence: Agree Target Date:  December 16, 2016  Action Plan:  a. HR is exploring better methods to track  temporary disability and return‐to‐work  status accurately, completely and timely.  b. HR will also improve process of  maintaining timely communication with  York.  c. HR staff will explore how to improve  management of disability leave buckets  in SAP.  d. HR will explore how to audit benefit  notices and vouchers issued by York to  ensure they are consistent with  timecards.  This would be a manual  process that may not be able to be  supported.  e. HR will work with supervisors to ensure  employees comply with City policy  requiring timely submission of work  status notes.  f. HR will explore options for improved  disability leave management and  Attachment A Disability Rates and Workers’ Compensation Audit 41    Recommendation Responsible  Department(s)  Agree, Partially Agree, or Do Not Agree  and Target Date and Corrective Action  Plan  Status  e. Employees comply with the City policy  requiring timely submission of work  status notes.  tracking as part of the SAP replacement  RFP process.  2.4. HR work with ASD to ensure that the data  necessary for disability leave management is  captured through time reporting in SAP to  support the process, including:  a. Revising the City’s payroll procedures,  Policies and Procedures 2‐06/ASD, to  provide clear instruction for reporting  disability leave on SAP timecards.  b. Configuring the SAP system to:  • Track compensation reportable to  CalPERS separately.  • Track medical appointments that  qualify as disability leave by creating a  separate payroll code.  • If feasible and cost‐effective, limit the  number of days each employee can  code disability leave or modified duty  on their timecard based on their  position.   Concurrence: Agree Target Date:  February 2017  Action Plan:  a. HR following up with ASD Payroll on  feasibility to revise City payroll procedures;  otherwise, will include steps in City’s  Workers Compensation policy.  b. ASD and HR have determined how to code  public safety temporary disability as  “PERSable” and non‐public safety temporary  disability as “non‐PERSable” by using  different SAP codes.  ‐ A separate timecard code (7600) is being  developed to track medical  appointments.  ‐ Limiting the number of hours each  employee can code disability leave can  be accomplished when disability leave  bucket is established; may not be feasible  for modified duty and requires further  review.  2.5. HR work with York to identify and train  responsible HR staff, and maintain online  access to York data for analyzing claims,  payment transactions, and trends. Establish  and maintain written procedures for  granting, monitoring, and removing access to  the York data and appropriate handling and  safeguarding of the data.   Concurrence: Agree Target Date:  December 2016  Action Plan:  Training will be provided to HR staff  newly assigned to oversee workers  compensation.  Attachment A Disability Rates and Workers’ Compensation Audit 42    Recommendation Responsible  Department(s)  Agree, Partially Agree, or Do Not Agree  and Target Date and Corrective Action  Plan  Status  Finding 3: The City has not met the state requirement for timely reporting of its workers’ compensation claims to York, potentially causing the  cost of claims to increase.  3.1. HR streamline the workers’ compensation  reporting process and improve the accuracy  and completeness of the claim forms by:  • Revising the procedures to clarify the  roles and responsibilities. This should  include determining whether  departments should be responsible for  completing only the Employee Claim  Forms (DWC‐1) and Supervisor’s Report  of Injury and Exposure (City form), with  HR staff being responsible for completing  the Form 5020.  • Revising the City form for supervisors to  complete with necessary information that  can be easily copied and pasted to the  Form 5020.  • Ensuring the use of York’s online claims  reporting to submit the Form 5020, and  having appropriate and trained staff enter  any sensitive personnel or payroll  information.  • Making the required forms and  procedures available online in one place  with clear instructions and adding  electronic signature capability, if feasible  and cost‐effective.  • Regularly reviewing the forms,  procedures, and performance to ensure  their compliance with state law.   Concurrence: Partially Agree  Target Date:  February 2017  Action Plan:  HR agrees the reporting process  needs to be improved and streamlined.  HR will  determine if using York’s online claim reporting  to submit the Form 5020 is most efficient  process.  As an alternative, HR will evaluate  ability to create DocuSign Form 5020 which  Department would initiate, completing facts  related to employee filing claim and details  regarding injury or illness.  DocuSign Form 5020  could then be submitted by departments to HR  staff who would complete salary data.  HR staff  could then submit DocuSign form to York.  Attachment A Disability Rates and Workers’ Compensation Audit 43    Recommendation Responsible  Department(s)  Agree, Partially Agree, or Do Not Agree  and Target Date and Corrective Action  Plan  Status  Finding 4: The City has not ensured that York met all contract terms.  4.1 HR create a list of key contract terms and  assign staff to monitor and follow up on York  performance against each term, including  recovery of $5,000 from York for not meeting  the indemnity claim closure ratio for FY 2013.   Concurrence: Agree Target Date:  July 29, 2016  Action Plan:  HR will create a list of key contract  terms that require follow‐up.  New HR staff  assigned to administer workers compensation  program will monitor and follow up with York  regularly on contract terms.  4.2. HR work with York to streamline the  monthly, quarterly, and annual reporting  process by leveraging online access to York  data (see recommendations 1.3 and 2.5).   Concurrence: Partially Agree  Target Date:  August 30, 2016  Action Plan:  The York data is readily available,  currently 8 reports are provided to HR monthly.   However the contract calls out for reports that  are no longer in use.  This can be cleaned up in  next contract RFP and in any future contracts.     HR will review reporting capabilities to determine  how to improve use of data.  Finding 5: Workers’ compensation revenues, costs, and performance data are not clearly reported for informed decision making.  5.1. HR work with ASD’s Office of Management  and Budget to clarify the presentation of the  workers’ compensation costs in the City’s  budget documents.   Concurrence: Agree Target Date:  December 16, 2016  Action Plan:  HR staff will meet with Budget  Manager to clarify presentation for workers  compensation costs for FY18 Budget and  determine changes or improvements.  5.2. HR work with York to identify useful  performance measures and establish  procedures to ensure reliable reporting of  performance data using a consistent  methodology.   Concurrence: Partially Agree  Target Date:  January 2017  Action Plan:  HR will explore best practice  performance measures and establish procedure  to ensure reliable reporting.    Attachment A Special Meeting June 14, 2016 Chairperson DuBois called the meeting to order at 6:10 P.M. in the Community Meeting Room, 250 Hamilton Avenue, Palo Alto, California. Present: DuBois (Chair), Kniss, Scharff Absent: Berman Agenda Items 1.Disability Rates and Workers' Compensation Audit. Chair DuBois: I guess we'll go on to Item 1, which is disability rates and workers' compensation audit. Council Member Kniss: I'll be listening. I'm going to grab some tea. Harriet Richardson, City Auditor: I know that you're not feeling well, so I'm going to try and get through this first item. Council Member Kniss: How did you know that? Ms. Richardson: Beth told us that we might lose a quorum. I'm going to try and get through the first item (crosstalk) ... Council Member Kniss: I'll make it for a little while. Ms. Richardson: ... little more time for the second item. Harriet Richardson, City Auditor, here to present the audit of disability rates and workers' compensation. Yuki Matsuura was the Senior Auditor on this, and she can't be here tonight. Lisa Wehara, who worked on this audit, is right over here in the audience. Vice Mayor Scharff: Welcome. Ms. Richardson: I'm assuming you've read the audit. Instead of going through the normal process, I have a PowerPoint that talks about the—(inaudible) the PowerPoint—audit scope objectives and the findings and the recommendations. What I really want to do is just skip over to the main finding, which is Finding Number 1, and spend a little bit of time on that. If Attachment B you have questions, we also have Sandra Blanch here from Human Resources (HR), who works as the Risk Manager for the City. We also have a representative from York Risk Services Groups. Sherri is—where'd she go— right back here, in case you have any questions for her. York is our third- party administrator for workers' compensation. The main finding is that the City's injury and illness prevention program has lost its effectiveness, and there's several reasons for that. The main one is that when the previous City Safety Officer left the City, that position was cut. His duties were distributed among all of the different Staff, the Senior HR Analysts in People Strategy and Operations (PSO). PSO reorganized; they redistributed the Staff, but yet they did not provide appropriate training to those people on workers' compensation. They've been working with an outdated safety manual that describes how to do things in a way other than what they currently do. There's also been a lack of Citywide safety committee meetings. There's also been insufficient City employee training throughout the City on safe, economic work practices, which increases the risk that you're going to have more repetitive motion injuries. Our recommendations really focus a lot on making sure that adequate resources are provided to the workers' compensation program. Right now, we have not seen an increase in injuries or costs since that loss. As that position remains unfilled, the risk increases that you're going to have more costs because people don't know how to adequately monitor the programs to minimize those costs. That's really what I wanted to focus on for this first audit. I think Suzanne wanted to make some comments regarding the audit. Suzanne Mason, Assistant City Manager: I just wanted to comment that our response is in the audit. I really appreciate Sandra's work on responding. I do think with reduced resources and dedicated resources to a program such as injury prevention and workers' compensation monitoring, there's a loss. You can't take a job and divide it among five people and make sure that every day you're staying on top of the program, making sure training is happening. Last night in the budget, you adopted the budget that included a dedicated position focused on workers' comp funded through our insurance fund. I think that's going to pay dividends and that we will be able to focus. I do think we are also working on securing the services of a Safety Officer on a contractual basis for the City. The Utilities Department does have a Safety Officer and does a very good job. They're a significant part of our workforce. It is important that we have someone providing our safety inspection. Finally, I know that—Sandra has shared with me and York that York does have a computer solution that can help us address the timeliness on some of the issues. We've been using a manual process. The computer system that's recently been updated by York will allow us to do immediate reporting from departments directly to York and Human Resources simultaneously. That will dramatically improve some of the findings addressed in this report. I don't Attachment B want to spend a lot of time going into detail; we can respond to detail. I do think the dedicated position in combination with the contracted Safety Officer functions and then the new computerized system that we'll be implementing Citywide, that York's providing, will address most of this audit. Ms. Richardson: From our perspective, the dedicated resources were really the big concern here. As Suzanne said, you start splitting up those tasks and you start losing the effectiveness because people don't know exactly what their responsibilities are and the law, what the law requires them to do. Council Member Kniss: Tom, could I ask a quick question? Just a little ... Chair DuBois: I was just going to say could we just go straight to questions. Council Member Kniss: Just to inform us on this. You didn't include any measurements, data or so forth. Is it in here somewhere and I didn't see it? Ms. Richardson: You mean comparisons with other jurisdictions? Council Member Kniss: Also percentage-wise what's happened with us. You said it's costing us more, right? Ms. Richardson: The risk is that it will cost us more. When you look at Exhibits 2 and 3 on Packet Pages 12 and 13, you see some fluctuation and you see '14 and '15 actually look like they've gone down, but what happens a lot of times is the full cost of the claims is not known within a short period of time. Those costs will continue to go up for the recent years until those claims are fully closed. If you go back to our Performance Report, which isn't part of this, you'll see that there's some open claims pretty far back. Part of that is because some of these costs continue over a period of years. Right now, our number of claims did go down. Fiscal Year (FY) '13 is where we lost the City Safety Officer. You're still seeing some of the effect of what that person did. Now as we start seeing in the program in the day-to-day operations some of the things that are happening, we can see that it's likely that those costs are going to start going up because they don't know how to administer the ... Council Member Kniss: What we should do is take this way back to 2006? Is this a good judge of what that person did? Ms. Richardson: I think from 2006 ... Vice Mayor Scharff: What page are you on? Ms. Richardson: Packet Page 12 and 13. Exhibits 2 and 3. Attachment B Chair DuBois: Do you know how it's accounted for in a particular year? When expenses come in for 2014, do they hit our books this year or do they go back? Ms. Richardson: I'm not certain on that. Sandra Blanch, Assistant Director of Human Resources: Yes, they do. Chair DuBois: The expense is actually incurred in this year even though it was a claim from 2014? Ms. Blanch: Right. Ms. Richardson: You track the claims also by year. Ms. Blanch: By year. Council Member DuBois: Your file. Ms. Richardson: Yeah. From an accounting perspective, it's different than from a claims perspective. Chair DuBois: Why don't we just go to broad questions? Do you want to continue? Council Member Kniss: That's fine. We'll just kind of keep chiming in, I think. Vice Mayor Scharff: Are you happy with the City Manager's response? Ms. Richardson: Yes. There were two that they indicated that they partially agreed. Vice Mayor Scharff: We're back on page ... Ms. Richardson: It's Packet Page 51, which is going to be your Page 42. They said they partially agreed with Recommendation 3.1 and, on the next page, with 4.2. When I read those, they actually sounded like they agreed. I wasn't sure why they said partially agree on those. Vice Mayor Scharff: What Suzanne said sounded slightly different, which was you were going to recreate their form in DocuSign. Have you decided now to use the York form directly? Ms. Mason: I think we are going to use the York form. They've just improved their system, and it sounds like it's going to work for us. Vice Mayor Scharff: Are you going to update that partially one. Attachment B Ms. Mason: No, we just met recently. Ms. Blanch: Yes. I think the auditor had recommended for HR to do all of the entry. We would disagree with that mandate. The department would do part of the entry, and HR would finish the entry. Ms. Mason: The idea is you're in a department, and someone comes in injured. You go right into the system and enter, which is a best practice. It immediately goes to HR and York, so we're all in a more timely basis. Vice Mayor Scharff: Sounds good. You're good with that? It sounds good to me. Ms. Richardson: Yes. Vice Mayor Scharff: Were there any other partially agrees? Ms. Richardson: Just those two. Vice Mayor Scharff: That's the first one. The second one was ... Ms. Richardson: 4.2. It's on the quarterly reporting. Monthly, quarterly and annual reporting. Ms. Mason: Basically what we wanted to say is that we think that we need to—we are getting reports, but we need to work on tailoring those. For the most part, some of the reports that were originally in the contract are not as useful. We need to work together—we do get information, and they do report to us. We do have a good working relationship; there's regular telephonic meetings, but we do need to make sure we're looking at the right data. Council Member Kniss: Is anyone from York here? Ms. Mason: Yes. Council Member Kniss: I missed the introduction. Sherri Adams, York Risk Services Group: I'm Sherri Adams. I'm the Senior Account Manager. Council Member Kniss: Thank you. Vice Mayor Scharff: Sherri, since we've mentioned you, do you have any comments on any of this, of how we could streamline it better, or do you agree with the auditor's recommendation? Attachment B Ms. Adams: I do. Council Member Kniss: Why don't you come join us? Vice Mayor Scharff: Come sit down at the mike. Ms. Adams: I do agree with the findings. We worked really closely with Lisa and Yuki, providing the information, the Claims Examiner, the Unit Manager. When we talk about the reports and some of the items that were in the contract, the original contract is from 2006. We've updated processes. Things have changed here at the City. I think it's just revising those, seeing what we can use. Loss of the Safety Officer, I think some of those reports got lost in the that shuffle as well. I've been on the account for 1 1/2 years and have been here multiple times to meet and try and come up with new and creative ways to help. It truly is a partnership. I think there's a lot of things that we can help the City with as we move forward. Like I said, we're here as a partner. Vice Mayor Scharff: We're going to be making changes to the York contract, is that part of it or not? I was confused about that. Ms. Mason: Really the primary amendment would be what reports they're providing to us and what frequency. Vice Mayor Scharff: Will there be a cost associated with that or not? Ms. Adams: No. Chair DuBois: It sounded like some departments were already dual reporting to York and HR at the same time. Ms. Richardson: Only Utilities. Chair DuBois: You're saying now everybody's going to do that? Ms. Mason: Basically it would streamline this. Their new addition to the system streamlines it, so that Utilities puts in and it goes directly to (inaudible). Chair DuBois: I think Utilities was already doing that, but other departments weren't. Ms. Blanch: We would work with ... Chair DuBois: Are all departments going to be? Attachment B Ms. Blanch: Correct. We would work with all departments to get them to enter the report into the system. Chair DuBois: Then York would automatically get it? Ms. Blanch: Right. Council Member DuBois: I have a few questions here. Ms. Mason: It would shorten the timeframe. Chair DuBois: In the text, it said there were some State laws that we're not in compliance with. Are those just reporting timeliness or ... Ms. Richardson: It's primarily reporting timeliness. There's a risk that you could get fined if an employee doesn't report the injury—if the City doesn't report the injury within five days of the date of knowledge. In discussion with Suzanne, she indicated that she's not aware of the State actually having fined anyone. York may be from their experience. We haven't experienced any fines, so we did add that to the report, that we haven't experienced a fine but the risk is there. Ms. Mason: We want to be in compliance. That's one of the reasons for this change. Chair DuBois: How long do employees have to report an injury? It sounded like sometimes that takes a while. Do they have to report within some ... Ms. Mason: They're supposed to report it immediately. The common story is "I tripped. I thought I was fine. Two weeks later, I'm not feeling fine. I'm not getting better the way I thought I would." That's always ... Chair DuBois: There was also some talk—I guess we had a comprehensive safety manual, and then it said departments have their own manuals. I guess the question is are those department manuals comprehensive and do they include the general information. Ms. Richardson: I believe the department manuals are pretty comprehensive, particularly the four departments that Yuki and Lisa looked at. With the Citywide manual not being completely up-to-date, we've requested as one of our recommendations that the City update the Citywide manual and then make sure that the department manuals align with that. We want to make sure there's some consistency in how the departments are doing things. Chair DuBois: I see Police Chief Burns here. I actually had a question about Police. It looks like about 40 percent of our costs are in the Police Department. Attachment B I was wondering do you guys do anything extra or different about training for safety in general? Ms. Mason: Sit here so you have the microphone. Council Member Kniss: Maybe you can weave firefighters in at the same time. As I recall, Police and Fire are usually the high numbers. Dennis Burns, Police Chief: Dennis Burns from the Police Department. We have a pretty robust kind of wellness program, which includes strengthening, endurance, diet. We get training on that on a regular basis. That's intended to be a preventative method. We also have a number of policies in place. The nature of police work, a lot of it involves safety. Officers are evaluated on that on an annual basis. We hold safety very serious. I think one of the reasons that some of the numbers were so high this year is we had two very unusual cardiac cases, where the officers will ultimately retire. A large chunk of the City's monies were paid on these two claims. I think Fire is similar. They really have a very strong wellness program. Again, it's focused on flexibility, strength and endurance. Their folks are evaluated regularly on their safety procedures. They're taken offline in the event that they show that they can't comport with these policies. Chair DuBois: Thanks. Mr. Burns: You bet. Chair DuBois: Do you have something? Vice Mayor Scharff: It seems like everyone's in agreement. There doesn't seem like there's any ... I guess I had some, I guess, questions. I was confused. Are we hiring a person in the budget to do this or are we contracting out for this person? Ms. Mason: No. We are actually hiring someone in HR to facilitate and monitor the program and get people back to work, make sure everything's being processed, to make sure training is taking place. There's many suggestions in this report. We added back a dedicated position that had been removed. It's being paid through the Insurance Fund. The reduction should pay for that position. Vice Mayor Scharff: When you say it's added to the Insurance Fund, every department is assessed something for the Insurance Fund. Correct? Ms. Mason: Right. Attachment B Vice Mayor Scharff: Do we expect the Insurance Fund to then not go up because there's—every department, if you have more people in the Police, are the Police assessed more? Is that how that works or is it everyone gets assessed the same? Ms. Mason: It's based on experience and exposure. It's a combination. Vice Mayor Scharff: On a department basis, right? Ms. Blanch: Yes. Ms. Mason: They get allocated, yes. Vice Mayor Scharff: Got it. Council Member Kniss: Just back to the Chief for a minute. As we look at these, I'm just looking at the numbers on Packet Page 12. Maybe there's a better one for us to look at. Looking at this, if we take it as 100 percent, what would you guess, Dennis, is the number of Police and Fire in that and ... Chair DuBois: Police were 40 percent of the total in terms of money. Council Member Kniss: It doesn't give it in terms of people. Chair DuBois: In terms of claims. Ms. Richardson: In terms of people ... Council Member Kniss: Yeah, claims. Are we going to figure claims equals people? Ms. Richardson: You might want to look at Exhibit 8, Packet Page 20. That might be more helpful to what you're asking. Council Member Kniss: If we look at—there are all kind of figures here, though. I don't think there's just one that I can pull everything from. Overall from looking at this, because I can remember from the County that Fire was often a big issue. I'm guessing it probably is here as well. That's the kinds of physical types of things that happen if you're in a fire or even in a paramedic job. You're more likely to get claims that cost. What this doesn't tell me here, unless I go through and analyze it, is what the overall price is. This is saying to me that you're about 1 1/2 times what Fire is. Is that right? Mr. Burns: I think for the use ... Attachment B Council Member Kniss: Because these are all stats, I know they're misleading. That's why I'm asking. Say more about this. Ms. Richardson: I think I can answer what she's asking. If you're referring to Exhibit 8, if you look at the $4.7 million, is that what you're referring to as the one? Council Member Kniss: Yeah. Ms. Richardson: As Chief Burns mentioned a little bit ago, there's two injuries that comprise a good portion of that. That's in the footnote. If you subtract those out, then it's $2 million for them. When you have an individual case that is really expensive, it's going to ... Council Member Kniss: You mean unusually high severity, is that what you're talking about? Ms. Richardson: Yes. You're going to have a higher cost that's disproportionate to the rest of your injuries. Council Member Kniss: I understand that. Maybe Dennis wants to just expand on that a little. Police and Fire are almost always where the cost lies or lays. Which one is it? Mr. Burns: Fire typically is ahead of Police or is more expensive than Police, because it's much more a—it's kind of labor intensive, almost like a blue collar job where there's a lot of lifting and twisting and pulling. There's just more opportunities with all the equipment that they're pulling and grabbing from their engines and their truck. There's just more opportunity ... Council Member Kniss: And lifting heavy people. Mr. Burns: Lifting people on the gurneys, exactly. Police officers tend to have a lot of repetitive motion injuries from getting in and out of cars or bending over and lifting different types of things. Some involving wrestling with people. Typically we see knees, backs and shoulders are going to be the most common injuries that you'll see from both Police and Fire. Again, we have two outlier cases that are very unique. Unique that they're similar and unique that they happened at the same time and that they were so expensive and so severe. Other than that, I think we're somewhat stable. I'd love to get them lower, but the reality of it is, as you know, flesh and blood and we break every now and then. Council Member Kniss: The other thing, Harriet, you talked about just briefly was how we compared with other jurisdictions that are similar. Attachment B Ms. Richardson: We didn't specifically put that in here, but we were pretty comparable. We did look at it, but we didn't put it in the report. Maybe we should have. Council Member Kniss: Just always this ... Ms. Richardson: We do have a chart that we could send to you, if you want to see that. Council Member Kniss: The reason I'm asking is sometimes there's something to be learned from other police and fire departments, not that our Police or Fire need to learn anything from anybody else, Dennis. Just because there are those times. Sunnyvale has the combination safety. It would be interesting to know how those are, but they have interchangeable roles, which is kind of fascinating. Chair DuBois: I think under Finding 1 you mention that we have outdated information that's posted. I didn't really see any of the recommendations address that. Is that included? Ms. Richardson: We tried to keep the recommendations somewhat high level. It's part of updating the whole manual and making sure that everything is the way it's supposed to be. When you update the manual, you look at the ... Chair DuBois: That was included. Ms. Richardson: It's meant to be included. The audit team actually went around to different facilities and looked at what was posted. There is quite a bit of outdated information posted. For example, in this building, it's on the A level, and not everyone goes down to that level and sees those posters. There should be something in each of the work areas that's visible to where people (crosstalk). Chair DuBois: Does anyone read the posters? Ms. Richardson: I don't know, but you are required to make sure that (crosstalk) ... Chair DuBois: If you're going to post it, it might as well be read. Vice Mayor Scharff: I'm not saying that. I just (crosstalk). Ms. Richardson: If you get injured, it helps you know what you're supposed to do. Attachment B Ms. Mason: I think it's also reflective of needing an update, because it really needs to be right on our computers, intranet site, so wherever you're at, you could access it, even if you're not at a bulletin board. Council Member Kniss: Since we have York here, I wonder if as we go along, whether there are things that you want to add to what our discussion is. You have the expertise in this. Ms. Adams: My only comment on the Police and Fire is they do have presumptions. When they do have certain injuries, there's a perception that they're accepted. That drives costs as well. Sometimes they're not rebutted, which means they're given that benefit. That can drive ... Vice Mayor Scharff: I saw that. It seemed like a lot of police officers and firefighters make claims that are denied. It's hard to deny police and firefighters, which means they must have been completely specious. Ms. Adams: We work through that with the City. We don't just flat deny a claim. The examiners work with the City. Sometimes there has to be an investigation, and there's some things that we need to find out. Sometimes they will deny a claim. Mr. Burns: On the Police side, every workers' comp claim or injury is investigated by the supervisor that day or ideally within the next couple of days. Vice Mayor Scharff: If you make an egregious claim—obviously there are things that are on the line. If you make one that's totally not true and fabricated, you look at it and say are there repercussions for doing such a thing? Mr. Burns: Sure. The District Attorney's Office has got a special unit that is funded by insurance companies that will go after, quite frankly, folks that are abusing the workers' comp process. Ms. Adams: We work with Probe Investigations. They are a highly respected, highly motivated group of folks who have prosecuted many, many cases. They've (crosstalk). Council Member Kniss: Highly motivated must be the ... Ms. Adams: They truly believe in what they do. We have a mini conference once a year. They come and present and let us know what they've collected during the year and returned to counties, cities and other public entities. Yes, there is a fraud unit that will investigate. There are specific things that they Attachment B look at when it's sent to them to determine whether it's being prosecuted or not. Ms. Blanch: These denials—I don't want you to get the wrong impression. Vice Mayor Scharff: No, I'm not (crosstalk). Ms. Blanch: These denials essentially were not found to be work-related; they weren't industrial injuries or illnesses. Ms. Adams: We also delay claims which allows 90 days for investigation to happen to see if it's truly a workers' comp injury. Council Member Kniss: That brings up a worse discussion. You can answer it or not, Dennis. If you find that somebody is making a claim that it's work- related, and yet it's discovered that it isn't, do we have a process that we go through? Mr. Burns: Sure. I don't think that we've had one of these cases. There's doing nothing, and then there's taking the case to the District Attorney's Office. In between it would be a policy violation or an internal affairs investigation where we would go ahead and see if we could prove, beyond a preponderance in an internal affairs investigation, did this person falsify some documentation or commit a fraud. Even though we don't think it's going to be provable at the "beyond a reasonable doubt" level, we could pursue that. Council Member Kniss: Thanks. I don't want to keep pushing on that, but I know that has to be an issue. Vice Mayor Scharff: That's