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Home My WebLink About2008-11-17 City Council Agenda Packet 1 11/17/08 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. Agenda posted according to PAMC Section 2.04.070. A binder containing supporting materials is available in the Council Chambers on the Friday preceding the meeting. Regular Meeting Council Chambers November 17, 2008 7:00 PM ROLL CALL STUDY SESSION 1. Operational Analysis of the City of Palo Alto Municipal Golf Course CMR 446:08 Attachment CITY MANAGER COMMENTS ORAL COMMUNICATIONS Members of the public may speak to any item not on the agenda; three minutes per speaker. Council reserves the right to limit the duration or Oral Communications period to 30 minutes. CONSENT CALENDAR Items will be voted on in one motion unless removed from the calendar by two Council Members. 2. Approval of a Utilities Enterprise Fund Contract with Audio Visual Innovations, Inc. in the Amount of $393,775 for Utility Control Center Upgrades – Capital Improvement Program Projects EL-06003 and EL-04012 CMR 442:08 Attachment 3. Adoption of an Ordinance Amending Palo Alto Municipal Code Section 2.28.240 (Settlement of Claims and Actions) to 11/17/08 2 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. Increase the City Attorney’s Settlement Authority from $10,000 to $35,000 Report Attachment 4. Approval of an Amendment to Contract C06115547 with Delta Dental to Extend the Term for an Additional Three Months and Add $23,112 for a Total Not to Exceed Amount of $328,112 for Claims Administration Services for the City of Palo Alto’s Self-Funded Dental Plan CMR 424:08 Attachment AGENDA CHANGES, ADDITIONS, AND DELETIONS HEARINGS REQUIRED BY LAW: Applications and/or appellants may have up to ten minutes at the outset of the public discussion to make their remarks and put up to three minutes for concluding remarks after other members of the public have spoken. OTHER AGENDA ITEMS: Public comments or testimony on agenda items other than Oral Communications shall be limited to a maximum of five minutes per speaker unless additional time is granted by the presiding officer. The presiding officer may reduce the allowed time to less than five minutes if necessary to accommodate a larger number of speakers. PUBLIC HEARINGS 5. Consider Adoption of an Ordinance to Restrict Food Vendors from Providing Prepared Food in Disposable Food Service Containers Made from Polystyrene or Non-Recyclable Plastic to Customer (Staff requests continuation to a date uncertain) Attachment 6. Approval of a Mitigated Negative Declaration and Adoption of an Ordinance Amending the Zoning Map of the City of Palo Alto to Change the Zone Designation for 420 Cambridge Avenue from Community Commercial 2 (CC(2)) to the California Avenue Pedestrian and Transit-Oriented Development (PTOD) Combining District 11/17/08 3 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. CMR 436:08 Attachment REPORTS OF OFFICIALS 7. Update on City Sustainability and Environmental Initiatives CMR 444:08 Attachment COUNCIL COMMENTS, ANNOUNCEMENTS, AND REPORTS FROM CONFERENCES Members of the public may not speak to the item(s). ADJOURNMENT 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. 10990 Wilshire Boulevard Suite 1500 Los Angeles, CA 90024 310.477.9585 FAX 310.478.1950 www.econres.com Los Angeles San Francisco San Diego Chicago Washington DC London New York Final Draft Operational Analysis of City of Palo Alto Municipal Golf Course Prepared for City of Palo Alto Submitted by Economics Research Associates November 2008 ERA Project No. 17383 City of Palo Alto Page ii ERA Report 17383 Golf Course Financial Projections Table of Contents Section I: Executive Summary ..........................................................................................................I- 1 Introduction..................................................................................................................................I- 1 Study Background........................................................................................................................I- 1 Current Conditions.......................................................................................................................I- 2 Capital Improvements..................................................................................................................I-12 Operating Options........................................................................................................................I-13 City Revenue Under Alternative Operating Options....................................................................I-15 Section II: Golf Market Overview .....................................................................................................II- 1 Introduction.................................................................................................................................II- 1 National Market