the standard, a preponderance of evidence, for internal affairs and then beyond a reasonable doubt for the ... Mr. Burns: For a criminal. Typically and in most internal affairs investigations, you're going to want more clear and convincing before you're going to be taking somebody's property rights. Ms. Blanch: We would work with York to do an investigation. We wouldn't have our own Police Department doing the investigation. We have done those type of presentations to the District Attorney; it's been some time. They have the resources to take cases to the District Attorney. Mr. Burns: They're rather difficult cases, I think, for the District Attorney (DA) to prove. You could have somebody on video doing some sort of activity, and they could have a claim that they injured their back or their knee or something like that. Their response would be, "I was having a good day that day. I felt good," or "I felt good for the last few days." This is not my area of expertise, Attachment B but soft tissue injuries are difficult. You're going to get conflicting opinions from doctors in a court of law. Chair DuBois: Switching gears. I just wondered if we could make a note. One of the recommendations was to update SAP. It sounds like we're going to do that, but I wonder if we could capture a note that we also, when we move to the new Enterprise Resource Planning (ERP) process, design this process. Just to capture that, since it's coming up pretty soon. Ms. Richardson: IT is getting started. August 4th starts the first kickoff meeting on discussing requirements for the new ERP. Chair DuBois: On Packet Page 42, it talks about the performance reporting and not getting accurate data. It sounded like the SAP data (inaudible) were more accurate. I wondered if we could use the more accurate data in that report. Ms. Richardson: The difference there is that the State has a limit on the number of days that have to be reported. That's what's been going into the Performance Report. It doesn't truly capture when someone's been off longer than 180 days, because we stop counting based on (crosstalk). Chair DuBois: I'm asking can we switch that, use the better data. Don't you put together the Performance Report? Ms. Richardson: Right now we do. That's our next topic. Ms. Blanch: Based on data that we provide to the Auditor's Office. I think it's been a footnote in the data that says it's capped at the Federal limit. Ms. Richardson: Right, but we don't ever say what the total is. Vice Mayor Scharff: One other question. When did we get rid of the safety person? Ms. Richardson: 2013. What happened was he got sick and retired, I believe. Vice Mayor Scharff: He went on disability and retired. Ms. Richardson: The position was eliminated in the budget cycle. Vice Mayor Scharff: Why did we eliminate the position? What was our thinking? Was our thinking we'd save money? What was our thinking about that, and why has that thinking changed? Ms. Mason: I was not here. Attachment B Vice Mayor Scharff: It's easier that you weren't here, because you'd be more—there's no investment. You can say it was a bad decision. What was the reasoning behind it? Ms. Blanch: The reasoning was there were other areas that needed focus, and we changed to a business partner model rather than a functional area model. The thought was you could spread out the work amongst various Staff. Workers' compensation is so technical, that the Staff really couldn't focus on recruitment, employee relations issues and learn workers' comp all at the same time. Ms. Mason: This is just one of the things I've been working with Sandra and Rumi, as Rumi's approaching HR and restructuring. I think the business partner model, which you see often, has been ... Vice Mayor Scharff: What is the business ... Ms. Mason: I will share it. Vice Mayor Scharff: It'd be great (inaudible). Ms. Mason: It's the idea that you take specialized positions and you convert them to generalized positions assigned to departments. They become the end-all for that assigned department or departments. Vice Mayor Scharff: What do you mean the end-all? Chair DuBois: Each department has an HR person. Ms. Mason: You call me, Suzanne Mason, and I'm going to take care of everything. You have a one-stop shop. The problem with this—it's something that HR professionals really have been struggling with. I just have to say the (inaudible) that I've dealt with, if you expect that person to be your person dealing with labor, person dealing with workers' compensation (comp), recruiting all your vacancies, it is very hard, number one, to have an individual who has specialized knowledge, who has the ability to respond quickly, within five days of, making sure paperwork is moving. Rumi's coming in and working with Sandra. We are switching back to a more specialized focus. In dedicating this position as well, I do think this position will be dedicated, but some of the Safety Officer functions, the "in the field" functions, we're probably going to be contracting for. It's going to be a combination. It's really putting a specialized knowledge base and training around that person. Sometimes you feel like it may be more efficient and more customer-friendly to go with a more generalized approach. I think it's challenging. Attachment B Council Member DuBois: I'm sensitive to Liz here. Do we have a Motion on this? Vice Mayor Scharff: I'll move we accept the Audit Report. Council Member Kniss: Second. Vice Mayor Scharff: That's what you're looking for, right? Chair DuBois: Yep. (crosstalk) Council. MOTION: Vice Mayor Scharff moved, seconded by Council Member Kniss to recommend the City Council accept the Disability Rates and Workers’ Compensation Audit. Ms. Richardson: Did you want to make the Motion to have them modify those two recommendations before we forward it to—their response to those two recommendations before forwarding it to Council? Vice Mayor Scharff: You're fine with that? Ms. Richardson: It was the two we talked about, 4. ... Ms. Mason: You mean the partially? Ms. Richardson: Yes. There would be new responses. Ms. Mason: I think there's reasons that we feel it's partially. I think that some of the reason around some of the report changes was because we wanted them to change. Yes, I guess if it's technical that they're not providing the same, exact reports that were in the contract. I think it was done on purpose. It wasn't a mistake. Ms. Richardson: What I'm saying is that what you've written here is different than what you said tonight (crosstalk) ... Ms. Mason: You mean on the computer system. Ms. Richardson: ... and after having spoken with York about what you're actually going to be doing. Ms. Mason: With the computer system? We can also do that. Vice Mayor Scharff: There were two things. There were two partially agrees. The first one, I thought ... Ms. Richardson: 3.1 and ... Attachment B Vice Mayor Scharff: 3.1, I thought you said that your opinion has changed on that. Was I incorrect? Ms. Mason: I'm sorry. I meant our action plan, not our opinion. Our action plan is a little bit different. We have found that York's system with some of the modifications they recently made, might be a more effective way of doing this than the DocuSign system. Chair DuBois: Which was the recommendation from Audit. It sounds like you've agreed instead of partially agreed. Ms. Mason: We need to improve the reporting timeliness. Vice Mayor Scharff: Wait. You went through that too fast. I'm not sure. They still partially agree. Ms. Mason: We still partially agree. Vice Mayor Scharff: The part you partially agree—the part you don't agree with is which one under 3.1? Ms. Mason: Let me go through this again. Vice Mayor Scharff: I thought you were agreeing, so I'm confused. Ms. Mason: Their specific recommendations are about how we do it. We are saying we are going to do it differently than the specific recommendations. Vice Mayor Scharff: How are you going to do it differently? Ms. Blanch: In the first bullet, at the end of the sentence, it says with HR Staff being responsible for completing the Form 5020. We're proposing that the department will initiate the Form 5020. Ms. Mason: On the computer system. Ms. Blanch: On the computer system. HR will receive it or at the same time, complete the salary portion and submit to York. Ms. Mason: We think there's a computerized solution where this was suggesting a manual process. I feel partially agree—we agree the process needs improvement, but we are not agreeing on the way to do it. Ms. Richardson: I think you actually are, and maybe just the way the recommendation is worded isn't quite clear. I think the third bullet, I think, clarifies that we're saying that trained Staff, which could be PSO Staff, enter Attachment B the sensitive personnel or payroll information. When you look at it as a whole, I think you're actually agreeing with it. Vice Mayor Scharff: I don't think we should wade into that fight. I do think that what would be really helpful—I don't know if you guys agree. You can say partially agree, but then in the action plan, if Council's interested, you call out exactly what you're going to do differently than what it says in 3.1. That way any Council Member can look at it, who hasn't been on this Committee, because this goes on Consent. That way it's no confusion. I can't read your action plan and understand why you're partially agreeing after this discussion today. Ms. Mason: It's just a different process we're proposing to use. Vice Mayor Scharff: That's fine. Just say that. Say what that—just address the different bullets about what's different. Ms. Mason: If you want us to put agree—I guess where we're at is ... Vice Mayor Scharff: No, I don't. No, no. I do not want you to put agree. I want clarity. Remember I'm a lawyer. I look at the document, and I say, "I want you to match what's written here and say we are not doing the HR Staff, we're doing this." I want you to take each bullet and tell me what you're doing differently. That's what I want. I just want clarity. I actually think it's great if you don't agree. That's fine. That doesn't bother me one way or the other. I just want to know what you don't agree on and what you're doing. Ms. Mason: If you look at each of the bullets, they are not all that—they're sort of one process that looks to be pretty manual. We are suggesting that we think using the online claims reporting process is a better process. Chair DuBois: When I read it, it says ensure the use of York's online forms. You said you disagree; we're going to use DocuSign. Now it sounds like you've changed your mind and you're going to use York's online forms. That was my confusion. Ms. Mason: We'll redo it. Council Member Kniss: Could I ask one more subjective question? Do we find that this is more about saving money or about accurate reporting or about something else that maybe I can't define? Vice Mayor Scharff: Safety. Council Member Kniss: Yes, of course. Attachment B Ms. Richardson: I would say it's a mix. I think that by dedicating a resource you will save money in the long term. If you don't have people who are implementing an effective illness and injury prevention program, you're going to have more injuries. By having someone who's focused on that effort, you can keep your costs down. There's the accurate reporting just to make sure that we're compliant with State law and don't get fined. Council Member Kniss: Yes. That, of course ... Chair DuBois: We need another Motion. You're asking to change 3.1. Is that it? Vice Mayor Scharff: Yes, I'm asking her to change 3.1 and 4.2, that you stand by what you had here. You partially agree with what you wrote in this one. That's what I understood from the comments previously. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion, “including changes to Audit Findings 3.1 and 4.2 which will outline the related Action Plans that will be implemented by Staff.” MOTION AS AMENDED RESTATED: Vice Mayor Scharff moved, seconded by Council Member Kniss to recommend the City Council accept the Disability Rates and Workers’ Compensation Audit, including changes to Audit Findings 3.1 and 4.2 which will outline the related Action Plans that will be implemented by Staff. Council Member Kniss: Ready to vote. Chair DuBois: Yep. All in favor. Thank you, guys. MOTION PASSED: 3-0 Berman absent Council Member Kniss: Thanks. Thank you for coming from York. Ms. Adams: Yes, you're welcome. My pleasure. Attachment B CITY OF PALO ALTO MEMORANDUM TO: HONORABLE CITY COUNCIL FROM: CITY AUDITOR AGENDA DATE: OCTOBER 17, 2016 ID# 7351 SUBJECT: Revised Human Resources Response to the Workers’ Compensation Audit Attached is the revised Human Resources response to recommendations 3.1 and 4.2 of the Disability Rates and Workers’ Compensation Audit that was presented to the Policy and Services Committee on June 14, 2016. The response was directed as a part of the Policy and Services Committee motion to accept the report. ___________________________ HARRIET RICHARDSON City Auditor Disability Rates and Workers’ Compensation Audit 1 APPENDIX 2 – City Manager’s Response The City Manager has agreed to take the following actions in response to the audit recommendations in this report. The City Manager will report progress on implementation six months after the Council accepts the audit report, and every six months thereafter until all recommendations have been implemented. Recommendation Responsible Department(s) Agree, Partially Agree, or Do Not Agree and Target Date and Corrective Action Plan Status Finding 1: The City’s Injury and Illness Prevention Program (IIPP) is comprehensive but has lost its effectiveness due to the loss of its City Safety Officer. 1.1. The City Manager allocate sufficient resources to implement and maintain the City’s IIPP and to monitor the City’s compliance with the program. Concurrence: Agree Target Date: July 1, 2016 Action Plan: The Human Resources Department requested new position (1 FTE) in FY17 Budget. Training would be implemented over FY17 in order to be fully functioning in role. Status: Completed. Council approved additional position in HR for FY17 to update and effectively monitor and maintain the City’s IIPP. 1.2. HR update the safety manual, including supplemental tools and guidance posted on the intranet, to ensure: • The roles and responsibilities over the IIPP are redefined. • The City’s IIPP complies with all Cal/OSHA standards and other applicable safety laws. Concurrence: Agree Target Date: March 2017 Action Plan: Once appropriate staff resources are in place, the roles and responsibilities can quickly be reestablished to ensure the safety manual (IIPP) is reviewed and updated as necessary. While a few safe work practices have been updated, such as the Heat Stress Prevention Guidelines in July 2014, a thorough review will be conducted and any necessary updates will be completed. Status: Not started 1.3. HR review departmental procedures and safety requirements to ensure they align with the revised IIPP and City policy and procedures. Concurrence: Agree Target Date: November 2016 Action Plan: HR is in process of securing a safety specialist to conduct periodic inspections of City Status: On-going Currently, the following components of an effective IIPP are ongoing: Disability Rates and Workers’ Compensation Audit 2 Recommendation Responsible Department(s) Agree, Partially Agree, or Do Not Agree and Target Date and Corrective Action Plan Status facilities for hazard assessment. This comprehensive evaluation will include determining if any corrections need to be completed, including updating or implementing work procedures. Accident Investigation: supervisors investigate all accidents, injuries and near-misses and make appropriate changes to minimize recurrence. Hazard Correction: Supervisors correct conditions that are discovered during their monthly inspections or after an injury or accident to prevent reoccurrence. Training: Supervisors are responsible for ensuring their employees are trained to perform work safely. Documentation: Safety training sign-in sheets and investigation reports are maintained. Communication: Employees know how to inform management about health and safety matters. 1.4. HR work with York and departments to identify useful safety statistics, appropriate HR and departmental recipients of this information, and reporting frequency, and establish an automated process for those statistics to be provided. Concurrence: Agree Target Date: October 31, 2016 Action Plan: HR will work with York to identify useful reports that identify injury and illness trends and implement an automated process for those reports to be emailed to department representatives. Status: In progress HR has requested sample reports that York can provide to departments on a monthly basis. 1.5. HR identify industry-specific ergonomics and general wellness training opportunities to minimize common injuries, and coordinate with departments to ensure regular training is provided to employees. Concurrence: Partially agree Target Date: March 2017 Action Plan: HR will coordinate industry-specific ergonomic training, similar to training provided to Parks maintenance employees in 2010 and Library employees in 2014. We agree industry- specific ergonomic training serves as a reminder Status: In progress Wellness Specialist is working on researching options for industry-specific ergonomic training. Disability Rates and Workers’ Compensation Audit 3 Recommendation Responsible Department(s) Agree, Partially Agree, or Do Not Agree and Target Date and Corrective Action Plan Status for example, that the best way to prevent back injuries is to develop habits that reduce the strain placed on the back. Even so, it is a challenge to minimize this common injury to backs as many of the City employee occupations, it is unavoidable to repetitively lift heavy equipment, parts, patients, suspects, etc. Finding 2: Injured employees’ benefit eligibility is not accurately and completely tracked and monitored, resulting in both overpayments and underpayments of workers’ compensation benefits. 2.1. HR continue working with ASD and CalPERS to address the disability leave benefits that were incorrectly reported as compensation to CalPERS. Concurrence: Agree Target Date: February 2017 Action Plan: HR worked with Payroll to identify wage codes and required corrections needed to fix CalPERS payroll report. Status: In Progress SAP Functional is configuring correction to CalPERS report. Due to long-term vacancy and challenge hiring Sr Business Analyst, this project has been delayed. 2.2. HR review the 22 claims that accounted for 87 percent of the total additional city benefits difference in Exhibit 11, and take necessary action to address any errors identified. Concurrence: Agree Target Date: November 30, 2016 Action Plan: HR working on timecard amendments to address errors with 2 Public Safety officers whose claims were initially delayed when claims first submitted and final determination resulted in denial and non-acceptance. Status: HR has completed review of 22 claims. HR will communicate action plan to department and employees. In progress. No other action necessary. Disability Rates and Workers’ Compensation Audit 4 Recommendation Responsible Department(s) Agree, Partially Agree, or Do Not Agree and Target Date and Corrective Action Plan Status 2.3. HR review the existing disability leave management process in Exhibit 12 and determine the optimal monitoring structure, update the tools and procedures, and allocate sufficient and skilled resources to ensure: a. Benefit eligibility and work status of injured employees is accurately, completely, and timely tracked including: • Start date of disability • Date released back to work by the treating physician • Date returned to modified duty, including the assignment and payroll code used • Date returned to full duty b. Any changes in work status are communicated to York c. Disability leave time buckets are updated as soon as HR is notified of the status change. d. Benefit notices and vouchers issued by York are consistent with the timecards and actual benefits paid through payroll. e. Employees comply with the City policy requiring timely submission of work status notes. Concurrence: Agree Target Date: February 2017 Action Plan: a. HR is exploring better method to track temporary disability and return-to-work status accurately, completely and timely. b. HR will also improve process of maintaining timely communication with York. c. HR staff will explore how to improve management of disability leave buckets in SAP. d. HR will explore how to audit benefit notices and vouchers issued by York to ensure they are consistent with timecards. This would be a manual process that may not be able to be supported. e. HR will work with supervisors to ensure employees comply with City policy requiring timely submission of work status notes. Status: Not started 2.4. HR work with ASD to ensure that the data necessary for disability leave management is captured through time reporting in SAP to support the process, including: a. Revising the City’s payroll procedures, Policies and Procedures 2-06/ASD, to Concurrence: Agree Target Date: February 2017 Action Plan: a. HR following up with ASD Payroll on feasibility to revise City payroll Status: In progress a. Not yet started Disability Rates and Workers’ Compensation Audit 5 Recommendation Responsible Department(s) Agree, Partially Agree, or Do Not Agree and Target Date and Corrective Action Plan Status provide clear instruction for reporting disability leave on SAP timecards. b. Configuring the SAP system to: • Track compensation reportable to CalPERS separately. • Track medical appointments that qualify as disability leave by creating a separate payroll code. • If feasible and cost-effective, limit the number of days each employee can code disability leave or modified duty on their timecard based on their position. procedures; otherwise, will include steps in City’s Workers Compensation policy. b. ASD and HR have determined how to code public safety temporary disability as “PERSable” and non public safety temporary disability as “non-PERSable” by using different SAP codes. - A separate timecard code (7600) is being developed to track medical appointments. - Limiting the number of hours each employee can code disability leave can be accomplished when disability leave bucket is established; may not be feasible for modified duty and requires further review b. Good progress has been made to accomplish configuration changes to SAP system. Work will continue to finalize these projects. UPDATE: New SAP payroll code has been created by ASD and tested by HR to track medical appointments separately from disability leave. An email communication was distributed to city staff on use of new code. 2.5. HR work with York to identify and train responsible HR staff, and maintain online access to York data for analyzing claims, payment transactions, and trends. Establish and maintain written procedures for granting, monitoring, and removing access to the York data and appropriate handling and safeguarding of the data. Concurrence: Agree Target Date: December 2016 Action Plan: Training will be provided to HR staff newly assigned to oversee workers compensation. Status: In progress Finding 3: The City has not met the state requirement for timely reporting of its workers’ compensation claims to York, potentially causing the cost of claims to increase. 3.1. HR streamline the workers’ compensation reporting process and improve the accuracy and completeness of the claim forms by: Concurrence: Partially Agree Target Date: February 2017 Status: In progress Disability Rates and Workers’ Compensation Audit 6 Recommendation Responsible Department(s) Agree, Partially Agree, or Do Not Agree and Target Date and Corrective Action Plan Status • Revising the procedures to clarify the roles and responsibilities. This should include determining whether departments should be responsible for completing only the Employee Claim Forms (DWC-1) and Supervisor’s Report of Injury and Exposure (City form), with HR staff being responsible for completing the Form 5020. • Revising the City form for supervisors to complete with necessary information that can be easily copied and pasted to the Form 5020. • Ensuring the use of York’s online claims reporting to submit the Form 5020, and having appropriate and trained staff enter any sensitive personnel or payroll information. • Making the required forms and procedures available online in one place with clear instructions and adding electronic signature capability, if feasible and cost-effective. • Regularly reviewing the forms, procedures, and performance to ensure their compliance with state law. Action Plan: HR agrees the reporting process needs to be improved and streamlined. HR will work with York to implement use of online claim reporting to submit the state-required Form 5020, Employee Report of Injury and Illness. Finding 4: The City has not ensured that York met all contract terms. 4.1 HR create a list of key contract terms and assign staff to monitor and follow up on York performance against each term, including recovery of $5,000 from York for not meeting the indemnity claim closure ratio for FY 2013. Concurrence: Agree Target Date: December 31, 2016 Action Plan: HR will create a list of key contract terms that require followup. New HR staff assigned to administer workers compensation program will Status: In progress York credited City $5000. Disability Rates and Workers’ Compensation Audit 7 Recommendation Responsible Department(s) Agree, Partially Agree, or Do Not Agree and Target Date and Corrective Action Plan Status monitor and follow up with York regularly on contract terms. 4.2. HR work with York to streamline the monthly, quarterly, and annual reporting process by leveraging online access to York data (see recommendations 1.3 and 2.5). Concurrence: Partially Agree Target Date: October 31, 2016 Action Plan: The York data is readily available, currently 8 reports are provided to HR monthly. However the contract calls out for reports that are no longer in use. This can be cleaned up in next contract RFP and in any future contracts. HR will review reporting capabilities to determine how to improve use of data. Status: Not started Finding 5: Workers’ compensation revenues, costs, and performance data are not clearly reported for informed decision making. 5.1. HR work with ASD’s Office of Management and Budget to clarify the presentation of the workers’ compensation costs in the City’s budget documents. Concurrence: Agree Target Date: December 2016 Action Plan: HR staff will meet with Budget Manager to clarify presentation for workers compensation costs for FY18 Budget and determine changes or improvements. Status: Not started 5.2. HR work with York to identify useful performance measures and establish procedures to ensure reliable reporting of performance data using a consistent methodology. Concurrence: Partially Agree Target Date: January 2017 Action Plan: HR will explore best practice performance measures and establish procedure to ensure reliable reporting. HR is not certain York can assist with identification of useful performance measures and may need to explore other resources. Status: Not started CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR October 17, 2016 The Honorable City Council Palo Alto, California Policy and Services Committee Recommendation to Accept the City Auditor's Office Fiscal Year 2017 Proposed Work Plan At its meeting on August 16, 2016, the Policy and Services Committee unanimously recommended the City Council accept the City Auditor’s Office Fiscal Year 2017 Proposed Work Plan. On page 6 of Attachment A, the Analysis of Agreements with PAUSD was revised based on Policy and Services Committee direction. The Auditor’s Office will be issuing quarterly reports describing the status and progress of the work plan. The Policy and Services Committee minutes are included in this packet. Respectfully submitted, Harriet Richardson City Auditor ATTACHMENTS:  Attachment A: City Auditor's Office Fiscal Year 2017 Proposed Work Plan (PDF)  Attachment B: Policy and Services Committee Meeting Minutes Excerpt (August 16, 2016) (PDF) Department Head: Harriet Richardson, City Auditor Page 2 Fiscal Year 2017 Audit Work Plan Office of the City Auditor “Promoting honest, efficient, effective, economical, and fully accountable and transparent city government” Attachment A Overview The Palo Alto Municipal Code requires the City Auditor to submit an annual audit work plan to the City Council for approval. This proposed audit work plan represents ongoing administrative responsibilities of the Office of the City Auditor, as well as required audit responsibilities. It estimates approximately 10,000 hours of direct time1 for six full-time staff. It accounts for reclassifying the Administrative Assistant to a Performance Auditor I to more effectively use the employee’s time, and for continuing to increase our efficiency in conducting performance audits. The proposed audit work plan considers risk factors that, if addressed, will provide opportunities to mitigate those risks and improve operations: • Financial – Is there an opportunity to improve how the City manages, invests, spends, and accounts for its financial resources? • Operational – Are City programs/activities performed and City services delivered in the most efficient, effective, and economical manner possible, and do they represent sound business decisions, including appropriate responses to changes in the business environment? • Regulatory – Do City programs and activities comply with applicable laws and regulations? • Health and Safety – Are City services delivered in a manner that protects our residents and employees from injury or unnecessary exposure to factors that can affect an individual’s health? • Information Security – Is City, resident, and employee information (electronic or physical) protected against unauthorized access, use, disclosure, disruption, modification, inspection, recording, or destruction? In addition, the proposed audit work plan considers several factors: • Relevance – Does the audit have the potential to affect Council or City management decision- making or impact City residents? • Best Practices – Does the audit provide the opportunity to compare current performance to best practices? • Return on Investment – Does the audit have the potential for cost savings, cost avoidance, or revenue generation? • Improvement – Does the audit have the potential to result in meaningful improvement in how the City does its business? • Actionable – Is it likely that the audit will produce actionable recommendations that are feasible and practical? • Manageable – Is the audit scope narrow enough to ensure it is completed in a timely manner? The audit work plan also considers risks related to major functions within the Utilities Department, as identified through a 2011 Utilities Risk Assessment, a 2013 Utilities Organizational Assessment conducted by external consultants, and prior audits. 1 The estimated hours consider available time after accounting for holidays, vacation, required training, and administrative time. Attachment A Nonaudit Services and Special Projects The following table lists nonaudit services and special projects for the FY 2017 audit work plan: Project Scope Planned Hours Annual Performance Report (Service Efforts and Accomplishments) Annual. We prepare the annual performance report to provide the City Council, City staff, Palo Alto residents, and other stakeholders with relevant information and data regarding the performance of City programs, functions, and activities. The reduced hours for FY 2017 represent our transition to a more streamlined process for collecting information and preparing the report and time to develop a transition plan for moving performance reporting to the City Manager’s Office. 300 National Citizen Survey Annual. We contract with the National Research Center (NRC) to conduct The National Citizen Survey™. The survey contains a series of standardized questions that the NRC uses to benchmark Palo Alto residents’ opinions of City services against other jurisdictions. In addition to the NRC’s report, we will tabulate the results in Tableau software to allow users of the Palo Alto Open Data website to perform an interactive analysis of the results (e.g., how people within different demographic categories answered a question). 300 Annual Citizen Centric Report Annual. We prepare a four-page summary of highlights from the annual Performance Report, financial data, and an overview of our City's economic outlook. The Citizen Centric Report follows the Association of Government Accountants' recommended report format, which is designed to provide information to the public about Palo Alto’s financial condition and performance in an easy-to-understand and visually appealing format. 20 Sales Tax Allocation Reviews Ongoing. We identify misallocations and underreporting of local sales and use tax through in-house monitoring and a contract with an outside vendor (currently MuniServices, LLC). We also look for opportunities to receive direct allocation of sales and use tax on large commercial construction projects. We report sales and use tax recoveries in quarterly reports to Council, and also provide a quarterly sales and use tax information report which includes information from MuniServices, LLC. 120 Administration of the Fraud, Waste, and Abuse Hotline Ongoing. We receive notification of complaints filed through the hotline, reply to the complainant, route and monitor cases for investigation, and convene the Hotline Review Committee (City Manager, City Attorney, and City Auditor) to determine the routing of cases and their closing upon completion of an investigation. The hours include time to review and update the procedures for administering the hotline and investigating complaints received. 60 Annual External Financial Audit Annual. The Palo Alto Municipal Code requires the Office of the City Auditor to contract with an independent certified public accounting firm (currently Macias, Gini, & O’Connell, LLP) to conduct the annual external audit of the City’s financial statements. The firm also conducts the federally required Single Audit. We coordinate those efforts between the Administrative Services Department and Macias, Gini, & O’Connell, LLP. 30 Review and Monitor the Implementation Status of Prior Audit Recommendations Ongoing. We review and provide feedback to departments on their reports of the implementation status of prior audit recommendations. We include a summary of the status in our Quarterly Reports. 90 Attachment A Project Scope Planned Hours Office of the City Auditor Quarterly Reports Quarterly. We prepare and issue quarterly reports to the City Council describing the status and progress toward completion of our annual work plan, as required by the Palo Alto Municipal Code. 60 Advisory Roles Ongoing. The City Auditor is a nonvoting, advisory member of the Utilities Risk Oversight Committee, the Information Technology Governance Review Board, the Information Security Steering Committee, and ERP Strategic and Technical Planning Committees. 60 Internal Control Training One-time. Coordinate with the Department of Administrative Services to conduct internal control training, with a focus on the recently revised publications, “Standards for Internal Control in the Federal Government” and “Internal Control: Integrated Framework.” Federal grant regulations now require recipients and subrecipients of federal grant dollars to comply with a recognized internal control framework. The regulations specifically identify these two frameworks. This project is a carryover project from our FY 2015 and FY 2016 audit work plan while we waited for the U.S. Government Accountability Office’s update of the “Internal Control Management and Evaluation Tool,” which was a companion document to the “Standards for Internal Control in the Federal Government” that provides a systematic, organized, and structured approach to assessing the internal control structure. 60 Total Hours for Special and Ongoing Projects 1,100 Performance Audits The following audits from our FY 2016 audit work plan are in progress and will continue into the FY 2017 audit work plan. The hours shown represent the remaining hours expected for FY 2017. Audit Department Audit Objective(s)2 Planned Hours Utilities Customer Service: Water Rate and Billing Accuracy Utilities Department Evaluate whether the Utilities Department properly implements rates and accurately bills customers for water services. 1,000 Utilities Customer Service: Gas and Electric Rate and Billing Accuracy Utilities Department Evaluate whether the Utilities Department properly implements rates and accurately bills customers for gas and electric services. 1,000 Fee Schedules Community Services Department Evaluate process for establishing fees to determine if the fees cover the cost of services provided when expected. 240 Analytic Development and Continuous Monitoring: Procure- to-Pay Citywide Determine if data analytics and continuous monitoring can help the City detect duplicate vendor or vendor payment records. 120 Analytic Development and Continuous Monitoring: Overtime Citywide Determine if implementing a continuous monitoring process for overtime could improve the City’s oversight and management of overtime. 300 2 The preliminary scope and planned hours may change after completing the planning phase of the audit. Attachment A Audit Department Audit Objective(s)2 Planned Hours Sustainable Purchases Citywide Evaluate the City’s purchasing practices to determine if environmental sustainability is adequately considered in purchases as appropriate. 360 Allocated Charges Administrative Services Department Evaluate the accuracy and use of allocated charges within the budgeting process to ensure charges are allocated equitably based on the benefit each department receives for centralized city services. 660 Total Hours for In-Progress Performance Audits 3,680 The following audits are proposed for the FY 2017 audit work plan; some of these may not be completed until FY 2018: Audit Department Preliminary Audit Objective(s)3 Planned Hours ERP Planning: Data Integrity, Reliability, and Security Information Technology Evaluate the integrity, reliability, and security of data in the current SAP system and make recommendations to ensure that any identified deficiencies are corrected prior to transferring data to the new ERP system. 1,100 ERP Planning: Segregation of Duties Information Technology Evaluate the adequacy of segregation of duties for various activities in the current SAP system and make recommendations to ensure that any identified deficiencies are corrected for the new ERP system. 1,000 ERP Planning: Data and System Governance Information Technology Evaluate the adequacy of data and system governance in the current SAP system and make recommendations to ensure that any identified deficiencies are corrected for the new ERP system. 750 Business Registry (limited scope) City Manager Evaluate the rules and processes used to establish the business registry and make recommendations to help clean up the data and ensure accuracy in the future. 125 Hydromax Crossbore Inspection Contract (limited scope) Utilities Evaluate the work performed to date under this contract to determine if the City is taking an appropriate approach to this work, getting appropriate line inspection data from this effort, and allocating an appropriate level of contractor oversight. 125 Code Enforcement Planning and Community Development Evaluate code enforcement policies and practices for responsiveness, consistency, and follow-up, particularly for repeat offenders and complex cases. 575 Contract Risk and Oversight Administrative Services Department Develop a systematic, data-driven process to identify high- risk expenditures and revenues that occur under formal contracts. Audit selected high-risk contracts to determine if the City has received the goods and/or services it paid for and/or the revenues to which it is entitled, that the contracts are needed and do not result in unnecessary overlaps in services, and that potential contract extensions are appropriately disclosed in the original contract documents. 600 3 The preliminary scope and planned hours may change after completing the planning phase of the audit. Attachment A Audit Department Preliminary Audit Objective(s)3 Planned Hours Analysis of Agreements with PAUSD Citywide Identify all agreements with PAUSD and the parties involved in each, and benchmark against other school districts to determine which services are generally provided by a school district or the city. Report will be an information report. 360 Public Safety: Civilianization of Sworn Positions Police and Fire Evaluate if the City can reduce costs by converting certain sworn public safety positions to nonsworn positions without increasing risk to an unacceptable level. Audit will include benchmarking with other public safety organizations. 450 Total Hours for New Performance Audits 5,085 Other Suggested or Carryover Audit Topics Not Included Above We have excluded some topics from the FY 2016 audit work plan that were not started and received suggestions for other audit topics, which are listed below, but that we do not have capacity to do during FY 2017: •From FY 2016 Audit Work Plan: o Utility Meter Routes o Utilities Asset Management o Utilities Staffing o Public Benefits o Procurement Processes o Mobile Device Usage and Security o Impact Fees o Payroll Processes o Application Controls for Critical City Applications (will be incorporated into ERP Planning audits) o Data Reliability (will be incorporated into ERP Planning audits) •New suggestions: o Facilities Management o Parking Assessment District o Transfer Development Rights o Planning Codes o Financial Condition Report o Long-term Liabilities, Including Infrastructure o Analysis of Revenue vs. Expenditures and Reserves Attachment A 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: Oral Communications None. Agenda Items 2.City Auditor's Office Fiscal Year 2017 Proposed Work Plan. Chair DuBois: Alright, so on to the next item. Council Member Kniss: Always like hearing about money, Harriet. Harriet Richardson, City Auditor: So the next item is the Auditor’s Office Fiscal Year (FY) 2017 Audit Plan. And when I prioritize these I try to look at you know different types of risk and I most of these came in actually as requests and I prioritize them based on what I thought were the riskiest areas that we needed to look at as well as my own staff and how I could spread them around the different projects during the during the year, keeping in mind that we do have one auditor who is Enterprise Funds so she only audits Enterprise Fund activities. So I'll start on your Packet Page 14 which is with our non-audit services and special projects. So we will continue to do the Annual Performance Report this year and as you know we've streamlined that so we have quite a bit fewer hours allocated to that this year. And we have started the process for the National Citizen Survey already. That should start going out being mailed out to residents by the end of August. And then we have our annual Citizen Centric Report which is just the four page summary of the financial situation of the City and Attachment B performance data. And then continue with the sales tax allocation reviews that we currently do, which I just spoke about in the quarterly report. And then the hotline I put I don't normally spend about 60 hours on the hotline, but I put some time in there because we've done a survey of other jurisdictions and I'm going to be using the results of that survey to help inform the Staff Report that I’ll write for the discussion item next month. And then we coordinate the annual External Financial Audit with the certified public accounting firm that does our audits. That's currently with Macias, Gini & O'Connell. And then we review and monitor the status of prior audit recommendations as those reports come in which I report on the quarterly report each… I report the status that we know, but the department’s report the actual status and separate reports. And we do verify those statuses as we receive the reports before they're presented to you. And then our quarterly reports that I do each quarter and then the advisory roles that I just talked about on the quarterly report and again that we have added the Enterprise Resource Planning (ERP) strategic and technical planning committees as an over in an oversight role. And then this last one, Internal Control Training, this is actually been on our last two audit plans and we didn't do it then because we were waiting for the Government Accountability Office (GAO) to publish another document sort of a management and valuation tool that assists management in implementing internal controls, but they decided not to do that. And so I have talked with our Administrative Services Department (ASD) Director and we’re going to coordinate an effort to do some internal control training. One of the reasons this is going to be important is as the GAO revises the government auditing standards they're pulling a lot more from the Standards for Internal Control into the auditing standards which means that we are as auditors are going to have to do more work on internal controls. And that typically is where we find deficiencies that we report in our audit findings. So based on that if we do some training it should help departments be understand at least what they should do to implement good internal controls and reduce their audit risk. So we have about 1,100 hours allocated for those types of projects. Then getting into the performance audits the first section here is the audits that are currently in progress. And then the second section is new audits. So as I mentioned on our quarterly report we’re in the process of doing the Utilities Customer Service Water Rate and Billing Accuracy and then Gas and Electric Rate Billing Accuracy will be a separate audit. I’m actually we have done some work on that and then stopped and I'm actually going to defer that to later in the year because of some of the new audits that I have planned that I think are going to be a higher priority right now. And we have the Fee Schedules Audit, the Procure to Pay, the Continuous Monitoring of Overtime, Sustainable Purchases all in progress that I have already talked about. We have preliminarily started an audit on allocated charges that I have not sent out an audits start letter on. What we're wanting to do is look Attachment B at the budget process to ensure that charges are allocated equitably based on the benefit the department’s received for the centralized City services. We're focusing on the General Fund and the IT allocations on for that particular audit. Moving into the new audits I have three audits on here for ERP planning. And the idea behind this audit is to try and identify concerns with the current ERP system, our SAP system that should be fixed to prevent basically garbage out becoming garbage in in the new ERP system when it's implemented. So the first one is data integrity, reliability, and security; we’ll be looking at those things in the current SAP system and make recommendations that go to make sure those types of things are corrected before transferring any data over to the new ERP system. We're going to look at segregation of duties. This particular segregation of duties is when you don't want one person doing multiple tasks that could allow them to basically commit fraud, steal, do things like that. So in ERP and SAP there is some concerns about how it was set up that some things were not adequately segregated among different staff and we're going to look at that and see how that can be fixed within the new ERP system. We’ll make some recommendations; probably have some matrices to help people understand how those should be separated. And then we're also going to be looking at data and system governance. Right now it's difficult to know who is really responsible for data when IT implements the system, but they say departments own the data. But when as auditors we go out and we’re asking for information the departments generally don't know the back anything beyond the screen they see. They don't understand the back workings, behind the screen workings of how things come together. For example, on the Utility Billing Audit we had to build the tables that go into a bill because we couldn't identify those easily from any records that the City has. So really looking at that and making sure that those types of things are well documented as we move into a new ERP system. The next audit is a limited scope audit just looking at the business registry, looking at the rules and processes that were used to establish it and see if we can make some recommendations to clean up the data and assure a smoother process in the future. And the next one this one was specifically requested by the City Manager's office for us to look at the Hydromax cross for inspection crop a contract. So the contractor who was doing that work had to stop due to some complications, but there's more work that needs to be done. And so they asked that we look at that to see if there's adequate documentation for what was done. Are we getting our money's worth for what was done and do we, are we on the right track for continuing providing the correct oversight and that sort of thing. The next audit is Code Enforcement. We were asked to look to evaluate the policies and practices for responses, responsiveness, consistency, and follow up especially for repeat offenders and complex cases. And the next audit is contract risk and oversight. Really looking at we focus in on certain types of contracts on that to Attachment B determine if the City receives the good value for its money, the goods and services it paid for it paid for, revenues its entitled to, that we're not duplicating services through varied multiple contracts, and that potential contract extensions are appropriately disclosed in the contract documents. And then if you turn to the last page we have two more audits there. One is looking at the just analyzing the agreements that we have with the School District. There's a lot of contracts out there or a lot of agreements and multiple City departments have responsibility for various aspects of different contracts and so we're really just kind of pulling it together for informational to see what the benefits, who is getting those benefits, who's paying for what, and looking at how that should continue in the future. And in some cases it might be recommending we continue financial support, return operational support over to or operations over or vice versa. We'll look and see how those, how those work out. And then the last one that I have a request for was to look at the civilian whether civilian is, civilianizing certain sworn positions and public safety would result in some cost savings without increasing risk to an unacceptable level. So we would be benchmarking against other public safety organizations to see if there are options for doing that. And then at the bottom of the page I've got two sections there. The first section is audits that were on our Audit Plan last year that are not included this year and I’ll explain why. And the last section are new audits. They were new suggestions that I just couldn't fit into the audit plan. So on the ones that we did not include the bottom three payroll process that application controls and data reliability we’ll be touching on each of those in the ERP audits that we're planning so I didn't see a need to do those as separate audits. The first three utility meter routes, utility asset management staff, and utilities staffing because we only have one enterprise auditor there was only so much that she could do so I haven't included those. Procurement Process is the Procurement Manager has been making quite a few changes to the procurement process and so based on that we didn't see the same level of risk in the need to do that as an audit. Mobile device usage and security IT we're starting a project on that and so we didn't start that audit, but now that we're doing the ERP audits we probably won't be able to fit IT in for a fourth audit. And then the last few public benefits and impact fees were simply just a matter of scheduling and not being able to fit them in. And then the new suggestions that the bond were all a matter of scheduling and not being able to fit them in; so that completes my recommendations for our audit plan for FY ‘17. James Keene, City Manager: Thank you, Mr. Chair and thank you Harriet. I had a just a couple of comments on the proposed Audit Work Plan and apologize I haven't had a chance to talk with Harriet about these. I don't think there’s a real issue per se or anything, but first of all obviously it's Attachment B pretty clear that the Auditor has an ambitious performance audit work plan for FY ‘17. Here when you look at the items that begin on Page 15 and carry over into Page 16 in addition I really think that the proposed audits identified especially these where the bulk of the of our resources are going to need to go related to the ERP planning and all of those are absolutely critical performance audits that need to take place. I did want to make a comment on just three of the proposed audits. First is this limited scope item on the business registry. And I would just say that of course we're at the very beginning of the FY here and a lot of these are going to depend upon her capacity during the course of the year. Some of them may be towards the later part of the year. Right now our own staffing situation is we've got a gap in that. So to the extent that the Auditor may need some direct staff support for doing that I don't think in the near term we're in a position to be able to support that. If she's able to sort of do that analysis without you know having to be able to work with you know Tom Fehrenbach who was the lead on the business registry and he's now departed. We could do that, but with that note. Secondly, under Code Enforcement, the Planning Director this morning after the leadership team meeting asked me to bring this up. That her suggestion would be to defer until later the audit on Code Enforcement and the reason for that is if you recall that the Council added funding for a key third Code Enforcement staff person who's been you know not on the job and up to speed for you know I mean for certainly under a year and we'd be in a much better position we think to get, do a good and meaningful audit after we have a little more track record with this additional staff person. I think was a key recommendation from the Council to be able to add that additional capacity. And I think if we did the audit in the beginning part in any way of the year you just wouldn't get the full measure of it. And then lastly just on the last page I would say is the analysis of the agreements with the Palo Alto Unified School District (PAUSD). I would just share that I had, you know I’ve had to put and those of you who were on the City School Liaison Committee. During the break I did have a chance to catch up with the School Superintendent on a number of issues. I did mention I’m not sure I got exactly the specifics of a performance audit being done, but that we anticipated that there would be reviews taking place this year on some of the different sort of shared service agreements that we have with the School District and that we would obviously keep them involved and I’d certainly would be in regular communication with the School Superintendent. So I did want to just make those three comments. Thank you. Vice Mayor Scharff: Great. Alright, so I guess I agree with the City Manager. I don’t think we should do Code Enforcement this year. We can just hire another person; I think City Manager is right. I think it would be the wrong Attachment B time to do that audit. I also agree with the business registry that with Tommy leaving I think it doesn’t make any sense. I don't see quite how we do that audit. And so I would probably not do those two audits frankly right now. I did have a question on the civilianization of sworn positions. I think this is a good audit if it moves us towards what the Chief has already said he wants to do. And I guess I was a little I know we've done a study in the past. We hired fire consultants to come in and do this and make recommendations as to how the Fire Department operates and then based on that we did a lot of I would say restructuring of the Fire Department. So I can’t remember if that was already included in some of the work that was done. I was also wondering if you know, Police and Fire seem specialized to me. I could be completely wrong and so is it a better use of resources for us to do this through the Auditor’s Office or to hire a consultant who specializes in this? I just wanted to raise that question and I guess I wanted to get the City Manager’s view on that. And then I also have some concerns about the analysis of the agreements to the PAUSD. I do think that that is an area of which at some point we should take on; however, you know this includes things like who pays for the crossing guards? I don't quite want to take on right now not paying for the crossing guards. You know the School District has a huge budget issue which is you know primarily of their own making. Council Member Kniss: Greg, are you talking about the track? Mr. Keene: No, he’s talking about the school crossing guards. Vice Mayor Scharff: No, I’m talking about the crossing guards. I mean I believe we pay for those and the School District doesn’t. And you know, I think we should move towards the School District pays for half of it or something along those lines. I think so, but I guess I’m raising we have a lot on our plate right now in all sorts of things and I'm just wondering if this is the moment where we should do this or not do this. And I'm sort of on the fence. I’m not really arguing one way or the other, I'm just saying that of all the audits this is going to be the most political and the most where we, you know, create a bunch of issues that we're going to have to then deal with and that's not necessarily a bad thing, it’s just a timing issue. And right now the School District is going to be more difficult on these issues because they have a big budget issue. So for them to come up with a bunch more money to start paying for things I think that could be more, more difficult. And what I would hate to see is us to do the audit, decide then to not take no action on it because it's too difficult politically because the School District doesn't have any money right now as opposed to a more ideal time to do it. So that's the only thing I raise that question. I actually wanted feedback from the City Attorney, from the City Manager on both those concerns. Attachment B Mr. Keene: Mr. Chair? Great, so let me start with the second item on the School District issue. I, first of all I think you bring up some very good points. I mean there are a whole range of formal relationships that we have and informal. We’ve got the school crossing guards, we run the shuttle bus program that you know provides transportation, we’ve obviously had the Track Watch Program guarding the tracks in relation to the teen suicide issue and that sort of thing which is a huge cost. And just this past year the whole issue of middle school athletics and things that come up. That being said I mean I think first of all the you know, the Auditor is very structured and required to be so in her approach to get to work plan clearly pacing on this work plan even during the course of the year. I mean things could be put off in my idea and I actually do think that it would not be really an appropriate signal to send to the School District that we're going to start this conversation off by putting doing an audit. I mean it seems to me that there are conversations that can happen at the City School District. I mean a City/School subcommittee between Board Members and Council Members about just this range of issues and how to go forward, but if this was the recommendation and act I’d just would I’m sensitive to your concern. I may ask the Auditor to jump in on the second item as relates to the public safety civilianization of sworn positions. We did do a comprehensive cost of services in coverage study I don't know about five or six years ago. It dealt with a whole range of issues. These were some of them. The ideal worked out with station location, response times, a whole bunch of things. So I don't I clearly think that additional analysis in some form will be necessary if we really want to. It's not so much a question of just moving forward with this, but able to have the rationale and documentation to explain to the public or to labor groups or whatever why this is in the City's best interest. As it relates to the question of would an outside consultant be a better route to go I’d really kind of defer, I’d certainly want to get Harriet’s perspective on that first. Ms. Richardson: So it is something that auditors in other jurisdictions have looked at so and they're… yes, I do acknowledge there are people who specialize in this type of thing. I think that there's a lot of literature out there also that can help us with assessing what types of positions are appropriate for civilianization and what types should be sworn. And there's a variety of factors that we would consider that we would list in the audit report about that would need to be considered when you make a decision should we convert it or should we leave it as sworn. So I don't think that our recommendations would be completely black and white. I think that they would, might be a little bit more these are some for consideration, these are some that you could probably easily convert, but I don't think it's going to be a clear list of these ones convert and these one stay. Attachment B Chair DuBois: …questions from Marc and Liz. I just want to say if you want to speak on an item later there are speaker cards. You can fill them out and bring them up to the Assistant City Clerk. So Marc. Council Member Berman: So thank you, Greg, for bringing up the Palo Alto Unified School District’s (PAUSD’s) timeline is sensitive. And yeah, that makes a lot of sense. On the business registry I'm you know, I understand that Tom isn’t with, you know, Tom left, but we do seem to have some issues with you know the accuracy of the data in that in that registry. And I’m, I don't know what's been done to try to make sure that the next round of data is you know either more accurate or perceived to be more accurate. Maybe the current data already is accurate, but clearly there are a lot of opinions in the community that there were some gaps there. So you know, do you think Harriet that you can conduct a pretty high level evaluation of the rules and processes? Even without Tom being here that could be valuable and helpful to staff to try to improve that process before the next round and if not or Jim if you don't think that would be helpful then what are we going to do to make sure that you know, that data is more comprehensive and more accurate this time around? Ms. Richardson: I do believe that there’s some things we can look at that would be, it would be high level. We're looking at the process. We're not getting into a lot of details, but we would look at what possibly went wrong. There are a lot of other cities that have some sort of business registry and even just talking to some of them and saying how do you ensure accuracy in getting some benchmarking against other cities would probably want to be the way we would start this audit. And I do you can see I don't have a lot of hours on it. We're not intending to get real deep on it. It's really looking at the rules and is there a way to clean that up for how people register to make sure that the business registry is accurate. Council Member Berman: Great. And if we, you know, if some things do get knocked off of this work list what, you know, what on the carryover audit topics is this listed in kind of order of priority or what would you prioritize? Ms. Richardson: I would probably start with something from the new suggestions list and not from the old lists for the reasons I cited earlier why I didn't include them. So there's been there's all of these were requested… Council Member Berman: By individual Council Members and… Ms. Richardson: Yes. Attachment B Council Member Berman: Got it. Ms. Richardson: Yes, so it’s just like it’s a yes. They were all requests by a Council Member. Council Member Berman: Ok. Ms. Richardson: And so I think it would really be thinking about what we can do within the same amount of time and would provide the most benefit to Council. The Facilities Management was really looking at how we maintain our infrastructure that we have. Parking Assessment District there were some concerns that came out about when we did the Parking Funds Audit. That came up about the rules for how that's managed. Transfer Development Rights was really looking at whether or not we have good records on all of those. I can tell you right now that I did talk to Hillary in Planning and they actually have someone in their department who's been doing a lot of work to collect data and go through old records and get a good set of data to make sure that they do have they are aware of all the ones that have been established and the ones that have been sold. Planning Codes was just released seeing is they’re comparing what we do and have in our planning codes to some other cities that seemed to be more simplified than what we have and making some recommendations there. Financial Condition Report was really