Trends...............................................................................................................II- 1 San Francisco Bay Area Regional Market...................................................................................II- 4 Survey of Selected Regional Public-Access Golf Courses..........................................................II- 7 Market Positioning......................................................................................................................II- 9 Changes in Play, Bay Area Municipal Courses, 2000-2007 ........................................................II-10 Regional Market Area, Supply and Demand Analysis.................................................................II-11 Section III: Description of Palo Alto Golf Course and Operations Overview ..................................III- 1 Introduction................................................................................................................................III- 1 Facility Description.....................................................................................................................III- 1 Greens Fees...............................................................................................................................III- 8 Trends in Play.............................................................................................................................III- 9 Existing Operating Agreements.................................................................................................III-11 Operating Revenues and Expenses, Palo Alto Golf Course ......................................................III-13 Cost Plan....................................................................................................................................III-18 Section IV: Competitive Benchmarking...........................................................................................IV- 1 Introduction................................................................................................................................IV- 1 Competitive Benchmarking, 18-Hole Municipal Courses ..........................................................IV- 1 Golf Course Maintenance Expenses..........................................................................................IV- 7 Section V: Palo Alto Municipal Golfer Survey...................................................................................V- 1 Introduction.................................................................................................................................V- 1 Demographic Characteristics of Respondents ...........................................................................V- 2 Golf Play Characteristics .............................................................................................................V- 4 Section VI: Golf Course Operating Options.....................................................................................VI- 1 Introduction................................................................................................................................VI- 1 Golf Facility Leases....................................................................................................................VI- 2 Management Agreements.........................................................................................................VI- 4 Hybrid Agreements....................................................................................................................VI- 7 Operating Options Strengths and Weaknesses ........................................................................VI- 8 Summary....................................................................................................................................VI- 8 Enterprise Fund..........................................................................................................................VI- 9 Section VII: Golf Course Financial Projections ...............................................................................VII- 1 Introduction...............................................................................................................................VII- 1 Capital Improvements...............................................................................................................VII- 1 Operating Revenue...................................................................................................................VII- 2 Projected Operating Income.....................................................................................................VII- 4 Summary of City Revenue........................................................................................................VII- 6 City of Palo Alto Page iii ERA Report 17383 Golf Course Financial Projections Index of Tables/Figures Table I-1 City Net Income Under Alternative Operating