looking at where do we sit for long term. It kind of ties into long term liabilities including infrastructure and the analysis of revenue expenditures and reserves get cut [inaudible] probably tie most of that into a single financial condition report. Council Member Berman: Got it, thanks. Mr. Keene: Just a suggestion, you know assuming that something does come off it's about at the most about a quarter of a Full Time Equivalent (FTE) for years’ capacity and you know probably the Auditor could be in better shape when the item from the committee goes to the Council and be in a position to have done some time assessment as to what, what that quarter FTE could buy as far as some of these other audits when the recommendation came forward and not have to make a decision on the fly. Council Member Berman: Absolutely, yeah. No, I was looking for what she thought, not necessarily a hard suggestion. Yeah, great. Thanks. Council Member Kniss: So let’s go to the PAUSD. As a former trustee a long time ago, but I remember even then that they actually the City came to the Attachment B rescue many years ago. I think it is a pattern. Maybe not a bad pattern, but I think if we don't begin to assess what it's really costing us we have the Track Watch that I think ran at least a million this year, am I right? Mr. Keene: Significantly over a million dollars. Council Member Kniss: Right. Mr. Keene: And we only actually we don't even have full year funding [inaudible] issue. Council Member Kniss: On the I don't know how much the crosswalks are? Mr. Keene: $350,000 - $400,000. Council Member Kniss: Yeah, yeah. So, so I think one of the things that would help me make a decision on this is to know what is the amount of money really involved? At some point we really do have to have this conversation. When I was on Finance at least two years ago we had a discussion then about approaching the School District on sharing cost especially for the Track Watch. And I think we also need some sort of philosophical discussion about is when kids are not on a school ground are they our responsibility? So if they're getting there in some way or another and what are the other, what are the other woven in costs? And it's it's we have an interesting situation because we have no control over the School District whatsoever. And so many of the decisions that are made we’re excluded from those as well and that's not a bad thing, but I think realistically at some point we have to actually take that on and I it probably isn't going to be wildly popular. So you bet on [inaudible]. Chair DuBois: Anything else? Council Member Kniss: Nope, that’s it. Chair DuBois: Yeah, so I was going to make a comment on that one as well. I guess I just wanted to clarify what the purpose was because it again, I can see kind of immediately jumping to cost sharing, but there could be other reasons to do the audit. Ms. Richardson: Right. It was really looking at the different programs that that are shared and evaluating whether they should truly be shared or Attachment B should they be operated by one party or another. And I don't think that necessarily means that we wouldn't provide financial support. I think part of it does, some of it probably comes down to what you were saying. Are we responsible for those kids? If we're operating it do we take on that responsibility versus whether they're operating it and we're just providing financial support. Council Member Kniss: That’s a good [inaudible]. Chair DuBois: Yeah, so again I think and I'm not sure we requested it either, but I think if we do it in the right way that probably is the most politically sensitive audit on this list. It’s a very, a vicious worklist. But overall it seems like it strikes a nice balance between different areas. So again if the purpose is to really understand all of our obligations with the School District because that seems reasonable to me then we can decide what the outcome of that is. On Code Enforcement I think that is a really useful one. I would just prefer to see it shifted towards the end of the year. It's a smaller audit. Ms. Richardson: And it and it likely would be because we have the audits in progress and then based on the timeline for ERP they're planning to issue a Request For Proposal (RFP) in March. We will need to get started on those pretty quickly to be able to provide some input even though the audits might not be complete. So it would end up being one pushed out. Chair DuBois: And I think then the owner’s been here for a little while, right? So if we did it towards the end of the year? Mr. Keene: Yeah, if we could plan that and I mean the Planning Director suggested and I think it was a good offer too that you know, there's nothing that would preclude us from doing a public study session with the Council on the status of Code Enforcement. That’s different than an audit, but there is an opportunity to at least get an interim report as to how things are going and how they’re working. Chair DuBois: Ok, and then on the data clean up one I kind of had the same thoughts I think that Marc did, which was again it's also relatively small hours. I think if it's more process oriented you could look at potentially even look at it after the fact in terms of how the data is analyzed and if we can spot check the data for inconsistencies and that kind of thing. You’re going to, it may not make a difference if we have a person there for you to talk to if you’re just working with the data. So my take would be to kind of keep Attachment B the plan as it is and maybe just shift priorities throughout the year without the ordering. Vice Mayor Scharff: So I've been sold on the business registry. I think if we keep it high level it’s only a 125 hours. On the Code Enforcement it's 575… Chair DuBois: It’s half the size of a business registry audit Vice Mayor Scharff: It’s three times, it’s almost three times the size of a business registry audit which [inaudible – multiple people talking]. Almost four times. So I mean I think, I think we should do it, but I think this is not a 2016 audit. I think it's a 2017 audit and I see no reason why we should try and shoehorn it in, I mean a 2018 audit not a 2017 audit. Council Member Berman: I'm assuming if we moved it the other work plan it might roll over anyways. Vice Mayor Scharff: But why not just start it then? I mean why not just say because it's 600 hours, what does that mean? Does that… I mean that’s a lot. That’s a big audit, 600 hours. So I wouldn't do that one. Now I mean I think we should do it, I just wouldn’t do it this year. And the agreements with the School District I think it depends on how we worded that. So I think it would be helpful to identify all agreements with PAUSD with the parties involved in each and evaluate the required services under each. I'm not so sure we really want the Auditor… Mr. Keene: We shouldn’t, right. Vice Mayor Scharff: To, to be making a recommendation, to be making recommendations about who… it’s one thing to identify everything and say these are all the agreements, these are how they're being done. I think that's useful information, but I don't want the Auditor saying we should do this or we should do that. I don’t think that's a good idea. And I guess I won't support it. I guess I've been sold on the public safety one and I think I’ve been sold on everything else that we would do. So for me, for me it's moving the Code Enforcement one off to next year and then it depends on… so I guess with that said what, how would you, what would you do on the PAUSD audit? Do you think it's worth going forward with it if I'm not going to want you make recommendations that would say anything about cost sharing or necessarily I'm not sure you say who should run it. I mean take, take crossing guards for instance. You know, it's clearly a School District function, right? [Inaudible] crossing guards, but the City does it. So I mean Attachment B how would you, how would you approach something like that as an auditor? Would you say I've gone and looked at 12 other school districts and cities and the school districts pay for that in six of them and you know the city pays in six or the school district pays in all 12 and the city doesn't pay in any. I mean how would you approach it? Ms. Richardson: Most likely that is how we would approach it. We'd look at similar types of school districts to see and I don't know what those school districts would be right now, but that's most likely what we would do if we were making just comparisons. And we could even do that without making a recommendation as to whether the City should continue supporting or not. We could still do some benchmarking in that and then leave it up to Council. I mean then you have the information you can make a decision based on that. Vice Mayor Scharff: So is it really an audit if you don't make recommendations? I don’t think I’ve ever seen an audit come out of your office without recommendations. That's my only, you know. Council Member Kniss: I mean is it just information? Vice Mayor Scharff: Right, I have never seen an audit that doesn't have recommendations and you know… Council Member Kniss: Could you do an information only really is the question. Ms. Richardson: Right, right. We could do that. Vice Mayor Scharff: You could? And you're sure? I mean this doesn’t go against auditing? Ms. Richardson: No. Vice Mayor Scharff: Ok. Council Member Berman: Harriet would tell us. Vice Mayor Scharff: Ok. Well alright, I’d be fine if we’re doing it for informational purposes as long as we’re not... Attachment B Mr. Keene: But, but this whole issue of even the determination you're talking about leaving out. I mean… Vice Mayor Scharff: Absolutely. Mr. Keene: Yeah. I would just think you would strike that second half of that language. Just say the required services under agreement and costs, you know, borne by each party or something. Vice Mayor Scharff: That’s right. Chair DuBois: And maybe benchmarking. Mr. Keene: And benchmarking, yeah. Vice Mayor Scharff: Correct. So I just sort of like a mini-Motion. Are we all agreed that that's what we want to do on the school? Chair DuBois: I am. Council Member Kniss: I can, I think it’s a good middle good middle of the road decision. Bad pun. Vice Mayor Scharff: Ok. Alright. So I guess that’s what we want. Chair DuBois: So in terms of the work plan in terms of either if we pull Code Enforcement off then I guess you would come back to, would this come back to Council on consent with the proposal? Ms. Richardson: I can do that. I can put it in as consent if you'd like me to do it that way. We do, we do forward this with any changes that you recommend now as a consent item and I can just go ahead if you want me to add one of these other ones in I can do that. Vice Mayor Scharff: So there's two approaches we could do. We could either do that or we could have her forward everything else for the work plan and then you could come back to us and we could talk about one of these and then recommend that to Council if we want. Council Member Kniss: A better decision. Attachment B Vice Mayor Scharff: What? Council Member Kniss: A better decision. I'm not sure the other five would agree to not go with the Code Enforcement. That's been a popular, popular item. Ms. Richardson: It was recommended by a Council Member who is not on this Committee. Council Member Kniss: Yes. Vice Mayor Scharff: Well, if we don't put it on Consent… Chair DuBois: It comes back as an Action Item and then you could, kind of an alternative… Vice Mayor Scharff: But wait you’re doing it wrong. If you don’t put it on Consent the whole point of having a Committee goes away. I mean why have a Committee? I mean there's three Council Members to pull it. Chair DuBois: Not everything that goes to Committee is unanimous. Things go to… Vice Mayor Scharff: No, that’s what I mean. Right. But I mean the goal is to make it unanimous and to get through the business because I know we get things through too fast and we sit around and have nothing to do at Council. Mr. Keene: Every time. Vice Mayor Scharff: Every time. Ms. Richardson: Another option would be to leave it on, but say start late in the FY so it's basically being mostly performed in FY 18. Council Member Kniss: For the Code? Ms. Richardson: Yes. Chair DuBois: Once a new person is [inaudible] Attachment B Council Member Berman: I would support that. Vice Mayor Scharff: Yeah, go with it. Council Member Kniss: Yeah, that’s… Mr. Keene: Well yeah, let's do that because… Vice Mayor Scharff: That’s fine. Mr. Keene: It needs to go on Consent. Somebody can always pull it off Consent. So this, this ought to force somebody pulling it off consent. Vice Mayor Scharff: So why don’t we do that? As long as it’s clearly understood. Chair DuBois: So do we have a Motion then to… So I’ll move we go with work plan with the changes discussed. Council Member Kniss: With the Code starting at a later date. Vice Mayor Scharff: Correct. Council Member Kniss: and I’ll second it. Chair DuBois: All in favor? Alright, well thank you very much Harriet. MOTION: Vice Mayor Scharff moved, seconded by Council Member Kniss to recommend the City Council approve the Fiscal Year (FY) 2017 Proposed Audit Work Plan with the following changes: A. The audit for Analysis of Agreements with PAUSD should read “Identify all agreements with PAUSD and the parties involved in each and benchmark against other school districts to determine which services are generally provided by a school district or the city.” B. The Code Enforcement audit should begin later in Fiscal Year 2017 so the bulk of the work is performed in Fiscal Year 2018. MOTION PASSED: 4-0 Attachment B CITY OF PALO ALTO MEMORANDUM TO: HONORABLE CITY COUNCIL FROM: CITY AUDITOR AGENDA DATE: OCTOBER 17, 2016 ID# 7352 SUBJECT: City Auditor’s Office Fiscal Year 2017 Proposed Work Plan The purpose of this memorandum is to clarify that the Auditor’s Office will begin work on the code enforcement audit during the last quarter of FY 2017, with an estimated completion date of the first quarter of FY 2018. ____________________________________________________________ HARRIET RICHARDSON City Auditor CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR October 17, 2016 The Honorable City Council Palo Alto, California Policy and Services Committee Recommendation to Accept the Auditor's Office Quarterly Report as of June 30, 2016 The Office of the City Auditor recommends acceptance of the Auditor’s Office Quarterly Report as of June 30, 2016. At its meeting on August 16, 2016, the Policy and Services Committee approved and unanimously recommended the City Council accept the report. The Policy and Services Committee minutes are included in this packet. Respectfully submitted, Harriet Richardson City Auditor ATTACHMENTS:  Attachment A: Auditor's Office Quarterly Report as of June 30, 2016 (PDF)  Attachment B: Policy and Services Committee Meeting Minutes Excerpt (August 16, 2016) (PDF) Department Head: Harriet Richardson, City Auditor Page 2 CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR August 16, 2016 The Honorable City Council Palo Alto, California Auditor's Office Quarterly Report as of June 30, 2016 RECOMMENDATION The City Auditor’s Office recommends the Policy and Services Committee review and recommend to the City Council acceptance of the Auditor’s Office Quarterly Report as of June 30, 2016. SUMMARY OF RESULTS In accordance with the Municipal Code, the City Auditor prepares an annual work plan and issues quarterly reports to the City Council describing the status and progress towards completion of the work plan. This report provides the City Council with an update on the fourth quarter for FY 2016. Respectfully submitted, Harriet Richardson City Auditor ATTACHMENTS:  Attachment A: Auditor's Office Quarterly Report as of June 30, 2016 (PDF) Department Head: Harriet Richardson, City Auditor Attachment A Page 2 Attachment A Quarterly Report as of June 30, 2016 Office of the City Auditor “Promoting honest, efficient, effective, economical, and fully Accountable and transparent city government.” Attachment A Fiscal Year (FY) 2016 Fourth Quarter Update (April – June 2016) Overview The audit function is essential to the City of Palo Alto’s public accountability. The mission of the Office of the City Auditor, as mandated by the City Charter and Municipal Code, is to promote honest, efficient, effective, economical, and fully accountable and transparent city government. We conduct performance audits and reviews to provide the City Council and City management with information and evaluations regarding how effectively and efficiently resources are used; the adequacy of internal control systems; and compliance with policies, procedures, and regulatory requirements. Taking appropriate action on our audit recommendations helps the City reduce risks and protect its good reputation. Highlights of Activities During the Quarter • Published and presented the performance audit on Cable Franchise and Public, Education, and Government (PEG) Fees. • Published and presented the performance audit on Disability Rates and Workers’ Compensation. • Harriet Richardson, Mimi Nguyen, and Lisa Wehara each gave presentations at the annual conference of the Association of Local Government Auditors (ALGA) in May: o Harriet gave a joint presentation with an auditor from Portland, OR, that discussed how each of our offices conducts its annual citizen survey; Harriet also discussed our approach to using a citizen survey for the Animal Services audit that we completed in April 2015. o Mimi’s presentation demonstrated how our office has implemented SharePoint as a means of documenting our audit work. Several other audit offices are replicating what we have done as an economical and efficient way to document their work. o Lisa’s presentation provided an overview of the Animal Services audit in a session devoted to the Knighton Award winners in the small, medium, and large audit office categories. • Harriet participated in an all-day session at the U.S. Government Accountability Office (GAO) and subsequent task force conference calls to discuss proposed changes to the Government Auditing Standards and the GAO requested her input on a proposed tool that it developed for auditors to use to assess internal controls in performance audits. Below is a summary of our audit and project work for the fourth quarter of FY 2016: Title Objective(s) Start Date End Date Status Results/Comments Cable Franchise and PEG Fees Audit Determine if 1) the City accurately accounted for its receipt of franchise and public, education, and government (PEG) fees and met its oversight responsibilities regarding the Media Center’s use of the PEG fees, 2) AT&T and Comcast collected and remitted the appropriate amount of franchise and PEG fees, and 3) the City established and sufficiently defined roles and responsibilities to administer its cable communications program and state franchises. 02/14 05/16 Complete Presented the report to the Policy and Services Committee at its meeting on May 10, 2016. Attachment A Title Objective(s) Start Date End Date Status Results/Comments Disability Rates and Workers’ Compensation Audit Assess the effectiveness of activities to manage and minimize disability retirements and workers’ compensation claims. Review of processes to ensure employee safety, tracking and reporting activities, contract administration, and efficiency of claim processing. 06/15 06/16 Complete Presented the report to the Policy and Services Committee at its meeting on June 14, 2016. Citywide Analytic Development and Continuous Monitoring: Procure-to-Pay Determine if data analytics and continuous monitoring can help the City detect duplicate vendor or vendor payment records. 06/15 11/16 In Process We are performing additional field work, at the request of the Administrative Services Department, to verify if potential duplicate payments we identified were indeed duplicate payments. We will revise our draft report based on the results and extend the planned date of presentation to Policy and Services Committee to November 2016. Fee Schedules Audit Evaluate City processes for establishing fees to determine if the fees cover the cost of services provided when expected. The specific fees to be reviewed will be narrowed down during the planning phase of the audit. 06/15 11/16 In Process The audit is focusing on Community Services fees and is in the field work phase. Estimated date of presentation to Policy and Services Committee is November 2016. Utilities Customer Service: Rate and Billing Accuracy Audits Evaluate whether the Utilities Department properly implements rates and accurately bills customers. 06/15 12/16 and 04/17 In Process The audit is in the field work phase and, thus far, has focused on water billings. Due to the variety of issues we have identified, we will issue a separate report on the accuracy of water billings and then do the field work for gas and electric billings. Estimated date of presentation of water billings to Policy and Services Committee is December 2016; estimated date of presentation of gas and electric billings is April 2017. Attachment A Title Objective(s) Start Date End Date Status Results/Comments Citywide Analytic Development and Continuous Monitoring: Overtime Determine if implementing a continuous monitoring process for overtime could improve the City’s oversight and management of overtime. 06/15 11/16 In Process The project is in the field work phase. Estimated date of presentation to Policy and Services Committee is November 2016. Sustainable Purchases Assess the City’s purchasing practices to determine if environmental sustainability is adequately considered in all purchases as appropriate. 03/16 11/16 In Process The project is in the planning phase. Estimated date of presentation to Policy and Services Committee is November 2016. Other Monitoring and Administrative Assignments Below is a summary of other assignments as of June 30, 2016: Title Objective(s) Status Results/Comments Sales and Use Tax Allocation Reviews 1) Identify businesses that do business in Palo Alto that may have underreported or misallocated their sales and use tax and submit inquiries to the state for review and tax reallocation. 2) Monitor sales taxes received from the Stanford University Medical Center Project and notify Stanford of any differences between their reported taxes and state sales tax information, in accordance with the development agreement. 3) Provide Quarterly Status Updates and Sales Tax Digest Summaries for Council review. Ongoing 1) Total sales and use tax recoveries for the fourth quarter were $43,249 from our inquiries and $11,098 from vendor inquiries, for a total of $59,551 year-to- date: $44,084 from our office and $15,467 from the vendor. Due to processing delays at the State Board of Equalization, there are 63 potential misallocations waiting to be researched and processed: 21 from our office and 42 from the vendor. 2) The City of Palo Alto received $963,464 as a result of the development agreement with Stanford University Medical Center. The amount included $884,649 for calendar year 2015 and $78,815 for prior-year adjustments. The City has received $2,017,656 for 2011 through 2015 as a result of this agreement. 3) Quarterly sales tax reports are published on the Office of the City Auditor website at www.cityofpaloalto.org/gov/depts/aud/reports/default.asp. City Auditor Advisory Roles Provide guidance and advice to key governance committees within the City. Ongoing The City Auditor serves as an advisor to the Utilities Risk Oversight Committee, Information Security Steering Committee, and Information Technology Governance Review Board. We have recently taken on an advisory role for the strategic and technical planning groups for planning the new Enterprise Resource Planning (ERP) system. Status of Audit Recommendations Sixty-six recommendations were open at the beginning of FY 2016, and we added 32 recommendations during the year; seventy-three recommendations remain open at this time. Twenty-five recommendations (38% of the 66) from prior Attachment A years were implemented during the fiscal year: 0 during the first quarter of FY 2016, 21 during the second quarter, 4 during the third quarter, and 0 during the fourth quarter. Below is a summary of open audit recommendations, by audit, as of June 30, 2016: Audit Title Report Date Status Report Dates Due Date of Next Status Report Total Recommendations Implemented During Quarter Open Citywide Cash Handling and Travel Expense 09/15/10 11/10/15 09/23/14 09/10/13 10/22/12 04/19/11 Past Due 11 0 2 Contract Oversight: Trenching and Installation of Electrical Substructure 11/05/13 12/15/15 09/23/14 Past Due 6 0 2 Inventory Management 02/18/14 09/23/14 Past Due 14 0 14 Utility Meters: Procurement, Inventory, and Retirement 03/10/15 None Past Due 15 0 15 Police Department: Palo Alto Animal Services 04/22/15 03/22/16 09/13/16 8 0 8 Parking Funds 12/15/15 None 09/13/16 8 0 8 Disability Rates and Workers’ Compensation 05/10/16 None 02/14/17 15 0 15 Cable Franchise and Public, Education, and Government (PEG) Fees 06/14/16 None 03/08/17 9 0 9 Fraud, Waste, and Abuse Hotline Administration The hotline review committee, composed of the City Auditor, the City Attorney, and the City Manager, or their designees, meets as needed to review hotline-related activities. We received two hotline complaints during the fourth quarter of FY 2016. The chart below summarizes the status of complaints received in each fiscal year since the hotline was implemented. 0 21 4 00 5 10 15 20 25 Q1 Q2 Q3 Q4 FY 2016 Quarter # Implemented Recommendations 41 32 0 20 40 60 80 100 FY 2016 # Open Recommendations From Prior Fiscal Years From Fiscal Year 2016 Attachment A Source: City of Palo Alto hotline case management system as of June 30, 2016 We recently sent a survey to about 60 local government audit offices that manage a hotline to seek input about how they manage their hotlines to ensure they receive calls when fraud, waste, or abuse are suspected and how they triage and investigate valid complaints. We have received about 25 responses so far and are compiling the results. We will present a discussion item on this topic at the September Policy & Services Committee meeting. 1 7 3 2 12 0 2 4 6 8 10 12 14 FY 2013 FY 2014 FY 2015 FY 2016 Status of Complaints Received by Fiscal Year Closed Complaints Open Complaints Attachment A CITY OF PALO ALTO MEMORANDUM TO: POLICY AND SERVICES COMMITTEE FROM: CITY AUDITOR AGENDA DATE: August 16, 2016 ID# 7194 SUBJECT: Correction to sales and use tax recoveries figures On page 4 of the City Auditor’s Office Quarterly Report as of June 30, 2016, under Other Monitoring and Administrative Assignments – Sales and Use Tax Allocation Reviews, the language should read: 1) Total sales and use tax recoveries for the fourth quarter were $27,845 from our inquiries and $9,590 from vendor inquiries, for a total of $59,551 year-to-date: $44,084 from our office and $15,467 from the vendor. Due to processing delays at the State Board of Equalization, there are 63 potential misallocations waiting to be researched and processed: 21 from our office and 42 from the vendor. ___________________________ HARRIET RICHARDSON City Auditor Attachment A 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: Oral Communications None. Agenda Items 1.Auditor's Office Quarterly Report as of June 30, 2016 Chair DuBois: So our first item on the agenda is the Auditor’s Office Quarterly Report. Harriet Richardson, City Auditor: Is this on? Good evening, Mr. Chair and members of the committee; Harriet Richardson, City Auditor, here to present the Auditor’s Office Quarterly Report as of June 30, 2016. So couple of highlights during the audit, during the quarter we completed, published, and presented two audits, the Cable Franchise and Public Education Government Fees Audit and the Disability Rates and Workers Compensation Audit. Also three people in my office, me and Mimi went in and Lisa Wehara each gave presentations at the annual conference for the Association of Local Government Auditors in May. I gave a presentation with an auditor from Portland on how we conduct our National Citizens Survey compared to how they conduct their citizen’s survey and also discussed our approach using the Citizen’s Survey in an audit which we did with our Annual Services Audit. Mimi’s presentation discussed how our office has implemented SharePoint as an efficient means for documenting our audit work and quite a few other audit offices around the country are replicating what we've done as an economical and efficient way to document their work. Lisa’s presentation Attachment B provided an overview of the Animal Services Audit at a session that was devoted to winners of the annual Knighton Award for the best audit shop. She presented in the medium size office category and I mentioned last time that we would be getting the award and I did bring the award so you could see it. And then I participated in an all-day session at the United States (U.S.) Government Accountability Office and subsequent task force conference calls to discuss proposed changes for the government auditing standards and to provide input on a proposed tool that is being developed for auditors to use to assess internal controls in a performance audit. So summary of the audits, so I already mentioned that we completed the Cable and Disability Rates Worker's Compensation Audits. We are in the process of completing an audit for continuous monitoring. We call it [inaudible] pay. It's really accounts payable and that's looking at determining if we can use data analytics to identify, to prevent or identify if we do pay a vendor twice on the same invoice. So where we have a draft report on that says in progress due to preforming additional field work. They have completed that field work at this point and we are in the process of drafting that report now. We expect to present that to this committee in November. We are also working on a fee schedule audit. Originally we had a broad scope that said we’d narrow it down to what we were going to look at as we got into the audit and some cost of services at were some fees were already audited or reviewed under cost of services study and so we're focusing on Community Services and we're in the fieldwork phase of that. We expect to finish that by November also. So the next audit was one audit that we are actually splitting into two, the Utilities Customer Service Rate and Billing Accuracy Audits. We plan to look at water, gas, and electric and we have done most of the work on water based, but based on the number of issues we’re identifying we have determined that we will separate that into two audits and we expect to present the water portion of it in December. I have on here that we will present the gas and electric in April. That may get deferred depending on how we do on our other audits that we have planned on our new audit plan that I'll be presenting next. And then we're also doing continuous monitoring audit of overtime to see if there's ways that we can use data analytics to identify trends and how we use overtime and determine if there's ways that we could better manage our overtime based on that data. And then we also have an audit in progress on sustainable purchasing to look at whether or not the City is complying with the City's environmental sustainability purchasing requirements as required when that opportunity is available. We do have several of these scheduled to end in November, but it's unlikely that we’ll put all of those on a single agenda so and you have other things besides our audits. So it will likely be that some of those will get delayed into December or January for presentation. We continue to monitor Sales and Use Tax. You do have a correction memo for the numbers that are in here. During this quarter we collected $27,845 Attachment B from our efforts and $9,590 from our vendors’ efforts for a total of $59,551 for the year. That is quite a bit lower than what we've collected in previous years, but we just got notification that for the next quarter we're going to have a very large sum coming in from a very old vendor form request for to the State Board of Equalization that’s going to be over $200,000 so that one’s for a multi-year collection of state sales tax, of sales tax. And then in June we always report the sales tax that we get from the development agreement with Stanford University. That's based on a calendar year so it's for calendar year ‘15 and we get the information in the May/June timeframe. So for this year we received $963,464 as a result of that development agreement. To date we’ve received 2,000 about approximately $2 million for 2011 through 2015 as a result of that agreement. We continue to participate in our advisory roles: the Utilities Risk Oversight Committee, the Information Security Steering Committee, and the Information Technology Governance Review