Income..........................................................I-19 II-1 Distribution of New Public-Access Golf Courses by Type, Since 1990................................II-14 II-2 Physical Facilities at Selected Public Golf Courses in the San Francisco Bay Area.............II-15 II-3 Greens Fees, Cart Fees and Annual Rounds at Selected Regional Public Golf Courses.....II-16 II-4 Comparison of Annual Rounds, 2000 and 2007...................................................................II-18 II-5 Regional Public Golf Supply and Demand Analysis..............................................................II-19 III-1 Summary of Greens and Cart Fees at the Palo Alto Golf Course .......................................III-20 III-2 Summary of Annual Rounds, Palo Alto Golf Course, FY2001/02 – FY 2006/07..................III-21 III-3 Comparison of Sources of Play, Palo Alto Golf Course, FY2002/03 & FY 2006/07.............III-22 III-4 Rounds Played by Month, Palo Alto Golf Course, FY2004/05 – FY 2006/07 ......................III-23 III-5 Rounds and Gross Revenue, Palo Alto Golf Course, FY2001/02 – FY 2006/07..................III-24 III-6 Summary of Annual Net Income to the City of Palo Alto....................................................III-25 IV-1 Summary of Gross Operating Revenue ..............................................................................IV- 9 IV-2 Summary of Gross Operating Revenue (continued)............................................................IV-10 IV-3 Annual Maintenance Expenses at Selected Bay Area Municipal Courses..........................IV-11 VII-1 Recommended Capital Improvement Program..................................................................VII- 9 VII-2 Base Line Projection of Net Operating Revenue................................................................VII-10 VII-3 Financial Projections of a Golf Concession Agreement with City Golf Course Maintenance under Current Contract Terms and Conditions.............................................VII-11 VII-4 Projection of Net Rental Income to the City of Palo Alto, Golf Concession with City Maintenance under Current Contract Terms and Conditions.............................................VII-12 VII-5 Financial Projections of a Golf Concession Agreement with City Golf Course Maintenance under Market Rate Terms and Conditions ...................................................VII-13 VII-6 Projection of Net Rental Income to the City of Palo Alto, Golf Concession with City Maintenance under Market Rate Terms and Conditions ...................................................VII-14 VII-7 Financial Projections of a Facility Lease at the Palo Alto Golf Course with Private Golf Course Maintenance...................................................................................................VII-15 VII-8 Projection of Net Rental Income to the City of Palo Alto, Facility Lease with Private Maintenance.......................................................................................................................VII-16 VII-9 Financial Projection of a Management Contract at Palo Alto Golf Course with Private Golf Course Maintenance...................................................................................................VII-17 VII-10 City Net Income Under Alternative Operating Options......................................................VII-18 Figure II-1 Market Positioning Map for Regional Public-Access Golf Courses......................................II-17 City of Palo Alto Page I-1 ERA Report 17383 Executive Summary SECTION I: EXECUTIVE SUMMARY INTRODUCTION The following section presents a summary of principal findings regarding Bay Area golf market trends, Palo Alto Muni’s market performance, the condition of existing facilities, capital improvements requirements, stakeholder and golfer responses, services, operating policies and other issues, and expected future financial performance of the course under alternative operating options available for the course. Analysis and documentation for these findings are contained in the subsequent sections of the report. STUDY BACKGROUND Palo Alto Municipal Golf Course (Palo Alto Muni) is an 18-hole regulation length public access golf complex owned by the City of Palo Alto. The golf course, developed on an approximate 170-acre site and opened in 1956, includes an 8,000-square-foot pro shop/restaurant, and a 26-tee station lighted golf practice range. Presently, the City has two agreements with Brad Lozares for golf operations and an agreement with R&T Restaurant Corporation (R&T) for food and beverage services at the course. The golf course is maintained by the City Recreation and Parks Division of the Community Services Department. Mr. Lozares has a management agreement with the City for operating the golf course (reservations, greens fees collection, starting, and marshalling services) which was recently extended one year and now expires on December 31, 2009. There also is a lease agreement between Mr. Lozares and the City for golf concession operations (carts, range, merchandise, and instruction) which expires on April 30, 2013, with an option to extend the agreement 10 additional years. R&T’s lease agreement for food and beverage operations on April 20, 2018. In response to declining utilization and financial performance of the golf course over the past six years, and as part of the City’s routine review of its operations, in April 2007, the City issued a Request for Proposals from qualified firms to conduct an operations analysis of Palo Alto Muni. A comprehensive analysis was requested to address a range of issues including current performance of the course, the golf market outlook, capital improvement needs, golfer satisfaction levels, alternative operating structures, and the overall potential financial outlook for the facility. The City selected Economics Research Associates (ERA) to conduct the study. In conducting this operations analysis, ERA reviewed historical course performance, interviewed stakeholders, evaluated current and expected future golf market conditions, surveyed golfers regarding satisfaction levels, investigated capital improvement needs, prepared financial projections, and analyzed alternative facility operating options. The study was conducted during the November 2007 through February 2008 period, and data contained in this report generally are current through February 2008. City of Palo Alto Page I-2 ERA Report 17383 Executive Summary CURRENT CONDITIONS • Palo Alto Muni is an 18-hole regulation length golf course which opened in May 1956. Developed on about 170 acres, the course is operated from an 8,000- square-foot clubhouse that includes a 26-tee station golf practice range which is lighted for night use. The course was originally designed by noted architect William Bell, Senior, and is generally regarded as an efficient and attractive routing. • Located on a relatively flat site which ranges in elevation from 4.4 feet below to 7.5 feet above sea level, the golf course faces substantial golf course maintenance challenges due to very poor soil conditions, use of reclaimed irrigation water, and the age of the facility. • The City embarked on an extensive capital improvements program in 1998-1999 in accordance with a facility master plan which had been adopted for the course in 1992 by the City Council. Funded with public debt, about $7 million in golf course improvements were completed, mostly related to improving the basic golf course infrastructure system including drainage and irrigation. However, due primarily to escalating construction costs and funding constraints, only about 40 percent of the master plan improvements were completed. • The completed capital improvements clearly improved the condition of the golf course, but, since many of the improvements addressed basic sub-surface infrastructure, from the consumer’s perspective the beneficial impact was much less than expected. The inability to complete the full master plan program, primarily due to finite funding resources available at the time, has resulted in inconsistent course conditions. • The golf course is operated from a 3,000-square-foot pro shop, which services golfer needs, merchandising, office space, and storage. A separate 5,000-square- foot building houses the food and beverage operation. While these structures are adequate for serving basic golfer needs, the structures are aged and require ongoing major maintenance. The food and beverage structure has limited banquet space which diminishes the attractiveness of Palo Alto Muni for tournaments, and restricts the accommodation of non-golf special events. Cart storage for 35 carts is provided below the pro shop. • The two existing golf operations agreements between the City of Palo Alto and Brad Lozares are unconventional, a product of several influencing factors including IRS regulations relating to the use of tax-exempt project funding, concessionaire-funded pro shop capital improvements, and the City’s desire to build-in appropriate performance incentives. One agreement calls for management fees paid to the operator, which are offset under the second agreement by lease payments paid by the operator to the City based on revenue production. • The existing food and beverage agreement between the City and R&T Restaurant Corporation is more traditional in structure, calling for the greater of a minimum rent payment versus a percentage of gross revenue. City of Palo Alto Page III-11 ERA Report 17383 Overview of Palo Alto Golf Course Distribution of Rounds by Month Table III-4 shows rounds played by month for the last three years at the Palo Alto Golf Course. Rounds played by month are summarized as follows: MONTH Rounds by Month (3-Year Average) % of Total July 9,089 12% August 8,677 11% September 7,142 9% October 6,208 8% November 5,383 7% December 4,199 5% January 4,349 6% February 4,765 6% March 5,636 7% April 