Board. We recently have taken on an advisory role to participate in both the strategic and technical planning groups for the new enterprise resource planning system. The purpose of that is really to see as they're planning the audit if we see something that looks like it may be going astray from what we'd expect to see if we audited after the fact that we try and get it corrected and get them on course, the right course before it gets, gets there. The next section of the Report is the Status of the Audit Recommendations. So we have what, two… four, five, six, seven, eight audits with open recommendations dating, the audits dating from 2010 until the two most recent ones in 2016. The graph below that shows that none of the recommendations were reported as implemented during this quarter. During the year a total of 25 were implemented. There is still 41 outstanding from audits prior to 2016 and 32 from the audits that we conducted this fiscal year. And then the last item on here is the Fraud Waste and Abuse Hotline. During fiscal year 2016 we received 13 complaints. One of those is still open. We continue to receive complaints that primarily are personnel types of issues rather than fraud, waste or abuse types of issues and we’ll be coming back at the Council’s request to Policy and Services next month with a report about how we might address that. And that completes my report for our Quarterly Report right now. [Inaudible] Answer any questions. Chair DuBois: Thank you for the report. You had some questions? Council Member Kniss: So I’ve got a couple of things, right? Maybe we’ll go backwards. So you said that the about the hotline which has been a hot topic since I’ve been here. It's something that you wanted to reevaluate because you're saying it's primarily about… am I not on? Attachment B James Keene, City Manager: Oh, no. Excuse me, I’m sorry. It’s just moving the mic just in case I had to say anything, but I’ll happily move it away. Council Member Kniss: So we have been discussing this for a long time and I think as you said it’ll come up next month? Ms. Richardson: Yes. Council Member Kniss: But I think it's important that we really take a good look at it. I don't think our City Manager is very enthused about it as I recall and so maybe we need to take a look at if it's not fraud abuse and so forth, but instead is personnel kinds of issues that that may not be worth our time. And I don't remember what it cost, but I'm going to presume that it’s everything [inaudible]. Ms. Richardson: I’ll be presenting that and looking at do, do we keep it and just define fraud waste and abuse better and advertise it to employees so they know what types of things to report or to do we do something different? So it will be a discussion item for next month. Council Member Kniss: And if you look back to seven, Page 7 and look at this for overtime it seems to me that whenever we've had these discussions that all overtime is not created equal. Ms. Richardson: That's correct. Council Member Kniss: So I'm not quite sure how you're going about that. I think you understand my… what I’m saying. So could you say a little more about that? Ms. Richardson: What we're looking at is if you look at data and really focus on when overtime is used and what the purpose of the overtime is and you start disaggregating the data instead of just looking at it in the aggregate can you identify trends that might help you look at different ways to staff that might be more efficient than using overtime? Council Member Kniss: Well, I’m also thinking that overtime for the Fire especially at this time of year is different. Ms. Richardson: Right. Attachment B Council Member Kniss: When Police are short on staff that's different. Ms. Richardson: Right, we understand … Council Member Kniss: And the same with Utilities with rights … Ms. Richardson: We’re looking at four departments primarily: Police, Fire, Utilities, and Public Works. Council Member Kniss: And [inaudible] seem to usually have very good reasons for why they have overtime. So that's what I, I guess what you're saying is it's the aggregation of this information is going to give you the data that you want? Ms. Richardson: Disaggregation. Council Member Kniss: The… Ok, the disaggregation. Ms. Richardson: De-aggregation? You choose the right one. Council Member Kniss: Ok, ok. I hear that, but that seems to be… Ms. Richardson: It's another way of looking, looking at data that might help you see things in a different way. Council Member Kniss: Ok, I’ll wait to see that. Those are my questions Tom. Chair DuBois: Great. Greg, Marc? Vice Mayor Scharff: I’m good. Chair DuBois: I just had one question which was seems so we had $200,000 in sales tax coming in, again on from a total basis where does that put us compared to last year? Ms. Richardson: Well that will count for the, to the first for the first quarter for this coming year. Chair DuBois: Ok. Attachment B Ms. Richardson: For this for Fiscal Year (FY) ‘17 and that puts us way ahead of anything we’ve collected in prior years. Chair DuBois: Ok, well we did have … Ms. Richardson: It’s a single, pardon me? Chair DuBois: We did have some large [inaudible] Ms. Richardson: Right, we… it's kind of up and down. This year was quite low compared to previous years. Chair DuBois: Ok, and then again there’s that backlog that you’re waiting to hear? Ms. Richardson: Correct. Chair DuBois: Has that backlog gotten larger? Ms. Richardson: It fluctuates. You might get a few that get resolved and then you add a few and so there's a little bit of up and down there. Last time that we had 50, last quarter we had 56 outstanding so we're up to 63 right now. Vice Mayor Scharff: So I just want to follow up, maybe I misunderstood. The $200,000 that you’re talking about I thought that was past collections [inaudible] the State didn’t give us that they were supposed to or is this? Ms. Richardson: It’s past collections that a vendor misallocated to other jurisdictions. Vice Mayor Scharff: Ok, that’s what I thought, right? So it's not, yeah. So when would that if that had normally come through, come in and… Ms. Richardson: It would have been spread out over the period of time that it should have normally come in, which was actually it was a long period of time. Third quarter of… third calendar quarter of 2007 or 2006 through the second quarter of 2014. Vice Mayor Scharff: So here again I think disaggregation is better than aggregation in that when we look at our 2016 sales tax and our 2017 sales Attachment B tax are we going to include that $200,000 in those numbers as if we, as if we collected it in 2017, which we show off the… Ms. Richardson: Yes, yes. Vice Mayor Scharff: But that’ll screw up the numbers in terms of a trend of are we collecting more sales tax or less sales tax because that sales tax really should've been counted in previous years. Ms. Richardson: Correct and I’m not sure how Administrative Services Department (ASD) reallocates that, is anyone? Vice Mayor Scharff: [inaudible] cash based accounting. Ms. Richardson: So we’re going to be getting a large sum, I already told Jim about that. A large sum of money; it’s sales tax, but it’s from the this these different years and he’s saying it’s going to throw off our how it looks like how much we collect this year when it’s really. David Ramberg, Assistant Director of Administrative Services: It will, yeah. We’ll accrue it in the current year. Vice Mayor Scharff: Right here you just do a footnote. Mr. Keene: We’ll do a footnote. Vice Mayor Scharff: Just says it so it's not… That would be great. Ok, sorry. Chair DuBois: But overall it sounds like sales tax has gone down. Ms. Richardson: Well, I wouldn't say in general. It's just that the misallocations that we've identified have gone down. Chair DuBois: Right, that’s yeah. Vice Mayor Scharff: Ok, sales tax receipts have not gone down. Just so we’re clear. Chair DuBois: Any other questions? Get a Motion? Attachment B Council Member Kniss: We’d like to have sales tax going through. I move adoption of the report from the Auditor. MOTION: Council Member Kniss moved, seconded by Chair DuBois to recommend the City Council accept the Auditor’s Office Quarterly Report as of June 30, 2016. MOTION PASSED: 4-0 Attachment B CITY OF PALO ALTO OFFICE OF THE CITY CLERK October 17, 2016 The Honorable City Council Palo Alto, California SECOND READING: 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 (FIRST READING: Sept. 26, 2016 PASSED: 9-0) This ordinance was first heard by the City Council on September 26, 2016, with no changes to the ordinance. It was approved 9-0. ATTACHMENTS:  Attachment A: 0131546 ORD Amendment to Citywide Minimum Wage (PDF) Department Head: Beth Minor, City Clerk Page 2 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 City of Palo Alto (ID # 7356) City Council Staff Report Report Type: Action Items Meeting Date: 10/17/2016 City of Palo Alto Page 1 Summary Title: Approval of the Temporary Fire Station No. 3 Site Title: Approval of 2000 Geng Road as the Temporary Location for Fire Station No. 3 During Construction of the Replacement Fire Station No. 3 From: City Manager Lead Department: Fire Recommendation Staff recommends that Council: 1) Direct staff to locate Temporary Fire Station No. 3 at 2000 Geng Road while the permanent replacement Fire Station No. 3 facility is under construction; and 2) Amend the Fiscal Year 2017 Budget Appropriation Ordinance for the General Fund by decreasing the revenue estimate for rental of the Geng Road site by $55,922 Executive Summary The Fire Station No. 3 Replacement Project is part of the 2014 Council Infrastructure Plan. A temporary fire station is needed for approximately 18 months while the new fire station is constructed. Staff analyzed a number of potential sites, with more in-depth analysis of three sites: 2000 Geng Road, 1142/1146 Middlefield Road and the Rinconada Park Tennis Courts. Due to lower estimated construction costs, neighborhood concerns about the Middlefield Road site and impacts to Rinconada Park users and adjacent residents, staff recommends locating the temporary fire station at the 2000 Geng Road site. While the Geng Road site has the greatest impact on emergency response times, the Fire Department believes that this can be successfully mitigated by locating Engine 63 at Fire Station No. 1 during the daytime hours. City of Palo Alto Page 2 Background The Fire Station No. 3 Replacement Project is part of the 2014 Council Infrastructure Plan. The project will provide a new facility built to meet essential services standards. The new fire station will be built on the existing location of Fire Station No. 3 at 799 Embarcadero Road. During the construction, the station must be relocated to an interim facility that will ensure continued fire, rescue and emergency medical services to the neighborhoods served by Fire Station No. 3. Engine 63 generally responds to areas in the following neighborhoods: Community Center, Leland Manor/Garland, Professorville, University South, Duveneck/St. Francis, and Old Palo Alto. Engine 63 also responds to emergencies on Highway 101. Engine 63 serves as backup to many other neighborhoods including the Downtown area. In 2015, Engine 63 responded to 1274 calls or 15 percent of all calls in Palo Alto and Stanford. The Palo Alto Fire Department’s (PAFD) adopted performance goal is to have a responder arrive on scene of an emergency within 8 minutes or less, 90 percent of the time. Within the last quarter, the Fire Department has been able to meet this response goal for Emergency Medical Service responses 91 percent of the time. However, in regards to Fire Suppression calls, the goal was accomplished 81 percent of the time. PAFD units are dispatched to emergencies via Automatic Vehicle Location (AVL) technology. This technology supports efficiency of operations, as the most appropriate unit that is geographically closest to the emergency will be dispatched to respond to the incident. The PAFD has been using this technology since 2014, specifically to reduce response times. The PAFD uses an advanced software program that uses historical emergency incident data to simulate the response of a fire jurisdiction and test the effectiveness of alternate deployment scenarios. This software allows the Fire Department to test ideas and provides objective, quantitative results to support or refute potential changes in deployment. Deployment scenarios using response data from calendar year 2015 were used to determine the effectiveness of emergency response from the proposed temporary Fire Station No. 3 sites. Discussion City of Palo Alto Page 3 The Temporary Fire Station No. 3 will need to accommodate the station’s three on-duty personnel and two apparatus (fire engine, and smaller pickup truck suppression vehicle) for a span of approximately 18 months during existing site demolition and construction of the new fire station. The temporary site would provide living quarters and a garage facility. The temporary station will include various service hookups such as electric and backup power, water and sanitary sewer, security, alarm and communication linkages. Staff identified six potential temporary site locations 1. 2000 Geng Road; 2. 1142/1146 Middlefield Road; 3. Rinconada Park Tennis Courts; 4. Rinconada Library parking lot; 5. Art Center Auditorium parking lot; and 6. The Art Center Lawn along the Embarcadero. The sites were evaluated on the following elements: parcel size and zoning district; community opposition and impact; and station operations. Interdepartmental meetings with the City Manager’s Office, Fire, Public Works, Community Services and Planning were held to discuss the potential impact of the temporary site locations. The top three sites (Geng Road, Middlefield Road and the tennis courts) were chosen for further analysis to determine which would have the least negative impacts on the community, could be constructed at a reasonable cost and could meet the fire department’s performance goals which are essential to public safety. Attachment A contains a location map of the top sites along with aerial photos of each site. A brief analysis of each site is provided below and summarized in matrix format on Attachment B. 2000 Geng Road The Geng Road site is located near the intersection of Geng Road and Embarcadero Road. The site is zoned Public Facility with a Site and Design Overlay (PF(d)). The site is located within the area covered by the Baylands Master Plan. The site is 1.3 miles from Fire Station No. 3. Currently home to GreenWaste of Palo Alto, the Geng Road lot is a fully developed and operational site with an existing garage/storage structure and two office buildings that may be modified for the temporary fire station. Per Council action on staff report #7082, GreenWaste of Palo Alto will vacate the facility at the end of 2016. The City of Palo Alto Page 4 estimated construction cost of locating the temporary fire station at this site is $141,000. Staff met with Baylands environmental stakeholders to discuss the proposed temporary fire station. The Baylands stakeholders were not concerned about the potential use of the site for the temporary fire station, but expressed interest in a future dedication of the 2000 Geng Road site as parkland. In order to effectively occupy this site during construction, the Fire Department would split the location of Engine 63 determined by the time of day. During the day, Engine 63 would respond from Fire Station No. 1 located at 301 Alma Street. If Engine 63 responds from this location during the day, the response times would improve in Downtown Palo Alto, and on Stanford Campus— the call volume and the risk is the highest in these two districts during daytime hours due to increased population of students, workers and visitors. However, the response times would increase by an average of 60 seconds in Station No. 3’s area. After 7:00 pm, Engine 63 would relocate to the Geng Road site. In the evening, the call volume and traffic congestion decreases and residents return from school and work. Therefore, relocating the engine to this site is more practical. Lastly, due to the relocation of Engine 63 during the day, adjacent Fire Station No. 4’s engine, located at 3600 Middlefield Road, will be responding into Station No. 3’s area more often. 1142/1146 Middlefield Located 0.6 miles west of Fire Station No. 3, the city owned parcels are within the residential zoned district. The site is currently vacant and undeveloped. The estimated construction cost of locating the temporary fire station at this site is $384,000. The adjacent neighborhood has raised issues about potential adverse impacts of the temporary station related to transportation impacts, noise, trees, street parking and serviceability. Attachment C is a letter from a number of adjacent neighbors expressing these concerns. Relocation to this site would increase the response times by 6 seconds in Station No. 3’s general response area. The Fire Department acknowledges the benefit of the minimal change in response times; however, responding from this site would be impacted by daytime traffic on Middlefield. City of Palo Alto Page 5 Rinconada Park Tennis Courts The third site is located on dedicated parkland and is one block north of Fire Station No. 3. This site accommodates three community tennis courts and a parking lot which is partially used as a sand bag station. Placing the temporary station at this location would temporarily eliminate the use of 2 tennis courts, the sand bag station and at least 4 public parking spaces. The estimated construction cost of locating the temporary fire station at this site is $290,000. Due to the close proximity to Station 3, responding to emergencies from a temporary fire station at this location would emulate current response times. After careful consideration of neighborhood and community impacts, emergency response time impacts and temporary fire station construction costs, staff recommends that the temporary fire station be located at the 2000 Geng Road site. Timeline The design of the new Fire Station No. 3 is scheduled to be completed in early spring of 2017, with construction to begin in late spring or early summer. Resource Impact Funding for the Fire Station No.3 Replacement Project including the temporary station is available in Capital Improvement Program (CIP) Project PE-15003. Locating the temporary fire station at 2000 Geng Road is expected to result in a decrease in rental revenue in FY 2017. GreenWaste of Palo Alto was paying $172,350 in FY 2017 rent for the site, but is moving to the Los Altos Treatment Plant site at the end of calendar year 2016. The Real Estate office intends to rent space at 2000 Geng Road for parking and staging. The temporary fire station is anticipated to occupy 65 percent of the 2000 Geng Road site, resulting in an estimated rent revenue reduction of $55, 922 for FY 2017 and $111,844 for FY 2018. Policy Implications This recommendation does not represent any change to existing City policies. Environmental Review This project is categorically exempt from the provisions of the California City of Palo Alto Page 6 Environmental Quality Act (CEQA) under Section 15301 of the CEQA Guidelines as repair, maintenance or minor alteration of an existing facility and no further environmental review is necessary. Attachments:  Attachment A: Temporary Fire Station 3 Site Location Options (PDF)  Attachment B: Fire Station 3 Temporary Site Matrix (PDF)  Attachment C: Letter regarding fire station at 1142 Middlefield (PDF) Gas Station #1 Garland Elementary School Fire Station # 3 Hopkins Electric Substation Rinconada Library Art Center Lucie Stern Community Center Girl Scout HouseChildren's Library Junior Museum and Zoo EMB 4 EMB-3 EMB-2 EMB-1 U.S. Post Office Building C Building D Building B Building E Channing House Webst e r O a k s A p t s . Addison Elementary School Elementary School Church C G M F H Jordan Middle School E B J A K L D Rinconada Well Storage E-SHED Coastla nd Dr hin gton Ave Ave Mario nAve Tasso St Middlefield Road Warren Way Iris W ay T ulip L n Garland Drive Louis Road Hilb ar Ln Alannah Ct Rhodes Dr Dennis Dr Agnes Way Blair Ct Santa Ana St El sinore Dr El Cajon Way CeliaDr Ind Santa Catalina St Ch Carmel Dr E d g e w o o d D r I v y L n East Bayshore Road S t Fra n c is D r Wild w oo d L n Watson Laura Lane O'Brine Lane Embarca dero Roa Ge n g Road Cowper St Tasso St Webster St Byron St No r t h C a l i f o r n i a A v e Portal Pl Or eg o n A v e n u e Ho m e r A v e Webster Street Kellogg Ave Tasso StAddison Ave e B o y c e A v e Middlefield Road Channing Ave R e g e nt Pl Fulton Street M el ville A v e Byron Street ve ve S om erset Pl Pit ma n A v e Fife A ve orest A ve coln A v e Fulton St Northampton Dr W Greenwich PlNewell Rd Guinda St E Greenwich Pl Southampton Dr K e nt Pla c eTevis Pl M artin A v e C e nter Dr H a rriet St Wils o n St C e d ar St H arker A v e G ree nw oo d A v e H utc hinso n A v e H o pkins A v e Embarcadero Road Ash b y Dr D a na A v e H am ilt on A v e Southwo od DrUniversity Ave Ar c a d i a Pl Louis a Ct N ew ell Pl S h aro n C t Erstwild C o urt W aln ut D r P arkins on D r Pine St Mark Twain St Barbara Dr P ri m rose W a y W a lt er H a y s D r J o rd a n Pl L ois L n H e ath er L n Bret Harte St Sta nley W a y D e Soto Dr Alester Ave C h a n nin g A v e Ne we ll Rd Kin gs L n Island Dr Jef fers o n Dr P a trici a L n Mad i son Way OregonE Bellview Dr Crescent Dr Morton St Azt N e w ell R d Faber St Francis Dr Sierra Ct 3 2 Existing Site 1 This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. 0'1067' Temporary Fire Station 3 Site Location Options CITY O F PALO A L TO I N C O R P O R ATE D C ALIFOR N IA P a l o A l t oT h e C i t y o f A P RIL 16 1894 The City of Palo Alto assumes no responsibility for any errors ©1989 to City of Palo Alto bmedved, 2016-09-29 11:03:32 008-02-004 008-02-013 008-02-029 008-02-033 008-02-026 008-02-034 008-02-017 008-03-066 008-02-027 008-02-032 GE N G R O A D 2200 2300 22 2 5 2100 17 3 0 17 0 0 2 2 7 5 17 1 7 17 5 5 17 3 1 2000 1 7 3 5 1900 22 2 2 This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. 0'160' Site Option 1 2000 Geng Road CITY O F PALO A L TO I N C O R P O R AT E D C ALIFOR N I A P a l o A l t o T h e C i t y o f A P R IL 16 1 894 The City of Palo Alto assumes no responsibility for any errors ©1989 to 2016 City of Palo Alto bmedved, 2016-05-09 09:45:44 (\\cc-maps\gis$\gis\admin\meta\view.mdb) 120-07-055 120-07-029 120-07-030 120-07-009 120-07-008 120-07-007 120-07-032 120-07-031 120-07-017 120-07-018 120-07-019 120-07-020 120-07-021 120-07-022 120-07-023 120-07-024 120-07-025 120-07-026 120-07-027 120-07-028 120-06-057 120-06-062 120-06-061 120-06-060 120-06-059 120-06-058 120-06-069 003-43-043 003-43-042 003-43-044 003-43-049 003-43-048 003-43-047 003-43-046 120-07-013 120-07-014 120-07-015 120-07-016 120-07-012 120-07-011 120-07-010 120-06-041 120-06-042 120-06-043 120-06-082 120-06-081 120-06-046 120-06-047 120-06-048 120-06-049 120-06-034 120-06-051 120-06-052 120-06-053 120-06-054 120-06-055 120-06-056 120-06-039 120-06-076 120-06-077 003-43-041 003-43-039 003-43-040 003-43-033 003-43-009 003-43-010 003-43-011 003-43-012 003-43-013 003-43-008 003-43-007 003-43-006 003-43-029 003-43-028 003-43-027 003-43-050 003-43-051 003-43-024 003-43-023 003-43-022 003-43-021 003-43-030 003-43-031 003-43-032 003-43-020 003-43-019 003-43-018 003-43-017 003-33-046 003-33-048 003-33-047 120-06-036 120-06-037 120-06-038 120-06-035 M I D D L E F I E L D R O A D F U L T O N S T R E E T KIN G S L E Y A V E N U E KIN G S L E Y A V E N U E KIN G S L E Y A V E N U E B Y R O N S T R E E T B Y R O N S T R E E T W E B S T E R S T R E E T LIN C O L N A V E N U E F U L T O N S T R E E T M I D D L E F I E L D R O A D M I D D L E F I E L D R O A D 61 8 122 0 66 0 65 6 121 1 120 5 122 1 115 0 66 3 67 1 64 6 114 7 113 9 122 8 124 2 121 2 120 2 115 1 60 9 57 1 65 5 65 9 62 9 116 0 62 5 115 0 114 5114 3 113 5 114 2 112 4 112 0 72 8 72 0 111 1 111 9 112 7 114 5 114 9 70 3 113 6 112 8 112 0 111 2 108 5 70 5 110 1 112 0 111 0 69 0 66 0 111 9 112 5 106 5 107 7 67 7 66 7 114 4 115 2 116 0 71 1 113 5 114 3 115 1 116 0 120 2 75 0 121 1 121 9 120 2 121 2 122 2 123 0 121 1 122 1 70 0 123 1 120 4 121 2 121 8 122 6 122 5 122 7 123 4 125 4 65 9 123 1 125 3 65 1 65 3 67 2 110 0 111 9 71 7 115 0 114 2 112 7 115 9 113 0 114 2 114 6 61 0 106 1 106 9 105 7 107 3 This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. 0'108' Site Option 2 1142/1146 Middlefield Rd CITY O F PALO A L TO I N C O R P O R AT E D C ALIFOR N I A P a l o A l t o T h e C i t y o f A P R IL 16 1 894 The City of Palo Alto assumes no responsibility for any errors ©1989 to 2016 City of Palo Alto bmedved, 2016-05-09 09:27:15 (\\cc-maps\gis$\gis\admin\meta\view.mdb) 003-56-035 003-56-034 003-56-052 003-56-053 003-56-054 003-56-080 003-56-055 003-45-074 003-45-069003-45-068 003-45-067 003-45-066003-45-065 003-45-087 Tennis Courts003-45-088 003-45-085 003-45-084 003-45-054003-45-055 003-45-056 003-45-063 003-45-083 003-45-051003-45-050003-45-049 003-56-033 003-56-037 003-56-036 003-47-020 HOPKINS AVENUE EMBAR C A D E R O R O A D PI N E S T R E E T PARKINSON AVENUE HOPKINS AVENUE NE W E L L R O A D NE W E L L R O A D EMBAR C A D E R O R O A D COMMUNITY LANE COMMUNITY LANE 171 1 79 9 1210 1249 14 3 0 14 2 0 14 1 0 14 0 2 1259 14 0 5 1200 13 2 1 1258 1272 13 3 5 13 2 7 13 3 6 13 3 2 13 3 0 171 0 1722 183 2 180 8 182 0 175 1 172 5 1806 8 1 6 8 3 6 15 3 0 15 2 4 15 2 0 15 3 4 1213 1313 1280 1350 77 7 13 4 0 78 4 1280 1300 1370 This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. 0'132' CITY O F PALO A L TO I N C O R P O R AT E D C ALIFOR N I A P a l o A l t o T h e C i t y o f A P R IL 16 1 894 The City of Palo Alto assumes no responsibility for any errors ©1989 to 2016 City of Palo Alto bmedved, 2016-05-09 09:42:35 (\\cc-maps\gis$\gis\admin\meta\view.mdb) Site Option 3 Rinconada Park Tennis Courts (Near Sand Bag Station) Location Zoning Available Site Size (sqft)Pros Cons Public Opposition Negative Impact Summary Comments 1 2000 Geng Rd PF(d) 12,000 ±• Minimal development issues or constraints • Geng Rd has low traffic congestion • Close to freeway • Large available space for double apparatus bay and  FD equipment • Response time longer and increased workload for surrounding  stations • Need to reprogram ringdown system for Fire Station 1 No known Public opposition. • FD Response time • Fire Dept Operations Fire Station 1 would host Fire Station 3 during the day and  then Fire Station 3 would relocate to the Geng Road site  during the night when the call volume is low.  Geng Road  Site is 1.3 miles from FS3. 2 1142/1146  Middlefield Rd R‐1 11,250 • No FD service disruption  • Concept plans show site is feasible • Tree removals can be mitigated • FD inspected site ‐ ok to maneuver in tight space • Large mature eucalyptus/cedar trees to be removed • Overhead/underground utilities to be relocated • Initial study & probable Mitigated Negative Declaration required to  address parking, noise, & tree impacts • Decrease in public parking on Middlefield Road • Fire Truck will be required to back into the site • Existing Middlefield traffic congestion • FD may need to implement noise mitigation measures • Cost to remove temp station and restore site Current Neighborhood opposition is high.   This site was initially the primary  candidate for the temporary station. • Neighborhood • Parking  • FD Truck Circulation  May need to integrate signal controls to hold vehicle traffic  at Melville and Homer during alarms.  Middlefield site is 0.6  miles from FS3. 3 Rinconada Park  Tennis Courts near  sandbag station PF 12,000 ±• No FD service disruption • Dedicated Park Land: needs Council approval/Park Improvement  Ordinance (PIO) • Rinconada Park is already deficient in parking spaces • Community programs and events disrupted • No Utility Connection available • Cost to remove temp station and rebuild Tennis Courts Public opposition likely high due to loss of  parking and estimated loss of 2 tennis  courts.  Also nearby homes would likely  oppose. • Neighborhood • Parking • Community Programs Rinconada Tennis Crts are 0.1 miles from FS3. FIRE STATION #3 TEMPORARY SITE LOCATION MATRIX Estimated Construction Cost $384,000 $141,000 $290,000 10/4/2016 Page 1 of 1 September   19,   2016    Dear   Matt   Raschke,    It   has   come   to   our   attention   that   there   is   an   evaluation   of   the   1142   Middlefield   Road   lot   for   use   as   a  temporary   fire   station   during   the   re­construction   of   Fire   Station   No   3.   at   799   Embarcadero   Road.   To   our  knowledge,   this   has   never   been   directly   communicated   to   the   surrounding   neighborhood,   so   if   there   is  no   such   plan,   it   would   be   great   to   get   that   statement   from   you.   If   there   is   such   a   plan,   we   believe   it   to   be  deeply   flawed.    We   appreciate   having   emergency   services   in   our   neighborhood   and   look   forward   to   having   a   modern  fire   station   on   Embarcadero   Road.      We   also   understand   that   you   are   navigating   difficult   tradeoffs   in  selecting   a   site   for   a   temporary   fire   station   during   this   project.    We   believe   that   the   proposed   site   for   the   temporary   fire   station   at   1142   Middlefield   Road   has   serious  challenges   due   to:  1.Traffic   congestion   and   safety   issues   on   this   segment   of   Middlefield   Road  2.Noise   disruption   to   multiple   homes   in   close   proximity  3.Permanent   damage   to   Palo   Alto’s   urban   forest.    We   ask   that   you   consider   alternate   locations   for   the   temporary   fire   station   along   Embarcadero   Road  that   do   not   face   these   challenges.    Sincerely,  Inge   Infante ,   1110   Middlefield   Road  Pramoda   Ramachandra ,   1120   Middlefield   Road  Thai   and   Anita   Tran ,   1130   Middlefield   Road  Mark   and   Nina   Homnack ,   1145   Middlefield   Road  Brent   Le   Blanc   and   Zuzia   Perkowska ,   1150   Middlefield   Road  Scott   Plemons ,   Owner   of   1150   Middlefield   Road  John   and   Laura   Sturino ,   1151   Middlefield   Road   Edith   Cohen   and   Alex   Wang ,   1139   Byron   Street  Beth   Libby ,   1222   Fulton   Street     Congestion   on   Middlefield   Road  The   current   location   of   Fire   Station   No   3   is   along   Embarcadero   Road,   which   has   two   lanes   in   each  direction   with   good   traffic   flow,   and   is   on   a   corner   with   a   traffic   signal.      The   proposed   location   of   the  temporary   fire   station   is   along   a   section   of   Middlefield   Road   that   has   one   lane   in   each   direction   with  cars   often   parked   on   both   sides   of   the   street.      This   section   of   Middlefield   Road   can   become   congested  during   commute   hours   and   whenever   there   is   a   traffic   incident   on   101,   Middlefield   becomes   backed   up  for   blocks.      This   would   make   it   nearly   impossible   for   emergency   vehicles   to   quickly   respond   to   issues.  Example   of   heavy   congestion   on   Middlefield   in   front   of   the   proposed   fire   station   due   to   a   slowdown   on   101.      All   of  these   cars   are   currently   stopped   due   to   red   lights   on   Middlefield.      (Photo   taken   on   Sept   15,   2016   at   5:50pm)  Google   traffic   map   showing   the   congestion   on   Middlefield   Road   extending   from   Lincoln   Ave   to   Embarcadero   Road  (orange   and   red   lines).      During   this   time,   traffic   is   flowing   on   Embarcadero   Road   (green   lines).  Safety   issues   on   Middlefield   Road At   other   times   of   the   day,   Middlefield   Road   is   prone   to   speeding   drivers   and   aggressive   passing.      In   the  6   month   period   between   March   and   August   2016,   there   were   7   reported   auto   accidents   on   Middlefield  Road   along   just   the   5   blocks   surrounding   the   proposed   location   (between   Channing   Ave   and   Kellogg  Ave).  To   reduce   speeding   and   limit   unsafe   passing,   the   City   of   Palo   Alto   is   planning   on   narrowing   the   lanes  on   Middlefield   Road   and   adding   crosshatching   with   raised   traffic   buttons   at   intersections.      The   residents  of   Middlefield   Road   are   looking   forward   to   these   safety   improvements,   but   they   may   make   it   harder   for  cars   to   pull   aside   to   let   an   emergency   vehicle   pass,   especially   during   times   of   congestion.  Illustration   of   the   planned   changes   to   Middlefield   Road   at   Kingsley   Ave  Children   crossing   Middlefield   Road  At   the   beginning   and   end   of   the   school   day,   many   young   children   cross   Middlefield   Road   at   Addison  Ave   to   get   to   and   from   Addison   Elementary   School.      