5,607 7% May 7,492 10% June 8,339 11% With variations due, in part, to the amount and timing of rainfall, the above distribution is considered typical in the Bay Area where the peak season occurs during the summer, spring and summer are shoulder seasons, and winter is the off season. EXISTING OPERATING AGREEMENTS The City of Palo Alto has existing operating agreements pertaining to: (1) the pro shop, and (2) food and beverage. The City of Palo Alto maintains the golf course. Pro Shop Operating Agreement The current pro shop operating agreement was entered into on March 16, 1998 between the City of Palo Alto and Brad Lozares, renewed for five years on January 28, 2003, and extended at the end of 2007 by one year to December 31, 2008, and again in 2008 by one year to December 31, 2009. The operating agreement covers the golf course, driving range, golf pro shop and cart storage and the following are other key points of this agreement: • Areas of responsibility for the operator include operate and manage the pro shop; collection of greens fees; acting as starter and marshaling of play on the course; operating and supervising the driving range; providing lessons and golf instruction; handling tournament events; promotion; offering a suitable inventory of merchandise in the pro shop; and providing and maintaining golf carts (50) for rental use. City of Palo Alto Page IV-5 ERA Report 17383 Competitive Benchmarking Gross Range Revenue and Average Range Revenue Per Tee Station Facility Night Lighting? Number of Tees Gross Range Revenue ($000) Average Range Revenue Per Tee Shoreline Yes 26 407 15,654 Santa Clara No 25 388 15,520 San Jose Muni Yes 60 898 14,967 Crystal Springs Yes 27 384 14,233 Palo Alto Yes 26 354 13,615 Metropolitan No 26 324 13,604 Santa Clara No 30 388 12,933 Shoreline Yes 35 407 11,637 Diablo Creek Yes 26 271 10,423 Santa Teresa No 50 508 10,160 Boundary Oak Yes 60 444 7,400 Los Lagos Yes 50 370 7,400 Tilden Park Yes 70 496 7,086 Rancho Solano No 12 79 6,583 Paradise Valley Yes 28 161 5,750 Callippe Preserve No 30 75 2,500 Average 36 $372 $10,591 The driving range at Palo Alto includes 26 lit tee-stations, 28 percent less than the survey average of 36 tee-stations. With gross range revenues of about $354,000 at Palo Alto, the average range revenue per tee-station of $13,615 is 29 percent higher than the survey average of $10,591 indicating that range performance is well above average. Average Food and Beverage Spending Per Round Although ERA requested information, food and beverage revenue information was not available at the following facilities: Santa Clara, Santa Teresa, Shoreline, and Sunnyvale Municipal. To the extent possible, for those facilities that provided food and beverage revenue information, ERA attempted to break-out a la carte spending by golfers in the grill versus meeting and banquet revenues. The following is a summary of average a la carte spending in a golfers grill: City of Palo Alto Page IV-6 ERA Report 17383 Competitive Benchmarking Facility Average F&B Spending Per Round in a Golfers Grill Callippe Preserve $8.91 Diablo Creek $7.45 San Jose Muni $6.52 Los Lagos $6.48 Palo Alto $6.36 Paradise Valley $5.12 Lone Tree $5.06 Los Positas $4.95 Rancho Solano $4.95 Boundary Oak $4.22 Tilden Park $3.99 Delta View $3.89 Average $5.66 At Palo Alto, average per-round spending by golfers in the café of $6.36 is 12 percent higher than the survey average of $5.66. Including banquet and meeting revenues, the following is a summary of total gross food and beverage revenues at surveyed facilities: Facility Total F&B Gross Revenue ( $000) Los Positas $2,200 Rancho Solano $1,900 Boundary Oak $1,860 Lone Tree $1,700 Diablo Creek $1,500 Paradise Valley $1,400 Delta View $975 Santa Teresa $949 Callippe Preserve $650 Palo Alto $606 Tilden Park $571 San Jose Muni $567 Los Lagos $438 Average $1,178 As mentioned, with limited banquet capacity at Palo Alto (1,500 square feet, capacity of 120 people), total food and beverage revenues are well below average. Total food and City of Palo Alto Page IV-7 ERA Report 17383 Competitive Benchmarking beverage revenues of $606,000 are 49 percent below the survey average of nearly $1.2 million. GOLF COURSE MAINTENANCE EXPENSES Table IV-3 presents a comparison of golf course maintenance expenses at Palo Alto and 14 selected municipally-owned facilities in the Bay Area for Fiscal Year 2006 / 2007 or calendar year 2007 (the latest available information). Although ERA requested information, golf course maintenance expense information was not available at San Jose Municipal, Santa Clara, and Poplar Creek. The following is a summary of key points where the municipal facilities are placed into two groups – those with public (City) operations and those where golf course maintenance is provided by a private golf course management firm: • The water cost component of golf course maintenance expenses ranges widely from effectively zero at Diablo Creek, where well water is free and pumped from the ground, to a high of $320,000 per year at Callippe Preserve and $350,000 at Shoreline. At Palo Alto, annual water costs of about $252,000 are 73 percent higher than the survey average of $146,000 per year. • For the 15 surveyed facilities, the total average annual golf course maintenance expense was nearly $1.1 million. • At Palo Alto, where the course is maintained by the City, the total annual golf course maintenance expense of $1.45 million was 35 percent higher than total survey average of nearly $1.1 million. As compared to other golf courses maintained by cities, the total maintenance expenses at Palo Alto were 6 percent higher than the survey average of $1.36 million. • At Palo Alto, the approximate 170-acre course is maintained by staff of about 10 full-time equivalents (FTE) including the Superintendent. As shown below, it is ERA’s opinion that the current golf course maintenance staffing levels are at a bare minimum, generally well below that at comparable facilities, especially when considering the above average acreage maintained and the challenges of a high water table and salt water intrusion: Golf Maintenance Employees Full-Time Part-Time (FTE) Total (FTE) Palo Alto 9 1 10 Comparative Courses Range 10 - 15 0 - 3 12 – 17 Average 12 2 14 City of Palo Alto Page IV-8 ERA Report 17383 Competitive Benchmarking • At Palo Alto, reflecting escalating costs of health care, the benefits for the golf course maintenance staff have increased from 35 percent of the total labor budget in FY 2001 / 2002 to 47 percent of the total labor budget in FY 2006 / 2007. Last year, the total labor budget for golf course maintenance was about $868,000 allocated about $481,000 to salaries and nearly $387,000 to benefits. • For the 15 surveyed facilities, excluding water costs, which are not under the control of the operator, the average annual expense for services and supplies was: − An average of $926,000 for the 15 surveyed facilities. − About $1.17 million for the public operations. − About $778,000 for the private operations. − On average, excluding water costs, the annual expense for services and supplies was about 50 percent higher for the public operations. To a large degree, this is due to extensive benefits which results in significantly higher labor costs than found in the private sector. • Overall, the average annual golf course maintenance expense for public operations of $1.36 million was about $462,000 higher than the average of nearly $900,000 for the private operations. # 081110 mb 0111049 Council Date: November 17, 2008 November 10, 2008 THE HONORABLE CITY COUNCIL Palo Alto, California Report Type: Consent RE: Adoption of an Ordinance Amending Palo Alto Municipal Code Section 2.28.240 (Settlement of Claims and Actions) to Increase the City Attorney’s Settlement Authority from $10,000 to $35,000 Dear Members of the Council: RECOMMENDATION The City Attorney recommends that Council adopt the attached ordinance increasing the City Attorney’s settlement authority for claims or lawsuits to $35,000. BACKGROUND AND DISCUSSION Section 2.28.240 of the Palo Alto Municipal Code grants the City Attorney authority to accept, settle or reject claims and actions against the City, without prior approval of the Council, provided that no allowance, compromise or settlement exceeds $10,000. Section 2.28.240 of the Palo Alto Municipal Code was last updated in 1995, and needs to be updated to reflect the monetary value of many actions against the City. Increasing the City Attorney’s authority to accept, settle or reject claims against the City in an amount of up to $35,000 will facilitate the prompt resolution of claims and actions worthy of settlement. Approving this ordinance will also reduce the number of closed sessions, creating greater transparency in the settlement process. The City Attorney will continue to make biannual reports to the Council on actions taken on claims and actions against the City, pursuant to Palo Alto Municipal Code §2.28.240(d). The suggestion to increase the City Attorney’s authority originated from a few Council Members after a closed session was held on an issue with a low dollar value. The change will result in the swifter settlement of larger dollar claims. This could reduce the amount of lawsuits that become claims, and is more citizen friendly as legitimate claims would be paid more THE HONORABLE CITY COUNCIL November 10, 2008 Page 2 RE: Adoption of an Ordinance Amending Palo Alto Municipal Code Section 2.28.240 (Settlement of Claims and Actions) to Increase the City Attorney’s Settlement Authority from $10,000 to $35,000 081110 mb 0111049 quickly. By comparison, the City Manager and Purchasing Manager both have $85,000 contract approval authority. RESOURCE IMPACT Passage of this ordinance will result in approximately two fewer closed sessions per year. Assuming that outside counsel was present at each closed session, the savings to the City