This   is   just   one   block   away   from   the   proposed  location   of   the   temporary   fire   station.  Because   Lincoln   Ave   is   a   through   street   to   University   Ave   (and   by   extension   101),   the   school   mornings  are   already   dangerous   for   children.      Several   years   ago,   before   the   current   levels   of   traffic,   one   mother  and   her   two   elementary­age   boys   ­­   who   live   near   the   proposed   location   of   the   fire   station   ­­   were   hit  while   crossing   Lincoln   Ave   at   Middlefield   Road   by   a   car   rushing   to   avoid   the   traffic.      We   are   concerned  that   emergency   vehicles   pulling   out   of   the   fire   station   with   their   sirens   blaring   would   further   aggravate  this   situation.  Children   crossing   Middlefield   Road   at   Addison   Ave  Negative   effects   of   loud   noises  The   current   location   of   Fire   Station   No   3   borders   with   Rinconada   Park   to   the   west,   Rinconada   Pool   to  the   north,   and   the   Palo   Alto   Art   Center   to   the   east.      The   closest   homes   are   to   the   south   across    four  lanes    of   Embarcadero   Rd   and   we   presume   that   the   people   who   chose   to   live   there   did   so   with   the   prior  knowledge   of   the   traffic   on   Embarcadero   Road   and   the   nearby   fire   station.  The   proposed   location   of   the   temporary   fire   station   is   adjacent   to   houses   on   all   sides,   including   ones  with   young   children   whose   bedrooms   directly   overlook   the   lot.      Fire   engine   sirens   can   be   120   dB   or  louder   in   close   proximity.      The   World   Health   Organization   (WHO)   recommends   that   children   should   not  be   exposed   to   noises   at   120   dB   for   any   period   of   time,   and   warns   that   sudden,   unexpected   noises   can  lead   to   startle   reactions   and   unintentional   injuries.  The   Tran’s   4   month   old   baby’s   bedroom   is   directly   next   to   the   location   of   the   proposed   fire   station.  Preserving   Palo   Alto’s   urban   forest  The   lot   at   at   1142   Middlefield   Road   features   three   towering   manna   gum   (eucalyptus)   trees   that   are   120  to   130   feet   tall   with   a   crown   radius   of   55   to   60   feet.      The   appraised   value   of   these   three   trees   is  $24,400.  Quoting   from   the   report   of   certified   arborist   Ray   Morneau   who   was   commissioned   by   the   City   of   Palo  Alto   to   assess   the   trees   on   this   lot   in   2013:  The   trees,   however,   make   some   prominent   statements   –­   both   as   excellent   elements   of   Palo  Alto’s   urban   forest   and   as   substantial   challenges   to   work   around   in   the   future.   Although   there  are   no   small   or   young   trees   here   at   this   time,   that   merely   leaves   room   for   designing   more   urban  forest   into   the   next   stage   of   each   parcel’s   use.  The   manna   gums   (#12,   #13,   and   #14)   are   the   most   ostentatious   and   effective   as   trees.   These  provide   all   the   benefits   we   expect   from   our   trees,   including:   shade,   carbon   sequestration,   wind  attenuation,   homes   for   wild   things   from   mammals   to   microbes,   storm   water   interception,   leaf  litter   (mulch)   production.   We   are   enveloped   by   a   trio   of   awesome   aesthetic   accents   punctuating  the   atmosphere   with   their   pungent   oils   up   close   and   with   their   visual   dominance   as   one   backs  away   ...   even   offering   perspective   from   blocks   away.  ...  On   a   general   note,   it   could   be   good   that   these   trees   have   been   stressed   by   lack   of   attention   and  care   in   recent   years.   It   is   a   sign   of   relative   “strength”for   them   to   be   doing   this   well   without  needing   to   be   pampered.  Palo   Alto’s   unique   appeal   is   the   beauty   of   its   urban   forest.      Removing   these   mature   trees   for   a   for   a   fire  station   that   would   be   in   service   for   less   than   two   years   would   create   a   hole   in   our   neighborhood’s  aesthetic   that   would   be   difficult   to   recover.  Can   the   City   preserve   these   manna   gum   (eucalyptus)   trees   when   building   the   temporary   fire   station?      If  the   trees   are   removed   because   the   City   forces   us   to   accept   this   location,   will   the   City   commit   to  developing   this   lot   after   the   temporary   fire   station   is   removed,   such   as   building   a   park   or   community  garden,   or   selling   this   lot   so   that   one   or   two   houses   can   be   built   that   are   comparable   to   the   rest   of   our  neighborhood?  Alternate   locations   for   the   temporary   fire   station  Has   the   City   considered   alternate   locations   for   the   temporary   fire   station   that   have   good   access   to  Embarcadero   Road   and   are   less   disruptive   to   nearby   homes   and   Palo   Alto’s   urban   forest?      Here   are  two   examples   very   near   the   current   location   of   Fire   Station   No   3...  Grassy   field   between   Palo   Alto   Art   Center   and   Embarcadero   Road  Palo   Alto   Art   Center   parking   lot   next   to   Embarcadero   Road  Further   information   If   the   City   decides   to   propose   the   Middlefield   site   for   the   temporary   fire   station,   we   would   expect   to   see  the   following   information   in   the   proposal:  ● How   will   the   City   maintain   its   emergency   response   rate   with   all   of   the   logistical   issues surrounding   the   site? ● What   is   the   expected   noise   impact   during   and   after   construction? ● What   will   be   done   to   minimize   noise   disruption   due   to   the   fire   station? ● Given   the   sustained   disruption   that   this   facility   will   mean   for   the   neighborhood,   what   form   will   the compensation   to   homeowners   take? ● What   is   the   plan   for   the   Middlefield   site   following   the   completion   of   the   Embarcadero   site?   What guarantees   will   the   City   be   giving   that   those   plans   will   be   realized? ● What   is   the   plan   for   the   replacement   of   the   tree   coverage   of   the   affected   area? ● What   other   sites   were   evaluated   and   why   is   the   Middlefield   site   superior   to   those? References  Planned   changes   to   Middlefield   Road  ● Palo   Alto   Online:      Narrower   lanes   on   Middlefield   Road   could   slow   traffic,   improve   safety: http://www.paloaltoonline.com/news/2016/07/01/narrower­lanes­on­middlefield­road­could­slow­ traffic­improve­safety  ● City   of   Palo   Alto   announcement: http://www.cityofpaloalto.org/news/displaynews.asp?NewsID=3420&TargetID=107 ● Photosimulation   of   changes   at   Middlefield   Road   &   Kinsgley   Ave: http://www.cityofpaloalto.org/civicax/filebank/documents/52768 ● Plans:       http://www.cityofpaloalto.org/civicax/filebank/documents/53429 Accidents   cited  These   are   only   recent   accidents   in   the   immediate   vicinity   of   the   proposed   site   for   the   temporary   fire  station.      Due   to   the   heavy   traffic   and   often   speeding   cars   on   this   segment   of   Middlefield,   many   other  accidents   have   taken   place   in   the   prior   months   and   years.  1.DUI   /   Accident    ­   Mar   19,   2016   @   1000   Block   of   Middlefield   Rd   (Incident   ID:   753402082,   Case No.:   160001370) 2.Accident   with   minor   injury    ­   Apr   16,   2016   @   Middlefield   Rd   &   Channing   Ave   (Incident   ID: 757109131,   Case   No.:   160001880) 3.Accident   with   property   damage    ­   May   26,   2016   @   Middlefield   Rd   &   Lincoln   Ave   (Incident   ID: 760655004,   Case   No.:   160002607) 4.Accident   with   property   damage    ­   Jun   13,   2016   @   1400   Block   of   Middlefield   Rd   (Incident   ID: 762212369,   Case   No.:   160002895) 5.Accident   with   property   damage    ­   Jul   14,   2016   @   Middlefield   Rd   &   Channing   Ave   (Incident   ID: 765044686,   Case   No.:   160003477) 6.Accident   with   property   damage    ­   Jul   29,   2016   @   Middlefield   Rd   &   Lincoln   Ave   (Incident   ID: 766539032,   Case   No.:   160003792) 7.Accident   with   property   damage    ­   Aug   13,   2016   @   Middlefield   Rd   &   Channing   Ave   (Incident ID:   767860914,   Case   No.:   160004098) Impact   of   noise   on   children  ● NY   Post:      Fire   truck   sirens   made   me   lose   my   hearing:   Retired   firefighter: http://nypost.com/2015/03/03/fire­truck­sirens­made­me­lose­my­hearing/  ● Noise   Help:      Noise   Exposure   Limits:       http://www.noisehelp.com/noise­dose.html ● World   Health   Organization:      Children   and   Noise:    http://www.who.int/ceh/capacity/noise.pdf Certified   Arborist   Report  ● Tree   Inventory   with   Appraisal   and   Tree   Protection   Report   for   1142   Middlefield   Road: https://www.dropbox.com/s/ulutuleuvy41my5/Tree%20Report%20Middlefield%201142%20CPA %20July%202013.pdf?dl=0  City of Palo Alto (ID # 7306) City Council Staff Report Report Type: Action Items Meeting Date: 10/17/2016 City of Palo Alto Page 1 Summary Title: Downtown & SOFA II Retail Preservation Ordinance Framework Title: Discussion and Direction Regarding Parameters of an Ordinance Strengthening Retail Protections in Downtown and the South of Forest Area (SOFA II) From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that the City Council review and provide feedback on the proposed draft framework for an ordinance strengthening retail protections in the Downtown and South of Forest Area (SOFA II). Based on the City Council’s direction, staff will prepare an ordinance for review by the Planning & Transportation Commission and consideration by the City Council such that the effective date of the proposed ordinance will precede the end of the City-wide urgency ordinance currently in effect (i.e. April 30, 2017). Executive Summary To allow for continued retail protections in Downtown and SOFA II following the expiration of the Interim Retail Urgency Ordinance next April, this report outlines a framework for a permanent retail preservation ordinance in this area of the City. (A separate ordinance will address the balance of the City.) The framework proposes to:  Reinforce University Avenue as the Downtown retail core and limit or prohibit certain personal services, offices and other non-retail uses at the ground floor on University Avenue;  Expand the existing Ground Floor (GF) protection boundary to strengthen the retail environment peripherally around the Downtown core;  Modify permitted and conditionally permitted uses within the GF boundary; and,  Add development standards to the GF and SOFA II districts to support active pedestrian- oriented retail uses. City of Palo Alto Page 2 Coupled with an outreach strategy that seeks feedback from decision-makers and Downtown and SOFA II stakeholders, staff proposes a work plan that aims to begin public hearings by December 2016 to enable adoption of the permanent ordinance prior to the expiration of the interim urgency ordinance. Concurrent to this effort, staff is initiating work on a citywide ordinance that would establish or strengthen retail protections outside of Downtown/SOFA II and the California Avenue area, which was separately addressed by Ordinance 5358 (adopted October 26, 2015). The larger City-wide effort is also scheduled to be completed prior to expiration of the interim urgency ordinance in April 2017 and provides an opportunity to consider modifications to the definition of ‘retail’ that would apply Citywide. Tonight’s discussion, however, is specifically tailored to the Downtown and SOFA II areas. Background In mid-2015, the City Council adopted an interim urgency ordinance prohibiting the conversion of ground floor spaces used for retail and “retail like” uses to office or other uses (Attachment A). The ordinance, which will sunset on April 30, 2017, was intended to protect retail spaces from converting to other uses while the City developed permanent zoning amendments to enhance retail preservations. Since the interim urgency ordinance was adopted, the City has adopted a permanent zoning amendment affecting the California Avenue Area (Ordinance No. 5358, adopted October 26, 2015) and closed a loophole affecting the Community Commercial (CC), Neighborhood Commercial (CN), and Service Commercial (CS) zoning districts (Ordinance No. 5373, adopted January 11, 2016). Several provisions in the interim urgency ordinance have proven difficult to administer, and/or have resulted in specific requests for a waiver or for a staff determination that the ordinance does not apply. The City Council considered these issues on August 22, 2016 and gave direction that framed this evening’s discussion. (The Council’s motion is included as Attachment B.) Provisions of the Interim Urgency Ordinance The interim urgency ordinance prohibits the conversion of ground floor retail use “permitted or operating as of March 2, 2015 or thereafter” to any other non-retail use, and defines “retail use” as including the following:  retail service  eating and drinking service  hotels  personal services  theaters  travel agencies City of Palo Alto Page 3  commercial recreation  commercial nurseries  auto dealerships  day care centers  service stations and  automotive services. The ordinance applies to legal non-conforming uses, stating that such uses “shall remain… and shall not be subject to the change, discontinuance, or termination provisions of Chapter 18.70.” The ordinance also applies to basements “currently in retail use or in use for retail support purposes,” which is subject to some interpretation, and contains an exemption for “pipeline projects.” There are also provisions regarding “waivers and adjustments” (18.85.104) which allow an applicant to request a waiver based on economic hardship by “showing that applying requirements [of the ordinance] would effectuate an unconstitutional taking of property or otherwise have an unconstitutional application to the property.” August 22 Direction from Council On August 22, 2016 City Council discussed policies and priorities for permanent zoning ordinance amendments related to retail preservation. As shown in Attachment B, the Council directed staff to return to Council with a framework for a retail preservation ordinance that: 1. Requires transparent windows or window display for non-conforming uses; 2. Considers adjustments to the GF boundary; 3. Considers preservations outside the GF and for basements, updating definitions as needed; 4. Add to the requirement that retail uses be generally open to the public with a minimum number of hours; and 5. Considers how to amortize out certain non-conforming uses along University Avenue. The framework described in this report address items #1, #2, and #3. #4 and #5 will be addressed through separate subsequent ordinances as detailed in the discussion section below. The Council also requested that staff prepare an amendment to the existing interim urgency ordinance to allow private schools in the RT35 zone adjacent to Alma Street, providing property owners in this area with some additional flexibility when seeking ground floor tenants. The amendment to the interim urgency ordinance was on the Council’s agenda for October 4, 2016 and failed on a 5-4 vote (urgency ordinances require a four-fifths vote). This issue can be taken up again in the context of continued retail protections. Discussion The proposed ordinance framework seeks to prioritize locations where retail development and the impacts from potential office conversions are most salient. The parcels that have frontage on University Avenue would have the narrowest regulations for retail uses. Properties in the City of Palo Alto Page 4 greater GF district would have some additional flexibility to conditionally allow retail-like uses such as personal services, retail showrooms, and commercial recreation (e.g., gyms). Lastly, the GF and RT35 and RT50 districts, which comprise the majority of properties in Downtown and SOFA II, would include strengthened regulations that support pedestrian-oriented ground-level activity through additional development standards. Proposed Framework This proposed framework is further detailed below (with the relevant Code section in parentheses): 1. Revise GF district provisions (Chapter 18.13(C)):  Expand district purposes to extend beyond use classification and reflect a desire for active uses, with a high level of transparency and visual interest at the ground-level  Narrow the types of retail uses that are permitted on the ground-floor of properties with frontage on University Avenue: i. Permitted uses on the ground-floor: eating and drinking, hotels, retail services, theaters, and entrances/lobbies to non-ground floor uses ii. Prohibit personal services (such as nail salons and barbershops) , commercial recreation, yoga studios, schools, office uses, and similar non-retail uses (i.e. eliminate conditional uses)  Allow a range of retail and retail like uses in the greater GF district (outside of University Avenue): i. Allow personal services, commercial recreation, medical offices, schools, and similar retail-like uses that encourage uses that promote active street life ii. Prohibit ground-floor offices, except for medical office  Add district-wide regulations that support architectural design and operations that contribute to Comprehensive Plan and Downtown Design Guidelines’ goals for pedestrian-oriented and active uses in Downtown: i. Taller 1st floor story heights (e.g., 17 feet), ii. High percentage of transparency in façades (e.g. 60% windows/doors) iii. Require window openings to have transparent glazing and provide views into display/sales areas except where operations preclude them (i.e., theaters)  Expand the scope of the GF regulations to include basements in addition to ground- floor as a way to preserve existing retail or ancillary retail use in basements. 2. Modify GF district boundaries in targeted locations a. Expand GF boundaries to include parcels along portions of Emerson Street, south of University Avenue, and select retail parcels close to University Avenue in order to broaden active retail uses Downtown (A map of the GF boundary that pre-existed a December 2009 ordinance is included as Attachment C; changes to the GF made by ordinance in May 2013 are included as Attachment D and a map of the current and proposed new GF boundaries is included as Attachment E.) City of Palo Alto Page 5 3. Require window transparency for non-conforming uses in the GF district: a. Restrict window coverings in non-conforming tenant spaces (e.g., hair salons, offices, and financial services on University Avenue) fronting onto a sidewalk, during business hours. Require displays of merchandise, artwork or items of visual interest where customer privacy requires window coverings. 4. Modify RT35 and RT50 district standards in the SOFA II Plan: a. Add development standards to foster an active street life in the SOFA II district that support goals for retail and actives uses described in the SOFA II plan. In the RT35 and RT50 districts for non-residential ground-floor uses, add standards for: i. Taller 1st floor story heights (e.g., 17 feet) ii. High percentage of transparency in storefront windows (e.g. 60%) b. Retain private schools as a permitted ground floor use in the RT-35 district. The GF district regulations would continue to allow 25 percent of ground floor areas not fronting onto a street to be occupied by offices or other uses permitted in the applicable underlying CD district. Issues for Subsequent Ordinances and Studies The framework above addresses retail preservation in the Downtown and SOFA II, which were identified as the priority areas for retail protection at the Council’s August 22, 2016 meeting. Remaining issues identified by the City Council will be addressed through subsequent ordinances and/or studies: 1. Protection for the remaining areas citywide would be addressed in a subsequent ordinance and/or through the Comprehensive Plan Update process since they affect much larger areas of the city and will require additional analysis. 2. The definition of Retail uses would also be included in a subsequent citywide initiative with the intention of broadening the definition to be based on the sales of goods rather than an exhaustive list of example uses. Hours of operation and public access would also be addressed here. 3. Policies regarding amortization of non-conforming uses would be addressed separately and subsequent to approval of the permanent ordinance. Amortization ordinances can take significantly more time to complete, given the work required with affected property owners, and it will not be feasible to prepare such an ordinance prior to the upcoming expiration of the interim urgency ordinance. Community Outreach Staff and consultants propose to conduct comprehensive, but efficient outreach efforts over the next several months:  Stakeholder Meetings: One-on-one or small group meetings to understand existing key City of Palo Alto Page 6 issues and concerns, and desires for the Downtown & SOFA II Retail Ordinance; and review the proposed framework and map changes. Stakeholders may include individuals representing the following groups: o Palo Alto Chamber of Commerce o Downtown Business Improvement District o Commercial Brokers o Major Property Owners o Residents  Website: The project website will serve as a library for existing documents and working products and memos; notification of upcoming meetings; and opportunity to sign up for the mailing list (to receive notification of meetings and new content).  Public Hearings: The Planning and Transportation Commission and City Council hearings would also provide opportunities for both public comment and decision-maker review. The analysis process will also rely on the extensive work completed to date for the Downtown Development Cap Evaluation, including survey data and stakeholder interviews. Timing The table below identifies proposed timing for completion of the permanent Ordinance. Task Timeline for Completion Community Outreach Stakeholder Meetings October – November 2016 City Council Study Sessions August 22, 2016, October 17, 2016 Website and Continued Outreach Ongoing Ordinance Development Analyze Available Data August – September 2016 Draft Framework September - October 2016 Draft Ordinance October - November 2016 Planning and Transportation Commission Hearing November/December 2016 City Council Hearings December 2016/January 2017 Policy Implications The City’s Comprehensive Plan identifies the desirability of neighborhood serving retail (Policy L-16) and envisions inviting, pedestrian-scale “centers” with a mix of uses as focal points for neighborhoods (Goal L-4). Policy L-20 suggests that the City “encourage street frontages that contribute to retail vitality…” and Policy B-5 calls on the City to “maintain distinct business districts within Palo Alto as a means of retaining local services and diversifying the City’s economic base.” Environmental Review The Council’s direction to staff this evening does not constitute a “project” requiring City of Palo Alto Page 7 environmental review, however the resulting ordinance will be reviewed in compliance with the California Environmental Quality Act (CEQA). Attachments:  Attachment A: Ordinances 5325 and 5330 (Retail Preservation Interim Ordinance) (PDF)  Attachment B: Excerpt August 22, 2016 City Council Minutes (PDF)  Attachment C: Map of Previous GF Boundary (2009 Ordinance) (PDF)  Attachment D: Map of Previous GF Boundary (2013 Ordinance) (PDF)  Attachment E: Map of Existing and Proposed GF Boundary Expansion (PDF) Ordinance No. 5325 Urgency Interim Ordinance of the Council of the City of Palo Alto Adopting a Temporary Moratorium on the Conversion of Ground Floor Retail and "Retail Like" Uses to Other Uses Citywide FINDINGS A. The City of Palo Alto has long been considered the birth place of Silicon Valley. With its proximity to Stanford University, its international reputation, its deep ties to technology firms, its highly rated public school system and its ample public parks, open space and community centers, Palo Alto continues to serve as a hub for technology based business. B. Palo Alto is considered one of Silicon Valley's most desirable office markets. According to one study Class A office rates have climbed 49 percent since the start of 2010. The same study reported Class B office space increasing by 114.4% since 2010. C. In particular, average commercial rental rates have gone up significantly from 2013 to 2015. In 2013 the average monthly rental rate citywide for office was $4.57 per square foot. That rate increased to $5.12 in 2015. While retail rents have also increased during this period, retail rents are considerably lower than office rents. The average monthly rental rate for retail in 2013 was $4.21 and in 2015 was $4.88. D. Price increases have been even more significant in the downtown area. In 2013 the average downtown monthly office rent was $6.37. In 2015 the rate increased to $7.33. E. At the end of 2014, Palo Alto's downtown vacancy rate was a low 2.83 percent, according to a report prepared by Newmark Cornish & Carey. F. These record high monthly rental rates for office and low vacancy rates have created financial incentives to replace current retail use with office use where such conversions are permitted by the City's zoning ordinance. These economic pressures are more severe in the downtown and California Avenue commercial areas but exist throughout the City. G. The data submitted by the City to support the Valley Transportation Authority's Congestion Management Plan (CMP) each fiscal year suggests that there has been a loss of approximately 70,000 square feet of retail-type uses in the period from 2008 to the present. The CMP data is broad in the sense that it inclupes uses like automotive services in the "retail" category even though they are considered separate uses in the City's zoning ordinance. However any overstatement of the trend towards less retail is likely to be offset by the data's reliance on a list of discretionary applications processed by the City, since there have also been recent conversions of retail space to office space that did not require discretionary approvals and are not included in the 70,000 square foot number. 1 150429 cs 0131335 May 11,2015 H. City residents have seen this occurring in the City's commercial districts as the City's Architectural Review Board has considered projects like those affecting Spagos restaurant at 265 Lytton, lnhabiture at 240 Hamilton Ave, Palo Alto Bowl at 4301 El Camino Real, and Club Illusions Restaurant at 260 California Avenue. In addition, familiar retail businesses like the Zibibbo restaurant have closed and their spaces have been acquired and occupied by non-retailers. Likewise the old location for Fraiche Yogurt, which moved from Emerson Street to Hamilton Avenue, was immediately re-purposed as office space. I. Based on these trends, on March 2, 2015, the Palo Alto City Council asked staff to consider whether zoning-based protections for ground floor retail uses need to be strengthened where they currently exist and expanded to areas of the City where they do not. J. On April 6, 2015, the City Council discussed these issues in detail and directed staff to prepare an urgency ordinance that would preserve existing ground floor retail and retail-like uses until permanent zoning revisions can be prepared. K. This direction is consistent with the City's existing Comprehensive Plan, which identifies the desirability of neighborhood serving retail (Policy L-16) and envisions inviting, pedestrian-scale "centers" with a mix of uses as focal points for neighborhoods (Goal L- 4). Policy L-20 suggests that the City "encourage street frontages that contribute to retail vitality ... " and Policy B-5 calls on the City to "maintain distinct business districts within Palo Alto as a means of retaining local services and diversifying the City's economic base." L. Palo Alto is in the process of updating its Comprehensive Plan, and it is expected that the updated Comprehensive Plan will contain additional policies and programs designed to preserve existing retail uses in the City. M. The public's health, safety and welfare are currently and immediately detrimentally affected as neighborhood-serving retail service and related uses are priced-out by rising rents and replaced by uses that do not provide similar services or activate the street frontage by creating pedestrian activity and visual interest (i.e. shop windows and doors). These changes affect neighborhood quality of life, and mean that local residents have to drive to similar retail destinations in other locations, diminishing the public health benefit when residents can walk to needed services and increasing traffic congestion, vehicle miles traveled and greenhouse gas emissions. N. Unless abated, the City's actions to approve conversion of ground floor spaces from retail to other uses will exacerbate the reduction of retail and changes described above, resulting in the need for the proposed interim ordinance. 0. The City Council desires on an interim basis to temporarily suspend conversions of retail and retail like uses to office throughout the City as such conversions may be in conflict with the City's Comprehensive Plan and zoning proposal that the legislative body, planning commission or the planning department is considering or studying or intends to study 2 150520 cs 0131335 May 11,2015 within a reasonable time. P. The possible extension of this interim ordinance beyond 45 days would not have a material effect on the development of projects with a significant component of multifamily housing because a specific exemption has been included to address this requirement of State law. Q. This urgency interim ordinance is adopted in accordance with the requirements of Government Code Section 65858 and Palo Alto Municipal Code Section 2.04.270 and is based on the need to protect the public safety, health and welfare as set forth in the above findings. A 4/5 vote is required for adoption. The Council of the City of Palo Alto does ORDAIN as follows: SECTION 1. Findings. The findings listed above are hereby incorporated. SECTION 2. The following Section 18.85.100 (Retail Preservation) is added to a new Chapter 18.85 entitled "Interim Zoning Ordinances" to the Palo Alto Municipal Code to read as follows: "18.85.100 Retail Preservation 18.85.101 Definitions. For the purposes of this Ordinance, the term "Retail" shall include a modified definition of "Retail Service" as well as the "Retail Like" uses defined below: (a) Retail Service: A use predominantly engaged in providing retail sale, rental, service, processing, or repair of items primarily intended for consumer or household use, including but not limited to the following: groceries, meat, vegetables, dairy products, baked goods, candy, and other food products; liquor and bottled goods, household cleaning and maintenance products; drugs, cards, and stationery, notions, books, tobacco products, cosmetics, and specialty items; flowers, plants, hobby materials, toys, household pets and supplies, and handcrafted items; apparel, jewelry, fabrics, and like items; cameras, photography services, household electronic equipment, records, sporting equipment, kitchen utensils, home furnishing and appliances, art supplies and framing, arts and antiques, paint and wallpaper, carpeting and floor covering, interior decorating services, office supplies, musical instruments, hardware and homeware, and garden supplies; bicycles; mopeds and automotive parts and accessories (excluding service and installation); cookie shops, ice cream stores and delicatessens. 150520 cs 0131335 (b) Retail Like Uses including but not limited to: (1) Eating and drinking service as defined in Section 18.04 (47); (2) Hotels as defined in Section 18.04 (73); (3) Personal services as defined in Section 18.04.030 (115); (4) Theaters; 3 May 11, 2015 (5) Travel agencies; (6) Commercial recreation; (7) Commercial nurseries; (8) Auto dealerships defined in Section 18.040.030(a)(12.5); (9) Day Care Centers defined in Section 18.040.030(a)(42); (10) Service Stations; and (11) Automotive Services. To qualify as a Retail use under this definition, the use shall be generally open to the public. 18.85.102 Moratorium on Retail Conversions. The City Council hereby enacts this Urgency Interim Ordinance establishing a moratorium on the conversion of any ground floor Retail use permitted or operating as of March 2, 2015 or thereafter to any other non-Retail use anywhere in the City. (a) 25% Exemption Suspended. During the pendency of this Ordinance, Section 18.30(C).020 permitting not more than twenty-five percent ofthe ground floor area not fronting on a street to be occupied by a non-retail service use otherwise permitted in the applicable underlying CD district shall be suspended. (b) Conditionally Permitted Uses Suspended. During the pendency of this Ordinance, no ground floor Retail use operating as of March 2, 2015 may be replaced by any other non-Retail use, including uses for which Conditional Use Permits are currently allowed. (c) Legal Nonconforming Uses. During the pendency of this Ordinance legal nonconforming Retail use shall remain as a grandfathered use and shall not be subject to the change, discontinuance, or termination provisions of Chapter 18.70. (d) Conversion of Basements. During the pendency ofthis Ordinance, elimination of or conversion of basement space currently in Retail use or in use for retail support purposes shall be prohibited. 18.85.103 Exemptions. The following shall be exempt from this Ordinance: (a) Pipeline Projects. Any Retail use where a discretionary permit or entitlement application to convert such Retail use to a non-Retail use was submitted to the City on or before March 2, 2015 and is currently pending. For purposes of this Ordinance a 11Use and Occupancy" Permit Application shall not constitute a discretionary permit. (b) Vested Rights. Any Retail use for which an applicant has received a valid building permit from the City and performed substantial work and incurred substantial liabilities in good faith reliance on such permit as of the date ofthis Ordinance. 4 150520 cs 0131335 May 11,2015 18.85.104 Waivers and Adjustments. The following shall be grounds for a request for waiver or adjustment of this Ordinance: (a) Economic Hardship. An applicant may request that the requirements of this Ordinance be adjusted or waived based on a showing that applying the requirements of this Ordinance would effectuate an unconstitutional taking of property or otherwise have an unconstitutional application to the property. (b) Multi-family uses. Any project which (i) contains four or more housing units, (ii) the multi-family housing component constitutes at least one-third or more of the total square footage of the project and (iii) otherwise complies with all sections of the Zoning Code may apply for a waiver or modification from this Ordinance upon a finding that this Ordinance would have a material effect on the multi-family component of such project. (c) Documentation. The applicant shall bear the burden of presenting substantial evidence to support a waiver or modification request under this Section and shall set forth in detail the factual and legal basis for the claim, including all supporting technical documentation. Any such request under this section shall be submitted to the Planning and Community Development Director together with an economic analysis or other supporting documentation and shall be acted upon by the City Council. 18.85.105 Reconstruction. Any ground floor Retail use existing on or after March 2, 2015 may be demolished and rebuilt provided that the portion of square footage used as Retail use on or after March 2, 2015 is not reduced except that Retail square footage may be reduced by the minimum amount needed to provide access to any new upper floor and/or lower level parking. 18.85.106 Applicability to Current Requirements. Nothing in this ordinance shall alter requirements of site-specific Planned Community zoning ordinances or adopted conditions of approval. Nothing in the ordinance shall be construed to waive the requirement for a conditional use permit or other entitlement where such requirements currently exist." SECTION 3. Study. The City Council directs the Department of Planning & Community Environment to consider and study possible amendments to the Comprehensive Plan and zoning ordinance to preserve existing Retail uses. SECTION 4. Written Report. At least ten (10) days before this Urgency Ordinance or any extension expires, the City Council shall issue a written report describing the measures taken to alleviate the condition which led to the adoption of this Urgency Interim Ordinance. SECTION 5. Severability. If any provision, clause, sentence or paragraph of this ordinance, or the application to any person or circumstances, shall be held invalid, such 5 150520 cs 0131335 May 11,2015 invalidity shall not affect the other provisions of this Ordinance which can be given effect without the invalid provision or application and, to this end, the provisions of this Ordinance are hereby declared to be severable. SECTION 6. Effective Period. This Urgency Ordinance shall take full force and effect immediately upon adoption. In accordance with Government Code Section 65856, this Ordinance shall be in full force and effect for a period offorty-five (45) days from adoption. This Ordinance shall expire on June 25, 2015 unless this period is extended by the City Council as provided in Government Code Section 65858. SECTION 7. ~-The City Council finds that this Ordinance falls under the California Environmental Quality Act (CEQA) exemption found in Title 14 California Code of Regulations Section 15061(b)(3) because it is designed to preserve the status quo. INTRODUCED AND PASSED: May 11, 2015 AYES: BERMAN, BURT, DUBOIS, FILSETH, HOLMAN, KNISS, SCHARFF, SCHMID, WOLBACH NOES: ABSTENTIONS: ABSENT: ATTEST: ~~ APPROVED: ~~~ City Clerk Mayor APPROVED AS TO FORM: ./~~- Senior Assistant City/.: t: 6 150520 cs 0131335 May 11,2015 DocuSign Envelope ID: D49C6B91-8428-4594-8DCD-3FD97FOAE507 Ordinance No. 5330 Ordinance of the Council of the City of Palo Alto Extending Urgency Interim Ordinance 5325 Adopting a Temporary Moratorium on the Conversion of Ground Floor Retail and "Retail Like" Uses to Other Uses Citywide FINDINGS A. The City of Palo Alto has long been considered the birth place of Silicon Valley. With its proximity to Stanford University, its international reputation, its deep ties to technology firms, its highly rated public school system and its ample public parks, open space and community centers, Palo Alto continues to serve as a hub for technology based business. B. Palo Alto is considered one of Silicon Valley's most desirable office markets. According to one study Class A office rates have climbed 49 percent since the start of 2010. The same study reported Class B office space increasing by 114.4 % since 2010. C. In particular, average commercial rental rates have gone up significantly from 2013 to 2015. In 2013 the average monthly rental rate citywide for office was $4.57 per square foot. That rate increased to $5.12 in 2015. While retail rents have also increased during this period, retail rents are considerably lower than office rents. The average monthly rental rate for retail in 2013 was $4.21 and in 2015 was $4.88. D. Price increases have been even more significant in the downtown area. In 2013 the average downtown monthly office rent was $6.37. In 2015 the rate increased to $7.33. E,. At the end of 2014, Palo Alto's downtown vacancy rate was a low 2.83 percent, according to a report prepared by Newmark Cornish & Carey. F. These record high monthly rental rates for office and low vacancy rates have created financial incentives to replace current retail use with office use where such conversions are permitted by the City's zoning ordinance. These economic pressures are more severe in the downtown and California Avenue commercial areas but exist throughout the City. G. The data submitted by the City to support the Valley Transportation Authority's Congestion Management Plan (CMP) each fiscal year suggests that there has been a loss of approximately 70,000 square feet of retail-type uses in the period from 2008 to the present. The CMP data is broad in the sense that it includes uses like automotive services in the "retail" category even though they are considered separate uses in the City's zoning ordinance. However any overstatement of the trend towards less retail is likely to be offset by the data's reliance on a list of discretionary applications processed by the City, since there have also been recent conversions of retail space to office space that did not require discretionary approvals and are not included in the 70,000 square foot number. H. City residents have seen this occurring in the City's commercial districts as the City's Architectural Review Board has considered projects like those affecting Spagos restaurant at 265 Lytton, lnhabiture at 240 Hamilton Ave, Palo Alto Bowl at 4301 El Camino Real, and Club Illusions Restaurant at 260 California Avenue. In addition, familiar retail businesses like the 150521 cs 0131444 1 June 15, 2015 DocuSign Envelope ID: D49C6B91-8428-4594-8DCD-3FD97FOAE507 Zibibbo restaurant have closed and their spaces have been acquired and occupied by non- retailers. Likewise the old location for Fraiche Yogurt, which moved from Emerson Street to Hamilton Avenue, was immediately re-purposed_ as office space. I. Based on these trends, on March 2, 2015, the Palo Alto City Council asked staff to consider whether zoning-based protections for ground floor retail uses need to be strengthened where they currently exist and expanded to areas of the City where they do not. J. On April 6, 2015, the City Council discussed these issues in detail and directed staff to prepare an urgency ordinance that would preserve existing ground floor retail and retail-like uses until permanent zoning revisions can be prepared. K. This direction is consistent with the City's existing Comprehensive Plan, which identifies the desirability of neighborhood serving retail (Policy L-16) and envisions inviting, pedestrian-scale "centers" with a mix of uses as focal points for neighborhoods (Goal L-4). Policy L-20 suggests that the City "encourage street frontages that contribute to retail vitality ... " and Policy B-5 calls on the City to "maintain distinct business districts within Palo Alto as a means of retaining local services and diversifying the City's economic base." L. Palo Alto is in the process of updating its Comprehensive Plan, and it is expected that the updated Comprehensive Plan will contain additional policies and programs designed to preserve existing retail uses in the City. M. The public's health, safety and welfare are currently and immediately detrimentally affected as neighborhood-serving retail service and related uses are priced-out by rising rents and replaced by uses that do not provide similar services or activate the street frontage by creating pedestrian activity and visual interest (i.e. shop windows and doors). These changes affect neighborhood quality of life, and mean that local residents have to drive to similar retail destinations in other locations, diminishing the public health benefit when residents can walk to needed services and increasing traffic congestion, vehicle miles traveled and greenhouse gas emissions. N. Unless abated, the City's actions to approve conversion of ground floor spaces from retail to other uses will exacerbate the reduction of retail and changes described above, resulting in the need for the proposed interim ordinance. 0. The City Council desires on an interim basis to temporarily suspend conversions of retail and retail like uses to office throughout the City as such conversions may be in conflict with the City's Comprehensive Plan and zoning proposal that the legislative body, planning commission or the planning department is considering or studying or intends to study within a reasonable time. P. The possible extension of this interim ordinance beyond 45 days would not have a material effect on the development of projects with a significant component of multifamily housing because a specific exemption has been included to address this requirement of State law. 150618 cs 0131444 2 June 15, 2015 \ DocuSign Envelope ID: D49C6B91-8428-4594-8DCD-3FD97FOAE507 Q. This urgency interim ordinance is adopted in accordance with the requirements of Government Code Section 65858 and Palo Alto Municipal Code Section 2.04.270 and is based on the need to protect the public safety, health and welfare as set forth in the above findings. A 4/5 vote is required for adoption. R. The City Council adopted Interim Ordinance No. 5325 on May 11, 2015, by a four- fifths vote after a public hearing pursuant to Government Code Section 65858 and Ordinance 5325 will expire on June 25, 2015. S. The Council desires to extend Interim Ordinance 5325 in accordance with the requirements of Government Code Section 65858 and Palo Alto Municipal Code Section 2.04.270 for an additional period of 22 months and 15 days. This extension is based on the need to protect the public safety, health and welfare as set forth in the above findings and a 4/5 vote is required for passage. The Council of the City of Palo Alto does ORDAIN as follows: SECTION 1. Findings. The findings listed above are hereby incorporated. SECTION 2. Written Report. Government Code Section 65858(d) states that "ten days prior to the expiration of an interim ordinance or any extension, the legislative body [the City Council] shall issue a written report describing the measures taken to alleviate the conditions which led to the adoption of the ordinance. Pursuant to this provision, the City Council hereby reports that much of the factors which gave rise to Urgency Interim Ordinance No. 5325 still apply, namely increasing commercial rental rates; low office vacancy rates; retail service uses being priced out of market and being replaced by office and other uses; and increased traffic congestion, vehicle miles traveled and greenhouse gas emissions resulting from these changing land use patterns. The City Council has undertaken a number of actions since the adoption of Ordinance Number 5325, including directing staff to bring to the Planning and Transportation Commission a "backstop" ordinance to retain retail and retail like uses as well as directing staff to more closely study retail protection initiatives together with a formula retail ban in the California Avenue commercial district. Staff has also begun detailed reviews of regulatory schemes from other jurisdictions. In order to have adequate time to fashion and propose appropriate regulations, and to ensure that the current and immediate threat to the public safety, health and welfare continues to be forestalled, adoption of this ordinance is necessary. SECTION 3. Moratorium. The City Council hereby extends Interim Urgency Ordinance No. 5325 establishing a moratorium on the conversion of any ground floor Retail use permitted or operating as of March 2, 2015 or thereafter to any other non-Retail use anywhere in the City. SECTION 4. Severability. If any provision, clause, sentence or paragraph of this ordinance, or the application to any person or circumstances, shall be held invalid, such invalidity shall not affect the other provisions of this.Ordinance which can be given effect without the invalid provision or application and, to this end, the provisions of this Ordinance are hereby declared to be severable. 150618 cs 0131444 3 June 15, 2015 DocuSign Envelope ID: D49C6B91-8428-4594-8DCD-3FD97FOAE507 SECTION 5. Effective Period. This extension ordinance shall take full force and effect ' immediately upon expiration of Interim Ordinance No.5325. In accordance with Government Code Section 65856, this ordinance shall be in full force and effect for an additional period of 22 months and 15 days following expiration of Interim Ordinance No. 5325. Thus the moratorium shall expire on April 30, 2017, unless this period is extended by the City Council as provided in Government Code Section 65858. SECTION 6. Supersedes Earlier Ordinances. During the time period that this Ordinance is effective, this Ordinance supersedes any provision of the Palo Alto Municipal Code inconsistent with the provisions of this Ordinance. SECTION 7. g,QA. The City Council finds that this ordinance falls under the California Environmental Quality Act (CEQA) exemption found in Title 14 California Code of Regulations Section 15061(b)(3) because it is designed to preserve the status quo and therefore does not have the potential to significantly impact the environment. This ordinance is also categorically exempt under CEQA Section 15308 as a regulatory action taken by the City pursuant to its police power and in accordance with Government Code Section 65858 to assure maintenance and protection of the environment pending the evaluation and adoption of potential local legislation, regulation, and policies. Adoption of the proposed interim ordinance is categorically exempt from review under Section 15301 (Class One -Existing Facilities) of the California Environmental Quality Act (CEQA) Guidelines since it will temporarily perpetuate existing environmental conditions. INTRODUCED AND PASSED: June 15, 2015 AYES: BERMAN, BURT, DUBOIS, FILSETH, HOLMAN, KNISS, SCHARFF, SCHMID, WOLBACH NOES: ABSTENTIONS: ABSENT: ATIEST: /. ~~ City Clerk APPROVED AS TO FORM: re,;:s~ii:r LC2CEDQ84ABC3429 Senior Assistant City Attorney 150618 cs 0131444 APPROVED: ~tlL Mayor GDocuSlgned by: ~4~, 39E7298FB2064DB ... City Manager CaS:~ Director of Planning and Community Environment 4 June 15, 2015 ACTION MINUTES Page 4 of 7 City Council Meeting Action Minutes: 08/22/16 within one year of reaching the cap from the expiring NEM program with a report describing other NEM programs in California with a comparison to the Palo Alto program including the effectiveness of our program in spurring local residential solar options.” INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion, “change the method for calculating the NEM cap to five percent of the customer class non-coincident peak.” MOTION RESTATED: Vice Mayor Scharff moved, seconded by Council Member Holman to adopt a Resolution adopting a Net Energy Metering (NEM) Successor Rate, E-EEC-1 (“Export Electricity Compensation”) amending Utilities Rule and Regulation 2 (“Definitions and Abbreviations”) and 29 (“Net Energy Metering and Interconnection”); direct Staff to return to Council within four months with options and a recommendation for the NEM Transition Policy; return to Council within one year of reaching the cap from the expiring NEM program with a report describing other NEM programs in California with a comparison to the Palo Alto program including the effectiveness of our program in spurring local residential solar options; and change the method for calculating the NEM cap to five percent of the customer class non-coincident peak. MOTION AS AMENDED PASSED: 8-0 Filseth absent Council took a break from 8:08 P.M. to 8:17 P.M. 12.Interim Retail Preservation Ordinance: Request for a Waiver at 100 Addison, Discussion Regarding Applicability to Retail and "Retail-Like" Uses Which do not Have Required Entitlements, and Discussion Regarding Potential Ordinance Improvements and Next Steps. MOTION: Council Member DuBois moved, seconded by Vice Mayor Scharff to direct Staff to return to Council with a framework for an Ordinance for the Downtown Area, including South of Forest Area Coordinated Area Plan Phase 2 (SOFA II) and a more flexible framework for the City as a whole. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion, “including: A. Requiring display windows on properties with non-conforming uses; and ACTION MINUTES Page 5 of 7 City Council Meeting Action Minutes: 08/22/16 B. Considering adjustments to the Ground Floor (GF) boundary; and C. Considering protections outside the GF and for basements; updating definitions as needed; and D. Options to amortize out certain non-conforming uses along University Avenue.” AMENDMENT: Council Member Holman moved, seconded by Council Member XX to add to the Motion, “somewhat” after “(SOFA II) and a.” AMENDMENT FAILED DUE TO THE LACK OF A SECOND INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion, “add to the requirement of Retail; ‘generally open to the public with a minimum number of hours.’” (New Part E) MOTION RESTATED: Council Member DuBois moved, seconded by Vice Mayor Scharff to direct Staff to return to Council with a framework for an Ordinance for the Downtown Area, including South of Forest Area Coordinated Area Plan Phase 2 (SOFA II) and a more flexible framework for the City as a whole, including: A. Requiring display windows on properties non-conforming uses; and B. Considering adjustments to the Ground Floor (GF) boundary; and C. Considering protections outside the GF and for basements; updating definitions as needed; and D. Options to amortize out certain non-conforming uses along University Avenue; and E. Add to the requirement of Retail; “generally open to the public with a minimum number of hours.” MOTION AS AMENDED PASSED: 8-0 Filseth absent ACTION MINUTES Page 6 of 7 City Council Meeting Action Minutes: 08/22/16 MOTION: Council Member Holman moved, seconded by Council Member DuBois to deny the request for a waiver at 100 Addison Avenue from the Retail Protection Ordinance and uphold the Director’s decision. AMENDENT: Vice Mayor Scharff moved, seconded by Council Member DuBois to add to the Motion, “and allow education uses in the Interim Ordinance.” AMENDMENT WITHDRAWN BY THE SECONDER AMENDENT: Vice Mayor Scharff moved, seconded by Council Member Kniss to add to the Motion, “and allow education uses in the Interim Ordinance.” AMENDMENT WITHDRAWN BY THE MAKER AMENDENT: Mayor Burt moved, seconded by Council Member Berman to add to the Motion, “and allow education and medical office uses in the Interim Ordinance.” INCORPORATED INTO THE AMENDENT WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Amendment, “for properties in SOFA II, Residential Transition-35 Zone (RT-35).” INCORPORATED INTO THE AMENDMENT WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Amendment, “on Alma Street.” INCORPORATED INTO THE AMENDMENT WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Amendment, “or abutting” after “(RT-35), on.” AMENDENT RESTATED: Mayor Burt moved, seconded by Council Member Berman to add to the Motion, “and allow education and medical office uses in the Interim Ordinance for properties in SOFA II, Residential Transition-35 Zone (RT-35), on or abutting Alma Street.” AMENDMENT FAILED: 4-4 DuBois, Holman, Scharff, Schmid no, Filseth absent AMENDENT: Vice Mayor Scharff moved, seconded by Council Member Kniss to add to the Motion, “and allow education uses in the Interim Ordinance for ACTION MINUTES Page 7 of 7 City Council Meeting Action Minutes: 08/22/16 properties in SOFA II, Residential Transition-35 Zone (RT-35), on or abutting Alma Street.” AMENDMENT PASSED: 5-3 DuBois, Holman, Schmid no, Filseth absent MOTION RESTATED: Council Member Holman moved, seconded by Council Member DuBois to deny the request for a waiver at 100 Addison Avenue from the Retail Protection Ordinance and uphold the Director’s decision and allow education uses in the Interim Ordinance for properties in SOFA II, Residential Transition-35 Zone (RT-35), on or abutting Alma Street. MOTION AS AMENDED PASSED: 8-0 Filseth absent 13. Policy Discussion on Comprehensive Plan Update Environmental Impact Report Scenarios 5 & 6 (Staff requests this item be continued to August 29, 2016). This Item was continued to August 29, 2016. Inter-Governmental Legislative Affairs 14. Status Update and Potential City Responses to the Governor's "By Right" Housing Bill and Pending Bills Addressing Housing Issues. NO ACTION TAKEN Council Member Questions, Comments and Announcements None. Adjournment: The meeting was adjourned at 11:40 P.M. B FireStation#1 BlockbusterVideo LyttonSquare SeniorCenter LanningChateau Downtown Library CityHall WilliamsProperty StThomasAquinasChurch Chase Bank CPAGIS DowningHouse CalifStateAutoAssn WaverleySurgeryCenter PostOffice94301 CedarTerracesCondominium CowperInn RoseLaneApts. EverettManor 7-11 EverettHouse WebsterHouse CPADev.Ctr Lytton Gardens Senior Residence CasaOlga A.G.Ferrari Gym ComericaBank ALMASTREET ALMASTREET HIGHSTREET FORESTAVENUE EMERSONSTREET HOMERAVENUE HOMERAVENUE AMONASTREET EMERSON STREET HIGH STREET EVERETTAVENUE EVERETTAVENUE HIGHSTREET ALMASTREET ALMASTREET LYTTONAVENUE ALMA STREET EMERSON STREET RAMONASTREET LYTTONAVENUE UNIVERSITYAVENUE RAMONASTREET BRYANTSTREET HIGHSTREET EMERSON STREET ALMASTREET EMERSONSTREET HIGHSTREET HIGHSTREET HA M I L T O N A V E N U E HA M I L T O N A V E N U E EMERSON STREET HAMILTONAVENUE GILMANSTREET WAVERLEY STREET BRYANTSTREET FO R E S T A V E N U E FORESTAVENUE BRYANTSTREET RAMONASTREET RAMONASTREET BRYANTSTREET FLORENCESTREET KIPLING STREET LYTTONAVENUE WAVERLEYSTREETWAVERLEYSTREET EVERETTAVENUE EVERETTAVENUE STREET AVERLEYSTREET RAMONASTREET BRYANTSTREET LYTTONAVENUE UNIVERSITYAVENUE COWPERSTREET KIPLINGSTREET UNIVERSITYAVENUE UNIVERSITYAVENUE COWPERSTREET WAVERLEY STREET HAMILTONAVENUE COWPERSTREET IPLINGSTREET EV E R E T T A V E N U E COWPERSTREET WEBSTER STREET EVERET WEBSTER STREET WEBSTERSTREET LYTTONAVENUE TASSOSTREET HAMILTONAVENUE COWPERSTREET FORESTAVENUE FORESTAVENUE WAVERLEYSTREET HOMERAVENUE WEBSTERSTREET WEBSTERSTREET COWPERSTREET HOMERAVENUE HOMERAVENUE LYTTO WEBSTERSTREET EVERETTCOURT LANE39 LANE7EAST LANE7WEST LANE5EAST LANE6EAST LANE20EAST LANE30 LANE20WEST LANE21 LANE15EAST BRYANTCOURT PAULSENLANE LANE12WEST LANE11WEST CENTENNIALWALK DOWNINGLANE PENINSULACORR PENINSULACORRIDORJOINTPOWERSBOARDPENINSULACORRIDORJOINTPOWERSBOARD 457451 465463 489-499360 530 480 420 430 480 463 451443 437411 405 419 405 401 441 480-498 347 351 355 359 525 430 473 332- 342 425 415 400 570568 556 550 543 327 321 315305 343 515 525 551 555 328 309-311 518-528 536-540 552-554 558-562 573A-E 591-599 557-571 330-332 318-320 406-418 417 542 548568 524 550 500-528 578 564 550 546 540 530 531-535 541 505 525 537 555 565 571 530 619-623 520 440-446 401 579 567 523610 600 555 581 420-438 437 224 228 A-F 244 579 575 565 559 251 355A-J 335 329 604 576 566 614 345-347 243 245 257 259 219 227 235 469 475 744 459 801APT1-5 427-453 460 803 802 800 567-569 559563 539541543 515-517 809 136 610 116-122 150 535529 525 542516140 102 116124 163 145 566 556 167 52 8 643 635 635 645- 685 660- 666 620 180 164 158156 624 628 632 636 640 644 617 621 151-165 171-195 203 642 640 636 200 151 115 125 135 514 10 1 440 444 436432 427 425 117119 630 616 208 228220 240-248 575 530- 534 536 540 552 177 156 201209 215 225 595 229231 611-623 180 508 500 625-631 170172-174 542 544 538- 542 552 548 546 54 1 - 54 7 230-238 734 723 721 702- 730220-244 744 701 731 755 757 771 200 160 728-732 762- 776 740-746 250 275 270 255741 265 724 730 651 221-225 227 668 707 205 201203451449 209 219 221 233235450 460 470 442 444 400 420 430 411 425 429 185 165 181 412 250 420 245 171-169 441- 445 435- 439 346 344 333 335 342 344 431 460 450 235530 220 220B 222 240 514278 274270 250 545 540 251485255 271 281 300 310 301 581 259-267 533 535 537 261267 518-526 532- 536 520-526 530-534 271 281 252 270 228 226 234 238 244 242 228- 234 223- 229 247-259 240 232 230 311-317 251 360 344 326 340 337339 323317 400 420 332330 314 353 355 367 305 347 265272-278 418 319 321- 341 328 330 300- 310 431401 366 436 426#1-7 369 335 319 390 301 315 375 307- 311 325330 332 1&23301-3 324 326 316 318 373- 377 416- 424 361 314 338 340 560 345 321325 315 529 285 555 650 636 6281-12 628A-E 385 365 375380 345 664 325650-654 661 635300 690 675 555541-549533 535- 539 318-324 326 352 425 439-447 435429 425 415-419 405403453 461 383460 502 510 526 520 540 499 467 459 439 425 555 400 436-452 456 379 370-374376380-382 384-396 550-552 364 360 431 440-444 423 499 475 421-423 431-433 432428 460-476 450 635 446 430 400 745 720 706 385744 734 724-730 720 712 704 360 351 315737 332 653 -681 683 685 512 501 619 609 605 518 482486496 610 630 455 400 651-687 543-545 532534 542544 550 552 554556 558560562564 635-637 643-645 601-619 470 313 333 5 303301 229 336 308 310 312 316 318 311 331 315 319 317 321 335 228220 347-367 351357 369-379360 258- 296 302- 316 379310 320 328 332 340 437 412 311A-B 404 313 325 327 333 407 401385 411 452 378-390 360-1A-1C360-2A-2C360-3A-3C360-4A -4C360-5A -5C360-6A 344-348 418420 482 328 456 321 325 330218 236 240 250- 252 477 475 467 457 453249235 225 221 275505-509 239- 243 513-519 460 474472228- 230 535 215 223 231 521 239-245 0 4 218-222 333 335- 337 351 505 610-616 727 678 676 674 672 642 636-638 567 555 711 701705 725 525 759 730 718704 734 738-740 760-770 746-750 701-71 721-725 6 5 609 759 751 753741-74 737-73 627 611 601 608600 623 137 145 700 780 790 744 111700 753 100 799 703 100 101 139654 735 707 248 230-23 212 800 812 801 801 791153 718 774 761 795745 201 209 217 222 171 421130 312 318 324 317 301 186 192 323 329 151 325 329 334 131 129 355301 235 258 163 115 291247 235 251 249 252 247 244 250 177220 261 251-257 205245 231 225 234 240 183 251 270 241-247 215- 237 216 219 235 245 221 13-317 220- 224 238 542-550 531-539 759 223-239 188190 251- 293 202 206 208 210 212 216 220 275 539 168 408 412 440 483A -F 435 751 735 745 210 727 733 335 328 330 345 214 350 806 409 419 230302 306 308 312 316 301 303 305 307 309 251 801 420 424 430 423425413-419 457-467 469-471473-481 454 729A-D 733-743 734-740 724-732 715 445 324 328 545547549 590 425447 565 585 595 507 561 706 536 200 280-290 150 158 164 276 516 698 161 159 157777 132 127 180 528 247 372 524 548550 152 345 336 515 658 227 539 115 135 321 558#200-202 558#C&D 140 461 435433 421 727A-C 218 255 206 739 26 650 642 351 451 551 375 530 643 415 700 802 548 423 668 305 -313 423 405 611 320 322 346 3 471 484 426 264 430 508 756- 760 544 546 515 151 160 257 433-457 482 330 349 401 539 440 312 202 651 443 445 447 716 398 262 335 218 640-646506 327 469 261 263 254 This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. Legend CD-C (GF) (P) Zone CD-C (P) Zone Add to (GF) District Remove from (GF) District 0' 364' Downtown Zoning with Proposed Changes to (GF) CITY O F PALO A L TO I N C O R P O R ATE D C ALIFOR N IA P a l o A l t oT h e C i t y o f A P RIL 16 1894 The City of Palo Alto assumes no responsibility for any errors ©1989 to 2009 City of Palo Alto jcutler, 2009-09-23 14:55:00 (\\cc-maps\gis$\gis\admin\Personal\Planning.mdb) Downtown Zoning 2009 Changes to GF District Lot RHigh StreetPkg Garage LyttonPlaza Undergroundarking Garage Civic C enter Plaza Parkin g W holM E-Trade 136 61 0 116-122 150 53 5 52 9 52 5 54 2 51 640 102 16 24 163 145 56 6 55 6 167 528 64 3 63 5 63 5 645- 685 660- 666 620 180 164 158 156 624 628 632 636 640 644 617 621 151-165 171-195 203 642 640 636 200 514 630 616 208 228 220 240 575 530- 534 536 540 552 177 156 201 209 215 225 595 229 231 611-623 80 508 500 625-631 170 172-174 542 544 538- 542 552 548 546 541- 547 230-238 734 723 721 702- 730220-244 701 731 755 757 160 728-732 762- 776740- 250 275 270 741 72 73 651 221-225 227 668 235530 22020 B 222 240 274 270 250 545 5 581 533 535 537 261 267 51 532- 536 520-526 53 555 623 137 145 700 780 744 1700 753 100 703 100 101 139654 735 707 718 761 795745 759 223-23 539 168 727 733 230 715 200 150 158162 164 698 161 159 157 777 132 528 247 658 539 115 135 739 650 551 548 668 539 202 716 218 725 705 541 600 EMERSON STREET RAMONA STREET ALMA STREET EMERSON STREET HIGH STREET HIGH STREET HAMILTON AVENUE HAMILTON AVENUE EMERSON STREET FO R E S T A V E N U E RAMONA STREET RAMONA STREET LANE 7 EASTLANE 5 EAST LANE 6 EAST LANE 12 WEST LANE 11 WEST CENTENNIAL WALK HIGH STREET ALMA STREET ALMA STREET FO R ES T A V E NU E This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. Legend Parcels on Emerson to be Rezoned to CDC & CDS (GF) (P) Tree 0'145' CD C ( P ) a n d C D S ( P ) P a r c e l s on Em e r s o n S t . an d Fo r e s t A v e pr o p o s e d t o b e r e z o n e d t o CD C ( G F ) ( P ) & C D S ( G F ) ( P ) CITY O F PALO A L TO I N C O R P O R ATE D C ALIFOR N IA P a l o A l t oT h e C i t y o f A P RIL 16 1894 The City of Palo Alto assumes no responsibility for any errors. ©1989 to 2013 City of Palo Alto rrivera, 2013-03-25 14:53:51 (\\cc-maps\gis$\gis\admin\Personal\Planning.mdb) 20 1 3 G F C h a n g e s 934 - 9 4 4 92 7 93 2 233 281 933 - 9 3 7 943 327 1001 942 469 475 744 459 832 801 A P T 1 - 5 427-453 920912 362 370 900 838 84 6 471 459 835 - 8 5 5 460 815 84 0 836 83 4 845 400 803 92893 0 931933 835 - 8 3 7 831 - 8 3 3 451453 802800 810 - 8 1 6 818 - 8 2 0 828 - 8 3 0 817 - 8 1 9 825 567-569 559563 521-529 531-539 541-547 556 596 904 926 561-567 569 845 847 527-533 543 551 510520 558-560 903 825 837 581 575940 934 813-823 501-509 511-519 539541543 515-517 809811 420 1001 1011 1010 376 370 1020 1022 1033 1027 1017-1023 980960 990 342-352 354-362 326 1019 1027 1035-1037 426-430 432-438 