should exceed $3,000 annually. ENVIRONMENTAL REVIEW Adoption of this ordinance does not require review under the California Environmental Quality Act because it does not meet the definition of a “project” pursuant to California Public Resources Codes §21065. The City Attorney respectfully requests that Council approve the attached ordinance. If you have any questions concerning this proposal, I will be present at the City Council meeting to respond. Respectfully submitted, GARY M. BAUM City Attorney GMB:mb Attachment cc: James Keene, City Manager Kelly Morariu, Deputy City Manager Steve Emslie, Deputy City Manager Russ Carlsen, Human Resources Director Sandra Blanch, Risk Manager NOT YET APPROVED 1 081110 mb 0111050 Ordinance No. _____ Ordinance of the Council of the City of Palo Alto Amending Palo Alto Municipal Code Section 2.28.240 (Settlement of Claims and Actions) to Increase the City Attorney’s Settlement Authority from $10,000 to $35,000 The City Council of the City of Palo Alto does ORDAIN as follows: SECTION 1. Findings. The City Council finds that: A. The public interest requires that periodic revision of the municipal code is necessary in order to make editorial changes for clarification and to make revisions that are consistent with current practice and public policy. B. The City Attorney has authority to perform the functions of the City Council relative to claims and actions against the City or its officers or employees under the provisions of Division 3.6 of the Government Code, “Claims and Actions Against Public Entities and Public Employees”. C. Section 2.28.240 of the Palo Alto Municipal Code authorizes the City Attorney to accept, settle or reject without prior approval of the Council, claims and actions against the City, provided that no allowance, compromise or settlement shall exceed $10,000. D. Section 2.28.240 of the Palo Alto Municipal Code was last updated in 1995 and no longer accurately reflects the monetary value of many actions against the City. E. Increasing the City Attorney’s authority to accept, settle or reject claims and actions against the City, without prior approval of the Council, in an amount of up to $35,000.00, will reduce the number of closed sessions, creating greater transparency in the settlement process, and facilitate the prompt resolution of claims and actions worthy of settlement. SECTION 2. Section 2.28.240 of the Palo Alto Municipal Code is hereby amended to read as follows: 2.28.240 Settlement of Claims and Actions. As provided in Section 935.4 of the Government Code of California, the City Attorney is designated to perform the functions of the City Council relative to claims and actions against the City or any of its officers or employees under the provisions of Division 3.6 of the Government Code, as follows: (a) Where the City has insured itself against liability for the claimed injury, the City Attorney shall forward to the insurance carrier without prior council approval a written recommendation as to acceptance, settlement, or rejection of such claim, provided that the amount of any recommended allowance, compromise or settlement does not exceed $10,000.00 $35,000.00; NOT YET APPROVED 2 081110 mb 0111050 (b) Where the City is uninsured, the City Attorney shall be authorized to accept, settle or reject without prior approval of the council, claims against the city, provided that no allowance, compromise or settlement shall exceed $10,000.00 $35,000.00. Upon the written order from the City Attorney, the Director of Administrative Services shall cause to be issued a warrant upon the treasury of the City in the amount for which a claim has been allowed, compromised or settled; (c) The City Attorney is further authorized to compromise or settle, without prior approval of the council, except on a matter of policy, any actions which the City is either plaintiff or defendant and which are not covered by insurance, provided that the amount of such compromise or settlement shall not exceed $10,000.00 35,000.00; (d) The City Attorney shall make bi-annual reports to the council on action taken on claims and actions against the City; (e) A recommendation under subsection (a) above shall constitute "action" upon such claim within the meaning of Government Code Section 945.4. SECTION 3. The Council finds that increasing the City Attorney’s settlement authority does not meet the definition of a project under the California Environmental Quality Act pursuant to California Public Resources Code Section 21065, and therefore no environment impact assessment is necessary. SECTION 4. This ordinance shall be effective on the thirty-first day after the date of its adoption. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ____________________________ ____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ____________________________ ____________________________ Deputy City Attorney City Manager ____________________________ Director of Administrative Services