1033 1042 1036 1018 1000 448 452 450 944 471 483948952 959947925 915 933 935 425-443 451449 463-465 936-940 458 460 440 428426 1028- 1030 536 526 1001 1011- 1015 1021 540 542 483 904 912 468 918 926 537 965-971 505-507 519-521 939-945 931-935 923-925518-520 1044 1026 1022580 574 566 552 548 546544 991- 997 136 610 116-122 150 535529525 542516140 102 116124 163 145 566556 167 528 643635 635 645- 685 660- 666 620 180 164 158156 624628 632636 640 644 617621 151-165 171-195 203 642640 636 200 151 115 125 135 514 101 440 444 436432 427 425 117119 630616 208 228 220 240 575 530- 534 536 540 552 177 156 201209 215 225 595 229231 611-623 180 508500 625-631 170 172-174 542 544 538- 542 552548546 541- 547 230-238 734 723 721 702- 730220-244 744 701 731 755757 771 200 160 728-732 762- 776740-746 250 275 270 255741 265 724 730 651 221-225 227 668 707 205 201203451449 209 219 221 233235450460470 442444 400 420 430 411 425 429 185 165 181 412 250 420 245 171-169 441- 445 435- 439 346 344 333335 342 344 431 460 450 235530 220220 B 222 240 514278 274 270 250 545 540 251485255 271 281 300 310 301 581 259-267 533535537 261 267 518-526 532- 536 520-526 530-536 271 281 252 270 234 238 244242 247-259 240 232 311-317 251 360 344 326 340 337339 323 317 400 420 332 330 314 353 355 367 305 347 265272-278 418 319 321- 341 328 330 300- 310 431401 366 436 426 #1-7 369 335 319 390 301 315 375 307- 311 325330 332 1&2330 1-3 324 326316 318 373- 377 416- 424 361 314 338 340 560 345 321325 315 529 285 555 650 636 628 1-12 628 A-E 385 365 375380 345 664 325650-654 661 635300 690 675 555541-549533 535- 539 318320322324326 352 425 439-441 435429425 415-419 405403453 461 383460 502 510 526 520 540 499 467 459 439 425 555 400 436-452 456 379 370-374 376380-382 384-396 550-552 364 360 431 440-444 423 499 475 421-423 431-433 432 428 460-476 450 635 446 430 400 745 720706 385744734 724-730 720712704 360 351 315737 332 300 653 -681 683 685 512 501 619 609605 518 482486496 610 630 455 400 653-687 543-545 532534 542544 550 552 554 556 558560562564 635-637 643-645 601-619 470 313 336 308 310 312 316 318 311 331 315 319 317 321 335 347-367 369-379360 258- 296 302- 316 379310 320 328 332 340 437 412 311 A-B 404 313 325 327 333 407 401385 411 452 378-390 360 - 1A - 1C360 - 2A - 2C360 - 3A - 3C360 - 4A - 4C360 - 5A - 5C360 - 6A 344-348 418420 482 328 456 321 325 330236240250- 252 477 475 467 457 453249235 275 505-509 239- 243 513-519 460 474472 535 231 521 239-245 333 335- 337 351 457451 465 463 489-499360 530 480 420 430 480 463 451443437411405 419405401 441 480-498 347 351 355 359 525 430 473 332- 342 425 415 400 570568 556 550 543 327321315305 343 515 525 551 555 328 309-311 518-528 536-540 552-554 558-562 573 A-E 591-599 557-571 330-332 318-320 406-418 417 542548568 524 550 500-528 578 564 550 546 540 530 531-535 541 505 525 537 555 565 571 530 619-623 520 440-446 401 579 567 649 625 523 518 610 600 616 624 630 555 581 420-438 437 228 A-F 244 579 575 565 559 244 250 260 251 355 A-J 335 329 334328 336 604 626 32634 576 566 614 345-347 623-643 243245 257259235 236 505 610-616 727 678 676 674672 642 636-638 567 555 711 701705 725 525 759 730 718704 734 738-740 760 746-750 701-717 719 723 630-638 620618 600 827 835 899 615 619 850 530 609 759 751753 627-631 617-619 741749 640 628 737-739 627 611 601 608600 620 626-628 601-635600-640 1028 1036 1013 1021 1029 1037 10041000 1006 1020 1024 1030 1040 1035 10271023 1017 1001 1043 1080 1040 1028 623 137 145 700 780 790 744 111150 753100 825805 33 51 75 63 841 44 675 49 41 711 799 703 100 101 139654 625 1019 1027 A B 1035 1044 1045 1028 1020160 1001 1005 1009 1015 1027 1037 1010 1024 1004 930 975945929931 948 181 940 960 145900 955 999875 853 925 81 855 901-907 909 87 98 1038 1036 917 921 925 735 849 707 847 842828 820248 230-232 212 825 829 833 839 800 812 818 882 165831 801 815 809801 841 791153 718 774 761 795745 201 209 834836 845 895 926 190 934 942 948 203 209 219 225 929200 240 904 910 926 270 935 904 909 909A 25 171 421 130 312 318 324 317 301 186 192 323 329 151 325 329 334 131 129 101 301 258 163 115 291247 235 251249 252 247 244 250 177 261 251-257 205245 234240 183 251 270 241-247 235 245 238 542-550 531-539 532 759 223-239 905 911-917907 188190 251- 293 202 206 208 210 212 216 220 1008 621-631 275 539 400 27 168 865857 302 324 340 795 848 918 903 903A 408412 440 483A - F 435 751 735 745 532 210 727 733 335 328 330 345 214 350 800 806 409 419 630 441 441A 230302306308312 316 301 303 305 307 309 325 807 821 829 801 818-824 420 424 430 832A 832 842A 842 852A 852 862A 862 872A 872 351A 351 355A 355 359A 359 363A 363 367A 367 425 911 943 951 918 936 940 944 271 253 241 301 319 919A 919 935 949 928 936 940-946 353 264 367 361 310 1005 1010 1020 423425 457-467 469-471 473-481 454 729 A-D 733-743 734-740 724-732 936 824 826 828 920 949 943941 715 95 445 324 328 545547549 590 425447 827 565585595 904 315 507 561 706 536 200 100 280-290 150158 162 164 276 516 698 161 159 157777 132 127 180 528 247 372 524 548 550 538 152 515 658 227 27 29 539 115 550 558 #200-202 558 #C & D 965 140 350 808 915 461 435433 945 1012 421 727 A-C 255 206 1032 1035 1037 453 739 260 840 650 642 351 451 551 375 530 643 415 12 700 5 802 99 89 87 901 560564568572576580584588592594 906908 910 912914 916 918920 922 924 548 423 668 901 305 -313 423 405 352354 611 320322 346 471 484 528 426 264 430 1001 508 756 - 760 940 930 544546 515 743 745 747 549 151 160 257 433-457 482 330 349 401 539 440 691 755 67 312 202 651 443445 447 716398 998 262 335 218 640-646506 327 469 261 263 303 401 403 254 401 91 40 101 819 301 725 595 705 541 321319 600 146 411 - 419 229 355365 111 121 548 597 829 602604 502 504 506 HIGH STRE RAMONA STR EMERSON STR QU ARRY ROA D EMERSON STREET HOMER AVENUEREET STREET REET EVERETT AVENUE EVERETT AVENUE HIGH STREET REET ALMA STREET LYTTON AVENUE EL CAMINO REAL QUARRY ROAD ALMA STREET EMERSON STREET RAMONA STREET LYTTON AVENUE UNIVERSITY AVENUE RAMONA STREET BRYANT STREET HIGH STREET EMERSON STREET ALMA STREET EMERSON STREET HIGH STREET HIGH STREET HAMILTON AVENUE HAMILTON AVENUE EMERSON STREET HA M I L T O N A V E N U E GILMAN STREET WAVERLEY STREET BRYANT STREET FO R E ST A V E NU E FO R E S T A V E N U E BRYANT STREET RAMONA STREET RAMONA STREET BRYANT STREET FLORENCE STREET KIPLING STREET LY T T O N A V E N U E WAVERLEY STREETWAVERLEY STREET EV E R E T T A V E N U E EV E R E T T A V E N U E T STREET RAMONA STREET BRYANT STREET LY T T O N A V E N U E UN I V E R S I T Y A V E N U E COWPER STREET KIPLING STREET UN I V E R S I T Y A V E N U E UNIVERSITY AVENUE COWPER STREET WAVERLEY STREET HA M I L T O N A V E N U E STREET TREET EVE R E T T A V E N U E COWPER STREET ER STREET EVERETT AVEN WEBSTER STREET WEBSTER STREET LYTTON AVENUE TASSO STREET SCOTT STREET AD D I S O N A V E N U E BRYANT STREET BRYANT STREE AD D I S O N A V E N U E HA M I L T O N A V E N U E COWPER STREET FOREST AVENUE FO R E S T A V E N U E WAVERLEY STREET BRYANT STREET HO M E R A V E N U E WAVERLEY STREET CHANNING AVENUE RAMONA STREET RAMONA STREET WEBSTER STREET WEBSTER STREET COWPER STREET HOMER AVENUE HOMER AVENUE COWPER STREET KIPLING STREET CHANNING AVENUE WAVERLEY STREET ADDISON AVENUE UNIVER LYTTON AVEN WEBSTER STREET HAMILTO FOREST WAVERLEY S ADDISO WEBSTER STR ADDISON AVENUE COWPER S WEBSTER STREET HOMER A WEBSTER STREET CHANNING AVENUE CHANNING A COWPER STREET U N I VER S I T Y C I R C L E EVERETT COURT LANE 39 LANE B EASLANE 7 EASTLANE 5 EAST LANE 6 EAST LANE 20 EAST LAN E 30 LANE 20 WEST LANE 21 MITCHELL LANE EAST PAULSEN LANE LANE 12 WEST LANE 11 WEST CENTENNIAL WALK LANE D EAS LANE D WES PEAR LANE DOWNING LANE LANE 56 EL CAMINO REAL PENINSULA CORRIDOR JOINT POWERS BOARD P A L M DR IV E PALO ROAD EMERSON STREET EMERSON STREET HIGH STREET HIGH STREET HIGH STREET ALMA STREET ALMA STREET ALMA STREET ALMA STREET ALMA STREEFOREST AVENUE CHANNING AVENUE HOMER AVENUE ADDISON AVENUE EL CAMINO REALEL CAMINO REAL EL CAMINO REALEL CAMINO REAL EL CAMINO REALEL CAMINO REAL EMBAR CADERO ROAD WELLS AVENUE URBAN LANE URBAN LANE ENCINA AVENUE ENCINA AVENUE MEDICAL FOUN D ATION WAY LANE 7 WEST LANE 8 WEST LANE A WEST LANE B WES CHANNING AVENUE This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. Legend Transportation Station University Avenue/Downtown Business District - Commercial Center Existing Ground Floor (GF) Combining District Zoned Parcels Proposed Ground Floor (GF) Combining District Zoned Parcels SOFA II CAP 0'500' Proposed Ground FloorCombining DistrictAdditions2016 CITY O F PALO A L TO I N C O R P O R ATE D C ALIFOR N IA P a l o A l t oT h e C i t y o f A P RIL 16 1894 The City of Palo Alto assumes no responsibility for any errors ©1989 to 2016 City of Palo Alto RRivera, 2016-09-27 14:08:34 (\\cc-maps\gis$\gis\admin\Personal\RRivera.mdb) City of Palo Alto (ID # 7361) City Council Staff Report Report Type: Inter-Governmental Legislative Affairs Meeting Date: 10/17/2016 City of Palo Alto Page 1 Summary Title: Measure A Endorsement Title: Request for City Council Endorsement of Santa Clara County Measure A, an Affordable Housing Bond Measure From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that the City Council adopt a motion endorsing Santa Clara County Measure A, an Affordable Housing Bond Measure on the November 8, 2016 ballot. Executive Summary On June 21, 2016, the County of Santa Clara County Board of Supervisors voted to place a $950 Million Bond Measure (Measure A) on the November ballot. If approved by voters, the resulting funding would be used to support affordable housing for vulnerable populations including veterans, seniors, the disabled, victims of abuse, the homeless and individuals suffering from mental health or substance abuse illnesses. See Attachment A for more specific information about the ballot measure. Passage of Measure A requires a two-thirds majority approval by voters and supporters have asked for the City’s endorsement. If approved, the measure would help to address the regional housing crisis and further the goals and policies in the City’s adopted Housing Element, which include the following:  Policy H3.1: Encourage, foster, and preserve diverse housing opportunities for very low, low, and moderate income households.  Policy H3.4: Pursue funding for the acquisition, construction, and rehabilitation of housing that is affordable to very low, low, and moderate income households.  Policy H3.5: Support the provision of emergency shelter, transitional housing, and ancillary services to address homelessness. City of Palo Alto Page 2 If approved by the voters, the measure would allow the County to issue bonds, in one or more series, with a principal amount not to exceed $950 million. The bond would raise property taxes $12.66 per $100,000 of assessed valuation. Palo Alto-based affordable housing projects could compete for the funds resulting from this ballot measure and the County has indicated its willingness to work with stakeholders in establishing criteria for use in evaluating responses to Notices of Funding Availability (NOFA). Environmental Review Endorsement of County Measure A is not a project requiring review under the California Environmental Quality Act (CEQA). Attachments:  Attachment A - Information on Measure A (DOCX) Measure A (November 2016 ballot) information The language of the measure appearing is: “To provide affordable local housing for vulnerable populations including veterans, seniors, the disabled, low and moderate income individuals or families, foster youth, victims of abuse, the homeless and individuals suffering from mental health or substance abuse illnesses, which housing may include supportive mental health and substance abuse services, shall the County of Santa Clara issue up to $950 million in general obligation bonds to acquire or improve real property subject to independent citizen oversight and regular audits?” If approved, the bond would represent the largest commitment to date for addressing the county's housing crisis. A 2015 survey found that Santa Clara County had more than 6,500 homeless people, making it the fourth largest homeless population in the nation. If passed, the County would issue the bond in three phases, each providing about $316 million for housing projects. The first bond issuance would be scheduled for September 2017, with the next phases coming in 2021 and 2025.1 $700 million of the funding would go toward projects for vulnerable populations, including the homeless and those living on extremely low incomes. 2 $100 million is geared towards low income families, and $150 million is for working families and first-time homebuyer programs. 3 The mechanism for repaying the bond is a $12.66 surcharge added on residential and commercial properties for every $100,000 of assessed value. The average homeowner can expect to pay approximately $63.00 annually in additional property taxes. The bond is expected to be fully paid by 2055. Those seeking bond funding (cities and nonprofit organizations) would enter a competitive process, with priority given to proposals demonstrating project readines and leveraging other grant programs. Lastly, oversight of the bond will come from the newly established Citizens Oversight Committee for the Housing Bond, a nine member committee appointed by the Board of Supervisors. Committee composition will include at least one attorney, one or more housing advocates, the County Assessor, one or more professional accountants, at least one investment professional, and one representative from organized labor, a civic organization, a business organization and the Santa Clara County Cities Association.4 1 See Palo Alto Online, June 23, 2016; accessed September 29, 2016. http://paloaltoonline.com/news/2016/06/23/santa-clara-county-approves-950-million-housing-bond-for- november-ballot 2 Those living on less than 30 percent of the area median income; $23,450 for an individual and $33,500 for a four- person household. 3 See “Yes on Affordable Housing,” accessed on September 29, 2016, http://yesonaffordablehousing.org/about/ 4 More information on the oversight body can be found here: http://yesonaffordablehousing.org/wp- content/uploads/2016/09/Oversight-Memo.pdf City of Palo Alto (ID # 7337) City Council Staff Report Report Type: Informational Report Meeting Date: 10/17/2016 City of Palo Alto Page 1 Summary Title: Agreement with East Palo Alto to Relocate Interpretive Programs Title: Agreement with East Palo Alto to Temporarily Relocate Baylands Interpretive Center Programs to Cooley Landing During Renovations of the Baylands Interpretive Center From: City Manager Lead Department: Community Services Recommendation This is an informational report and no City Council action is required. Executive Summary For many years, the Palo Alto Junior Museum and Zoo, a division of the City’s Community Services Department, has conducted Open Space educational programs at the Lucy Evans Baylands Nature Interpretive Center (BNC). These programs will temporarily relocate to East Palo Alto’s Cooley Landing Education Center (Cooley Landing) under an Agreement (Attachment A) with the City of East Palo Alto during the renovation of the BNC this year. Background On September 19, 2009, Council authorized major improvements to the BNC. This work— scheduled for October 20, 2016 through April 30, 2017—necessitates a closure of the building. During this temporary closure, Community Services will relocate its Open Space educational programs to Cooley Landing at no additional cost to Palo Alto or its program participants. These programs include hands-on science lessons about the plants, animals and ecology of the Bay and our local marsh environment. Each year, approximately 3,000 elementary school students from over 30 schools participate in these programs, while more than 80,000 visitors learn from the BNC’s exhibits and lab activities during free public hours. To facilitate the continuation of these important programs during renovation at the BNC, the City of Palo Alto and the City of East Palo Alto have entered into an agreement. CPA desires to conduct its educational programs at an alternative location during the closure of its facility and the City of East Palo Alto desires to allow CPA to use Cooley Landing to operate its educational programs while the BNC is closed for renovation. City of Palo Alto Page 2 After negotiations of terms at the staff level between the two cities, the City of East Palo Alto approved the Agreement as a mutually beneficial partnership in service to the greater community. Discussion Both the Cooley Landing and the BNC serve their local residents as well as residents of neighboring jurisdictions. Both East Palo Alto and Palo Alto acknowledge the value of collaboration, cooperation, and mutual support to improve, enhance and sustain the capacity of the educational opportunities and services for our communities. Temporary closure of the Baylands Nature Center is required for construction, and because Cooley Landing Park lies on the northern tip of the Palo Alto Baylands, it is suitable for supporting BNC programs during the closure. By moving the programs to Cooley Landing, Community Services avoids canceling most of its BNC educational and revenue-generating programs for the community. Timeline Temporary closure of the Baylands Nature Center and relocation of the educational programs are scheduled for October 20, 2016 through April 30, 2017. Resource Impact Expenses and revenues associated with the BNC’s educational programs are included in the approved FY 2017 Community Services Department’s operating budget for the Junior Museum and Zoo. Revenues come from fees paid by schools participating in these programs, as well as from grants managed by the Junior Museum and Zoo. The temporary relocation of BNC programs to Cooley Landing will result in no additional expenses or cost to the City or its BNC program participants. Policy Implications The BNC programming and its current renovation is consistent with Policy C-26 of the Community Services element of the Comprehensive Plan. This policy encourages the maintenance of open space and park facilities as safe and healthy community assets. The project is also consistent with Policy C-22, which encourages community facilities to have flexible functions to ensure adaptability to the changing needs of the community. Environmental Review This temporary change in programming is not subject to the Environmental Review under the California Environmental Quality Act (CEQA). Attachments:  Attachement A: Agreement for Temporary use and Operation of the Cooley Landing Education Center (DOCX) DRAFT AGREEMENT FOR TEMPORARY USE AND OPERATION OF THE COOLEY LANDING EDUCATION CENTER This AGREEMENT FOR TEMPORARY USE AND OPERATION OF THE COOLEY LANDING EDUCATION CENTER (“Agreement”) dated for convenience, September 1, 2016 (the Effective Date”) is entered into by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CPA”), and the CITY OF EAST PALO ALTO, a municipal corporation (“CEPA”) individually, a “Party” and collectively, the “Parties”, in reference to the following facts and circumstances: RECITALS: 1. CPA owns and operates the Lucy Evans Baylands Nature Center (the “Baylands Nature Center”), located at 2775 Embarcadero Road, Palo Alto. The Baylands Nature Center is operated through a city program (the “Nature Center Program”) of the Arts and Science Division of Palo Alto’s Community Services Department. The Baylands Nature Center will be closed for a period for renovation, which is anticipated to be between September 9, 2016 and April 30, 2017. CPA desires to conduct its Nature Center Program at an alternative location during the closure of its facility. 2. CEPA owns and operates the Cooley Landing Park and Education Center (the “Education Center”), located at 2100 Bay Road, East Palo Alto, which currently has limited services. CEPA’s operation of the access gate to the Education Center is performed pursuant to a Partnership Agreement with the Midpeninsula Regional Open Space District (the “MROSD”), owner of the adjoining Ravenswood Open Space Preserve (“MROSD Property”). CEPA desires to allow CPA to use the Education Center to operate the Nature Center Program while the Baylands Nature Center is closed for renovation. 3. Both facilities serve their local residents as well as residents of the neighboring jurisdictions (the “Community”). The Parties acknowledge the value of collaboration, cooperation, and mutual support to improve, enhance and sustain the capacity of the educational opportunities and related services to the Community. AGREEMENT: NOW, THEREFORE, and in consideration of the forgoing recitals and the following covenants, terms, conditions and provisions of this Agreement, the Parties agree: SECTION 1. TERM: DRAFT 1.1 This Agreement will commence on the Effective Date, and the initial term, for convenience sake and in recognition of the uncertainties inherent in the construction/renovation process, will be for one (1) year. However, it is anticipated that the actual term will be of shorter duration, and that use of the Education Center by CPA will terminate prior to one year. The Parties anticipate that the Baylands Nature Center will reopen and be available to Nature Center Program staff sometime in March or April 2017. At such time as Baylands Nature Center becomes available, Nature Center Program staff will relocate its services back to the Baylands Nature Center and cease all operations and programs at the Cooley Landing site. CPA shall notify CEPA, by written notice, of its intended termination date at least 30 days prior to its relocation. 1.2 The Term may be extended by the Parties for one (1) additional term of (1) year. 1.3 Either Party, in its sole discretion, may terminate for convenience this Agreement, in whole or in part, by giving the other Party no less than 30 days prior written notice. 1.4 This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code (the “PAMC”). This Agreement will terminate without penalty: (A) at the end of any fiscal year in the event that funds are not appropriated for the Nature Center Program for the following fiscal year; or (B) at any time within a fiscal year in the event that funds are appropriated for a portion of the fiscal year and funds for this Agreement are no longer available. This Section 1.4 will take precedence in the event of a conflict with any other covenant, term, condition or provision of this Agreement and the Exhibits. Nothing in this Section 1.4 is intended to affect CEPAs’ rights and remedies as may be available under applicable laws. SECTION 2. RESPONSIBILITIES OF THE PARTIES 2.1 The responsibilities of CPA include the following: A. The development and provision of educational programs in the Education Center relating to the Nature Center Program’s Salt Marsh Field Trip Program, and the supervision of community volunteers in support of these programs; B. Securing appropriate permits, if required, from MROSD for any programming under this Agreement anticipated to occur on MROSD Property; C. The operation of programs at the Education Center during the following time periods: 1) Programs for local and regional schoolchildren from approximately 8 a.m. – 2 p.m. weekdays; and, 2) public visitation and volunteer led programs for approximately 10 hours per week, over the course of 3 afternoons (specific schedule to be determined). Cooley Landing Park is closed and programming will not be operated on CEPA official holidays including New DRAFT Year’s Eve, New Year’s Day, Martin Luther King, Jr. Day, Lincoln’s Birthday, President’s Day, Cesar Chavez Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Eve, and Christmas Day; D. The hire, supervision, evaluation, and control of its employees and volunteers at its sole expense; E. The selection of one or more individuals to serve as CPA’s liaison(s) to CEPA for coordination of programming, safety, schedules and duties. The liaison shall participate in quarterly meetings with CEPA to discuss the program and facilities and to resolve any issues which may arise. The liaison shall exercise reasonable discretion in determining whether to close the Education Center on any given day in the event of inclement weather. If the liaison is unsure whether to close the Education Center, the liaison shall consult with CEPA’s representative; F. The provision, care and maintenance of educational artifacts, equipment, models, and other teaching materials owned by CPA and used for its programming at the Education Center. The teaching materials will remain the property of the CPA and will be returned to Palo Alto at the end the Term of this Agreement; G. Operating the access gate to Cooley Landing in conjunction with its programming, and exercising reasonable care in so doing. The Nature Center Program staff shall unlock and relock the gate access to the Education Center at Cooley Landing Park before and after operations, which will take place during the times described above. Generally, the gate’s operation is governed by a Partnership Agreement between CEPA and MROSD. CEPA retains its responsibility to operate the MROSD-owned gate, as set forth in the MROSD Partnership Agreement, and authorizes CPA to operate the gate under the conditions described herein. CEPA represents that it has authority under the Partnership Agreement to allow CPA to operate the access gate in the manner described in this Agreement; and, H. The reimbursement to CEPA for 50% of utility and janitorial costs associated with operating the Education Center, along with 50% of any additional contracted security personnel (if needed). 2.2 The responsibilities of CEPA include the following: A. The supervision and management of its employees, volunteers, contractors, subcontractors and consultants, while they and each of them, are performing obligations on behalf of CEPA and pursuant to this Agreement; DRAFT B. The maintenance, at its sole expense, of the Education Center physical plant, the security fence, and the access gate securing the Education Center at Cooley Landing Park, as governed by the MROSD Partnership Agreement; C. The provision of security to the Education Center to ensure the safety of staff and visitors through routine patrol officers, and the provision to the Nature Center Program staff of keys, security equipment, including Closed Circuit Television (CCTV), phones, alarm button, and/or information which is reasonably necessary to carry out its duties described above; D. The selection of one or more individuals to serve as CEPA liaison(s) for coordination of programming, safety, schedules and duties. The liaison shall participate in quarterly meetings to discuss the programs and facilities and to resolve any issues, which may arise and to report on the activities to CPA in order to provide information on the number of events conducted, participants in those events, and identification of the schools and organizations with a view to including in these events a broad cross section of CEPA’s residents; E. The preparation and provision of an invoice to CPA for 50% of the janitorial services, refuse disposal, contracted security services (if needed), and utility services associated with program operation at the Education Center. SECTION 3. GENERAL LICENSE; LIMITATIONS ON USE OF PROPERTY 3.1 CEPA hereby grants CPA, its employees, and volunteers a nonexclusive license to enter upon and use the Education Center in connection with the execution of educational programming described in this agreement, and the right to operate the access gate to conduct the programming. CEPA will provide CPA employees of the Nature Center Program with keys and security access to the Education Center. CEPA's permission to CPA to use the Education Center in accordance with this Agreement shall not create any right, title, or interest in the Education Center. SECTION 4. INSURANCE 4.1 CPA shall maintain, for the duration of the contract, self-insurance against claims for injuries to persons or damages to property which may arise from, or in connection with, the performance of the work hereunder by CPA, its agents, representatives, contractors, and employees. SECTION 5. INDEMNITY 5.1 Neither CPA nor any officer, agent, employee, or volunteer of CPA (collectively, “CPA”) is responsible for any damages or liability occurring by reason of anything done or omitted to be done by CEPA, its officials, officers, agents and employees (collectively “CEPA”), under or in connection with any work or performance under this Agreement. Pursuant to California Government Code Section 895.4, CEPA will fully indemnify, hold harmless and defend in any claim or litigation, CPA from any damage or liability DRAFT occurring by reason of anything done or omitted to be done by CEPA under or in connection with any work or performance under this Agreement. The duty of CEPA to indemnify and hold harmless, as set forth above, shall include the duty to defend as set forth in Section 2778 of the California Civil Code, provided, however, that nothing herein shall be construed to require CEPA to indemnify CPA against any responsibility or liability in contravention of Section 2782 of the California Civil Code. 5.2 Neither CEPA nor any officer, agent, employee, or volunteer of CEPA (collectively, “CEPA”) is responsible for any damages or liability occurring by reason of anything done or omitted to be done by CPA, its officials, officers, agents and employees (collectively “CPA”), under or in connection with any work or performance under this Agreement. Pursuant to California Government Code Section 895.4, CPA will fully indemnify, hold harmless and defend in any claim or litigation, CEPA from any damage or liability occurring by reason of anything done or omitted to be done by CPA under or in connection with any work or performance under this Agreement. The duty of CPA to indemnify and hold harmless, as set forth above, shall include the duty to defend as set forth in Section 2778 of the California Civil Code, provided, however, that nothing herein shall be construed to require CPA to indemnify CEPA against any responsibility or liability in contravention of Section 2782 of the California Civil Code. SECTION 6. WAIVER 6.1 Waiver of a breach or default under this Agreement shall not constitute a continuing waiver or a waiver of a subsequent breach of the same or any other provision of this Agreement. SECTION 7. ASSIGNMENT 7.1 This Agreement, and any portion thereof, shall not be assigned or transferred, nor shall any of the Party’s duties be delegated, without the written consent of the other Party. Any attempt to assign or delegate this Agreement without the written consent of the other Party shall be void and of no force or effect. Consent by a Party to one assignment shall not be deemed to be a consent to any subsequent assignment. SECTION 8. NOTICES 8.1 Any notice, request, consent or approval by a Party that is required to be furnished by this Agreement, will be given, in writing, and delivered by personal service, the United States Postal Service, mailed, first class, postage prepaid, or by facsimile transmission, to the following: To CPA: To CEPA: City Clerk City Clerk City of Palo Alto City of East Palo Alto P.O. Box 10250 Palo Alto, CA 94303 DRAFT with a copy to: and to: Manager, Junior Museum and Zoo Community Services Manager City of Palo Alto City of East Palo Alto P.O. Box 10250 Palo Alto, CA 94303 SECTION 9. MISCELLANEOUS 9.1 This Agreement will be governed by and construed in accordance with the laws of the State of California and local ordinances. The Parties will comply with all applicable federal, state and local laws in the exercise of their rights and the performance of their obligations under this Agreement. 9.2 All covenants, terms, conditions, and provisions of this Agreement, whether covenants or conditions, will be deemed to be both covenants and conditions. 9.3 This Agreement represents the entire agreement between the Parties and supersedes all prior negotiations, representations and contracts, written or oral. This Agreement may be amended by an instrument, in writing, signed by the Parties. This Agreement may be executed in any number of counterparts, each of which will be an original, but all of which together will constitute one and the same instrument. 9.4 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, the Exhibits, or any amendment thereto. 9.5 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 or the County of San Mateo, State of California. 9.6 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. IN WITNESS WHEREOF, the Parties by their duly authorized representatives have executed this Agreement on the Effective Date. CITY OF PALO ALTO, A MUNICIPAL AGENCY APPROVED AS TO FORM: CITY OF PALO ALTO DRAFT ___________ __________ _________________________ City Attorney or designee City Manager CITY OF EAST PALO ALTO, A MUNICIPAL CORPORATION _____________________ Carlos Martínez City Manager Date:_____________________ APPROVED AS TO FORM: By:______________________ Marc G. Hynes Interim City Attorney